Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 55581 

chamber or after the waste heat recovery 

equipment, if any; and the combustion 

unit bottom ash system, which ends at 

the truck loading station or similar 

equipment that transfers the ash to final 

disposal. The CISWI unit includes all 

ash handling systems connected to the 

bottom ash handling system. A CISWI 

unit does not include any of the fifteen 

types of units described in § 60.2555 of 

this subpart, nor does it include any 

combustion turbine or reciprocating 

internal combustion engine. 

Commercial or industrial waste means 

solid waste (as defined in this subpart) 

that is combusted at any commercial or 

industrial facility using controlled flame 

combustion in an enclosed, distinct 

operating unit: Whose design does not 

provide for energy recovery (as defined 

in this subpart); or operated without 

energy recovery (as defined in this 

subpart). Commercial or industrial 

waste also means solid waste (as 

defined in this subpart) combusted in an 

air curtain incinerator that is a distinct 

operating unit of any commercial or 

industrial facility. 

* * * * * 

Solid waste means any garbage, 

refuse, sludge from a waste treatment 

plant, water supply treatment plant, or 

air pollution control facility and other 

discarded material, including solid, 

liquid, semisolid, or contained gaseous 

material resulting from industrial, 

commercial, mining, agricultural 

operations, and from community 

activities, but does not include solid or 

dissolved material in domestic sewage, 

or solid or dissolved materials in 

irrigation return flows or industrial 

discharges which are point sources 

subject to permits under section 402 of 

the Federal Water Pollution Control Act, 

as amended (33 U.S.C. 1342), or source, 

special nuclear, or byproduct material 

as defined by the Atomic Energy Act of 

1954, as amended (42 U.S.C. 2014). 

* * * * * 

Subpart DDDD—[AMENDED] 

■ 3. Section 60.2875 is amended by: 

■ a. Removing the definition of 

‘‘commercial and industrial waste’’; 

■ b. Adding the definition of 

‘‘commercial or industrial waste’’ in 

alphabetical order; and 

■ c. Revising the definitions of 

‘‘commercial and industrial solid waste 

incineration (CISWI) unit’’ and ‘‘solid 

waste’’ to read as follows: 

§ 60.2875 What definitions must I know? 

* * * * * 

Commercial and industrial solid 

waste incineration (CISWI) unit means 

any combustion unit that combusts 

commercial or industrial waste (as 

defined in this subpart), that is a 

distinct operating unit of any 

commercial or industrial facility 

(including field erected, modular, and 

custom built incineration units 

operating with starved or excess air), 

and any air curtain incinerator that is a 

distinct operating unit of any 

commercial or industrial facility that 

does not comply with the opacity limits 

under this subpart applicable to air 

curtain incinerators burning commercial 

or industrial waste. While not all CISWI 

units will include all of the following 

components, a CISWI unit includes, but 

is not limited to, the commercial or 

industrial solid waste feed system, grate 

system, flue gas system, waste heat 

recovery equipment, if any, and bottom 

ash system. The CISWI unit does not 

include air pollution control equipment 

or the stack. The CISWI unit boundary 

starts at the commercial or industrial 

waste hopper (if applicable) and extends 

through two areas: The combustion unit 

flue gas system, which ends 

immediately after the last combustion 

chamber or after the waste heat recovery 

equipment, if any; and the combustion 

unit bottom ash system, which ends at 

the truck loading station or similar 

equipment that transfers the ash to final 

disposal. The CISWI unit includes all 

ash handling systems connected to the 

bottom ash handling system. A CISWI 

unit does not include any of the fifteen 

types of units described in § 60.2555 of 

this subpart, nor does it include any 

combustion turbine or reciprocating 

internal combustion engine. 

Commercial or industrial waste means 

solid waste (as defined in this subpart) 

that is combusted at any commercial or 

industrial facility using controlled flame 

combustion in an enclosed, distinct 

operating unit: Whose design does not 

provide for energy recovery (as defined 

in this subpart); or operated without 

energy recovery (as defined in this 

subpart). Commercial or industrial 

waste also means solid waste (as 

defined in this subpart) combusted in an 

air curtain incinerator that is a distinct 

operating unit of any commercial or 

industrial facility. 

* * * * * 

Solid waste means any garbage, 

refuse, sludge from a waste treatment 

plant, water supply treatment plant, or 

air pollution control facility and other 

discarded material, including solid, 

liquid, semisolid, or contained gaseous 

material resulting from industrial, 

commercial, mining, agricultural 

operations, and from community 

activities, but does not include solid or 

dissolved material in domestic sewage, 

or solid or dissolved materials in 

irrigation return flows or industrial 

discharges which are point sources 

subject to permits under section 402 of 

the Federal Water Pollution Control Act, 

as amended (33 U.S.C. 1342), or source, 

special nuclear, or byproduct material 

as defined by the Atomic Energy Act of 

1954, as amended (42 U.S.C. 2014). 

* * * * * 

[FR Doc. 05–18825 Filed 9–21–05; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF TRANSPORTATION 

Maritime Administration 

46 CFR Part 296 

[Docket No. MARAD–2004–18489] 

RIN 2133–AB62 

Maritime Security Program 

AGENCY: Maritime Administration, 

Department of Transportation. 

ACTION: Final rule. 

SUMMARY: This rule revises and adopts 

as final the interim final rule published 

in the Federal Register on July 20, 2004. 

The Maritime Administration (MARAD) 

is issuing this final rule to implement 

provisions of the National Defense 

Authorization Act for Fiscal Year 2004, 

the Maritime Security Act of 2003 (MSA 

2003). The MSA 2003 authorizes the 

creation of a new Maritime Security 

Program (MSP) that establishes a fleet of 

active, commercially viable, privately 

owned vessels to meet national defense 

and other security requirements and to 

maintain a United States presence in 

international commercial shipping. 

DATES: Effective Date: This final rule is 

effective November 21, 2005. 

FOR FURTHER INFORMATION CONTACT: 

Taylor E. Jones II, Director, Office of 

Sealift Support, Maritime 

Administration, Telephone 202–366–

2323. For legal questions, call Murray 

Bloom, Chief, Division of Maritime 

Programs, Maritime Administration, 

202–366–5320. 

SUPPLEMENTARY INFORMATION: 

Background 

On October 8, 1996, the President 

signed the Maritime Security Act of 

1996 establishing the Maritime Security 

Program (MSP) for FYs 1996 through 

2005 to provide financial assistance of 

up to $2.1 million per vessel per year to 

operators of U.S.-flag vessels with 

approved MSP Operating Agreements. 

The MSP is funded at $98.7 million per 

year for each year from FY 1996 through 

55582 Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 

FY 2005, which covers a maximum of 

47 vessels. 

On November 24, 2003, the President 

signed the National Defense 

Authorization Act for Fiscal Year 2004, 

which contained the MSA 2003 creating 

a new MSP for FY 2006 through FY 

2015. This program also provides 

financial assistance to operators of U.S.- 

flag vessels that meet certain 

qualifications. The MSA 2003 requires 

that the Secretary of Transportation, in 

consultation with the Secretary of 

Defense, establish a fleet of active, 

commercially viable, militarily useful, 

privately-owned vessels to meet 

national defense and other security 

requirements. Section 53111 of the MSA 

2003 authorizes $156 million annually 

for FYs 2006, 2007, and 2008; $174 

million annually for FYs 2009, 2010, 

and 2011; and $186 million annually for 

FYs 2012, 2013, 2014, and 2015 to 

support the operation of up to 60 U.S.- 

flag vessels in the foreign commerce of 

the United States. Payments to 

participating operators are specified in 

the statute at $2.6 million per ship per 

year for FYs 2006 through 2008, $2.9 

million per ship per year for FYs 2009 

through 2011, and $3.1 million per ship 

per year for FYs 2012 through 2015. 

Payments are subject to annual 

appropriations. Participating operators 

are required to enter into an Emergency 

Preparedness Agreement, which would 

make their commercial transportation 

resources available upon request by the 

Secretary of Defense during times of war 

or national emergency. 

Subtitle A, section 3517 of the MSA 

2003 provides for a pilot program under 

which the Secretary of Transportation 

may enter into an agreement(s) to 

reimburse MSP vessel operators up to 

80 percent of the cost of performing 

maintenance and repairs in U.S. 

shipyards versus the cost of performing 

this work in a geographic region in 

which the MSP vessel generally 

operates. Funding to perform qualified 

maintenance and repair work in the 

United States on MSP vessels is 

authorized to be appropriated in the 

amount of $19.5 million for each of 

fiscal years 2006 through 2011. 

Interim Final Rule 

As authorized by section 53103(b)(1) 

of the MSA 2003, MARAD issued an 

interim final rule on July 20, 2004 (69 

FR 43328), which added a new part 296 

to title 46 of the Code of Federal 

Regulations. The interim final rule 

established procedures to implement 

the MSA 2003 with respect to the 

application for, and award of, MSP 

Operating Agreements that provide 

financial assistance to owners and/or 

operators of the vessels enrolled in the 

program. The program will be 

administered on the basis of one-year 

renewable MSP Operating Agreements, 

provided funding is available in 

subsequent years. Participating 

operators will receive financial 

assistance when operating eligible 

vessels in the foreign commerce of the 

United States, and certain specified 

foreign and domestic areas, with a 

minimum of operating restrictions, for 

at least 320 days in any fiscal year. 

Payment under the program will be 

made on a prorated basis for vessels 

operated less than 320 days in any year, 

exclusive of days a MSP vessel is being 

drydocked, surveyed, or repaired. In 

addition, no payment will be made for 

each day any vessel carries civilian bulk 

preference cargoes of 7,500 tons or 

more. MARAD’s interim final rule 

solicited applications for participation 

in the MSP using the application 

approved under OMB Control No. 2133–

0525. MARAD received applications 

from 26 applicants for 142 applicant 

vessels; MSP Operating Agreements for 

60 vessels were awarded on January 12, 

2005. 

Discussion of Comments and Changes 

MARAD received fifteen sets of 

comments on the interim final rule. 

MARAD also received comments that 

were not related to the interim final 

rule, which will not be addressed in this 

document. Comments on the interim 

final rule, MARAD’s responses, and 

changes made to the interim rule, are as 

follows. 

1. Definitions; Section 296.2 

Definition of Citizen of the United States 

Comment: One commenter approves 

of the definition of ‘‘Section 2 Citizen’’

but urges that the definition of ‘‘Section 

2 Citizen’’ be used in sections 296.20, 

296.22, 296.30(f)(2)(ii)A&B, 

296.31(d)(3), and 296.41(c)(ii) instead of 

‘‘citizens of the United States under 

section 2 of the Shipping Act, 1916 (46 

App. U.S.C. 802).’’ The commenter 

urges that the term ‘‘Citizen of the 

United States’’ not be used because it is 

duplicative, unnecessary, and 

confusing. 

Response: MARAD agrees to 

substitute ‘‘Section 2 Citizen’’ for 

‘‘citizens of the United States under 

section 2 of the Shipping Act, 1916 (46 

App. U.S.C. 802)’’. In the sections 

referred to by the commenter, the term 

‘‘Citizen of the United States’’ will be 

deleted from the regulation. 

Comment: One commenter argued 

that the last phrase of the definition of 

‘‘Citizen of the United States’’—‘‘or a 

corporation, partnership, or association 

as determined under section 2 of the 

Shipping Act, 1916, as amended (46 

App U.S.C. 802)’’—is too restrictive as 

it defines U.S. citizenship and is not in 

agreement with section 12102 of title 46, 

United States Code. The commenter 

stated that the definition of ‘‘Citizen of 

the United States’’ should also include 

documentation citizens. 

Response: The commenter’s 

suggestion is rejected because the 

documentation statutes, 46 U.S.C. 

12101, et seq., do not contain a 

definition for ‘‘Citizen of the United 

States’’. 

Definition of Domestic Trade 

Comment: One commenter seeks to 

have the term ‘‘domestic trade’’ conform 

with terminology used elsewhere in the 

rule—‘‘coastwise trade’’. 

Response: The terms ‘‘domestic trade’’

and ‘‘coastwise trade’’ are used in two 

contexts in the statute. First, MSP 

operators may not participate in 

noncontiguous domestic trade unless 

they are Section 2 Citizens. Second, 

MSP vessels may be operated in mixed 

foreign commerce and domestic trade 

allowed under a registry endorsement; 

however, the MSP vessel cannot 

otherwise be operated in ‘‘coastwise 

trade’’. The use of both terms in the 

regulation is consistent with the statute. 

The statute apparently uses both terms 

‘‘coastwise trade’’ and ‘‘domestic trade’’

interchangeably to mean trade between 

points in the United States. The 

definition section will reflect both 

definitions, which have been clarified 

by removing ‘‘two or more ports and/or’’

as being redundant with the term 

‘‘points’’. 

Definition of Fleet 

Fleet has been removed as the 

definition of ‘‘Fleet’’ was redundant to 

the definition of MSP Fleet. 

Definition of Foreign Commerce 

Comment: The definition of ‘‘foreign 

commerce’’ is divided into two 

paragraphs ‘‘the first paragraph 

concerns vessels other than liquid or 

dry bulk carriers; the second paragraph 

concerns liquid and dry bulk carrying 

services. Three parties commented on 

the first paragraph. One commenter 

stated that the term ‘‘cargo’’ in line ten 

of the definition is ambiguous because 

it could be interpreted that only cargo 

originating in or destined for the United 

States could be carried by a covered 

vessel. The commenter urged that the 

definition be clarified by adding the 

word ‘‘any’’ in front of cargo, enabling 

a single unit of cargo with origination in 

or destination to the United States to 

Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 55583 

qualify the vessel/voyage. Two other 

commenters stated that 46 U.S.C. 

