[Federal Register: October 18, 2006 (Volume 71, Number 201)]
[Rules and Regulations]
[Page 61413-61425]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18oc06-12]
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DEPARTMENT OF HOMELAND SECURITY
Coast Guard
46 CFR Parts 67 and 68
[USCG-2005-20258]
RIN 1625-AA95
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 for documenting lease-
financed vessels that have a ``coastwise endorsement'' (i.e., vessels
used in trade and passenger service within the U.S. or between U.S.
ports and those used in dredging and towing in U.S. waters). The
vessels affected by this proposal are owned by foreign owned or
controlled U.S. companies, where there is a ``demise charter'' to a
U.S. citizen (i.e., an agreement for the charterer to assume
responsibility for operating, crewing, and maintaining the vessel as if
the charterer owned it).
DATES: This final rule is effective November 17, 2006, except for
Sec. Sec. 68.65, 68.70, 68.75, 68.100, 68.107, and 68.109, which
contain certain collection of information requirements that have not
[[Page 61414]]
yet 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-2005-20258 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 or submitting material to the docket, call Renee V. Wright,
Program Manager, Docket Operations, telephone 202-493-0402.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Regulatory History
II. Background and Purpose
III. Discussion of Comments and Changes
IV. Regulatory Analysis and Review
I. Regulatory History
On February 15, 2006, we published a notice of proposed rulemaking
(proposed rule) entitled ``Vessel Documentation: Lease Financing for
Vessels Engaged in the Coastwise Trade'' in the Federal Register (71 FR
7897). We received 14 letters commenting on the proposed rule. One
party requested that the 90-day comment period be extended to 120 days.
After consideration of the reasons for the request, we believe that the
90 day comment period was far more than adequate to allow for carefully
researched, thoroughly responsive comments and, therefore, deny the
request for extension. To do otherwise would be a disservice to those
who complied with the published deadline of May 16, 2006, and would
unnecessarily delay publication of this final rule. No public meeting
was requested and none was held.
II. Background and Purpose
This final rule amends the regulations in title 46, Code of Federal
Regulations (CFR), parts 67 and 68, on the documentation of U.S.-built
vessels owned by foreign owned or controlled U.S. companies that are
lease financed to a U.S. citizen for use in the coastwise trade. Under
lease financing, ownership of the vessel is in the name of the owner,
with a demise charter to the charterer (i.e., the operator) 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.
This final rule is necessary to align our lease-financing
regulations with amendments made by Congress under the Coast Guard and
Maritime Transportation Act of 2004 (Pub. L. 108-293) (the Act)
concerning the information needed to determine the eligibility of a
vessel owner for a coastwise endorsement under the lease-financing law.
As the lease-financing provisions of the Act do not require regulatory
action on our part to make them effective, this rule merely aligns our
lease-financing regulations with the provisions of the Act.
Specifically, the final rule makes the following five changes primarily
to align our regulations with the Act:
1. It clarifies the requirements used to determine the eligibility
of lease-financed vessels for coastwise endorsements.
2. It permanently grandfathers, from the new statutory
requirements, all lease-financed vessels, except for offshore supply
vessels documented on or before August 9, 2004.
3. It requires the owners of lease-financed offshore supply vessels
with valid coastwise endorsements issued before August 9, 2004, to
reapply for a new coastwise endorsement by August 9, 2007.
4. It requires all owners of lease-financed vessels with recently-
issued coastwise endorsements (i.e., those issued after August 9, 2004)
to certify each year that their ownership and investment status has not
changed.
5. It requires entities that enter into a demise sub-charter
agreement to file a copy of the sub-charter and amendments to the sub-
charter with the Director of the National Vessel Documentation Center
(Documentation Center).
III. Discussion of Comments and Changes
By the close of the comment period for the proposed rule, 14
letters were received. Three of the letters were received after the May
16, 2006, deadline. We considered the comments in the late-filed
letters, but the comments either were similar to those in the on-time
letters or suggested organizational changes that we determined were not
suitable for this rulemaking. Thus, we made no changes to the
regulatory text as a result of the late-filed letters. The request made
by one party for an extension of the comment period is discussed in the
``Regulatory History'' section of this preamble.
1. Section 68.55. Two comments requested that paragraph (2) of the
definition of the word ``affiliate'' in proposed Sec. 68.55 be changed
to include reports submitted to a comparable agency of a foreign
government as well as reports submitted to the United States Securities
and Exchange Commission (SEC) or the Internal Revenue Service (IRS).
They pointed out that not being named as being part of the same
consolidated group in any report or other document submitted to the SEC
or IRS is not the only proof of non-affiliation. They noted that the
affiliation test, as a practical matter, could be applied in cases
where the document was not one submitted to the SEC or IRS but to a
comparable agency of a foreign government.
Though there is merit to this suggestion, to adopt it would expand
the term ``affiliate'' beyond the scope of the definition in the Act.
We believe that, in providing a specific definition, Congress expected
the Coast Guard to apply that definition.
2. Section 68.55. One comment noted that the definition of the term
``passive investment'' in Sec. 68.55, though tracking the language of
the Act, needed further clarification. The comment offered no
suggestion as to how the definition should be clarified.
We believe that, in providing a specific definition, Congress
expected the Coast Guard to apply that definition.
3. Section 68.55. One comment requested that we provide a less
complicated definition of the term ``qualified proprietary cargo'' than
is found in proposed Sec. 68.55. The comment makes no suggestion as to
how to improve the definition.
The definition in Sec. 68.55, though lengthy, is identical to the
language in the Act. We do not believe that further clarification is
necessary or desirable.
4. Section 68.65(a)(1)(i). One comment noted that neither the Act
nor the proposed rule defines ``leasing company, bank, and financial
institution,'' as used in Sec. 68.65(a)(1)(i). They requested that we
provide ``a clearer standard for qualification.''
We believe that, by doing so, we could inadvertently and improperly
restrict sources of funding. Accordingly, we left the term unchanged.
