Vessel Documentation: Lease Financing for Vessels Engaged in the Coastwise Trade, 61413-61425 [E6-17037]

Agencies

• Coast Guard
• DEPARTMENT OF HOMELAND SECURITY

[Federal Register Volume 71, Number 201 (Wednesday, October 18, 2006)]
[Rules and Regulations]
[Pages 61413-61425]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-17037]


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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Parts 67 and 68

[USCG-2005-20258]
RIN 1625-AA95


Vessel Documentation: Lease Financing for Vessels Engaged in the 
Coastwise Trade

AGENCY: Coast Guard, DHS.

ACTION: Final rule.

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SUMMARY: The Coast Guard amends its regulations for documenting lease-
financed vessels that have a ``coastwise endorsement'' (i.e., vessels 
used in trade and passenger service within the U.S. or between U.S. 
ports and those used in dredging and towing in U.S. waters). The 
vessels affected by this proposal are owned by foreign owned or 
controlled U.S. companies, where there is a ``demise charter'' to a 
U.S. citizen (i.e., an agreement for the charterer to assume 
responsibility for operating, crewing, and maintaining the vessel as if 
the charterer owned it).

DATES: This final rule is effective November 17, 2006, except for 
Sec. Sec.  68.65, 68.70, 68.75, 68.100, 68.107, and 68.109, which 
contain certain collection of information requirements that have not

[[Page 61414]]

yet been approved by the Office of Management and Budget (OMB). The 
Coast Guard will publish a document in the Federal Register announcing 
the effective date of those sections.

ADDRESSES: Comments and material received from the public, as well as 
documents mentioned in this preamble as being available in the docket, 
are part of docket USCG-2005-20258 and are available for inspection or 
copying at the Docket Management Facility, U.S. Department of 
Transportation, room PL-401, 400 Seventh Street, SW., Washington, DC, 
between 9 a.m. and 5 p.m., Monday through Friday, except Federal 
holidays. You may also find this docket on the Internet at https://
dms.dot.gov.

FOR FURTHER INFORMATION CONTACT: If you have questions on this rule, 
call Patricia Williams, Deputy Director, National Vessel Documentation 
Center, Coast Guard, telephone 304-271-2506. If you have questions on 
viewing or submitting material to the docket, call Renee V. Wright, 
Program Manager, Docket Operations, telephone 202-493-0402.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Regulatory History
II. Background and Purpose
III. Discussion of Comments and Changes
IV. Regulatory Analysis and Review

I. Regulatory History

    On February 15, 2006, we published a notice of proposed rulemaking 
(proposed rule) entitled ``Vessel Documentation: Lease Financing for 
Vessels Engaged in the Coastwise Trade'' in the Federal Register (71 FR 
7897). We received 14 letters commenting on the proposed rule. One 
party requested that the 90-day comment period be extended to 120 days. 
After consideration of the reasons for the request, we believe that the 
90 day comment period was far more than adequate to allow for carefully 
researched, thoroughly responsive comments and, therefore, deny the 
request for extension. To do otherwise would be a disservice to those 
who complied with the published deadline of May 16, 2006, and would 
unnecessarily delay publication of this final rule. No public meeting 
was requested and none was held.

II. Background and Purpose

    This final rule amends the regulations in title 46, Code of Federal 
Regulations (CFR), parts 67 and 68, on the documentation of U.S.-built 
vessels owned by foreign owned or controlled U.S. companies that are 
lease financed to a U.S. citizen for use in the coastwise trade. Under 
lease financing, ownership of the vessel is in the name of the owner, 
with a demise charter to the charterer (i.e., the operator) of the 
vessel. A demise charter, also known as a bareboat charter, is an 
agreement in which the charterer assumes the responsibility for 
operating, crewing, and maintaining the vessel as if the charterer 
owned it.
    This final rule is necessary to align our lease-financing 
regulations with amendments made by Congress under the Coast Guard and 
Maritime Transportation Act of 2004 (Pub. L. 108-293) (the Act) 
concerning the information needed to determine the eligibility of a 
vessel owner for a coastwise endorsement under the lease-financing law. 
As the lease-financing provisions of the Act do not require regulatory 
action on our part to make them effective, this rule merely aligns our 
lease-financing regulations with the provisions of the Act. 
Specifically, the final rule makes the following five changes primarily 
to align our regulations with the Act:
    1. It clarifies the requirements used to determine the eligibility 
of lease-financed vessels for coastwise endorsements.
    2. It permanently grandfathers, from the new statutory 
requirements, all lease-financed vessels, except for offshore supply 
vessels documented on or before August 9, 2004.
    3. It requires the owners of lease-financed offshore supply vessels 
with valid coastwise endorsements issued before August 9, 2004, to 
reapply for a new coastwise endorsement by August 9, 2007.
    4. It requires all owners of lease-financed vessels with recently-
issued coastwise endorsements (i.e., those issued after August 9, 2004) 
to certify each year that their ownership and investment status has not 
changed.
    5. It requires entities that enter into a demise sub-charter 
agreement to file a copy of the sub-charter and amendments to the sub-
charter with the Director of the National Vessel Documentation Center 
(Documentation Center).

III. Discussion of Comments and Changes

    By the close of the comment period for the proposed rule, 14 
letters were received. Three of the letters were received after the May 
16, 2006, deadline. We considered the comments in the late-filed 
letters, but the comments either were similar to those in the on-time 
letters or suggested organizational changes that we determined were not 
suitable for this rulemaking. Thus, we made no changes to the 
regulatory text as a result of the late-filed letters. The request made 
by one party for an extension of the comment period is discussed in the 
``Regulatory History'' section of this preamble.
    1. Section 68.55. Two comments requested that paragraph (2) of the 
definition of the word ``affiliate'' in proposed Sec.  68.55 be changed 
to include reports submitted to a comparable agency of a foreign 
government as well as reports submitted to the United States Securities 
and Exchange Commission (SEC) or the Internal Revenue Service (IRS). 
They pointed out that not being named as being part of the same 
consolidated group in any report or other document submitted to the SEC 
or IRS is not the only proof of non-affiliation. They noted that the 
affiliation test, as a practical matter, could be applied in cases 
where the document was not one submitted to the SEC or IRS but to a 
comparable agency of a foreign government.
    Though there is merit to this suggestion, to adopt it would expand 
the term ``affiliate'' beyond the scope of the definition in the Act. 
We believe that, in providing a specific definition, Congress expected 
the Coast Guard to apply that definition.
    2. Section 68.55. One comment noted that the definition of the term 
``passive investment'' in Sec.  68.55, though tracking the language of 
the Act, needed further clarification. The comment offered no 
suggestion as to how the definition should be clarified.
    We believe that, in providing a specific definition, Congress 
expected the Coast Guard to apply that definition.
    3. Section 68.55. One comment requested that we provide a less 
complicated definition of the term ``qualified proprietary cargo'' than 
is found in proposed Sec.  68.55. The comment makes no suggestion as to 
how to improve the definition.
    The definition in Sec.  68.55, though lengthy, is identical to the 
language in the Act. We do not believe that further clarification is 
necessary or desirable.
    4. Section 68.65(a)(1)(i). One comment noted that neither the Act 
nor the proposed rule defines ``leasing company, bank, and financial 
institution,'' as used in Sec.  68.65(a)(1)(i). They requested that we 
provide ``a clearer standard for qualification.''
    We believe that, by doing so, we could inadvertently and improperly 
restrict sources of funding. Accordingly, we left the term unchanged.
    5. Section 68.65(a)(2)(vi). One comment noted a typographical error 
in