53101(4)(A)(ii) clearly permits 

‘‘commerce or trade between foreign 

countries’’ without restriction. Both 

commenters urged that the definition be 

changed to reflect the statute’s language. 

Response: MARAD agrees to add the 

word ‘‘any’’ regarding origination or 

destination to the United States to 

qualify the vessel/voyage and will revise 

the definition of foreign commerce 

accordingly. MARAD does not agree 

that the definition of foreign commerce 

for MSP liner cargo is intended to be 

between foreign countries if no cargo 

originates in or is destined for the 

United States. 

Comment: Two parties commented on 

the second paragraph. Both commenters 

stated that the definition of ‘‘foreign 

commerce’’ as written precludes the 

carriage of cargo between the United 

States and a foreign port. 

Response: MARAD agrees that the 

second paragraph could be interpreted 

as precluding carriage of cargo between 

United States ports and foreign ports 

and needs clarification. We have added 

a phrase that specifically permits 

trading between United States ports and 

foreign ports. 

Definition of Militarily Useful 

Comment: One commenter stated that 

the definition of ‘‘militarily useful’’ may 

limit the discretion of the Secretary of 

Defense by binding him to ‘‘minimum 

military capabilities, according to the 

Department of Defense (DOD) Joint 

Strategic Planning Capabilities Plan 

(JSCAP) guidance.’’ The commenter 

‘‘suggests that the definition of 

‘‘militarily useful’’ be revised to confirm 

DOD’s unfettered authority’’ over the 

vessel selection process. 

Response: The standards for 

‘‘militarily useful’’ are DOD standards. 

MARAD does not agree that the 

definition limits the discretion of the 

Secretary of Defense during the 

selection of vessels for the MSP. 

Definition of MSA 2003 

MARAD has added a definition for 

‘‘MSA 2003’’. 

Definition of MSP Operating Agreement 

MARAD has clarified the term MSP 

Operating Agreement by defining it as 

an assistance agreement as opposed to a 

procurement. 

Definition of Noncontiguous Domestic 

Trade 

Comment: One commenter seeks to 

include the phrase ‘‘including 

transportation under the Third Proviso 

to Section 27 of the Merchant Marine 

Act of 1920 (the Jones Act) (46 App. 

U.S.C. 883)’’ at the end of the definition 

of ‘‘noncontiguous domestic trade’’. 

Response: The Third Proviso provides 

an exception to the prohibition in the 

Jones Act on the use of non-coastwise 

vessels for carriage of cargo between 

points within the continental United 

States, including Alaska, provided part 

of the transportation is over Canadian 

rail lines. However, 46 U.S.C. 53107, 

specifically prohibits participation by 

an MSP operator in transportation 

between ‘‘a point in the contiguous 48 

States and a point in Alaska, Hawaii, or 

Puerto Rico, other than a point in 

Alaska north of the Arctic Circle.’’ The 

question is whether the current 

definition is sufficient on the 

prohibition of carriage of cargo in the 

noncontiguous domestic trades under 

MSP, even if allowed under the Third 

Proviso to section 27. In our view, the 

definition is specific, and the only 

exception to the MSP prohibition is 

spelled out ‘‘other than a point in 

Alaska north of the Arctic Circle’’. 

Definition of Operator 

Comment: MARAD received two 

comments that ownership alone does 

not necessarily qualify an owner as an 

operator. 

Response: MARAD agrees and has 

added the phrase ‘‘and operates that 

vessel directly’’ immediately after the 

words ‘‘owns a vessel’’ in the text. 

Definition of Person 

Comment: MARAD received two 

comments that the concluding sentence 

‘‘A trust is not a person’’ causes 

unintended consequences particularly 

with respect to ownership of enrolled 

vessels. 

Response: The purpose of this 

determination is that MARAD did not 

want to grant an MSP Operating 

Agreement to a trust, because we believe 

that an MSP Operating Agreement 

should be awarded to an entity that can 

actively manage a vessel in its own 

right. Accordingly, a corporation, 

limited liability company, partnership, 

or individual are all acceptable 

contractors. However, a trust cannot act 

in its own right and should not be 

eligible. Therefore, we are changing the 

concluding sentence to ‘‘For purposes of 

holding an MSP Operating Agreement, 

the term ‘‘person’’ excludes a trust.’’

MARAD is adding to the definitions of 

Applicant and Contractor that ‘‘the 

term, applicant excludes a trust’’ and 

‘‘the term, contractor excludes a trust’’, 

respectively. 

Definition of Section 2 Citizen 

Comment: One commenter does not 

understand or agree with the phrase 

‘‘without regard to any statute that 

‘‘deems’’ a vessel to be owned and 

operated by a Section 2 Citizen’’, and 

urges clarification as to the purpose of 

this phrase. 

Response: MARAD used the 

‘‘deeming’’ phrase to account for the 

possibility of future changes to the 

‘‘deeming’’ law. The ‘‘deeming statute’’

is cited in 46 U.S.C. 12102(d)(4), as 

amended, and does not currently apply 

to chapter 531 of title 46. 

Definition of Transfer of an Operating 

Agreement 

Comment: Two commenters objected 

to the definition of ‘‘transfer of an 

operating agreement’’. Both commenters 

wanted the phrase ‘‘either directly or 

indirectly’’ removed and both did not 

want the definition to reflect intercompany transfers that, under the 

existing MSP, do not require an 

amendment to the MSP Operating 

Agreement. Both commenters proposed 

revised language and one offered an 

additional definition. 

Response: We do not feel that it is 

unreasonable to require contractors to 

report all proposed transfers. A transfer 

of an MSP Operating Agreement could 

be accomplished indirectly, if the MSP 

Operator is acquired by another entity. 

In such events, MARAD and DOD have 

a responsibility under the statute to 

review the transfer. Thus, MARAD 

declines to revise this definition. 

Definition of United States Citizen Trust 

Comment: One commenter states that 

section 53102 of the MSA 2003 requires 

only that each trustee be a ‘‘citizen of 

the United States’’ for a trust to qualify, 

not a Section 2 Citizen, as specified in 

the definition. The commenter requests 

that MARAD’s definition conform to the 

law. 

Response: MARAD believes that the 

intent of the statute is that each trustee 

be a Section 2 Citizen. Further, not 

requiring each trustee to be a Section 2 

Citizen defeats the purpose of having a 

United States Citizen Trust. Therefore, 

no change will be made to this 

definition. 

2. Applications; Section 296.3 

Comment: One commenter notes that 

the term ‘‘contractor’’ in section 296.3(a) 

should be replaced by ‘‘applicant’’. 

Response: MARAD agrees and has 

amended section 296.3(a) accordingly. 

The sentence including this change has 

been moved to a new section 296.24. 

Comment: One commenter states that 

MARAD should make clear what sort of 

55584 Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 

substantiating information is required to 

establish either ownership or the status 

of a demise charter for the application 

to be considered ‘‘complete’’. 

Response: MARAD is adding to 

section 296.3(a) the sentence 

‘‘Contractors of MSP Operating 

Agreements are required to submit 

ownership information such as a vessel 

title of ownership and signed charters to 

MARAD for approval by July 1, 2005.’’

Comment: One commenter objected to 

the qualifier ‘‘U.S.’’ before citizenship as 

it applies to vessel managers in 

paragraph (b)(1). 

Response: MARAD is requiring that 

vessel managers meet the same 

standards of citizenship as the applicant 

for whom they provide service. We have 

modified the language to clarify that 

vessel managers for Section 2 Citizen 

applicant operators must meet Section 2 

Citizenship standards, and vessel 

managers for documentation citizens 

must meet citizenship standards for 

documentation citizens. 

Comment: One commenter believes 

that the use of the word ‘‘demonstrates’’

with regard to submitting an affidavit of 

U.S. citizenship to qualify as being able 

to document a vessel under 46 U.S.C. 

chapter 121, needs to be changed to 

‘‘declare’’ or ‘‘affirm’’. 

Response: MARAD does not believe 

that a change to the definition is 

necessary as an affidavit is an 

affirmation. 

Comment: One commenter requested 

changing ‘‘your’’ to ‘‘any’’ in section 

296.3(b)(12) in reference to supplying 

special security agreements with the 

MSP application. 

Response: MARAD agrees and has 

changed ‘‘your’’ to ‘‘any’’ in section 

296.3(b)(12). 

Comment: One commenter states that 

the text of section 296.3(b)(13) limits the 

scope of the certification from a 

documentation citizen who is a demise 

charterer of the MSP vessel to only ‘‘the 

foreign country of the parent’’ of any 

documentation citizen required to so 

certify, whereas the form of the 

declaration states the scope as ‘‘laws of 

the foreign country(ies) of the 

[Applicant’s] ultimate foreign parent or 

intermediate parents’’. * * * 

Response: MARAD agrees and has 

changed the text of section 296.3(b)(13) 

to agree with the declaration. 

Comment: One commenter argues that 

section 296.3(b)(15) regarding 

replacement vessel plans and age 

waivers is inconsistent with the MSP 

application form and that the 

application form should prevail. The 

commenter notes that item 17 of the 

MSP application form requires that an 

applicant for a Participating Fleet Vessel 

that is over 15 years of age include 

detailed information on its intended 

replacement vessel and item 18 requires 

an applicant for an age waiver to 

provide statutory information to support 

an age waiver. The commenter believes 

that section 296.3(b)(15) appears to 

require applicants to provide details of 

their replacement plan, which is 

premature. 

Response: MARAD agrees and has 

added language regarding the 

replacement plan to section 296.3(b)(15) 

that is consistent with the MSP 

application form. 

3. Citizenship Requirements of Owners, 

Charterers and Operators; Section 

296.10 

Comment: One commenter suggests 

that in order to ensure proper 

interpretation of MSA 2003 

requirements, ‘‘entire’’ should be added 

to section 296.10 to ensure that 

citizenship requirements apply 

throughout the term of an MSP 

Operating Agreement. 

Response: MARAD agrees and has 

amended the regulation to read 

‘‘Citizenship requirements are deemed 

to have been met if during the entire 

period of an MSP Operating Agreement 

under this chapter’’. * * * 

Comment: One commenter requests 

that the word ‘‘person’’ should be 

replaced by ‘‘non-Section 2 Citizen’’ so 

that foreign certification and other 

documentation requirements would 

apply to only documentation citizens. 

Response: MARAD agrees and has 

amended the regulation to read ‘‘A 

vessel to be included in an MSP 

Operating Agreement is owned by a 

person that is a Section 2 Citizen or a 

United States Citizen Trust, and the 

vessel is demise chartered to a nonSection 2 Citizen’’. 

Comment: One commenter states that 

MARAD does not cover the procedures 

it will follow as to the approval of board 

and executive personnel at the time of 

application in section 296.10(b)(2). 

Response: MARAD does not believe 

that establishing specific procedures for 

approval of board and executive 

personnel is necessary. MARAD 

believes that maintaining flexibility to 

consider all factors during the 

evaluation of applications and 

considering unforeseen events does not 

require establishment of specific 

procedures. 

Comment: One commenter objects to 

requiring a majority of the members of 

the board of directors of a 

Documentation Citizen charterer being 

Section 2 Citizens and recommends that 

‘‘section 2’’ be deleted and ‘‘of the 

United States’’ be inserted after 

‘‘citizens.’’

Response: MARAD’s language in 

section 296.10 conforms to 46 U.S.C. 

53102(c)(2)(A)(ii)(II) of the MSA 2003. 

Thus, no revision is necessary. 

Comment: One commenter requested 

that MARAD revise the introductory 

text of section 296.10(c) by adding the 

phrase ‘‘and operated’’ to indicate that 

a vessel to be included in an MSP 

Operating Agreement must be owned 

and operated by defense contractors as 

set forth in paragraph (c). The 

commenter also suggested that MARAD 

modify the phrase ‘‘owned and operated 

by a defense contractor’’ by adding ‘‘or 

a related person to include affiliated or 

related companies within the same 

corporate group’’ as the commenter 

believes the phrase ‘‘who is a person’’

is too restrictive. 

Response: MARAD agrees and has 

added these changes to the section 

296.10. 

4. Vessel Requirements; Section 296.11 

Comment: One commenter notes that 

section 296.11(a)(5) should modify 

section 296.11(a)(4)(ii). 

Response: MARAD agrees and has 

renumbered section 296.11(a)(5) to 

section 296.11(a)(4)(ii)(A) and 

renumbered sections 296.11(a)(5)(i) 

through 296.11(a)(5)(iii) to sections 

296.11(a)(4)(ii)(A)(1) through 

296.11(a)(4)(ii)(A)(3), respectively. 

Comment: One commenter argues that 

the reflagging-in requirement as 

stipulated in section 296.11(a)(4) (which 

includes the former section 296.11(a)(5)) 

implies that the vessel standard 

exception is a threshold for vessel 

participation in the MSP, rather than an 

exception from U.S. Coast Guard 

standards that apply to every other U.S.- 

flag vessel. The commenter requests that 

this section be moved to another 

subsection and clarified to state that a 

vessel enrolled in the MSP that satisfies 

the statutory requirements will receive a 

valid Certificate of Inspection from the 

U.S. Coast Guard for all purposes. 

Response: MARAD believes that 

section 296.11(a)(4) states clearly that in 

order to be eligible for an MSP 

Operating Agreement, a foreign flag 

vessel must meet the Coast Guard 

standards noted in section 

296.11(a)(4)(ii)(A). Whether or not a 

vessel meets the standards noted in 

section 296.11(a)(4)(ii)(A) can only be 

addressed by the U.S. Coast Guard. 