5. Section 68.65(a)(2)(vi). One comment noted a typographical error
in
[[Page 61415]]
proposed Sec. 68.65(a)(2)(vi), which refers to a non-existent Sec.
68.10.
The correct reference is Sec. 67.20. However, because Sec. 67.20
is removed by this final rule, we revised Sec. 68.65(a)(2)(vi) to
read: ``That person owned one or more vessels documented as of August
9, 2004, under Sec. 67.20, as that section was in effect on that
date.''
6. Section 68.70(e). One comment suggested that, in proposed Sec.
68.70(e), we exclude time charters, voyage charters, and contracts of
affreightment from the requirement that they be filed with the
Documentation Center.
We disagree. The purpose of Sec. 68.70(e) is to provide for
discretionary review by the Documentation Center of these instruments
in order to ensure that, regardless of their title, they do not
transfer impermissible control of the vessel to a person not qualified
to operate vessels in coastwise trade.
7. Sections 68.70(d) and 68.75(d). Two comments took issue with the
requirement in proposed Sec. Sec. 68.70(d) and 68.75(d) that sub-
charters and amendments to them be filed within 10 days after their
effective date. The comments requested that we require sub-charters and
amendments to be filed no later than 10 days before their effective
date.
Although we understand the concern behind this comment, 46 U.S.C.
12106(e)(2) requires that amendments to charters be filed within 10
days following the filing of an amendment. We believe that all demise
charters should be treated equally and that Congress did not intend to
place a greater burden on sub-charterers than on the original demise
charterer. Therefore, we require both to be filed within 10 days after
their effective date.
8. Section 68.100. One comment noted that the proposed rule did not
account for the special grandfather clause in sections 608(c)(1) and
(c)(2) of the Act concerning permanent replacement vessels contracted
for purchase or construction not later than December 31, 2004.
We deliberately left these provisions out of our regulations
because of the very small universe of vessels to which these provisions
apply. Instead, we intend to evaluate applications for these vessels on
a case-by-case basis, applying the literal language of the Act.
9. Section 68.105(b) and (d). Two comments noted that proposed
Sec. 68.105(b) and (d) would extend grandfather provisions to vessels
documented before February 4, 2004, instead of those documented before
August 9, 2004, as provided by the Act.
We agree and have changed the dates in Sec. 68.105(b) and (d) to
August 9, 2004, to align with the Act.
10. Section 68.111. Four comments expressed concern that a
coastwise endorsement under Sec. 68.111(a)(1) and (b)(1) would be
invalidated upon the expiration or termination of a demise charter. The
comments noted that, under the Act, vessels documented for coastwise
trade under a lease-financing arrangement before August 9, 2004, are
``grandfathered'' and are not subject to regulations published after
February 4, 2004.
These provisions are from previous 46 CFR 67.167(c)(10) and
(c)(11), which are relocated by this rulemaking, without change, to new
Sec. 68.111(a)(1) and (b)(1). We believe that the invalidation of
endorsements upon expiration or transfer of a charter is essential to
proper management and integrity of the coastwise-documentation process.
There are numerous other circumstances under which an endorsement
becomes invalid, such as a change in the vessel's tonnage, change of
ownership, change of the vessel's name, change of hailing port, or even
a failure to renew. However, it has always been our position that
vessels documented under 46 U.S.C. 12106(e) before August 9, 2004, will
be eligible to apply, under subpart D of part 68, for a new coastwise
endorsement. However, because it is probable that other readers may
have similar concerns, we have added new paragraph (c) to Sec. 68.111
to clearly state these grandfather rights.
11. A late-filed comment requested that we reorganize the proposed
rule to provide a separate subpart for owners of ``certain tank
vessels'' specifically addressed in 46 U.S.C. 12106(f)(3). It further
requested a new opportunity for comment on the proposed rule following
such a reorganization.
We do not believe that a new subpart would be helpful in light of
the delay it would cause. The uncertainty engendered by the lack of a
final rule while a supplemental notice of proposed rulemaking is being
prepared and submitted for comment outweighs any perceived advantage
which might be realized through such a reorganization.
12. One late-filed comment requested an extension of the comment
period to allow for comments ``within the financial community
concerning the desirability of provisions that would allow large non-
citizen vessel financing organizations, that might include a single
vessel operating affiliate, to qualify on the basis of some form of de
minimis exception.''
Should we re-open the comment period as suggested, we would not be
able to consider this issue because the Act makes no provision for
these exceptions. Therefore, we did not adopt this suggestion.
13. Third-party audits. Four comments addressed the issue of third-
party audits in response to a question in the preamble to the proposed
rule (71 FR 7899; February 15, 2006). The proposed rule itself did not
contain a third-party-audit provision. The question was: ``Should we
require each applicant for a coastwise endorsement issued under lease
financing to provide a certification from an independent auditor with
expertise in the business of vessel financing and operations?''
All of the comments on third-party-audit question stated that any
benefit which might be derived from these audits would be outweighed by
the cost of the audits. As explained in the preamble to the proposed
rule (71 FR 7899), the same question was asked in an earlier lease-
financing rulemaking that was withdrawn on April 13, 2005, before the
Act was passed. Though the comments to the withdrawn rulemaking were
evenly split between those favoring third-party audits and those
opposing it, we believe that the new self-certification requirement in
the Act (46 U.S.C. 12106(f)) evidently caused those who favored third-
party audits to change their minds. Therefore, we do not intend to
further consider the issue of third-party audits.
IV. Regulatory Analysis and Review
Assessment
This rule is not a ``significant regulatory action'' under section
3(f) of Executive Order 12866, Regulatory Planning and Review. We
expect the economic impact of this rule to be minimal. The supplemental
``Regulatory Analysis'' in the docket for the proposed rule is
unchanged for the final rule. There were no comments on the Regulatory
Analysis. A summary of the analysis follows:
The Coast Guard amends its regulations on the documentation for
U.S.-built vessels owned by foreign-owned or controlled U.S. companies
that are lease financed to a U.S. citizen for use in the coastwise
trade. This rule addresses amendments provided by Congress under the
Act concerning information needed to determine the eligibility of a
vessel owner for a coastwise endorsement under the lease-financing law.