[[Page 61415]]

proposed Sec.  68.65(a)(2)(vi), which refers to a non-existent Sec.  
68.10.
    The correct reference is Sec.  67.20. However, because Sec.  67.20 
is removed by this final rule, we revised Sec.  68.65(a)(2)(vi) to 
read: ``That person owned one or more vessels documented as of August 
9, 2004, under Sec.  67.20, as that section was in effect on that 
date.''
    6. Section 68.70(e). One comment suggested that, in proposed Sec.  
68.70(e), we exclude time charters, voyage charters, and contracts of 
affreightment from the requirement that they be filed with the 
Documentation Center.
    We disagree. The purpose of Sec.  68.70(e) is to provide for 
discretionary review by the Documentation Center of these instruments 
in order to ensure that, regardless of their title, they do not 
transfer impermissible control of the vessel to a person not qualified 
to operate vessels in coastwise trade.
    7. Sections 68.70(d) and 68.75(d). Two comments took issue with the 
requirement in proposed Sec. Sec.  68.70(d) and 68.75(d) that sub-
charters and amendments to them be filed within 10 days after their 
effective date. The comments requested that we require sub-charters and 
amendments to be filed no later than 10 days before their effective 
date.
    Although we understand the concern behind this comment, 46 U.S.C. 
12106(e)(2) requires that amendments to charters be filed within 10 
days following the filing of an amendment. We believe that all demise 
charters should be treated equally and that Congress did not intend to 
place a greater burden on sub-charterers than on the original demise 
charterer. Therefore, we require both to be filed within 10 days after 
their effective date.
    8. Section 68.100. One comment noted that the proposed rule did not 
account for the special grandfather clause in sections 608(c)(1) and 
(c)(2) of the Act concerning permanent replacement vessels contracted 
for purchase or construction not later than December 31, 2004.
    We deliberately left these provisions out of our regulations 
because of the very small universe of vessels to which these provisions 
apply. Instead, we intend to evaluate applications for these vessels on 
a case-by-case basis, applying the literal language of the Act.
    9. Section 68.105(b) and (d). Two comments noted that proposed 
Sec.  68.105(b) and (d) would extend grandfather provisions to vessels 
documented before February 4, 2004, instead of those documented before 
August 9, 2004, as provided by the Act.
    We agree and have changed the dates in Sec.  68.105(b) and (d) to 
August 9, 2004, to align with the Act.
    10. Section 68.111. Four comments expressed concern that a 
coastwise endorsement under Sec.  68.111(a)(1) and (b)(1) would be 
invalidated upon the expiration or termination of a demise charter. The 
comments noted that, under the Act, vessels documented for coastwise 
trade under a lease-financing arrangement before August 9, 2004, are 
``grandfathered'' and are not subject to regulations published after 
February 4, 2004.
    These provisions are from previous 46 CFR 67.167(c)(10) and 
(c)(11), which are relocated by this rulemaking, without change, to new 
Sec.  68.111(a)(1) and (b)(1). We believe that the invalidation of 
endorsements upon expiration or transfer of a charter is essential to 
proper management and integrity of the coastwise-documentation process. 
There are numerous other circumstances under which an endorsement 
becomes invalid, such as a change in the vessel's tonnage, change of 
ownership, change of the vessel's name, change of hailing port, or even 
a failure to renew. However, it has always been our position that 
vessels documented under 46 U.S.C. 12106(e) before August 9, 2004, will 
be eligible to apply, under subpart D of part 68, for a new coastwise 
endorsement. However, because it is probable that other readers may 
have similar concerns, we have added new paragraph (c) to Sec.  68.111 
to clearly state these grandfather rights.
    11. A late-filed comment requested that we reorganize the proposed 
rule to provide a separate subpart for owners of ``certain tank 
vessels'' specifically addressed in 46 U.S.C. 12106(f)(3). It further 
requested a new opportunity for comment on the proposed rule following 
such a reorganization.
    We do not believe that a new subpart would be helpful in light of 
the delay it would cause. The uncertainty engendered by the lack of a 
final rule while a supplemental notice of proposed rulemaking is being 
prepared and submitted for comment outweighs any perceived advantage 
which might be realized through such a reorganization.
    12. One late-filed comment requested an extension of the comment 
period to allow for comments ``within the financial community 
concerning the desirability of provisions that would allow large non-
citizen vessel financing organizations, that might include a single 
vessel operating affiliate, to qualify on the basis of some form of de 
minimis exception.''
    Should we re-open the comment period as suggested, we would not be 
able to consider this issue because the Act makes no provision for 
these exceptions. Therefore, we did not adopt this suggestion.
    13. Third-party audits. Four comments addressed the issue of third-
party audits in response to a question in the preamble to the proposed 
rule (71 FR 7899; February 15, 2006). The proposed rule itself did not 
contain a third-party-audit provision. The question was: ``Should we 
require each applicant for a coastwise endorsement issued under lease 
financing to provide a certification from an independent auditor with 
expertise in the business of vessel financing and operations?''
    All of the comments on third-party-audit question stated that any 
benefit which might be derived from these audits would be outweighed by 
the cost of the audits. As explained in the preamble to the proposed 
rule (71 FR 7899), the same question was asked in an earlier lease-
financing rulemaking that was withdrawn on April 13, 2005, before the 
Act was passed. Though the comments to the withdrawn rulemaking were 
evenly split between those favoring third-party audits and those 
opposing it, we believe that the new self-certification requirement in 
the Act (46 U.S.C. 12106(f)) evidently caused those who favored third-
party audits to change their minds. Therefore, we do not intend to 
further consider the issue of third-party audits.

