[Federal Register: February 4, 2004 (Volume 69, Number 23)]
[Rules and Regulations]
[Page 5389-5402]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04fe04-25]
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Part III
Department of Homeland Security
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Coast Guard
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46 CFR Part 67
Department of Transportation
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Maritime Administration
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46 CFR Part 221
Vessel Documentation: Lease Financing for Vessels Engaged in the
Coastwise Trade; Final Rule and Proposed Rule
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DEPARTMENT OF HOMELAND SECURITY
Coast Guard
46 CFR Part 67
[USCG-2001-8825]
RIN 1625-AA28 (Formerly RIN 2115-AG08)
Vessel Documentation: Lease Financing for Vessels Engaged in the
Coastwise Trade
AGENCY: Coast Guard, DHS.
ACTION: Final rule.
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SUMMARY: The Coast Guard amends its regulations on the documentation of
vessels engaged in the coastwise trade. These amendments respond to
statutory changes that eliminate certain barriers for U.S.-vessel
operators seeking foreign financing by lease. These amendments specify
the information needed to determine the eligibility of a vessel
financed in this manner for a coastwise endorsement. To address certain
issues raised by the comments to this rulemaking but not proposed in
this rulemaking, we are publishing a separate notice of proposed
rulemaking found elsewhere in this issue of the Federal Register.
DATES: This final rule is effective on February 4, 2004, except for
Sec.Sec. 67.147 and 67.179, which contain information collection
requirements that have not been approved by the Office of Management
and Budget (OMB). The Coast Guard will publish a document in the
Federal Register announcing the effective date of those sections.
ADDRESSES: Comments and material received from the public, as well as
documents mentioned in this preamble as being available in the docket,
are part of docket USCG-2001-8825 and are available for inspection or
copying at the Docket Management Facility, U.S. Department of
Transportation, room PL-401, 400 Seventh Street SW., Washington, DC,
between 9 a.m. and 5 p.m., Monday through Friday, except Federal
holidays. You may also find this docket on the Internet at http://dms.dot.gov
.
FOR FURTHER INFORMATION CONTACT: If you have questions on this rule,
call Patricia Williams, Deputy Director, National Vessel Documentation
Center, Coast Guard, telephone 304-271-2506. If you have questions on
viewing the docket, call Andrea M. Jenkins, Program Manager, Docket
Operations, telephone 202-366-0271.
SUPPLEMENTARY INFORMATION:
Related Rulemaking
A separate, but related rulemaking entitled ``Vessel Documentation:
Lease Financing for Vessels Engaged in the Coastwise Trade; Second
Rulemaking'' (USCG-2003-14472, RIN 1625-AA63) appears elsewhere in this
issue of the Federal Register. It concerns the question of whether we
should prohibit or restrict the chartering back, whether by time
charter, voyage charter, space charter, or contract of affreightment,
of a lease-financed vessel to the vessel's owner, the parent of the
owner, or a subsidiary or affiliate of the parent. If restrictions
should be imposed, what criteria should be applied in charter-back
situations?
Also, the separate rulemaking raises the question of whether we
should seek the assistance of a third party with expertise in reviewing
charters for compliance with the law, such as the Maritime
Administration (MARAD) or an independent third party. (MARAD is
currently reviewing its policy of general approval of time charters (67
FR 50406) and has agreed to consider this issue.)
In addition, the separate rulemaking will seek comments regarding
the issue of providing a time limit for the grandfather provisions in
Sec. 67.20(b) through (e), which allows endorsements issued under the
lease-financing provisions before the date of publication of this final
rule to continue in effect (subject to certain specified exceptions).
Though these subjects were discussed in many of the comments
received to the present rulemaking (USCG-2001-8825), we feel that we
need additional public input specifically focused on these subjects and
on our proposed changes in the separate rulemaking.
Regulatory History
On May 2, 2001, we published a notice of proposed rulemaking (NPRM)
entitled ``Vessel Documentation: Lease-Financing for Vessels Engaged in
the Coastwise Trade'' in the Federal Register (66 FR 21902). On June
29, 2001, we published a notice extending the comment period from July
2, 2001, to September 4, 2001 (66 FR 34603). On December 14, 2001, we
published a notice reopening the comment period until January 28, 2002,
and announcing that we were contemplating publishing a supplemental
notice of proposed rulemaking (SNPRM) (66 FR 64784). On August 9, 2002,
we published an SNPRM with a comment period closing on October 8, 2002.
We received over 100 letters commenting on the NPRM and SNPRM.
We received numerous requests for one or more public meetings.
After considering these requests and the comments received, we decided
that public meetings would not benefit this rulemaking project because
of the depth and thoroughness of the comments and the tremendous help
they provided. We believed that public meetings would not provide new
information that would assist us in writing the final rule. In
addition, public meetings would delay the issuance of a final rule,
which is contrary to the expressed desire of many of the commenters.
However, we do plan to hold a public meeting on the separate rulemaking
discussed in the ``Related Rulemaking'' section of this preamble.
At the request of industry representatives, several ex parte
meetings were held with senior Coast Guard officials. Memoranda of
those meetings were entered into the docket. (See ADDRESSES.)
Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause
exists for making this rule effective in less than 30 days after
publication in the Federal Register. Without regulations in place, many
commenters contended that they would be uncertain of the Coast Guard's
policy for processing applications during that 30-day period. Making
these regulations effective as soon as possible relieves the burden of
uncertainty on applicants.
Background and Purpose
In 1996, Congress amended the vessel documentation laws to promote
lease financing of vessels engaged in the coastwise trade (section
1113(d) of Pub. L. 104-324, the Coast Guard Authorization Act of 1996;
46 U.S.C. 12106(e)) (``the 1996 Act''). Lease financing has become a
very common way to finance capital assets in the maritime industry.
Under lease financing, ownership of the vessel is in the name of the
lessor, with a demise charter to the charterer of the vessel. (A
``demise charter,'' also known as a ``bareboat charter,'' is an
agreement in which the charterer assumes the responsibility for
operating, crewing, and maintaining the vessel as if the charterer
owned it.) Many vessel operators choose to acquire or build vessels
through lease financing, instead of the traditional mortgage financing,
because of possible cost benefits. But, until the 1996 Act, operators
were prevented from obtaining this financing from companies that are
less than 75 percent U.S. owned because the leasing company had to be a
U.S. citizen under section 2 of the Shipping Act, 1916, (46 U.S.C. app.
802), which requires at least 75 percent U.S. ownership. This
[[Page 5391]]
situation severely restricted the sources of available capital.
Under section 1113(d) of the 1996 Act, Congress eliminated this
technical impediment to vessel financing by adding a new paragraph (e)
to 46 U.S.C. 12106. Under 46 U.S.C. 12106(e), Congress authorized the
Secretary of Transportation (since delegated to the Commandant of the
Coast Guard) to issue coastwise endorsements if (1) the vessel is
eligible for documentation; (2) the vessel's owner, the parent of the
owner, or subsidiary of the parent of the owner is primarily engaged in
leasing or other financing transactions; (3) the vessel is under a
demise charter to a person certifying that the person is a U.S. citizen
eligible to engage in coastwise trade under section 2 of the Shipping
Act, 1916; and (4) the demise charter is for at least 3 years (or less
under Sec. 67.20(a)(11)).
According to the legislative history for the 1996 Act (See House
Conference Report No. 104-854; Pub. L. 104-324; 1996 U.S. Code
Congressional and Administrative News, p. 4323.) (``Conference
Report''), Congress intended to broaden the sources of capital for
owners of U.S. vessels engaged in the coastwise trade by creating new
lease-financing options. At the same time, the Conference Report states
that Congress did not intend to undermine the basic principle of U.S.
maritime law that vessels operated in domestic trades must be built in
shipyards in the United States and be operated and controlled by U.S.
citizens, which is vital to U.S. military and economic security. In
that report, Congress also directed the Coast Guard to establish the
necessary regulations to administer 46 U.S.C. 12106(e), including the
filing of demise charters for vessels issued a coastwise endorsement
under that provision. We discuss our authority and need to resort to
legislative history, of which the Conference Report is a part, in the
section entitled ``Interpreting the statute'' under ``General
Comments'' in this preamble.
List of Changes to the SNPRM
This is a list of the changes that we have made to the supplemental
notice of proposed rulemaking (SNPRM) published on August 9, 2002. You
may find an additional discussion of these changes in the ``Discussion
of Comments'' section later in this preamble.
This rulemaking project proved to be somewhat unusual in the field
of rulemaking, because most of the comments received dealt with
conceptual approaches to interpreting the 1996 Act and the degree and
direction of statutory implementation required, rather than with
specific regulatory provisions. Therefore, in responding to comments in
the manner we consider most appropriate and fair under the
circumstances, we have incorporated changes in this final rule that,
though not specifically requested by a comment, are in character with
the original scheme as set forth in the NPRM and SNPRM and are a
logical outgrowth of our proposals. Because of the lengthy comment
periods, some 7\1/2\ months, and the issuance of an SNPRM before going
to a final rule, we feel that we have provided a high degree of
exposure for the issues at hand and an ample opportunity for the
parties affected to develop evidence in the record.
A list of the changes, in order of their appearance in the
regulatory text, follows:
1. The word ``affiliate,'' as used in the new definition of the
word ``group'' described below, is defined in Sec. 67.3 to mean a
``person'' (defined to include a corporation, partnership, etc., as
well as an individual) that is less than 50 percent owned or controlled
by another person. The intent is to include within the ``group'' not
only the owner, parent of the owner, and ``subsidiaries'' (which are
defined in Sec. 67.3 as being at least 50 percent owned by another) of
the parent, but also those persons (i.e., affiliates) that are less
than 50 percent owned or controlled by the parent. For example, we
would include in the aggregate revenue test provisions in Sec.Sec.