This rule will update and provide consistent documentation
requirements to determine the eligibility of lease-
[[Page 61416]]
financed vessels for coastwise endorsements as discussed under the
``Background and Purpose'' section of this preamble. The rule also
implements the Congressionally-mandated permanent grandfathering of all
lease-financed vessels, except for offshore supply vessels documented
on or before August 9, 2004, from the new requirements.
This rule will make three changes to the existing regulations that
will cause additional costs to industry. First, it requires owners of
lease-financed offshore supply vessels with valid coastwise
endorsements issued before August 9, 2004, to reapply for a new
coastwise endorsement by August 9, 2007. Second, it will require all
owners of lease-financed vessels with recently issued coastwise
endorsements (i.e., those issued after August 9, 2004) to certify each
year that their ownership and investment status has not changed.
Lastly, it will require entities that enter into a demise sub-charter
agreement to file a copy of the sub-charter and amendments to the sub-
charter with the Director of the Documentation Center. These changes
are additional collection-of-information (paperwork) requirements.
Based on Coast Guard data, we estimate that this rule will affect
eight current owners of offshore supply vessels. We also estimate, from
the Coast Guard data and information from the Documentation Center,
that there will be 25 current and future owners affected by the annual
certification requirements of this rule, which includes the eight
owners of offshore supply vessels affected by this rule. Based on
projections from the Documentation Center, we assume that there will be
approximately three demise sub-charter agreements over the next 10
years.
We estimate that the total first-year cost of this rule to industry
is $11,059. This first-year cost includes the one-time cost to the
affected offshore supply vessel owners to reapply for a new coastwise
endorsement, the first year cost of annual certification for the
affected vessel owners, and a portion of the cost to affected vessel
charterers associated with paperwork submissions of future demise sub-
charter agreements. After the first year of implementation, the total
annual cost of this rule to industry is $1,621, which is the first-year
cost less the one-time cost to the affected offshore supply vessel
owners to reapply for a new coastwise endorsement. The estimated 10-
year (2006-2015), discounted present value of the total cost of this
rule to all affected owners and charterers is $21,623 based on a 7
percent discount rate and $23,684 based on a 3 percent discount rate.
The benefit of this rule is that it updates and provides consistent
documentation requirements. These requirements comply with mandates
provided by Congress under the Act concerning information and
documentation needed to determine the eligibility of a vessel owner.
These updated documentation requirements will assist the Coast Guard in
determining the eligibility of lease-financed vessels for coastwise
endorsements. We need this information to determine whether an entity
meets the current statutory requirements. We will use these
documentation requirements to issue coastwise endorsements to eligible
lease-financed vessels.
Small Entities
Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have
considered whether this rule will 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 not have a significant economic impact on a substantial
number of small entities. The Initial Regulatory Flexibility Analysis
in the supplemental ``Regulatory Analysis'' in the docket for the
proposed rule is unchanged for the final rule.
This rule will affect owners of lease-financed offshore supply
vessels with valid coastwise endorsements issued before August 9, 2004,
owners of lease-financed vessels with recently-issued coastwise
endorsements, and charterers that enter into a demise sub-charter
agreement.
The owners and charterers mentioned above are U.S. subsidiaries or
branch companies that are owned or controlled by larger, foreign,
corporate affiliates and, therefore, are considered as ``one party with
such interests aggregated'' under the small business size regulations
(13 CFR 121.103). We determined in the Initial Regulatory Flexibility
Analysis whether an owner is a small or large entity using the North
American Industry Classification System (NAICS) codes and the small
entity revenue or employee size standards provided by the U.S. Small
Business Administration (SBA).
Based on our determination in the Initial Regulatory Flexibility
Analysis in the docket for the proposed rule, the owners in each NAICS
code category exceed the SBA size standard and are classified as large
businesses. We received no comments on this initial determination or
any potential economic impacts on small entities from this rulemaking.
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 (Public Law 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 proposed rule
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). Under 46 CFR
68.65, 68.70, 68.75, 68.100, 68.107, and 68.109, this rule will amend
the collection-of-information requirements for vessel owners and
charterers engaging 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 modify the burden in the collection
previously approved by the Office of Management and Budget (OMB) under
OMB Control Number 1625-0027, Vessel Documentation.
We performed an assessment of the additional burden associated with
these provisions and published them in the proposed rule and in the
supplemental ``Regulatory Analysis'' in the docket. We received no
public comment on the assessment of these provisions or the extent they
modify the burden in the
[[Page 61417]]
previously approved collection. The assessment published in the
proposed rule and the supplemental Regulatory Analysis in the docket is
unchanged for the final rule.
As required by the Paperwork Reduction Act of 1995 (44 U.S.C.
3507(d)), we have submitted a copy of this rule to OMB for its review
of the collection of information. OMB has not yet completed its review
of, or approved the changes to, this collection. Therefore, Sec. Sec.
68.65, 68.70, 68.75, 68.100, 68.107, and 68.109 in this rule will not
become effective until this collection is approved by OMB. We will
publish a notice 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, that 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.
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 will not create an
environmental risk to health or risk to safety that might
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 will 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 because it is not a ``significant
regulatory action'' under Executive Order 12866 and is not likely to
have a significant adverse effect on the supply, distribution, or use
of energy. The Administrator of the Office of Information and
Regulatory Affairs has not designated it as a significant energy
action. Therefore, it does not require a Statement of Energy Effects
under Executive Order 13211.