IV. Regulatory Analysis and Review

Assessment

    This rule is not a ``significant regulatory action'' under section 
3(f) of Executive Order 12866, Regulatory Planning and Review. We 
expect the economic impact of this rule to be minimal. The supplemental 
``Regulatory Analysis'' in the docket for the proposed rule is 
unchanged for the final rule. There were no comments on the Regulatory 
Analysis. A summary of the analysis follows:
    The Coast Guard amends its regulations on the documentation for 
U.S.-built vessels owned by foreign-owned or controlled U.S. companies 
that are lease financed to a U.S. citizen for use in the coastwise 
trade. This rule addresses amendments provided by Congress under the 
Act concerning information needed to determine the eligibility of a 
vessel owner for a coastwise endorsement under the lease-financing law.
    This rule will update and provide consistent documentation 
requirements to determine the eligibility of lease-

[[Page 61416]]

financed vessels for coastwise endorsements as discussed under the 
``Background and Purpose'' section of this preamble. The rule also 
implements the Congressionally-mandated permanent grandfathering of all 
lease-financed vessels, except for offshore supply vessels documented 
on or before August 9, 2004, from the new requirements.
    This rule will make three changes to the existing regulations that 
will cause additional costs to industry. First, it requires owners of 
lease-financed offshore supply vessels with valid coastwise 
endorsements issued before August 9, 2004, to reapply for a new 
coastwise endorsement by August 9, 2007. Second, it will require all 
owners of lease-financed vessels with recently issued coastwise 
endorsements (i.e., those issued after August 9, 2004) to certify each 
year that their ownership and investment status has not changed. 
Lastly, it will require entities that enter into a demise sub-charter 
agreement to file a copy of the sub-charter and amendments to the sub-
charter with the Director of the Documentation Center. These changes 
are additional collection-of-information (paperwork) requirements.
    Based on Coast Guard data, we estimate that this rule will affect 
eight current owners of offshore supply vessels. We also estimate, from 
the Coast Guard data and information from the Documentation Center, 
that there will be 25 current and future owners affected by the annual 
certification requirements of this rule, which includes the eight 
owners of offshore supply vessels affected by this rule. Based on 
projections from the Documentation Center, we assume that there will be 
approximately three demise sub-charter agreements over the next 10 
years.
    We estimate that the total first-year cost of this rule to industry 
is $11,059. This first-year cost includes the one-time cost to the 
affected offshore supply vessel owners to reapply for a new coastwise 
endorsement, the first year cost of annual certification for the 
affected vessel owners, and a portion of the cost to affected vessel 
charterers associated with paperwork submissions of future demise sub-
charter agreements. After the first year of implementation, the total 
annual cost of this rule to industry is $1,621, which is the first-year 
cost less the one-time cost to the affected offshore supply vessel 
owners to reapply for a new coastwise endorsement. The estimated 10-
year (2006-2015), discounted present value of the total cost of this 
rule to all affected owners and charterers is $21,623 based on a 7 
percent discount rate and $23,684 based on a 3 percent discount rate.
    The benefit of this rule is that it updates and provides consistent 
documentation requirements. These requirements comply with mandates 
provided by Congress under the Act concerning information and 
documentation needed to determine the eligibility of a vessel owner. 
These updated documentation requirements will assist the Coast Guard in 
determining the eligibility of lease-financed vessels for coastwise 
endorsements. We need this information to determine whether an entity 
meets the current statutory requirements. We will use these 
documentation requirements to issue coastwise endorsements to eligible 
lease-financed vessels.

Small Entities

    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have 
considered whether this rule will have a significant economic impact on 
a substantial number of small entities. The term ``small entities'' 
comprises small businesses, not-for-profit organizations that are 
independently owned and operated and are not dominant in their fields, 
and governmental jurisdictions with populations of less than 50,000. 
This rule will not have a significant economic impact on a substantial 
number of small entities. The Initial Regulatory Flexibility Analysis 
in the supplemental ``Regulatory Analysis'' in the docket for the 
proposed rule is unchanged for the final rule.
    This rule will affect owners of lease-financed offshore supply 
vessels with valid coastwise endorsements issued before August 9, 2004, 
owners of lease-financed vessels with recently-issued coastwise 
endorsements, and charterers that enter into a demise sub-charter 
agreement.
    The owners and charterers mentioned above are U.S. subsidiaries or 
branch companies that are owned or controlled by larger, foreign, 
corporate affiliates and, therefore, are considered as ``one party with 
such interests aggregated'' under the small business size regulations 
(13 CFR 121.103). We determined in the Initial Regulatory Flexibility 
Analysis whether an owner is a small or large entity using the North 
American Industry Classification System (NAICS) codes and the small 
entity revenue or employee size standards provided by the U.S. Small 
Business Administration (SBA).
    Based on our determination in the Initial Regulatory Flexibility 
Analysis in the docket for the proposed rule, the owners in each NAICS 
code category exceed the SBA size standard and are classified as large 
businesses. We received no comments on this initial determination or 
any potential economic impacts on small entities from this rulemaking.
    Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that 
this final rule will not have a significant economic impact on a 
substantial number of small entities.

Assistance for Small Entities

    Under section 213(a) of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (Public Law 104-121), we offered to assist small 
entities in understanding the rule so that they can better evaluate its 
effects on them and participate in the rulemaking. The proposed rule 
provided small businesses, organizations, and governmental 
jurisdictions with a Coast Guard contact to handle questions concerning 
this rule's provisions.
    Small businesses may send comments on the actions of Federal 
employees who enforce, or otherwise determine compliance with, Federal 
regulations to the Small Business and Agriculture Regulatory 
Enforcement Ombudsman and the Regional Small Business Regulatory 
Fairness Boards. The Ombudsman evaluates these actions annually and 
rates each agency's responsiveness to small business. If you wish to 
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR 
(1-888-734-3247).

Collection of Information

    This rule calls for a new collection of information under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). Under 46 CFR 
68.65, 68.70, 68.75, 68.100, 68.107, and 68.109, this rule will amend 
the collection-of-information requirements for vessel owners and 
charterers engaging in the coastwise trade under the lease-financing 
provisions of 46 U.S.C. 12106(e). The Coast Guard needs this 
information to determine whether an entity meets the statutory 
requirements. These provisions will modify the burden in the collection 
previously approved by the Office of Management and Budget (OMB) under 
OMB Control Number 1625-0027, Vessel Documentation.
    We performed an assessment of the additional burden associated with 
these provisions and published them in the proposed rule and in the 
supplemental ``Regulatory Analysis'' in the docket. We received no 
public comment on the assessment of these provisions or the extent they 
modify the burden in the

[[Page 61417]]

previously approved collection. The assessment published in the 
proposed rule and the supplemental Regulatory Analysis in the docket is 
unchanged for the final rule.
    As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)), we have submitted a copy of this rule to OMB for its review 
of the collection of information. OMB has not yet completed its review 
of, or approved the changes to, this collection. Therefore, Sec. Sec.  
68.65, 68.70, 68.75, 68.100, 68.107, and 68.109 in this rule will not 
become effective until this collection is approved by OMB. We will 
publish a notice in the Federal Register announcing OMB's approval and 
effective date of those sections.
    You are not required to respond to a collection of information 
unless it displays a currently valid OMB control number.

Federalism

    A rule has implications for federalism under Executive Order 13132, 
Federalism, if it has a substantial direct effect on State or local 
governments and would either preempt State law or impose a substantial 
direct cost of compliance on them.
    We have analyzed this rule under that Order and have determined 
that it does not have implications for federalism.

Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
requires Federal agencies to assess the effects of their discretionary 
regulatory actions. In particular, that act addresses actions that may 
result in the expenditure by a State, local, or tribal government, in 
the aggregate, or by the private sector of $100,000,000 or more in any 
one year. Though this rule will not result in such an expenditure, we 
do discuss the effects of this rule elsewhere in this preamble.

Taking of Private Property

    This rule will not effect a taking of private property or otherwise 
have taking implications under Executive Order 12630, Governmental 
Actions and Interference with Constitutionally Protected Property 
Rights.

