Document ID: USCG-2011-0619-0016
Agency: uscg
Document Type: Notice
Title: Mechanisms of Compliance With United States Citizenship Requirements for the Ownership of Vessels Eligible To Engage in Restricted Trades by Publicly Traded Companies (Federal Register Puiblication)
Posted Date: 2012-11-26T05:00Z

[Federal Register Volume 77, Number 227 (Monday, November 26, 2012)]
[Notices]
[Pages 70452-70453]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-28560]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

[Docket No. USCG-2011-0619]

Mechanisms of Compliance With United States Citizenship 
Requirements for the Ownership of Vessels Eligible To Engage in 
Restricted Trades by Publicly Traded Companies

AGENCY: Coast Guard, DHS.

ACTION: Notice; response to comments.

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SUMMARY: As part of its January 2011 report on a Coast Guard 
investigation into the citizenship of owners of a publicly traded 
company, the National Vessel Documentation Center recommended 
requesting comments and information on the various measures that 
publicly traded companies employ to comply with the statutory 
requirement that at least 75 percent of the ownership of companies that 
operate vessels engaged in the coastwise trade be vested in U.S. 
citizens. On November 3, 2011, the Coast Guard published a notice in 
the Federal Register seeking those comments and that information. The 
Coast Guard read the written submissions and listened to oral comments 
generated by that notice and issues today's notice to inform industry 
and the public on how the Coast Guard plans to exercise its discretion 
in enforcing the referenced U.S. citizen ownership requirement.

ADDRESSES: Comments and material received from the public, as well as 
documents mentioned in this notice as being available in the docket, 
are part of docket USCG-2011-0619 and are available for inspection or 
copying at the Docket Management Facility (M-30), U.S. Department of 
Transportation, West Building Ground Floor, Room W12-140, 1200 New 
Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m., 
Monday through Friday, except Federal holidays. You may also find this 
docket on the Internet by going to http://www.regulations.gov, 
inserting USCG-2011-0619 in the ``Search'' box, and then clicking 
``Search.''

FOR FURTHER INFORMATION CONTACT: If you have questions on this notice, 
call or email Mr. Douglas Cameron, United States Coast Guard, National 
Vessel Documentation Center; telephone 304-271-2506, email 
Douglas.G.Cameron@uscg.mil. If you have questions on viewing the 
docket, call Renee V. Wright, Program Manager, Docket Operations, 
telephone 202-366-9826.

SUPPLEMENTARY INFORMATION: On November 3, 2011, the Coast Guard 
published a notice in the Federal Register (76 FR 68203) (``2011 
notice'') requesting comments and information on the various measures 
that publicly traded companies employ in order to comply with the 
requirement in 46 U.S.C. 50501 that at least 75 percent of the 
ownership of companies that operate vessels engaged in the coastwise 
trade be vested in U.S. citizens. The 2011 notice was published because 
of a recommendation in a January 12, 2011, Coast Guard report of an 
investigation into the citizenship of Trico Marine Services, Inc. 
(``Trico Report''). A copy of this report has been placed in the docket 
and is also available via http://www.uscg.mil/hq/cg5/nvdc/ (under the 
Latest News tab). The Coast Guard solicited the following information 
in the 2011 notice (emphasis added):

[[Page 70453]]

    This notice solicits information, for the benefit of the Coast 
Guard but also for the mutual benefit of industry, as to the 
mechanisms that publicly traded companies have employed, including 
but not limited to those mentioned in the quoted language above, to 
assure compliance with United States citizenship requirements. We 
are also requesting information on the manner in which those 
mechanisms function to provide that assurance and, when called upon 
to do so, to offer proof of compliance. 76 FR 68205.

    The reference to ``the quoted language above'' was to language in 
the most recent Coast Guard statement published in the Federal Register 
which addressed this subject. See 58 FR 60256, November 15, 1993 
(``1993 final rule''). At that time, the Coast Guard offered the 
following statement which referenced only two mechanisms as examples 
(emphasis added):

    The documentation laws are meant to be restrictive and are 
intended to limit the persons who are eligible to document vessels 
under U.S. law and acquire trading privileges. Corporations can make 
proof of citizenship less difficult, for instance by restricting 
sale of their stock to U.S. citizens, or using a transfer agent to 
administer a dual stock certificate system. Of course, any U.S. 
corporation that is unwilling to subject itself to the possibility 
of having to prove that it qualifies for coastwise or fisheries 
privileges can choose not to seek them. The Coast Guard will not be 
bound by any presumptions or inferences in making eligibility 
determinations for documentation purposes. 58 FR 60258-59.