Technical Standards
The National Technology Transfer and Advancement Act (NTTAA) (15
U.S.C. 272 note) directs agencies to use voluntary consensus standards
in their regulatory activities unless the agency provides Congress,
through the Office of Management and Budget, with an explanation of why
using these standards would be inconsistent with applicable law or
otherwise impractical. Voluntary consensus standards are technical
standards (e.g., specifications of materials, performance, design, or
operation; test methods; sampling procedures; and related management
systems practices) that are developed or adopted by voluntary consensus
standards bodies. This rule does not use technical standards.
Therefore, we did not consider the use of voluntary consensus
standards.
Environment
We have analyzed this rule under Commandant Instruction M16475.lD
and Department of Homeland Security Management Directive 5100.1, which
guide the Coast Guard in complying with the National Environmental
Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded
that there are no factors in this case that would limit the use of a
categorical exclusion under section 2.B.2 of the Instruction.
Therefore, this rule is categorically excluded, under figure 2-1,
paragraph (34)(d), of the Instruction, from further environmental
documentation. A final ``Environmental Analysis Check List'' and a
final ``Categorical Exclusion Determination'' are available in the
docket where indicated under ADDRESSES.
List of Subjects
46 CFR Part 67
Reporting and recordkeeping requirements, Vessels.
46 CFR Part 68
Oil pollution, Reporting and recordkeeping requirements, Vessels.
0
For the reasons discussed in the preamble, the Coast Guard amends 46
CFR parts 67 and 68 as follows:
PART 67--DOCUMENTATION OF VESSELS
0
1. The authority citation for part 67 continues 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, 2110; 46 U.S.C. app. 876; Department of Homeland
Security Delegation No. 0170.1.
Sec. 67.3 [Amended]
0
2. In Sec. 67.3, remove the following terms and their definitions:
``affiliate,'' ``group,'' ``operation or management of vessels,''
``parent,'' ``primarily engaged in leasing or other financing
transactions,'' ``sub-charter,'' and ``subsidiary.''
Sec. 67.20 [Removed]
0
3. Remove Sec. 67.20.
Sec. 67.35 [Amended]
0
4. In Sec. 67.35(c), remove the words ``Sec. 67.20'' and add, in
their place, the words ``Sec. Sec. 68.60 or 68.105 of this chapter''.
Sec. 67.36 [Amended]
0
5. In Sec. 67.36(c)(2), remove the words ``Sec. 67.20'' and add, in
their place, the words ``Sec. 68.60 or Sec. 68.105 of this chapter''.
Sec. 67.39 [Amended]
0
6. In Sec. 67.39(c)(2), remove the words ``Sec. 67.20'' and add, in
their place, the words ``Sec. 68.60 or Sec. 68.105 of this chapter''.
Sec. 67.147 [Removed]
0
7. Remove Sec. 67.147.
[[Page 61418]]
0
8. In Sec. 67.167, in paragraph (c)(9), following the semicolon, add
the word ``and''; revise paragraph (c)(10) to read as shown below; and
remove paragraph (c)(11):
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), one of the events in Sec. Sec. 68.80 or 68.111 of this
chapter occurs.
Sec. 67.179 [Removed]
0
9. Remove Sec. 67.179.
PART 68--DOCUMENTATION OF VESSELS: EXCEPTIONS TO COASTWISE
QUALIFICATION
0
10. Revise the authority citation for part 68 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, 2110; 46 U.S.C. app. 876; Department of Homeland
Security Delegation No. 0170.1.
0
11. Revise the heading to part 68 to read as shown above.
Subpart 68.03 [Removed]
0
12. Remove subpart 68.03.
0
13. In part 68--
0
a. Redesignate the subparts and their appendices as shown in the
following table:
------------------------------------------------------------------------
Old subpart/appendix New subpart/appendix
------------------------------------------------------------------------
Subpart 68.01.......................... Subpart A.
Appendix A to Subpart 68.01 of Part 68. Appendix A to Subpart A of Part
68.
Appendix B to Subpart 68.01 of Part 68. Appendix B to Subpart A of Part
68.
Subpart 68.03.......................... [Removed].
Subpart 68.05.......................... Subpart B.
Appendix A to Subpart 68.05 of Part 68. Appendix A to Subpart B of Part
68.
Appendix B to Subpart 68.05 of Part 68. Appendix B to Subpart B of Part
68.
------------------------------------------------------------------------
0
b. In the redesignated subparts, redesignate the sections as shown in
the following table:
------------------------------------------------------------------------
Old section New section
------------------------------------------------------------------------
68.01-1.................................................... 68.3
68.01-3.................................................... 68.5
68.01-5.................................................... 68.7
68.01-7.................................................... 68.9
68.01-9.................................................... 68.11
68.01-11................................................... 68.13
68.01-13................................................... 68.15
68.01-15................................................... 68.17
68.01-17................................................... 68.19
68.05-1.................................................... 68.25
68.05-3.................................................... 68.27
68.05-5.................................................... 68.29
68.05-7.................................................... 68.31
68.05-9.................................................... 68.33
68.05-11................................................... 68.35
68.05-13................................................... 68.37
------------------------------------------------------------------------
0
c. In the redesignated sections listed in the first column of the
following table, the reference in the second column is revised to read
as shown in the third column:
------------------------------------------------------------------------
New section Old reference New reference
------------------------------------------------------------------------
68.7............................ 68.01-3.......... 68.5
68.7............................ 68.01-9(a)....... 68.11(a)
68.9............................ 68.01-1.......... 68.3
68.9............................ 68.01-9(a)....... 68.11(a)
68.11........................... 68.01-5........... 68.7
68.11........................... 68.01-3(a)........ 68.5(a)
68.11........................... 68.01-11.......... 68.13
68.11........................... 68.01-13.......... 68.15
68.11........................... 68.01-7........... 68.9
68.11........................... 13................ 68.15
68.13........................... 68.01-15.......... 68.17
68.13........................... 68.01-17.......... 68.19
68.15........................... 68.01-15.......... 68.17
68.15........................... 68.01-1........... 68.3
68.15........................... 68.01-15(c)....... 68.17(c)
68.17........................... 68.01-1........... 68.3
68.19........................... 68.01-5........... 68.7
68.29........................... 68.05-9........... 68.33
68.31........................... 68.05-5........... 68.29
68.35........................... 68.05-13.......... 68.37
68.35........................... 68.05-7(a)........ 68.31(a)
68.37........................... 68.05-11(a)....... 68.35(a)
68.37........................... 68.05-5........... 68.29
68.37........................... 68.05-9........... 68.33
------------------------------------------------------------------------
0
d. The table of contents for part 68 reads as follows:
PART 68--DOCUMENTATION OF VESSELS: EXCEPTIONS TO COASTWISE
QUALIFICATION
Subpart A--Regulations for Engaging in Limited Coastwise Trade
Sec.