67.20(a)(2), 67.147(a)(1)(v), 67.167(c)(10)(iv), and 67.179(a)(1)(v)
all entities in the ``group,'' not just the owner, parent, and the
parent's subsidiaries.
2. In Sec. 67.3, the word ``group'' is defined. It replaces the
phrase ``the person that owns a vessel, the parent of that person, and
all subsidiaries of the parent of that person,'' which was used many
times throughout the SNPRM. In the definition of ``group,'' we added
``affiliates'' of the parent. This definition of ``group,'' as used in
the Conference Report, contemplates today's business environment, where
few corporate entities stand alone with no relationship to one another.
3. The term ``operation or management of vessels'' as used
throughout Sec.Sec. 67.20, 67.147, 67.167, and 67.179 is now defined in
Sec. 67.3. It is defined to include all activities related to the use
of vessels to provide services. The definition is needed to identify
those business activities of an entity or group that are relevant in
determining whether a person may qualify as a vessel owner under 46
U.S.C. 12106(e). A broad definition of this term is consistent with
Congressional intent and preserves the effectiveness of the control
test and the majority of aggregate revenues test. The term does not
include activities directly associated with making financial
investments in vessels or the receipt of earnings derived from those
investments. Thus, lease-financing activities and other purely
financial investments are excluded. It also does not include businesses
that provide services to vessels, such as fueling and ship chandling. A
broad definition of the term ``operation or management of vessels'' to
include any and all activities related to the use of vessels to provide
services is supported by several comments and is a logical outgrowth of
the discussion of this term in the NPRM and the SNPRM.
4. In Sec. 67.3, we have added two new sentences in the definition
of the word ``parent'' to make it clear that ``parent'' includes all
parents in the owner's chain of ownership to the ultimate parent.
5. In Sec. 67.3, the term ``primarily engaged in leasing or other
financing transactions'' is re-defined to include only transactions
that have a financing component and exclude transactions that only
include ``leasing.'' The law was enacted to promote ``lease financing''
not ``leasing.'' The Conference Report, at page 130, states that the
overall purpose of the lease-financing provisions is to eliminate
technical impediments to using various techniques for financing vessels
operating in the domestic trade. Thus, the clear intent of Congress was
to create a vehicle for vessel financing, not an alternative means of
vessel ownership. See the discussion of our responsibilities under the
Jones Act in the ``Interpreting the statute'' section under ``General
Comments'' in this preamble.
In 46 U.S.C. chapter 121, Congress entrusted the Coast Guard with
the responsibility of administering the vessel-documentation laws
consistently with the Jones Act, 46 U.S.C. app. 802 and 808 and 46
U.S.C. 12106. Accordingly, it is our responsibility to implement the
lease-financing provisions in such a way as to be consistent with the
Jones Act, with its prior effect on the documentation laws, and with
the intent of Congress.
Furthermore, the Conference Report, at pages 131 and 132, states
that banks, leasing companies, or other financial institutions qualify
as owners. This statement evinces Congress's intent to prevent the
statute from being used as a loophole to avoid coastwise
[[Page 5392]]
citizenship requirements. The purpose is to prevent the use of
specially created ``leasing-company'' subsidiaries that merely take
title to existing vessels, with no financing involved, for the sole
purpose of leasing them. Thus, the acquisition of a vessel must have
some element of financing involved. An intra-group, book-to-book
transfer without any financing involved will not suffice.
6. A definition of the word ``sub-charter'' is added to Sec. 67.3
to indicate that sub-charters include all types of charters and
contracts for the use of the vessel subsidiary to a demise charter,
including but not limited to those denominated as ``demise charters,''
``time charters,'' ``voyage charters,'' and other subordinate
contracts, however denominated, for the use of the vessel. The purpose
for this definition is to ensure that all charters and contracts for
the use of the vessel are filed with the Coast Guard so that they may
be made available for examination by the Coast Guard and third parties.
This is necessary because sub-charters or contracts have the potential
of giving a non-citizen an unacceptable amount of control over vessels
operating in the coastwise trade. For example, simply styling a charter
as a ``time charter'' or ``voyage charter'' does not ensure that the
charter will not transfer an unacceptable amount of control from the
demise charterer.
7. In Sec.Sec. 67.20(a)(2), 67.147(a)(1)(viii), and
67.179(a)(1)(ix), we added the words ``the vessel was financed with
lease financing.'' These additional words help ensure that the
acquisition of a vessel must have some element of financing involved.
An intra-group, book-to-book transfer without any financing involved
will not suffice.
8. Section 67.20(a)(5) is changed by adding, after the words ``the
person that owns the vessel,'' the words ``the parent of the person
that owns the vessel'' and ``group of which the person that owns the
vessel is a member.'' This change also excludes, from qualifying for a
coastwise endorsement under lease financing, ownership arrangements
where the parent of the owner of the vessel and the group of which the
owner is a member are primarily engaged in the direct operation or
management of vessels.
As the Conference Report at page 131 notes, ownership must be
primarily a financial investment in the vessel without the ability and
intent to control the vessel's operations and that the operation of the
vessel must not be by a person not primarily engaged in the direct
operation or management of vessels. Taken together, these phrases
suggest that a requirement that the owner, the parent of the owner, or
the group of which the owner is a member must not be primarily engaged
in the direct operation or management of vessels is a permissible
restriction on who can qualify as a lease-financing owner. Therefore,
for example, a foreign group that gets more than 50 percent of its
revenue from the direct operation or management of vessels would be
barred from setting up a U.S. subsidiary for the purpose of being an
owner under lease financing.
9. In Sec. 67.20(a)(6), the words ``directly or indirectly'' are
added before the word ``control.'' The words are added in recognition
of the fact that vessels may also be controlled indirectly through
devices such as side agreements between parties involved in the
vessel's ownership and charter. Allowing indirect control of the
vessels through side agreements or similar devices would be
inconsistent with the purpose of the lease-financing provision. That
provision was not intended to implicitly repeal the Jones Act
protections afforded to a U.S. citizen eligible to engage in coastwise
trade under section 2 of the Shipping Act, 1916 (section 2 citizen) any
more than is necessary to further the goal of making more capital
available for the owners of U.S. vessels.
10. The ``aggregate revenues'' test in Sec.Sec. 67.20(a)(7),
67.147(a)(1)(v), 67.167(c)(10)(iv), and 67.179(a)(1)(v) for use in
determining eligibility for a coastwise endorsement is changed from
applying just to the group of which the owner is a member (i.e., the
vessel owner, the parent of the owner, and all subsidiaries of the
parent). It now applies to each of the following taken separately: the
owner, the owner's parent, and the owner's group. This permits foreign
banks, lease-financing companies, or other financial institutions to
qualify as owners of U.S.-flag vessels under lease financing even if
they have vessel owning and operating subsidiaries or affiliates, but
prevents qualification of companies in which the primary business of
the owner, the owner's parent, or the group of which the owner is a
member, is vessel ownership or operation.
11. In Sec.Sec. 67.20(a)(8), 67.147(a)(1)(vi), 67.167(c)(10)(v),
and 67.179(a)(1)(vi) concerning the operation or management of
commercial, foreign-flag vessels, the word ``group,'' as newly defined
in Sec. 67.3 with its inclusion of ``affiliates'' of the parent,
replaces the words ``the group that includes the person that owns the
vessel, the parent of that person, and all subsidiaries of the parent
of that person.'' This test is extended to apply to the vessel owner
and the owner's parent, as well as the group. Thus, we clarify that the
lease-financing owner must have only a financial investment interest in
the vessel and may not be involved in operating vessels. Additionally,
because of the possibility for a foreign parent that is actually
involved in the operation or management of foreign vessels to exercise
``control'' of the vessel's operations, we have included the words
``parent of the owner'' in this part of the test.
12. The grandfather provision in Sec. 67.20(b) has one change. The
date before which an endorsement must be issued to be eligible for the
grandfather provision is changed from the effective date of this final
rule to the date of publication of this rule, which is 30 days sooner.
The purpose of the grandfather provision is to protect existing
business arrangements. Changing the date by which vessels must be
documented under this section from the effective date of the rule to
the date of publication prevents the establishment of new business
arrangements during that 30-day period that would be prohibited by this
rule.
New paragraph (c) is added to provide a grandfather provision for
newly constructed vessels built in reliance upon a letter ruling from
the Coast Guard before the date of publication of this final rule.
Also, new paragraphs (d) and (e) are added to apply to barges that
are not required to be documented under 46 U.S.C. 12110(b). These new
paragraphs are similar to paragraphs (b) and (c) discussed above but
are needed because the existing documentation regulations handle
undocumented barges somewhat differently from other vessels.
13. In Sec.Sec. 67.147(a)(1) and 67.179(a)(1) concerning the
individual required to certify the certification submitted with an
application, the term ``officer'' was used. As suggested by several
comments, this term alone, which is based on the corporate model, does
not accommodate the many different types of business entities that
qualify as owners and the different titles by which individuals
authorized to provide the certification are known. We expect the
authorized individual to be on a level at least equivalent to an
officer in a corporation, a partner in a partnership, or a member of
the board of managers in a limited liability company. Therefore, these
sections have been amended to address these differences.
14. One comment to Sec. 67.147(a)(2) in the NPRM, on submitting a
copy of the charter as part of an application for an endorsement, asked
that we delete the requirement that the charter provide that the
charterer is deemed to be the
[[Page 5393]]
owner pro hac vice for the term of the charter. It suggested that
practitioners generally understand that a demise charter does convey to
the charterer the full possession, control, and command of a vessel and
that the provision is therefore surplusage.
