Retrospective Review Under E.O. 13563: War Risk Insurance, 17896-17910 [2014-06756]

Agencies

• Maritime Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 79, Number 61 (Monday, March 31, 2014)]
[Rules and Regulations]
[Pages 17896-17910]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-06756]


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DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 308

RIN 2133-AB82


Retrospective Review Under E.O. 13563: War Risk Insurance

AGENCY: Maritime Administration, Department of Transportation.

ACTION: Final rule.

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SUMMARY: In accordance with Executive Order 13563, ``Improving 
Regulation and Regulatory Review,'' the Maritime Administration (MARAD) 
is evaluating the continued accuracy of its rules and determining 
whether they effectively address current issues and provide the 
regulated public with necessary guidance. As part of this review, MARAD 
is issuing this final rule to correct numerous citations in accordance 
with the codification of Title 46 of the United States Code, update 
relevant agency contact and underwriting agent information, and remove 
obsolete references to lighter aboard ship barges in Part 308. This 
rulemaking will have no substantive effect on the regulated public.

DATES: This rule is effective April 30, 2014.

FOR FURTHER INFORMATION CONTACT: You may contact Jeff R. Vogel, 
Attorney-Advisor, Office of Chief Counsel, at (202) 493-0307. You may 
send mail to Mr. Vogel at Office of Chief Counsel, MAR-222, Maritime 
Administration, 1200 New Jersey Avenue SE., Washington, DC 20590-0001. 
You may send electronic mail to jeff.vogel@dot.gov.

SUPPLEMENTARY INFORMATION: On January 18, 2011, President Obama issued 
Executive Order 13563, which outlined a plan to improve regulation and 
regulatory review (76 FR 3821, January 21, 2011). Executive Order 13563 
reaffirms and builds upon governing principles of contemporary 
regulatory review, including Executive Order 12866, ``Regulatory 
Planning and Review,'' (58 FR 51735, October 4, 1993), by requiring 
Federal agencies to design cost-effective, evidence-based regulations 
that are compatible with economic growth, job creation and 
competitiveness. The President's plan recognizes that these principles 
should not only guide the Federal government's approach to new 
regulations, but to existing ones as well. To that end, Executive Order 
13563 requires agencies to promote retrospective analysis of rules that 
may be outmoded, ineffective, insufficient or excessively burdensome.
    Accordingly, MARAD identified its regulations governing its war 
risk insurance program for improvement consistent with the President's 
order. The regulations were deemed inconsistent with current agency 
practices and provided out-of-date information for those participating 
in, or potentially interested in, the war risk insurance program.
    As authorized by 46 U.S.C. 53902, and delegated under 46 CFR 1.93, 
MARAD may provide war risk insurance adequate for the needs of the 
waterborne commerce of the United States, if such insurance coverage 
cannot be obtained on reasonable terms and conditions from companies 
authorized to conduct an insurance business in a State of the United 
States. MARAD's authority to issue marine war risk insurance, as 
provided by 46 U.S.C. 53912, currently expires on December 31, 2020, 
subject to a further extension of the program by Congress. This U.S. 
Government war risk insurance program is a standby emergency program 
and becomes effective simultaneously with the automatic termination of 
ocean marine commercial war risk insurance policies. This program makes 
it possible for applicants to obtain war risk insurance from the U.S. 
Government when such insurance is unavailable on reasonable terms and 
conditions in the commercial market. The program is mutually-beneficial 
to the United States and to the shipowner in that it assures continued 
flow of essential U.S. trade and protection of the shipowner from loss 
by risks of war.
    The war risk insurance statutory provisions were codified at 46 
U.S.C. Chapter 539 pursuant to Public Law 109-304 on October 6, 2006. 
In order to alleviate any confusion caused by the current war risk 
insurance regulations, all statutory references have been amended to 
reflect the correct sections of Title 46 of the United States Code. In 
addition, all contact information contained in 46 CFR Part 308 has been 
updated to ensure that program participants and the general public have 
access to all current information. In their current form, the 
regulations also make repeated reference to the ``American War Risk 
Agency'' as MARAD's underwriter. The American War Risk Agency was 
operated by the American Hull Insurance Syndicate, as successor to the 
American Marine Insurance Syndicate ``C'', which was created at the 
insistence of the House Subcommittee on Merchant Marine and Fisheries 
and was approved by such Committee and the United States Shipping Board 
on June 28, 1920. The American War Risk Agency served as MARAD's 
underwriter until December 2012 when it ceased operation. All 
references to the American War Risk Agency have been replaced in Part 
308, and subsequent underwriters will be contracted for in accordance 
with the Federal Acquisition Regulations. Finally, this final rule 
removes references to lighter aboard ship (LASH) barges in sections 
308.102 and 308.202. The regulations now make general reference to 
binder fees for all barges in lieu of specifically referencing LASH 
barges.

Rulemaking Analysis and Notices

Executive Orders 12866 (Regulatory Planning and Review), 13563 
(Improving Regulation and Regulatory Review) and DOT Regulatory 
Policies and Procedures

    Under E.O. 12866 (58 FR 51735, October 4, 1993), supplemented by 
E.O. 13563 (76 FR 3821, January 18, 2011) and DOT policies and 
procedures, MARAD must determine whether a regulatory action is 
``significant,'' and therefore subject to Office of Management and 
Budget (OMB) review and the requirements of the Executive Order. The 
Order defines ``significant regulatory action'' as one likely to result 
in a rule that may: (1) Have an annual effect on the economy of $100 
million or more or adversely affect in a material way the economy, a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
government or communities. (2) Create

[[Page 17897]]

a serious inconsistency or otherwise interfere with an action taken or 
planned by another Agency. (3) Materially alter the budgetary impact of 
entitlements, grants, user fees, or loan programs or the rights and 
obligations of recipients thereof. (4) Raise novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    MARAD has determined that this final rule is not considered a 
significant regulatory action under section 3(f) of Executive Order 
12866 and, therefore, it was not reviewed by OMB. This final rule will 
not result in an annual effect on the economy of $100 million or more. 
It also is not considered a major rule for purposes of Congressional 
review under Public Law 104-121. The rule is also not significant under 
the Regulatory Policies and Procedures of the Department of 
Transportation (44 FR 11034, February 26, 1979). The costs and overall 
economic impact of this rulemaking do not require further analysis.

Executive Order 13132 (Federalism)

    MARAD analyzed this rulemaking in accordance with the principles 
and criteria contained in Executive Order 13132 (``Federalism'') and 
determined that it does not have sufficient Federalism implications to 
warrant the preparation of a Federalism summary impact statement. This 
rule has no substantial effect on the States, or on the current 
Federal-State relationship, or on the current distribution of power and 
responsibilities among the various local officials. Nothing in this 
document preempts any State law or regulation. Therefore, MARAD did not 
consult with State and local officials because it was not necessary.

Executive Order 13175 (Consultation and Coordination With Indian Tribal 
Governments)

    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.

Executive Order 12372 (Intergovernmental Review)

    The regulations implementing Executive Order 12372 regarding 
intergovernmental consultation on Federal programs and activities do 
not apply to this rule.

Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 requires MARAD to assess 
whether this rule would have a significant economic impact on a 
substantial number of small entities and to minimize any adverse 
impact. MARAD certifies that this rule will not have a significant 
economic impact on a substantial number of small entities.

Environmental Assessment

    We have analyzed this final rule for purposes of compliance with 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) 
and 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 rulemaking has no environmental 
impact.

Executive Order 13211 (Energy Supply, Distribution, or Use)

    MARAD has determined that the final rule would not significantly 
affect energy supply, distribution or use. Therefore, no Statement of 
Energy Effects is required.

Executive Order 13045 (Protection of Children)

    Executive Order 13045, Protection of Children from Environmental 
Health Risks and Safety Risks, requires agencies issuing ``economically 
significant'' rules that involve an environmental health or safety risk 
that may disproportionately affect children, to include an evaluation 
of the regulation's environmental health and safety effects on 
children. As discussed previously, this final rule is not economically 
significant, and it would cause no environmental or health risk that 
disproportionately affects children.

Executive Order 12988 (Civil Justice Reform)

    This action meets applicable standards in sections 3(a) and 3(b)(2) 
of E.O. 12988, Civil Justice Reform, to minimize litigation, eliminates 
ambiguity and reduce burden.

Executive Order 12630 (Taking of Private Property)

    This rule would 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.

National Technology Transfer and Advancement Act

    The National Technology Transfer and Advancement Act (15 U.S.C. 272 
note) requires Federal agencies proposing to adopt Government technical 
standards to consider whether voluntary consensus standards are 
available. If the Agency chooses to adopt its own standards in place of 
existing voluntary consensus standards, it must explain its decision in 
a separate statement to OMB. MARAD determined that there are no 
voluntary national consensus standards related to the war risk 
insurance program addressed by this regulation.

International Trade Impact Assessment

    This rule is not expected to contain standards-related activities 
that create unnecessary obstacles to the foreign commerce of the United 
States.

Privacy Impact Assessment

    Section 522(a)(5) of the Transportation, Treasury, Independent 
Agencies, and General Government Appropriations Act, 2005 (Pub. L. 108-
447, div. H, 118 Stat. 2809 at 3268) requires the Department of 
Transportation and certain other Federal agencies to conduct a privacy 
impact assessment of each final rule that will affect the privacy of 
individuals. Claims submitted under this rule will be treated the same 
as all legal claims received by MARAD. The processing and treatment of 
any claim within the scope of this rulemaking by MARAD shall comply 
with all legal, regulatory and policy requirements regarding privacy.

Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), Federal agencies must obtain approval from OMB for each 
collection of information they conduct, sponsor or require through 
regulations. This final rule proposes regulatory clarification to 
MARAD's war risk insurance program. This rulemaking contains no new or 
amended information collection or recordkeeping requirements that have 
been approved or require approval by the OMB.

Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995 requires Agencies to 
evaluate whether an Agency action would result in the expenditure by 
State, local and tribal governments, in the aggregate, or by the 
private sector, of $141.3 million or more (as adjusted for inflation) 
in any

[[Page 17898]]

one year, and if so, to take steps to minimize these unfunded mandates. 
This final rule does not impose unfunded mandates under the Unfunded 
Mandates Reform Act of 1995. It does not result in costs of $141.3 
million or more to either State, local or tribal governments, in the 
aggregate, or to the private sector, and is the least burdensome 
alternative that achieves the objectives of the rule.

Regulation Identifier Number (RIN)

    A regulation identifier number (RIN) is assigned to each regulatory 
action listed in the Unified Agenda of Federal Regulations. The 
Regulatory Information Service Center publishes the Unified Agenda in 
April and October of each year. The RIN number contained in the heading 
of this document can be used to cross-reference this action with the 
Unified Agenda.

List of Subjects in 46 CFR Part 308

    Disability benefits, Freight, Maritime carriers, Reporting and 
recordkeeping requirements, Seamen, Vessels, War risk insurance.

