[Federal Register Volume 75, Number 213 (Thursday, November 4, 2010)]
[Notices]
[Pages 68019-68020]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27812]
[[Page 68019]]
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DEPARTMENT OF TRANSPORTATION
Maritime Administration
[Docket No. MARAD-2007-0012]
RIN 2133-AB69
Determination of Foreign Reconstruction or Rebuilding of U.S.-
Built Vessels That Participate in the Capital Construction Fund and
Cargo Preference Programs
AGENCY: Maritime Administration, Department of Transportation.
ACTION: Notice of Withdrawal.
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SUMMARY: The Maritime Administration (MARAD) is withdrawing and
terminating its notice published in the Federal Register on November
14, 2007, at 72 FR 64109, which requested comments on what standards
MARAD should apply concerning determinations of foreign reconstruction
of U.S.-built vessels that participate in the Capital Construction Fund
(CCF) program and foreign rebuilding of U.S.-built vessels that
participate in the cargo preference program. Initially, when the notice
was published, it was considered useful to obtain public comment on
whether MARAD should issue regulations on standards applicable to
determination of rebuilding or reconstruction. At the time the notice
was published, the Coast Guard's approach to rebuilding was an
unsettled area of law and a particular issue had arisen with regard to
MARAD's method of determination in a foreign rebuild context. That
matter was resolved and in December 2009, the Coast Guard's method of
carrying out rebuilding determinations was affirmed by the United
States Court of Appeals for the Fourth Circuit. Likewise, MARAD's
approach to such determinations had been affirmed by the United States
Court of Appeals for the Second Circuit. Even though the standards are
different as applied regarding the cargo preference program, the two
approaches would only rarely produce a different result. Furthermore,
because they are generally applied in different circumstances, they
even more rarely produce inconsistent results regarding the same
vessel. MARAD has been requested to make a determination only twice in
the last fifteen years. Therefore, a new rule is not required.
DATES: The notice published at 72 FR 64109 (November 14, 2007) is
withdrawn and terminated on November 4, 2010.
Docket: For access to the docket to read background documents,
please go to http://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Murray A. Bloom, Chief, Division of
Maritime Programs, Office of Chief Counsel, Maritime Administration,
1200 New Jersey Ave., SE., Washington, DC 20590; Ph. (202) 366-5320,
fax: (202) 366-3511; or e-mail [email protected].
SUPPLEMENTARY INFORMATION:
I. Background
Three maritime promotional statutes mandate use of U.S.-built
vessels and generally provide that a U.S.-built vessel becomes
ineligible to carry preference cargo if the vessel is determined to
have been reconstructed or rebuilt in a foreign country.
Section 12132(b) of title 46, United States Code, provides that a
vessel eligible to engage in the U.S. coastwise trade and later rebuilt
outside the United States may no longer engage in the coastwise trade.
This statute is administered by the U.S. Coast Guard. The Coast Guard's
regulations that implement the statute are set forth in 46 CFR part 67.
In determining whether a vessel has been rebuilt, the Coast Guard
examines the amount of steel replaced on a vessel. The Coast Guard's
interpretation of its regulations regarding rebuilding was affirmed in
Shipbuilders Council of America, Inc. v. United States Coast Guard, 578
F.3d 234 (4th Cir. 2009) and followed in the more recent case decided
December 3, 2009, in Shipbuilders Council of America v. United States
Dept. of Homeland Security, 673 F.Supp.2d 438 (E.D.Va. 2009).
Chapter 535 of title 46, United States Code, established the
Capital Construction Fund (CCF) program, whereby a U.S. citizen owner
of an eligible vessel may defer Federal income taxes on income derived
from the operation of an eligible vessel to the extent that income is
deposited into a fund to be used solely for the acquisition,
construction or reconstruction of qualified vessels. The statutory
definitions of both eligible and qualified vessels, as pertaining to
the CCF program, require such vessels, if reconstructed, to be
reconstructed in the United States. MARAD administers the CCF program
(except for the CCF applicable to fishery vessels and administered by
the National Oceanic and Atmospheric Administration) under regulations
located at 46 CFR part 390. To evaluate reconstruction under the CCF
program, MARAD follows determinations made by the Coast Guard for Jones
Act purposes. Under the CCF, because most vessels are Jones Act vessels
and must meet Coast Guard limitations for rebuilding, it is appropriate
for CCF vessels to meet only the single test for Coast Guard and MARAD.