We made the suggested deletion in the SNPRM. However, upon
reconsideration, we have reinserted that provision in the final rule.
It is clear from the legislative history that Congress intended the
charterer to be the owner pro hac vice for the term of the charter. The
fact that the words ``pro hac vice'' may not be reflective of common
charter practice is added reason for their inclusion in any charter
submitted under the lease-financing exception.
15. In Sec.Sec. 67.147(d)(1) and 67.179(d)(1), changes are made
that would lessen the paperwork burden. The SNPRM would require copies
of sub-charters to be filed with the Director, National Vessel
Documentation Center. In the final rule, we also require that
amendments to sub-charters be similarly filed. However, we added that
they both need to be filed only when requested to do so by the
Director.
16. In Sec.Sec. 67.147(d) and 67.179(d), the word ``demise'' is
removed and the term ``sub-charter'' (as newly defined in Sec. 67.3) is
added. The word ``demise'' is eliminated because the Coast Guard
believes that it is necessary to make all charter and other contractual
arrangements for the use of the vessel available for examination by the
public and for review by the Secretary as needed. This is necessary to
ensure that an unacceptable amount of control over the vessel's
operation is not transferred from the demise charterer in contravention
of the requirement that the demise charterer be the owner pro hac vice
during the charter period. Also, we have aligned Sec.Sec. 67.147(d)(2)
and 67.179(d)(2) with the above changes.
17. In Sec.Sec. 67.147(e) and 67.179(e) concerning penalties for
false certification, the words ``and 18 U.S.C. 1001'' are added
following ``subject to penalty under 46 U.S.C. 12122.'' We added the
additional criminal provision concerning knowingly false or fraudulent
statements to emphasize the importance of the accuracy of the
certifications to the integrity of the Coast Guard's implementation of
the lease-financing law.
Discussion of the Comments
In this section, we discuss the comments both to the NPRM and
SNPRM. They are grouped into two parts: ``General Comments'' and
``Comments to Specific Sections.'' The ``General Comments'' section
addresses comments, such as comments on interpreting the 1996 Act, that
are not specific to a particular proposed provision. The section on
``Comments to Specific Sections'' is organized in numerical order by
regulatory section.
Many of the comments to the NPRM were rendered moot by changes in
the SNPRM. We limited discussion of them in the preamble to avoid
confusing the reader.
Certain provisions in the NPRM and SNPRM were repeated, almost
verbatim, in several sections throughout the proposed rule. For
example, in the NPRM, the aggregate revenue provision in Sec.
67.20(a)(4) (eligibility for endorsement) is also found in Sec.Sec.
67.147(a)(1)(iv) (applications for vessels), 67.167(c)(1)(iv) (exchange
of certificates), and 67.179(a)(1)(iv) (applications for barges) of the
NPRM. We found that comments to one section were generally applicable
to other, similar sections.
Comments submitted to this rulemaking, but that now relate to the
subjects addressed in the separate rulemaking referenced in the
``Related Rulemaking'' section of this preamble, such as concerns over
the potential abuse of the chartering element in the lease-financing
provisions, have also been considered under that separate rulemaking.
I. General Comments
1. Interpreting the statute. (a) Virtually all of the commmenters
fall, in varying degrees, within two broad groups. One group argues for
a literal application of the statute. They urge that the statute is not
ambiguous. They contend that the Coast Guard's proposals in the NPRM
and SNPRM are based on an erroneous interpretation of the statute and
amount to legislating that goes far beyond permissible implementation.
According to these comments, no resort to the legislative history is
permissible in implementing the statute. They urge that Congress's
intention as expressed by the plain language of the statute will be
frustrated unless the Coast Guard's regulations are limited to the
literal requirements in the statute. These comments argue that the
statute, by vesting control of the vessel in the demise charterer,
which must be a section-2 citizen under 46 U.S.C. app. 802, Congress
provided sufficient protection of the Jones Act principles.
We disagree. Primarily as a result of 6 years of experience with
the law, we believe the result of such a literal interpretation could
eviscerate the principles that Congress enunciated in the cabotage
restrictions contained in the Jones Act and might even effectuate an
implicit repeal of that statute. The Jones Act principles referred to
here include the cabotage principles embodied in 46 U.S.C. app. 883
(the Jones Act), 46 U.S.C. app. 802, and 46 U.S.C. 12106.
The second broad group of commenters recognize that the lease-
financing law opened the Jones Act trade to lease-financing companies,
but argue for a narrow application of the statute. According to these
comments, the lease-financing law was intended to be a narrow exception
to the Jones Act; it was not intended to repeal that Act. They argue
that the lease-financing law should be read very narrowly so as to
protect those traditionally engaged in the Jones Act trade. They rely
on statements in the Conference Report, as well as on the principle
that implicit repeal of statutes is not favored. According to them, the
only proper interpretation is to apply the lease-financing law with a
view toward opening the Jones Act to foreign owners only to the extent
necessary to ensure that those persons who have relied on it in
structuring their business models are not subject to undue foreign
competition. The term ``foreign owners,'' as used here, means persons
who qualify to own a U.S. vessel, but are not eligible to engage in the
coastwise trade.
As stated above, we do not agree that the statute should be applied
so literally that the result would be a wholesale, yet implicit, repeal
of the Jones Act protections for domestic shipping. Because of the rich
history of the Jones Act, the protections it has traditionally extended
to American citizens, and the lack of any indication in either the
statute or the legislative history in favor of an intended repeal of
the Jones Act, we reject the conclusion of those who construe the law
so as to accomplish such a repeal. Instead, we conclude that the lease-
financing provisions were intended to accomplish a narrow relaxation of
the restrictions formerly applicable to owners who desired to engage in
lease financing, as opposed to mortgage financing, of vessels.
Furthermore, we believe that, when implementing the statute through
regulations, as Congress directed us to do, Congress sought to apply
the lease-financing provisions as consistently as possible with the
existing provisions of the Jones Act. Otherwise, there would have been
no need for the Conference Report to state on page 130 that it was the
Conferees' intention not to undermine a basic principle of U.S.
maritime law that vessels operated in
[[Page 5394]]
domestic trades must be operated and controlled by American (i.e.,
section-2) citizens, which is vital to United States military and
economic security.
Congress entrusted the Coast Guard with the responsibility, under
46 U.S.C. chapter 121, to administer the vessel documentation laws
consistently with the Jones Act, 46 U.S.C. app. 802, 808, and 883 and
46 U.S.C. 12106. The Coast Guard has had this role continuously since
1967. We have historically implemented the vessel-documentation law
with due regard to the important cabotage principles embodied in the
Jones Act. We have endeavored in the past, as we do now, to carry out
the cabotage principles that are the essence of the Jones Act as
expressed by Congress in the Act itself and its legislative history, as
well as in the lease-financing amendment and its legislative history.
Thus, we have relied on the legislative history of not only the
lease-financing law, but also of the Jones Act itself. In that regard,
we are aware of the Congressional purpose of that Act, as explained on
the floor of the House at the time of discussions on who could be a
U.S. citizen for purposes of owning and operating a vessel in the U.S.
coastwise trade. That purpose was expressed by Congressman Saunders, as
follows:
The amendment [to section 2 of the Shipping Act] intends to make
it impossible for any arrangement to be effected by which such a
corporation, partnership or association shall be a citizen of the
United States when the real control of same is in the hands of
aliens. We have sought to make the language so sweeping and
comprehensive that no lawyer, however ingenious, would be able to
work out any device under this section to keep the letter, while
breaking the spirit of the law. See 56 Cong. Rec. 8029 (June 19,
1918).
Congress required the Secretary of Transportation to implement the
lease-financing law with regulations. Consistent with prior practice
since 1967, that responsibility has been delegated to us. We believe
that in order to carry out Congress's intent in implementing the lease-
financing law, we must be mindful of all legitimate sources from which
that intent may be gleaned. In fact, for us to ignore the Jones Act or
its rich history would be contrary to our responsibility.
On the other hand, we recognize that the principal purpose of the
lease-financing provisions is to increase the sources of capital.
(b) In determining whether the statute should be applied literally,
it is clear that some of the statute's critical terms are not self-
defining. For example, the term ``primarily engaged in leasing or other
financing transactions'' is not clear. It is not clear on its face
whether the clause ``primarily engaged'' means that the entity so
engaged derives a majority of its revenue from that activity; that the
entity devotes a majority of its resources to that activity; or, in the
case of multiple entities in a group (which is probably typical), that
one of those entities derives more revenue or devotes more resources
than any of the others, but not necessarily a majority of the group's
revenue or resources.
Similarly, it is not clear on the face of the statute whether
Congress intended to authorize special-purpose leasing companies
engaged in leasing vessels only to qualify if they have no financing
component to the transaction or whether it intended financing to be an
essential component of that activity (as we provide in this final
rule). Therefore, a resort to the legislative history, particularly the
Conference Report, to interpret the ambiguous terms of the statute is
appropriate to determine the intent of Congress as to who may qualify
for this newly created, lease-financing exception to the Jones Act and
how the Coast Guard should implement the statute.
We note that the Conference Report does not answer all the
questions that must be answered in order to implement the statutory
language. For example, while both the statute and the Conference Report
are clear that control of the vessel receiving a coastwise endorsement
must be placed in a U.S. citizen, the statute and Conference Report are
silent as to whether the Coast Guard is to implement this requirement
by prohibiting agreements between the owner and the demise charterer
with respect to operating the vessel, other than the demise charter
itself. This is one of the subjects addressed in the separate
rulemaking (See the ``Related Rulemaking'' section in this preamble.).
2. Charters. Many comments concerned the potential abuse of the
required transfer of control from the owner to the charterer by the use
of charter deemed ``demise'' in name only and of sub-charters that they
believe to be inconsistent with the intent of Congress.