    For the reasons stated in the preamble, the Maritime Administration 
revises 46 CFR Part 308 to read as follows:

PART 308--WAR RISK INSURANCE

Subpart A--General
Sec.
308.1 Eligibility for vessel insurance.
308.2 Requirements for eligible vessels.
308.3 Applications for insurance; warranties; supporting documents; 
payment of binder fees.
308.4 [Reserved]
308.5 Voluntary contract of commitment.
308.6 Period of interim binders, updating application information 
and new applications.
308.7 Premiums and payment thereof.
308.8 War risk insurance underwriting agency agreement.
Subpart B--War Risk Hull and Disbursements Insurance
308.100 Insured amount.
308.101 [Reserved]
308.102 Issuance of interim binder; terms and conditions; fees.
308.103 Insured amounts under interim binder.
308.104 Additional war risk insurance.
308.105 Reporting casualties and filing claims.
308.106 [Reserved]
308.107 War risk hull insurance policy.
Subpart C--War Risk Protection and Indemnity Insurance
308.200 Insured amount--application.
308.201 [Reserved]
308.202 Issuance of interim binder; terms and conditions.
308.203 Amount insured under interim binder.
308.204 Additional war risk protection and indemnity insurance.
308.205 Reporting casualties and filing claims.
308.206 [Reserved]
308.207 War risk protection and indemnity insurance policy.
Subpart D--Second Seamen's War Risk Insurance
308.300 Insured amount--application.
308.301 [Reserved]
308.302 Issuance of interim binder; terms and conditions.
308.303 Amounts insured under interim binder.
308.304 Reporting casualties and filing claims.
308.305 [Reserved]
308.306 Second Seamen's War Risk Policy, Form MA-242.
Subpart E--War Risk Builder's Risk Insurance
308.400 Authority.
308.401 Eligibility for insurance.
308.402 Insurance during vessel construction period.
308.403 Insured amounts.
308.404 Application for insurance.
308.405 Form of application.
308.406 Issuance of policies; terms and conditions.
308.407 Premiums and payment.
308.408 Right of Maritime Administrator to change rate of premium.
308.409 Standard form of War Risk Builder's Risk Insurance Policy, 
Form MA-283.
308.410 Reporting casualties and filing claims.
Subpart F--War Risk Cargo Insurance

Introduction

308.500 Authority.
308.501 Cargoes on which coverage is available.
308.502 Additional insurance.
308.503 Rate schedules.
308.504 Definition of territories and possessions.

Open Policy War Risk Cargo Insurance

308.505 General.
308.506 Application for an Open Cargo Policy.
308.507 Security for payment of premiums.
308.508 Issuance of an Open Cargo Policy.
308.509 Collateral deposit fund.
308.510 Surety bond.
308.511 Cancellation of Open Cargo Policy.
308.512 Declaration of shipments under Open Cargo Policy.
308.513 Payment of premiums and fees.
308.514 Return premium.
308.515 Payment in event of loss.
308.516 Failure to comply with Clause 21.
308.517 Open Cargo Policy, Form MA-300.
308.518 Standard optional endorsement No. 1, Form MA-300-A.
308.519 Standard optional endorsement No. 2, Form MA-300-B.
308.520 Standard optional endorsement No. 3, Form MA-300-C.
308.521 Application for Open Cargo Policy, Form MA-301.
308.522 Collateral deposit fund, letter of transmittal, Form MA-302.
308.523 Application for revision of Open Cargo Policy, Form MA-303.
308.524 Application for cancellation of Open Cargo Policy, Form MA-
304.
308.525 Application for decrease in amount of cash collateral fund, 
Form MA-305.
308.526 Certificate for repayment of decrease of collateral deposit 
fund, Form MA-306.
308.527 Application for return premium, Form MA-307.
308.528 Surety Bond A, Form MA-308.
308.529 Surety Bond B, Form MA-309.
308.530 Letter requesting increase or decrease in amount of surety 
bond, Form MA-310.
308.531 Endorsement of surety bond increasing or decreasing amount 
of coverage, Form MA-311.
308.532 Release of surety bond, Form MA-312.
308.533 Closing report, Form MA-313.
308.534 Certificate to be attached to closing report, Form MA-313-A.
308.535 Certificate to be attached to final closing report, Form MA-
313-B.
308.536 Declaration where failure to comply with Clause 21 was 
inadvertent, Form MA-314.

Facultative War Risk Cargo Insurance

308.538 General.
308.539 Application.
308.540 Premiums.
308.541 Issuance.
308.542 Warranty re thirty-day shipments.
308.543 Cancellation.
308.544 Facultative binder, Form MA-315.
308.545 Facultative cargo policy, Form MA-316.
308.546 Standard optional endorsement No. 1-A, Form MA-316-A.
308.547 Application for return premium, Form MA-317.

General

308. 548 Standard form of underwriting agency agreement for cargo, 
Form MA-318.
308.549 Application for appointment of Cargo Underwriting Agent, 
Form MA-319.
308.550 Certificate, Form MA-320.
308.551 War risk insurance clearing agency agreement for cargo, Form 
MA-321.
308.552 Effective date.
Subpart G--Records Retention
308.600 Records retention requirement.

Subpart A--General


Sec.  308.1  Eligibility for vessel insurance.

    Any vessel within one of the following categories shall be eligible 
for insurance, but shall remain eligible only while meeting the 
qualifications criteria in one of said categories. An eligible vessel 
is not insured unless and until an application is submitted as required 
in subpart B, C, or D of this part 308 and the Maritime Administrator, 
Department

[[Page 17899]]

of Transportation, (Maritime Administrator) Maritime Administration 
(MARAD), approves said application.
    (a) A vessel registered, enrolled, or licensed under the laws of 
the United States of America (United States); any undocumented vessel 
owned or chartered by or made available to the United States or any 
department or agency thereof; any tug or barge or other watercraft 
(documented under the laws of the United States, or undocumented) owned 
by a citizen of the United States and used in essential water 
transportation; and United States citizen-owned watercraft used in the 
fishing trade or industry, except when used exclusively in or for sport 
fishing.
    (b) Any vessel, other than a vessel described in paragraph (a) of 
this section determined by the Maritime Administrator to be engaged in 
the national defense or the national economy of the United States and 
subject to an unqualified Contract of Commitment with the United States 
in a form required by the Maritime Administrator, and which is:
    (1) Owned by a United States corporation, or a foreign corporation 
in which a majority of the stock is owned and controlled by a citizen 
or citizens of the United States, whether direct or through intervening 
corporations, foreign or domestic. Where such intervening corporations 
are foreign, the ultimate majority ownership and control of the stock 
of such corporations must be vested in a citizen or citizens of the 
United States as defined 46 U.S.C. 50501(a);
    (2) Owned by a foreign corporation which is not directly or 
beneficially owned by a citizen or citizens of the United States, but 
which vessel is under a long-term charter or other long-term contract 
covering the use of the vessel on terms deemed by the Maritime 
Administrator to subject the vessel to United States control in the 
event of an emergency. The charterer of such vessel must be either a 
citizen or citizens of the United States or a foreign corporation in 
which a majority of the stock is owned and controlled by a citizen or 
citizens of the United States, whether direct or indirect through 
intervening corporations, foreign or domestic. Where such intervening 
corporations are foreign, ultimate majority ownership and control of 
the stock of such corporations must be vested in a citizen or citizens 
of the United States, as defined in 46 U.S.C. 50501(a).
    (c) Any other vessel, at the sole discretion of the Maritime 
Administrator, but only while engaged in a service which has been 
determined by the Maritime Administrator to be in the interest of the 
national defense or the national economy of the United States. Vessels 
in this category are not eligible for war risk insurance interim 
binders.


Sec.  308.2  Requirements for eligible vessels.

    (a) Restrictions--foreign-flag vessels. Interim insurance is 
available on any vessel described in Sec.  308.1(a) and (b), provided 
application for interim insurance is submitted as required in subparts 
B, C, or D of this part 308, and the Maritime Administrator approves 
said application: Provided, that only vessels of Panamanian, Honduran, 
Bahamian, Republic of the Marshall Islands or Liberian registry not 
more than 20 years old will be considered eligible under Sec.  308.1 
(b) for interim insurance, subject at all times to the determination 
specified in paragraph (b) of this section.
    (b) Special rules--foreign-flag vessels. For the purpose of 
providing interim insurance on vessels described in Sec.  308.1(b), the 
Maritime Administrator shall consider the characteristics, employment, 
and general management of the vessel. The Maritime Administrator 
formally determines that the following vessels are engaged in a service 
in the interest of the national defense or the national economy of the 
United States and qualify for an interim binder:
    (1) Vessels substantially engaged in the foreign commerce of the 
United States or which would be required in the event of war or 
national emergency;
    (2) Tankers of not less than 2,000 deadweight tons;
    (3) Dry cargo vessels, including containerships, break-bulk, and 
dry bulk vessels;
    (4) Heavy lift vessels;
    (5) Refrigerated vessels and other classes of ships in short supply 
in the United States-flag fleet;
    (6) Passenger vessels; and
    (7) Other vessels with special capabilities, as determined by the 
Maritime Administrator.
    (c) Vessel Position Reports. All vessels for which war risk 
insurance interim binders have been issued shall file a Vessel Position 
Report. The purpose of this report is to inform U.S. agencies of vessel 
arrivals, departures, and at-sea locations. Failure to make required 
regular reports will cause MARAD to issue a one-time notice of default. 
If failure to report continues, MARAD shall cancel the interim binder 
for the subject vessel and any insurance attaching thereunder. MARAD 
will issue reporting instructions and formats with the binders.
    (d) Notice of change in status of vessel after binder issued. Any 
breach of the warranty prescribed hereunder as to vessels in all 
categories with respect to Department of Commerce Transportation Order 
T-1 (44 CFR Parts 401 and 402), as well as the additional warranties as 
to vessels in categories (b)(1) and (b)(2) of this section, with 
respect to maintenance of eligibility for insurance and availability of 
the insured vessels to the U.S. Government in time of emergency, shall 
terminate the binders and any insurance attaching thereunder. In the 
event of the sale, demise charter, requisition, confiscation, change of 
flag, total loss, or any other change in status which, by the terms of 
the binder causes the binder to terminate, prompt notice shall be given 
in writing to MARAD's underwriting agent and to MARAD at: Division of 
Marine Insurance, Maritime Administration, Department of 
Transportation, 1200 New Jersey Avenue SE., MAR-712, Washington, DC 
20950.
    (e) Nature of change in status of other vessels. It is the 
intention of the parties that any breach of the warranty as to 
operation in the approved service of vessels described in Sec.  
308.1(c) shall terminate the insurance. In the event of the sale, 
demise charter, requisition, confiscation, change of flag, total loss, 
any other change in status or change in operation of the vessel in the 
approved service prompt notice shall be given to MARAD's underwriting 
agent MARAD's underwriting agent and to MARAD at the address in 
paragraph (d) of this section.


Sec.  308.3  Applications for insurance; warranties; supporting 
documents; payment of binder fees.

