Tanker Security Program, 74977-74987 [2022-26358]

Agencies

• Maritime Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 87, Number 234 (Wednesday, December 7, 2022)]
[Rules and Regulations]
[Pages 74977-74987]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-26358]


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DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 294

[Docket Number MARAD-2022-0247]
RIN 2133-AB95


Tanker Security Program

AGENCY: Maritime Administration (MARAD), Department of Transportation 
(DOT).

ACTION: Interim final rule; request for comments.

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SUMMARY: This interim final rule provides procedures to implement 
certain provisions of the National Defense Authorization Act for Fiscal 
Year 2021 (FY21 NDAA) and the National Defense Authorization for Fiscal 
Year 2022 (FY22 NDAA). The FY21 NDAA authorized the Secretary of 
Transportation to establish the Tanker Security Program (TSP) comprised 
of a fleet of active, commercially viable, militarily useful, privately 
owned product tank vessels of the United States. The fleet will meet 
national defense and other security requirements and maintain a United 
States presence in international commercial shipping. The FY22 NDAA 
made minor adjustments related to the participation of long-term 
charters in the TSP. The Maritime Administration solicits written 
comments on this rulemaking.

DATES: 
    Effective date: This interim final rule is effective December 7, 
2022.
    Comments due date: Comments on this interim final rule must be 
received on or before February 6, 2023.

ADDRESSES: You may submit comments identified by DOT Docket Number 
MARAD-2022-0247 by any of the following methods:
     Federal eRulemaking Portal: www.regulations.gov. Search 
``MARAD-2022-0247'' and follow the instructions for submitting 
comments.
     Email: [email protected]. Include ``MARAD-2022-
0247'' in the subject line of the message.
     Mail/Hand-Delivery/Courier: Docket Management Facility; 
U.S. Department of Transportation, 1200 New Jersey Avenue SE, Room W12-
140, Washington, DC 20590. If you would like to know that your comments 
reached the facility, please enclose a stamped, self-addressed postcard 
or envelope. The Docket Management Facility is open 9:00 a.m. to 5:00 
p.m., Monday through Friday, except on Federal holidays. Call 202-493-
0402 to determine facility hours prior to hand delivery.
    You may view the public comments submitted on this rulemaking at 
www.regulations.gov. When searching for comments, please use the Docket 
ID: MARAD-2022-0247. An electronic copy of this document may also be 
downloaded from the Office of the Federal Register's website at 
www.FederalRegister.gov and the Government Publishing Office's website 
at www.GovInfo.gov.

    Note: If you fax, mail or hand-deliver your comments, we 
recommend that you include your name and a mailing address, an email 
address, or a telephone number in the body of your document so that 
we can contact you if we have questions regarding your submission. 
If you submit your comments by mail or hand-delivery, they must be 
submitted in an unbound format, no larger than 8\1/2\ by 11 inches, 
single-sided, suitable for copying and electronic filing.

    Instructions: All submissions received must include the agency name 
and docket number or Regulation Identifier Number (RIN) for this 
rulemaking, 2133-AB95. All comments received will be posted without 
change to the docket at www.regulations.gov, including any personal 
information provided. For detailed instructions on submitting comments 
and additional information on the rulemaking process, see the section 
entitled Public Participation.

FOR FURTHER INFORMATION CONTACT: David Hatcher, Office of Sealift 
Support, at (202) 366-0688, or via email at [email protected]. You 
may send mail to Mr. Hatcher at Department of Transportation, Maritime 
Administration, Office of Sealift Support, 1200 New Jersey Avenue SE, 
Washington, DC 20590. If you have questions on viewing the Docket, call 
Docket Operations, telephone: (800) 647-5527.