(a) A number of comments suggest that the proposed rules would have
a detrimental effect on the integrity of the Jones Act, as well as on
U.S. military and economic security, because the proposals could allow
significant portions of the U.S.-flag coastwise fleet to fall under
foreign control.
We agree with the premise of these comments. Thus, our final rule
makes foreign capital available to U.S.-flag operators, while at the
same time keeps coastwise shipping out of the control of foreign
operators. In the separate NPRM (See the ``Related Rulemaking section
of this preamble.), we are proposing various alternatives to deal with
the time-chartering back of the vessel from the demise charterer to,
for example, an affiliate of the owner.
(b) Many of the comments we received in response to both the NPRM
and the SNPRM question not only the proposed rules, but also the policy
established by the Coast Guard to implement the lease-financing
provisions of the 1996 Act. In general, the comments indicate that we
may have created an unintended loophole that is effectively allowing
the foreign control of vessels operating in Jones Act protected trades.
See our response in paragraph (a) above.
(c) One comment states that proposed Sec. 67.20(a)(6) in the SNPRM
should be rewritten so controlling vessel operations and revenues by
means of a time charter back to a member of the group that includes a
foreign vessel operator would disqualify eligibility, because, as the
comment asserts, such an arrangement is a scheme for control and not
for investment. The comment adds that Sec. 67.20(a)(9) should broaden
the definition of control, so that the time-charter-back scheme would
be recognized for what it is--a control scheme.
See the response in paragraph (a) above.
(d) Eleven comments express support for the Jones Act and for
broadening sources of financing for vessels in the domestic trade,
while upholding the U.S.-ownership requirement of the Jones Act.
See the response in paragraph (a) above.
(e) Ten comments express support for preserving the basic
principles of the Jones Act, because it is the basis of our investments
and provides many economic, security, and environmental benefits to our
nation.
See the response in paragraph (a) above.
(f) Two comments express support for the Jones Act because they see
no need for foreign financing in the industry.
Insofar as these comments contend that there was no need for
foreign financing for U.S. vessels, we disagree that Congress did not
authorize foreign financing of U.S. vessels. Indeed, that was an
expressed purpose of the law as stated in the Conference Report. On the
other hand, we agree that Congress also did not intend any more of a
relaxation
[[Page 5395]]
of the Jones Act than was necessary to effectuate the purposes of the
lease-financing provision. It sought to preserve control of the
operation and management of lease-financed vessels in the hands of
section 2 citizens by means of requiring a long-term demise charter to
such a citizen. The final rule and the separate NPRM (See the ``Related
Rulemaking'' section of this preamble.) attempt to strike the
appropriate balance to effectuate that Congressional intent.
(g) Ten comments state that some foreign entities are not abiding
by the intent of Congress in 46 U.S.C. 12106(e) and have used this
provision as a loophole to avoid coastwise citizenship requirements.
They ask that this loophole be eliminated in the regulations.
We agree with the contention that Congress did not intend a
wholesale repeal of the Jones Act with the lease-financing amendments.
Instead, it intended a narrow relaxation of the ownership requirements
of that law to allow a broadening of the capital market available to
U.S. operators, while preserving control of the vessel in the hands of
a U.S. citizen. The final rule, together with the proposals in the
separate rulemaking (See the ``Related Rulemaking'' section in this
preamble.), are designed to preserve the Jones-Act protections
completely, while allowing lease-financing owners to own vessels in
coastwise trade.
(h) Three comments stated that the proposed regulations should
focus on ensuring that the demise charter meets the intent of the
coastwise protection laws.
We agree that one of the key inquiries is whether control of the
vessel is vested in the demise charterer unaffected by any agreement,
including a side agreement outside of the demise charter itself, an
understanding between the owner or any entity exercising control over
the owner and the demise charterer, or otherwise, that would vest
control of the vessel in the owner or a member of the owner's group. We
do not necessarily agree that the demise charterer should be able to
time charter the vessel to anyone of the charterer's choosing without
restriction. If, for example, the demise charterer time charters the
vessel back to the owner or a member of the owner's group, there is a
potential loss of control of the vessel by the demise charterer to an
entity that we believe Congress did not intend to have any control over
the vessel. A number of comments have termed this as the ``time-
charter-back'' issue. We have proposed to deal with that issue in the
separate NPRM (See the ``Related Rulemaking'' section in this
preamble.) for the reasons stated in the preambles to this rule and to
the NPRM.
(i) Nine commenters stated that the lease-financing law has
protected the control of coastwise-eligible vessels by U.S. citizens
due to the requirement that coastwise vessels be demise chartered to an
entity qualified to engage in the coastwise trade.
We disagree with the comments that contend that the law is clear
and unambiguous on how to preserve control by section-2 U.S. citizens
over vessels lease financed by foreigners. We also disagree that the
so-called additional requirements in our regulations are unnecessary,
counter-productive, or both in fulfilling the Congressional intent by
threatening the sources of financing. See our reasons stated in the
``General Comments'' and ``Comments to Specific Sections'' sections of
this preamble in response to comments raising similar issues. We have
not addressed the additional requirements of the existing documentation
law, such as the requirement that the vessels be U.S.-built, because
this requirement did not originate with the 1996 Act.
(j) Six comments support using the lease-financing provision to
justify self-financing of vessels used in domestic commerce primarily
to carry proprietary cargo. One comment approves of transactions
similar to those used by quasi-Bowater organizations.
These issues are discussed in the preamble to the separate NPRM.
(See the ``Related Rulemaking'' section of this preamble.)
(k) One comment recommends that the term ``coastwise-qualified U.S.
citizen'' be used and defined as a citizen that must be independent of,
and not controlled (by contract, fiduciary relationship, or otherwise)
by, the non-citizen owner or any member of the owner's group. According
to the comment, this would preclude U.S. citizens from agreeing to act
as straw men for aliens.
We believe that this issue is already adequately covered in 46 CFR
part 67, subpart C, and that no additional definition is needed.
(l) To ensure that our rule does not undermine the Jones Act, one
comment recommends that we require the non-citizen applicant to be
licensed as a banking institution in the United States under U.S.
banking laws and that we require the non-citizen applicant to prove
that it has been a bona fide financial institution for not less than 10
years.
We can find no legal support for this suggestion and, therefore,
have not adopted it.
(m) One comment states that, to protect U.S. national and economic
security, the rule should include a ``catch-all'' provision that
prohibits placing effective control of U.S.-flag vessels engaged in the
coastwise trade in the hands of an alien.
We believe that the concern expressed in this comment is adequately
addressed in existing documentation regulations (46 CFR part 67,
subpart C), as amended by this final rule, and in the proposals in the
separate NPRM. (See the ``Related Rulemaking'' section of this
preamble.)
(n) One comment states that proposed Sec. 67.20(a)(6) and (a)(9) in
the SNPRM should be rewritten to prohibit the operator of a foreign
vessel from time chartering the vessel back to a member of the vessel
owner's group; because, as the comment asserts, such an arrangement
would be a scheme for control and not for investment.
This matter is discussed in the separate NPRM. (See the ``Related
Rulemaking'' section of this preamble.)
3. Perceived ``taking of private property'' issue. Several comments
contend that the NPRM and SNPRM will accomplish a ``taking'' of private
property without just compensation in violation of the 5th amendment to
the U.S. Constitution and of international law. This is discussed in
the ``Taking of Private Property'' section of this preamble.
4. Grandfather provision (Sec. 67.20(b)). (a) Several comments
objected to any grandfather provision. They argue that, once the
rulemaking is final, all lease-financing owners should comply with the
final rules.
We believe that the likely result of such a position would be that
the holders of endorsements, who received them in good faith reliance
on the policy of the Coast Guard at the time, would have to re-
structure, at perhaps some financial expense and with little time to
plan for such a restructuring, when the document is renewed.
(b) Comments, principally from those who have received coastwise
endorsements under lease financing issued between 1996 and 2002, argue
that the proposed grandfather provision is too restrictive. They urge
us to adopt a rule that would validate, for future use, the particular
types of financial transaction or arrangement under which documents
were issued before the final rule was published. In other words, any
new vessel owner that chose to use a previously used type of
transaction or arrangement in the future would be able to do so. In
their view, a grandfather provision that just covers the vessel that
received the document, as opposed to
[[Page 5396]]
the vessel owner or to the type of transaction or arrangement, is too
restrictive and amounts to little effective relief from the changed
requirements of this rule.
On one hand, we believe that to require those vessel owners who
relied on our prior practice and policy to comply immediately (or at
the first renewal of the document) with the new rules would
unnecessarily penalize them. On the other hand, we do not believe that
the owners of vessels that already have a lease-financing endorsement
or that intend to apply for such an endorsement in the future should be
entitled to unlimited renewals based on the prior policies and
practices of the Coast Guard. The purpose of the grandfather provision
is to provide reasonable relief for investments and business
arrangements made in reliance on the standard in effect when they were
made. Furthermore, allowing owners that already have an endorsement to
expand their businesses in a manner not available to others would make
those owners and vessels attractive vehicles for further foreign
investment in domestic trade, thus contravening the basic tenets of the
Jones Act.
In order to properly address the issue of limiting the grandfather
provisions and to obtain guidance from those affected by the
grandfather provision, we have proposed a time limit to the grandfather
provision in the new, separate rulemaking (See the ``Related
Rulemaking'' section in this preamble.). The grandfather provision in
Sec. 67.20(b) of the SNPRM remains unchanged at this time.
5. Foreign tax and investment regimes. Two comments raised
questions concerning tax and investment regimes in foreign countries
either favoring or disfavoring foreign competition by U.S. interests.