Comment: One commenter noted that 

MARAD did not address regulatory 

relief provided in 46 U.S.C. 53108(c), as 

enacted in the MSA 2003, regarding 

telecommunications and other 

electronic equipment on a foreign vessel 

Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 55585 

that will be documented under the U.S. 

flag for operation in the MSP. The 

commenter suggested that MARAD 

incorporate the Federal 

Communications Commission (FCC) 

regulatory relief provisions into section 

296.11(a)(5). 

Response: MARAD agrees, and is 

adding the FCC provision under section 

296.11(c). 

5. Tank Vessels; Section 296.20 

Comment: One commenter stated that, 

because of uncertainty of funding for the 

National Defense Tank Vessel 

Construction Assistance Program 

(NDTVCP), the application process for 

tankers in the MSP should be phased in. 

The commenter stated the difficulty of 

providing specific existing vessel 

information when the uncertainty of 

funding makes it impossible to know 

how long the existing vessels need to be 

contracted for, or even whether 

NDTVCP funding will eventually occur. 

The commenter urges MARAD to allow 

NDTVCP applicants to provide generic 

information on October 15, regarding 

vessels for temporary slots, and to fill in 

the specific data later. 

Response: MARAD is keenly aware of 

the dilemma presented to NDTVCP 

tanker applicants. However, MARAD 

was required to offer MSP Operating 

Agreements to operators on January 12, 

2005. Those MSP Operating Agreements 

will, by necessity, include temporary 

vessel slots for existing tankers or other 

vessels to temporarily occupy the slots 

of NDTVCP tankers well in advance of 

MARAD knowing that tanker 

construction money will be available. 

Funding availability will determine 

when NDTVCP permanent slots are 

awarded. 

Comment: One commenter noted that 

section 296.20(e) specifies that if a tank 

vessel contractor does not offer an 

eligible existing tank vessel during 

construction of the tank newbuilding, 

then the Secretary may award an MSP 

Operating Agreement to a non-tank 

vessel of another contractor until 

construction of the new tank vessel is 

completed in the United States. The 

commenter suggests that another 

alternative would be to temporarily 

award an MSP Operating Agreement to 

a different contractor with an eligible 

tank vessel. 

Response: MARAD will amend the 

language to change ‘‘non-tank vessel’’ to 

‘‘any eligible vessel’’. In addition, 

MARAD is adding to the end of this 

section further clarification to this 

section in accordance with MARAD’s 

determination of January 12, 2005 

specifying that a Contractor awarded 

MSP Operating Agreements for three 

existing tank vessels must sign and 

execute a binding agreement for 

construction in the United States of 

three replacement tank vessels to be 

operated under MSP Operating 

Agreements not later than nine months 

after construction and MSP operating 

assistance funding for three tank vessels 

becomes available. 

Section 296.20(b)(1) has been 

amended for clarity, including that the 

requirement for a Contractor to enter 

into a binding agreement only occurs 

after both construction and operating 

assistance are available. Sections 

(b)(2)(i) and (b)(2)(ii) have been 

rewritten to reflect MSP Operating 

Agreement language that was not 

available when the Interim Final Rule 

was published. 

6. Participating Fleet Vessels; Section 

296.21 

Comment: One commenter suggests 

revising the last sentence in section 

296.21(d)(1) by inserting after 

‘‘Applicants must certify that they will 

have the requisite authority’’ the phrase 

‘‘as of October 1, 2005 and for the full 

period of the Operating Agreement 

thereafter’’ and adding ‘‘that remains in 

effect beyond September 30, 2015’’ to 

the end of the sentence. 

Response: MARAD agrees that this 

language adds clarity but has changed 

‘‘beyond’’ to ‘‘until’’ after ‘‘that remain 

in effect’. 

Comment: One commenter suggests 

that requesting applicants to name a 

replacement vessel with their 

applications as noted in section 

296.21(d)(2) is unreasonable and that a 

‘‘replacement plan’’ is what should be 

approved by MARAD. 

Response: In conjunction with 

comments on section 296.31, MARAD 

has decided to change its requirements. 

For companies requesting age waivers, 

MARAD will require Applicants to 

submit a replacement vessel plan at 

least 120 days before the expiration of 

age eligibility for the MSP vessel. 

Comment: One commenter believes 

that section 296.21(d)(2) is misplaced 

because it refers to all vessels subject to 

an age waiver, not just Participating 

Fleet Vessels. The commenter further 

believes that MARAD should clarify that 

the decision to extend an MSP 

Operating Agreement beyond the date 

that the vessel becomes 25 years of age 

will be made during the term of the 

MSP Operating Agreement when an 

appropriate vessel can be offered 

instead of during the application 

process. 

Response: Section 296.21(d)(2) refers 

to the need of the applicant to provide 

replacement plans for vessels in section 

296.21(d)(1) that become over age. This 

section relates only to Priority II vessels, 

so no change to this section is required. 

The statute does not give authority to 

allow a vessel over 25 years of age in the 

program unless it is a Priority II vessel, 

and only during the first 30 months of 

the program. 

Comment: One commenter suggested 

that DOD has the right to reject a 

Participating Fleet Vessel if it is no 

longer deemed militarily useful. The 

commenter states that DOD has 

authority to specify operational 

requirements to determine the order of 

priority within a category of priority and 

the authority to approve or not approve 

the award of an MSP Operating 

Agreement within a priority. The 

commenter believes that MARAD’s 

reference in section 296.30(a)(2) to the 

Commander establishing general 

evaluation criteria for operational 

requirements * * * for vessels eligible 

under the third and fourth priorities is 

incorrect, and should also be applied to 

the second priority. 

Response: MARAD does not agree as 

a determination was made by the U.S. 

Transportation Command 

(USTRANSCOM) prior to acceptance of 

applications that all the Participating 

Fleet Vessels in Priority II have already 

been deemed to be militarily useful, and 

therefore, the Commander’s general 

evaluation criteria will be restricted to 

Priority III and Priority IV applicants. 

While some Priority III and Priority IV 

vessels having greater military 

usefulness than some Priority II vessels 

may be rejected, MARAD and the 

Commander intend to honor the 

‘‘grandfather’’ rights of the Participating 

Fleet Vessels, pursuant to 46 U.S.C. 

53103(a)(1)(B). No change needs to be 

made to the regulation. 

Comment: One commenter expressed 

concern over the possibility that a 

Participating Fleet Vessel may not be 

available to participate in the MSP on 

October 1, 2005 due to an unforeseen 

casualty to the vessel, and suggested 

that the Contractor be allowed to offer 

an eligible replacement vessel with a 60 

day (or other agreed upon) period to 

preserve the MSP slot. 

Response: MARAD agrees to add a 

new paragraph (f) to section 296.21 to 

address this concern. Section 296.21(f) 

will read ‘‘In the event that a 

Participating Fleet Vessel will be 

unavailable to participate in the MSP on 

October 1, 2005, due to an unforeseen 

casualty to the vessel, a Contractor may 

offer an eligible replacement vessel. The 

replacement vessel must subsequently 

be approved by MARAD and DOD. The 

replacement vessel must operate under 

an MSP Operating Agreement in 

55586 Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 

sufficient time to meet the 180 

minimum operation days required 

during the fiscal year to avoid being in 

default of the MSP Operating 

Agreement.’’

7. Discretion Within Priority; New 

Section 296.23 

Comment: Several commenters stated 

that Discretion Within Priority applied 

to all priorities and placing it in section 

296.22, which only references Priority 

III and Priority IV vessels, implies that 

Discretion Within Priority applies only 

to Priority III and Priority IV vessels. 

Response: MARAD agrees and has 

moved the provisions regarding 

Discretion Within Priority to a new 

section 296.23. 

A new subsection has been added 

stating that the Secretary must follow 

the priority system established in 46 

U.S.C. 53103(c) when awarding initial 

MSP Operating Agreements. In other 

words, MARAD cannot, for example, 

favor a Priority III applicant over a 

Priority II applicant. 

8. Subsequent Awards of MSP Operating 

Agreements; New Section 296.24 

Comment: One commenter indicated 

that if for any reason, after the award of 

an operating agreement, the contractor 

is unwilling or unable to enter into an 

MSP Operating Agreement, MARAD 

may award that operating agreement to 

an applicant having an eligible vessel 

that applied but was not awarded an 

MSP Operating Agreement or may 

award that operating agreement 

following a new round of applications at 

a later date. 

Response: MARAD is adding section 

296.24 to adopt these views by 

providing for subsequent awards of MSP 

Operating Agreements should an 

opening occur at a later date. Part of 

section 296.3(a) concerning failure of 

MSP Operating Agreement holders to 

commence operations pursuant to the 

terms of the MSP Operating Agreement 

has been restated and moved to the new 

section 296.24. Section 296.24 also 

provides procedures for awarding 

replacement MSP Operating Agreements 

subsequent to October 1, 2005. MARAD 

retains the discretion envisioned in the 

statute to award an MSP Operating 

Agreement either from the original pool 

of applicants or from a new pool of 

applicants. At the time subsequent 

awards are made, MARAD will 

determine if the original applicant pool 

is stale. Section 296.24 also states that 

inasmuch as MSP furthers a public 

purpose and MARAD does not acquire 

goods or services through MSP, the 

selection process for award of MSP 

Operating Agreements does not 

constitute an acquisition process subject 

to procurement law or the Federal 

Acquisition Regulations. This 

determination results from recent ‘‘bid 

protests’’ that were filed with the 

Government Accountability Office and 

subsequently withdrawn. 

Comment: One commenter argues that 

MSP applicants meeting the Section 2 

Citizenship requirements, whose vessels 

have been found eligible but are wait 

listed for an award of an MSP Operating 

Agreement due to the lack of available 

slots, should receive first priority 

consideration if slots become available. 

Response: Until October 1, 2005 MSP 

applicants meeting the Section 2 

citizenship requirements will get 

priority because the priority system will 

apply, subject to approval of 

USTRANSCOM. After October 1, 2005 

MARAD, in conjunction with 

USTRANSCOM, will select vessels on 

the basis of military utility and 

commercial viability, giving priority to 

applicants that have the same or more 

restrictive citizenship status as the 

original awardee of the slot returned to 

MARAD for reissue. New section 296.24 

covers the procedures to be used by 

MARAD to select vessels if slots become 

available. No change is necessary in 

section 296.30. 

9. General Conditions; Approval; 

Section 296.30 

Comment: One commenter stated that 

MARAD should have the flexibility to 

consider newbuilds other than tank 

vessels, but that the language of section 

296.30(b) seemed to preclude this as the 

starting date for the new MSP was 

established as October 1, 2005. The only 

exception listed in section 296.30(b)(2) 

is for vessels under charter to the 

Government. The commenter 

recommended language for a second 

exception specifically for newbuilds. 

Response: One of the goals of the new 

MSP is to have 60 vessels selected and 

ready to enter the program on October 

1, 2005. There were a couple of 

applications that featured newbuilds. 

For those applications, MARAD has the 

discretion to offer temporary slots to 

existing vessels if the newbuilds are 

selected for future inclusion when they 

are delivered. MARAD does not believe 

additional language is necessary. 

Comment: One commenter noted that 

the sections under 296.30 address the 

situation of partial funding by Congress 

for the MSP, and that section 296.30(g) 

specifies that a determination on which 

vessels will be funded will be based on 

the most militarily useful and 

commercially viable vessels. The 

commenter argues that a determining 

consideration of which vessels will be 

funded should also include the 

Contractors’ services and systems. In 

addition, the commenter believes that 

the priority system must be followed. 

Response: MARAD believes that a 

determination of ‘‘commercially viable’’

vessels addresses the commenter’s 

concerns about Contractors’ services 

and systems. MARAD is not required to 

follow the initial application priority 

system in determining which MSP 

Operating Agreements to fund when the 

program is partially funded after 

October 1, 2005. 

Comment: One commenter stated that 

tank vessels not built under the 

NDTVCP should not be treated the same 

as tank vessels built under the NDTVCP 

with regard to flagging out vessels in the 

event of termination of the MSP 

Operating Agreement with replacement 

by the Contractor or if sufficient MSP 

funding is not appropriated for any 

fiscal year by the 60th day of that fiscal 

year. Section 296.30(h) requires the 

owner and operator of any tank vessel 

to formally apply to MARAD pursuant 

to section 9 of the Shipping Act, 1916 

to transfer and register the vessel under 

a foreign registry. 

Response: MARAD agrees that the 

requirement for formally applying under 

section 9 of the Shipping Act, 1916, to 

flag out tankers applies only to tankers 

built under the NDTVCP. Appropriate 

changes have been made to sections 

296.30(h)(2) and 296.30(h)(3). 

Comment: One commenter argued 

that the transfer of MSP Operating 

Agreements should be allowed only to 

a person with the same or more 

restrictive U.S. citizenship priority. The 

commenter also urged that MARAD 

should render decisions on MSP 

transfer requests within 90 days—not 

with a minimum of 90 days without an 

upper limit to process such transfer 

requests. 

Response: MARAD agrees that 

transfers of MSP Operating Agreements 

will be to persons of the same or more 

restrictive U.S. citizenship priority. 

However, the statute provides for both 

DOD and MARAD approval of transfers, 

and does not set a time limit for review. 

Therefore, MARAD will not limit MSP 

transfer requests to 90 days or less. 

MARAD does not believe any changes 

are necessary to the rule with regard to 

the commenter’s suggestions. 

Comment: One commenter believes 

that a transfer from a holder of an MSP 

Operating Agreement under the Third 

citizenship category be required to 

transfer that MSP Operating Agreement 

to another person that qualifies under 

the Third citizenship category. In 

connection, the commenter requests that 

section 296.30(f)(2)(B) be reworded to 

Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 55587 

‘‘Owned by a person that is a 

Documentation Citizen and operated by 

a person that is a Section 2 Citizen.’’