SUPPLEMENTARY INFORMATION: The FY21 NDAA, with minor adjustments in the 
FY22 NDAA, required that the Secretary of Transportation, in 
consultation with the Secretary of Defense, establish a fleet of 
active, commercially viable, militarily useful, privately-owned product 
tank vessels to meet national defense and other security requirements. 
The TSP will provide a stipend to tanker operators of U.S.-flagged 
vessels that meet certain qualifications.
    Congress appropriated $60,000,000 for the TSP in the Consolidated 
Appropriations Act of 2022, Public Law 117-269. Authorized payments to 
participating operators are limited to $6 million per ship, per fiscal 
year and are subject to annual appropriations. Participating operators 
will be required to make their commercial transportation resources 
available upon request by the Secretary of Defense for military 
purposes during times of war or national emergency.

Background

    A fuel tanker study required by the Fiscal Year 2020 National 
Defense Authorization Act (FY20 NDAA) examined the sufficiency of the 
U.S.-flagged tanker fleet to meet National Defense Strategy (NDS) 
requirements. A summary of the report is provided on the DOT/MARAD 
docket for this rulemaking. The report's summary found there to be a 
substantial risk to the nation's defense associated with a heavy 
reliance on foreign-flagged tankers, particularly within a contested 
environment. The location, timing, and specific missions associated 
with some tanker requirements dictate the need for U.S.-flagged assets, 
for which there currently are insufficient numbers available. The 
report's gap analysis found a clear and critical need for a tanker 
security program to increase U.S.-flagged tanker capacity, to reduce 
the risk of reliance on foreign-flagged tankers for the most important 
fuel missions, and to ensure the Department of Defense (DoD) has 
sufficient tanker capabilities to meet NDS objectives.
    In response to the FY20 NDAA Fuel Tanker Study, Congress directed 
in the FY21 NDAA, with minor adjustments in the FY22 NDAA, that the 
Secretary of Transportation, in consultation with the Secretary of 
Defense, establish a fleet of active, commercially viable, militarily

[[Page 74978]]

useful, privately owned product tanker vessels to meet national defense 
and other security requirements and maintain a United States presence 
in international commercial shipping.\1\ The Maritime Administration 
worked with the DoD's United States Transportation Command to identify 
and shape TSP requirements and timelines.
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    \1\ The tanker security program authority is codified at 46 
U.S.C. 53402-53412.
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    Pursuant to the statute, the rule establishes requirements that 
support typical DOT and MARAD commercial economic objectives such as 
the tanker vessel eligibility requirements of Section 294.9 to be 
commercially viable, not more than 10 years in age, and to operate in 
U.S. foreign commerce. (See 46 U.S.C. 53402(b)(2)-(4),(6)-(7)). In 
addition, Section 294.9 requires tanker vessels to be suitable for use 
by the United States for national defense or military purposes in time 
of war or national emergency, as determined by the Secretary of 
Defense. (See 46 U.S.C. 53402(b)(5).)). The statute also requires 
vessel owners, charterers, and operators to meet certain requirements 
under Section 294.11 intended to identify their corporate citizenship 
as a matter of ensuring security through proper operational control. 
(See 46 U.S.C. 54302(b)(1) and (c)). And, under Section 294.25 a TSP 
participant must agree to the installation onboard its vessel of 
militarily useful features for national defense purposes as approved by 
U.S. Coast Guard and the vessel's classification society. (See 46 
U.S.C. 53402(a), (b)(5); 46 U.S.C. 53407). Finally, in the event of a 
national defense emergency, all TSP participants are subject to the 
terms of an agreement \2\ that obligates the TSP participant to make 
commercial transportation resources (including services) available for 
military use, upon request by the Secretary of Defense during a time of 
war or national emergency, or whenever the Secretary of Defense 
determines that it is necessary for national security or contingency 
operation. (See 46 U.S.C. 53403-53405, 53407). Section 294.31 also 
provides for annual payments to program participants and specifies 
payment conditions as specified in the statute. (See 46 U.S.C. 53406.) 
Taken together, the TSP supports both the nation's economy and its 
national security by strengthening and ensuring the continued 
availability of U.S.-flag sealift capacity.
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    \2\ See 50 U.S.C. 4558, Voluntary agreements and plans of action 
for preparedness programs and expansion of production capacity and 
supply.
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Immediate Effective Date and Request for Comment