    (a) Application, binder forms. A single application for War Risk 
Insurance shall be filed on Form MA-528, specifying the types of 
insurance coverages for which the applicant is applying. A single 
application may be submitted for several vessels, if the application 
identifies each vessel to be insured and the coverage(s) required, by 
completing appendices A and B to that form. An interim binder for war 
risk insurance coverage, of the types described in subparts B, C and D 
of this part, shall be on Form MA-942, which may be obtained from the 
MARAD's underwriting agent or from MARAD.
    (b) Warranties--
    (1) In general. Applications for war risk hull and protection and 
indemnity insurance in any eligible category of this Part 308 shall 
include a warranty that, at all times during the effective period of 
the binder and any insurance

[[Page 17900]]

attaching thereunder, the insured vessel, regardless of its nation of 
registry, will comply with Department of Commerce Transportation Order 
T-1 (44 CFR Parts 401 and 402), or any modifications thereof so long as 
it remains in force and that the vessel will not be chartered, unless 
in accordance with the provisions of Sec. Sec.  221.11 and 221.13 of 
this chapter, which requirement is applicable to any charter in 
existence at the time the applicant applies for insurance.
    (2) Vessels described in Sec.  308.1(a). Applications for war risk 
insurance on a vessel described in Sec.  308.1(a) shall contain the 
warranty that at, and from the date of issuance of the interim binder, 
and for and during the term of any insurance attaching thereunder, such 
vessel will remain eligible within its category.
    (3) Vessels described in Sec.  308.1(b). Applications for war risk 
insurance on a vessel described in Sec.  308.1(b) shall contain the 
warranties that at all times the vessel will remain eligible within its 
applicable category; that the vessel will be made available for use by 
the United States pursuant to the signed Contract of Commitment 
submitted with the insurance applications, as required by MARAD; that 
the vessel will remain in the approved service; and that no controlling 
interest in the vessel shall be transferred by a subsequent sale or 
long-term charter, except on the condition that the successor in 
interest agrees to be bound by the terms of the applicant's Contract of 
Commitment. All instruments transferring any controlling interest in 
the vessel, including long-term charter or merger agreements, shall be 
submitted to MARAD for prior approval.
    (4) Vessels described in Sec.  308.1(c). Applications for war risk 
insurance on a vessel described in Sec.  308.1(c) shall contain 
warranties that the vessel will remain in the approved service and that 
any change in flag or service will be reported in advance to MARAD for 
a new determination as to whether the vessel's service is in the 
interest of the national defense or the national economy of the United 
States. Vessels in this category are not eligible for war risk 
insurance interim binders.
    (5) Vessel locator filing requirements. Applications for insurance 
on vessels in all categories, except tugs and barges and vessels used 
exclusively in the fishing trade or industry, described in Sec.  
308.1(a), shall contain a warranty that at all times the vessel will 
file reports as required under the U.S. Coast Guard's Automated Mutual-
Assistance Vessel Rescue System (AMVER) as prescribed in Sec.  308.2(c) 
of this section.
    (c) Filing applications for insurance. All applications for 
insurance on a vessel shall be made to MARAD's underwriting agent and 
to MARAD at the address in Sec.  308.2(d).
    (d) Required submissions with--
    (1) In general. An application for insurance on a vessel described 
in Sec.  308.1(b) shall be accompanied by:
    (i) A contract of commitment, in the form prescribed in Sec.  
308.5. In the event the vessel is determined to be ineligible under the 
terms of this part 308, the applicant will be so advised and the 
executed contract of commitment and any official foreign government 
action or approval will be returned to the applicant by MARAD.
    (ii) An executed agreement contained in the application for 
insurance that any charter or other contract covering the use of the 
vessel during the period of the binder or any insurance attaching 
thereunder shall be subject to termination or suspension without notice 
in the event the United States requires the use of the vessel under the 
voluntary contract of commitment submitted by the applicant.
    (2) Certification of citizenship. An application for insurance on 
such a vessel shall be supported by execution of the citizenship 
certification, in the format set out in appendix C to Form MA-528, as 
described in paragraph (a) of this section. That certification shall be 
required to establish the U.S. citizenship of the majority ownership 
and control of the vessel-owning corporation, whether that ownership is 
direct or through intervening corporations.
    (3) Existing long-term charters. An application for a vessel in 
this category which is at the time of application under long-term 
charter or other long-term contract, either to the applicant or from 
the applicant to a third party, shall be jointly submitted by the owner 
and the charterer, and in addition to the other materials required 
under this paragraph, shall be accompanied by a copy of the long-term 
contract covering the use of the vessel and all addenda thereto, 
certified to be full and complete copies (except as to rate of hire or 
freight) and a completed appendix C to Form MA-528, establishing the 
U.S. citizenship of the majority of the shareholders and control of the 
charterer. The charterer shall also furnish to MARAD a certified copy 
of any amendment to such charter which may be issued subsequent to the 
issuance of any binder of insurance under this part 308.
    (4) Foreign government action or approval. An application for a 
vessel in this category also shall be accompanied by a certified copy 
of the evidence of any official action or approval required by the 
government of the country of registry as a prerequisite to the 
execution of a contract of commitment with the United States.
    (5) Additional materials. With respect to a vessel in this 
category, the applicant shall submit the following additional 
materials:
    (i) A statement describing the service in which the vessel is 
engaged, including a listing of the vessel's voyages and ports of call 
during the immediately preceding six (6) month period, indicating the 
tonnage and type of cargo carried on such voyages and the reasons why 
such service should be deemed to be in the interest of the national 
defense or the national economy of the United States;
    (ii) Material demonstrating the management and financial 
capabilities of the applicant; and
    (iii) In the case of a new vessel or a vessel which has not for the 
six (6) months immediately prior to the date of the application been 
engaged in the foreign commerce of the United States, a statement, 
signed by a responsible company official, certifying the extent to 
which the vessel will be engaged in the foreign commerce of the United 
States for the six (6) months immediately following the issuance of any 
interim binder of insurance under this part 308.
    (e) Requests for changes in binders. All requests for changes in 
binders and inquiries relative to the insurance after the interim 
binders have been issued shall be directed to MARAD's underwriting 
agent or MARAD at the address in Sec.  308.2(d).
    (f) Fees. A check payable in U.S. funds to the ``Maritime 
Administration, Department of Transportation'' for the total amount of 
all binder fees payable by such applicant shall accompany each 
application. Binder fees are not returnable.
    (g) Availability of Application Forms. Form MA-528 may be obtained 
from either MARAD's underwriting agent or MARAD at the address in Sec.  
308.2 (d).


Sec.  308.4  [Reserved]


Sec.  308.5  Voluntary contract of commitment.

    Applications for insurance on vessels described in Sec.  308.1(b) 
shall be accompanied by a contract of commitment, in triplicate 
originals, executed by the owner (or by the owner and the charterer 
where required by Sec.  308.3). Contracts of commitment to make the 
vessel available to the United States during any period in which 
vessels may be requisitioned under 46 U.S.C. Chapter 563 shall be 
submitted

[[Page 17901]]

on standard contract form which may be obtained from MARAD's 
underwriting agent or MARAD. The effective date of the contract of 
commitment will be the effective date of the binder and will be 
inserted in the contract of commitment by MARAD.


Sec.  308.6  Period of interim binders, updating application 
information and new applications.

    (a) All existing interim binders remain in full force and effect 
without the necessity of re-application or the payment of additional 
fees so long as the Secretary of Transportation's authority to provide 
such insurance has been extended and is continuous.
    (b) Assureds under interim binders are required to notify MARAD's 
underwriting agent annually, by June 30th, of any change in the 
information provided in their original binder applications including, 
but not limited to, change of address, vessel name or vessel 
characteristics.
    (c) New applications for interim binders on American vessels, with 
necessary attachments (as specified in Sec.  308.3), as well as checks 
for the binder fees prescribed made payable to ``Maritime 
Administration, Department of Transportation,'' shall be filed with the 
MARAD's underwriting agent. All interim binders on American vessels 
shall become effective as of the date of determination of eligibility 
by MARAD.
    (d) New applications for interim binders on U.S. citizen-owned or 
controlled foreign-flag vessels, with necessary attachments (as 
specified in Sec.  308.3), as well as checks for the binder fees 
prescribed made payable to ``Maritime Administration, Department of 
Transportation,'' shall be filed for review in accordance with 
eligibility requirements specified in Sec.  308.2, and mailed to 
MARAD's underwriting agent. All interim binders on foreign-flag vessels 
will become effective on the date the owner's contract of commitment is 
executed by MARAD.


Sec.  308.7  Premiums and payment thereof.

    Rate to be fixed promptly upon the happening of the event causing 
the American Institute Hull War Risks and Strikes Clauses dated 
December 1, 1977 (including Automatic Termination and Cancellation 
Provisions) for attachment to American Institute Hull Clauses dated 
June 2, 1977 of any war risk policies to become operative and premium 
shall be payable within ten (10) days after receipt of notice of the 
amount thereof by the assured. Premiums shall be paid to the 
Underwriting Agent that issued the binders by check payable to the 
order of ``Maritime Administration, Department of Transportation.'' In 
the event that it is subsequently determined that insurance under 
interim binders did not attach, premiums paid will be refunded by the 
Maritime Administrator.


Sec.  308.8  War risk insurance underwriting agency agreement.

    Standard form MA-355, Underwriting Agency Agreement, shall be 
executed by the Maritime Administrator and domestic insurance companies 
or groups of domestic insurance companies authorized to do a marine 
insurance business in any States of the United States, appointing such 
companies or groups of companies as Underwriting Agents to issue 
binders and policies covering hull, protection and indemnity, and 
Second Seamen's war risk insurance under subparts B, C, and D of this 
part. It shall contain provisions including, but not limited to the 
appointment of the agent, duties of the agent, books and records, 
compensation, standard of performance, indemnification effective date, 
amendment and termination, and nondiscrimination.

Subpart B--War Risk Hull and Disbursements Insurance


Sec.  308.100  Insured amount.

    An applicant for war risk hull insurance shall state the amount of 
insurance desired but any payment of claim for damage to or actual or 
constructive total loss of the vessel insured shall be made as provided 
in Sec.  308.103(a). An applicant desiring disbursements insurance may 
at his option obtain such additional insurance but any claim for loss 
of disbursements as a consequence of the actual or constructive total 
loss of the vessel insured shall be made as provided in Sec.  
308.103(c).


Sec.  308.101  [Reserved]


Sec.  308.102  Issuance of interim binder; terms and conditions; fees.

    Upon acceptance of an application, an interim binder in the form 
set forth in Sec.  308.106, will be issued and there shall be deemed to 
be incorporated therein by references all the terms, conditions, and 
warranties contained in the application for war risk hull and 
disbursements insurance and the standard war risk hull insurance policy 
(set forth in Sec.  308.107), to the same extent as if such application 
and policy were made a part of the binder. The binder fee (not 
refundable) for American vessels shall be $25 per application for 
vessels under 500 gross tons; $100 per application for vessels 500 
gross tons or over; and $100 per barge application. The binder fee (not 
refundable) for foreign-flag vessels shall be $50 per application for 
vessels under 500 gross tons; $200 per application for vessels 500 tons 
or over; and $200 per barge application. All fees are payable in U.S. 
funds by check to order of ``Maritime Administration, Department of 
Transportation.''


Sec.  308.103  Insured amounts under interim binder.

