4058 Federal Register / Vol. 66, No. 11 / Wednesday, January 17, 2001 / Notices

together with petition for leave to

intervene should do so in accordance

with the above instructions for

submitting comments. The petition

should state clearly and concisely the

grounds of interest, and the alleged facts

relied on for relief.

If no petition for leave to intervene is

received with the specified time or if it

is determined that petitions filed do not

demonstrate sufficient interest to

warrant a hearing, the Maritime

Administration will take such action as

may be deemed appropriate.

In the event petitions regarding the

relevant section 805(a) issues are

received from parties with standing to

be heard, a hearing will be held, the

purpose of which will be to receive

evidence under section 805(a) relative to

whether the proposed operations: (a)

could result in unfair competition to

any person, firm, or corporation

operating exclusively in the coastwise

or inter-coastal service, or (b) would be

prejudicial to the objects and policy of

the Act relative to domestic trade

operations.

(Catalog of Federal Domestic Assistance

Programs No. 20.805 Operating-Differential

Subsidies)

By Order of the Maritime Administrator.

Dated: January 11, 2001.

Joel C. Richard,

Secretary.

[FR Doc. 01–1359 Filed 1–16–01; 8:45 am]

BILLING CODE 4910–81–P

DEPARTMENT OF TRANSPORTATION

Maritime Administration

[Docket No. MARAD–2000–8666]

ALASKA ROSE, BERING ROSE, and

SEA WOLF—Applicability of Preferred

Mortgage, Ownership and Control

Requirements to Obtain a Fishery

Endorsement

AGENCY: Maritime Administration,

Department of Transportation.

ACTION: Invitation for public comments

on a petition requesting MARAD to

issue a determination that the

ownership and control requirements

and the preferred mortgage

requirements of the American Fisheries

Act of 1998 and 46 CFR Part 356 are in

conflict with an international

investment agreement.

SUMMARY: The Maritime Administration

(MARAD, we, our, or us) is soliciting

public comments on a petition from the

owners and mortgagees of the vessels

ALASKA ROSE—Official Number

610984, BERING SEA—Official Number

609823, and SEA WOLF—Official

Number 609823 (hereinafter the

‘‘Vessels’’). The petition requests that

MARAD issue a decision that the

American Fisheries Act of 1998

(‘‘AFA’’), Division C, Title II, Subtitle I,

Pub. L. 105–277, and our regulations at

46 CFR Part 356 (65 Fed. Reg. 44860

(July 19, 2000)) are in conflict with the

U.S.-Japan Treaty and Protocol

Regarding Friendship, Commerce and

Navigation, 206 UNTS 143, TIAS 2863,

4 UST 2063 (1953) (‘‘U.S.-Japan FCN’’ or

‘‘Treaty’’). The petition is submitted

pursuant to 46 CFR 356.53 and 213(g) of

AFA, which provide that the

requirements of the AFA and the

implementing regulations will not apply

to the owners or mortgagees of a U.S.-

flag vessel documented with a fishery

endorsement to the extent that the

provisions of the AFA conflict with an

existing international agreement relating

to foreign investment to which the

United States is a party. This notice sets

forth the provisions of the international

agreement that the Petitioner alleges are

in conflict with the AFA and 46 CFR

Part 356 and the arguments submitted

by the Petitioner in support of its

request. If MARAD determines that the

AFA and MARAD’s implementing

regulations conflict with the U.S.-Japan

FCN, the requirements of 46 CFR Part

356 and the AFA will not apply to the

extent of the inconsistency.

Accordingly, interested parties are

invited to submit their views on this

petition and whether there is a conflict

between the U.S.-Japan FCN and the

requirements of both the AFA and 46

CFR Part 356. In addition to receiving

the views of interested parties, MARAD

will consult with other Departments and

Agencies within the Federal

Government that have responsibility or

expertise related to the interpretation of

or application of international

investment agreements.

DATES: You should submit your

comments early enough to ensure that

Docket Management receives them not

later than February 16, 2001.

ADDRESSES: Comments should refer to

the docket number that appears at the

top of this document. Written comments

may be submitted by mail to the Docket

Clerk, U.S. DOT Dockets, Room PL–401,

Department of Transportation, 400 7th

St., S.W., Washington, D.C. 20590–0001.

You may also send comments

electronically via the Internet at http://

dms.dot.gov/submit/. All comments will

become part of this docket and will be

available for inspection and copying at

the above address between 10 a.m. and

5 p.m., E.T., Monday through Friday,

except Federal Holidays. An electronic

version of this document and all

documents entered into this docket are

available on the World Wide Web at

http://dms.dot.gov.

FOR FURTHER INFORMATION CONTACT: John

T. Marquez, Jr. of the Office of Chief

Counsel at (202) 366–5320. You may

send mail to John T. Marquez, Jr.,

Maritime Administration, Office of

Chief Counsel, Room 7228, MAR–222,

400 Seventh St., S.W., Washington,

D.C., 20590–0001 or you may send email to John.Marquez@marad.dot.gov.

SUPPLEMENTARY INFORMATION:

Background

The AFA was enacted in 1998 to give

U.S. interests a priority in the harvest of

U.S.-fishery resources by increasing the

requirements for U.S. Citizen

ownership, control and financing of

U.S.-flag vessels documented with a

fishery endorsement. MARAD was

charged with promulgating

implementing regulations for fishing

vessels of 100 feet or greater in

registered length while the Coast Guard

retains responsibility for vessels under

100 feet.

Section 202 of the AFA, raises, with

some exceptions, the U.S.-Citizen

ownership and control standards for

U.S.-flag vessels that are documented

with a fishery endorsement and

operating in U.S.-waters. The ownership

and control standard was increased

from the controlling interest standard

(greater than 50%) of 2(b) of Shipping

Act, 1916 (‘‘1916 Act’’), as amended, 46

App. U.S.C. 802(b), to the standard

contained in 2(c) of the 1916 Act, 46

App. U.S.C. 802(c), which requires that

75 percent of the ownership and control

in a vessel owning entity be vested in

U.S. Citizens. In addition, section 204 of

the AFA repeals the ownership

grandfather ‘‘savings provision’’ in the

Anti-Reflagging Act of 1987, Pub. L.

100–239, 7(b), 101 Stat 1778 (1988),

which permits foreign control of

companies owning certain fishing

vessels.

Section 202 of the AFA also

establishes new requirements to hold a

preferred mortgage on a vessel with a

fishery endorsement. State or federally

chartered financial institutions must

now comply with the controlling

interest standard of 2(b) of the 1916 Act

in order to hold a preferred mortgage on

a vessel with a fishery endorsement.

Entities other than state or federally

chartered financial institutions must

either meet the 75% ownership and

control requirements of 2(c) of the 1916

Act or utilize an approved U.S.-Citizen

Trustee that meets the 75% ownership

and control requirements to hold the

Federal Register / Vol. 66, No. 11 / Wednesday, January 17, 2001 / Notices 4059

preferred mortgage for the benefit of the

non-citizen lender.

Section 213(g) of the AFA provides

that if the new ownership and control

provisions or the mortgagee provisions

are determined to be inconsistent with

an existing international agreement

relating to foreign investment to which

the United States is a party, such

provisions of the AFA shall not apply to

the owner or mortgagee on October 1,

2001, with respect to the particular

vessel and to the extent of the

inconsistency. MARAD’s regulations at

46 CFR 356.53 set forth a process

wherein owners or mortgagees may

petition MARAD, with respect to a

specific vessel, for a determination that

the implementing regulations are in

conflict with an international

investment agreement. Petitions must be

noticed in the Federal Register with a

request for comments. The Chief

Counsel of MARAD, in consultation

with other Departments and Agencies

within the Federal Government that

have responsibility or expertise related

to the interpretation of or application of

international investment agreements,

will review the petitions and, absent

extenuating circumstances, render a

decision within 120 days of the receipt

of a fully completed petition.

The Petitioners

Alaska Rose L.P., Bering Rose, L.P.

and Kendrick Bay, L.P. (each a ‘‘Vessel

Owner’’ and collectively, the ‘‘Vessel

Owners’’), are the owners, respectively,

of the fishing vessels ALASKA ROSE,

BERING ROSE and SEA WOLF (each a

‘‘Vessel’’ and collectively, the

‘‘Vessels’’). Wards Cove Packing

Company (‘‘Wards Cove’’), Gravina

Fisheries, Inc., Flag Point, L.P., Duke

Point, L.P., Island Point Corporation,

Maruha Corporation (‘‘Maruha’’),

Western Alaska Fisheries, Inc. (‘‘WAF’’)

and WAFBO, Inc., are owners of direct

or indirect interests in the Vessel

Owners and indirect interests in the

Vessels. Alyeska Seafoods, Inc.

(‘‘Alyeska’’) is the owner of direct and

indirect interests in the Vessel Owners

and indirect interests in the Vessels and

is the mortgagee under preferred

mortgages on the Vessels. The parties

identified above, including the

shareholders and the Japanese Bank

Lenders identified below are hereinafter

referred to as the ‘‘Petitioner’’ or

‘‘Petitioners.’’

Petitioner’s Entry Into and

Participation In U.S. Fisheries

The Petitioner provided the following

background on its entry into and

participation in the fisheries of the

United States.

‘‘In 1985, Wards Cove, Maruha and

Marubeni Corporation (‘‘Marubeni’’)

formed Alyeska to acquire, construct

and operate a large seafood processing

facility at Dutch Harbor, Alaska.

Alyeska purchased an existing

processing facility in 1985 and

constructed a surimi processing plant

and fish meal plant at the site in 1986

and 1987 to process pollock. Alyeska’s

total investment in its processing plant

and equipment is approximately $70

million.