68.1 Purpose of subpart.
68.3 Definitions for the purposes of this subpart.
68.5 Requirements for citizenship under 46 U.S.C. App. 833-1.
68.7 Qualification as an 883-1 corporation.
68.9 Qualification as a parent or subsidiary.
68.11 Cessation of qualifications.
68.13 Privileges conferred--documentation of vessels.
68.15 Privileges conferred--operation of vessels.
68.17 Restrictions.
68.19 Application by an 883-1 corporation to document a vessel.
Appendix A to Subpart A of Part 68--Oath for the Qualification of
Corporation as a Citizen of the United States Under the Act of Sept.
2, 1958 (46 U.S.C. 883-1)
Appendix B to Subpart A of Part 68--Oath of Parent or Subsidiary
Corporation Act of September 2, 1958 (46 U.S.C. 883-1)
Subpart B--Documentation of Certain Vessels for Oil Spill Cleanup
68.25 Purpose and scope.
68.27 Definitions for purpose of this subpart.
68.29 Citizenship requirements for limited coastwise endorsement.
68.31 Vessel eligibility requirements for limited coastwise
endorsement.
68.33 Privileges of a limited coastwise endorsement.
68.35 Application to document a vessel under this subpart.
68.37 Cessation of qualifications.
Appendix A to Subpart B of Part 68--Oath for Qualification of a Not-
For-Profit Oil Spill Response Cooperative
Appendix B to Subpart B of Part 68--Oath for Documentation of
Vessels for Use by a Not-For-Profit Oil Spill Response Cooperative
Subpart C--Vessels With a Coastwise Endorsement Issued on or After
August 9, 2004, That Are Demised Chartered to Coastwise Qualified
Citizens
68.50 Purpose and applicability.
68.55 Definitions.
68.60 Eligibility of a vessel for a coastwise endorsement under this
subpart.
68.65 Annual ownership certification.
68.70 Application procedure for vessels other than barges to be
operated in coastwise trade without being documented.
68.75 Application procedure for barges to be operated in coastwise
trade without being documented.
68.80 Invalidation of a coastwise endorsement.
Subpart D--Vessels With a Coastwise Endorsement Issued Before August 9,
2004, and Their Replacements That Are Demise Chartered to Coastwise
Qualified Citizens
68.100 Purpose and applicability.
68.103 Definitions.
68.105 Eligibility of a vessel for a coastwise endorsement under
this subpart.
68.107 Application procedure for vessels other than barges to be
operated in
[[Page 61419]]
coastwise trade without being documented.
68.109 Application procedure for barges to be operated in coastwise
trade without being documented.
68.111 Invalidation of a coastwise endorsement.
0
14. In part 68, revise the heading to subpart A to read as follows:
Subpart A--Regulations for Engaging in Limited Coastwise Trade
0
15. Add Sec. 68.1 to subpart A to read as follows:
Sec. 68.1 Purpose of subpart.
This subpart contains citizen ownership requirements and procedures
to allow documentation of vessels that do not meet the requirements of
part 67 of this chapter. The requirements are for corporations engaged
in a manufacturing or mineral industry in the United States.
Sec. 68.7 [Amended]
0
16. In Sec. 68.7--
0
a. In paragraph (b), after the redesignated number ``Sec. 68.11(a)'',
remove the words ``of this subpart''; and following the words
``appendix A'', add the words ``of this subpart''.
Sec. 68.9 [Amended]
0
17. In Sec. 68.9--
0
a. In paragraph (a), following the words ``appendix B'', add the words
``of this subpart'';
0
b. In paragraph (b), following the words ``appendix B'', add the words
``of this subpart''; and
0
c. In paragraph (c), following the redesignated number ``Sec.
68.11(a)'', remove the words ``of this subpart''; and, following the
words ``appendix B'', add the words ``of this subpart''.
Sec. 68.11 [Amended]
0
18. In Sec. 68.11--
0
a. In paragraph (a), after the redesignated number ``Sec. 68.7'',
remove the words ``of this subpart''; and
0
b. In paragraph (b), after the redesignated number ``Sec. 68.9'',
remove the words ``of this subpart''.
Appendix A to Subpart A of Part 68 [Amended]
0
19. In appendix A--
0
a. In the appendix heading and in the text, remove the words ``(46
U.S.C. 883-1)'' and add, in their place, the words ``(46 U.S.C. app.
883-1)''; and
0
b. Following the word ``Sec. 67.39(c)'', add the words ``of this
chapter''.
Appendix B to Subpart A of Part 68 [Amended]
0
20. In appendix B, in the appendix heading and in the text, remove the
words ``(46 U.S.C. 883-1)'' and add, in their place, the words ``(46
U.S.C. app. 883-1)''.
0
21. Add new subpart C, consisting of Sec. Sec. 68.50 through 68.80, to
read as follows:
Subpart C--Vessels With a Coastwise Endorsement Issued on or After
August 9, 2004, That Are Demised Chartered to Coastwise Qualified
Citizens
Sec.
68.50 Purpose and applicability.
68.55 Definitions.
68.60 Eligibility of a vessel for a coastwise endorsement under this
subpart.
68.65 Annual ownership certification.
68.70 Application procedure for vessels other than barges to be
operated in coastwise trade without being documented.