    MARAD is issuing this interim final rule without prior notice and 
the opportunity for public comment and the delayed effective date 
ordinarily prescribed by the Administrative Procedure Act (APA). MARAD 
concludes that this rule involves a military function of the United 
States under 5 U.S.C. 553(a)(1) and is therefore exempt from the 
requirements of 5 U.S.C. 553 (see 5 U.S.C. 553(a)(1)). Nonetheless, 
MARAD has also analyzed this rule under 5 U.S.C. 553(b)(B) and 
determined that it has good cause to waive prior opportunity for notice 
and comment. For similar reasons, MARAD has determined that it has good 
cause to waive the 30-day delay in effective date under 5 U.S.C. 553. 
MARAD seeks comment on this interim final rule and will consider 
comments received in issuing any final rule.
    Pursuant to section 5 U.S.C. 553(a)(1), the requirements of 5 
U.S.C. 553, including general notice and the opportunity for public 
comment on a proposed rule and a 30-day delay in the effective date of 
a final rule, are not required with respect to a rulemaking ``to the 
extent that there is involved . . . a military or foreign affairs 
function of the United States.'' MARAD finds that this interim final 
rule involves a military function of the United States and therefore 
can be made effective prior to receiving public comment. 5 U.S.C. 
553(a)(1). Under the requirements for establishment of the TSP set 
forth in the FY21 NDAA, as amended by the FY22 NDAA, and this 
rulemaking, vessels in the TSP must be militarily useful, participants 
must be under the supervisory control of the DoD when requested during 
times of war or national emergency, and participants will perform a 
direct military function by providing emergency supply capacity. The 
tanker security program established by the rule therefore directly 
involves a military function, and the tanker vessels involved in the 
program perform significantly more than ordinary civilian support 
services.
    Consistent with the statutory authority for the program at 46 
U.S.C. 53402, the fleet must be established in consultation with the 
Secretary of Defense and is intended to meet national defense and other 
security requirements in addition to maintaining a U.S. presence in 
international commercial shipping. As required by section 53402, the 
regulation specifies that a vessel is eligible for inclusion in the 
fleet only if it ``is determined by the Secretary of Defense to be 
suitable for use by the United States for national defense or military 
purposes in time of war or national emergency. . .'' In addition, 
consistent with 46 U.S.C. 53407, the regulation requires that operating 
agreements between the owner/operator of a vessel in the TSP must be 
approved by the Secretary of Transportation and the Secretary of 
Defense. The regulation also requires that a participant in the TSP 
agree to the installation on its vessel of militarily useful features 
for national defense purposes as approved by the U.S. Coast Guard and 
the vessel's classification society. The statutory provision at 46 
U.S.C. 53407, titled ``National security requirements,'' states 
specifically that operating agreements ``shall provide that upon 
request by the Secretary of Defense during time of war or national 
emergency, or whenever determined by the Secretary of Defense to be 
necessary for national security or contingency operation . . ., the 
program participant shall make available commercial transportation 
resources (including services) described in subsection (d) to the 
Secretary of Defense . . . .'' 46 U.S.C. 53407(b)(1). For these 
reasons, MARAD concludes that the rule involves a military function of 
the United States and is thus exempt from the requirements of 5 U.S.C. 
553.
    While MARAD concludes that the rule is exempt from the requirements 
of 5 U.S.C. 553 as a rule involving a military function, MARAD also 
finds good cause under 5 U.S.C. 553(b)(B) to issue this interim final 
rule to create the Tanker Security Program and establish, in 
consultation with the Secretary of Defense, a Tanker Security Fleet. 
Pursuant to 5 U.S.C. 553(b)(B), general notice and the opportunity for 
public comment are not required with respect to a rulemaking when an 
``agency for good cause finds (and incorporates the finding and a brief 
statement of reasons therefor in the rules issued) that notice and 
public procedure thereon are impracticable, unnecessary, or contrary to 
the public interest.'' Similarly, pursuant to 5 U.S.C. 553(d), a 30-day 
delay in effective date is not required if the agency finds good cause 
to waive the delay and publishes its finding in the rule.
    MARAD has determined that it would be impracticable and contrary to 
the public interest to seek notice and comment on this final rule 
because of the urgent need to ensure the nation's security in the face 
of shifting real-time military priorities and requirements. To meet the 
urgent national security demand explained in the National Defense 
Authorization Act for Fiscal