Response: MARAD agrees to this 

language and has revised the regulation 

accordingly. 

10. MSP Assistance Conditions; Section 

296.31 

Comment: One commenter requested 

that MARAD amend the proposed 

regulations to allow U.S. Merchant 

Marine Academy (USMMA) cadets to be 

carried either on the MSP vessel or on 

non-MSP U.S.-flag vessels in the 

Contractor’s fleet. 

Response: MARAD does not agree to 

this change. One of the requirements for 

receiving an MSP Operating Agreement 

is that MSP vessels carry USMMA 

cadets. Section 296.31 has been 

amended for clarity. 

11. Payment procedures; Section 296.41 

Comment: One commenter claims that 

MARAD has exceeded its authority in 

section 296.41(c)(1)(v) by limiting the 

number of days that a vessel may be 

drydocked, surveyed, inspected, or 

repaired without MARAD approval to 

30 days, and requests removal of this 

section or, alternatively, an increase in 

the number of days to 45. 

Response: MARAD believes thirty 

days is a reasonable limit. If a 

Contractor anticipates that the number 

of repair days will exceed this amount, 

a request for MARAD approval may be 

submitted by the Contractor. 

Comment: One commenter believes 

that MARAD must set a limit per voyage 

on carriage of preference cargo of 7,500 

tons bagged and/or bulk, or 

alternatively, MARAD should adopt 

rules requiring that full shipment lot 

bids submitted to agricultural agencies 

on behalf of MSP vessels be augmented 

with the per ton value of the daily 

government assistance from MSP. 

Response: Section 296.41(c)(i) states 

that no payments will be made ‘‘[f]or 

any day that an MSP Agreement Vessel 

is engaged in transporting more that 

7,500 tons* * *of civilian bulk 

preference cargoes pursuant to section 

901(a), 901(b), or 901b of the Act 

provided that it is bulk cargo.’’ Section 

296.41(c)(i) comports with the language 

in 46 U.S.C. 53106 which does not 

allow for ‘‘7,500 bagged’’ preference 

cargo or a reduction based on a per ton 

value of the daily government MSP 

assistance. Therefore, MARAD is not 

changing section 296.41(c)(i). 

MARAD has replaced the words ‘‘of 

up to’’ preceding $2,600,000 in the first 

paragraph in section 296.41 with ‘‘equal 

to’’ to comport with the governing 

statute, 46 U.S.C. 53106(a). 

12. Administrative Determinations; 

Section 296.50 

Section 296.50(a) has been amended 

to clarify and to indicate that appeals to 

the Administrator under this paragraph 

are a prerequisite to exhausting 

administrative remedies. Section 

296.50(b) has been amended for 

purposes of clarity. 

13. Miscellaneous Editorial and 

Clarifying Changes Adopted 

The commenters submitted several 

editorial and clarifying comments 

which MARAD is incorporating in this 

final rule. In section 296.11(a)(2), the 

reference to foreign commerce of the 

United States, and in sections 

296.31(d)(2) and 296.41, the 

descriptions of ‘‘foreign trade’’ are being 

replaced by the words ‘‘foreign 

commerce’’ because the reference and 

the descriptions closely mirror the 

definition of ‘‘foreign commerce’’ in 

section 296.2. 

MARAD has amended Section 

296.31(b) to clarify funding levels and 

vessel selection under a continuing 

resolution, and section 296.31(d)(3) to 

clarify the meaning of the term 

‘‘participates’’. 

MARAD has added the phrase ‘‘or if 

not current year data, a Schedule 310 of 

the MA–172’’ to section 296.32(b) to 

clarify MARAD’s expectations if current 

year data is not available. 

Rulemaking Analyses and Notices 

Executive Order 12866 (Regulatory 

Planning and Review), and Department 

of Transportation (DOT) Regulatory 

Policies; Pub. L. 104–121 

This rulemaking is considered to be 

an economically significant regulatory 

action under section 3(f) of Executive 

Order 12866 and is also considered a 

major rule for purposes of Congressional 

review under Pub. L. 104–121. Since the 

program is designed to support up to 60 

vessels in FY 2006, each receiving equal 

to $2.6 million annually, the Maritime 

Administrator finds that the program 

may have an annual effect on the 

economy of $100 million or more. Thus, 

it is considered to be a significant rule 

under Executive Order 12866 and DOT’s 

Regulatory Policies and Procedures (44 

FR 11034, February 26, 1979), and has 

been reviewed by OMB. Under 

Executive Order 12866, MARAD is 

required to provide an analysis of 

information developed as part of its 

decision making process, including the 

benefits anticipated from the regulatory 

action, the costs anticipated from the 

action, and an assessment of the costs 

and benefits of potentially effective and 

reasonably feasible alternatives to the 

regulatory action. MARAD’s regulatory 

analysis follows. 

Background 

The Maritime Security Act of 1996 

(MSA) was passed with strong 

bipartisan support in Congress and was 

signed into law on October 8, 1996. The 

MSA outlined, in detail, the 

establishment of a fleet of vessels, 

pursuant to agreement, engaged in U.S. 

foreign commerce and available for use 

by the Department of Defense (DOD) 

during times of war or national 

emergency. Based on the success of the 

program under the original MSA, 

Congress, as part of the recently enacted 

MSA 2003, created a new program that 

permits an increase in both the number 

of participant vessels as well as the 

payment amounts such vessels will 

receive under the program. 

Benefits 

The major benefit of the MSA 2003 is 

that it will provide DOD with assured 

access of up to 60 vessels that may be 

used during times of war or national 

emergency. The existing MSP fleet of 47 

vessels consists primarily of 

containerships, which are mainly 

designed for the sustainment phase of 

sealift operations that support military 

operations. In Operation Iraqi Freedom, 

40 MSP vessels were employed in 

support of military operations. Four 

additional MSP ships have been utilized 

for reconstruction of Iraq. In addition, 

the MSP provides necessary support to 

help maintain a U.S.-flag presence in 

international commerce. The MSP 

vessels are a major component of the 

U.S.-flag capability that contributes to 

the U.S. mariner base for utilization on 

both commercial and DOD organic 

fleets. The MSP also supports the 

training of merchant mariners by 

including United States Merchant 

Marine Academy cadets on voyages of 

MSP vessels. 

Costs 

From the inception of the program, 

Congress set strict limits, not subject to 

the Secretary of Transportation’s 

discretion, on the number of participant 

vessels and the annual payment per 

vessel. The MSA 2003 will permit an 

increase in the number of participant 

vessels from 47 authorized under the 

original MSA (for FYs 1997–2005) to 60 

(authorized for FYs 2006–2015). 

Similarly, the payments per vessel are 

increased from $2.1 million (under the 

original MSA for FYs 1997–2005) to 

$2.6 million (for FYs 2006–2008); $2.9 

million (for FYs 2009–2011); and $3.1 

million (for FYs 2012–2015). The 

maximum programmatic payment that 

55588 Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 

Congress directed through the MSA 

2003 is $156 million, $174 million, and 

$186 million per year for FYs 2006–

2008, 2009–2011, and 2012–2015, 

respectively, subject to appropriation. 

Analysis of Alternatives 

The MSA 2003 expands the MSP 

program that was originally established 

by Congress in 1996 by increasing the 

number of participant vessels, annual 

funding amounts, and expenditure 

amounts for the new MSP program. 

However, beyond the increased size of 

the new MSP program under the MSA 

2003, the underlying statutes are 

substantially similar, and envision a 

new MSP program that is essentially a 

continuation of the prior MSP program 

under the original MSA. Under both the 

original MSA and the MSA 2003, 

Congress prescribed the salient details 

of the MSP program, including ship 

ownership, vessel eligibility, vessel 

documentation, program duration, the 

number of participants, the amount of 

funding, and, under the MSA 2003, 

guidelines regarding the composition of 

the fleet. Since the MSA 2003 provides 

detailed requirements for continuing the 

MSP program, MARAD has little 

discretion to propose regulatory options. 

In fact, given the highly prescriptive 

nature of both the original MSA and 

MSA 2003, MARAD believes that no 

viable regulatory alternatives exist in 

lieu of implementing these regulations, 

which continue and expand the current 

MSP program. 

Executive Order 13132 

We have analyzed this rulemaking in 

accordance with the principles and 

criteria contained in Executive Order 

13132 (‘‘Federalism’’) and have 

determined that it does not have 

sufficient federalism implications to 

warrant the preparation of a federalism 

summary impact statement. The 

regulations have no substantial effects 

on the States, the current Federal-State 

relationship, or the current distribution 

of power and responsibilities among 

various local officials. Therefore, 

consultation with State and local 

officials was not necessary. 

Executive Order 13175 

MARAD does not believe that this 

final rule will significantly or uniquely 

affect the communities of Indian tribal 

governments when analyzed under the 

principles and criteria contained in 

Executive Order 13175 (Consultation 

and Coordination with Indian Tribal 

Governments). Therefore, the funding 

and consultation requirements of this 

Executive Order do not apply. 

Regulatory Flexibility 

Because no notice of proposed 

rulemaking was required prior to 

issuance of this final rule, as set forth in 

section 3533 of Subtitle C, Title XXXV, 

of the National Defense Authorization 

Act for Fiscal Year 2004, the provisions 

of the Regulatory Flexibility Act (5 

U.S.C. 601 et. seq.) do not apply. 

However, the Maritime Administrator 

certifies that this final rule will not have 

a significant economic impact on a 

substantial number of small entities. We 

anticipate that few, if any, small entities 

will participate in this program due to 

the nature of the shipping industry and 

the capital costs associated with ships 

that are eligible for the program. In 

addition, because this final rule 

implements a financial assistance 

program, it does not impose an 

economic burden on small entities. 

Unfunded Mandates Reform Act of 1995 

This final rule will not impose an 

unfunded mandate under the Unfunded 

Mandates Reform Act of 1995. It will 

not result in costs of $100 million or 

more, in the aggregate, to any of the 

following: State, local, or Native 

American tribal governments, or the 

private sector. 

Environmental Assessment 

We have analyzed this final rule for 

purposes of compliance with the 

National Environmental Policy Act of 

1969 (NEPA) (42 U.S.C. 4321 et seq.) 

and we have concluded that, under the 

categorical exclusions provision in 

section 4.05 of Maritime Administrative 

Order (MAO) 600–1, ‘‘Procedures for 

Considering Environmental Impacts,’’

50 FR 11606 (March 22, 1985), neither 

the preparation of an Environmental 

Assessment, an Environmental Impact 

Statement, nor a Finding of No 

Significant Impact for this rulemaking is 

required. This final rule does not change 

the environmental effects of the current 

MSP, which has been operational since 

FY 1997. This final rule implements a 

financial assistance program which 

results in a negligible, if any cumulative 

effect on the environment. The vessels 

eligible for the MSP under the MSA 

2003 (1) will continue to operate under 

the U.S. flag, and will continue to be 

governed by U.S.-flag state control while 

operating in the foreign commerce of the 

United States; and (2) are and will 

continue to be designed, constructed, 

equipped and operated in accordance 

with stringent United States Coast 

Guard and International Maritime 

Organization standards for maritime 

safety and maritime environmental 

protection. 

Paperwork Reduction 

The Office of Management and Budget 

extended its approval of an information 

collection under the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3507 

et seq.) for three years on January 31, 

2005. The title of the information 

collection is Application and Reporting 

Elements for Participation in the 

Maritime Security Program, OMB 

Control No. 2133–0525. 

This information collection requires 

vessel operators to continue to submit 

initial applications, amendments to 

applications (if necessary), and monthly 

and annual reports. We estimate that the 

number of annual respondents under 

the new MSP program will increase 

from 12.5 to 15, the average total 

number of annual responses will 

increase from 132 to 198.5, and that the 

average annual recordkeeping and 

reporting burden program total will 

increase from 152 hours to 224 hours. 

We estimate that the total average 

annual cost burden associated with this 

information collection will be 

$10,726.65, or $715.11 per respondent. 

List of Subjects in 46 CFR Part 296 

Assistance payments, Maritime 

carriers, Reporting and recordkeeping 

requirements. 

■ Accordingly, the interim final rule 

adding part 296 to title 46, Code of 

Federal Regulations, which was 

published at 69 FR 43328 on July 20, 

2004, is revised and adopted as a final 

rule to read as follows: 

PART 296—MARITIME SECURITY 

PROGRAM (MSP) 

Subpart A—Introduction 

Sec. 

296.1 Purpose. 

296.2 Definitions. 

296.3 Applications. 

296.4 Waivers. 

Subpart B—Eligibility 

296.10 Citizenship requirements of owners, 

charterers and operators. 

296.11 Vessel requirements. 

296.12 Applicants. 

Subpart C—Priority for Granting 

Applications 

296.20 Tank vessels. 

296.21 Participating Fleet Vessels. 

296.22 Other vessels. 

296.23 Discretion within priority. 

296.24 Subsequent awards of MSP 

Operating Agreements. 

Subpart D—Maritime Security Program 

Operating Agreements 

296.30 General conditions. 

296.31 MSP assistance conditions. 

296.32 Reporting requirements. 

Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 55589 

Subpart E—Billing and Payment 

Procedures 

296.40 Billing procedures. 

296.41 Payment procedures. 

Subpart F—Appeals Procedures 

296.50 Administrative determinations. 

Subpart G—Maintenance and Repair 

Reimbursement Pilot Program 

296.60 Applications. 

Authority: Pub. L. 108–136, 117 Stat. 1392; 

46 App. U.S.C. 1114(b), 49 CFR 1.66. 

Subpart A—Introduction 

§ 296.1 Purpose. 