68.75 Application procedure for barges to be operated in coastwise
trade without being documented.
68.80 Invalidation of a coastwise endorsement.
Subpart C--Vessels With a Coastwise Endorsement Issued on or After
August 9, 2004, That Are Demised Chartered to Coastwise Qualified
Citizens
Sec. 68.50 Purpose and applicability.
(a) This subpart contains requirements, in addition to those in
part 67 of this chapter, for obtaining a coastwise endorsement for a
U.S.-built vessel--
(1) That is owned by a person that qualifies as a citizen under
Sec. Sec. 67.35(a), 67.36(a), 67.37, or 67.39(a) of this chapter; and
(2) That is demise chartered to a coastwise qualified citizen under
Sec. Sec. 67.33, 67.35(c), 67.36(c), 67.37, 67.39(c), or 67.41 of this
chapter.
(b) This subpart applies to a vessel with a coastwise endorsement
issued on or after August 9, 2004. It does not apply to a vessel under
subpart D of this part.
Sec. 68.55 Definitions.
In addition to the terms defined in Sec. 67.3 of this chapter, as
used in this subpart--
Affiliate means, with respect to any person, any other person that
is--
(1) Directly or indirectly controlled by, under common control
with, or controlling that person; or
(2) Named as being part of the same consolidated group in any
report or other document submitted to the United States Securities and
Exchange Commission or the Internal Revenue Service.
Cargo does not include cargo to which title is held for non-
commercial reasons and primarily for the purpose of evading the
requirements of Sec. 68.65(a)(2).
Oil has the meaning given that term in 46 U.S.C. 2101(20).
Operation or management, for vessels, means all activities related
to the use of vessels to provide services. These activities include,
but are not limited to, 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.
Passive investment means an investment in which neither the
investor nor any affiliate of the investor is involved in, or has the
power to be involved in, the formulation, determination, or direction
of any activity or function concerning the use, operation, or
management of the asset that is the subject of the investment.
Qualified proprietary cargo means--
(1) Oil, petroleum products, petrochemicals, or liquefied natural
gas cargo that is beneficially owned by the person who submits to the
Director, National Vessel Documentation Center, an application or
annual certification under Sec. 68.65(a)(2), or by an affiliate of
that person, immediately before, during, or immediately after the cargo
is carried in coastwise trade on a vessel owned by that person;
(2) Oil, petroleum products, petrochemicals, or liquefied natural
gas cargo not beneficially owned by the person who submits to the
Director, National Vessel Documentation Center, an application or an
annual certification under Sec. 68.65(a)(2), or by an affiliate of
that person, but that is carried in coastwise trade by a vessel owned
by that person and which is part of an arrangement in which vessels
owned by that person and at least one other person are operated
collectively as one fleet, to the extent that an equal amount of oil,
petroleum products, petrochemicals, or liquefied natural gas cargo
beneficially owned by that person, or an affiliate of that person, is
carried in coastwise trade on one or more other vessels, not owned by
that person, or an affiliate of that person, if the other vessel or
vessels are also part of the same arrangement;
(3) In the case of a towing vessel associated with a non-self-
propelled tank vessel where the two vessels function as a single self-
propelled vessel, oil, petroleum products, petrochemicals, or liquefied
natural gas
[[Page 61420]]
cargo that is beneficially owned by the person who owns both the towing
vessel and the non-self-propelled tank vessel, or any United States
affiliate of that person, immediately before, during, or immediately
after the cargo is carried in coastwise trade on either of the two
vessels; or
(4) Any oil, petroleum products, petrochemicals, or liquefied
natural gas cargo carried on any vessel that is either a self-propelled
tank vessel having a length of at least 210 meters (about 689 feet) or
a tank vessel that is a liquefied natural gas carrier that--
(i) Was delivered by the builder of the vessel to the owner of the
vessel after December 31, 1999; and
(ii) Was purchased by a person for the purpose, and with the
reasonable expectation, of transporting on the vessel liquefied natural
gas or unrefined petroleum beneficially owned by the owner of the
vessel, or an affiliate of the owner, from Alaska to the continental
United States.
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.
United States affiliate means, with respect to any person, an
affiliate the principal place of business of which is located in the
United States.
Sec. 68.60 Eligibility of a vessel for a coastwise endorsement under
this subpart.
(a) 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 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) of this chapter and has not lost coastwise eligibility under
Sec. 67.19(d) of this chapter.
(3) The person that owns the vessel (or, if the vessel is owned by
a trust or similar arrangement, the beneficiary of the trust or similar
arrangement) makes the certification in Sec. 68.65.
(4) 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 vessel through a demise charter in which the demise
charterer is considered the owner pro hac vice during the term of the
charter.
(5) 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.
(6) 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) To apply for a coastwise endorsement for a vessel under a
demise charter, see Sec. 68.70 and, for a barge, see Sec. 68.75.
Note to Sec. 68.60: Section 608(b) of Public Law 108-293
provides special requirements for certain vessels in the Alaska
trade.
Sec. 68.65 Annual ownership certification.
(a) At the time of initial application for documentation and at the
time for annual renewal of the endorsement as required by Sec. 67.163
of this chapter, the person that owns a vessel with a coastwise
endorsement under Sec. 68.60 must certify in writing to the Director,
National Vessel Documentation Center--
(1) That the person who owns a vessel with a coastwise endorsement
under Sec. 68.60--
(i) Is a leasing company, bank, or financial institution;
(ii) Owns, or holds the beneficial interest in, the vessel solely
as a passive investment;
(iii) Does not operate any vessel for hire and is not an affiliate
of any person who operates any vessel for hire; and
(iv) Is independent from, and not an affiliate of, any charterer of
the vessel or any other person who has the right, directly or
indirectly, to control or direct the movement or use of the vessel.