Comments in Response to 2011 Notice

    The comments the Coast Guard received from industry in response to 
the 2011 notice detailed how companies monitor and determine compliance 
with the statutory standard in the current paperless securities trading 
market, which is regulated by the Securities and Exchange Commission 
(``SEC'') and more complex than the system that existed when the Coast 
Guard issued its 1993 final rule. Those comments indicated that 
publicly-traded companies employ several measures to monitor and 
determine compliance, sometimes in combination with one another. These 
include, among others:
     Use of the Depository Trust Company segregated account (or 
``SEG-100'') system;
     Monitoring SEC filings re: 5% holders (Schedules 13D, 13G, 
Form 13F) and follow-up requests for information from filers;
     Use of protective provisions in organizational documents 
in order to guard against and rectify the possibility of what are 
referred to as excess shares;
     Communications with Non-Objecting Beneficial Owners (or 
``NOBOs'');
     Analysis of registered stockholders; and
     Use of dual stock certificates.
    We also considered comments made at a general discussion of these 
issues at a forum organized by the Chamber of Shipping of America held 
on September 13, 2012, in Washington, DC, the minutes of which have 
been placed in the online docket (USCG-2011-0619 via 
www.regulations.gov).
    The Coast Guard has taken all of the comments offered into account 
and is grateful to the commenters who were thorough, candid and 
forthcoming in their responses to the 2011 notice, both in the written 
responses and the discussion engaged in at the forum referred to above. 
The responses received and information provided are exactly what had 
been hoped for by publication of the notice and affirmed our sense, 
following issuance of the Trico Report, that it was appropriate, in 
light of the significant technological changes that have occurred in 
the trading of shares of stock since the Coast Guard's 1993 final rule, 
to take another look at the issue.
    The Coast Guard recognizes that in the modern, complex, multi-
faceted, and dynamic securities market no single measure or combination 
of measures may always provide direct proof of the citizenship of every 
shareholder. The Coast Guard also recognizes that the choice of 
compliance measures is best left up to the individual company as each 
one is best positioned to evaluate initially and on an on-going basis 
the totality of its circumstances.
    Companies that employ, and diligently administer and adhere to, 
measures such as those identified above in an active system of 
monitoring stock ownership may use these as a sufficient basis to file 
an Application for Initial Issue, Exchange, or Replacement of 
Certificate of Documentation (form CG-1258) to document a vessel with a 
coastwise endorsement. In that regard, while the Coast Guard expects 
diligence and good faith efforts, it will be realistic about acceptable 
measures in the current trading environment. Finally, the Coast Guard 
acknowledges that it does not seek to unnecessarily restrict access to 
the legitimate capital markets, which it recognizes to be essential to 
the maintenance of a strong and vibrant coastwise shipping industry, 
nor to mandate a one-size-fits-all structure or mechanism to ensure 
compliance with U.S. citizenship requirements. The Coast Guard, 
however, must fulfill its obligation to ensure compliance with those 
requirements, and will look for due diligence and timely good faith 
action by every company that seeks to participate in restricted trading 
privileges, using means that are available to the company and at its 
disposal, in order to satisfy U.S. citizenship requirements.
    The Coast Guard has a long-standing policy that the filing of a 
properly completed CG-1258 establishes a rebuttable presumption that 
the applicant is a United States citizen. See 46 CFR 67.43. The 
presumption can be rebutted with evidence that the statutory 
requirements have not been met. Such evidence can provide the basis for 
the Coast Guard to initiate an investigation and the burden will be 
upon the vessel owner to establish compliance. In investigations of 
publicly-traded companies for compliance with the statutory citizenship 
requirements, the Coast Guard will give positive consideration to a 
company's diligent and good faith efforts to timely and effectively 
monitor the ownership of its stock and take prompt action where 
necessary so as to maintain compliance with the statutory requirements.

Further Development of Enforcement Policy

    The Coast Guard will continue to listen to industry and the public 
and monitor events concerning this issue. We anticipate refining our 
enforcement policy as we see how well our stated policy works in 
allowing the Coast Guard to meet its obligation to ensure that at least 
75 percent of the ownership of companies that operate vessels engaged 
in the coastwise trade are vested in U.S. citizens. If we see the need 
for any new enforcement policy, we would invite comments on any such 
policy through a separate notice. We appreciate all the comments made 
in response to the 2011 notice.
    This notice is issued under authority of 5 U.S.C. 552(a).

    Dated: November 14, 2012.
Timothy V. Skuby,
Director, National Vessel Documentation Center, U.S. Coast Guard.
[FR Doc. 2012-28560 Filed 11-23-12; 8:45 am]
BILLING CODE 9110-04-P