Civil Justice Reform

    This rule meets applicable standards in sections 3(a) and 3(b)(2) 
of Executive Order 12988, Civil Justice Reform, to minimize litigation, 
eliminate ambiguity, and reduce burden.

Protection of Children

    We have analyzed this rule under Executive Order 13045, Protection 
of Children from Environmental Health Risks and Safety Risks. This rule 
is not an economically significant rule and will not create an 
environmental risk to health or risk to safety that might 
disproportionately affect children.

Indian Tribal Governments

    This rule does not have tribal implications under Executive Order 
13175, Consultation and Coordination with Indian Tribal Governments, 
because it will not have a substantial direct effect on one or more 
Indian tribes, on the relationship between the Federal Government and 
Indian tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.

Energy Effects

    We have analyzed this rule under Executive Order 13211, Actions 
Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use. We have determined that it is not a ``significant 
energy action'' under that order because it is not a ``significant 
regulatory action'' under Executive Order 12866 and is not likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy. The Administrator of the Office of Information and 
Regulatory Affairs has not designated it as a significant energy 
action. Therefore, it does not require a Statement of Energy Effects 
under Executive Order 13211.

Technical Standards

    The National Technology Transfer and Advancement Act (NTTAA) (15 
U.S.C. 272 note) directs agencies to use voluntary consensus standards 
in their regulatory activities unless the agency provides Congress, 
through the Office of Management and Budget, with an explanation of why 
using these standards would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., specifications of materials, performance, design, or 
operation; test methods; sampling procedures; and related management 
systems practices) that are developed or adopted by voluntary consensus 
standards bodies. This rule does not use technical standards. 
Therefore, we did not consider the use of voluntary consensus 
standards.

Environment

    We have analyzed this rule under Commandant Instruction M16475.lD 
and Department of Homeland Security Management Directive 5100.1, which 
guide the Coast Guard in complying with the National Environmental 
Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded 
that there are no factors in this case that would limit the use of a 
categorical exclusion under section 2.B.2 of the Instruction. 
Therefore, this rule is categorically excluded, under figure 2-1, 
paragraph (34)(d), of the Instruction, from further environmental 
documentation. A final ``Environmental Analysis Check List'' and a 
final ``Categorical Exclusion Determination'' are available in the 
docket where indicated under ADDRESSES.

List of Subjects

46 CFR Part 67

    Reporting and recordkeeping requirements, Vessels.

46 CFR Part 68

    Oil pollution, Reporting and recordkeeping requirements, Vessels.


0
For the reasons discussed in the preamble, the Coast Guard amends 46 
CFR parts 67 and 68 as follows:

PART 67--DOCUMENTATION OF VESSELS

0
1. The authority citation for part 67 continues to read as follows:

    Authority: 14 U.S.C. 664; 31 U.S.C. 9701; 42 U.S.C. 9118; 46 
U.S.C. 2103, 2110; 46 U.S.C. app. 876; Department of Homeland 
Security Delegation No. 0170.1.


Sec.  67.3  [Amended]

0
2. In Sec.  67.3, remove the following terms and their definitions: 
``affiliate,'' ``group,'' ``operation or management of vessels,'' 
``parent,'' ``primarily engaged in leasing or other financing 
transactions,'' ``sub-charter,'' and ``subsidiary.''


Sec.  67.20  [Removed]

0
3. Remove Sec.  67.20.


Sec.  67.35  [Amended]

0
4. In Sec.  67.35(c), remove the words ``Sec.  67.20'' and add, in 
their place, the words ``Sec. Sec.  68.60 or 68.105 of this chapter''.


Sec.  67.36  [Amended]

0
5. In Sec.  67.36(c)(2), remove the words ``Sec.  67.20'' and add, in 
their place, the words ``Sec.  68.60 or Sec.  68.105 of this chapter''.


Sec.  67.39  [Amended]

0
6. In Sec.  67.39(c)(2), remove the words ``Sec.  67.20'' and add, in 
their place, the words ``Sec.  68.60 or Sec.  68.105 of this chapter''.


Sec.  67.147  [Removed]

0
7. Remove Sec.  67.147.

[[Page 61418]]

0
8. In Sec.  67.167, in paragraph (c)(9), following the semicolon, add 
the word ``and''; revise paragraph (c)(10) to read as shown below; and 
remove paragraph (c)(11):


Sec.  67.167  Requirement for exchange of Certificate of Documentation.

* * * * *
    (c) * * *
    (10) For a vessel with a coastwise endorsement under 46 U.S.C. 
12106(e), one of the events in Sec. Sec.  68.80 or 68.111 of this 
chapter occurs.


Sec.  67.179  [Removed]

0
9. Remove Sec.  67.179.

PART 68--DOCUMENTATION OF VESSELS: EXCEPTIONS TO COASTWISE 
QUALIFICATION

0
10. Revise the authority citation for part 68 to read as follows:

    Authority: 14 U.S.C. 664; 31 U.S.C. 9701; 42 U.S.C. 9118; 46 
U.S.C. 2103, 2110; 46 U.S.C. app. 876; Department of Homeland 
Security Delegation No. 0170.1.


0
11. Revise the heading to part 68 to read as shown above.

Subpart 68.03 [Removed]

0
12. Remove subpart 68.03.

0
13. In part 68--
0
a. Redesignate the subparts and their appendices as shown in the 
following table:

------------------------------------------------------------------------
          Old subpart/appendix                 New subpart/appendix
------------------------------------------------------------------------
Subpart 68.01..........................  Subpart A.
Appendix A to Subpart 68.01 of Part 68.  Appendix A to Subpart A of Part
                                          68.
Appendix B to Subpart 68.01 of Part 68.  Appendix B to Subpart A of Part
                                          68.
Subpart 68.03..........................  [Removed].
Subpart 68.05..........................  Subpart B.
Appendix A to Subpart 68.05 of Part 68.  Appendix A to Subpart B of Part
                                          68.
Appendix B to Subpart 68.05 of Part 68.  Appendix B to Subpart B of Part
                                          68.
------------------------------------------------------------------------

0
b. In the redesignated subparts, redesignate the sections as shown in 
the following table:

------------------------------------------------------------------------
                        Old section                          New section
------------------------------------------------------------------------
68.01-1....................................................         68.3
68.01-3....................................................         68.5
68.01-5....................................................         68.7
68.01-7....................................................         68.9
68.01-9....................................................        68.11
68.01-11...................................................        68.13
68.01-13...................................................        68.15
68.01-15...................................................        68.17
68.01-17...................................................        68.19
68.05-1....................................................        68.25
68.05-3....................................................        68.27
68.05-5....................................................        68.29
68.05-7....................................................        68.31
68.05-9....................................................        68.33
68.05-11...................................................        68.35
68.05-13...................................................        68.37
------------------------------------------------------------------------

0
c. In the redesignated sections listed in the first column of the 
following table, the reference in the second column is revised to read 
as shown in the third column:

------------------------------------------------------------------------
           New section               Old reference       New reference
------------------------------------------------------------------------
68.7............................   68.01-3..........  68.5
68.7............................   68.01-9(a).......  68.11(a)
68.9............................   68.01-1..........  68.3
68.9............................   68.01-9(a).......  68.11(a)
68.11...........................  68.01-5...........  68.7
68.11...........................  68.01-3(a)........  68.5(a)
68.11...........................  68.01-11..........  68.13
68.11...........................  68.01-13..........  68.15
68.11...........................  68.01-7...........  68.9
68.11...........................  13................  68.15
68.13...........................  68.01-15..........  68.17
68.13...........................  68.01-17..........  68.19
68.15...........................  68.01-15..........  68.17
68.15...........................  68.01-1...........  68.3
68.15...........................  68.01-15(c).......  68.17(c)
68.17...........................  68.01-1...........  68.3
68.19...........................  68.01-5...........  68.7
68.29...........................  68.05-9...........  68.33
68.31...........................  68.05-5...........  68.29
68.35...........................  68.05-13..........  68.37
68.35...........................  68.05-7(a)........  68.31(a)
68.37...........................  68.05-11(a).......  68.35(a)
68.37...........................  68.05-5...........  68.29
68.37...........................  68.05-9...........  68.33
------------------------------------------------------------------------

0
d. The table of contents for part 68 reads as follows:

PART 68--DOCUMENTATION OF VESSELS: EXCEPTIONS TO COASTWISE 
QUALIFICATION

Subpart A--Regulations for Engaging in Limited Coastwise Trade
Sec.
68.1 Purpose of subpart.
68.3 Definitions for the purposes of this subpart.
68.5 Requirements for citizenship under 46 U.S.C. App. 833-1.
68.7 Qualification as an 883-1 corporation.
68.9 Qualification as a parent or subsidiary.
68.11 Cessation of qualifications.
68.13 Privileges conferred--documentation of vessels.
68.15 Privileges conferred--operation of vessels.
68.17 Restrictions.
68.19 Application by an 883-1 corporation to document a vessel.
Appendix A to Subpart A of Part 68--Oath for the Qualification of 
Corporation as a Citizen of the United States Under the Act of Sept. 
2, 1958 (46 U.S.C. 883-1)
Appendix B to Subpart A of Part 68--Oath of Parent or Subsidiary 
Corporation Act of September 2, 1958 (46 U.S.C. 883-1)
Subpart B--Documentation of Certain Vessels for Oil Spill Cleanup
68.25 Purpose and scope.
68.27 Definitions for purpose of this subpart.
68.29 Citizenship requirements for limited coastwise endorsement.
68.31 Vessel eligibility requirements for limited coastwise 
endorsement.
68.33 Privileges of a limited coastwise endorsement.
68.35 Application to document a vessel under this subpart.
68.37 Cessation of qualifications.
Appendix A to Subpart B of Part 68--Oath for Qualification of a Not-
For-Profit Oil Spill Response Cooperative
Appendix B to Subpart B of Part 68--Oath for Documentation of 
Vessels for Use by a Not-For-Profit Oil Spill Response Cooperative
Subpart C--Vessels With a Coastwise Endorsement Issued on or After 
August 9, 2004, That Are Demised Chartered to Coastwise Qualified 
Citizens
68.50 Purpose and applicability.
68.55 Definitions.
68.60 Eligibility of a vessel for a coastwise endorsement under this 
subpart.
68.65 Annual ownership certification.
68.70 Application procedure for vessels other than barges to be 
operated in coastwise trade without being documented.
68.75 Application procedure for barges to be operated in coastwise 
trade without being documented.
68.80 Invalidation of a coastwise endorsement.
Subpart D--Vessels With a Coastwise Endorsement Issued Before August 9, 
2004, and Their Replacements That Are Demise Chartered to Coastwise 
Qualified Citizens
68.100 Purpose and applicability.
68.103 Definitions.
68.105 Eligibility of a vessel for a coastwise endorsement under 
this subpart.
68.107 Application procedure for vessels other than barges to be 
operated in

[[Page 61419]]

coastwise trade without being documented.
68.109 Application procedure for barges to be operated in coastwise 
trade without being documented.
68.111 Invalidation of a coastwise endorsement.

0
14. In part 68, revise the heading to subpart A to read as follows:

Subpart A--Regulations for Engaging in Limited Coastwise Trade

0
15. Add Sec.  68.1 to subpart A to read as follows:


Sec.  68.1  Purpose of subpart.

    This subpart contains citizen ownership requirements and procedures 
to allow documentation of vessels that do not meet the requirements of 
part 67 of this chapter. The requirements are for corporations engaged 
in a manufacturing or mineral industry in the United States.


Sec.  68.7  [Amended]

0
16. In Sec.  68.7--
0
a. In paragraph (b), after the redesignated number ``Sec.  68.11(a)'', 
remove the words ``of this subpart''; and following the words 
``appendix A'', add the words ``of this subpart''.


Sec.  68.9  [Amended]

0
17. In Sec.  68.9--
0
a. In paragraph (a), following the words ``appendix B'', add the words 
``of this subpart'';
0
b. In paragraph (b), following the words ``appendix B'', add the words 
``of this subpart''; and
0
c. In paragraph (c), following the redesignated number ``Sec.  
68.11(a)'', remove the words ``of this subpart''; and, following the 
words ``appendix B'', add the words ``of this subpart''.


Sec.  68.11  [Amended]

0
18. In Sec.  68.11--
0
a. In paragraph (a), after the redesignated number ``Sec.  68.7'', 
remove the words ``of this subpart''; and
0
b. In paragraph (b), after the redesignated number ``Sec.  68.9'', 
remove the words ``of this subpart''.

Appendix A to Subpart A of Part 68 [Amended]

0
19. In appendix A--
0
a. In the appendix heading and in the text, remove the words ``(46 
U.S.C. 883-1)'' and add, in their place, the words ``(46 U.S.C. app. 
883-1)''; and
0
b. Following the word ``Sec.  67.39(c)'', add the words ``of this 
chapter''.

Appendix B to Subpart A of Part 68 [Amended]

0
20. In appendix B, in the appendix heading and in the text, remove the 
words ``(46 U.S.C. 883-1)'' and add, in their place, the words ``(46 
U.S.C. app. 883-1)''.
0
21. Add new subpart C, consisting of Sec. Sec.  68.50 through 68.80, to 
read as follows:
Subpart C--Vessels With a Coastwise Endorsement Issued on or After 
August 9, 2004, That Are Demised Chartered to Coastwise Qualified 
Citizens
Sec.
68.50 Purpose and applicability.
68.55 Definitions.
68.60 Eligibility of a vessel for a coastwise endorsement under this 
subpart.
68.65 Annual ownership certification.
68.70 Application procedure for vessels other than barges to be 
operated in coastwise trade without being documented.
68.75 Application procedure for barges to be operated in coastwise 
trade without being documented.
68.80 Invalidation of a coastwise endorsement.

Subpart C--Vessels With a Coastwise Endorsement Issued on or After 
August 9, 2004, That Are Demised Chartered to Coastwise Qualified 
Citizens


Sec.  68.50  Purpose and applicability.