    (a) Valuation. The valuation in the policy for damage to, or actual 
or constructive total loss of the vessel insured shall be a stated 
valuation (exclusive of National Defense features paid for by the 
Government) determined by the Maritime Administrator which shall not 
exceed the amount that would be payable if the vessel had been 
requisitioned for title under 46 U.S.C. Chapter 563 at the time of the 
attachment of the insurance under said policy: Provided, however, that 
in the case of a construction subsidized vessel, for the period of 
insurance prior to requisition for title or use, the valuation so 
determined shall be reduced by such proportion as the amount of 
construction subsidy paid with respect to the vessel bears to the 
entire construction cost and capital improvements thereof (excluding 
the cost of national defense features), and for the period of insurance 
after requisition for use the valuation so determined shall not exceed 
the amount which would be payable under 46 U.S.C. 56303 in the case of 
requisition for title or use: Provided, further, that the insured shall 
have the right within sixty (60) days after the attachment of the 
insurance under said policy, or within sixty (60) days after 
determination of such valuation by the Maritime Administrator, 
whichever is later, to reject such valuation, and shall pay, at the 
rate provided for in said policy, premiums upon such asserted valuation 
as the insured shall specify at the time of rejection, but such 
asserted valuation shall not operate to the prejudice of the Government 
in any subsequent action on the policy. In the event of the actual or 
constructive total loss of the vessel, if the insured has not rejected 
such valuation the amount of any claim therefor which is adjusted, 
compromised, settled, adjudged, or paid shall not exceed such stated 
amount, but if the insured has so rejected such valuation, the insured 
shall be paid as a tentative advance only, 75 per centum of such 
valuation so determined by the Maritime Administrator and shall be 
entitled to sue the United States in a court having jurisdiction of 
such claims to recover such valuation as would be

[[Page 17902]]

equal to the just compensation which such court determines would have 
been payable if the vessel had been requisitioned for title under 46 
U.S.C. Chapter 563 at the time of the attachment of the insurance under 
said policy: Provided, however, that in the case of a construction-
subsidized vessel, the valuation determined by the court as such just 
compensation for any period of insurance prior to actual requisition 
for title or use of the vessel shall be reduced by such proportion as 
the amount of construction subsidy paid with respect to the vessel 
bears to the entire construction cost and capital improvements thereof 
(excluding the cost of national defense features), and for any period 
of insurance after actual requisition for use, the valuation determined 
by the court shall be the amount which would have been payable under 46 
U.S.C. 56303 in the case of requisition for title: And provided 
further, that in the event of an election by the insured to reject the 
stated valuation fixed by the Maritime Administrator and to sue in the 
courts, the amount of the judgment will be payable without regard to 
any limitations provided by statute, although the excess of any amounts 
advanced on account of just compensation that is over the amount of the 
court judgment shall be required to be refunded by the insured. In the 
event of such court determination, premiums under the policy shall be 
adjusted on the basis of the valuation as finally determined and of the 
rate provided for in said policy. The ``stated valuation'' of the 
vessel insured refers to the vessel as described in Sec.  309.5 of this 
chapter.
    (b) Insurance risks. Insurance risks covered by the terms of the 
standard form of war risk hull insurance policy (Sec.  308.107), except 
damage to or actual or constructive total loss of the vessel insured as 
set forth in paragraph (a) of this section and loss of disbursements 
(limited to consumable and subsistence stores, slop chests, bar stock 
and bunker fuel lost as a consequence of the actual or constructive 
total loss of the vessel insured) as set forth in paragraph (c) of this 
section and identified as disbursements, shall be insured for an amount 
not in excess of the ``sum insured'' as referred to in said policy.
    (c) Disbursements. Disbursements shall be insured as authorized 
under 46 U.S.C. 53903(a)(4) and shall be limited to consumable and 
subsistence stores, slop chests, bar stock and bunker fuel. 
Disbursements insurance shall be optional and is insurance additional 
to the war risk hull insurance provided under this subpart, and payment 
of claim shall be limited to the actual value of the disbursements lost 
as a consequence of the actual or constructive total loss of the vessel 
insured.


Sec.  308.104  Additional war risk insurance.

    Owners or charterers may obtain, on an excess basis, additional war 
risk insurance in such amounts as desired and such insurance shall not 
inure to the benefit of the Maritime Administrator as underwriter.


Sec.  308.105  Reporting casualties and filing claims.

    All casualties occurring after insurance under a binder has 
attached shall be reported promptly to the underwriting agent that 
issued the binder and all claim documents shall likewise be filed with 
such underwriting agent, but payment of the amounts due in settlement 
of claims will be made by the Maritime Administrator.


Sec.  308.106  [Reserved]


Sec.  308.107  War risk hull insurance policy.

    Standard Form MA-240, issued by the Maritime Administrator, acting 
for the United States, through authority delegated by the Secretary of 
Transportation, may be obtained from MARAD's underwriting agent or 
MARAD.

Subpart C--War Risk Protection and Indemnity Insurance


Sec.  308.200  Insured amount--application.

    An applicant for war risk protection and indemnity insurance shall 
state the amount of insurance desired but such amount shall not exceed 
$750 per gross ton of the Vessel.


Sec.  308.201  [Reserved]


Sec.  308.202  Issuance of interim binder; terms and conditions.

    Upon acceptance of an application, an interim binder in form as set 
forth in Sec.  308.3 will be issued and there shall be deemed to be 
incorporated therein by reference all the terms, conditions, and 
warranties contained in the application for war risk protection and 
indemnity insurance (set forth in Sec.  308.3) and the standard war 
risk protection and indemnity insurance policy (set forth in Sec.  
308.207) to the same extent as if such application and policy were made 
a part of the binder. The binder fee (not refundable) shall be $100 per 
application for American barges; $25 per application for all other 
American vessels; $200 per application for foreign-flag barges; and $50 
per application for all other foreign-flag vessels. All fees are 
payable in U.S. funds by check to the order of ``Maritime 
Administration, Department of Transportation.''


Sec.  308.203  Amount insured under interim binder.

    The amount insured shall be the amount stated in the application, 
but not in excess of $750 per gross ton of the vessel.


Sec.  308.204  Additional war risk protection and indemnity insurance.

    Owners or charterers may obtain, on an excess basis, additional war 
risk protection and indemnity insurance in such amounts as desired and 
such insurance shall not inure to the benefit of the Maritime 
Administrator, as underwriter.


Sec.  308.205  Reporting casualties and filing claims.

    All casualties occurring after insurance under a binder has 
attached shall be reported promptly to, and all claim documents filed 
with ``Office of Marine Insurance, Maritime Administration, Department 
of Transportation.''


Sec.  308.206  [Reserved]


Sec.  308.207  War risk protection and indemnity insurance policy.

    The standard form of war risk protection and indemnity insurance 
policy, Form MA-241, may be obtained from MARAD's underwriting agent or 
MARAD.

Subpart D--Second Seamen's War Risk Insurance


Sec.  308.300  Insured amount--application.

    An applicant for Second Seamen's war risk insurance shall not state 
the amount of insurance desired, which shall be as provided in Sec.  
308.303.


Sec.  308.301  [Reserved]


Sec.  308.302  Issuance of interim binder; terms and conditions.

    Upon acceptance of an application, an interim binder in form as set 
forth in Sec.  308.3 will be issued and there shall be deemed to be 
incorporated therein by reference all the terms, conditions, and 
warranties contained in the application for Second Seamen's war risk 
insurance (set forth in Sec.  308.3) and the Second Seamen's War Risk 
Policy (1955) (set forth in Sec.  308.306) to the same extent as if 
such application and policy were made a part of the binder. The binder 
fee (not refundable) shall be $75 per application for American vessels 
and $150 per application for foreign-flag vessels. All fees are payable 
in U.S. funds by check to the order of ``Maritime Administration, 
Department of Transportation.''

[[Page 17903]]

Sec.  308.303  Amounts insured under interim binder.

    The amounts insured are the amounts specified in the Second 
Seamen's War Risk Policy (1955) or as modified by shipping articles, 
collective bargaining agreements or other applicable employment 
agreements which are in effect as of the date of a casualty involving 
the subject vessel. Upon the attachment of this binder, the number of 
crew members and modified benefits payable as of that date shall be 
declared immediately to the Underwriting Agent that issued the binder. 
Any subsequent changes shall be likewise declared.


Sec.  308.304  Reporting casualties and filing claims.

    All casualties occurring after insurance under a binder has 
attached shall be reported promptly to, and all claim documents filed 
with, ``Maritime Administration, Attention: Chief, Office of Marine 
Insurance.''


Sec.  308.305  [Reserved]


Sec.  308.306  Second Seamen's War Risk Policy, Form MA-242.

    The standard form of Second Seamen's War Risk Policy Form MA-242, 
may be obtained from MARAD's underwriting agent or MARAD.

Subpart E--War Risk Builder's Risk Insurance


Sec.  308.400  Authority.

    The Secretary of Transportation has delegated authority to the 
Maritime Administrator to perform the functions vested in the Secretary 
of Transportation by 46 U.S.C. Chapter 539. The Maritime Administrator, 
pursuant to a finding by the Secretary under 46 U.S.C. 53902(a) has 
authorized the issuance of war risk insurance on American vessels under 
construction in shipyards in the United States.


Sec.  308.401  Eligibility for insurance.

    A vessel is eligible for insurance if it is an American vessel, as 
defined in 46 U.S.C. 53901, being constructed in a shipyard within the 
United States.


Sec.  308.402  Insurance during vessel construction period.

    (a) Prelaunching period. This period is from the date and time the 
first material destined for inclusion as part of the vessel becomes at 
risk at the shipyard of the builder to the date and time the vessel 
first becomes water-borne after launching.
    (b) Postlaunching period. This period is from the date and time the 
vessel first becomes water-borne after launching to the date and time 
of delivery of the vessel by the builder.
    (c) Portions of periods. A vessel may be insured for a portion of 
either period as cited in paragraph (a) or (b) of this section at the 
sole discretion of the Maritime Administrator.


Sec.  308.403  Insured amounts.

    (a) Prelaunching period. The amount insured during this period will 
be the cost of material destined for inclusion as a part of the vessel 
at risk at the shipyard of the builder, plus the cost of labor, other 
direct charges, overhead, and profit not exceeding 10 percent, all as 
determined from the builder's records.
    (b) Postlaunching period. The amount insured during this period 
will be:
    (1) An amount not in excess of the difference in amount between the 
total amount of war risk insurance obtainable from companies authorized 
to do an insurance business in a State of the United States and the 
contract price of the vessel plus the cost of the materials and 
equipment furnished by the owner and not included in such contract 
price, or
    (2) An amount not in excess of the contract price of the vessel 
plus the cost of materials and equipment furnished by the owner and not 
included in the contract price: Provided, that no war risk insurance is 
obtainable from companies authorized to do an insurance business in a 
State of the United States.
    (c) Maximum liability. The amount of any claim for damage to or the 
total or constructive total loss of the vessel adjusted, compromised, 
settled, adjudged or paid shall not exceed the amount insured: 
Provided, that the amount payable hereunder shall not exceed the 
maximum sum which the Maritime Administrator, as Underwriter, is 
authorized to pay under any applicable Acts of Congress: Provided, 
further, that where MARAD is an Excess Underwriter, the amount payable 
under this insurance for damage to or the total or constructive total 
loss of the vessel, after all sums due and payable under primary and 
excess insurance written by commercial Underwriters have been 
exhausted, shall be the balance, if any, of said claims.


Sec.  308.404  Application for insurance.

    Application for insurance shall be made to ``Maritime 
Administration, Attention: Chief, Division of Marine Insurance'' at the 
address in Sec.  308.2(d). The applications shall be signed by all 
parties to be named as assureds, unless they have filed with the Chief, 
Division of Marine Insurance, written designations of a broker or 
brokers to act for them, in which case the applications may be signed 
by such broker or brokers.


Sec.  308.405  Form of application.

    Applications shall be submitted in duplicate and may be obtained 
from MARAD's underwriting agent or MARAD.