‘‘The Alyeska processing facility is

one of the largest fish processing

facilities in the state of Alaska. Alyeska

employs approximately 400 people at its

Dutch Harbor processing facility and

processes in excess of 125 million

pounds of seafood annually. In order to

secure a stable supply of raw material to

this processing facility, Alyeska,

Maruha and its subsidiaries, and Wards

Cove, Alyeska’s U.S. Citizen

shareholder, have made investments in

and provided financing for a number of

fishing vessels, including the Vessels.

By investing in the Vessel Owners,

Alyeska, Maruha and Wards Cove also

sought to realize the potential profits

that could accrue to the Vessel Owners

from sales to Alyeska. The Vessel

Owners were organized and the Vessels

were acquired by the Vessel Owners in

1996.

‘‘Alyeska assisted in financing the

acquisition of the Vessels by the Vessel

Owners in return for the agreement of

the Vessel Owners that fish harvested by

the Vessels would be sold exclusively to

Alyeska and in reliance on the assured

revenue stream which sales to Alyeska

would provide to the Vessel Owners.

Such financing is a common and

traditional means in the Alaska fishing

industry by which fishing vessel owners

secure financing for the acquisition,

improvement or operation of their

vessels and seafood processors secure

supply commitments from fishing vessel

owners. Each of the Vessels is 100 feet

or greater in registered length. Each of

the Vessels was designed and

constructed or rebuilt for operation in

the U.S. fisheries of the North Pacific

Ocean and Bering Sea.

‘‘As a result of the enactment of

Section 208(a) of the American Fisheries

Act, the fishing vessels eligible to catch

and deliver pollock to Alyeska’s Dutch

Harbor facility are limited to vessels

meeting specified criteria, including

prior deliveries of certain quantities of

pollock to Alaskan onshore processing

plants. Accordingly, there is a fixed,

limited number of vessels, including the

Vessels, which are permitted by law to

deliver to the Alyeska facility.’’

Ownership and Mortgage Structure of

the Vessels

The ownership and mortgage

structure is substantially the same for

each of the Vessels and is summarized

as follows:

A. Ownership Structure

Alaska Rose, L.P., and Bering Rose,

L.P., are Washington limited

partnerships that were formed in 1996

for the purpose of acquiring and

operating the vessels ALASKA ROSE

and BERING ROSE, respectively. From

the time of formation through the

present date, Alaska Rose L.P. and

Bering Rose, L.P. have been owned by

Duke Point, L.P. (‘‘Duke Point’’), as sole

general partner, and Alyeska Seafoods,

Inc., as sole limited partner, in the

following percentages: Duke Point—

75%; Alyeska—25%.

Duke Point is a Washington limited

partnership. At all times since the

acquisition of the Vessels by Alaska

Rose, L.P. and Bering Rose L.P., Duke

Point has been owned by Flag Point,

L.P. (‘‘Flag Point’’), as sole general

partner, and Alyeska, as sole limited

partner, in the following percentages:

Flag Point—75%; Alyeska—25%.

Flag Point is a Washington limited

partnership. Flag Point is owned by

Gravina Fisheries, Inc., a Washington

corporation, as sole general partner; and

Island Point Corporation, a Washington

corporation, and Alyeska, as limited

partners, in the following percentages:

Gravina Fisheries, Inc.—50%; Island

Point Corp.—25%; Alyeska—25%.

Gravina Fisheries, Inc. is a wholly

owned subsidiary of Wards Cove, an

Alaska corporation. Petitioners state that

all of the capital stock of Wards Cove is

owned by United States Citizens, as

defined in 46 C.F.R. Part 356. All of the

capital stock of Island Point Corporation

is owned by Alec W. Brindle, Winn F.

Brindle and Harold A. Brindle, each an

individual United States Citizen.

Wards Cove is a 100% U.S. Citizenowned fish processing company which

has been engaged in processing salmon

and other fish and shellfish species in

Alaska since 1912. In 1928, Wards Cove

was acquired by two brothers, A. W.

Brindle and Harold A. Brindle, and

continues to be owned by the Brindle

family or entities owned and controlled

by them. All of the officers and directors

of Wards Cove, Gravina Fisheries, Inc.,

and Island Point Corporation are U.S.

Citizens.

Alyeska is an Alaska corporation,

formed in 1985 to acquire, construct and

operate a large seafood processing

facility at Dutch Harbor, Alaska. All of

the capital stock of Alyeska is owned by

4060 Federal Register / Vol. 66, No. 11 / Wednesday, January 17, 2001 / Notices

1As used herein, the term ‘‘Non-Citizen’’ means

a person or entity which is not a U.S. Citizen, as

defined at 46 CFR § 356.3(e). The ‘‘Non-Citizen

Investors’’ are Alyeska, Maruha, WAF, Marubeni

Corporation, WAFBO, Inc., and Duke Point, L.P.

Wards Cove, Maruha, WAF and

Marubeni. Maruha and Marubeni are

publicly traded Japanese corporations.

WAF is a wholly-owned U.S. subsidiary

of Maruha. Maruha, WAF and Marubeni

collectively own more than 25% of the

capital stock of Alyeska. Accordingly,

Alyeska does not qualify as a U.S.

Citizen under the standards of the AFA

and MARAD’s implementing rules and

is therefore a ‘‘Non-Citizen,’’ as defined

in 46 CFR 356.3(0).

The SEA WOLF is owned by Kendrick

Bay, L.P. (‘‘Kendrick Bay’’), a

Washington limited partnership formed

in 1996 for the purpose of acquiring and

operating the SEA WOLF. At the time of

its formation through the present date,

Kendrick Bay has been owned by Duke

Point, as sole general partner, and

WAFBO, Inc., as sole limited partner, in

the following percentages: Duke Point—

75%, WAFBO, Inc.—25%,

The ownership structure of Duke

Point is described above in connection

with the discussion of the ownership of

Alaska Rose, L.P. and Bering Rose, L.P.

WAFBO, Inc. is a Washington

corporation wholly owned by WAF.

WAF is an Alaska corporation wholly

owned by Maruha. Prior to the

acquisition of the SEA WOLF by

Kendrick Bay, the SEA WOLF was

owned by Sea Wolf Limited Partnership,

a Washington limited partnership in

which WAF held a 25% limited

partnership interest. Sea Wolf Limited

Partnership distributed undivided

interests in the SEA WOLF to its

partners in proportion to their interests

in the partnership prior to the

acquisition of the Vessel by Kendrick

Bay. WAFBO, Inc. is an entity which

satisfies the requirements of 46 U.S.C.

12102(a), commonly referred to as a

‘‘Documentation Citizen,’’ and was

formed by WAF to hold WAF’s

undivided 25% interest in the SEA

WOLF prior to transfer of the entire

Vessel to Kendrick Bay. The former

partners in Sea Wolf Limited

Partnership with the exception of

WAFBO, Inc. sold their undivided

interests in the Vessel—totaling 75%—

to Duke Point, which transferred this

75% interest in the SEA WOLF to

Kendrick Bay as a capital contribution.

WAFBO, Inc. transferred its undivided

25% interest in the SEA WOLF directly

to Kendrick Bay as a capital

contribution in return for a 25% limited

partnership interest in Kendrick Bay.

The ownership structure of the

Vessels was reviewed and approved by

the U.S. Coast Guard under the

standards applicable to fishing vessels

and coastwise qualified vessels in a

letter ruling dated December 11, 1996.

B. Mortgage Structure

Permanent financing for the

acquisition of the Vessels was provided

by three Japanese banks, Mitsubishi

Trust and Banking Corporation, The

Industrial Bank of Japan, Limited and

The Dai-Ichi Kangyo Bank, Limited

(collectively, the ‘‘Japanese Bank

Lenders’’), pursuant to a Term Loan

Agreement dated March 27, 1997 (the

‘‘Alyeska Loan Agreement’’). Pursuant

to the Alyeska Loan Agreement, the

Japanese Bank Lenders made loans to

Alyeska (collectively, the ‘‘Alyeska

Loan’’) for use by Alyeska for loans and

capital contributions to the Vessel

Owners and related entities to finance

the acquisition by the Vessel Owners of

the fishing vessels BERING ROSE,

ALASKA ROSE and SEA WOLF.

Simultaneously with the Alyeska

Loan transaction, Alyeska provided

permanent financing to Alaska Rose,

L.P. (the ‘‘Alaska Rose Loan’’) and

Bering Rose, L.P. (the ‘‘Bering Rose

Loan’’) for the purchase of the ALASKA

ROSE and the BERING ROSE,

respectively. In addition, permanent

financing for the acquisition of the SEA

WOLF was provided by the Japanese

Bank Lenders through the Alyeska Loan

transaction to Duke Point (the ‘‘Duke

Point Loan’’) for Duke Point’s purchase

of an undivided 75% interest in the SEA

WOLF. Alaska Rose, L.P., Bering Rose,

L.P. and Duke Point executed Loan

Agreements, Promissory Notes and

Preferred Ship Mortgages in favor of

Alyeska with respect to the loans. In

consideration of the loans, Alaska Rose,

L.P., Bering Rose, L.P., and Kendrick

Bay also executed Nonrecourse

Guaranties in favor of Mitsubishi Trust

and Banking Corporation, as agent for

the Japanese Bank Lenders (hereafter

referred to as ‘‘MTBC, as agent’’),

limited to the amount of the loans

outstanding from time to time plus

applicable interest, together with the

following documents:

(a) Preferred Ship Mortgages on the

Vessels in favor of MTBC, as agent,

securing the Nonrecourse Guaranties;

and

(b) Assignments of Insurance

Proceeds in favor of MTBC, as agent,

securing the Nonrecourse Guaranties.

C. Exclusive Marketing Agreement

The Petitioners state that Alyeska

financed the purchase of the Vessels in

order to ensure a stable supply of fish

to Alyeska’s Dutch Harbor facility and

in reliance on the assured revenue

stream which sales to Alyeska would

generate for the Vessel Owner.

Accordingly, Section 5(A) of the loan

agreement for each Vessel provides:

So long as there remains any outstanding

balance on the Loan, Borrower agrees that the

Vessel’s sole market shall be Alyeska

Seafoods, Inc. for any and all products

regularly processed by Alyeska Seafoods,

Inc., and for any and all species of catch

processed by Alyeska Seafoods, Inc.