This part prescribes regulations 

implementing the provisions of Subtitle 

C, Maritime Security Fleet Program, 

Title XXXV of the National Defense 

Authorization Act for Fiscal Year 2004, 

the Maritime Security Act of 2003 (MSA 

2003), governing Maritime Security 

Program (MSP) payments for vessels 

operating in the foreign trade or mixed 

foreign and domestic commerce of the 

United States allowed under a registry 

endorsement issued under 46 U.S.C. 

12105. The MSA 2003 provides for joint 

responsibility between the Department 

of Defense (DOD) and the Department of 

Transportation (DOT) for administering 

the law. These regulations provide the 

framework for the coordination between 

DOD and DOT in implementing the 

MSA 2003. Implementation of the MSA 

2003 has been delegated by the 

Secretary of Transportation to the 

Maritime Administrator, U.S. Maritime 

Administration and by the Secretary of 

Defense to the Commander, U.S. 

Transportation Command, respectively. 

§ 296.2 Definitions. 

For the purposes of this part: 

Act means the Merchant Marine Act, 

1936, as amended (46 App. U.S.C. 1101 

et seq.). 

Administrator means the Maritime 

Administrator, U.S. Maritime 

Administration (MARAD), U.S. DOT, 

who is authorized by the Secretary of 

Transportation to administer the MSA 

2003, in consultation with the 

Commander, U.S. Transportation 

Command (USTRANSCOM). 

Agreement Vessel means a vessel 

covered by an MSP Operating 

Agreement. 

Applicant means an applicant for an 

MSP Operating Agreement. The term, 

‘‘applicant’’ excludes a trust. 

Bulk Cargo means cargo that is loaded 

and carried in bulk without mark or 

count. 

Chapter 121 means the vessel 

documentation provisions of chapter 

121 of title 46, United States Code. 

Coastwise Trade means trade between 

points in the United States. 

Commander means Commander, 

USTRANSCOM, who is authorized by 

the Secretary of Defense to administer 

the MSA 2003, in consultation with the 

Administrator. 

Contracting Officer means the 

Associate Administrator for National 

Security, MARAD. 

Contractor means the owner or 

operator of a vessel that enters into an 

MSP Operating Agreement for the vessel 

with the Secretary of Transportation 

(acting through MARAD) pursuant to 

§ 53103 of the MSA 2003. The term, 

‘‘Contractor’’ excludes a trust. 

Defense Contractor means a person 

that operates or manages United States 

documented vessels for the Secretary of 

Defense or charters vessels to the 

Secretary of Defense and has entered 

into a special security agreement with 

the Secretary of Defense. 

Documentation Citizen means an 

entity able to document a vessel under 

46 U.S.C. chapter 121. This definition 

includes a trust. 

DOD means the U.S. Department of 

Defense. 

Domestic Trade means trade between 

points in the United States. 

Eligible Vessel means a vessel that 

meets the requirements of § 53102(b) of 

the MSA 2003. 

Emergency Preparedness Agreement 

means an agreement, required by 

§ 53107 of the MSA 2003, between a 

Contractor and the Secretary of 

Transportation (acting through MARAD) 

to make certain commercial 

transportation resources available 

during time of war or national 

emergency or whenever determined by 

the Secretary of Defense to be necessary 

for national security or contingency 

operation. 

Enrollment means the entry into an 

MSP Operating Agreement with 

MARAD to operate a vessel(s) in the 

MSP Fleet in accordance with § 296.30. 

Fiscal Year means any annual period 

beginning on October 1 and ending on 

September 30. 

Foreign Commerce means: 

(1) For any vessel other than a liquid 

or a dry bulk carrier, a cargo freight 

service, including direct and relay 

service, operated exclusively in the 

foreign trade or in mixed foreign and 

domestic trade allowed under a registry 

endorsement under section 12105 of 

title 46, United States Code, where the 

origination point or the destination 

point of any cargo carried is the United 

States, regardless of whether the vessel 

provides direct service between the 

United States and a foreign country, or 

commerce or trade between foreign 

countries; and 

(2) For liquid and dry bulk cargo 

carrying services, includes trading 

between ports in the United States and 

foreign ports or trading between foreign 

ports in accordance with normal 

commercial bulk shipping practices in 

such manner as will permit United 

States-documented vessels to freely 

compete with foreign-flag bulk carrying 

vessels in their operation or in 

competing for charters. 

LASH Vessel means a lighter aboard 

ship vessel. 

Militarily Useful is defined, in terms 

of minimum military capabilities, 

according to DOD Joint Strategic 

Planning Capabilities Plan (JSCAP) 

guidance. 

MSA 2003 means the Maritime 

Security Act of 2003. 

MSP Fleet means the fleet of vessels 

established under section 53102(a) of 

the MSA 2003 and operated under MSP 

Operating Agreements. 

MSP Operating Agreement means the 

assistance agreement between a 

Contractor and MARAD that provides 

for MSP payments, but is not a 

‘‘procurement contract.’’

MSP Payments means the payments 

made for the operation of U.S.-flag 

vessels in the foreign commerce. 

Noncontiguous Domestic Trade 

means transportation of cargo between a 

point in the contiguous 48 states and a 

point in Alaska, Hawaii, or Puerto Rico, 

other than a point in Alaska north of the 

Arctic Circle. 

Operating Day means any calendar 

day during which a vessel is operated in 

accordance with the terms and 

conditions of the MSP Operating 

Agreement. 

Operator is a person that either owns 

a vessel and operates that vessel directly 

or charters in a vessel at a financial risk 

through a demise charter that transfers 

virtually all the rights and obligations of 

the vessel owner to the vessel operator, 

such as that of crewing, supplying, 

maintaining, insuring and navigating 

the vessel. 

Owner means an entity that has title 

and/or beneficial ownership of a vessel. 

Only an owner that is a person is 

eligible to enter into an MSP Operating 

Agreement. 

Participating Fleet Vessel means any 

vessel that: 

(1) On October 1, 2005—

(i) Meets the citizenship requirements 

of paragraph (1), (2), (3), or (4) of section 

53102(c) of the MSA 2003; 

(ii) Is less than 25 years of age, or is 

less than 30 years of age in the case of 

a LASH vessel; and 

(2) On December 31, 2004, is covered 

by an MSP Operating Agreement. 

55590 Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 

Person includes corporations, limited 

liability companies, partnerships, and 

associations existing under or 

authorized by the laws of the United 

States, or any State, Territory, District, 

or possession thereof, or of any foreign 

country. For purposes of holding an 

MSP Operating Agreement, the term 

‘‘person’’ excludes a trust. 

Roll-on/Roll-off Vessel means a vessel 

that has ramps allowing cargo to be 

loaded and discharged by means of 

wheeled vehicles so that cranes are not 

required. 

SecDef means Secretary of Defense 

acting through the Commander 

USTRANSCOM. 

Section 2 Citizen means a United 

States citizen within the meaning of 

section 2 of the Shipping Act, 1916, 46 

U.S.C. 802, without regard to any statute 

that ‘‘deems’’ a vessel to be owned and 

operated by a Section 2 Citizen. 

Secretary means the Secretary of 

Transportation acting through the 

Maritime Administrator. 

Tank Vessel means, as stated in 46 

U.S.C. 2101(38), a self-propelled tank 

vessel that is constructed or adapted to 

carry, or that carries, oil or hazardous 

material in bulk as cargo or cargo 

residue. In addition, the vessel must be 

double hulled and capable of carrying 

simultaneously more than two separated 

grades of refined petroleum products. 

Transfer of an MSP Operating 

Agreement includes any sale, 

assignment or transfer of the MSP 

Operating Agreement, either directly or 

indirectly, or through any sale, 

reorganization, merger, or consolidation 

of the MSP Contractor. 

United States includes the 50 U.S. 

States, the District of Columbia, the 

Commonwealth of Puerto Rico, the 

Northern Mariana Islands, Guam, 

American Samoa, and the Virgin 

Islands. 

United States Citizen Trust means: 

(1) Subject to paragraph (3) of this 

definition, a trust that is qualified under 

this definition. 

(2) A trust is qualified only if: 

(i) Each of the trustees is a Section 2 

Citizen; and 

(ii) The application for documentation 

of the vessel under 46 U.S.C. chapter 

121, includes the affidavit of each 

trustee stating that the trustee is not 

aware of any reason involving a 

beneficiary of the trust that is not a 

Section 2 Citizen, or involving any other 

person that is not a Section 2 Citizen, as 

a result of which the beneficiary or 

other person would hold more than 25 

percent of the aggregate power to 

influence or limit the exercise of the 

authority of the trustee with respect to 

matters involving any ownership or 

operation of the vessel that may 

adversely affect the interests of the 

United States. 

(3) If any person that is not a Section 

2 Citizen has authority to direct or 

participate in directing a trustee for a 

trust in matters involving any 

ownership or operation of the vessel 

that may adversely affect the interests of 

the United States or in removing a 

trustee for a trust without cause, either 

directly or indirectly through the 

control of another person, the trust 

instrument provides that persons who 

are not Section 2 Citizens may not hold 

more than 25 percent of the aggregate 

authority to so direct or remove a 

trustee. 

(4) This definition shall not be 

considered to prohibit a person who is 

not a Section 2 Citizen from holding 

more than 25 percent of the beneficial 

interest in a trust. 

United States Documented Vessel 

means a vessel documented under 46 

U.S.C. chapter 121. 

§ 296.3 Applications. 

(a) Action by MARAD.—Time 

Deadlines. Applications for enrollment 

of vessels in the MSP were due by 

October 15, 2004 to the Secretary, 

Maritime Administration, Room 7218, 

Maritime Administration, U.S. 

Department of Transportation, 400 

Seventh Street, SW., Washington, DC 

20590. Any applications received before 

October 15, 2004 were deemed to have 

been submitted on October 15, 2004. 

Within 90 days after receipt of a 

completed application, the Secretary 

was obligated to approve the 

application, in conjunction with the 

SecDef, or provide in writing the reason 

for denial of that application. Execution 

of a standard MSP Operating Agreement 

took place reasonably soon after 

approval of the application. Contractors 

of MSP Operating Agreements were 

required to submit ownership 

information and signed charters to 

MARAD for approval by July 1, 2005. 

(b) Action by the Applicant. Each 

applicant for an MSP Operating 

Agreement was required to submit an 

application under OMB control number 

2133–0525 to the Secretary, Maritime 

Administration in the manner 

prescribed on that form. Application 

forms were made available from 

MARAD’s Office of Sealift Support, or 

the application form could be 

downloaded from the MARAD Web site, 

http:www.marad.dot.gov, Information 

required included: 

(1) An Affidavit of Section 2 

Citizenship that comports with the 

requirements of 46 CFR part 355, if 

applying as a Section 2 Citizen. 

Otherwise, an affidavit which 

demonstrates that the applicant is 

qualified to document a vessel under 46 

U.S.C. chapter 121 is required. If the 

applicant is a vessel operator and 

proposes to employ a vessel manager, 

then the applicant must supply an 

affidavit for the vessel manager that 

meets the same citizenship 

requirements applicable to the 

applicant; 

(2) Certificate of Incorporation; 

(3) Copies of by-laws or other 

governing instruments; 

(4) Maritime related affiliations; 

(5) Financial data: 

(i) Provide an audited financial 

statement or a completed MARAD Form 

MA–172 dated within 120 days after the 

close of the most recent fiscal period; 

and 

(ii) Provide estimated annual forecast 

of maritime operations for the next five 

years showing revenue and expense, 

including explanations of any 

significant increase or decrease of these 

items; 

(6) Intermodal network: 

(i) If applicable, a statement 

describing the applicant’s operating and 

transportation assets, including vessels, 

container stocks, trucks, railcars, 

terminal facilities, and systems used to 

link such assets together; 

(ii) The number of containers and 

their twenty-foot equivalent units 

(TEUs) by size and type owned and/or 

long-term leased by the applicant 

distinguishing those that are owned 

from those that are leased; and 

(iii) The number of chassis by size 

and type owned and/or long-term leased 

by the applicant distinguishing those 

that are owned from those that are 

leased; 

(7) Diversity of trading patterns: A list 

of countries and trade routes serviced 

along with the types and volumes of 

cargo carried; 

(8) Applicant’s record of owning and/ 

or operating vessels: Provide number of 

ships owned and/or operated, 

specifying flag, in the last ten years, 

trades involved, number of employees 

in your ship operations department, 

vessel or ship managers utilized in the 

operation of your vessels, and any other 

information relevant to your record of 

owning or operating vessels; 

(9) Bareboat charter arrangements, if 

applicable; 

(10) Vessel data including vessel type, 

size, and construction date; 

(11) Military Utility: Provide an 

assessment of the value of the vessel to 

DOD sealift requirements. Provide 

characteristics which indicate the value 

of the vessels to DOD including items of 

Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 55591 

specific value, e.g., ramp strengths, 

national defense sealift features; 

(12) Special Security Agreements: If 

applicable, provide a copy of any 

Special Security Agreement; 

(13) If applicable, Certification from 

documentation citizen who is the 

demise charterer of the MSP vessel: In 

a letter submitted at the time of the 

application addressed to the 

Administrator and the Commander from 

the Chief Executive Officer, or 

equivalent, of a documentation citizen 

that is the proposed Contractor of an 

MSP Operating Agreement, provide a 

statement that there are no treaties, 

statutes, regulations, or other laws of the 

foreign country(ies) of the parent, that 

would prohibit the proposed Contractor 

from performing its obligations under an 

MSP Operating Agreement. The 

statement should be substantially in the 

following format: 