The lease-financing law does not allow the Coast Guard to deny
foreign entities the right to engage in lease financing based on
whether and to what extent they are granted tax benefits or subsidies
by foreign countries. If a foreign entity complies with the lease-
financing law and these implementing regulations, we cannot prevent it
from engaging in lease financing. As explained elsewhere in this
preamble, the lease-financing law accomplished a limited amendment to
the Jones Act to increase the amount of foreign capital available to
U.S.-vessel owners and operators, while at the same time preserving the
time-honored principle that complete control of a vessel in the
coastwise trade must be in the hands of a U.S. citizen. Thus, the
lease-financing law allows certain foreign banks, leasing companies,
and other financial institutions to engage in the lease financing of
vessels and, if these regulations are observed, to obtain a coastwise
endorsement, even if they have a vessel-operating subsidiary. The law
does not condition the entrance into the U.S. lease-financing market on
whether and to what extent foreign interests grant tax benefits and
subsidies to foreign vessel operators.
6. Foreign energy companies. One comment contends that the proposed
regulations may effectively permit foreign-owned energy companies to
enter the business of owning U.S.-flag vessels and allow those vessels,
through arrangements with charterers, to carry their own proprietary
cargoes.
Foreign-owned energy companies are not prohibited by the statute
from engaging in lease-financing transactions, if they comply with the
requirements of the law and the implementing regulations. The subject
of carriage of proprietary or non-proprietary cargoes by vessels
financed by foreign-owned energy companies will be addressed in the
separate rulemaking (See the ``Related Rulemaking'' section in this
preamble.) under the charter-back issue.
7. Consultation with MARAD. One comment requests that we enlist the
services of the U.S. Maritime Administration (MARAD) to review the
applications and charters, do background checks, and have the power to
require additional supporting data from the applicant.
Although this final rule does not address the use of MARAD's
services, the Coast Guard has worked closely with that agency in the
development of this final rule. In addition, in the separate rulemaking
(See the ``Related Rulemaking'' section in this preamble.), we will ask
for comments specifically on the benefits which might be derived from
such an arrangement and how the arrangement should be implemented.
8. Requests for quick completion of this rulemaking. Nineteen
comments urged that the Coast Guard proceed as quickly as possible to a
final rule. They contend that Coast Guard policy has allowed undue
foreign entry into Jones Act trade and that the continued lack of a
final rule invites further incursions.
As discussed in the ``Regulatory History'' section of this
preamble, these comments factored into our decision to postpone holding
a public meeting until the second rulemaking. (See the ``Related
Rulemaking'' section in this preamble.)
9. Requests for public meetings. Numerous comments asked for one or
more public meetings on the rulemaking.
This is discussed in the ``Regulatory History'' section of this
preamble.
10. Moratorium on processing applications for endorsements. Several
comments suggested that our current policy on lease financing is a
threat to the Jones-Act industry and recommended a moratorium on the
processing of applications for coastwise endorsements under the lease-
financing provisions.
We do not believe that a moratorium is legally supportable. Some
applications have already been approved under the provisions of 46
U.S.C. 12106(e). There is nothing in either the statute or legislative
history that provides a basis for imposing a moratorium on lease-
financing applications. Even if there were, by setting forth the
requirements to participate in lease financing, publication of this
final rule would eliminate the need for a moratorium.
11. Favorable comments. We received comments favoring this or that
proposal, especially to the changes in the SNPRM. For example, one
comment supported the SNPRM as written because it strikes the proper
balance by encouraging financing for U.S. coastwise vessel assets,
while retaining operating control over those assets with fully
qualified coastwise entities, and because it is an appropriate exercise
of the Coast Guard's regulatory authority.
II. Comments to Specific Sections
Section 67.3, Definitions
1. One comment recommends that we define the term ``operation or
management of vessels'' to identify those business activities of an
owner or group that are relevant in determining whether a person may
qualify as a vessel owner.
Based on the suggested wording in comment letter number 30 in the
docket to this rulemaking (See ADDRESSES), we have added such a
definition in Sec. 67.3.
2. One comment recommends that we define the term ``demise
charter'' in the regulation so that it cannot be confused with a time
charter or a hybrid of the two. The comment contends that time charters
are often mislabeled as demise charters.
This concern of mislabeling is remedied, in part, by the addition
of a definition of the term ``sub-charter'' in Sec. 67.3, which is
defined to include all types of charters. See the new use of the term
``sub-charter'' as it appears in Sec.Sec. 67.147(d) and 67.179(d) in
this final rule.
3. Several comments objected to the definition of ``primarily
engaged in
[[Page 5397]]
leasing or other financing activities'' in Sec. 67.3 of the NPRM being
restricted to banks or institutions that were engaged in banking. They
objected to our reliance on the language of the Conference Report that
banks, leasing companies, or other financial institutions would
qualify. Some of the comments assert that this phrase is vague in that
it is unclear whether the qualifying entity is limited to one that only
provides ``banking'' services.
We agree and made changes to the SNPRM. The final rule further
clarifies that the financial institution that may qualify is not
limited to a bank, although such an institution would qualify. It
includes other entities that are primarily engaged in financing
activities, including lease financing. In addition to Federal- or
State-chartered banks, the term would include, but not be limited to,
vendor financing credit companies, industrial commercial finance
companies, and leasing companies, provided that there is an element of
financing involved in the transaction.
Section 67.20, Coastwise Endorsement for a Vessel Under a Demise
Charter
1. To ensure that our rule on lease financing does not undermine
the Jones Act, one comment recommends that we require the non-citizen
applicant to be licensed as a banking institution in the United States
under U.S. banking laws and to prove that it has been a bona fide
financial institution for not less than 10 years.
We disagree that the non-citizen applicant must be a licensed
banking institution. Neither the statute nor the Conference Report
indicates that the applicant must be a banking institution. Other
financial institutions, such as insurance companies or pension plans,
might qualify. However, we believe that there must be a vessel-
financing component in the transaction. Therefore, we revised the
definition of the term ``primarily engaged in leasing or other
financing transactions'' in Sec. 67.3 to include only transactions with
a financing component and to exclude special-purpose leasing companies.
There is no basis for limiting lease-financing entities only to banks
or for requiring the financial institution to be in business for 10
years. To do so would severely limit the funds available for lease
financing.
2. One comment to Sec. 67.20(a)(4) of the NPRM on the ``majority of
the aggregate revenues'' test stated that Congress, in the Conference
Report, did not intend that this test allow up to 49 percent of the
aggregate revenues to be derived from vessel operation or management or
up to 49 percent of person's or group's activities to have nothing to
do with leasing, banking, or similar financing transactions, but to
have everything to do, up to 49 percent, with foreign vessel operations
and still be allowed under 46 U.S.C. 12106(e). The comment contends
that these broad loopholes undermine a level playing field and will
result in a degradation of the U.S. fleet.
We believe that the Conference Report strongly supports the
requirement that ownership of the vessel be primarily a financial
investment and not be by a person primarily engaged in the direct
operation of vessels. However, the Conference Report did not define the
words ``primarily engaged'' and did not specify where to draw the line
between primarily engaged and not primarily engaged. These rules
implement the statute as we believe Congress intended. They protect the
Jones Act principles while allowing foreign owners to qualify even if
they have a vessel owning and operating affiliate. The Conference
Report indicates that the owner should qualify under the law so long as
the majority of the aggregate revenues of the owner, its parent (as
defined herein to include all parents in the owner's chain of ownership
to the ultimate parent) and the group are not derived from the
operation or management of vessels. We believe that inclusion of the
owner, the owner's parent, and the owner's group in the aggregate
revenues test is consistent with the law and the legislative history.
Using the aggregate revenue test in this way is one measure, although
not necessarily the only measure, of determining whether the owner, the
owner's parent, or the owner's group is primarily engaged in vessel
operation or management.
3. One comment on Sec. 67.20(a)(8) of the SNPRM on the operation or
management of commercial foreign-flag vessels suggested that routinely
prepared and published documents or reports should serve as
satisfactory, conclusive proof of the primary business of the group.
These documents for a publicly traded company or group might include,
without limitation, reports filed with the Securities and Exchange
Commission, routine audit reports, or annual reports distributed to
shareholders.
We intend to rely primarily on the certifications of the applicant
because the applicant is best able to know whether the entire group is
primarily engaged in the operation and management of commercial
foreign-flag vessels. However, we reserve the right to investigate
further when circumstances warrant. In that regard, we may use all
available sources of information, including publicly available reports
filed with public bodies such as the Securities and Exchange
Commission, routine audit reports, and reports distributed to
shareholders. As discussed in the separate NPRM (See the ``Related
Rulemaking'' section of this preamble.), we may also require that an
independent auditor having expertise in marine financing and operations
certify that the applicant's operations conform to the requirements of
the applicable regulations.
Section 67.147, Application Procedure: Coastwise Endorsement for a
Vessel Under a Demise Charter
1. One comment to Sec. 67.147(a)(1) stated that the owner should
not have to submit an affidavit because the lease-financing law does
not require it.
We believe that the use of certifications is a cost-effective way
for the vessel owner to establish that it is qualified for a coastwise
endorsement under the lease-financing provisions. While the Director of
the National Vessel Documentation Center may request that the owner
submit additional documentation supporting the certification, for many
owners, the certification will be all that is required. We believe that
it is less burdensome to provide a certification rather than to submit
various documents to show that the owner is qualified. Also, the owner
is the person most qualified to determine whether the owner and group
meet the ``primarily engaged in operation or management of vessels''
test. We may obtain information from publicly available sources or rely
upon the advice of an independent auditor as explained in the separate
NPRM (See the ``Related Rulemaking'' section of this preamble).