    (a) This subpart contains requirements, in addition to those in 
part 67 of this chapter, for obtaining a coastwise endorsement for a 
U.S.-built vessel--
    (1) That is owned by a person that qualifies as a citizen under 
Sec. Sec.  67.35(a), 67.36(a), 67.37, or 67.39(a) of this chapter; and
    (2) That is demise chartered to a coastwise qualified citizen under 
Sec. Sec.  67.33, 67.35(c), 67.36(c), 67.37, 67.39(c), or 67.41 of this 
chapter.
    (b) This subpart applies to a vessel with a coastwise endorsement 
issued on or after August 9, 2004. It does not apply to a vessel under 
subpart D of this part.


Sec.  68.55  Definitions.

    In addition to the terms defined in Sec.  67.3 of this chapter, as 
used in this subpart--
    Affiliate means, with respect to any person, any other person that 
is--
    (1) Directly or indirectly controlled by, under common control 
with, or controlling that person; or
    (2) Named as being part of the same consolidated group in any 
report or other document submitted to the United States Securities and 
Exchange Commission or the Internal Revenue Service.
    Cargo does not include cargo to which title is held for non-
commercial reasons and primarily for the purpose of evading the 
requirements of Sec.  68.65(a)(2).
    Oil has the meaning given that term in 46 U.S.C. 2101(20).
    Operation or management, for vessels, means all activities related 
to the use of vessels to provide services. These activities include, 
but are not limited to, ship agency; ship brokerage; activities 
performed by a vessel operator or demise charterer in exercising 
direction and control of a vessel, such as crewing, victualing, 
storing, and maintaining the vessel and ensuring its safe navigation; 
and activities associated with controlling the use and employment of 
the vessel under a time charter or other use agreement. It does not 
include activities directly associated with making financial 
investments in vessels or the receipt of earnings derived from these 
investments.
    Passive investment means an investment in which neither the 
investor nor any affiliate of the investor is involved in, or has the 
power to be involved in, the formulation, determination, or direction 
of any activity or function concerning the use, operation, or 
management of the asset that is the subject of the investment.
    Qualified proprietary cargo means--
    (1) Oil, petroleum products, petrochemicals, or liquefied natural 
gas cargo that is beneficially owned by the person who submits to the 
Director, National Vessel Documentation Center, an application or 
annual certification under Sec.  68.65(a)(2), or by an affiliate of 
that person, immediately before, during, or immediately after the cargo 
is carried in coastwise trade on a vessel owned by that person;
    (2) Oil, petroleum products, petrochemicals, or liquefied natural 
gas cargo not beneficially owned by the person who submits to the 
Director, National Vessel Documentation Center, an application or an 
annual certification under Sec.  68.65(a)(2), or by an affiliate of 
that person, but that is carried in coastwise trade by a vessel owned 
by that person and which is part of an arrangement in which vessels 
owned by that person and at least one other person are operated 
collectively as one fleet, to the extent that an equal amount of oil, 
petroleum products, petrochemicals, or liquefied natural gas cargo 
beneficially owned by that person, or an affiliate of that person, is 
carried in coastwise trade on one or more other vessels, not owned by 
that person, or an affiliate of that person, if the other vessel or 
vessels are also part of the same arrangement;
    (3) In the case of a towing vessel associated with a non-self-
propelled tank vessel where the two vessels function as a single self-
propelled vessel, oil, petroleum products, petrochemicals, or liquefied 
natural gas

[[Page 61420]]

cargo that is beneficially owned by the person who owns both the towing 
vessel and the non-self-propelled tank vessel, or any United States 
affiliate of that person, immediately before, during, or immediately 
after the cargo is carried in coastwise trade on either of the two 
vessels; or
    (4) Any oil, petroleum products, petrochemicals, or liquefied 
natural gas cargo carried on any vessel that is either a self-propelled 
tank vessel having a length of at least 210 meters (about 689 feet) or 
a tank vessel that is a liquefied natural gas carrier that--
    (i) Was delivered by the builder of the vessel to the owner of the 
vessel after December 31, 1999; and
    (ii) Was purchased by a person for the purpose, and with the 
reasonable expectation, of transporting on the vessel liquefied natural 
gas or unrefined petroleum beneficially owned by the owner of the 
vessel, or an affiliate of the owner, from Alaska to the continental 
United States.
    Sub-charter means all types of charters or other contracts for the 
use of a vessel that are subordinate to a charter. The term includes, 
but is not limited to, a demise charter, a time charter, a voyage 
charter, a space charter, and a contract of affreightment.
    United States affiliate means, with respect to any person, an 
affiliate the principal place of business of which is located in the 
United States.


Sec.  68.60  Eligibility of a vessel for a coastwise endorsement under 
this subpart.

    (a) To be eligible for a coastwise endorsement under 46 U.S.C. 
12106(e) and to operate in coastwise trade under 46 U.S.C. 12106(e) and 
12110(b), a vessel must meet the following:
    (1) The vessel is eligible for documentation under 46 U.S.C. 12102.
    (2) The vessel is eligible for a coastwise endorsement under Sec.  
67.19(c) of this chapter and has not lost coastwise eligibility under 
Sec.  67.19(d) of this chapter.
    (3) The person that owns the vessel (or, if the vessel is owned by 
a trust or similar arrangement, the beneficiary of the trust or similar 
arrangement) makes the certification in Sec.  68.65.
    (4) The person that owns the vessel has transferred to a qualified 
U.S. citizen under 46 U.S.C. app. 802 full possession, control, and 
command of the vessel through a demise charter in which the demise 
charterer is considered the owner pro hac vice during the term of the 
charter.
    (5) The charterer must certify to the Director, National Vessel 
Documentation Center, that the charterer is a citizen of the United 
States for engaging in the coastwise trade under 46 U.S.C. app. 802.
    (6) The demise charter is for a period of at least 3 years, unless 
a shorter period is authorized by the Director, National Vessel 
Documentation Center, under circumstances such as--
    (i) When the vessel's remaining life would not support a charter of 
3 years; or
    (ii) To preserve the use or possession of the vessel.
    (b) To apply for a coastwise endorsement for a vessel under a 
demise charter, see Sec.  68.70 and, for a barge, see Sec.  68.75.


    Note to Sec.  68.60: Section 608(b) of Public Law 108-293 
provides special requirements for certain vessels in the Alaska 
trade.

Sec.  68.65  Annual ownership certification.