‘‘I, llll, Chief Executive Officer of 

llll, certify to you that there are no 

treaties, statutes, regulations, or other laws of 

the foreign country(ies) of ll’s ultimate 

foreign parent or intermediate parents that 

would prohibit ll from performing its 

obligations under an Operating Agreement 

with the Maritime Administration pursuant 

to the Maritime Security Act of 2003.’’; 

(14) Agreement from the ultimate foreign 

parent of the documentation citizen: An 

agreement to be signed and submitted at the 

time of application from the equivalent of the 

Chief Executive Officer of the ultimate 

foreign parent of a documentation citizen not 

to influence the operation of the MSP vessel 

in a manner that will adversely affect the 

interests of the United States. The Agreement 

should be substantially in the following 

format: 

‘‘I, llll, am the Chief Executive 

Officer [or equivalent] of lll, the ultimate 

foreign parent of llll, a documentation 

citizen of the United States that is applying 

for an MSP Operating Agreement. I agree on 

behalf of the ‘‘foreign parent’’ that neither 

llll (the ultimate foreign parent) nor any 

representative of llll (the ultimate 

foreign parent) will in any way influence the 

operation of the MSP vessel in a manner that 

will adversely affect the interests of the 

United States.’’; 

(15) Replacement Vessel Plan and 

Age Waiver: If applicable, an applicant 

must submit a replacement vessel plan 

along with an age waiver request if the 

applicant seeks an age waiver for an 

existing vessel(s). The vessel 

replacement plan shall include the 

vessel’s characteristics, a letter of intent 

or other document indicating agreement 

for purchase of vessel, and a forecast of 

operations for five years for the 

replacement vessel. The age restriction 

for over-age vessels shall not apply to a 

Participating Fleet Vessel during the 30- 

month period beginning on the date the 

vessel begins operating under an MSP 

Operating Agreement under the MSA 

2003 provided that the Secretary has 

determined that the Contractor has 

entered into an arrangement for a 

replacement vessel that will be eligible 

to be included in an MSP Operating 

Agreement, and; 

(16) Anti-Lobbying Certificate: A 

certificate as required by 49 CFR part 20 

stating that no funds provided under 

MSP have been used for lobbying to 

obtain an Operating Agreement. 

(Approved by the Office of Management 

and Budget under Control Number 

2133–0525) 

§ 296.4 Waivers. 

In General—In special circumstances, 

and for good cause shown, the 

procedures prescribed in this part may 

be waived in writing by the Secretary, 

by mutual agreement of the Secretary in 

consultation with the SecDef, and the 

Contractor, so long as the procedures 

adopted are consistent with the MSA 

2003 and with the objectives of these 

regulations. 

Subpart B—Eligibility 

§ 296.10 Citizenship requirements of 

owners, charterers and operators. 

Citizenship requirements are deemed 

to have been met if during the entire 

period of an MSP Operating Agreement 

under this chapter that applies to the 

vessel, all of the conditions of any of the 

paragraphs (a), (b), (c), or (d) of this 

section are met, and subject to 

conditions in paragraph (e): 

(a) A vessel to be included in an MSP 

Operating Agreement is owned and 

operated by one or more persons that 

are Section 2 Citizens. 

(b) A vessel to be included in an MSP 

Operating Agreement is owned by either 

a person that is a Section 2 Citizen or 

a United States Citizen Trust, and the 

vessel is demise chartered to a nonSection 2 Citizen—

(1) That is eligible to document the 

vessel under 46 U.S.C. chapter 121; 

(2) Whose chairman of the board of 

directors, chief executive officer, and a 

majority of the members of the board of 

directors are Section 2 Citizens, and are 

appointed and subject to removal only 

upon approval by the Secretary as 

follows: 

(i) Proposed changes to the chairman 

of the board, chief executive officer, and 

membership of the board of directors 

must be submitted to the Administrator 

60 days before scheduled to take effect; 

and 

(ii) MARAD must approve or 

disapprove changes within 30 days of 

receiving the proposed changes; 

(3) That certifies to the Secretary in a 

format substantially similar to the 

format at § 296.3(b)(13) that there are no 

treaties, statutes, regulations, or other 

laws that would prohibit the Contractor 

from performing its obligations under an 

MSP Operating Agreement at the time of 

application for an MSP Operating 

Agreement; and 

(4) The ultimate foreign parent of that 

person proffers, at the time of 

application for an MSP Operating 

Agreement, an agreement in a format 

substantially similar to the format at 

§ 296.3(b)(14) not to influence the 

vessel’s operation in a way that is 

detrimental to the United States. 

(c) A vessel to be included in an MSP 

Operating Agreement is owned and 

operated by a defense contractor or a 

related person to include affiliated or 

related companies within the same 

corporate group that: 

(1) Is eligible to document the vessel 

under 46 U.S.C. chapter 121; 

(2) Operates or manages other United 

States-documented vessels for the 

SecDef, or charters other vessels to the 

SecDef; 

(3) Has entered into a special security 

agreement with the SecDef; 

(4) Certifies to the Secretary, at the 

time of application, in a format 

substantially similar to the format of 

§ 296.3(b)(13), that there are no treaties, 

statutes, regulations, or other laws that 

would prohibit the Contractor from 

performing its obligations under an MSP 

Operating Agreement; and 

(5) Has its ultimate foreign parent 

proffer, at the time of application for an 

MSP Operating Agreement, an 

agreement in a format substantially 

similar to the format of § 296.3(b)(14) 

not to influence the vessel’s operation in 

a way that is detrimental to the United 

States. 

(d) The vessel is owned by a 

documentation citizen and demise 

chartered to a Section 2 Citizen. 

(e) Where applicable, the Secretary 

and the SecDef shall notify the Senate 

Committees on Armed Services, and 

Commerce, Science, and Transportation 

and the House of Representatives 

Committee on Armed Services that they 

concur with the certifications by the 

documentation citizens under 

§ 296.3(b)(13) and that they have 

reviewed the agreements proffered by 

the ultimate foreign parent under 

§ 296.3(b)(14), and agree that there are 

no other legal, operational, or other 

impediments that would prohibit the 

contractors for the vessels from 

performing their obligations under MSP 

Operating Agreements. 

55592 Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 

§ 296.11 Vessel requirements. 

(a) Eligible Vessel. A vessel is eligible 

to be included in an MSP Operating 

Agreement if: 

(1) The vessel is: 

(i) Determined by the SecDef to be 

suitable for use by the United States for 

national defense or military purposes in 

time of war or national emergency; and 

(ii) Determined by the Secretary to be 

commercially viable; 

(2) The vessel is operated or, in the 

case of a vessel to be purchased or 

constructed, will be operated to provide 

transportation in the foreign commerce; 

(3) The vessel is self-propelled and is: 

(i) A Roll-on/Roll-off vessel with a 

carrying capacity of at least 80,000 

square feet or 500 twenty-foot 

equivalent units and is 15 years of age 

or less on the date the vessel is included 

in the MSP; 

(ii) A tank vessel that is constructed 

in the United States after November 24, 

2003; 

(iii) A tank vessel that is 10 years of 

age or less on the date the vessel is 

included in the MSP Fleet; 

(iv) A LASH vessel that is 25 years of 

age or less on the date the vessel is 

included in the MSP fleet; or 

(v) Any other type of vessel that is 15 

years of age or less on the date the 

vessel is included in the MSP fleet; 

(4) The vessel is: 

(i) A United States documented vessel 

under 46 U.S.C. chapter 121; or 

(ii) Not a United States-documented 

vessel under 46 U.S.C. chapter 121, but 

the owner of the vessel has 

demonstrated an intent to have the 

vessel documented under 46 U.S.C. 

chapter 121 at the time the vessel is to 

be included in the MSP fleet; and 

(A) The vessel is eligible for a 

certificate of inspection if the Secretary 

of the Department in which the United 

States Coast Guard is operating 

determines that: 

(1) The vessel is classed and designed 

in accordance with the rules of the 

American Bureau of Shipping (ABS) or 

another classification society accepted 

by such Secretary; 

(2) The vessel complies with 

applicable international agreements and 

associated guidelines as determined by 

the country in which the vessel was 

documented immediately before 

becoming a U.S.-flag vessel; and 

(3) The flag country has not been 

identified by such Secretary as 

inadequately enforcing international 

vessel regulations. 

(B) [Reserved] 

(b) Waiver of Age Restriction of 

Vessels. The SecDef, in conjunction 

with the Secretary, may waive the age 

restriction in paragraph (a) of this 

section if the Secretaries jointly 

determine that the waiver: 

(1) Is in the national interest; 

(2) Is appropriate to allow the 

maintenance of the economic viability 

of the vessel and any associated 

operating network; and 

(3) Is necessary due to the lack of 

availability of other vessels and 

operators that comply with the 

requirements of the MSA 2003. 

(c) Telecommunications and Other 

Electronic Equipment. The 

telecommunications and other 

electronic equipment on an existing 

vessel that is redocumented under the 

laws of the United States for operation 

under an MSP Operating Agreement 

shall be deemed to satisfy all Federal 

Communications Commission 

equipment certification requirements, if 

(1) Such equipment complies with all 

applicable international agreements and 

associated guidelines as determined by 

the country in which the vessel was 

documented immediately before 

becoming documented under the laws 

of the United States; 

(2) That country has not been 

identified by the Secretary as 

inadequately enforcing international 

regulations as to that vessel; and 

(3) At the end of its useful life, such 

equipment will be replaced with 

equipment that meets Federal 

Communications Commission 

equipment certification standards (see 

49 CFR Chapter I). 

§ 296.12 Applicants. 

Applicant. Owners or operators of an 

eligible vessel may apply to MARAD for 

inclusion of that vessel in the MSP Fleet 

pursuant to the provisions of the MSA 

2003. Applications shall be addressed to 

the Secretary, Maritime Administration, 

Room 7218, Maritime Administration, 

U.S. Department of Transportation, 400 

Seventh Street, SW., Washington, DC 

20590. 

Subpart C—Priority for Granting 

Applications 

§ 296.20 Tank vessels. 

(a) First priority for the award of MSP 

Operating Agreements under MSA 2003 

shall be granted to a tank vessel that is 

constructed in the United States after 

October 1, 2004. 

(b) First priority for the award of MSP 

Operating Agreements under the MSA 

2003 may be granted to a tank vessel 

that is less than ten years of age on the 

date it enters an MSP Operating 

Agreement: 

(1) Provided: (i) That the Contractor 

agrees to execute a binding agreement 

approved by the Secretary for a 

replacement vessel to be operated under 

the MSP Operating Agreement and to be 

built in the United States not later than 

nine months after the first date 

appropriated funds are available for 

construction and operating assistance 

for a minimum of three tank vessels; 

(ii) A tank vessel under this section is 

eligible to be included in the MSP under 

§ 296.11(a); and 

(iii) A tank vessel under this section 

is owned and operated during the 

period of the MSP Operating Agreement 

by one or more persons that are Section 

2 Citizens; 

(2) No payment can be made for an 

existing tank vessel granted priority one 

status after the earlier of: 

(i) Four years following the date this 

MSP Operating Agreement is effective, 

except if amounts are available for 

construction of a minimum of three tank 

vessels under the National Defense Tank 

Vessel Construction Assistance Program 

(NDTVCP) by October 1, 2007, then no 

payments shall be made for the existing 

‘‘tank vessel’’ after four years following 

the date such amounts are available; or 

(ii) The date of delivery of the 

replacement tank vessel constructed in 

the United States after October 1, 2004. 

(3) The Secretary will not enter into 

more than five MSP Operating 

Agreements for tank vessels under this 

priority. If the five tank vessel MSP 

Operating Agreement slots are not fully 

subscribed, the Secretary, in 

consultation with the SecDef, may 

award the non-subscribed slots to lower 

priority vessels, if deemed appropriate. 

If the Secretary determines that no 

funds are, or are likely to be, allocated 

for any tank vessel construction in the 

United States, the five slots may 

nevertheless be awarded to existing tank 

vessels or the slots may be awarded 

permanently to any eligible vessels. The 

Secretary may temporarily award a slot 

reserved for a tank vessel under 

construction to a lower priority vessel 

during the construction period of that 

vessel if an existing tank vessel offered 

by the tank vessel Contractor is not 

eligible for priority for that slot. If no 

existing tank vessel is offered by the 

tank vessel Contractor, the Secretary 

may temporarily award an MSP 

Operating Agreement to any eligible 

vessel of another Contractor until a new 

tank vessel’s construction is completed 

in the United States. Such temporary 

MSP Operating Agreements may be 

terminated under terms set forth in the 

temporary MSP Operating Agreement. 

§ 296.21 Participating Fleet Vessels. 

(a) Priority.—To the extent that 

appropriated funds are available after 

applying the first priority, tank vessels, 

Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 55593 

in § 296.20, the second priority is 

applicable to Participating Fleet Vessels. 

(b) Number of MSP Operating 

Agreements.—MARAD will not enter 

into more than 47 MSP Operating 

Agreements for Participating Fleet 

Vessels. 

(c) Reduction of Participating Fleet 

Vessel MSP Operating Agreements.—

The number of MSP Operating 

Agreements available to Participating 

Fleet Vessels shall be reduced by one 

for: 

(1) Each Participating Fleet Vessel for 

which an application for enrollment in 

the MSP is not received by the 

Secretary, Maritime Administration on 

October 15, 2004; or 

(2) Each Participating Fleet Vessel for 

which an application for enrollment in 

the MSP is received by the Secretary, 

Maritime Administration on October 15, 

2004, but the application is not 

approved by the Secretary of 

Transportation and the SecDef by 

January 12, 2005. 