To the extent this comment is based on the argument that the lease-
financing law is clear on its face and there is no place in the
implementing regulations for considering the Conference Report in
interpreting the law, we disagree. See the discussion in the ``General
Comments'' section that articulates our reasons for considering the
Conference Report and other sources of Congressional intent in order to
properly implement the law.
2. Ten comments oppose Sec. 67.147(a)(1)(i) in the NPRM, which
would require the owner to certify that it is a bank, leasing company,
or other financial entity. It should have referenced the owner, the
parent of the owner, or a subsidiary of a parent of the owner, as in 46
U.S.C. 12106(e).
We agree with these comments to the NPRM. Section 67.147(a)(1)(i)
in the SNPRM was revised accordingly.
[[Page 5398]]
3. One commenter stated that proposed Sec. 67.147(a)(1)(ii) and
(a)(1)(iv) in the NPRM (Sec. 67.147(a)(1)(iii), (iv), and (vi) in the
SNPRM) find no support in the language of the statute.
We disagree. To the extent that this comment contends that the
language of the statute is clear and unambiguous in setting forth what
we may require in implementing regulations, see our discussion on this
subject in the ``General Comments'' section of this preamble. We
believe that one must refer to the Conference Report to properly
implement this statute. The provisions addressed by this comment come
from the Conference Report and reflect Congressional intent.
4. One comment to the NPRM stated that Sec. 67.147(a)(1)(iv) on the
aggregate revenues test and Sec. 67.147(a)(1)(v) on the operation or
management of foreign-flag vessels both refer to the owner, parent, or
subsidiary of the parent and that this varies from the Conference
Report.
In Sec. 67.147(a)(1)(v) and (a)(1)(vi) of the SNPRM, we changed the
``or'' to ``and.'' In the final rule, we apply the aggregate revenues
test to each of the following taken separately: the owner, the parent
of the owner, and the owner's group. We agree that the aggregate
revenue test should be applied only to the owner, the owner's parent,
and the group of which the owner is a part and not to each entity
within the group of which the owner is a part. Similarly, in the final
rule, we apply the operation and management test to the owner, the
parent, and to the owner's group as a whole, but not to each entity
within the group. We believe, based on the Conference Report statement
to this effect, that Congress intended that an owner could qualify if
one of the affiliates of the owner's group was engaged in the operation
or management of vessels, provided that the aggregate revenues of the
group as a whole, as well as the owner and the owner's parent, were not
derived from vessel operation or management.
Assessment
Due to substantial public interest, this rule is classified as a
``significant regulatory action'' under section 3(f) of Executive Order
12866, Regulatory Planning and Review. The Office of Management and
Budget has reviewed it under that Order. It requires an assessment of
potential costs and benefits under section 6(a)(3) of that Order. It is
``significant'' under the regulatory policies and procedures of the
Department of Homeland Security. The Assessment in the docket for the
SNPRM is unchanged for the final rule.
There are no mandatory costs associated with this rulemaking.
Vessel owners that choose to take advantage of the lease-financing
option would incur costs imposed by this rule that include preparing
and submitting the required documents. Those costs vary from applicant
to applicant.
This rule requires vessel and barge owners and charterers opting to
take advantage of the lease-financing provisions in 46 U.S.C. 12106(e)
to submit certain documents to the Coast Guard's National Vessel
Documentation Center (NDVC). According to our data, 87 business
entities have applied under the lease-financing provisions since the
passage of the 1996 Act. We estimate that the number of entities opting
to do the same in the future will be about 35 annually. We estimate
that it would take about 12 hours to prepare the affidavits and make
the submissions. Using an average estimated rate of $167 per hour, the
total cost per application is $2004. The annual cost is expected to be
$70,140 (Sec. 2004 x 35). The 10-year present value, 2003-2012, is
approximately $540,000.
Congress intended to broaden the sources of capital for owners of
U.S. vessels engaged in the coastwise trade by creating new lease-
financing options. This rule removes the technical impediments to using
various techniques for financing vessels operating in the domestic
trade by increasing the sources of capital available to vessel owners.
Small Entities
Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have
considered whether this rule would have a significant economic impact
on a substantial number of small entities. The term ``small entities''
comprises small businesses, not-for-profit organizations that are
independently owned and operated and are not dominant in their fields,
and governmental jurisdictions with populations of less than 50,000.
This rule will affect vessel owners and charterers who choose to
take advantage of the lease-financing option. This option reduces the
burden on owners by increasing vessel-financing options that would be
acceptable for vessel documentation, enabling vessel owners to obtain
the cheapest financing available. Companies tend to choose lease
financing only if they expect its costs to be offset by increased
profits. Under this rule, to take advantage of the lease-financing
option, both the vessel owner and vessel charterer must submit
affidavits and a copy of their charter or sub-charter to the NVDC. The
estimated cost of preparing and submitting this material will be
minimal.
Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that
this final rule will not have a significant economic impact on a
substantial number of small entities.
Assistance for Small Entities
Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996 (Pub. L. 104-121), we offered to assist small
entities in understanding the rule so that they can better evaluate its
effects on them and participate in the rulemaking. The NPRM and SNPRM
provided small businesses, organizations, and governmental
jurisdictions with a Coast Guard contact to handle questions concerning
this rule's provisions.
Small businesses may send comments on the actions of Federal
employees who enforce, or otherwise determine compliance with, Federal
regulations to the Small Business and Agriculture Regulatory
Enforcement Ombudsman and the Regional Small Business Regulatory
Fairness Boards. The Ombudsman evaluates these actions annually and
rates each agency's responsiveness to small business. If you wish to
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR
(1-888-734-3247).
Collection of Information
This rule calls for a new collection of information under the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). Sections 67.147
and 67.179 amend the collection-of-information requirements for vessel
owners and charterers applying to engage in the coastwise trade under
the lease-financing provisions of 46 U.S.C. 12106(e). The Coast Guard
needs this information to determine whether an entity meets the
statutory requirements. These provisions will require modifying the
burden in the previously approved collection under OMB Control Number
2115-0110 (now 1625-0027). No comments were received relating to the
collection-of-information requirements as presented in the NPRM or
SNPRM.
As required by 44 U.S.C. 3507(d), we submitted a copy of this rule
to the Office of Management and Budget (OMB) for its review of the
collection of information. The section numbers are Sec.Sec. 67.147 and
67.179, and the corresponding approval number from OMB is OMB Control
Number 1625-0027 (formerly 2115-0110). OMB has not yet completed its
review of, or approved the changes to, this collection. Therefore,
Sec.Sec. 67.147 and 67.179 in this rule will not become effective until
[[Page 5399]]
approved by OMB. We will publish a document in the Federal Register
announcing OMB's approval and effective date of those sections.
You are not required to respond to a collection of information
unless it displays a currently valid OMB control number.
Federalism
A rule has implications for federalism under Executive Order 13132,
Federalism, if it has a substantial direct effect on State or local
governments and would either preempt State law or impose a substantial
direct cost of compliance on them. We have analyzed this rule under
that Order and have determined that it does not have implications for
federalism.
Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
requires Federal agencies to assess the effects of their discretionary
regulatory actions. In particular, the Act addresses actions that may
result in the expenditure by a State, local, or tribal government, in
the aggregate, or by the private sector of $100,000,000 or more in any
one year. Though this rule will not result in such an expenditure, we
do discuss the effects of this rule elsewhere in this preamble.
Taking of Private Property
This rule will not effect a taking of private property or otherwise
have taking implications under Executive Order 12630, Governmental
Actions and Interference with Constitutionally Protected Property
Rights.
Several commenters contend that the proposals in the NPRM and the
SNPRM would accomplish a taking of private property without just
compensation in violation of the 5th amendment to the U.S. Constitution
and international law. They argue that they have invested millions of
dollars in lease-financing transactions in reliance on the Coast
Guard's assurances that their transactions would be approved by the
Coast Guard. Although the comments do not set forth the specifics of
their claims of takings, the comments do appear to assert that the
Coast Guard created a property right in the transactions engaged in by
the commenters when it approved their applications and that the
proposals in the NPRM and SNPRM, to the extent that they differ
materially from past policies, would diminish the value of that
property right, thus resulting in a compensable taking.
We disagree that the regulations accomplish such a taking. The
courts have recognized two types of takings in the context of
regulatory actions by Federal agencies. The first is a regulatory
taking, and the second is a categorical taking. The rules with respect
to each type were recently set forth in Maritrans Inc. v. United States
(No. 96-483 C, Dec. 21, 2001; 51 Fed. Cl. 277; 2001 U.S. Claims Lexis
263; 53 ERC (BNA) 1989; 2002 AMC 419). Briefly, the court stated, with
respect to both types of takings, that a mere diminution, however
serious, is insufficient to demonstrate a taking (Slip op. at p. 5).
According to the U.S. Supreme Court, legislation readjusting rights and
burdens is not unlawful solely because it upsets settled expectations
(Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15-16 (1976)). The
commenters have not asserted that the vessels they are operating under
lease-financing coastwise endorsements will become valueless as a
result of this rulemaking. They have asserted that they may, in the
future, have to restructure or divest their investment or adjust their
expectations as to how much longer and under what circumstances they
can continue to so operate them. However, these claims are insufficient
to establish a compensable taking under the Constitution or under
international law.
The commenters further contend they have a compensable claim under
the Restatement of the Foreign Relations Law of the United States,
section 712. These claims are governed by section 713(2) of the
Restatement. Section 713(2)(a) allows parties to pursue remedies
provided by international agreement. Here, commenters suggest that the
Charter of Economic Rights and Duties of States applies. Yet, the
Charter only governs state action nationalizing, expropriating, or
transferring private property. The Charter does not apply here because
the regulations will not accomplish any of these actions. Other
subsections of section 713 of the Restatement are equally inapplicable
on their face.