Exceptions to this requirement are specified

(1) on a delivery-by-delivery basis, where

Alyeska informs the partnership that it lacks

capacity to process the delivery; and (2)

where Alyeska and [Vessel Owner] agree that

the vessel may sell into other markets.

Section 5(B) of the [Vessel Loan Agreement]

provides that, in return for this marketing

commitment, Alyeska will pay [Vessel

Owner] a substantial annual ‘‘commitment

fee.’’

Requested Action

The Petitioners have requested a

consolidated filing for the Vessels.

MARAD’s regulations require at 46 CFR

356.53(c) that a separate petition be

filed for each vessel for which the

owner or mortgagee is requesting an

exemption unless the Chief Counsel

authorizes a consolidated filing. The

Chief Counsel hereby authorizes the

consolidated filing by Petitioners

relating to the three Vessels.

The Petitioners seek a determination

from MARAD under 213(g) of the Act

and 46 CFR 356.53 that they are exempt

from the requirements of sections 202,

203 and 204 of the AFA and 46 CFR Part

356 on the ground that the requirements

of the AFA and 46 CFR Part 356, as

applied to Petitioners with respect to

the Vessels, conflict with U.S.

obligations under U.S.-Japan FCN. The

Petitioners request a determination that

the restrictions placed on foreign

ownership, foreign financing and

foreign control of U.S.-flag vessels

documented with a fishery endorsement

contained in 46 C.F.R. Part 356 and

sections 202, 203 and 204 of the AFA

do not apply to Petitioners with respect

to:

(1) the existing ownership interests in

the Vessels held, directly or indirectly,

by the Vessel Owners and their NonCitizen Investors; 1

(2) the existing preferred mortgage

interests in the Vessels held by Alyeska

and the Japanese Bank Lenders

identified below, including existing

exclusive marketing agreements and

other contract rights and interests

ancillary to such financing

arrangements; and

(3) future loan, financing and other

transactions between the Non-Citizen

Investors or the Japanese Bank Lenders,

Federal Register / Vol. 66, No. 11 / Wednesday, January 17, 2001 / Notices 4061

3The text of the relevant provisions of the U.S.-

Japan FCN cited herein is found at Attachment 1

to the Annex I of Authorities (hereinafter ‘‘Annex’’),

filed herewith.

4The AFA makes two primary changes to the

existing limitation on foreign ownership of fishing

vessels: (1) The required percentage of U.S. Citizen

ownership is increased from ‘‘a majority’’ to 75%;

(2) this new test is to be applied both ‘‘at each tier

of ownership and in the aggregate,’’ whereas the

existing standard is applied solely at each tier of

ownership, allowing foreign interests ‘‘in the

aggregate’’ to exceed 50%, so long as U.S. Citizen

ownership is maintained ‘‘at each tier.’’ See 46 CFR

221.3(c) (a U.S. Citizen is a Person who ‘‘at each

tier of ownership’’ satisfies the requisite ownership

standard). Compare, 46 U.S.C. 12102(c), as now in

effect, and 46 CFR 67.31(c), with 46 U.S.C.

12102(c)(1), as amended by Section 202(a) of the

Act, and 46 CFR 356.9. The Vessels are owned by

U.S. Citizens (as defined at 46 CFR 356.3(e)) at each

‘‘tier’’ of ownership but the ‘‘aggregate’’ U.S. citizen

ownership is less than 75%. In addition, Section

204 of the AFA repeals a provision of prior law

which permits 100% foreign owned corporations to

own certain vessels.

on the one hand, and the Vessel

Owners, on the other, with respect to

the Vessels.

Petitioner’s Description of the Conflict

Between the FCN Treaty and Both 46

CFR Part 356 and the AFA

MARAD’s regulations at 46 CFR

356.53(b)(3) require Petitioners to

submit a detailed description of how the

provisions of the international

investment agreement or treaty and the

implementing regulations are in

conflict. The entire text of the FCN

Treaty is available on MARAD’s internet

site at http://www.marad.dot.gov. The

description submitted by the Petitioner

of the conflict between the FCN Treaty

and both the AFA and MARAD’s

implementing regulations forms the

basis on which the Petitioners request

that the Chief Counsel issue a ruling

that 46 CFR Part 356 does not apply to

Petitioners with respect to the Vessels.

The Petitioner’s description of how the

provisions of the U.S.-Japan FCN are in

conflict with both the AFA and 46 CFR

Part 356 is as follows:

A. The AFA’s Limitations and

Restrictions on Foreign Involvement in

the U.S. Fishing Industry Are

Inconsistent With U.S. Obligations

Under the U.S.-Japan FCN.3

1. The AFA’s Restrictions on Foreign

Ownership Violates Article VII

(a) The AFA’s Restrictions on Foreign

Investment Impair Petitioners’ Existing

Ownership Interests. The AFA’s new

restrictions on foreign investment in

fishing vessels will prohibit the Vessel

Owners from employing their Vessels in

the U.S. fisheries on and after October

1, 2001, because the extent of Japanese

investment in the Vessel Owners

exceeds the maximum permitted by the

AFA.

Dept. verify hwer ref. &

ft2**FOOTNOTES** [1]: [3]:

A vessel cannot lawfully be employed

in the fisheries of the United States

unless it is documented as a vessel of

the United States with a fishery

endorsement issued by the U.S. Coast

Guard pursuant to 46 U.S.C. Chapter

121. 46 U.S.C. Chapter 121 sets out the

requirements which must be met for a

vessel to be eligible for documentation

with a fishery endorsement, including

requirements related to the citizenship

of vessel owners.

The Vessels are fishing vessels,

designed and constructed or rebuilt for

use in the U.S. fisheries and operated in

the U.S. fisheries of the North Pacific

Ocean and Bering Sea. Each of the

Vessel Owners is eligible to own a

vessel with a fishery endorsement under

the current standards of 46 U.S.C.

Chapter 121 and each of the Vessels is

documented as a vessel of the United

States with a fishery endorsement.

However, the Vessel Owners will be

prohibited from owning or operating the

Vessels in the U.S. fisheries on and after

October 1, 2001 under the new

restrictions on foreign investment in

fishing vessels imposed by the AFA and

MARAD’s implementing rules, codified

at 46 CFR Part 356 (65 Fed. Reg. 44860

et seq., July 19, 2000). The aggregate of

the ownership interests held, directly or

indirectly, in the Vessel Owners by

Alyeska (in the case of the SEA WOLF,

by Alyeska and WAFBO, Inc.) exceeds

25%—the maximum percentage interest

permitted to be held by Non Citizens

under Section 202(a) of the AFA,

effective on and after October 1, 2001

(see 46 U.S.C. 12102(c)(1), as

amended).4 The AFA requires MARAD

to revoke the fishery endorsement of

any fishing vessel whose owner does

not comply with this new requirement.

AFA Section 203(e). Accordingly,

unless exempted from the AFA’s new

requirements, the Vessel Owners will no

longer be permitted to own and operate

their Vessels in the U.S. fisheries as of

October 1, 2001. As a result, the Vessel

Owners will be deprived of income from

their Vessels; will be driven into

insolvency and will default under the

terms of their Guaranties in favor of the

Japanese Bank Lenders and their Loan

Agreements with Alyeska, and Alyeska,

in turn, will be forced into default under

the terms of its loan agreement with the

Japanese Bank Lenders. Alternatively,

the Vessel Owners would be forced to

sell the Vessels or their Non-Citizen

Investors would be forced to sell their

interests in the Vessel Owners,

assuming a buyer could be found. In

either case, if Alyeska loses access to the

fish that would otherwise be harvested

by the Vessels and delivered to its

Dutch Harbor processing facility, the

$70 million investment which Alyeska

and its shareholders have made in that

facility and the jobs of its employees

would be jeopardized.

(b) The Impairment of Petitioners’

Existing Ownership Interests Violates

Article VII.1 and the Grandfather

Provision of Article VII.2 The

impairment of Petitioners’ existing

ownership interests in the Vessels

violates their right to ‘‘national

treatment’’ under Article VII. 1 and the

grandfather provision of Article VII.2 of

the U.S.-Japan FCN.

The U.S.-Japan FCN was one of a

series of similar Friendship, Commerce

and Navigation (‘‘FCN’’) Treaties

entered into by the United States with

various countries after World War II,

based on a standard State Department

treaty text. All of these treaties reflect

U.S. post-war policy to encourage and

protect international trade and

investment. Herman Walker, Jr., the

principal author of the standard FCN

treaty text and one of the principal State

Department negotiators during this

period, has described the FCN treaties

as ‘‘concerned with the protection of

persons, natural and juridical, and of

the property interests of such persons.’’

Herman Walker, Jr., ‘‘Modern Treaties of

Friendship, Commerce and Navigation,’’

42 Minn. L. Rev. 805, 806 (1958)

(hereinafter, ‘‘Modern Treaties’’).

Article VII.1 of the U.S.-Japan FCN

guarantees broad ‘‘national treatment’’

for the nationals and enterprises of the

U.S. and Japan when doing business

within the jurisdiction of the other

country. Article XXII.1 of the U. S.-

Japan FCN defines ‘‘national treatment’’

as ‘‘treatment accorded within the

territories of a Party upon terms no less

favorable than the treatment accorded

therein, in like situations, to nationals,

companies, products, vessels or other

objects, as the case may be, of such

Party.’’ The principle of national

treatment is the central principle of all

of the post-war FCN treaties. National

treatment requires that each State Party

must treat nationals of the other in the

same way that it treats its own

nationals. The treaties focus on business

and investment. ‘‘The right of

corporations to engage in business on a

national-treatment basis may be said to

constitute the heart of the treaty.’’