(d) Authority to Enter into an MSP 

Operating Agreement—(1) Applications 

for inclusion of a Participating Fleet 

Vessel under the priority in paragraph 

(a) of this section will be accepted only 

from a person that has authority to enter 

into an MSP Operating Agreement for 

the vessel with respect to the full term 

of the MSP Operating Agreement. 

Applicants must certify that they have 

the requisite authority as of October 1, 

2005 and for the full period of the MSP 

Operating Agreement thereafter and 

provide the basis on which they rely for 

such certification, such as a copy of a 

vessel title of ownership or a demise 

charter that remains in effect until 

September 30, 2015. 

(2) The full term of the MSP 

Operating Agreement is the period from 

October 1, 2005 through September 30, 

2015. If a vessel proposed to be 

included in the MSP will become 

ineligible for the program prior to 

September 30, 2015, due to vessel age 

restrictions, then the full term of the 

MSP Operating Agreement for that 

vessel for purposes of paragraph (d)(1) 

of this section is the period the vessel 

meets the applicable age restrictions. 

MARAD may still award an MSP 

Operating Agreement through 

September 30, 2015, to an applicant 

having authority to enter into an MSP 

Operating Agreement for a vessel whose 

age eligibility expires before that date. 

For companies requesting an age waiver, 

the Applicant must submit an 

appropriate replacement vessel at least 

120 days prior to the date of expiration 

of age eligibility. 

(3) For the purposes of paragraph 

(d)(1) of this section, in the case of a 

vessel that is subject to a demise charter 

that terminates by its terms on 

September 30, 2005 (without giving 

effect to any extension provided therein 

for completion of a voyage or to effect 

the actual redelivery of the vessel), or 

that is terminable at will by the owner 

of the vessel after such date, only the 

owner of the vessel (provided the owner 

of the vessel is a ‘‘person’’ as defined in 

§ 296.2) shall be treated as having the 

authority referred to in paragraph (d)(1) 

of this section. 

(4) If two or more applicants claim 

authority for the same vessel, the 

Secretary may request additional 

information bearing on the issue of 

which party has authority to enter into 

an MSP Operating Agreement, and the 

Secretary shall, in his/her sole 

discretion, decide the matter as he/she 

deems appropriate. 

(e) During the 30-month period 

commencing October 1, 2005, the age 

restrictions set forth under § 296.11(a) 

and § 296.41(c) do not apply to a 

Participating Fleet Vessel operating 

under an MSP Operating Agreement, 

provided: 

(1) The Contractor has entered into an 

arrangement to obtain and operate 

under that MSP Operating Agreement a 

replacement vessel for that Participating 

Fleet Vessel; and 

(2) The Secretary determines that the 

replacement vessel will be eligible to be 

included in the MSP Fleet under 

§ 296.11(a). 

(f) In the event that a Participating 

Fleet Vessel will be unavailable to 

participate in the MSP on October 1, 

2005, due to an unforeseen casualty to 

the vessel, a Contractor may offer an 

eligible replacement vessel. The 

replacement vessel must subsequently 

be approved by MARAD and DOD. The 

replacement vessel must operate under 

an MSP Operating Agreement in 

sufficient time to meet the 180 

minimum operation days required 

during the fiscal year to avoid being in 

default of the MSP Operating 

Agreement. 

§ 296.22 Other vessels. 

(a) Third Priority.—To the extent that 

appropriated funds are available after 

applying the first priority, tank vessels, 

in § 296.20, and the second priority, 

Participating Fleet Vessels, in § 296.21, 

the third priority is for any other vessel 

that is eligible to be included in an MSP 

Operating Agreement under § 296.11(a), 

and that, during the period of that MSP 

Operating Agreement, will be: 

(1) Owned and operated by one or 

more persons that are Section 2 

Citizens; or 

(2) Owned by a person that is eligible 

to document the vessel under 46 U.S.C. 

chapter 121 and operated by a person 

that is a Section 2 Citizen. 

(b) Fourth Priority.—To the extent that 

appropriations are available after 

applying the first priority in § 296.20, 

the second priority in § 296.21, and the 

third priority in paragraph (a) of this 

section, the fourth priority is for any 

other vessel that is eligible to be 

included in an MSP Operating 

Agreement under § 296.11(a). 

§ 296.23 Discretion within priority. 

The Secretary—

(a) Subject to paragraph (b) of this 

section, may award MSP Operating 

Agreements within each priority as the 

Secretary considers appropriate; and 

(b) Shall award MSP Operating 

Agreements within a priority—

(1) In accordance with operational 

requirements specified by the SecDef; 

(2) In the cases of the Priorities III and 

IV, according to the applicants’ records 

of owning and operating vessels; and 

(3) Subject to the approval of the 

SecDef. 

(c) The Secretary does not have 

discretion to override the priority 

requirements with respect to the initial 

award of MSP Operating Agreements. 

§ 296.24 Subsequent awards of MSP 

Operating Agreements. 

(a) Until October 1, 2005, if, for any 

reason, after the award of an MSP 

Operating Agreement, the Applicant is 

unwilling or unable to commence 

operations pursuant to the terms of the 

MSP Operating Agreement, MARAD 

may, pursuant to the priority criteria, 

award that MSP Operating Agreement to 

an Applicant having an eligible vessel 

that applied but was not awarded an 

MSP Operating Agreement. 

(b) After October 1, 2005, MARAD 

intends to ensure that all available MSP 

Operating Agreements are fully utilized 

at all times, in order to maximize the 

benefit of the MSP. Accordingly, when 

an MSP Operating Agreement becomes 

available through termination by the 

Secretary, expiration of a temporary 

MSP Operating Agreement or early 

termination by the MSP contractor, and 

no transfer under 46 U.S.C. 53105(e) is 

involved, MARAD will reissue the MSP 

Operating Agreement pursuant to the 

following criteria. 

(1) The proposed vessel must meet the 

requirements for vessel eligibility in 46 

U.S.C. 53102(b); 

(2) The applicant must meet the 

vessel ownership and operating 

requirements for priority in 46 U.S.C. 

53103(c); and 

55594 Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 

(3) Priority will be assigned in 

accordance with operational 

requirements specified by the SecDef. 

(c) MARAD will use the following 

procedures in reissuing an MSP 

Operating Agreement. MARAD and 

USTRANSCOM will determine if the 

applications received on October 15, 

2004 form an adequate pool for award 

of a reissued MSP Operating Agreement. 

If so, MARAD will award a reissued 

MSP Operating Agreement from that 

pool of qualified applicants in its 

discretion, subject to approval of the 

SecDef. MARAD and USTRANSCOM 

may decide to open a new round of 

applications. Applicants for reissued 

MSP Operating Agreements must meet 

the citizenship requirements of Priority 

III. Inasmuch as MSP furthers a public 

purpose and MARAD does not acquire 

goods or services through MSP, the 

selection process for award of MSP 

Operating Agreements does not 

constitute an acquisition process subject 

to any procurement law or the Federal 

Acquisition Regulations. 

Subpart D—Maritime Security Program 

Operating Agreements 

§ 296.30 General conditions. 

(a) Approval. (1) The Secretary, in 

conjunction with the SecDef, may 

approve applications to enter into an 

MSP Operating Agreement and make 

MSP Payments with respect to vessels 

that are determined by the Secretary to 

be commercially viable and those that 

are deemed by the SecDef to be 

militarily useful for meeting the sealift 

needs of the United States in time of 

war or national emergencies. The 

Secretary announced an initial award of 

60 MSP Operating Agreements on 

January 12, 2005. In addition, the 

Secretary advised those applicants 

found to be eligible but not included in 

the initial award that those applicants 

will be wait-listed for an award of an 

MSP Operating Agreement if additional 

slots become available. 

(2) The Commander established 

general evaluation criteria for 

operational requirements for 

considering replacement vessels 

described in § 296.21(e), and for vessels 

eligible under the third and fourth 

priorities described in § 296.22. These 

general evaluation criteria were made 

available by the Commander in 

sufficient time for preparing 

applications. 

(b) Effective date. (1) General Rule. 

Unless otherwise provided, the effective 

date of an MSP Operating Agreement is 

October 1, 2005. 

(2) Exceptions. In the case of an 

Eligible Vessel to be included in an MSP 

Operating Agreement that is on charter 

to the U.S. Government, other than a 

charter under the provisions of an 

Emergency Preparedness Agreement 

(EPA) provided by § 53107 of the MSA 

2003, unless an earlier date is requested 

by the applicant, the effective date for 

an MSP Operating Agreement shall be: 

(i) The expiration or termination date 

of the Government charter covering the 

vessel; or 

(ii) Any earlier date on which the 

vessel is withdrawn from that charter, 

but not before October 1, 2005. 

(c) Replacement Vessels. A Contractor 

may replace an MSP vessel under an 

MSP Operating Agreement with another 

vessel that is eligible to be included in 

the MSP under § 296.11(a), if the 

Secretary, in conjunction with the 

SecDef, approves the replacement 

vessel. The replacement vessel must 

qualify with the same or with more 

militarily useful capability as the MSP 

vessel to be replaced for operational 

requirements as determined by the 

Commander. 

(d) Termination by the Secretary. If 

the Contractor materially fails to comply 

with the terms of the MSP Operating 

Agreement: 

(1) The Secretary shall notify the 

Contractor and provide a reasonable 

opportunity for the Contractor to 

comply with the MSP Operating 

Agreement; 

(2) The Secretary shall terminate the 

MSP Operating Agreement if the 

Contractor fails to achieve such 

compliance; and 

(3) Upon such termination, any funds 

obligated by the relevant MSP Operating 

Agreement shall be available to the 

Secretary to carry out the MSP. 

(e) Early termination by Contractor, 

generally. An MSP Operating 

Agreement shall terminate on a date 

specified by the Contractor if the 

Contractor notifies the Secretary not 

later than 60 days before the effective 

date of the proposed termination that 

the Contractor intends to terminate the 

MSP Operating Agreement. The 

Contractor shall be bound by the 

provisions relating to vessel 

documentation and national security 

commitments, and by its EPA for the 

full term, from October 1, 2005 through 

September 30, 2015, of the MSP 

Operating Agreement. 

(f) Early termination by Contractor, 

with available replacement. An MSP 

Operating Agreement shall terminate 

without further obligation on the part of 

the Contractor upon the expiration date 

of the three-year period beginning on 

the date a vessel begins operating under 

the MSP, if: 

(1) The Contractor notifies the 

Secretary, by not later than two years 

after the date the vessel begins operation 

under an MSP Operating Agreement, 

that the Contractor intends to terminate 

the MSP Operating Agreement; and 

(2) The Secretary, in conjunction with 

the SecDef, determines that: 

(i) An application for an MSP 

Operating Agreement has been received 

for a replacement vessel that is 

acceptable to the Secretaries; and 

(ii) During the period of an MSP 

Operating Agreement that applies to the 

replacement vessel, the replacement 

vessel will be: 

(A) Owned and operated by one or 

more persons that are Section 2 

Citizens; or 

(B) Owned by a person that is a 

Documentation Citizen and operated by 

a person that is a Section 2 Citizen. 

(g) Non-renewal for lack of funds. If, 

by the first day of a fiscal year, sufficient 

funds have not been appropriated under 

the authority of MSA 2003 for that fiscal 

year, the Secretary will notify the 

Senate’s Committees on Armed Services 

and Commerce, Science, and 

Transportation, and the House of 

Representatives’ Committee on Armed 

Services, that MSP Operating 

Agreements for which sufficient funds 

are not available, will not be renewed 

for that fiscal year if sufficient funds are 

not appropriated by the 60th day of that 

fiscal year. If only partial funding is 

appropriated by the 60th day of such 

fiscal year, then the Secretary, in 

consultation with the SecDef, shall 

select the vessels to retain under MSP 

Operating Agreements, based on the 

Secretaries’ determinations of the most 

militarily useful and commercially 

viable vessels. In the event that no funds 

are appropriated, then all MSP 

Operating Agreements shall be 

terminated and, each Contractor shall be 

released from its obligations under the 

MSP Operating Agreement. Final 

payments under the terminated MSP 

Operating Agreements shall be made in 

accordance with § 296.41. To the extent 

that funds are appropriated in a 

subsequent fiscal year, former MSP 

Operating Agreements may be reinstated 

if mutually acceptable to the 

Administrator and the Contractor 

provided the MSP vessel remains 

eligible. 

(h) Release of Vessels from 

Obligations: If an MSP Operating 

Agreement is terminated by the 

Contractor, with available replacement 

under paragraph (f) of this section, or if 

sufficient funds are not appropriated for 

payments under an MSP Operating 

Agreement for any fiscal year by the 

60th day of that fiscal year, then—

Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 55595 

(1) Each vessel covered by the 

terminated MSP Operating Agreement is 

released from any further obligation 

under the MSP Operating Agreement; 

(2) The owner and operator of a nontank vessel or a tank vessel not built 

under the NDTVCP may transfer and 

register the applicable vessel under a 

foreign registry deemed acceptable by 

the Secretary and the SecDef, 

notwithstanding section 9 of the 

Shipping Act, 1916 (46 App. U.S.C. 808) 

and 46 CFR part 221; 

(3) The owner and operator of a tank 

vessel built under the NDTVCP must 

formally apply to MARAD pursuant to 

section 9 of the Shipping Act, 1916 to 

transfer and register the vessel under a 

foreign registry; and 

(4) If section 902 of the Act is 

applicable to a vessel that has been 

transferred to a foreign registry due to a 

terminated MSP Operating Agreement, 

then that vessel is available to be 

requisitioned by the Secretary pursuant 

to section 902 of the Act. 