Civil Justice Reform
This rule meets applicable standards in sections 3(a) and 3(b)(2)
of Executive Order 12988, Civil Justice Reform, to minimize litigation,
eliminate ambiguity, and reduce burden.
Protection of Children
We have analyzed this rule under Executive Order 13045, Protection
of Children from Environmental Health Risks and Safety Risks. This rule
is not an economically significant rule and does not create an
environmental risk to health or risk to safety that may
disproportionately affect children.
Indian Tribal Governments
This rule does not have tribal implications under Executive Order
13175, Consultation and Coordination with Indian Tribal Governments,
because it does not have a substantial direct effect on one or more
Indian tribes, on the relationship between the Federal Government and
Indian tribes, or on the distribution of power and responsibilities
between the Federal Government and Indian tribes.
Energy Effects
We have analyzed this rule under Executive Order 13211, Actions
Concerning Regulations That Significantly Affect Energy Supply,
Distribution, or Use. We have determined that it is not a ``significant
energy action'' under that order, although it is considered a
``significant regulatory action'' under Executive Order 12866. We
expect that this rulemaking will not have a significant adverse effect
on the supply, distribution, or use of energy, including a shortfall in
supply, price increases, and increased use of foreign supplies. The
Administrator of the Office of Information and Regulatory Affairs has
not designated this rulemaking as a significant energy action.
Therefore, it does not require a Statement of Energy Effects under
Executive Order 13211.
Environment
We have considered the environmental impact of this rule and
concluded that, under figure 2-1, paragraph (34)(d), of Commandant
Instruction M16475.lD, this rule is categorically excluded from further
environmental documentation. This rulemaking is administrative in
nature and identifies the information necessary to apply for a
coastwise endorsement under 46 U.S.C. 12106(e). A ``Categorical
Exclusion Determination'' is available in the docket where indicated
under ADDRESSES.
List of Subjects in 46 CFR Part 67
Reporting and recordkeeping requirements, Vessels.
0
For the reasons discussed in the preamble, the Coast Guard amends 46
CFR part 67 as follows:
PART 67--DOCUMENTATION OF VESSELS
0
1. The authority citation for part 67 is revised to read as follows:
Authority: 14 U.S.C. 664; 31 U.S.C. 9701; 42 U.S.C. 9118; 46
U.S.C. 2103, 2107, 2110, 12106, 12120, 12122; 46 U.S.C. app. 876;
Department of Homeland Security Delegation No. 0170.1.
[[Page 5400]]
0
2. In Sec. 67.3, revise the definition for the term ``person''; and
add, in alphabetical order, definitions for the terms ``affiliate,''
``group,'' ``operation or management of vessels,'' ``parent,''
``primarily engaged in leasing or other financing transactions,''
``sub-charter,'' and ``subsidiary'' to read as follows:
Sec. 67.3 Definitions.
* * * * *
Affiliate means a person that is less than 50 percent owned or
controlled by another person.
* * * * *
Group means the person that owns a vessel, the parent of that
person, and all subsidiaries and affiliates of the parent of that
person.
* * * * *
Operation or management of vessels means all activities related to
the use of vessels to provide services. These activities include ship
agency; ship brokerage; activities performed by a vessel operator or
demise charterer in exercising direction and control of a vessel, such
as crewing, victualing, storing, and maintaining the vessel and
ensuring its safe navigation; and activities associated with
controlling the use and employment of the vessel under a time charter
or other use agreement. It does not include activities directly
associated with making financial investments in vessels or the receipt
of earnings derived from these investments.
Parent means any person that directly or indirectly owns or
controls at least 50 percent of another person. If an owner's parent is
directly or indirectly controlled at least 50 percent by another
person, that person is also a parent of the owner. Therefore, an owner
may have multiple parents.
Person means an individual; corporation; partnership; limited
liability partnership; limited liability company; association; joint
venture; trust arrangement; and the government of the United States, a
State, or a political subdivision of the United States or a State; and
includes a trustee, beneficiary, receiver, or similar representative of
any of them.
Primarily engaged in leasing or other financing transactions means
lease financing, in which more than 50 percent of the aggregate revenue
of a person is derived from banking, investing, lease financing, or
other similar transactions.
* * * * *
Sub-charter means all types of charters or other contracts for the
use of a vessel that are subordinate to a charter. The term includes,
but is not limited to, a demise charter, a time charter, a voyage
charter, a space charter, and a contract of affreightment.
Subsidiary means a person at least 50 percent of which is directly
or indirectly owned or controlled by another person.
* * * * *
0
3. Add Sec. 67.20 to read as follows:
Sec. 67.20 Coastwise endorsement for a vessel under a demise charter.
(a) Except as under paragraphs (b) through (e) of this section, to
be eligible for a coastwise endorsement under 46 U.S.C. 12106(e) and to
operate in coastwise trade under 46 U.S.C. 12106(e) and 12110(b), a
vessel under a demise charter must meet the following:
(1) The vessel is eligible for documentation under 46 U.S.C. 12102.
(2) The vessel is eligible for a coastwise endorsement under Sec.
67.19(c), has not lost coastwise eligibility under Sec. 67.19(d), and
was financed with lease financing.
(3) The person that owns the vessel, the parent of that person, or
a subsidiary of the parent of that person is primarily engaged in
leasing or other financing transactions.
(4) The person that owns the vessel is organized under the laws of
the United States or of a State.
(5) None of the following is primarily engaged in the direct
operation or management of vessels:
(i) The person that owns the vessel.
(ii) The parent of the person that owns the vessel.
(iii) The group of which the person that owns the vessel is a
member.
(6) The ownership of the vessel is primarily a financial investment
without the ability and intent to directly or indirectly control the
vessel's operations by a person not primarily engaged in the direct
operation or management of vessels.
(7) The majority of the aggregate revenues of each of the following
is not derived from the operation or management of vessels:
(i) The person that owns the vessel.
(ii) The parent of the person that owns the vessel.
(iii) The group of which the person that owns the vessel is a
member.
(8) None of the following is primarily engaged in the operation or
management of commercial, foreign-flag vessels used for the carriage of
cargo for parties unrelated to the vessel's owner or charterer:
(i) The person that owns the vessel.
(ii) The parent of the person that owns the vessel.
(iii) The group of which the person that owns the vessel is a
member.
(9) The person that owns the vessel has transferred to a qualified
U.S. citizen under 46 U.S.C. app. 802 full possession, control, and
command of the U.S.-built vessel through a demise charter in which the
demise charterer is considered the owner pro hac vice during the term
of the charter.
(10) The charterer must certify to the Director, National Vessel
Documentation Center, that the charterer is a citizen of the United
States for engaging in the coastwise trade under 46 U.S.C. app. 802.
(11) The demise charter is for a period of at least 3 years, unless
a shorter period is authorized by the Director, National Vessel
Documentation Center, under circumstances such as--
(i) When the vessel's remaining life would not support a charter of
3 years; or
(ii) To preserve the use or possession of the vessel.
(b) A vessel under a demise charter that was eligible for, and
received, a document with a coastwise endorsement under Sec. 67.19 and
46 U.S.C. 12106(e) before February 4, 2004, may continue to operate
under that endorsement on and after that date and may renew the
document and endorsement if the certificate of documentation is not
subject to--
(1) Exchange under Sec. 67.167(b)(1) through (b)(3);
(2) Deletion under Sec. 67.171(a)(1) through (a)(6); or
(3) Cancellation under Sec. 67.173.
(c) A vessel under a demise charter that was constructed under a
building contract that was entered into before February 4, 2004, in
reliance on a letter ruling from the Coast Guard issued before February
4, 2004, is eligible for documentation with a coastwise endorsement
under Sec. 67.19 and 46 U.S.C. 12106(e). The vessel may continue to
operate under that endorsement and may renew the document and
endorsement if the certificate of documentation is not subject to--
(1) Exchange under Sec. 67.167(b)(1) through (b)(3);
(2) Deletion under Sec. 67.171(a)(1) through (a)(6); or
(3) Cancellation under Sec. 67.173.
(d) A barge deemed eligible under 46 U.S.C. 12106(e) and 12110(b)
to operate in coastwise trade before February 4, 2004, may continue to
operate in that trade after that date unless--
(1) The ownership of the barge changes in whole or in part;
(2) The general partners of a partnership owning the barge change
by addition, deletion, or substitution;
(3) The State of incorporation of any corporate owner of the barge
changes;
(4) The barge is placed under foreign flag;
[[Page 5401]]
(5) Any owner of the barge ceases to be a citizen within the
meaning of subpart C of this part; or
(6) The barge ceases to be capable of transportation by water.
(e) A barge under a demise charter that was constructed under a
building contract that was entered into before February 4, 2004, in
reliance on a letter ruling from the Coast Guard issued before February
4, 2004, is eligible to operate in coastwise trade under 46 U.S.C.
12106(e) and 12110(b). The barge may continue to operate in coastwise
trade unless--
(1) The ownership of the barge changes in whole or in part;
(2) The general partners of a partnership owning the barge change
by addition, deletion, or substitution;
(3) The State of incorporation of any corporate owner of the barge
changes;
(4) The barge is placed under foreign flag;
(5) Any owner of the barge ceases to be a citizen within the
meaning of subpart C of this part; or
(6) The barge ceases to be capable of transportation by water.
(f) To apply for a coastwise endorsement for a vessel under a
demise charter, see Sec. 67.147 and, for a barge, see Sec. 67.179.
Sec. 67.35 [Amended]
0
4. In Sec. 67.35, at the end of paragraph (c), add the words ``or the
vessel qualifies under Sec. 67.20''.
0
5. In Sec. 67.36, revise paragraphs (c)(1) and (c)(2) to read as
follows:
Sec. 67.36 Trust.