Herman Walker, Jr., ‘‘The Post-War

Commercial Treaty Program of the

United States,’’ 73 Pol. Sci. Q. 57, 67

(1958). In a case involving interpretation

of the U.S.-Japan FCN, the United States

Supreme Court noted that the purpose

4062 Federal Register / Vol. 66, No. 11 / Wednesday, January 17, 2001 / Notices

5Petitioners presume that MARAD has access to

the Jones Study and the Sullivan Study referenced

below. Petitioners will provide copies of these

studies to MARAD on request.

6Annex, Attachment 2, Department of State

Incoming Telegram dated March 20, 195, p. 1. 7Annex, Attachment 3, Memorandum from Frank

A. Waring, Counselor of U.S. Embassy for Economic

Affairs undated excerpt). 8Annex, Attachment 2 Department of State

Incoming Telegram dated March 20, 1953, p. 1, and

Attachment Office Memorandum dated March 23,

1953, pp. 1–2.

of the FCN treaties was ‘‘to assure

[foreign corporations] the right to

conduct business on an equal basis

without suffering discrimination based

on their alienage.’’ Sumitomo Shoii

America v Avagliano, 457 U.S. 176,

187–88 (1982). ‘‘[N]ational treatment of

corporations means equal treatment

with domestic corporations.’’ Id. at 188

n. 18.

The preamble of the U.S.-Japan FCN

provides that guaranteeing nationals of

each Party ‘‘national * * * treatment

unconditionally’’ is one of the two

general principles upon which the U.S.-

Japan FCN was based. Use of the word

‘‘unconditionally’’ in this context

clearly demonstrates the strength of the

drafters’ general intent. Accordingly, the

exceptions to the principle of national

treatment stated in the U.S.-Japan FCN

must be narrowly construed. The AFA’s retroactive prohibition of

ownership interests acquired by Alyeska

and WAFBO, Inc. in compliance with

existing law clearly denies national

treatment to them and to the Vessel

Owners. The AFA’s new limitation on

foreign ownership of fishing vessels is

thus inconsistent with the most

fundamental principle of the U.S.-Japan

FCN.

The first sentence of Article VII.2 of

the U.S.-Japan FCN provides a limited

exception to the principle of national

treatment for enterprises engaged in

‘‘the exploitation of land or other

natural resources.’’ Even in that context,

however, the second sentence of Article

VII.2 (referred to as the ‘‘grandfather’’

provision of Article VII.2) prohibits

application of new restrictions and

limitations to Japanese nationals or

enterprises which have previously

‘‘acquired interests’’ in enterprises

owning U.S. fishing vessels or have

previously engaged in the business

activities now to be restricted. Article

VII.2 provides in pertinent part:

Each Party reserves the right to limit the

extent to which aliens may within its

territories establish, acquire interests in, or

carry on * * * enterprises engaged in * * *

the exploitation of land or other natural

resources. However, new limitations imposed

by either Party upon the extent to which

aliens are accorded national treatment, with

respect to carrying on such activities within

its territories. shall not be applied as against

enterprises which are engaged in such

activities therein at the time such new

limitations are adopted and which are owned

or controlled by nationals and companies of

the other Party

Emphasis added. The grandfather

provision of Article VII.2 thus provides

that any new limitations on national

treatment placed on alien participation

in the sectors covered by the first

sentence of Article VII.2 shall not apply

to existing enterprises engaged in

business within those sectors at the time

such new limitations are adopted.

A study commissioned by the State

Department of its past interpretations of

the FCN treaties notes that, under the

grandfather provision of Article VII.2,

‘‘protection is afforded to any privilege

granted * * * prior to a change in

national treatment; hence at a minimum

these foreign enterprises are guaranteed

the maintenance of their existing

operations.’’ Ronny E. Jones, ‘‘State

Department Practices Under U.S.

Treaties of Friendship, Commerce, and

Navigation’’ (1981) (hereinafter ‘‘Jones

Study’’) at 57.5 ‘‘[R]egulations that force

divestiture of interests already acquired

or established prior to promulgation of

such regulation * * * raise Art. VII

questions.’’ Id. at 107. Herman Walker,

Jr. stated the purpose of the Article VII.2

grandfather provision clearly: ‘‘The aim

is to * * * guarantee duly established

investors against subsequent

discrimination. The failure to find a

welcome as to entry is of much less

importance than would be a failure,

once having entered and invested in

good faith, to be protected against

subsequent harsh treatment.’’ Modern

Treaties at 809. In describing the import

of the phrase ‘‘new limitations,’’ another

State Department study states,

The net effect [of the second sentence of

Article VII.2 is that, although not obligated to

allow alien interests to become established in

those fields of activity, rights which have

been extended in the past shall be respected

and exempted from the application of new

restrictions.

Charles H. Sullivan, ‘‘State Department

Standard Draft Treaty of Friendship,

Commerce and Navigation’’ (undated)

(hereinafter ‘‘Sullivan Study’’) at 149

(emphasis added). ‘‘the second sentence

of Article VII(2) is a grandfather clause

intended in the interest of fairness to

protect legitimately established alien

enterprises against retroactive

impairment.’’ Id. at 148.

Both State Parties placed great

importance on the grandfather provision

of Article VII.2 because they recognized

that it would not only protect existing

property rights but would entitle

foreign-owned enterprises to continue to

operate in the same manner as before,

notwithstanding later limitations placed

on the rights of foreign-owned entities

to engage in such business activities. It

was a ‘‘principal negotiating point’’ of

the U.S. side to ensure that the

reservations in Article VII.2 would not

permit retroactive application of any

new limits to companies already

engaged in relevant business activities.6

The U.S. negotiators therefore resisted

efforts to modify the grandfather

provision of Article VII.2, despite strong

Japanese efforts to restrict its

application. As an indication of the

importance the Japanese negotiators

attached to the provision, the Japanese

Embassy at one point late in the

negotiations indicated that the Ministry

of Finance might be persuaded to

withdraw ‘‘all other objections’’ to the

draft treaty if the sentence granting

grandfather rights to existing businesses

were deleted.7 Eventually, the Japanese

negotiators accepted the language in

Article VII.2 without any change after

the U.S. agreed to the language

appearing in the second sentence of

Paragraph 4 of the Protocol. The U.S.

State Department agreed to the Protocol

language only on the understanding that

it in no way undermined the prohibition

against application of discriminatory

laws to existing enterprises in the

second sentence of Article VII.2.8

As adopted, the second sentence of

Article VII.2 follows the standard treaty

text developed by the State Department

and used as the basis for more than a

dozen FCN treaties. The Sullivan Study

notes the breadth of the protection this

sentence affords existing companies

otherwise subject to VII.2. The Sullivan

Study indicates that an enterprise

protected by the Article VII.2

grandfather provision is not only

protected as to existing property

interests or contract rights, but ‘‘is able

to enjoy what may be considered normal

business growth in terms of acquiring

new customers and increasing the dollar

volume of its business, but it cannot

claim expanded privileges. * * *’’

Sullivan Study at 150.

In short, the protections afforded

existing investments and existing

businesses by the second sentence of

Article VII.2 were seen by the U.S. as a

key part of the U.S.-Japan FCN and

similar FCN treaties, providing

substantial protections to foreign

investors and businesses. The provision

affords Alyeska and WAFBO, Inc. the

right to continue to hold their direct and

indirect investments in the Vessel

Owners and, more generally, to

continue to transact business with the

Federal Register / Vol. 66, No. 11 / Wednesday, January 17, 2001 / Notices 4063

Vessel Owners on the same basis as

permitted prior to passage of the AFA.

Similarly, the Article VII.2 grandfather

provision guarantees the Vessel Owners

the right to own and operate the Vessels

in the U.S. fisheries on equal terms with

wholly domestic enterprises.

Maruha and Marubeni are clearly

entitled to protection as Japanese

enterprises which, at the time the AFA

was adopted, were ‘‘engaged in * * *

activities’’ within the United States

which the AFA but for Section 213(g),

would prohibit, limit or restrict.

Alyeska, WAF, WAFBO, Inc. and the

Vessel owners likewise come within the

protection of the Article VII.2

grandfather provision by reason of the

direct and indirect ownership interests

in them held by Maruha and/or

Marubeni. Thus, the Article VII.2

grandfather provision protects the

ownership interests of Maruha, WAF

and Marubeni in Alyeska, the

ownership interests of Alyeska and

WAFBO, Inc. in the Vessel Owners and

the Vessel Owners’ right to continue to

own and operate the Vessels in the U.S.

fisheries.

However, as noted above, the Article

VII.2 grandfather provision not only

protects preexisting rights and interests

acquired, directly or indirectly, by

Japanese nationals prior to a

discriminatory change in the law, but

protects existing enterprises from such

changes. Accordingly, the Article VII.2

grandfather provision, together with

Section 213(g) of the AFA, exempts the

Vessel Owners and their Non-Citizen

Investors from the new restrictions of

Section 202, 203 and 204 of the AFA

and 46 CFR Part 356 with respect to (a)

the Non-Citizen Investors’ existing

direct and indirect ownership interests

in the Vessel Owners and the Vessels,

(b) the continued operations of the

Vessels by the Vessel Owners in the

U.S. fisheries, and (c) future

transactions between the Non-Citizen

Investors and the Vessel Owners to

further or protect the existing rights and

interests of the Non-Citizen Investors in

the Vessels and the Vessel Owners, such

as the refinancing of existing loans, the

making of new loans, the modification

of existing mortgages, the taking of new

mortgages or other security and the

conclusion of other contractual

arrangements ancillary to such

financing activities.

2. The AFA’s Restrictions on Foreign

Financing of Fishing Vessels Violate

Article VII.

(a) The AFA’s Restrictions on Foreign

Financing of Fishing Vessels Impair

Petitioners’ Rights and Interests With

Respect to Vessel Financing. The AFA

will nullify the preferred mortgage

interests in the Vessels currently held

by Alyeska and the Japanese Bank

Lenders, impair their rights and

interests under existing financing

documents and prevent them from

protecting their established businesses

and interests by entering into future

financing and related business

transactions with the Vessel Owners.