(5) Paragraph (h) of this section is not 

applicable to vessels under MSP 

Operating Agreements that have been 

terminated for any other reason. 

(i) Foreign Transfer of Vessel. A 

Contractor may transfer a non-tank 

vessel to a foreign registry, without 

approval of the Secretary, if the 

Secretary, in conjunction with the 

SecDef, determines that the contractor 

will provide a replacement vessel: 

(1) Of equal or greater military 

capability or of a capacity that is 

equivalent or greater as measured in 

deadweight tons, gross tons, or 

container equivalent units, as 

appropriate; 

(2) That is a documented vessel under 

46 U.S.C. chapter 121 by the owner of 

the vessel to be placed under a foreign 

registry; and 

(3) That is not more than 10 years of 

age on the date of that documentation. 

(j) Transfer of MSP Operating 

Agreements. A Contractor subject to an 

MSP Operating Agreement may transfer 

that MSP Operating Agreement 

(including all rights and obligations 

under that MSP Operating Agreement) 

to any person eligible to enter into an 

MSP Operating Agreement under 

§ 296.10 and of the same or more 

restrictive U.S. citizen priority, 

provided that prior approval to transfer 

the MSP Operating Agreement is 

granted by the Secretary and the SecDef. 

The Contractor should allow at least 90 

days for processing of a transfer request. 

§ 296.31 MSP assistance conditions. 

(a) Term of MSP Operating 

Agreement. MSP Operating Agreements 

are authorized for 10 years, starting on 

October 1, 2005, and ending on 

September 30, 2015, but payments to 

Contractors are subject to annual 

appropriations each fiscal year. MARAD 

may enter into MSP Operating 

Agreements for a period less than the 

full term authorized under the MSA 

2003. 

(b) Terms under a Continuing 

Resolution (CR). In the event funds are 

available under a CR, the terms and 

conditions of the MSP Operating 

Agreements shall be in force provided 

sufficient funds are available to fully 

meet obligations under MSP Operating 

Agreements, and only for the period 

stipulated in the applicable CR. If funds 

are not appropriated under a CR at 

sufficient levels for any portion of a 

fiscal year, the Secretary will select the 

vessels to retain within the funding 

level of the previous fiscal year, in 

consultation with the SecDef, based on 

the Secretaries’ determination of the 

most militarily useful and commercially 

viable vessels. With regard to an MSP 

Operating Agreement that does not 

receive funds, the terms and conditions 

of any applicable MSP Operating 

Agreement may be voided and the 

Contractor may request termination of 

the MSP Operating Agreement. 

(c) National security requirements. 

Each MSP Operating Agreement shall 

require the owner or operator of an 

Eligible Vessel included in that MSP 

Operating Agreement to enter into an 

EPA pursuant to section 53107 of the 

MSA 2003. The EPA shall be a 

document incorporating the terms of the 

Voluntary Intermodal Sealift Agreement 

(VISA), as approved by the Secretary 

and the SecDef, or other agreement 

approved by the Secretaries. 

(d) Vessel operating agreements. The 

MSP Operating Agreement shall require 

that during the period an Eligible Vessel 

is included in that MSP Operating 

Agreement, the Eligible Vessel shall: 

(1) Documentation: Be documented as 

a U.S.-flag vessel under 46 U.S.C. 

chapter 121; 

(2) Operation: Be operated exclusively 

in the foreign commerce, except for 

tankers, which may be operated in 

foreign-to-foreign commerce, and shall 

not otherwise be operated in the 

coastwise trade of the United States; and 

(3) Noncontiguous Domestic Trade: 

Not receive MSP payments during a 

period in which the Contractor 

participates, i.e., directly or indirectly 

owns, charters, or operates, a vessel 

engaged in noncontiguous domestic 

trade unless the Contractor is a Section 

2 Citizen. 

(e) Obligation of the U.S. Government. 

The amounts payable as MSP payments 

under an MSP Operating Agreement 

shall constitute a contractual obligation 

of the United States Government to the 

extent of available appropriations. 

(f) U.S. Merchant Marine Academy 

cadets. The MSP Operator shall agree to 

carry on the MSP vessel two U.S. 

Merchant Marine Academy cadets, if 

available, on each voyage. 

§ 296.32 Reporting requirements. 

The Contractor shall submit to the 

Director, Office of Financial and Rate 

Approvals, Maritime Administration, 

400 Seventh St., SW., Washington, DC 

20590, one of the following reports, 

including management footnotes where 

necessary to make a fair financial 

presentation: 

(a) Form MA–172: Not later than 120 

days after the close of the Contractor’s 

semiannual accounting period, a Form 

MA–172 on a semiannual basis, in 

accordance with 46 CFR 232.6; or 

(b) Financial Statement: Not later 

than 120 days after the close of the 

Contractor’s annual accounting period, 

an audited financial statement in 

accordance with 46 CFR 232.6 and the 

most recent vessel operating cost data 

submitted as part of its EPA, or if not 

current year data, a Schedule 310 of the 

MA–172. 

(Approved by the Office of Management 

and Budget under Control Number 

2133–0005.) 

Subpart E—Billing and Payment 

Procedures 

§ 296.40 Billing procedures. 

Submission of voucher. For 

contractors operating under more than 

one MSP Operating Agreement, the 

contractor may submit a single monthly 

voucher applicable to all its MSP 

Operating Agreements. Each voucher 

submission shall include a certification 

that the vessel(s) for which payment is 

requested were operated in accordance 

with § 296.31(d) and applicable MSP 

Operating Agreements with MARAD, 

and consideration shall be given to 

reductions in amounts payable as set 

forth in § 296.41(b) and (c). All 

submissions shall be forwarded to the 

Director, Office of Accounting, MAR–

330, Room 7325, Maritime 

Administration, 400 Seventh Street, 

SW., Washington, DC 20590. Payments 

shall be paid and processed under the 

terms and conditions of the Prompt 

Payment Act, 31 U.S.C. 3901. 

§ 296.41 Payment procedures. 

(a) Amount payable. An MSP 

Operating Agreement shall provide, 

subject to the availability of 

appropriations and to the extent the 

MSP Operating Agreement is in effect, 

55596 Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 

for each Agreement Vessel, an annual 

payment equal to $2,600,000 for FY 

2006, FY 2007, FY 2008; $2,900,000 for 

FY 2009, FY 2010, FY 2011; and 

$3,100,000 for FY 2012, FY 2013, FY 

2014, FY 2015. This amount shall be 

paid in equal monthly installments at 

the end of each month. The annual 

amount payable shall not be reduced 

except as provided in paragraphs (b) 

and (c) of this section. 

(b) Reductions in amount payable. (1) 

The annual amount otherwise payable 

under an MSP Operating Agreement 

shall be reduced on a pro rata basis for 

each day less than 320 in a fiscal year 

that an Agreement Vessel: 

(i) Is not operated exclusively in the 

foreign commerce, except for tank 

vessels, which may be operated in 

foreign-to-foreign commerce; 

(ii) Is operated in the coastwise trade; 

or 

(iii) Is not documented under 46 

U.S.C. chapter 121. 

(2) To the extent that a Contractor 

operates MSP vessels less than 320 days 

under the provisions of § 296.31(d), 

payments will be reduced for each day 

less than 320 days. 

(c) No payment. (1) Regardless of 

whether the Contractor has or will 

operate for 320 days in a fiscal year, a 

Contractor shall not be paid: 

(i) For any day that an Agreement 

Vessel is engaged in transporting more 

than 7,500 tons (using the U.S. English 

standard of short tons, which converts 

to 6,696.75 long tons, or 6,803.85 metric 

tons) of civilian bulk preference cargoes 

pursuant to section 901(a), 901(b), or 

901b of the Act, provided that it is bulk 

cargo; 

(ii) During a period in which the 

Contractor participates in 

noncontiguous domestic trade, unless 

that Contractor is a Section 2 Citizen; 

(iii) While under charter to the United 

States Government other than a charter 

pursuant to an EPA under § 53107 of the 

MSA 2003. A voyage charter that is 

essentially a contract of affreightment 

will not be considered to be a charter; 

(iv) For a vessel in excess of 25 years 

of age, except for a LASH vessel in 

excess of 30 years of age or a tank vessel 

which is limited to 20 years of age, 

unless the vessel is a Participating Fleet 

Vessel meeting the requirements of 

§ 296.21(e); 

(v) For days in excess of 30 days in 

a fiscal year in which a vessel is 

drydocked or undergoing survey, 

inspection, or repair unless prior to the 

expiration of the vessel’s 30-day period, 

approval is obtained from MARAD for 

an extension beyond 30 days. 

Drydocking, survey, inspection, or 

repair periods of 30 days or less are 

considered operating days; and 

(vi) If the contracted vessel is not 

operated or maintained in accordance 

with the terms of the MSP Operating 

Agreement. 

(2) To the extent that non-payment 

days under paragraph (c) of this section 

are known, Contractor payments shall 

be reduced at the time of the current 

billing. The daily reduction amounts 

shall be based on the annual amounts in 

paragraph (a) of this section divided by 

365 days (366 days in leap years) and 

rounded to the nearest cent. Daily 

reduction amounts shall be applied. 

(3) MARAD may require, for good 

cause, that a portion of the funds 

payable under this section be withheld 

if the provisions of § 296.31(d) have not 

been met. 

(4) Amounts owed to MARAD for 

reductions applicable to a prior billing 

period shall be electronically transferred 

using MARAD’s prescribed format, or a 

check may be forwarded to the Maritime 

Administration, P.O. Box 845133, 

Dallas, Texas 75284–5133, or the 

amount owed can be credited to 

MARAD by offsetting amounts payable 

in future billing periods. 

Subpart F—Appeals Procedures 

§ 296.50 Administrative determinations. 

(a) Policy. A Contractor who disagrees 

with the findings, interpretations or 

decisions of the Maritime 

Administration or the Contracting 

Officer with respect to the 

administration of this part or any other 

dispute or complaint concerning MSP 

Operating Agreements may submit an 

appeal to the Administrator. Such 

appeals shall be made in writing to the 

Secretary, within 60 days following the 

date of the document notifying the 

Contractor of the administrative 

determination of the Contracting 

Officer. Such an appeal should be 

addressed to the Maritime 

Administrator, Attn.: MSP Operating 

Agreement Appeals, Maritime 

Administration, 400 Seventh St., SW., 

Washington, DC 20590. Such an appeal 

is a prerequisite to exhausting 

administrative remedies. 

(b) DOD determinations. The MSA 

2003 assigns joint and separate roles 

and responsibilities to the Secretary and 

to the SecDef. The Administrator and 

the Commander will make joint and 

separate findings, interpretations, and 

decisions necessary to implement the 

MSA 2003. A Contractor who disagrees 

with the initial findings, interpretations 

or decisions regarding the 

implementation of the MSA 2003—

whether joint or separate in nature—

shall communicate such disagreement 

to the Contracting Officer. Any 

disagreement or dispute of a Contractor 

may, where appropriate, be transferred 

to the Director, Policy and Plans, U.S. 

Transportation Command (Director), for 

resolution. A Contractor who disagrees 

with the findings, interpretations, or 

decisions of the Director, with respect to 

the administration of this part, may 

submit an appeal to the Commander. 

Such an appeal shall be made in writing 

to the Commander within 60 days 

following the date of the document 

notifying the Contractor of the 

administrative determination of the 

Director. Such an appeal should be 

addressed to the Commander, U.S. 

Transportation Command, 508 Scott 

Drive, Scott Air Force Base, IL 62225–

5357. 

(c) Process. The Administrator, or the 

Commander in the case of a DOD 

determination, may require the person 

making the request to furnish additional 

information, or proof of factual 

allegations, and may order any 

proceeding appropriate in the 

circumstances. The decision of the 

Administrator, or the Commander in the 

case of a DOD determination, shall be 

final. 

Subpart G—Maintenance and Repair 

Reimbursement Pilot Program 

§ 296.60 Applications. 

Section 3517, Subtitle A of Title 

XXXV establishes a five-year pilot 

program for MSP vessels to perform 

maintenance and repair (M&R) work in 

United States shipyards. 

(a) The M&R pilot program is 

authorized at $19.5 million per year for 

FYs 2006–2011. 

(b) The M&R pilot program is a 

voluntary program and MSP operators 

are not required to participate. 

(c) Subject to available funding, 

expenses are reimbursable at 80 percent 

of the difference between the fair and 

reasonable costs of the repairs in a 

foreign shipyard in the geographic 

region in which the MSP vessel operates 

and the fair and reasonable costs of 

performing the repairs in a United 

States shipyard. 

(1) An MSP operator must apply at 

least 180 days in advance of anticipated 

M&R work. 

(2) The application must include 

estimates of M&R costs in the United 

States and outside the United States in 

the geographic region in which the MSP 

vessel operates. 

(d) MARAD has 60 days to notify the 

M&R applicant if the repair work meets 

the requirements of the M&R pilot 

program, if there is a shipyard in the 

Federal Register / Vol. 70, No. 183 / Thursday, September 22, 2005 / Rules and Regulations 55597 

United States that can perform the 

approved repairs, and whether funds are 

available. 

(e) Qualified M&R work includes any 

required inspection and any M&R work 

determined in the course of an 

inspection that is necessary to comply 

with the laws of the United States. 

(f) Qualified M&R work does not 

include routine M&R or emergency M&R 

that is necessary to enable a vessel to 

return to a port in the United States. 

By order of the Maritime Administrator. 

Dated: September 15, 2005. 

Joel C. Richard, 

Secretary, Maritime Administration. 

[FR Doc. 05–18678 Filed 9–21–05; 8:45 am] 

BILLING CODE 4910–81–P