* * * * *
(c) * * *
(1) It meets the requirements of paragraph (a) of this section and
at least 75 percent of the equity interest in the trust is owned by
citizens; or
(2) It meets the requirements of Sec. 67.20.
0
6. In Sec. 67.39, revise paragraphs (c)(1) and (c)(2) to read as
follows:
Sec. 67.39 Corporation.
* * * * *
(c) * * *
(1) It meets the requirements of paragraph (a) of this section and
at least 75 percent of the stock interest in the corporation is owned
by citizens; or
(2) It meets the requirements of Sec. 67.20.
* * * * *
0
7. Add Sec. 67.147 to read as follows:
Sec. 67.147 Application procedure: Coastwise endorsement for a vessel
under a demise charter.
(a) In addition to the items under Sec. 67.141, the person that
owns the vessel (other than a barge under Sec. 67.179) and that seeks a
coastwise endorsement under Sec. 67.20 must submit the following to the
National Vessel Documentation Center:
(1) A certification in the form of an affidavit and, if requested
by the Director, National Vessel Documentation Center, supporting
documentation establishing the following facts with respect to the
transaction from an individual who is authorized to provide
certification on behalf of the person that owns the vessel and who is
an officer in a corporation, a partner in a partnership, a member of
the board of managers in a limited liability company, or their
equivalent. The certificate must certify the following:
(i) That the person that owns the vessel, the parent of that
person, or a subsidiary of a parent of that person is primarily engaged
in leasing or other financing transactions.
(ii) That the person that owns the vessel is organized under the
laws of the United States or a State.
(iii) That none of the following is primarily engaged in the direct
operation or management of vessels:
(A) The person that owns the vessel.
(B) The parent of the person that owns the vessel.
(C) The group of which the person that owns the vessel is a member.
(iv) That ownership of the vessel is primarily a financial
investment without the ability and intent to directly or indirectly
control the vessel's operations by a person not primarily engaged in
the direct operation or management of vessels.
(v) That the majority of the aggregate revenues of each of the
following is not derived from the operation or management of vessels:
(A) The person that owns the vessel.
(B) The parent of the person that owns the vessel.
(C) The group of which the person that owns the vessel is a member.
(vi) That none of the following is primarily engaged in the
operation or management of commercial, foreign-flag vessels used for
the carriage of cargo for parties unrelated to the vessel's owner or
charterer:
(A) The person that owns the vessel.
(B) The parent of the person that owns the vessel.
(C) The group of which the person that owns the vessel is a member.
(vii) That the person that owns the vessel has transferred to a
qualified United States citizen under 46 U.S.C. app. 802 full
possession, control, and command of the U.S.-built vessel through a
demise charter in which the demise charterer is considered the owner
pro hac vice during the term of the charter.
(viii) That the vessel is financed with lease financing.
(2) A copy of the charter, which must provide that the charterer is
deemed to be the owner pro hac vice for the term of the charter.
(b) The charterer must submit the following to the National Vessel
Documentation Center:
(1) A certificate certifying that the charterer is a citizen of the
United States for the purpose of engaging in the coastwise trade under
46 U.S.C. app. 802.
(2) Detailed citizenship information in the format of form CG-1258,
Application for Documentation, section G, citizenship. The citizenship
information may be attached to the form CG-1258 that is submitted under
Sec. 67.141 and must be signed by, or on behalf of, the charterer.
(c) Whenever a charter under paragraph (a) of this section is
amended, the vessel owner must file a copy of the amendment with the
Director, National Vessel Documentation Center, within 10 days after
the effective date of the amendment.
(d) Whenever the charterer of a vessel under paragraph (a) of this
section enters into a sub-charter with another person for the use of
the vessel--
(1) The charterer must file a copy of the sub-charter and
amendments to the sub-charter with the Director, National Vessel
Documentation Center, within 10 days after the effective date of the
sub-charter if requested to do so by the Director; and
(2) If the sub-charter is a demise charter, the sub-charterer must
provide detailed citizenship information in the format of form CG-1258,
Application for Documentation, section G, citizenship.
(e) A person that submits a false certification under this section
is subject to penalty under 46 U.S.C. 12122 and 18 U.S.C. 1001.
0
8. In Sec. 67.167, in paragraph (c)(8), remove the last ``or''; in
paragraph (c)(9), remove the period and add, in its place, a semicolon;
and add paragraphs (c)(10) and (c)(11) to read as follows:
Sec. 67.167 Requirement for exchange of Certificate of Documentation.
* * * * *
(c) * * *
(10) For a vessel with a coastwise endorsement under 46 U.S.C.
12106(e), except for a vessel with a coastwise endorsement under 46
U.S.C. 12106(e) that was in effect before February 4, 2004--
[[Page 5402]]
(i) The demise charter expires or is transferred to another
charterer;
(ii) The citizenship of the charterer or sub-charterer changes to
the extent that they are no longer qualified for a coastwise
endorsement;
(iii) Neither the person that owns the vessel, nor the parent of
that person, nor any subsidiary of the parent of that person is
primarily engaged in leasing or other financing transactions;
(iv) The majority of the aggregate revenues of at least one of the
following is derived from the operation or management of vessels:
(A) The person that owns the vessel.
(B) The parent of the person that owns the vessel.
(C) The group of which the person that owns the vessel is a member;
or
(v) At least one of the following is primarily engaged in the
operation or management of commercial, foreign-flag vessels used for
the carriage of cargo for parties unrelated to the vessel's owner or
charterer:
(A) The person that owns the vessel.
(B) The parent of the person that owns the vessel.
(C) The group of which the person that owns the vessel is a member;
or
(11) For a vessel with a coastwise endorsement under 46 U.S.C.
12106(e) that was in effect before February 4, 2004--
(i) The demise charter expires or is transferred to another
charterer;
(ii) The citizenship of the charterer or sub-charterer changes to
the extent that they are no longer qualified for a coastwise
endorsement; or
(iii) Neither the person that owns the vessel, nor the parent of
that person, nor a subsidiary of the parent of that person is primarily
engaged in leasing or other financing transactions.
* * * * *
0
9. Add Sec. 67.179 to subpart M to read as follows:
Sec. 67.179 Application procedure: Coastwise operation of a barge
under a demise charter.
(a) The person that owns a barge qualified to engage in coastwise
trade under the lease-financing provisions of 46 U.S.C. 12106(e) must
submit the following to the National Vessel Documentation Center:
(1) A certification, in the form of an affidavit and, if requested
by the Director, National Vessel Documentation Center, supporting
documentation establishing the following facts with respect to the
transaction from an individual who is authorized to provide
certification on behalf of the person that owns the barge and who is an
officer in a corporation, a partner in a partnership, a member of the
board of managers in a limited liability company, or their equivalent.
The certificate must certify the following:
(i) That the person that owns the barge, the parent of that person,
or a subsidiary of the parent of that person is primarily engaged in
leasing or other financing transactions.
(ii) That the person that owns the barge is organized under the
laws of the United States or a State.
(iii) That none of the following is primarily engaged in the direct
operation or management of vessels:
(A) The person that owns the barge.
(B) The parent of the person that owns the barge.
(C) The group of which the person that owns the barge is a member.
(iv) That ownership of the barge is primarily a financial
investment without the ability and intent to directly or indirectly
control the barge's operations by a person not primarily engaged in the
direct operation or management of the barge.
(v) That the majority of the aggregate revenues of each of the
following is not derived from the operation or management of vessels:
(A) The person that owns the barge.
(B) The parent of the person that owns the barge.
(C) The group of which the person that owns the barge is a member.
(vi) That none of the following is primarily engaged in the
operation or management of commercial, foreign-flag vessels used for
the carriage of cargo for parties unrelated to the vessel's owner or
charterer:
(A) The person that owns the barge.
(B) The parent of the person that owns the barge.
(C) The group of which the person that owns the barge is a member.
(vii) That the person that owns the barge has transferred to a
qualified United States citizen under 46 U.S.C. app. 802 full
possession, control, and command of the U.S.-built barge through a
demise charter in which the demise charterer is considered the owner
pro hac vice for the term of the charter.
(viii) That the barge is qualified to engage in the coastwise trade
and that it is owned by a person eligible to own vessels documented
under 46 U.S.C. 12102(e).
(ix) That the barge is financed with lease financing.
(2) A copy of the charter, which must provide that the charterer is
deemed to be the owner pro hac vice for the term of the charter.
(b) The charterer must submit the following to the National Vessel
Documentation Center:
(1) A certificate certifying that the charterer is a citizen of the
United States for engaging in the coastwise trade under 46 U.S.C. app.
802.
(2) Detailed citizenship information in the format of form CG-1258,
Application for Documentation, section G, citizenship. The citizenship
information must be signed by, or on behalf of, the charterer.
(c) Whenever a charter under paragraph (a) of this section is
amended, the barge owner must file a copy of the amendment with the
Director, National Vessel Documentation Center, within 10 days after
the effective date of the amendment.
(d) Whenever the charterer of a barge under paragraph (a) of this
section enters into a sub-charter with another person for the use of
the barge--
(1) The charterer must file a copy of the sub-charter and
amendments to the sub-charter with the Director, National Vessel
Documentation Center, within 10 days after the effective date of the
sub-charter if requested to do so by the Director; and
(2) If the sub-charter is a demise charter, the sub-charterer must
provide detailed citizenship information in the format of form CG-1258,
Application for Documentation, section G, citizenship.
(e) A person that submits a false certification under this section
is subject to penalty under 46 U.S.C. 12122 and 18 U.S.C. 1001.
Dated: January 29, 2004.
Thomas H. Collins,
Admiral, Coast Guard, Commandant.
[FR Doc. 04-2230 Filed 1-30-04; 11:34 am]
BILLING CODE 4910-15-P