Current law permits wholly or partly

Japanese-owned lenders, including the

Japanese Bank Lenders, Alyeska and the

other Non-Citizen Investors, to finance

U.S. fishing vessels and to hold

preferred mortgage interests in U.S.

fishing vessels to secure their loans. See

46 USC 31322. A ‘‘preferred mortgage’’

is a creature of federal statute and gives

the mortgagee a lien on the mortgaged

vessel, enforceable in U.S. District Court

under a priority scheme that protects

the mortgagee from most maritime liens.

See, generally, 46 USC Chapter 313. 46

USC 31326(b)(1) gives the preferred

mortgage lien priority over all maritime

liens arising after filing of the mortgage

except a limited number of ‘‘preferred’’

maritime liens listed at 46 USC 31301(5)

and provides that a sale of the vessel by

order of the District Court terminates all

liens or other claims against the vessel,

thus ensuring the purchaser clear title

and allowing the mortgagee to realize

maximum value for its security. Since

maritime liens arise in favor of

suppliers, materialmen, repairmen and

others in the course of the ordinary

operations of the vessel, protection

against such liens is essential to the

mortgagee’s security, as is the ability to

terminate those liens on foreclosure and

to sell the vessel ‘‘free and clear’’ of

liens. Absent preferred mortgage status,

a mortgage provides little or no security

for the lender. Thus, the preferred

mortgages which Alyeska and the

Japanese Bank Lenders hold in the

Vessels are valuable property interests

in the Vessels.

The AFA will prohibit Alyeska and

the Japanese Bank Lenders from

continuing to hold their existing

preferred mortgages on the Vessels

unless, in the case of the Japanese Bank

Lenders, their mortgages are transferred

to a qualified Mortgage Trustee (see

AFA Section 202(b), amending 46 USC

31322, and 46 CFR 356.19) and the

terms of the financing documents are

approved by a MARAD under the AFA’s

new ‘‘control’’ standards (see AFA

Section 202(a), adding 46 USC

12102(c)(4)(A), and 46 CFR 356.15(d)

and 356.21(d)). The AFA contains a new

definition of impermissible Non-Citizen

‘‘control’’ (AFA Section 202(a), codified

at 46 USC 12102(c)(2)) and requires

transfers of ‘‘control’’ of fishing vessels

to be ‘‘rigorously scrutinized’’ by

MARAD under this new standard (AFA

Section 203(c)(2)). MARAD has

implemented the AFA’s new ‘‘control’’

standard by adopting a host of new

restrictions and limitations on

contractual and other business

arrangements between fishing vessel

owners and Non-Citizens. See,

generally, 46 CFR 356.11, 356.13–15,

356.21–25, 356.39–45. Unless MARAD

reviews and approves the terms of the

loan agreements, preferred mortgages

and other financing documents

previously executed by the Vessel

Owners in favor of the Alyeska and the

Japanese Bank Lenders prior to October

1, 2001 under these new standards, the

Vessels will lose their fishery

endorsements and the Vessel Owners

will no longer be permitted to own or

operate the Vessels in the U.S. fisheries.

See 46 CFR 356.15(d), 356.21(d). This,

in turn, will destroy the value of the

Vessels as security under the mortgages

held by Alyeska and the Japanese Bank

Lenders and destroy the ability of the

Vessel Owners to pay the debts which

the mortgages secure. By prohibiting

Alyeska and the Japanese Bank Lenders

from continuing to hold their existing

preferred mortgages on the Vessels,

imposing new conditions and

restrictions on the terms of their existing

financing documents, including a new

requirement of administrative review

and approval of those financing

documents under AFA’s new ‘‘control’’

standards, the AFA and MARAD’s

implementing regulations will impair

the contractual rights and mortgage

interests of Alyeska and the Japanese

Bank Lenders under their existing

preferred mortgages and related

financing documents.

In the case of Petitioner Alyeska’s

mortgages, MARAD has made clear that

there is no way that Alyeska can

preserve its mortgage interests under the

AFA. MARAD has interpreted the AFA’s

requirements to prohibit Non-Citizen

fish processors, such as Alyeska, from

holding mortgages or other security

interests in fishing vessels, even if the

mortgage is held by a qualified Mortgage

Trustee and the loan and mortgage

terms are otherwise acceptable to

MARAD. 65 Fed. Reg. at 44871 c.2 (July

19, 2000) (‘‘[A]dvancements of funds

from Non-Citizen processors will not be

permitted where the security for the

loan is a security interest in the vessel’’).

Thus, in the case of Alyeska, the AFA’s

requirements will nullify Alyeska’s

existing preferred mortgage interests in

the Vessels. If Alyeska’s mortgages are

not released, the Vessels will lose their

fishery endorsements, destroying the

4064 Federal Register / Vol. 66, No. 11 / Wednesday, January 17, 2001 / Notices

9Annex, Attachment 5, Memorandum of

Conversation dated March 4, 1952, pp. 2–3.

10Annex, Attachment 6, Dept. of State Outgoing

Telegram dated March 10, 1952, p. 1.

11Annex, Attachment 7, Dept. of State Outgoing

Telegram dated May 21, 1952, p. 3.

value of the Vessels as collateral for

Alyeska’s loans and destroying the

Vessel Owners’ ability to pay their

debts.

Further, even if Alyeska’s existing

financial interests in the Vessel Owners

were found to be exempt from the

requirements of the AFA and MARAD’s

implementing rules, the AFA’s

restrictions on future financing

transactions between Alyeska or its

Japanese shareholders and the Vessel

Owners will substantially impair the

rights and interests of Alyeska and its

Japanese shareholders in violation of

Article VII.1. The AFA’s restrictions on

foreign financing of fishing vessels will

prevent Alyeska and its Japanese

shareholders from protecting their

investments in Alyeska’s Dutch Harbor

processing facility and their existing

investments in and loans to the Vessel

Owners by offering the Vessel Owners

financing, secured by mortgages on the

Vessels or otherwise, for vessel repairs

or improvements which may become

necessary to permit the Vessel Owners

to operate profitably—or at all. If

alternative financing from a financial

institution is unavailable to the Vessel

Owners, the ability of Alyeska to make

loans to support the Vessels’ continuing

operations may be the only means

available to protect the Vessel Owners

from insolvency and default on their

existing loans from Alyeska—triggering

a default by Alyeska under its loan

agreement with the Japanese Bank

Lenders. Thus, the AFA’s restrictions on

the ability of Alyeska or its Japanese

shareholders to make new loans to the

Vessel Owners and to take security in

the Vessels jeopardize the existing

financial interests of Alyeska and its

Japanese shareholders in the Vessel

Owners and the Vessels, as well as

Alyeska’s own financial health.

Finally, the new restrictions imposed

by the AFA and MARAD’s regulations

on the ability of Alyeska to make loans

to fishing vessel owners will disrupt

Alyeska’s ability to secure a reliable

supply of fish to its processing facility.

Alyeska’s ability to offer financing for

the construction, acquisition or

improvement of fishing vessels is a

necessary means to secure a stable

supply of fish to its processing plant. A

processor’s agreement to provide

financing on favorable terms to qualified

U.S. vessel owners in return for the

vessel owner’s agreement to sell the

vessel’s catch exclusively to the

processor is a customary means by

which vessel owners finance the

acquisition, repair or improvement of

their vessels and processors secure a

reliable supply of fish to their plants.

Such arrangements between vessel

owners and processors, both wholly

domestic and Non-Citizen processors,

are common and traditional in the

Alaska fishing industry. Non-Citizen

processors, such as Alyeska, which have

invested many millions of dollars in

shore-based processing plants in remote

locations in Alaska, must have the

ability, like their wholly domestic

competitors, to secure a reliable supply

of fish to their plants by financing the

acquisition or improvement of fishing

vessels on normal commercial terms in

return for the vessel owner’s agreement

to sell exclusively to that processor

during the term of the loan. Just as their

existing ownership and mortgage

interests are protected by the Treaty;

Alyeska, its Japanese shareholders and

the Japanese Bank Lenders must also be

able to modify and restructure their

loans and related security arrangements

with the Vessel owners and make new

loans to the Vessel Owners with respect

to the Vessels in order to further and

protect their existing investments,

mortgages and business interests, as

circumstances may require.

(b) The Restrictions on Foreign

Financing of Fishing Vessels Imposed by

the AFA and MARAD’s Implementing

Rules Violate Article VII.1.

The new restrictions on foreign

financing of fishing vessels imposed by

the AFA and MARAD’s implementing

regulations violate Article VII.1’s

national treatment guaranty by (1)

depriving Alyeska and the Japanese

Bank Lenders of existing preferred

mortgage interests securing existing

loans; (2) subjecting the terms of their

existing loan documents to a new

requirement of administrative review

and approval by MARAD under the new

‘‘control’’ standards of the AFA and

MARAD’s implementing rules; (3)

depriving Alyeska and the Japanese

Bank Lenders of the value of their

collateral and the income stream from

operations on which they relied in

making their loans; and (4) preventing

Alyeska, its shareholders or the

Japanese Bank Lenders from refinancing

existing loans, making new loans to the

Vessel Owners, taking new mortgages

on the Vessels or entering into other

contractual arrangements with respect

to the Vessels or the Vessel Owners

necessary to further or protect their

existing financial and business interests.

Article VII.1 extends full national

treatment protection ‘‘with respect to

engaging in all types of commercial,

industrial, financial and other business

activities.’’ The negotiating history of

the U.S.-Japan FCN leaves no doubt that

loans and lending by foreign-owned

lenders are entitled to full national

treatment under the first sentence of

Article VII.1.

At the fourth informal meeting of the

U.S. and Japanese negotiators, the

Japanese negotiators argued that foreignowned banks should be denied national

treatment, as well as most-favorednation protection. One reason given was

that their loans could result in the

foreign-owned bank lender controlling

key industries.9 For this and other

reasons, Japan suggested rewriting

Article VII.1, and among other changes

deleting ‘‘financial’’ from the activities

provided national treatment in the first

sentence of the provision.