Sec.  308.406  Issuance of policies; terms and conditions.

    Upon acceptance of an application, a policy in the form specified 
in Sec.  308.409 will be issued with endorsements MA-283(A) and MA-
283(D), or MA-283(B) and MA-283(D), or MA-283(C), and MA-283(D), as 
appropriate.


Sec.  308.407  Premiums and payment.

    For the prelaunching period premium will be charged on the average 
value at risk during each calendar month or the daily pro rata part 
thereof for periods of less than one calendar month. For the 
postlaunching period premium will be charged on the amount insured for 
the full period. Premiums shall be due and payable within thirty days 
after receipt by the Assured of notice of the amount thereof and if not 
paid within that period the insurance shall become null and void and of 
no effect from the beginning of the period for which the premium charge 
is made unless the Maritime Administrator agrees otherwise. Payment 
shall be made to MARAD at the address in Sec.  308.2(d), by check 
payable to the order of ``Maritime Administration, Department of 
Transportation.''


Sec.  308.408  Right of Maritime Administrator to change rate of 
premium.

    The Maritime Administrator, acting for the Secretary of 
Transportation, shall have the right to change the rate of premium at 
any time, and unless the revised rate of premium is accepted in writing 
by the Assured within fifteen (15) days after receipt by the Assured of 
notice of the revised rate, the policy shall become null and void and 
of no effect as of midnight, Standard Time, at the location of the 
shipyard on the fifteenth (15th) day after receipt of said notice. 
Premium at the revised rate shall be payable for the fifteen (15) day 
period during which the insurance remained in force unless the Assured, 
within such period, dispatches notice to MARAD by fax, certified mail 
or courier of his refusal to accept such revised rate of premium, in 
which event premium at the revised rate shall be payable for that 
portion of the fifteen (15) day period prior to dispatch of such 
notice. Upon the dispatch of such notice of non-acceptance the 
insurance shall terminate.

[[Page 17904]]

Sec.  308.409  Standard form of War Risk Builder's Risk Insurance 
Policy, Form MA-283.

    The standard form of War Risk Builder's Risk Insurance Policy, Form 
MA-283 may be obtained from MARAD's underwriting agent or MARAD.


Sec.  308.410  Reporting casualties and filing claims.

    Casualties shall be reported promptly to, and all claims documents 
filed with MARAD, Attention: Chief, Division of Marine Insurance, at 
the address in Sec.  308.2(d).

Subpart F--War Risk Cargo Insurance

Introduction


Sec.  308.500  Authority.

    The Secretary of Transportation has delegated authority to the 
Maritime Administrator to perform the functions vested in the Secretary 
by 46 U.S.C. Chapter 539, which authority includes the insurance set 
forth in this Subpart, as provided under 46 U.S.C. 53903(a)(3). For the 
purposes of this Subpart F--War Risk Cargo Insurance, the terms 
``cargo'' and ``cargoes'' as used herein shall include loaded or empty 
containers located aboard American and foreign-flag vessels insured 
under 46 U.S.C. Chapter 539. Cargo war risk insurance will be written 
under either an open policy or a facultative policy in accordance with 
the provisions of this subpart.


Sec.  308.501  Cargoes on which coverage is available.

    The Maritime Administrator will be prepared to provide marine 
insurance against loss or damage by the risks of war under approved 
clauses on shipments of cargoes coming within one or more of the 
following categories:
    (a) Shipped or to be shipped on any American vessel, as defined in 
46 U.S.C. 53901;
    (b) Shipped or to be shipped on any foreign flag vessels owned by 
citizens of the United States;
    (c) Owned by citizens or residents of the United States, its 
Territories or possessions;
    (d) Imported to, or exported from, the United States, its 
Territories or possessions, under contracts of sale or purchase by the 
terms of which the risk of loss by war risks or the obligation to 
provide insurance against such risks is assumed by or falls upon a 
citizen or resident of the United States, its Territories or 
possessions;
    (e) Sold or purchased by citizens or residents of the United 
States, its Territories or possessions, under contracts of sale or 
purchase by the terms of which the risk of loss by war risks or the 
obligation to provide insurance against such risks is assumed by or 
falls upon a citizen or resident of the United States, its Territories 
or possessions;
    (f) Shipped between ports in the United States, or between ports in 
the United States and its Territories and possessions, or between ports 
in such Territories or possessions; and
    (g) Shipped or to be shipped on any foreign flag vessels, whether 
or not owned by citizens of the United States, if such vessels are 
engaged in transportation in the water-borne commerce of the United 
States or in such other transportation by water or such other services 
as may be deemed by the Maritime Administrator to be in the interest of 
the national defense or the national economy of the United States, when 
so engaged.


Sec.  308.502  Additional insurance.

    The assured may place increased value or additional insurance in 
other markets beyond the amount of insurance provided by the Maritime 
Administrator, but such insurance must be non-participating with the 
Maritime Administrator's coverage, and without benefit of salvage or 
right of contribution.


Sec.  308.503  Rate schedules.

    Rate schedules published by the Maritime Administrator may be 
obtained from an underwriting agent. All rate schedules are subject to 
change by the Maritime Administrator at any time without notice. If no 
rate is published for a voyage on which war risk coverage is available, 
the Maritime Administrator will name a rate through an underwriting 
agent upon application.


Sec.  308.504  Definition of territories and possessions.

    Whenever reference is made to the territories and possessions of 
the United States in this subpart or in any supplement thereto or any 
policy of insurance issued pursuant to the provisions thereof, said 
territories and possessions shall be deemed to include only the Virgin 
Islands of the United States, the Commonwealth of Puerto Rico, American 
Samoa, Commonwealth of the Northern Mariana Islands, Guam, Wake Island, 
Midway Islands, Baker Island, Howland Island, Jarvis Island, Johnston 
Atoll, Kingman Reef, Navassa Island, and Wake Island.

Open Policy War Risk Cargo Insurance


Sec.  308.505  General.

    The Maritime Administrator is prepared to provide an open cargo war 
risk insurance policy covering any cargoes described in Sec.  308.501. 
The policy will be in the standard form of War Risk Open Cargo Policy, 
Form MA-300, prescribed in Sec.  308.517. All policies will be issued 
by underwriting agents appointed by the Maritime Administrator. All 
underwriting agents will be domestic insurance companies authorized to 
do a marine insurance business in a State of the United States.


Sec.  308.506  Application for an Open Cargo Policy.

    Application for an Open Cargo Policy shall be made by filing Form 
MA-301, prescribed in Sec.  308.521, with the underwriting agent of 
MARAD. The application shall state the applicant's name and address; 
the person or persons to whom loss shall be payable; the nature and 
geographic scope of the shipments to be covered under the policy which 
shall not be broader than the coverage authorized in Sec.  308.501; the 
requested effective date, which shall not be earlier than the date of 
the completion of the requirements for the issuance of the policy; and 
the basis of valuation to be incorporated in the policy. An applicant 
may specify one basis of valuation for imports and another for exports, 
and he may specify different bases of valuation for different 
commodities or voyages, provided that each basis of valuation specified 
by the applicant shall define the value by the use of facts which 
existed prior to the date of the shipment and which are readily 
ascertainable by either party after the safe arrival or loss of the 
shipment.


Sec.  308.507  Security for payment of premiums.

    Clause 21 of the policy requires the assured to maintain with the 
Maritime Administrator a collateral deposit fund or a surety bond, to 
secure the payment of the premiums, in an amount which shall at all 
times exceed the unpaid premiums on all risks which have attached under 
the policy. The minimum amount of the fund or of the surety bond shall 
be $1,000. Clause 21 also provides that, within seven (7) days from the 
time knowledge comes to the assured that the amount of the deposit or 
the surety bond is insufficient to meet the requirements of Clause 21, 
the assured shall deposit additional collateral or increase the surety 
bond in an amount not less than double the amount of such 
insufficiency, and for a

[[Page 17905]]

sum which shall be a multiple of $500. If the assured fails to increase 
the deposit or the surety bond within the seven (7) day period, the 
policy automatically becomes void at the end of the seven (7) day 
period except as to risks which have attached prior to that date. The 
procedure for establishing a collateral deposit fund is prescribed in 
Sec.  308.509, and the procedure for posting and maintaining a surety 
bond is prescribed in Sec.  308.510. An application for the issuance of 
an open cargo policy shall be ineffective unless a collateral deposit 
fund is established and maintained, or a surety bond is posted and 
maintained, in accordance with the provisions of this section and Sec.  
308.510.


Sec.  308.508  Issuance of an Open Cargo Policy.

    (a) Time. The underwriting agent will issue an Open Cargo Policy 
within fifteen (15) days after the completion by the applicant of the 
requirements set forth in Sec. Sec.  308.506 and 308.507 unless the 
time for issuance is extended by the Maritime Administrator in writing. 
The underwriting agent may not make any Open Cargo Policy effective 
with respect to shipments attaching on a date earlier than the date 
when the application was completed, but he may make it effective on the 
date of the completion of the application or any date thereafter 
requested by the applicant.
    (b) Numbering. Each Open Cargo Policy supplied to the underwriting 
agent by the Maritime Administrator shall be numbered by MARAD before 
it is supplied to the underwriting agent. No two numbers shall be the 
same. The underwriting agent when issuing the policy shall add at the 
end of the policy number the agency number assigned to that 
underwriting agent, and where policies are issued by more than one 
office of an underwriting agent, the issuing office shall also be 
identified in the policy number. For example, policies issued by an 
office in New York will be designated by ``NY'' and policies issued in 
San Francisco will be designated by ``SF'' prefixed to the underwriting 
agent's agency number.


Sec.  308.509  Collateral deposit fund.

