[Federal Register: September 22, 2005 (Volume 70, Number 183)] [Rules and Regulations] [Page 55581-55597] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr22se05-18] ======================================================================= ----------------------------------------------------------------------- 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 [[Page 55582]] 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 [[Page 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 inter-company 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 [[Page 55584]] 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 non-Section 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 [[Page 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 [[Page 55586]] 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 [[Page 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 [[Page 55588]] 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. 0 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. [[Page 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 Sec. 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. Sec. 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 Sec. 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 Sec. 53102(b) of the MSA 2003. Emergency Preparedness Agreement means an agreement, required by Sec. 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 Sec. 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. [[Page 55590]] 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. Sec. 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: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 [[Page 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, --------, Chief Executive Officer of --------, certify to you th