A cable from U.S. State Department

headquarters in Washington noted that

the Japanese proposal, and in particular

its interest in denying national

treatment to bank loans, reflected an

attitude that creates a ‘‘difficulty going

to heart of treaty.10 The State

Department opposed any change that

would delete the word financial from

the first sentence of Article VII.1.

Subsequently, the Japanese side

suggested instead adding the word

‘‘lending’’ to the exception provided in

the first sentence of Article VII.2, so the

phrase would have read ‘‘banking

involving depository, lending or

fiduciary functions.’’ In response, the

State Department reiterated its

opposition to any change that would

deny foreign lenders the right to full

national treatment under Article VII.1.

A Department cable explained why

the exception to national treatment

provided by the first sentence of the

U.S. draft of Article VII.2 was limited to

only the depository and fiduciary

functions of banks.11 The cable states:

‘‘Mr. Otabe is incorrect in supposing

that the U.S. reservation for banking is

based on the reason he alleges. The

reservation has to do with receiving and

keeping custody of deposits from the

public at large; that is, the safekeeping

of other people’s money, a function of

particular trust. It does not have to do

with the lending activities of a bank;

and the Department does not feel that a

reservation is either appropriate or

necessary as to a bank’s lending its own

money.’’ Id. During the second round of

informal meetings, the U.S. negotiators

continued to oppose adding loans to the

banking functions excluded from full

national treatment by the first sentence

of Article VII.2, and the Japanese

Federal Register / Vol. 66, No. 11 / Wednesday, January 17, 2001 / Notices 4065

12Annex, Attachment 8, Memorandum of

Conversation dated October 15, 1952, p. 15.

13To the extent that it could be argued that the

first sentence of Article VII.2 might permit

restrictions on foreign financing of fishing vessels,

the grandfather provision of Article VII.2 would

clearly protect Alyeska, its shareholders and the

Japanese Bank Lenders with respect to their existing

rights and interests, as the holders of ownership

and debt interests in the Vessel Owners and

mortgage interests in the Vessels, and with respect

to future financing activities undertaken to further

or protect those interests. Alyeska, WAFBO, Inc.,

their Japanese shareholders and the Japanese Bank

Lenders clearly ‘‘acquired interests’’ in the Vessel

Owners prior to enactment of the AFA and are thus

entitled to national treatment in future dealings

with the Vessel Owners.

14Annex, Attachment 9, Letter to the Chairman

of the House of Representatives Committee on

Merchant Marine and Fisheries from Robert Lee,

August 17, 1964.

15Annex, Attachment 10, Memorandum of

Conversation dated April 15, 1952 at p. 3.

16 Id.

government eventually agreed to

withdraw its proposed change.12

The exception to national treatment

for certain banking functions in the first

sentence of Article VII.2 is the same as

in the standard FCN treaty text. The

Sullivan Study notes that ‘‘this

reservation is stated in terms intended

to circumscribe it as much as possible,

thereby maximizing the extent to which

the banking business remains subject to

the rule [of national treatment] set forth

in Article VII(1).’’ Sullivan Study at 144.

The Sullivan Study notes that the two

areas reserved, depositary and fiduciary

functions, involve the custody and

management of other people’s money,

and therefore are the most sensitive

areas of banking.

It is clear, therefore, that the reference

in the first sentence of Article VII.2 to

‘‘banking involving depository or

fiduciary functions’’ does not include

the lending activities of the Japanese

Bank Lenders or Alyeska. Both the U.S.

and Japanese negotiators were in full

agreement as to the meaning of this

phrase. Thus, the financing activities of

banks and other lenders are entitled to

the full national treatment under Article

VII.1.13

The provisions of the AFA and

MARAD’s implementing rules which

restrict the right of Japanese-owned

entities to make loans secured by

mortgages on U.S. vessels or to make

such loans without prior MARAD

approval of the loan terms are

inconsistent with the guaranty of

national treatment in Article VII.1. The

rationale that such loan activities may

be restricted on the grounds that they

could result in a degree of control over

sensitive industries was specifically

considered by the U.S. negotiators and

rejected as a valid reason for limiting

the Treaty’s protections for such lending

activities. The control argument

presented by Japan at that time is the

same argument used to justify the

restrictions of the AFA. Although the

negotiating history deals largely with

banking, the language of Article VII.1

extends the protections of national

treatment broadly to ‘‘all types of * * *

financial * * * activities.’’ Under

Article VII.1, neither State Party may

restrict loans by foreign-owned entities

secured by vessels of their national flag.

The AFA and MARAD’s

implementing rules impose new

restrictions on the ability of Alyeska and

the Japanese Bank Lenders, going

forward, to protect their existing

financial interests in the Vessel Owners

and the Vessels by, e.g., re-financing

existing loans, advancing new loans for

repair or improvement of the Vessels or

entering into other financing or

contractual arrangements with the

Vessel Owners. These restrictions are

not permitted by Article VIII of the

Treaty. Article VIII extends the Treaty’s

protection both to loans, mortgages and

other financing arrangements that are

now outstanding under the terms of

existing financing documents and to

future financing activities by Alyeska,

its shareholders or the Japanese Bank

Lenders involving the Vessels or the

Vessel Owners.

Application of the AFA’s new

‘‘control’’ standards to restrict the

ability of Alyeska to do business with

the Vessel Owners that supply fish to its

processing plant, as it has done in the

past and on the same terms as its U.S.

Citizen competitors, would deny

national treatment to Alyeska and its

Japanese shareholders. The State

Department has recognized that the

exception to the requirement of national

treatment that may apply with respect to

the ownership of fishing vessels under

the first sentence of Article VII.2 does

not apply to fish processors.14 Article

VII.1 applies, and it extends the

protection of full and unconditional

national treatment to fish processors

with Japanese ownership, such as

Alyeska. The discriminatory restrictions

imposed under the AFA on Alyeska’s

ability to enter into future financing and

other contractual arrangements with the

Vessel Owners to ensure a stable supply

of fish to Alyeska’s Dutch Harbor

processing facility clearly violate Article

VII.1.

For these reasons, Petitioners seek a

determination by MARAD that Sections

202, 203 and 204 of the AFA and

MARAD’s implementing regulations do

not apply to Petitioners with respect to

(a) existing preferred mortgages and

associated loan and security documents

previously executed by the Vessel

owners in favor of Alyeska or the

Japanese Bank Lenders, including the

exclusive marketing agreements

contained in Alyeska’s loan agreements

with the Vessel Owners (or, in the case

of the SEA WOLF, with the Vessel

Owner’s general partner); or (b) fixture

financing and ancillary contractual

arrangements between Alyeska or the

Japanese Bank Lenders and the Vessel

Owners, including exclusive marketing

agreements.

3. Application of the AFA and

MARAD’s Implementing Rules to

Petitioners Would Result in a ‘‘Taking’’

in Violation of Article VI.3

The first sentence of Article VI.3 of

the Treaty states that ‘‘[p]roperty of

nationals and companies of either Party

shall not be taken within the territories

of the other Party except for a public

purpose, nor shall it be taken without

the prompt payment of just

compensation.’’ This ‘‘takings’’

provision precludes expropriations and

other measures that substantially impair

a Japanese national’s direct and indirect

property rights. Applying the AFA’s

new restrictions to prohibit the NonCitizen Petitioners from holding their

pre-existing ownership interests,

mortgage interests and contract rights

would deprive them of their property in

violation of Article VI.3.

The term ‘‘property’’ in Article VI.3

includes not simply direct ownership

but also a wide variety of property

interests, such as those which the NonCitizen Petitioners have in the Vessel

Owners and in the Vessels. The Protocol

to the U.S.-Japan FCN explicitly states

that ‘‘[t]he provisions of Article VI,

paragraph 3 * * * shall extend to

interests held directly or indirectly by

nationals and companies of either Party

in property which is taken within the

territories of the other Party.’’ Protocol,

¶ 2 (emphasis added). As the United

States delegates made clear during the

negotiation of the Treaty, the phrase

‘‘interests held directly or indirectly’’ is

intended to extend to every type of right

or interest in property which is capable

of being enjoyed as such, and upon

which it is practicable to place a

monetary value. These direct and

indirect interests in property include

not only rights of ownership, but [also]

* * * lease hold interest[s], easements,

contracts, franchises, and other tangible

and intangible property rights.15 In

short, ‘‘all property interests are

contemplated by the provision.’’ 16 This

necessarily includes the direct and

indirect ownership interests which

4066 Federal Register / Vol. 66, No. 11 / Wednesday, January 17, 2001 / Notices

17Annex, Attachment 11, Department of State

Instruction dated February 15, 1954, p. 2,

(discussing the applicability of Article V of the

U.S.-Japan FCN to American lawyers doing

business in Japan, and citing May, 1952

memorandum to U.S. Committee on Foreign

Relations).

18Annex, Attachment 12; Department of State

Division of Communications & Records Outgoing

Airgram dated October 28, 1952, p. 2.

Petitioners have in the Vessel Owners

and in the Vessels and the preferred

mortgage interests which Alyeska and

the Japanese Bank Lenders have in the

Vessels, together with ancillary contract

rights granted in their loan documents.

The concept of a taking in this context

is broad and ‘‘is considered as covering,

in addition to physical seizure, a wide

variety of whole or partial

sequestrations and other impairments of

interests in or uses of property.’’

Sullivan Study at 116 (emphasis added).

Here, the AFA’s new restrictions on

foreign investment and foreign

financing will prohibit the Vessel

Owners from using their Vessels in the

U.S. fisheries. In effect, the AFA will

either deprive the Petitioners of the

economic value of their interests in the

Vessels by prohibiting their productive

use or force divestiture. The impairment

of the presently existing rights of the

Vessel Owners to use their Vessels in

the U.S. fisheries—and the rights of the

other Petitioners to hold their existing

direct and indirect ownership interests

in the Vessel Owners and mortgage

interests in the Vessels—is a sufficient

impairment of those rights and interests

as to constitute a violation of Article

VI.3.