    (a) Requirements. An assured electing to use a cash collateral 
deposit fund pursuant to Sec.  308.507 shall comply with the provisions 
of this section and Clause 21 of the Open Cargo Policy, Form MA-300, 
prescribed in Sec.  308.517.
    (b) Cash or Government bonds. To establish a collateral deposit 
fund the applicant shall deposit with the underwriting agent a check 
payable to the order of the ``Maritime Administration, Department of 
Transportation'' for the amount of the fund, or United States 
Government bonds having a par value at the time of deposit of the 
amount of the fund, which shall be a multiple of $500 but not less than 
$1,000, together with a letter of transmittal executed by the applicant 
on Form MA-302, prescribed in Sec.  308.522. Upon receipt of the 
deposit, the underwriting agent shall assign it a serial number and 
transmit it to ``Maritime Administration, Attention: Chief Financial 
Officer, Maritime Administration''. It is the responsibility of the 
assured to make sure that this deposit fund is sufficient at all times 
to cover the premiums payable on all risks which have attached under 
the policy, so as to prevent the termination of the insurance under the 
provisions of Clause 21.
    (c) Overdue premiums. Pursuant to Clause 20, if the assured fails 
to pay any premium when it becomes due and payable, he thereby breaches 
the policy and it automatically ceases to insure any shipments which 
would otherwise have attached after the expiration of fifteen (15) days 
following the due date of the premium, unless within the fifteen (15) 
day period the premium has been paid and the assured has otherwise 
complied with the requirements of the policy, including the filing of 
the closing report required by Clause 19 and the payment of the 
reinstatement fee of $25 required by Clause 20. If the assured fails to 
pay the premium within the fifteen (15) day period, the Maritime 
Administrator may deduct from the assured's collateral deposit fund all 
amounts due.
    (d) Increase in amount of collateral as required by Clause 21. If 
the assured fails to deposit additional collateral in the fund within 
seven (7) days from the time knowledge comes to the assured that the 
amount of collateral is insufficient to meet the requirements of Clause 
21, the policy shall be void except as to risks which have attached 
prior to the expiration of the seven (7) day period.
    (e) Changes in amount of collateral. The assured may increase or 
decrease the amount of the collateral deposit fund by amounts of not 
less than $500 or multiples thereof, provided that the amount of the 
fund shall not be less than the amount required by Clause 21, or the 
required minimum of $1,000, whichever is greater. The effect of any 
change in the amount of the collateral deposit shall be the sole 
responsibility of the assured, and the permission granted by this 
paragraph to change the amount of collateral in the fund shall in no 
manner relieve the assured of the responsibility imposed by Clause 21.
    (f) Increase of collateral. To increase the amount of the 
collateral on deposit in the fund, the assured shall transmit to the 
underwriting agent on Form MA-302, prescribed in Sec.  308.522, a check 
payable to the order of ``Maritime Administration, Department of 
Transportation'' or United States Government bonds having a par value 
at the time of deposit of not less than the amount of the requested 
increase. The increase shall become effective upon the date of the 
receipt of the application and check or bonds by the underwriting 
agent, as shown on Form MA-302.
    (g) Decrease of collateral. To decrease the collateral deposit 
fund, the assured shall file with the underwriting agent an application 
on Form MA-305, prescribed in Sec.  308.525. The decrease shall become 
effective upon the date of the receipt of the application by the 
underwriting agent as shown on Form MA-305.
    (h) Refund of collateral. Whenever the assured becomes entitled to 
a refund of the collateral deposit, in whole or in part, by reason of a 
request for a partial return of such collateral, or the cancellation of 
the policy and the payment in full of all premiums then or thereafter 
due, or the waiver by the Maritime Administrator of the requirements of 
maintaining the collateral deposit fund because the assured is a 
department or agency of the United States or is acting on behalf of 
such a department or agency, or the substitution of a surety bond in 
the place and stead of the collateral deposit fund, as provided in 
Sec.  308.510(j), the Maritime Administrator will refund to the assured 
the amount of the collateral deposit to which the assured is entitled; 
provided, however, that the repayment of such collateral shall not be 
made by the Maritime Administrator until the assured has filed a 
closing report and paid in full all premiums with respect to all 
shipments which had attached at the time of the receipt by the 
underwriting agent of the application for the refund, Form MA-305, and 
a certificate executed in duplicate on Form MA-306, prescribed in Sec.  
308.526, and, in the event of the substitution of a surety bond for the 
collateral deposit fund, the receipt by the underwriting agent of the 
surety bond properly executed, in accordance with Sec.  308.510.


Sec.  308.510  Surety bond.

    (a) Requirements. An assured electing to post a surety bond 
pursuant to Sec.  308.507 shall comply with the provisions of this 
section and Clause 21 of the Open Cargo Policy, Form MA-300, prescribed 
in Sec.  308.517.

[[Page 17906]]

    (b) Amount of bond. An applicant who wishes to post a surety bond 
shall deliver to the underwriting agent a surety bond on Form MA-308, 
prescribed in Sec.  308.528, executed by the assured as principal, and 
by the surety, in such amount as the assured determines to be necessary 
to comply with Clause 21. Such amount shall be a multiple of $500 but 
shall not be less than $1,000. Upon receipt of the surety bond, the 
underwriting agent shall assign a serial number to it and transmit it 
to ``Maritime Administration, Attention: Chief, Division of Marine 
Insurance.'' It shall be the responsibility of the assured to provide 
that the amount of the bond is sufficient at all times to cover the 
premium payable on all risks which have attached under the policy, so 
as to prevent the termination of the insurance under the provisions of 
Clause 21.
    (c) Surety. The sufficiency of the surety executing the bond shall 
be subject to approval by the Maritime Administrator. The underwriting 
agent may accept on behalf of the Maritime Administrator a surety bond 
executed by a surety named on the United States Treasury Department's 
approved list of sureties whose bonds are acceptable to the United 
States Treasury Department to secure obligations due the United States, 
provided the bond is within the maximum amount for which the surety is 
so authorized to write bonds as shown by the approved list.
    (d) Overdue premiums. Pursuant to Clause 20, if the assured fails 
to pay any premium when it becomes due and payable, he thereby breaches 
the policy and it automatically ceases to insure any shipments which 
would otherwise have attached after the expiration of fifteen (15) days 
following the due date of the premium, unless within the fifteen (15) 
day period the premium has been paid and the assured has otherwise 
complied with the requirements of the policy, including the filing of 
the closing report required by Clause 19 and the payment of the 
reinstatement fee of $25 required by Clause 20. If the assured fails to 
pay the premium within the fifteen (15) day period, all amounts due 
shall become a liability collectible under the surety bond and from the 
assured.
    (e) Increase in amount of bond as required by Clause 21. If the 
assured fails to increase the amount of the surety bond within seven 
(7) days from the time knowledge comes to the assured that the amount 
of the bond is insufficient to meet the requirements of Clause 21, the 
policy shall be void except as to risks which have attached prior to 
the expiration of the seven (7) day period.
    (f) Changes in amount of bond. The assured may increase or decrease 
the amount of the surety bond by amounts of not less than $500 or 
multiples thereof, provided that the amount of the bond shall not be 
less than the amount required by Clause 21, or the required minimum of 
$1,000, whichever is greater. The effect of any change in the amount of 
the bond shall be the sole responsibility of the assured, and the 
permission granted by this paragraph to change the amount of the bond 
shall in no manner relieve the assured of the responsibility imposed by 
Clause 21.
    (g) Increase in amount of bond. To increase the surety bond the 
assured shall transmit to the underwriting agent, on Form MA-310, 
prescribed in Sec.  308.530, an endorsement duly executed by the 
assured and the surety company on Form MA-311, prescribed in Sec.  
308.531. The increase shall become effective upon the date of the 
receipt of the endorsement by the underwriting agent as shown on Form 
MA-311.
    (h) Decrease in amount of bond. To decrease the amount of the bond, 
the assured shall transmit to the underwriting agent, on Form MA-310, 
prescribed in Sec.  308.530, an endorsement duly executed by the 
assured and the surety on Form MA-311, prescribed in Sec.  308.531. The 
decrease shall become effective upon the date of the receipt of the 
endorsement by the underwriting agent as shown on Form MA-311, except 
as to shipments which on that date are known or reported to the assured 
to be in transit and which have attached under the policy and upon 
which premium has not been paid in full.
    (i) Termination of bond. Whenever the assured becomes entitled to a 
termination of a surety bond by reason of the cancellation of the 
policy and the payment in full of all premiums then or thereafter due, 
or the waiver by the Maritime Administrator of the requirements of 
maintaining the surety bond by an assured which is a department or 
agency of the United States or is acting on behalf of such a department 
or agency, or the substitution of a collateral deposit fund in the 
place or stead of the surety bond, the underwriting agent shall execute 
a release on Form MA-312, prescribed in Sec.  308.532. The release 
shall be made effective as of:
    (1) The effective date of the cancellation of the policy when the 
bond is terminated for that reason, or
    (2) The date of the Maritime Administrator's directive waiving the 
requirement of a surety bond when the bond is terminated for that 
reason, or
    (3) The effective date of the establishment of a collateral deposit 
fund when the bond is terminated for that reason.
    (j) Substitution of bond for collateral deposit. An assured may 
substitute a surety bond for a collateral deposit fund by delivering to 
the underwriting agent a surety bond on Form MA-309, prescribed in 
Sec.  308.529, executed by the assured as principal, and by the surety, 
in such amount as the assured determines to be necessary to comply with 
Clause 21. Such amount shall be a multiple of $500, but shall not be 
less than $1,000. The collateral deposit fund will be refunded to the 
assured after the bond has been posted, in accordance with the 
provisions of Sec.  308.509(h).


Sec.  308.511  Cancellation of Open Cargo Policy.

    An assured may cancel an Open Cargo Policy by delivering to the 
underwriting agent, at least fifteen (15) days prior to the requested 
date of cancellation, an application for cancellation executed by the 
assured on Form MA-304, prescribed in Sec.  308.524, together with the 
original policy. The policy shall be cancelled as of the effective date 
requested in the application, which, unless otherwise agreed by the 
Maritime Administrator in writing, shall not be a date earlier than 
fifteen (15) days following the date of the receipt of the application 
as acknowledged by the underwriting agent on Form MA-304, with respect 
to all risks that have not attached prior to said effective date. Such 
cancellation shall not relieve the assured of the obligation to file 
closing reports with respect to all risks which attached prior to the 
effective date of the cancellation and to pay all unpaid premiums. 
Within four (4) months of the effective date of cancellation, unless 
otherwise agreed by the Maritime Administrator in writing, the assured 
must file a closing report in duplicate on Form MA-313, prescribed in 
Sec.  308.533, of all shipments covered by the policy for which closing 
reports have not been previously filed. The assured shall mark this 
closing report ''Final Closing Report on Cancellation of Policy'', and 
file a certificate on Form MA-313-B, prescribed in Sec.  308.535, 
executed by the assured in duplicate. Thereafter, when all unpaid 
premiums have been paid, the assured will become entitled to a refund 
of the collateral deposit, or cancellation of the surety bond in 
accordance with Sec. Sec.  308.509 and 308.510. If the assured has lost 
or mislaid the original policy and is unable to produce it for 
cancellation, the assured shall execute a letter of indemnity and such 
other documents as

[[Page 17907]]

may be required by the Maritime Administrator.


Sec.  308.512  Declaration of shipments under Open Cargo Policy.

