[Federal Register Volume 63, Number 146 (Thursday, July 30, 1998)]
[Proposed Rules]
[Pages 40690-40691]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20290]


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DEPARTMENT OF TRANSPORTATION

Maritime Administration
RIN 2133-AB32
[Docket No. MARAD-98-3468]

46 CFR Part 298


Proposed Amendments to the Title XI; Closing Documentation and 
Application

AGENCY: Maritime Administration, Department of Transportation.

ACTION: Proposed rule; request for comments.

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SUMMARY: The Maritime Administration (MARAD) is considering changes to 
the existing application form used by the agency in evaluating whether 
to issue, under Title XI of the Merchant Marine Act, 1936, as amended, 
a commitment to guarantee obligations for the construction of vessels 
in shipyards located in the United States or for the modernization of 
such yards, and the documentation forms used by the agency in closing 
such commitments. The purpose of this proposed rule is to solicit 
public review and comment of the proposed changes to the application 
form and the closing documentation.

DATES: Comments should be submitted on or before August 31, 1998, to 
the address listed below.

ADDRESSES: Signed, written comments should refer to the docket number 
that appears at the top of this document and must be submitted to the 
Docket Clerk, U.S. DOT Dockets, Room PL-401, 400 Seventh Street, SW, 
Washington, DC 20590-001. All comments received will be available for 
examination at the above address between 10 a.m. and 5 p.m., Monday 
through Friday except Federal Holidays. An electronic version of the 
new application forms and the closing documents is available from the 
persons listed below on computer disk or on the World Wide Web at 
http://marad.dot.gov.

FOR FURTHER INFORMATION CONTACT: Richard Lorr, Office of Chief Counsel, 
Maritime Administration, MAR-223, Room 7228, 400 Seventh Street, SW, 
Washington, DC 20590, telephone 202-366-5168 or fax 202-366-7485 with 
respect to the closing documentation, and Jean E. McKeever, Office of 
Ship Financing, Maritime Administration, MAR-530, Room 8122, 400 
Seventh Street, SW, Washington, DC 20590, telephone 202-366-5744 or fax 
202-366-7901 with respect to the application forms.

SUPPLEMENTARY INFORMATION: On February 17, 1998, MARAD issued an 
Advance Notice of Proposed Rulemaking (ANPRM) and request for comments 
on whether MARAD should amend its existing regulations or alter its 
existing administrative practices governing the Title XI application 
process, standards for evaluation and approval of applications, and the 
process of documentation for closing of commitments to guarantee 
obligations. The ANPRM was issued in response to Executive Order 12862 
issued by President Clinton which called for agencies to strive for a 
``customer-driven government'' that matches or exceeds the best service 
available in the private sector.
    MARAD requested that its customers, shipyard and shipowner 
executives, their lawyers, accountants, investment bankers and other 
professionals, who have used or are familiar with the Title XI program, 
provide MARAD with their views about how the Title XI program could be 
improved. MARAD requested specific comments on several topics including 
the following:
    1. Whether changes to the current application form (Form MA-163) 
are needed and, if so, what specific changes would make the application 
process more efficient without eliminating critical information needed 
by MARAD;
    2. Whether there should be separate application forms for export 
vessels, U.S.-flag vessels, and shipyard modernizations, and what 
specific information should be requested by each;
    3. Whether MARAD should waive the requirement in the application 
form for the submission of plans and specifications if a vessel design 
has previously been approved by MARAD;
    4. Whether MARAD should permit electronic filing of all or a part 
of a Title XI application;
    5. Whether MARAD should create special closing documentation to 
govern shipyard modernization guarantees; and
    6. Whether the current closing documentation on a commitment to 
guarantee imposes requirements that are unnecessary and redundant, and 
what changes should be made to the standard documentation.
    The response of commenters to these questions and the actions that 
MARAD is proposing are described below. Upon receipt of further public 
comment to the proposed application forms and closing documentation, 
MARAD will make final changes to the application forms and the 
documentation. MARAD is preparing a separate Notice of Proposed 
Rulemaking covering any conforming changes with respect to the content 
of the application forms and the documentation and the other regulatory 
issues that were raised in the ANPRM, but are not addressed herein.