Further, a taking is permitted under

the Treaty only for a ‘‘public purpose,’’

and it is clear that application of the

AFA’s ownership restrictions to the

Vessel Owners so as to force a

divestiture of the interests of Alyeska or

WAFBO, Inc. to a private party which

qualifies as a U.S. Citizen would not

satisfy the ‘‘public purpose’’

requirement of the U.S.-Japan FCN.

Even if such a forced sale to a private

party could be characterized as having

a ‘‘public purpose,’’ the AFA makes no

provision for the ‘‘prompt payment of

just compensation,’’ as required by

Article VI.3. The fact that the AFA and

46 CFR Part 356 fail to provide any

compensation scheme—let alone

‘‘adequate provision * * * at or prior to

the time of taking for the determination

and payment thereof’’—is another basis

for concluding that the AFA’s

retroactive limitations on foreign

ownership and foreign financing of

fishing vessels are inconsistent with

Article VI.3 of the U.S.-Japan FCN.

4. The AFA and MARAD’s

Implementing Rules Impair Petitioners’

Legally Acquired Rights in Violation of

Article V

The new restrictions imposed by the

AFA and MARAD’s implementing rules

on foreign involvement in the U.S.

fishing industry are ‘‘unreasonable or

discriminatory measures’’ that impair

the legally acquired rights and interests

of Petitioners in violation of Article V of

the Treaty.

Article V provides that ‘‘[n]either

Party shall take unreasonable or

discriminatory measures that would

impair the legally acquired rights or

interests within its territories of

nationals and companies of the other

Party in the enterprises which they have

established. * * *’’ The provision

follows the standard FCN treaty

language, except that the language was

moved from Article VI.3 in the standard

text to a new Article V and certain

additional language, not relevant here,

was added. According to the Sullivan

Study, the provision ‘‘offers a basis in

rather general terms for asserting

protection against excessive

governmental interference in business

activities or particular activities not

specifically covered by the treaty.’’

Sullivan Study at 115. Herman Walker

observed that this language is designed

‘‘to account for the possibility of

injurious governmental harassments

short of expropriation or sequestration.’’

Herman Walker, Jr., ‘‘Treaties for the

Encouragement and Protection of

Foreign Investment: Present United

States Practice,’’ 5 Am. T. Comp. Law at

236 (1956). A State Department

memorandum to Congress, discussing

language very similar to Article V in

another treaty, noted that the language

‘‘affords one more ground, in addition to

all the other grounds set forth in the

treaty, for contesting foreign actions

which appear to be injurious to

American interests.’’ 17

The negotiating history confirms that

Article V was intended as a general

provision prohibiting discrimination

against foreign-owned entities not

subject to other provisions of the U.S.-

Japan FCN. During the negotiations,

Japan proposed-adding language

prohibiting the denial ‘‘of opportunities

and facilities for the investment of

capital.’’ The proposal was not adopted

after the U.S. opposed it on the grounds

that Article VII fully addressed

investment activities and that the

additional language was not appropriate

in Article V, which addresses issues not

limited to investment.18

Thus, Article V was intended as a

general prohibition of discriminatory

restrictions not covered by other

provisions of the U.S.-Japan FCN and of

restrictions that do not rise to the level

of a ‘‘taking.’’ Article V prohibits

deprivations of both most-favored

nation treatment and national treatment.

Sullivan Study at 115. Thus, it would

apply to the variety of discriminatory

prohibitions and restrictions that the

AFA and MARAD’s implementing

regulations impose on Petitioners’

existing ownership and mortgage

interests and other contract rights and

on Petitioners’ ongoing ability to protect

those rights and interests by entering

into future transactions with the Vessel

Owners.

The intrusive and discriminatory

restrictions imposed by the AFA and

MARAD’s implementing rules on

transactions between Non-Citizen

lenders, such as Alyeska and the

Japanese Bank Lenders, and U.S. fishing

vessel owners place the Non-Citizen

lenders at a significant competitive

disadvantage. U.S. Citizen processors

and other lenders are free to make loans

and to enter into contracts with fishing

vessel owners without restriction. U.S.

Citizen processors remain free to obtain

a reliable supply of fish by financing

fishing vessel acquisitions, conversions

and improvements in return for

exclusive marketing relationships while

Non-Citizen processors are prohibited

from making similar arrangements. As

previously noted, MARAD has stated

that Non-Citizen processors will be

flatly prohibited from taking security in

fishing vessels to secure loans to vessel

owners. Under 46 CFR 356.45, a NonCitizen lender is not even permitted to

make an unsecured loan to a fishing

vessel owner, if (a) the loan exceeds the

annual value of the vessel’s catch

(where an exclusive marketing

agreement is involved—see

§ 356.45(a)(2)(i)); or (b) the lender is

‘‘affiliated with any party with whom

the owner * * * has entered into a

mortgage, long-term or exclusive sales

or purchase agreement, or other similar

contract * * * ’’ (see § 356.45(b)(1)).

Under these standards, Alyeska’s

existing loans to the Vessel Owners

would not have been permitted and

Alyeska will not be permitted to make

future loans to the Vessel Owners,

secured or unsecured, to protect its

existing interests. Further, the

requirement of MARAD review and

approval is itself an unreasonable and

discriminatory burden, particularly in

the absence of coherent standards. The

AFA and MARAD’s rules thus impose

‘‘unreasonable or discriminatory

measures’’ on Non-Citizen fish

processors and other lenders with

Japanese ownership, such as Alyeska

Federal Register / Vol. 66, No. 11 / Wednesday, January 17, 2001 / Notices 4067

19Article XIX.7 defines ‘‘vessel’’ to exclude

‘‘fishing vessels’’ for purposes of Article XIX.6.

20Annex, Attachment 9, Letter to the Chairman

of the House of Representatives Committee on

Merchant Marine and Fisheries from Robert Lee,

August 17, 1964.

21Annex, Attachment 13, Memorandum of

Conversation dated April 3, 1952.

22Annex, Attachment 14, Department of State

Outgoing Airgram dated June 12, 1952.

23See fn. 21. See also, Jones Study at 80–81.

and the Japanese Bank Lenders,

impairing their legally acquired rights

and interests and their ongoing ability to

protect those interests in violation of

Article V of the U.S.-Japan FCN.

5. Article XIX 6 Does Not Authorize the

Provisions of the AFA and MARAD’s

Implementing Rules Which Are

Otherwise in Violation of the U.S.-Japan

FCN

Article XIX.6 provides that

notwithstanding any other provision of

the Treaty, ‘‘each Party may reserve

exclusive rights and privileges to its

own vessels with respect to the * * *

national fisheries.* * *’’ This provision

does not authorize the discriminatory

limitations on Japanese investment and

financing contained in the AFA and

MARAD’s implementing rules.

Even if Article XIX. 6 is interpreted as

applying to fishing vessels,19 it would

be irrelevant to the issues presented

here with respect to the AFA. Consistent

with the Treaty text authorizing a Party

to reserve exclusive rights to ‘‘its own

vessels,’’ the State Department has

interpreted Article XIX.6 merely to

permit the U.S. to reserve the right to

catch or land fish in the U.S. national

fisheries to ‘‘U.S. flag vessels.’’ 20 The

text of Article XIX.6 says nothing about

and certainly does not authorize

restrictions on foreign ownership or

financing of U.S. flag fishing vessels or

the ability of foreign-owned enterprises

to do business with the owners of U.S.

flag fishing vessels—restrictions that

otherwise clearly violate Article VII of

the Treaty.

The historical record of the

negotiations provides further evidence

that Article XIX.6 was not intended to

override Article VII’s national treatment

requirements with respect to foreign

investment in or financing of U.S. flag

fishing vessels or other dealings

between foreign-owned enterprises and

fishing vessel owners. At one point, the

Japanese negotiators proposed rewriting

Article XIX.6 to provide that the

national treatment provisions of the

Treaty would not extend to ‘‘nationals

companies and vessels of the other

Party any special privileges reserved to

national fisheries.’’ See Memorandum of

Conversation dated April 3, 1952, at 5.21

The State Department understood the

Japanese suggestion as an attempt to

obtain a blanket exception from the

entire Treaty for national fisheries. See

U.S. Dept. of State, Outgoing Airgram to

U.S. Embassy in Tokyo (June 12, 1952),

at 1–2 (noting that a clearer way to effect

the Japanese intent would be by

adopting a single comprehensive

exception stating that ‘‘[t]he provisions

of the present Treaty shall not apply

with respect to the national fisheries of

either Party, or to the products of such

fisheries’’).22 The U.S. rejected the

Japanese proposal and the language of

Article XIX.6 remained unchanged. The

issue of Japanese investment in and

other dealings with enterprises owning

or operating U.S. flag fishing vessels

was left to Article VII.

Subsequent practice of the State

Department confirms this reading of

Article XIX.6. In 1964, the State

Department reaffirmed the narrow scope

of Article XIX.6 in a letter to the House

Committee on Merchant Marine and

Fisheries. The letter makes clear that the

provision merely permits the United

States to reserve the right to catch or

land fish to U.S. flag vessels? 23

This reading of Article XIX.6 in the

U.S.-Japan FCN also comports with the

State Department’s reading of this same

language in other FCN treaties to which

the U.S. is a party. The Sullivan Study

explicitly states that ‘‘[t]he crucial

element in Article XIX is that it relates

to the treatment of vessels and to the

treatment of their cargoes. It is not

concerned with the treatment of the

enterprises which own the vessels and

the cargoes.’’ Sullivan Study at 284

(emphasis added).