    (a) At the time of initial application for documentation and at the 
time for annual renewal of the endorsement as required by Sec.  67.163 
of this chapter, the person that owns a vessel with a coastwise 
endorsement under Sec.  68.60 must certify in writing to the Director, 
National Vessel Documentation Center--
    (1) That the person who owns a vessel with a coastwise endorsement 
under Sec.  68.60--
    (i) Is a leasing company, bank, or financial institution;
    (ii) Owns, or holds the beneficial interest in, the vessel solely 
as a passive investment;
    (iii) Does not operate any vessel for hire and is not an affiliate 
of any person who operates any vessel for hire; and
    (iv) Is independent from, and not an affiliate of, any charterer of 
the vessel or any other person who has the right, directly or 
indirectly, to control or direct the movement or use of the vessel.
    (2) For vessels under paragraph (b) of this section, that--
    (i) The aggregate book value of the vessels owned by that person 
and United States affiliates of that person does not exceed 10 percent 
of the aggregate book value of all assets owned by that person and its 
United States affiliates;
    (ii) Not more than 10 percent of the aggregate revenues of that 
person and its United States affiliates is derived from the ownership, 
operation, or management of vessels;
    (iii) At least 70 percent of the aggregate tonnage of all cargo 
carried by all vessels owned by that person and its United States 
affiliates and documented under 46 U.S.C. 12106 is qualified 
proprietary cargo;
    (iv) Any cargo other than qualified proprietary cargo carried by 
all vessels owned by that person and its United States affiliates and 
documented under 46 U.S.C. 12106 consists of oil, petroleum products, 
petrochemicals, or liquified natural gas;
    (v) No vessel owned by that person or any of its United States 
affiliates and documented under 46 U.S.C. 12106 carries molten sulphur; 
and
    (vi) That person owned one or more vessels documented as of August 
9, 2004, under Sec.  67.20, as that section was in effect on that date.
    (b) Paragraph (a)(2) of this section applies only to--
    (1) A tank vessel having a tonnage of not less than 6,000 gross 
tons, as measured under 46 U.S.C. 14502 (or an alternative tonnage 
measured under 46 U.S.C. 14302 as prescribed under 46 U.S.C. 14104); or
    (2) A towing vessel associated with a non-self-propelled tank 
vessel that meets the requirements of paragraph (b)(1) of this section, 
where the two vessels function as a single self-propelled vessel.


    Note to Sec.  68.65: The Secretary of Transportation may waive 
or reduce the qualified proprietary cargo requirement of Sec.  
68.65(a)(2)(iii) for a vessel if the person that owns the vessel 
(or, if the vessel is owned by a trust or similar arrangement, the 
beneficiary of the trust or similar arrangement) notifies the 
Secretary that circumstances beyond the direct control of the person 
that owns the vessel or its affiliates prevent, or reasonably 
threaten to prevent, the person that owns the vessel from satisfying 
this requirement, and the Secretary does not, with good cause, 
determine otherwise. The waiver or reduction applies during the 
period of time that the circumstances exist.

Sec.  68.70  Application procedure for vessels other than barges to be 
operated in coastwise trade without being documented.

    (a) The person that owns the vessel (other than a barge under Sec.  
68.75) and that seeks a coastwise endorsement under Sec.  68.60 must 
submit the following to the National Vessel Documentation Center:
    (1) Application for Initial Issue, Exchange, or Replacement of 
Certificate of Documentation; or Redocumentation (form CG-1258);
    (2) Title evidence, if applicable;
    (3) Mortgagee consent on form CG-4593, if applicable;
    (4) If the application is for replacement of a mutilated document 
or for exchange of documentation, the outstanding Certificate of 
Documentation;
    (5) The certification required by Sec.  68.65(a)(1) or, if a vessel 
under Sec.  68.65(b), the certification required by Sec.  68.65(a)(2);

[[Page 61421]]

    (6) A certification in the form of an affidavit and, if requested 
by the Director, National Vessel Documentation Center, supporting 
documentation establishing the following facts with respect to the 
transaction from an individual who is authorized to provide 
certification on behalf of the person that owns the vessel and who is 
an officer in a corporation, a partner in a partnership, a member of 
the board of managers in a limited liability company, or their 
equivalent. The certificate must certify that the person that owns the 
vessel has transferred to a qualified United States citizen under 46 
U.S.C. app. 802 full possession, control, and command of the U.S.-built 
vessel through a demise charter in which the demise charterer is 
considered the owner pro hac vice during the term of the charter.
    (7) A copy of the charter, which must provide that the charterer is 
deemed to be the owner pro hac vice for the term of the charter.
    (b) The charterer must submit the following to the National Vessel 
Documentation Center:
    (1) A certificate certifying that the charterer is a citizen of the 
United States for the purpose of engaging in the coastwise trade under 
46 U.S.C. app. 802.
    (2) Detailed citizenship information in the format of form CG-1258, 
Application for Documentation, section G, citizenship. The citizenship 
information may be attached to the form CG-1258 that is submitted under 
paragraph (a)(1) of this section and must be signed by, or on behalf 
of, the charterer.
    (c) Whenever a charter submitted under paragraph (a)(7) of this 
section is amended, the vessel owner must file a copy of the amendment 
with the Director, National Vessel Documentation Center, within 10 days 
after the effective date of the amendment.
    (d) Whenever the charterer of a vessel under paragraph (a) of this 
section enters into a sub-charter that is a demise charter with another 
person for the use of the vessel, the charterer must file a copy of the 
sub-charter and amendments to the sub-charter with the Director, 
National Vessel Documentation Center, within 10 days after the 
effective date of the sub-charter and the sub-charterer must provide 
detailed citizenship information in the format of form CG-1258, 
Application for Documentation, section G, citizenship.
    (e) Whenever the charterer of a vessel under paragraph (a) of this 
section enters into a sub-charter other than a demise charter with 
another person for the use of the vessel, the charterer must file a 
copy of the sub-charter and amendments to the sub-charter with the 
Director, National Vessel Documentation Center, within 10 days after a 
request by the Director to do so.
    (f) A person that submits a false certification under this section 
is subject to penalty under 46 U.S.C. 12122 and 18 U.S.C. 1001.


Sec.  68.75  Application procedure for barges to be operated in 
coastwise trade without being documented.

    (a) The person that owns a barge qualified to engage in coastwise 
trade must submit the following to the National Vessel Documentation 
Center:
    (1) The certification required by Sec.  68.65(a)(1) or (a)(2).
    (2) A certification in the form of an affidavit and, if requested 
by the Director, National Vessel Documentation Center, supporting 
documentation establishing the following facts with respect to the 
transaction from an individual who is authorized to provide 
certification on behalf of the person that owns the barge and who is an 
officer in a corporation, a partner in a partnership, a member of the 
board of managers in a limited liability company, or their equivalent. 
The certificate must certify the following:
    (i) That the person that owns the barge is organized under the laws 
of the United States or a State.
    (ii) That the person that owns the barge has transferred to a 
qualified United States citizen under 46 U.S.C. app. 802 full 
possession, control, and command of the U.S.-built barge through a 
demise charter in which the demise charterer is considered the owner 
pro hac vice during the term of the charter.
    (iii) That the barge is qualified to engage in the coastwise trade 
and that it is owned by a person eligible to own vessels documented 
under 46 U.S.C. 12102(e).
    (3) A copy of the charter, which must provide that the charterer is 
deemed to be the owner pro hac vice for the term of the charter.
    (b) The charterer must submit the following to the National Vessel 
Documentation Center:
    (1) A certificate certifying that the charterer is a citizen of the 
United States for engaging in the coastwise trade under 46 U.S.C. app. 
802.
    (2) Detailed citizenship information in the format of form CG-1258, 
Application for Documentation, section G, citizenship. The citizenship 
information must be signed by, or on behalf of, the charterer.
    (c) Whenever a charter under paragraph (a) of this section is 
amended, the barge owner must file a copy of the amendment with the 
Director, National Vessel Documentation Center, within 10 days after 
the effective date of the amendment.
    (d) Whenever the charterer of a barge under paragraph (a) of this 
section enters into a sub-charter that is a demise charter with another 
person for the use of the barge, the charterer must file a copy of the 
sub-charter and amendments to the sub-charter with the Director, 
National Vessel Documentation Center, within 10 days after the 
effective date of the sub-charter and the sub-charterer must provide 
detailed citizenship information in the format of form CG-1258, 
Application for Documentation, section G, citizenship.
    (e) Whenever the charterer of a barge under paragraph (a) of this 
section enters into a sub-charter other than a demise charter with 
another person for the use of the barge, the charterer must file a copy 
of the sub-charter and amendments to the sub-charter with the Director, 
National Vessel Documentation Center, within 10 days after a request by 
the Director to do so.
    (f) A person that submits a false certification under this section 
is subject to penalty under 46 U.S.C. 12122 and 18 U.S.C. 1001.