    (a) Closing report. (1) The assured shall file with the 
underwriting agent, not later than the twenty-fifth (25th) day of each 
month, a closing report for all inward shipments and a closing report 
for all outward shipments, and pay the premium and fees, for all 
shipments covered during the preceding calendar month, as required by 
Clause 19. Each closing report shall be filed in duplicate on Form MA-
313, prescribed in Sec.  308.533, supported by a certificate executed 
by the assured on Form MA-313-A, prescribed in Sec.  308.534. If the 
assured has no shipments to report during any calendar month, the 
closing report, Form MA-313, shall, nevertheless, be filed with one or 
both of the following statements, depending upon their applicability, 
noted thereon certifying that:
    (i) No inward shipment coming within the scope of this policy 
arrived at destination during the preceding calendar month, and that 
during the preceding calendar month no knowledge has come to the 
assured of an inward shipment covered under the terms of the policy 
which will not arrive by reason of loss, frustration or other similar 
cause,
    (ii) No outward shipment coming within the scope of this policy was 
made during the preceding calendar month, and
    (iii) Whenever a sea passage is made with respect to cargo covered 
under the policy by a barge or sailing vessel the assured shall note 
that fact upon the closing report, unless the Maritime Administrator 
otherwise agrees.
    (2) An assured reporting for one calendar month shall not include 
therein a report of a shipment due to be reported in the report for the 
next succeeding calendar month. Thus, the report of January closing 
shipments filed in February does not include February closings.
    (b) Inward shipments. The closing report covering inward shipments 
shall include:
    (1) All such shipments which have arrived at the port of 
destination during the preceding calendar month, and
    (2) All such shipments with respect to which inability to so arrive 
by reason of loss, frustration, or other similar causes has come to the 
knowledge of the assured during the preceding calendar month.
    (c) Outward shipments. The closing report covering outward 
shipments shall include all such shipments which attached under the 
policy during the preceding calendar month.
    (d) Definition of inward and outward shipments. A shipment will be 
classified as an inward shipment or as an outward shipment by reference 
to the geographical location of the assured with respect to the 
movement of the shipment. The address of the assured as stated in the 
application filed by him for the policy shall be deemed to be the 
assured's geographical location for the purpose of determining whether 
the shipment is inward or outward. To illustrate, if an assured has 
stated in his application that his address is in Hawaii, the assured's 
shipments of goods from the United States to Hawaii would be classified 
as inward, and his shipments from Hawaii to the United States would be 
classified as outward. Any shipments that cannot be classified as 
inward or outward under this definition shall be treated as inward 
shipments for the purposes of the declaration.
    (e) Supplemental closing report. If an assured files a closing 
report and thereafter discovers that one or more additional shipments 
should have been included in the report, then, even though the assured 
has executed the certificate on Form MA-313-A, prescribed in Sec.  
308.534, or Form MA-313-B, prescribed in Sec.  308.535, in connection 
with the closing report, the assured must nevertheless amend the 
closing report by filing a supplemental closing report supported by an 
appropriate certificate. The supplemental closing report must be 
accompanied by a statement in writing signed by the assured giving the 
reasons for the omission of such shipments from the original closing 
report. If the Maritime Administrator finds that the failure to file 
the complete closing report was either inadvertent or unintentional or 
arose by reason of causes beyond the control of the assured, the 
otherwise automatic termination of the policy by reason of a breach of 
the warranty embodied in Clause 20 shall be avoided pursuant to the 
provisions of Clause 23.


Sec.  308.513  Payment of premiums and fees.

    The assured shall pay the premium, when his closing report is 
filed, for all shipments shown on his closing report for the preceding 
month, at the rates prescribed by the Maritime Administrator and in 
effect on the date of the ocean bill of lading, or if an ocean bill of 
lading was not issued, on the date of the equivalent shipping document, 
or if no ocean bill of lading or equivalent shipping document was 
issued, or if such documents were undated, on the date the goods were 
laden on the overseas vessel, as required by Clause 19. All payments of 
premium or fees must be made by check or money order payable to the 
order of ''Maritime Administration, Department of Transportation.''


Sec.  308.514  Return premium.

    No premium will be returned to the assured with respect to a 
shipment of goods that attached under the policy except where there was 
a declaration of value at variance with Clause 8, or an error in the 
application of a rate or in the computation of a premium, or the 
insured goods were short-shipped. An application for the return of a 
premium shall be made on Form MA-307, prescribed in Sec.  308.527, 
filed in duplicate with the Underwriting Agent who will transmit it to 
the Maritime Administrator for payment.


Sec.  308.515  Payment in event of loss.

    All claims for losses shall be filed by the assured with the 
Underwriting Agent who issued the policy. Such claims must be supported 
by the customary documents required in connection with war risk 
insurance claims, together with appropriate declarations as required by 
Clause 9, and such further data as may now or hereafter be required by 
the Maritime Administrator.


Sec.  308.516  Failure to comply with Clause 21.

    (a) If the assured willfully fails to maintain a collateral deposit 
fund or a surety bond in an amount sufficient to meet the requirements 
of Clause 21, the policy becomes void from the date the fund or bond 
was first insufficient, but, if the assured's failure was inadvertent, 
the policy may be reinstated when the assured complies with Clause 21, 
and shows to the satisfaction of the Maritime Administrator that his 
failure was inadvertent and not willful. If the failure was in fact 
inadvertent, the assured shall file a declaration on Form MA-314, 
prescribed in Sec.  308.536, executed in duplicate, with the 
Underwriting Agent within seven (7) days from the time knowledge comes 
to the assured of the insufficiency of the collateral deposit fund or 
surety bond unless the time for filing such declaration is extended by 
permission of the Maritime Administrator. If the space provided in the 
declaration, Form MA-314, for an explanation of the circumstances 
whereby the assured first had knowledge that the collateral was not 
sufficient, the assured shall attach to the declaration a detailed 
statement and

[[Page 17908]]

include the same by reference in the declaration.
    (b) If any policy becomes void by reason of the failure of the 
assured to deposit additional collateral or increase the amount of its 
surety bond under the provisions of Clause 21, the Maritime 
Administrator reserves the right to refuse to issue another policy to 
such assured for a period of ninety (90) days.


Sec.  308.517  Open Cargo Policy, Form MA-300.

    The standard form of War Risk Open Cargo, Form MA-300, may be 
obtained from MARAD's underwriting agent or MARAD.


Sec.  308.518  Standard optional endorsement No. 1, Form MA-300-A.

    Standard Optional Endorsement No. 1, which may be obtained from 
MARAD's underwriting agent or MARAD, limits the amount payable for the 
loss of goods to the actual bona fide pecuniary loss to the Assured, 
exclusive of any allowance for anticipated or accrued profit arising 
out of the insured venture. An Assured may elect to have his Open Cargo 
Policy endorsed with Standard Optional Endorsement No. 1 applicable on 
all shipments, or on all outward shipments, or on all inward shipments, 
or on named commodities except goods sold by the Assured prior to 
loading on board the overseas vessel and shipped for the account and at 
the risk of third persons other than a branch subsidiary or affiliate 
of the Assured. When an Assured has elected to have Standard Optional 
Endorsement No. 1 made applicable to certain named commodities he may 
not change to a different basis of valuation for those commodities 
until after he has given ninety (90) days written notice to the 
Maritime Administrator through the Underwriting Agent of his election 
to make the change. Application for Standard Optional Endorsement No. 1 
may be made to the Underwriting Agent which is authorized to issue the 
endorsement without prior approval of the Maritime Administrator.


Sec.  308.519  Standard optional endorsement No. 2, Form MA-300-B.

    Standard Optional Endorsement No. 2, which may be obtained from 
MARAD's underwriting agent or MARAD, amends the policy to cover 
shipments made to the Assured or shipped by the Assured as agent for 
the account and risk of a principal. Application for Standard Optional 
Endorsement No. 2 may be made to the Underwriting Agent, which is 
authorized to issue the endorsement without prior approval of the 
Maritime Administrator.


Sec.  308.520  Standard optional endorsement No. 3, Form MA-300-C.

    Standard Optional Endorsement No. 3, which may be obtained from 
MARAD's underwriting agent or MARAD, amends the policy to include 
shipments of diamonds for industrial purposes, or rubies or sapphires, 
natural or synthetic, used for instruments or watch jewels imported to 
the Continental United States (excluding Alaska). Application for 
Standard Optional Endorsement No. 3 may be made to the Underwriting 
Agent, which shall transmit it to the Maritime Administrator for 
approval or disapproval of the issuance of the endorsement.


Sec.  308.521  Application for Open Cargo Policy, Form MA-301.

    The standard form of application for a War Risk Open Cargo Policy 
may be obtained from MARAD's underwriting agent or MARAD.


Sec.  308.522  Collateral deposit fund, letter of transmittal, Form MA-
302.

    The standard form of letter of transmittal for use in establishing 
a collateral deposit fund may be obtained from MARAD's underwriting 
agent or MARAD.


Sec.  308.523  Application for revision of Open Cargo Policy, Form MA-
303.

    An application for the revision of an Open Cargo Policy shall be 
filed in duplicate with the Underwriting Agent on a form which may be 
obtained from MARAD's underwriting agent or MARAD.


Sec.  308.524  Application for cancellation of Open Cargo Policy, Form 
MA-304.

    The standard form of application for cancellation of an Open Cargo 
Policy Form MA-304 may be obtained from MARAD's underwriting agent or 
MARAD.


Sec.  308.525  Application for decrease in amount of cash collateral 
fund, Form MA-305.

    Application for decrease in the amount of the cash collateral 
deposit fund shall be made on Form MA-305, which may be obtained from 
MARAD's underwriting agent or MARAD.


Sec.  308.526  Certificate for repayment of decrease of collateral 
deposit fund, Form MA-306.

    The standard form of certificate for repayment of the amount of the 
decrease of the collateral deposit fund, Form MA-306, may be obtained 
from MARAD's underwriting agent or MARAD.


Sec.  308.527  Application for return premium, Form MA-307.

    An application for the return of premium, which may be obtained 
from MARAD's underwriting agent or MARAD, shall be filed in duplicate 
with the Underwriting Agent on Form MA-307.


Sec.  308.528  Surety Bond A, Form MA-308.

    The Standard Form of Surety Bond A, Form MA-308, which may be 
obtained from MARAD's underwriting agent or MARAD, shall be used by an 
Assured who elects to post a surety bond as security for payment of the 
premiums pursuant to Clause 21 of the policy:


Sec.  308.529  Surety Bond B, Form MA-309.

    An Assured who elects to substitute a surety bond for a collateral 
deposit fund shall submit Form MA-309, which may be obtained from 
MARAD's underwriting agent or MARAD.


Sec.  308.530  Letter requesting increase or decrease in amount of 
surety bond, Form MA-310.

    An endorsement increasing or decreasing the amount of the surety 
bond, Form MA-310, shall be transmitted to the underwriting agent and 
may be obtained from MARAD's underwriting agent or MARAD.


Sec.  308.531  Endorsement of surety bond increasing or decreasing 
amount of coverage, Form MA-311.

    The Standard Form of Endorsement which shall be used in increasing 
or decreasing the amount of a surety bond, Form MA-311, may be obtained 
from MARAD's underwriting agent or MARAD.


Sec.  308.532  Release of surety bond, Form MA-312.

    The Standard Form of Release of Surety bond, Form MA-312, may be 
obtained from MARAD's underwriting agent or MARAD.


Sec.  308.533  Closing report, Form MA-313.

    This form, which may be obtained from MARAD's underwriting agent or 
MARAD, shall be filed in duplicate with the Underwriting Agent not 
later than the 25th day of each month.


Sec.  308.534  Certificate to be attached to closing report, Form MA-
313-A.

    The standard form of Certificate to be attached to the closing 
report, Form MA-313-A, may be obtained from MARAD's underwriting agent 
or MARAD and shall be filed each month.


Sec.  308.535  Certificate to be attached to final closing report, Form 
MA-313-B.

    The Standard Form of Certificate, Form MA-313-B, shall be attached 
to

[[Page 17909]]

the final closing report after cancellation of the policy, and may be 
obtained from MARAD's underwriting agent or MARAD.


Sec.  308.536  Declaration where failure to comply with Clause 21 was 
inadvertent, Form MA-314.

    An Assured that fails inadvertently to maintain a collateral 
deposit fund or surety bond in an amount sufficient to meet the 
requirements of Clause 21 of the Policy shall file this Declaration, 
Form MA-314, which may be obtained from MARAD's underwriting agent or 
MARAD.

Facultative War Risk Cargo Insurance


Sec.  308.538  General.