Thus, the text, negotiating history and

subsequent State Department practice

and understanding all explicitly confirm

that Article XIX.6 is irrelevant to laws

restricting foreign ownership and

control of fishing vessel owners and

thus does not override the other

provisions of the U.S.-Japan FCN

dealing with foreign investment and

business activity. Article XIX.6 does not

exempt the AFA’s foreign ownership,

financing and control restrictions, from

Articles V, VI.3, VII or IX.2, each of

which bars application of those

restrictions to Petitioners with respect to

the Vessel Owners and the Vessels.

6. Broad Interpretation of the Treaty’s

Protections is in the U.S. Interest

The terms of the U.S.-Japan FCN and

the other FCN treaties which share the

same language are reciprocal—that is,

the principle of ‘‘national treatment’’

applies not only to protect the

investments of foreign nationals in the

United States but also to protect the

investments of U.S. nationals in Japan

and other countries. Thus, any

interpretation of the U.S.-Japan FCN

adopted by MARAD in the present

context will also define the rights of

U.S. nationals doing business in Japan

and other countries, now and in the

future. A narrow interpretation of the

U.S.-Japan FCN’s protections for

Japanese enterprises and their

investments in the present context will

effectively limit the rights of U.S.

investors and U.S. businesses in Japan

and other countries with which the

United States has concluded similar

FCN treaties.

For this reason, the State Department

has interpreted the national treatment

requirement of the FCN treaties broadly

in the past. See, generally, Jones Study.

The U.S. interest in protecting U.S.

nationals doing business abroad, as well

as the State Department’s historical

practice in interpreting the FCN treaties,

requires an interpretation of the U.S.-

Japan FCN which will protect the

interests of foreign enterprises and the

U.S. companies in which they have

invested from the retroactive and

discriminatory prohibitions and

restrictions of the AFA and 46 C.F.R.

Part 356.

B. AFA Section 213(g) Exempts

Japanese Enterprises and U.S.

Enterprises With Japanese Investment

From The AFA’s Limitations and

Restrictions on Foreign Ownership,

Foreign Financing and Foreign

‘‘Control’’ of U.S. Fishing Vessels

Sections 202, 203 and 204 of the AFA

and the implementing regulations

published by MARAD on July 19, 2000,

codified at 46 C.F.R. Part 356, impose a

host of new limitations and restrictions

on foreign ownership of fishing vessels,

foreign financing of fishing vessels and

contractual arrangements between

foreign enterprises or U.S. companies

with substantial foreign ownership and

U.S. fishing vessel owners. As

demonstrated above, if applied to

Petitioners, these new limitations and

restrictions would deprive Petitioners

and the Japanese Bank Lenders of

valuable existing ownership, mortgage

and contract rights and interests in

violation of the U.S.-Japan FCN.

Application of the new restrictions to

bar Petitioner Alyeska or its Japanese

shareholders from entering into future

transactions with the Vessel Owners,

particularly financing and ancillary

contractual arrangements, such as

exclusive marketing agreements, would

also violate the U.S.-Japan-FCN by

substantially impairing the ability of

Alyeska and its shareholders to protect

4068 Federal Register / Vol. 66, No. 11 / Wednesday, January 17, 2001 / Notices

their existing rights and interests and to

carry on their existing lawful business

in the United States in conformity with

past practice and on an equal footing

with U.S. Citizens.

To avoid these results, Congress

included a provision in the AFA to

ensure that the Act would not

contravene U.S. treaty obligations.

Section 213(g) provides in pertinent

part:

In the event that any provision of section

12102(c) or section 31322(a) of title 46,

United States Code, as amended by this Act,

is determined to be inconsistent with an

existing international agreement relating to

foreign investment to which the United

States is a party with respect to the owner or

mortgagee on October 1, 2001 of a vessel with

a fishery endorsement, such provision shall

not apply to that owner or mortgagee with

respect to such vessel to the extent of any

such inconsistency * * *.

Section 213(g) makes clear that its reach

is intended to extend to every ‘‘owner’’

or ‘‘mortgagee’’ holding an ownership or

mortgage interest on October 1, 2001,

when Sections 202, 203 and 204 of the

AFA become effective. Section 213(g)

provides explicitly that the exemption

does not apply to ‘‘subsequent owners

and mortgagees’’ who acquire their

interests after October 1, 2001 or ‘‘to the

owner [of the vessel] on October 1, 2001

if any ownership interest in that owner

is transferred to or otherwise acquired

by a foreign individual or entity after

such date (emphasis added).

Petitioners are ‘‘owners’’ and

‘‘mortgagees’’ who acquired their

interests in the Vessels prior to October

1, 2001, and who intend to continue to

hold those interests on and after October

1, 2001. The inconsistency between the

provisions of the AFA and MARAD’s

implementing regulations and the

requirements of the U.S.-Japan FCN is

demonstrated above. Accordingly,

under Section 213(g) of the Act, the

provisions of Sections 202, 203 and 204

‘‘shall not apply’’ to Petitioners ‘‘to the

extent of the inconsistency.’’

The exemption provided by Section

213(g) is not limited to existing property

rights, mortgage interests or investment

interests in existence on October 1,

2001, but rather applies to an ‘‘owner’’

or ‘‘mortgagee’’ on October 1, 2001 ‘‘to

the extent of the inconsistency’’

between the Act and the Treaty.

Petitioners qualify as ‘‘owners’’ and

‘‘mortgagees.’’ Petitioners are, therefore,

exempt from the requirements of the

AFA ‘‘to the extent of the

inconsistency’’ between the AFA and

the Treaty. As demonstrated above, the

‘‘inconsistency’’ between the AFA and

the Treaty is two-fold: (1) The Treaty

protects the existing ownership and

mortgage interests of Petitioners and the

Japanese Bank Lenders in the Vessels

and related contract rights, which the

AFA would prohibit or restrict; and (2)

the Treaty protects future transactions

between Alyeska, its Japanese

shareholders or the Japanese Bank

Lenders and the Vessel Owners, which

the AFA would prohibit or restrict,

including future loans, preferred

mortgages and other financing and

contractual arrangements, which

Petitioners may deem necessary or

appropriate to protect their existing

businesses and their existing interests in

the Vessels and the Vessel Owners.

Thus, Section 213(g) exempts

Petitioners from the restrictions and

limitations of Sections 202, 203 and 204

of the AFA and MARAD’s implementing

rules.

IV. Conclusion

For the reasons stated above, Sections

202, 203 and 204 of the AFA and 46

CFR Part 356 are inconsistent with the

U.S.-Japan FCN and therefore may not

be applied to Petitioners with: respect to

the Vessels or the Vessel Owners.

This concludes the analysis submitted

by Petitioner for consideration.

Dated: January 11, 2001.

By Order of the Maritime Administrator.

Joel Richard,

Secretary, Maritime Administration.

[FR Doc. 01–1357 Filed 1–16–01; 8:45 am]

BILLING CODE 4910–81–P

DEPARTMENT OF TRANSPORTATION

Maritime Administration

[Docket No. MARAD–2001–8665]

ARICA—Applicability of Ownership

and Control Requirements to Obtain a

Fishery Endorsement to the Vessel’s

Documentation

AGENCY: Maritime Administration,

Department of Transportation.

ACTION: Invitation for public comments

on a petition requesting MARAD to

issue a determination that the

ownership and control requirements

and the preferred mortgage

requirements of the American Fisheries

Act of 1998 and 46 CFR Part 356 are in

conflict with an international

investment agreement.

SUMMARY: The Maritime Administration

(‘‘MARAD’’) is soliciting public

comments on a petition from the owners

and mortgagees of the vessel ARICA—

Official Number 550139 (hereinafter the

‘‘Vessel’’). The petition requests that

MARAD issue a decision that the

American Fisheries Act of 1998 (‘‘AFA’’

or ‘‘Act’’), Division C, Title II, subtitle I,

Pub. L. 105–277, and the implementing

regulations at 46 CFR part 356 (65 FR

44860 (July 19, 2000)) are in conflict

with the Agreement Between the United

States of America and Denmark

Regarding Friendship, Commerce and

Navigation, 421 UNTS 105, TIAS:

4797,12 UST 908951 (1961) (‘‘Denmark

Treaty’’ or ‘‘FCN’’). The petition is

submitted pursuant to 46 CFR 356.53

and 213(g) of AFA, which provide that

the requirements of the AFA and the

implementing regulations will not apply

to the owners or mortgagees of a U.S.-

flag vessel documented with a fishery

endorsement to the extent that the

provisions of the AFA conflict with an

existing international agreement relating

to foreign investment to which the

United States is a party. This notice sets

forth the provisions of the international

agreement that the Petitioner alleges are

in conflict with the AFA and 46 CFR

part 356 and the arguments submitted

by the Petitioner in support of its

request. If MARAD determines that the

AFA and MARAD’s implementing

regulations conflict with the Denmark

Treaty, the requirements of 46 CFR Part

356 and the AFA will not apply to the

extent of the inconsistency.

Accordingly, interested parties are

invited to submit their views on this

petition and whether there is a conflict

between the Denmark Treaty and the

requirements of both the AFA and 46

CFR Part 356. In addition to receiving

the views of interested parties, MARAD

will consult with other Departments and

Agencies within the Federal

Government that have responsibility or

expertise related to the interpretation of

or application of international

investment agreements.

DATES: You should submit your

comments early enough to ensure that

Docket Management receives them not

later than February 16, 2001.

ADDRESSES: Comments should refer to

the docket number that appears at the

top of this document. Written comments

may be submitted by mail to the Docket

Clerk, U.S. DOT Dockets, Room PL–401,

Department of Transportation, 400 7th

St., SW, Washington, DC 20590–0001.

You may also send comments

electronically via the Internet at http://

dms.dot.gov/submit/. All comments will

become part of this docket and will be

available for inspection and copying at

the above address between 10 a.m. and

5 p.m., E.T., Monday through Friday,

except Federal Holidays. An electronic

version of this document and all

documents entered into this docket are

available on the World Wide Web at

http://dms.dot.gov.