(2) For vessels under paragraph (b) of this section, that--
(i) The aggregate book value of the vessels owned by that person
and United States affiliates of that person does not exceed 10 percent
of the aggregate book value of all assets owned by that person and its
United States affiliates;
(ii) Not more than 10 percent of the aggregate revenues of that
person and its United States affiliates is derived from the ownership,
operation, or management of vessels;
(iii) At least 70 percent of the aggregate tonnage of all cargo
carried by all vessels owned by that person and its United States
affiliates and documented under 46 U.S.C. 12106 is qualified
proprietary cargo;
(iv) Any cargo other than qualified proprietary cargo carried by
all vessels owned by that person and its United States affiliates and
documented under 46 U.S.C. 12106 consists of oil, petroleum products,
petrochemicals, or liquified natural gas;
(v) No vessel owned by that person or any of its United States
affiliates and documented under 46 U.S.C. 12106 carries molten sulphur;
and
(vi) That person owned one or more vessels documented as of August
9, 2004, under Sec. 67.20, as that section was in effect on that date.
(b) Paragraph (a)(2) of this section applies only to--
(1) A tank vessel having a tonnage of not less than 6,000 gross
tons, as measured under 46 U.S.C. 14502 (or an alternative tonnage
measured under 46 U.S.C. 14302 as prescribed under 46 U.S.C. 14104); or
(2) A towing vessel associated with a non-self-propelled tank
vessel that meets the requirements of paragraph (b)(1) of this section,
where the two vessels function as a single self-propelled vessel.
Note to Sec. 68.65: The Secretary of Transportation may waive
or reduce the qualified proprietary cargo requirement of Sec.
68.65(a)(2)(iii) for a vessel if the person that owns the vessel
(or, if the vessel is owned by a trust or similar arrangement, the
beneficiary of the trust or similar arrangement) notifies the
Secretary that circumstances beyond the direct control of the person
that owns the vessel or its affiliates prevent, or reasonably
threaten to prevent, the person that owns the vessel from satisfying
this requirement, and the Secretary does not, with good cause,
determine otherwise. The waiver or reduction applies during the
period of time that the circumstances exist.
Sec. 68.70 Application procedure for vessels other than barges to be
operated in coastwise trade without being documented.
(a) The person that owns the vessel (other than a barge under Sec.
68.75) and that seeks a coastwise endorsement under Sec. 68.60 must
submit the following to the National Vessel Documentation Center:
(1) Application for Initial Issue, Exchange, or Replacement of
Certificate of Documentation; or Redocumentation (form CG-1258);
(2) Title evidence, if applicable;
(3) Mortgagee consent on form CG-4593, if applicable;
(4) If the application is for replacement of a mutilated document
or for exchange of documentation, the outstanding Certificate of
Documentation;
(5) The certification required by Sec. 68.65(a)(1) or, if a vessel
under Sec. 68.65(b), the certification required by Sec. 68.65(a)(2);
[[Page 61421]]
(6) 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 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.
(7) 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
paragraph (a)(1) of this section and must be signed by, or on behalf
of, the charterer.
(c) Whenever a charter submitted under paragraph (a)(7) 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 that is a demise charter with another
person for the use of the vessel, 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 and the sub-charterer must provide
detailed citizenship information in the format of form CG-1258,
Application for Documentation, section G, citizenship.
(e) Whenever the charterer of a vessel under paragraph (a) of this
section enters into a sub-charter other than a demise charter with
another person for the use of the vessel, 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 a
request by the Director to do so.
(f) 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.
Sec. 68.75 Application procedure for barges to be operated in
coastwise trade without being documented.
(a) The person that owns a barge qualified to engage in coastwise
trade must submit the following to the National Vessel Documentation
Center:
(1) The certification required by Sec. 68.65(a)(1) or (a)(2).
(2) 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 is organized under the laws
of the United States or a State.
(ii) 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 during the term of the charter.
(iii) 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).
(3) 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 that is a demise charter with another
person for the use of the barge, 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 and the sub-charterer must provide
detailed citizenship information in the format of form CG-1258,
Application for Documentation, section G, citizenship.
(e) Whenever the charterer of a barge under paragraph (a) of this
section enters into a sub-charter other than a demise charter with
another person for the use of the barge, 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 a request by
the Director to do so.
(f) 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.
Sec. 68.80 Invalidation of a coastwise endorsement.
In addition to the events in Sec. 67.167(c)(1) through (c)(9) of
this chapter, a Certificate of Documentation together with a coastwise
endorsement under this subpart becomes invalid when--
(a) The owner fails to make the certification required by Sec.
68.65 or ceases to meet the requirements of the certification on file;
(b) The demise charter expires or is transferred to another
charterer; or
(c) The citizenship of the charterer or sub-charterer changes to
the extent that they are no longer qualified for a coastwise
endorsement.
22. Add new subpart D, consisting of Sec. Sec. 68.100 through
68.111, to read as follows:
Subpart D--Vessels With a Coastwise Endorsement Issued Before August 9,
2004, and Their Replacements That Are Demise Chartered to Coastwise
Qualified Citizens
Sec.
68.100 Purpose and applicability.
68.103 Definitions.
68.105 Eligibility of a vessel for a coastwise endorsement under
this subpart.
68.107 Application procedure for vessels other than barges to be
operated in coastwise trade without being documented.
[[Page 61422]]
68.109 Application procedure for barges to be operated in coastwise
trade without being documented.
68.111 Invalidation of a coastwise endorsement.
Subpart D--Vessels With a Coastwise Endorsement Issued Before
August 9, 2004, and Their Replacements That Are Demised Chartered
to Coastwise-Qualified Citizens
Sec. 68.100 Purpose and applicability.
(a) This subpart contains requirements for the documentation of
U.S.-built vessels in the coastwise trade that were granted special
rights under the Coast Guard and Maritime Transportation Action of 2004
(Pub. L. 108-293).