Chapter 553 of title 46, United States Code, provides that
preference be given in the carriage of U.S. Government-impelled cargoes
to privately-owned commercial vessels of the United States. The statute
excludes any vessel rebuilt in a foreign country, unless the vessel
shall have been documented under U.S. registry for at least three years
prior to seeking preference cargoes. MARAD regulations at 46 CFR part
381 govern shipment of preference cargoes. To assess rebuilding under
cargo preference rules, MARAD examines the extent of shipyard work and
whether vessel type has been or would be changed, and how the changes
to the vessel would affect trade, U.S. shipyards, and purposes and
policy of the Merchant Marine Act. MARAD's authority to apply a
standard to rebuilding determinations, different from the Coast
Guard's, was affirmed in Aquarius Marine Co. v. Pena, 64 F.3d 82 (2nd
Cir. 1995). This case was followed by MARAD's final opinions in Barge
Connor, Docket No. A-198 (Oct. 26, 2005) and Matson Navigation Company,
MARAD Docket No. A-199 (Dec. 9, 2008).
II. Summary of the Notice
On November 14, 2007, MARAD published a notice requesting comments.
It was published at 72 FR 64109. The notice requested comments as to
how MARAD should administer the programs assigned to it and sought
answers to four questions. MARAD received 21 comments from 10
commenters. Commenters included U.S. shippers, individuals, and
shipping associations. A discussion of the comments follows.
III. Discussion of Comments
The notice requested comments on four topics pertaining to foreign
rebuild and reconstruction standards as applied to the CCF program and
cargo preference. The questions included: (1) What substantive
standards should MARAD apply to determine whether a CCF vessel has been
reconstructed or a cargo preference vessel has been rebuilt; (2) what
procedures should the MARAD adopt to investigate whether a CCF vessel
has been reconstructed or a cargo preference vessel has been rebuilt;
(3) what role, if any, should unrelated third parties, such as
competitors or shipyards, play in developing a record of decision on
whether a CCF vessel has been reconstructed or a cargo preference
vessel has been rebuilt; and (4) what public disclosure criteria should
apply
[[Page 68020]]
to the record of decision on whether a CCF vessel has been
reconstructed or a cargo preference vessel has been rebuilt. In
response to question one as to which substantive standards MARAD should
apply to determine whether a CCF vessel has been reconstructed or a
cargo preference vessel has been rebuilt, the majority of commenters
responded that there were already established precedents in the
Aquarius Marine Co. case and MARAD's determinations in Golden Monarch
and Barge Connor; two others suggested that MARAD adopt the Coast
Guard's standard for rebuild/reconstruction determinations. MARAD will
maintain the status quo by adhering to the established precedents. As
to question number two regarding what procedures MARAD should adopt to
inquire into whether a CCF vessel has been reconstructed or a cargo
preference vessel has been rebuilt, a majority of the commenters felt
participants in the CCF and cargo preference programs should seek
advisory opinions from MARAD prior to having work performed outside the
United States. One commenter suggested that MARAD enter into a
Memorandum of Understanding with the Coast Guard to be notified of all
applications for rebuild determinations and then make an independent
determination based upon the application submitted to the Coast Guard.
MARAD noted in its decision in Barge Connor that it would have provided
an advisory decision to Moby Marine Corporation if asked prior to work
having been performed in Colombia. MARAD is willing to provide advisory
opinions and will do so when asked. Such advisory opinions will be
published in the Federal Register.
As to the third question posed in the notice regarding what role,
if any, that unrelated third parties should play in developing a record
of decision on whether a CCF vessel has been reconstructed or a cargo
preference vessel has been rebuilt, all commenters felt third parties
should play a substantial role in developing the record.
A variety of comments were received in response to question four
regarding public disclosure of records of decision. There was general
consensus that MARAD should publish its final rulings in the Federal
Register. MARAD currently does not publish its rulings in the Federal
Register. Instead, previous final opinions and orders may be found on
MARAD's Web site at http://www.marad.dot.gov in its Electronic Reading
Room. However, MARAD will publish final decisions and orders relating
to the rebuilding of vessels, as it pertains to programs administered
by MARAD, in the future.
IV. Reason for Withdrawal
MARAD's procedures on foreign rebuilding for cargo preference
purposes were affirmed in Aquarius Marine Co. in 1995 and reaffirmed in
the Barge Connor (2005) and Matson (2008) decisions. This is a settled
area of law. Also, MARAD received no objections to its practice that
CCF reconstruction follow Coast Guard guidance. MARAD and the Coast
Guard have different standards for rebuilding as discussed herein, but
those standards have a very slight chance of overlapping or producing
conflicting results. This is so because the differing standards address
diverse segments of the vessel market. Thus, there is no need for a new
rule or to amend the cargo preference regulations or the CCF
regulations with respect to rebuild or reconstruction determination
standards.
By Order of the Maritime Administrator.
Dated: October 25, 2010.
Christine Gurland,
Secretary, Maritime Administration.
[FR Doc. 2010-27812 Filed 11-3-10; 8:45 am]
BILLING CODE 4910-81-P