    The Maritime Administrator is prepared to provide facultative war 
risk insurance policies covering any cargoes described in Sec.  308.501 
which are designated by an applicant prior to the attachment of risks, 
if the applicant does not have an Open Cargo Policy issued by the 
Maritime Administrator, or if he has a shipment which is not covered by 
his Open Cargo Policy. However, a person with regular shipments is 
urged to avail himself of the advantages of the automatic coverage of 
an Open Cargo Policy. The Maritime Administrator reserves the right to 
decline to quote rates or bind insurance on shipments of cargo that 
could be covered by an Open Cargo Policy unless the applicant can show 
to the satisfaction of the Maritime Administrator that the risk is not 
one of a series of similar risks forming part of a continual flow of 
business for the applicant. The policy will be in the standard form of 
War Risk Facultative Cargo Policy, Form MA-316, prescribed in Sec.  
308.545. All policies shall be issued by Underwriting Agents appointed 
by the Maritime Administrator. All Underwriting Agents shall be 
domestic insurance companies authorized to do a marine insurance 
business in a State of the United States.


Sec.  308.539  Application.

    (a) Preliminary request. Application for a Facultative Cargo Policy 
shall be made by filing a preliminary request in writing (including 
telegram) with an Underwriting Agent of MARAD, setting forth the 
following information:
    (1) The name and address of the applicant;
    (2) The amount of insurance requested;
    (3) The commodity and quantity to be insured;
    (4) The voyage to be covered;
    (5) The name of the vessel upon which the cargo will be shipped, if 
known, the name of the steamship line, if known, and the date of 
shipment, if the applicant is submitting the request to bind war risk 
in writing; for security reasons, if the applicant is submitting the 
order to bind war risk insurance by telefax, neither the name of the 
vessel nor the name of the steamship line nor the anticipated date of 
sailing, should be mentioned. Mentioning such information in a telefax 
may result in a denial of insurance to the applicant. Any envelope 
transmitting a letter containing such information shall be marked 
``confidential.''
    (b) Binder. Before the insurance can be bound, the applicant shall 
provide the Underwriting Agent with a properly prepared binder on Form 
MA-315 prescribed in Sec.  308.544. The binder must be submitted in 
duplicate, accompanied by check or Money Order payable to the order of 
''Maritime Administration, Department of Transportation'' for the full 
amount of the premium computed on the amount to be insured at the rate 
set by the Maritime Administrator. Any application for facultative 
cargo war risk insurance received by an Underwriting Agent later than 4 
p.m. (Local Time) shall be considered the next day's business.
    (c) Optional loss limits clause. Clause 9 of the standard form of 
facultative cargo policy, Form MA-316, prescribed in Sec.  308.545, 
limits the amount payable for loss to the fair market value at the 
place and approximate time of the attachment of risk, plus the cost of 
marine insurance, transportation and expenses incident thereto, and war 
risk insurance with respect to the lost or damaged goods, or if it is 
impossible to determine the fair market value at place and time of 
attachment of risk, the fair market value at the designated port of 
arrival on the date of the attachment of the risk, plus the cost of 
marine insurance, transportation and expenses incidental thereto, and 
war risk insurance with respect to the lost or damaged goods, or if the 
goods had been purchased prior to loading, the actual amount paid or 
payable to the seller for the goods less all discounts, plus the cost 
of marine insurance, transportation and expenses incidental thereto, 
and war risk insurance with respect to the lost or damaged goods. In 
lieu of these loss limits, the Assured by so specifying in his 
application, and the binder may have attached to the policy when issued 
Standard Optional Endorsement No. 1-A, Form MA-316, prescribed in Sec.  
308.546, which limits the amount payable for loss to the actual bona 
fide pecuniary loss to the Assured, exclusive of any allowance for 
anticipated or accrued profits arising out of the insured venture.


Sec.  308.540  Premiums.

    (a) Rates. Rate Schedules for war risk facultative cargo insurance 
will be published by the Maritime Administrator from time to time, and 
may be obtained from an Underwriting Agent. All Rate Schedules are 
subject to change by the Maritime Administrator without notice. If no 
rate is published for a voyage on which war risk facultative cargo 
insurance is available, the Maritime Administrator will name a rate 
through an Underwriting Agent upon application. Whenever an applicant 
for war risk facultative cargo insurance receives a definite rate 
quotation and desires to bind insurance at the quoted rate, an order to 
bind the insurance in accordance with the procedure set forth in this 
subpart should be submitted within two business days following the day 
of quotation accompanied by check or Money Order payable to the order 
of ``Maritime Administration, Department of Transportation'' for the 
full amount of the premium thereon computed on the amount to be insured 
at the rate set by the Maritime Administrator, or the quotation will 
expire.
    (b) Return premium. Where goods are short-shipped, the amount of 
insurance may be reduced by an amount computed by applying to the 
original amount of insurance the proportion which the quantity of 
merchandise short-shipped (i.e., bales, barrels, tons, and other 
designations of quantity) bears to the total quantity of merchandise 
originally declared for insurance. Where more than one class of 
merchandise is insured under one policy (e.g., fuel, oil and gasoline) 
the reduced amount of insurance must be computed separately on each 
item. Where the amount of insurance is reduced, the Maritime 
Administrator will give consideration to requests for proportionate 
returns of premium. An application for the return of a premium must be 
submitted to the Underwriting Agent in quadruplicate on Form MA-317, 
prescribed in Sec.  308.547.


Sec.  308.541  Issuance.

    (a) Binder. The Underwriting Agent is authorized to issue a 
facultative policy in Form MA-316, prescribed in Sec.  308.545, when 
there has been presented to him a properly prepared binder on Form MA-
315, prescribed in Sec.  308.544, together with the payment of the 
premium as required, and such policy shall be issued as soon as 
possible after the binder form has been presented to the Underwriting 
Agent.

[[Page 17910]]

Prior to the issuance of the policy, the Underwriting Agent is 
authorized to accept the risk on behalf of the Maritime Administrator 
by signing the binder. The Maritime Administrator will provide each 
Underwriting Agent with a supply of facultative policies which shall 
not be valid until countersigned by the Underwriting Agent. The 
Underwriting Agent shall keep a permanent record of all such policies 
and the Assured to whom the policy is issued.
    (b) Numbering. Each Facultative Cargo Policy supplied to the 
Underwriting Agent by the Maritime Administrator shall be numbered by 
MARAD before it is supplied to the Underwriting Agent. No two numbers 
shall be the same. The Underwriting Agent when issuing the policy shall 
add at the end of the Policy number the agency number assigned to that 
Underwriting Agent, and where policies are issued by more than one 
office of an Underwriting Agent the issuing office shall also be 
identified in the policy number. For example, the policies issued by an 
office in New York will be designated ``NY'' and policies issued in San 
Francisco will be designated by ``SF'' prefixed to the Underwriting 
Agent's agency number.


Sec.  308.542  Warranty regarding thirty-day shipments.

    If, after an effective binding of war risk insurance on a shipment 
of cargo, the assured believes that it will be impossible to comply 
with the warranty requiring the goods to be shipped and in transit 
within thirty days from the effective date of binding, such an assured 
may apply to the Maritime Administrator, through the Underwriting 
Agent, to modify the warranty. If the Maritime Administrator is 
satisfied that an extension of time within which the goods are 
warranted to be shipped and in transit should be granted, he will do 
so, but additional premium may be charged in the discretion of the 
Maritime Administrator.


Sec.  308.543  Cancellation.

    Facultative war risk insurance is not subject to cancellation by 
the Assured unless the goods are not shipped within thirty (30) days 
following the effective date of binding, and then only if the policy is 
returned for cancellation.


Sec.  308.544  Facultative binder, Form MA-315.

    The standard form of War Risk Facultative Cargo Binder, which may 
be obtained from MARAD's underwriting agent of MARAD, shall be 
completed by the applicant and submitted, in duplicate, to an 
Underwriting Agent before the insurance can be bound.


Sec.  308.545  Facultative cargo policy, Form MA-316.

    The standard form of War Risk Facultative Cargo Policy, Form MA-
316, may be obtained from MARAD's underwriting agent or MARAD.


Sec.  308.546  Standard optional endorsement No. 1-A, Form MA-316-A.

    Standard Optional Endorsement No. 1-A limits the amount payable for 
the loss of goods to the actual bona fide pecuniary loss to the 
Assured, exclusive of any allowance for anticipated or accrued profit 
arising out of the insured venture. (Similar provisions for Open Cargo 
Policies are contained in Standard Optional Endorsement No. 1, Form MA-
300-A, prescribed in Sec.  308.518.) Application for Standard Optional 
Endorsement No. 1-A shall be made to the Underwriting Agent at the time 
application is made for the policy. The Underwriting Agent is 
authorized to issue the endorsement without prior approval of the 
Maritime Administrator. This form may be obtained from MARAD's 
underwriting agent or MARAD.


Sec.  308.547  Application for return premium, Form MA-317.

    An application for the return of premium must be filed in duplicate 
with the Underwriting Agent on Form MA-317, which may be obtained from 
MARAD's underwriting agent or MARAD.

General


Sec.  308.548  Standard form of underwriting agency agreement for 
cargo, Form MA-318.

    This form, which may be obtained from MARAD's underwriting agent or 
MARAD, is the standard form of underwriting agency agreement applicable 
with respect to agreements executed by the Maritime Administrator and 
domestic insurance companies authorized to do a marine insurance 
business in any State of the United States, appointing such companies 
as Underwriting Agents to issue war risk cargo policies in accordance 
with the provision of the agreement and this subpart.


Sec.  308.549  Application for appointment of Cargo Underwriting Agent, 
Form MA-319.

    Any domestic insurance company authorized to do a marine insurance 
business in any State of the United States may apply for appointment as 
a Cargo Underwriting Agent by submitting to the Maritime Administrator 
a letter and Form MA-399, which may be obtained from MARAD's 
underwriting agent or MARAD.


Sec.  308.550  Certificate, Form MA-320.

    Wherever any provision of this subpart, or any amendment thereto, 
requires the Assured to make a declaration or certification under the 
penalties of perjury, and the form of the declaration or certificate is 
not prescribed, the Assured may execute a certificate on Form MA-320-A 
for an individual, on Form MA-320-B for a partnership, or on Form MA-
320-C for a corporation, which forms may be obtained from MARAD's 
underwriting agent or MARAD.


Sec.  308.551  War risk insurance clearing agency agreement for cargo, 
Form MA-321.

    The standard form of clearing agency agreement, Form MA-321, shall 
be executed by the Maritime Administrator and domestic insurance 
companies, or groups of domestic insurance companies authorized to do a 
marine insurance business in any State of the United States, appointing 
such companies or groups of companies as clearing agents, which form 
may be obtained from MARAD's underwriting agent or MARAD.


Sec.  308.552  Effective date.

    This subpart shall be effective as and when the Maritime 
Administrator finds that war risk cargo insurance adequate for the 
needs of the waterborne commerce of the United States cannot be 
obtained on reasonable terms and conditions from companies authorized 
to do an insurance business in a State of the United States.

Subpart G--Records Retention


Sec.  308.600  Records retention requirement.

    The records specified in Sec. Sec.  308.8, 308.517, and 308.548 of 
this part shall be retained until a release is granted by MARAD, at 
which time MARAD will take custody of the records.

(Authority: 46 U.S.C. sections 53902, 53910; 49 CFR 1.93)


    Dated: March 21, 2014.

    By Order of the Maritime Administrator.
Julie P. Agarwal,
Secretary, Maritime Administration.
[FR Doc. 2014-06756 Filed 3-28-14; 8:45 am]
BILLING CODE 4910-81-P