(b) This subpart applies to--
(1) A vessel under a demise charter that was eligible for, and
received, a document with a coastwise endorsement under Sec. 67.19 of
this chapter and 46 U.S.C. 12106(e) before August 9, 2004;
(2) A barge deemed eligible under 46 U.S.C. 12106(e) and 12110(b)
to operate in coastwise trade without being documented before August 9,
2004; and
(3) A replacement vessel of a similar size and function for any
vessel under paragraphs (b)(1) through (b)(3) of this section.
(c) Except for vessels under paragraph (d) of this section, this
subpart applies to a certificate of documentation, or renewal of one,
endorsed with a coastwise endorsement for a vessel under 46 U.S.C.
12106(e) or a replacement vessel of a similar size and function that
was issued before August 9, 2004, as long as the vessel is owned by the
person named in the certificate, or by a subsidiary or affiliate of
that person, and the controlling interest in the owner has not been
transferred to a person that was not an affiliate of the owner as of
August 9, 2004.
(d) With respect to offshore supply vessels with a certificate of
documentation endorsed with a coastwise endorsement as of August 9,
2004, this subpart applies until August 9, 2007. On and after August 9,
2007, subpart C of this part applies to these vessels.
Sec. 68.103 Definitions.
In addition to the terms defined in Sec. 67.3 of this chapter, as
used in this subpart--
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.
Offshore supply vessel means a motor vessel of more than 15 gross
tons but less than 500 gross tons as measured under 46 U.S.C. 14502, or
an alternate tonnage measured under 46 U.S.C. 14302 as prescribed under
46 U.S.C. 14104, that regularly carries goods, supplies, individuals in
addition to the crew, or equipment in support of exploration,
exploitation, or production of offshore mineral or energy resources.
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.
Replacement vessel means--
(1) A temporary replacement vessel for a period not to exceed 180
days if the vessel described in Sec. 68.50 is unavailable due to an
act of God or a marine casualty; or
(2) A permanent replacement vessel if--
(i) The vessel described in Sec. 68.50 is unavailable for more
than 180 days due to an act of God or a marine casualty; or
(ii) A contract to purchase or construct a replacement vessel is
executed not later than December 31, 2004.
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.
Sec. 68.105 Eligibility of a vessel for a coastwise endorsement under
this subpart.
(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) of this chapter, has not lost coastwise eligibility under
Sec. 67.19(d) of this chapter, 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.
[[Page 61423]]
(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 of
this chapter and 46 U.S.C. 12106(e) before August 9, 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) of this
chapter;
(2) Deletion under Sec. 67.171(a)(1) through (a)(6) of this
chapter; or
(3) Cancellation under Sec. 67.173 of this chapter.
(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 of this chapter 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) of this
chapter;
(2) Deletion under Sec. 67.171(a)(1) through (a)(6) of this
chapter; or
(3) Cancellation under Sec. 67.173 of this chapter.
(d) A barge deemed eligible under 46 U.S.C. 12106(e) and 12110(b)
to operate in coastwise trade before August 9, 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;
(5) Any owner of the barge ceases to be a citizen within the
meaning of part 67, subpart C, of this chapter; 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.
Sec. 68.107 Application procedure for vessels other than barges to be
operated in coastwise trade without being documented.
(a) In addition to the items under Sec. 67.141 of this chapter,
the person that owns the vessel (other than a barge under Sec. 68.109)
and that seeks a coastwise endorsement under this subpart 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 of this chapter and must be signed by, or on behalf of,
the charterer.
[[Page 61424]]
(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 that is a demise charter with another
person for the use of the vessel, 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 and the sub-charterer must provide
detailed citizenship information in the format of form CG-1258,
Application for Documentation, section G, citizenship.
(e) Whenever the charterer of a vessel under paragraph (a) of this
section enters into a sub-charter other than a demise charter with
another person for the use of the vessel, 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 a
request by the Director to do so.
(f) 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.
Sec. 68.109 Application procedure for barges to be operated in
coastwise trade without being documented.
(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 that is a demise charter with another
person for the use of the barge, 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 and the sub-charterer must provide
detailed citizenship information in the format of form CG-1258,
Application for Documentation, section G, citizenship.
(e) Whenever the charterer of a barge under paragraph (a) of this
section enters into a sub-charter other than a demise charter with
another person for the use of the barge, 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 a request by
the Director to do so.
(f) 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.
Sec. 68.111 Invalidation of a coastwise endorsement.
(a) In addition to the events in Sec. 67.167(c)(1) through (c)(9)
of this chapter, a Certificate of Documentation together with a
coastwise endorsement in effect before February 4, 2004, becomes
invalid when--
(1) The demise charter expires or is transferred to another
charterer;
(2) The citizenship of the charterer or sub-charterer changes to
the extent that they are no longer qualified for a coastwise
endorsement; or
(3) 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.
(b) In addition to the events in Sec. 67.167(c)(1) through (c)(9)
of this chapter, a Certificate of Documentation together with a
coastwise endorsement in effect on or after February 4, 2004, and
before August 9, 2004, becomes invalid when--
(1) The demise charter expires or is transferred to another
charterer;
(2) The citizenship of the charterer or sub-charterer changes to
the extent that they are no longer qualified for a coastwise
endorsement;
(3) Neither the person that owns the vessel, nor the parent of that
person, nor any subsidiary of the parent of that
[[Page 61425]]
person is primarily engaged in leasing or other financing transactions;
(4) The majority of the aggregate revenues of at least one of the
following is 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; or
(5) 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:
(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.
(c) When the coastwise endorsement for a vessel to which this
subpart applies becomes invalid under paragraph (a)(1) or (b)(1) of
this section, the vessel remains eligible for documentation under this
subpart provided it is a vessel to which Sec. 68.100(b) or (c)
applies.
Dated: October 6, 2006.
B.M. Salerno,
Rear Admiral, U.S. Coast Guard, Acting Assistant Commandant for
Prevention.
[FR Doc. E6-17037 Filed 10-17-06; 8:45 am]
BILLING CODE 4910-15-P