[[Page 74979]]

Year 2020 Department of Defense Report on United States-Flagged Fuel 
Tanker Vessel Capacity gap analysis (Tanker Study), MARAD must issue 
this final rule to ensure its ability to notice, accept, and process 
applications followed by the review and execution of supporting 
agreements with qualified vessel operators. This urgency is heightened 
by an increased DOD priority for tankers since issuance of the Tanker 
Study. MARAD has consulted with DOD and is issuing this IFR to address 
the heightened demand for tankers to meet national security objectives. 
In addition, MARAD emphasizes that national security needs can change 
quickly, and there is a need to establish the TSP through this IFR to 
ensure that DOD can meet new or changed circumstances that may arise at 
any time. There is good cause to make this rule effective immediately 
to provide for the most efficient means of shoring up sealift capacity 
not readily available to support DoD's national security mission 
demands.
    As discussed earlier in the SUPPLEMENTARY INFORMATION section of 
this document, the intent of this action is to provide improved tanker 
sealift capacity for the nation's security demands. The FY20 NDAA Fuel 
Tanker Study found that while U.S.-Flag commercial tankers provide DoD 
the greatest reliability for waterborne fuel transportation, the size 
of the current U.S.-Flag tanker fleet is insufficient to meet specific 
U.S. national security requirements, leaving significant gaps in DoD's 
fuel transportation capabilities. DoD mobility studies have 
demonstrated a growing concern that DoD's access to foreign-flag tanker 
capacity to meet defense objectives will be negatively impacted by the 
increasing influence and relative control of the global shipping market 
by the United States' near-peer competitors. The increased volatility 
in fuel commodity markets since the publication of the FY20 Fuel Tanker 
Study has only increased these risks, particularly concerning fuel 
distribution capabilities. The FY20 Fuel Tanker Study's analysis found, 
and subsequent mobility studies and market volatility have underscored, 
a clear and critical need for a Tanker Security Program to reduce DoD's 
risk of reliance on foreign-flag tankers and stated that TSP should be 
considered for rapid implementation given the military value it 
represents.
    For these reasons, MARAD also finds good cause to waive prior 
opportunity for notice and comment on the rule and to waive the 30-day 
delay in effective date as impracticable and contrary to the public 
interest. MARAD issues this rule so that it may begin the 
administrative process necessary to seek applicants and to evaluate and 
engage qualified tanker vessels and vessel operators, thereby 
establishing the TSP as early as possible. The Tanker Study's gap 
analysis demonstrated pressing DoD fuel tanker supply needs. A delay in 
this rulemaking could result in serious national security concerns if a 
situation arises where TSP supply resources are necessary.
    Though this interim final rule is effective immediately, MARAD 
seeks comment in response to this interim final rule in determining how 
to proceed with any final rule. Any final rule may differ from today's 
rule in response to comments received. Comments are solicited from 
interested members of the public on all aspects of the interim final 
rule. MARAD is interested in information concerning whether the rule 
will be comprehensive and effective in meeting both commercial product 
fuel needs and DoD fuel transportation requirements and whether any 
other steps could be taken to ensure that all qualified vessel 
operators may overcome potential obstacles to admission.
    Comments must be submitted on or before the date indicated in the 
DATES section at the beginning of this document. MARAD believes that 
the 60-day comment period will allow commenters sufficient time to 
address any issues raised by the interim final rule and still meet the 
national security demands contemplated. See ``Public Participation'' 
section below.