The Application Form

    Four commenters addressed the application form and requested that 
the agency simplify and streamline the existing form. Five commenters 
recommended that there be a separate application form for shipyard 
modernizations and four commenters recommended an additional, separate 
application form for export vessel projects.
    MARAD has responded favorably to most of these recommendations. 
MARAD has simplified and reorganized the application, and deleted 
questions that were unnecessary or redundant, and clarified questions 
that were ambiguous. MARAD is also placing the new application forms on 
our home page and is printing the forms on letter-size paper instead of 
legal-size paper.
    MARAD created a separate application form for shipyard 
modernizations, but did not draft a separate application form for 
export vessels because the differences between the domestic and the 
export applications were not substantial enough to justify the extra 
form. However, the proposed vessel application form has a separate 
section dealing with export transactions.
    MARAD believes that the net result is clearer application forms 
which are easier to follow and complete and which will impose a reduced 
preparation time on applicants and should allow for a more expedited 
processing of applications. MARAD welcomes any further suggestions 
commenters have to the two proposed forms.

Plans and Specifications

    The four commenters on the issue of approved vessel designs believe 
that MARAD should not require the submission of plans and 
specifications for vessel designs previously approved by MARAD. MARAD 
agrees and the application form has been amended accordingly.

Electronic Filing

    Seven commenters responded to this issue. A number of them thought 
that electronic filing would raise

[[Page 40691]]

confidentiality concerns, while still others thought that paper filing 
is not unduly burdensome. A few commenters said that electronic filing 
of non-confidential information should be allowed as a means of 
expediting the process. Neither MARAD nor the Department of 
Transportation has the current capacity to utilize electronic filing 
efficiently or to ensure the confidentiality of information submitted. 
The Department is currently working on resolving these issues as part 
of its centralized docket system. When such a system is in place, MARAD 
will consider offering electronic filing to applicants as an option.

Shipyard Documentation

    Five commenters stated that they believed MARAD should create 
special documents to govern closings on commitments to guarantee 
shipyard modernizations. Most commenters recognized that the 
differences between the land transactions involved in shipyard 
modernization projects and the maritime transactions involved in vessel 
guarantees merited different closing documentation. In addition, 
commenters requested that MARAD simplify the documentation. In 
response, MARAD has prepared a separate set of closing documents for 
shipyard modernizations. A decision was made not to include a land 
mortgage since these mortgages vary considerably under local law.

U.S.-Flag and Export Closing Documents

    Eight commenters informed us that the existing documents are 
redundant, inconsistent with current financing practices, unnecessarily 
voluminous and cumbersome, and difficult to understand. They said that 
the current documents deter use of the program instead of facilitating 
its use. They asked MARAD to streamline its documents to reduce 
unnecessary work and legal fees and other expenses and to make the 
documentation clearer.
    The proposed closing documentation has been rewritten to address 
many of these concerns. The proposed documentation for the financing of 
vessels and shipyard modernizations has been simplified and rewritten 
in plainer English. The length of the vessel documents has been reduced 
by about 45% (for an uncomplicated transaction) to about 135 pages from 
about 250 pages. Naturally, the size of the documentation will vary 
depending on the need for intercreditor agreements, subordination 
agreements, corporate guarantees, and other complexities that arise out 
of the individual considerations of any specific transaction. Most 
importantly, MARAD believes that the proposed revisions to the 
documents have been made without sacrificing any of the essential 
rights of the government, shipowners, shipyards or other parties.
    In response to requests for documents to cover private placements 
of obligations without the use of an Indenture Trustee, the agency has 
developed an even more compact set of documents to cover guarantees of 
direct debt instead of the necessarily more complicated public bond 
offerings. These documents eliminate the need for a bond purchase 
agreement, a trust indenture, bonds, and an authorization agreement. 
They may be especially useful in attracting smaller applications, but 
they can be used in larger transactions as well. Depending on the size 
of the credit agreement and promissory note negotiated by the bank or 
other direct lender, the documentation needed in these nontrustee 
transactions could be reduced by about another 40 pages to about 95 
pages in their entirety.
    By offering the maritime industry and its underwriters and 
attorneys the opportunity to use these clearer, more streamlined and 
contemporary financial documents, MARAD will make the Title XI program 
more attractive to shipowners and shipyards without compromising the 
interests of the government. By reducing the burden and cost, MARAD 
will carry out its statutory mission more effectively. MARAD welcomes 
review of and comments on these documents.

    By Order of the Maritime Administrator.

    Dated: July 24, 1998.
Joel C. Richard,
Secretary.
[FR Doc. 98-20290 Filed 7-29-98; 8:45 am]
BILLING CODE 4910-81-P