Sec.  68.80  Invalidation of a coastwise endorsement.

    In addition to the events in Sec.  67.167(c)(1) through (c)(9) of 
this chapter, a Certificate of Documentation together with a coastwise 
endorsement under this subpart becomes invalid when--
    (a) The owner fails to make the certification required by Sec.  
68.65 or ceases to meet the requirements of the certification on file;
    (b) The demise charter expires or is transferred to another 
charterer; or
    (c) The citizenship of the charterer or sub-charterer changes to 
the extent that they are no longer qualified for a coastwise 
endorsement.
    22. Add new subpart D, consisting of Sec. Sec.  68.100 through 
68.111, to read as follows:
Subpart D--Vessels With a Coastwise Endorsement Issued Before August 9, 
2004, and Their Replacements That Are Demise Chartered to Coastwise 
Qualified Citizens
Sec.
68.100 Purpose and applicability.
68.103 Definitions.
68.105 Eligibility of a vessel for a coastwise endorsement under 
this subpart.
68.107 Application procedure for vessels other than barges to be 
operated in coastwise trade without being documented.

[[Page 61422]]

68.109 Application procedure for barges to be operated in coastwise 
trade without being documented.
68.111 Invalidation of a coastwise endorsement.

Subpart D--Vessels With a Coastwise Endorsement Issued Before 
August 9, 2004, and Their Replacements That Are Demised Chartered 
to Coastwise-Qualified Citizens


Sec.  68.100  Purpose and applicability.

    (a) This subpart contains requirements for the documentation of 
U.S.-built vessels in the coastwise trade that were granted special 
rights under the Coast Guard and Maritime Transportation Action of 2004 
(Pub. L. 108-293).
    (b) This subpart applies to--
    (1) A vessel under a demise charter that was eligible for, and 
received, a document with a coastwise endorsement under Sec.  67.19 of 
this chapter and 46 U.S.C. 12106(e) before August 9, 2004;
    (2) A barge deemed eligible under 46 U.S.C. 12106(e) and 12110(b) 
to operate in coastwise trade without being documented before August 9, 
2004; and
    (3) A replacement vessel of a similar size and function for any 
vessel under paragraphs (b)(1) through (b)(3) of this section.
    (c) Except for vessels under paragraph (d) of this section, this 
subpart applies to a certificate of documentation, or renewal of one, 
endorsed with a coastwise endorsement for a vessel under 46 U.S.C. 
12106(e) or a replacement vessel of a similar size and function that 
was issued before August 9, 2004, as long as the vessel is owned by the 
person named in the certificate, or by a subsidiary or affiliate of 
that person, and the controlling interest in the owner has not been 
transferred to a person that was not an affiliate of the owner as of 
August 9, 2004.
    (d) With respect to offshore supply vessels with a certificate of 
documentation endorsed with a coastwise endorsement as of August 9, 
2004, this subpart applies until August 9, 2007. On and after August 9, 
2007, subpart C of this part applies to these vessels.


Sec.  68.103  Definitions.

    In addition to the terms defined in Sec.  67.3 of this chapter, as 
used in this subpart--
    Affiliate means a person that is less than 50 percent owned or 
controlled by another person.
    Group means the person that owns a vessel, the parent of that 
person, and all subsidiaries and affiliates of the parent of that 
person.
    Offshore supply vessel means a motor vessel of more than 15 gross 
tons but less than 500 gross tons as measured under 46 U.S.C. 14502, or 
an alternate tonnage measured under 46 U.S.C. 14302 as prescribed under 
46 U.S.C. 14104, that regularly carries goods, supplies, individuals in 
addition to the crew, or equipment in support of exploration, 
exploitation, or production of offshore mineral or energy resources.
    Operation or management of vessels means all activities related to 
the use of vessels to provide services. These activities include ship 
agency; ship brokerage; activities performed by a vessel operator or 
demise charterer in exercising direction and control of a vessel, such 
as crewing, victualing, storing, and maintaining the vessel and 
ensuring its safe navigation; and activities associated with 
controlling the use and employment of the vessel under a time charter 
or other use agreement. It does not include activities directly 
associated with making financial investments in vessels or the receipt 
of earnings derived from these investments.
    Parent means any person that directly or indirectly owns or 
controls at least 50 percent of another person. If an owner's parent is 
directly or indirectly controlled at least 50 percent by another 
person, that person is also a parent of the owner. Therefore, an owner 
may have multiple parents.
    Person means an individual; corporation; partnership; limited 
liability partnership; limited liability company; association; joint 
venture; trust arrangement; and the government of the United States, a 
State, or a political subdivision of the United States or a State; and 
includes a trustee, beneficiary, receiver, or similar representative of 
any of them.
    Primarily engaged in leasing or other financing transactions means 
lease financing, in which more than 50 percent of the aggregate revenue 
of a person is derived from banking, investing, lease financing, or 
other similar transactions.
    Replacement vessel means--
    (1) A temporary replacement vessel for a period not to exceed 180 
days if the vessel described in Sec.  68.50 is unavailable due to an 
act of God or a marine casualty; or
    (2) A permanent replacement vessel if--
    (i) The vessel described in Sec.  68.50 is unavailable for more 
than 180 days due to an act of God or a marine casualty; or
    (ii) A contract to purchase or construct a replacement vessel is 
executed not later than December 31, 2004.
    Sub-charter means all types of charters or other contracts for the 
use of a vessel that are subordinate to a charter. The term includes, 
but is not limited to, a demise charter, a time charter, a voyage 
charter, a space charter, and a contract of affreightment.
    Subsidiary means a person at least 50 percent of which is directly 
or indirectly owned or controlled by another person.


Sec.  68.105  Eligibility of a vessel for a coastwise endorsement under 
this subpart.

    (a) Except as under paragraphs (b) through (e) of this section, to 
be eligible for a coastwise endorsement under 46 U.S.C. 12106(e) and to 
operate in coastwise trade under 46 U.S.C. 12106(e) and 12110(b), a 
vessel under a demise charter