Regulatory Analyses and Notices

a. Executive Orders 12866, 13563, and DOT Rulemaking Procedures

    Executive Order (E.O.) 12866, E.O. 13563, and the Department of 
Transportation's administrative rulemaking procedures, provide for 
determining whether a regulatory action is ``significant'' and 
therefore subject to Office of Management and Budget (OMB) review. This 
rule has been determined to be significant pursuant to section 3(f) of 
Executive Order 12866.
Background
    Congress authorized the establishment of a Tanker Security Fleet in 
Sec. 3511 of the FY21 NDAA, which was enacted on January 1, 2021. 
Section 3511(a) of the Act outlines the establishment of a fleet of 
product tank vessels, pursuant to agreement, engaged in U.S. foreign 
commerce and available for military use by the DoD during times of war 
or national emergency. The statutory language defines, among other 
elements: the maximum size of the fleet at ten vessels; the general 
vessel selection criteria; the obligations and rights of program 
participants; the maximum annual payments per vessel under each 
agreement and the conditions of such payments; and each participant's 
national security obligations under the program.
Benefits
    The major benefits of TSP are that it will: (1) provide DoD with 
assured access of up to 10 U.S.-flagged product tank vessels that may 
be used to supply the armed forces of the United States with fuel 
during times of war or national emergency, and (2) help to ensure that 
a core fleet of U.S.-based product tankers can operate competitively in 
international trade and enhance U.S. supply chain resiliency for liquid 
fuel products. The report on U.S.-flagged fuel tanker vessels completed 
by DoD in accordance with section 3519 of the National Defense 
Authorization Act for Fiscal Year 2020 (Pub. L. 116-92) identified an 
insufficient U.S.-flagged tanker capacity to meet National Defense 
Strategy requirements. In addition, TSP will provide necessary support 
to help maintain a U.S.-flag presence in international commerce. The 
TSP vessels will be a critical component of the U.S.-flag capability 
that contributes to the U.S. mariner base for utilization on both the 
commercial and DoD fleets.
Costs
    Congress set strict statutory limits, not subject to the Secretary 
of Transportation's discretion, on the maximum number of participant 
vessels and the annual payment per vessel. Section 3511(a) of the Act 
authorized the participation of 10 vessels in TSP through the end of FY 
2035. The operators of each of these 10 vessels may be paid up to $6 
million per vessel per year, subject to specific operating 
requirements, with a maximum programmatic payment authorization of $60 
million per year for FYs 2022-2035, subject to appropriations. 
Application costs for vessels that may apply for the TSP are discussed 
in paragraph (e) of this section, describing MARAD's compliance with 
the Paperwork Reduction Act for this rule.
Analysis of Alternatives
    Section 3511 of the FY21 NDAA provides for the TSP with new funding 
authorization and establishes a dedicated product tanker fleet program 
distinct from the existing MSP. Congress also prescribed the minimum 
requirements of the TSP, including ship

[[Page 74980]]

ownership, vessel eligibility, vessel documentation, program duration, 
the number of participating vessels, the amount of funding, and 
national security obligations. The Act provides detailed requirements 
for starting and operating the TSP, and MARAD does not have discretion 
to deviate from those requirements in the regulations that establish 
the TSP's operation.

b. Regulatory Flexibility Act

    Under the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., rules 
that are exempt from notice and comment under the APA are also exempt 
from the RFA analytical requirements, including conducting a regulatory 
flexibility analysis. See 5 U.S.C. 603(a). Because, as discussed above, 
this rule is exempt from the APA notice and comment requirements, MARAD 
is not required to conduct a regulatory flexibility analysis.

c. Executive Order 13132, Federalism

    MARAD has examined the interim final rule pursuant to E.O. 13132 
(64 FR 43255, August 10, 1999) and concluded that no additional 
consultation with States, local governments, or their representatives 
is mandated beyond the rulemaking process. The Agency has concluded 
that the rulemaking would not have sufficient federalism implications 
to warrant consultation with State and local officials or the 
preparation of a federalism summary impact statement. The interim final 
rule will not have ``substantial direct effects on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.''

d. The Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires 
agencies to prepare a written assessment of the costs, benefits, and 
other effects of proposed or final rules that include a federal mandate 
likely to result in the expenditure by State, local, or tribal 
governments, in the aggregate, or by the private sector, of more than 
$100 million annually. This action will not result in additional 
expenditures by State, local, or tribal governments or by any members 
of the private sector. Therefore, the Agency has not prepared an 
assessment pursuant to the Unfunded Mandates Reform Act.

e. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA), a person is not 
required to respond to a collection of information by a federal agency 
unless the collection displays a valid Office of Management and Budget 
(OMB) control number. This interim final rule includes a new emergency 
OMB approved collection of information under OMB Control Number 2133-
0554. The collection is necessary to accept applications, undertake the 
review of applicant qualifications to ensure applications are complete, 
and administer and maintain all aspects of the TSP program. MARAD 
expects an estimated 10 respondents, with a response frequency of once 
annually. The annual burden estimate is $2,438.50. We seek comment from 
the public on our burden estimates.

f. Privacy Act

    Anyone can search the electronic form of all comments received into 
any of our dockets by the name of the individual submitting the comment 
(or signing the comment, if submitted on behalf of an association, 
business, labor union, etc.). For information on DOT's compliance with 
the Privacy Act, please visit https://www.transportation.gov/privacy.

Public Participation

How long do I have to submit comments?

    MARAD is providing a 60-day comment period.

How do I prepare and submit comments?

    To ensure that your comments are correctly filed in the Docket, 
please include the Docket Number shown at the beginning of this 
document in your comments.
    If you are submitting comments electronically as a PDF (Adobe) 
File, MARAD asks that the documents be submitted using the Optical 
Character Recognition (OCR) process, thus allowing MARAD to search and 
copy certain portions of your submissions. Comments may be submitted to 
the Docket electronically by logging onto the Docket Management System 
website at https://www.regulations.gov. Search using the MARAD Docket 
Number and follow the online instructions for submitting comments.
    You may also submit two copies of your comments, including the 
attachments, to Docket Management at the address given above under 
ADDRESSES.
    Please note that pursuant to the Data Quality Act, for substantive 
data to be relied upon and used by the agency, it must meet the 
information quality standards set forth in the OMB and DOT Data Quality 
Act guidelines. Accordingly, we encourage you to consult the guidelines 
in preparing your comments. OMB's guidelines may be accessed at https://www.whitehouse.gov/omb/fedreg/reproducible.html. DOT's guidelines may 
be accessed at https://www.bts.gov/programs/statistical_policy_and_research/data_quality_guidelines.

How can I be sure that my comments were received?

    If you wish Docket Management to notify you upon its receipt of 
your comments, enclose a self-addressed, stamped postcard in the 
envelope containing your comments. Upon receiving your comments, Docket 
Management will return the postcard by mail.

How do I submit confidential business information?

    Confidential business information (CBI) is commercial or financial 
information that is both customarily and actually treated as private by 
its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), 
CBI is exempt from public disclosure. If your comments to the interim 
final rule contain commercial or financial information that is 
customarily treated as private, that you actually treat as private, and 
that is relevant or responsive to this interim final rule, it is 
important that you clearly designate the submitted comments as CBI. 
Please mark each page of your submission that constitutes CBI as 
``PROPIN'' to indicate it contains proprietary information. MARAD will 
treat such marked submissions as confidential under the FOIA, and they 
will not be placed in the public docket of this interim final rule. 
Submissions containing CBI should be sent to the email address provided 
in the FOR FURTHER INFORMATION CONTACT section. In addition, you should 
submit two copies, from which you have deleted the claimed CBI, to 
Docket Management at the address given above under ADDRESSES. Any 
comments MARAD receives which are not specifically designated as CBI 
will be placed in the public docket for this rulemaking.

Will the agency consider late comments?

    We will consider all comments that Docket Management receives 
before the close of business on the comment closing date indicated 
above under DATES. To the extent possible, we will also consider 
comments that Docket Management receives after that date.

[[Page 74981]]

How can I read the comments submitted by other people?

    You may read the comments received by Docket Management at the 
address given above under ADDRESSES. The hours of the Docket Management 
office are indicated above in the same location. You may also see the 
comments on the internet. To read the comments on the internet, go to 
https://www.regulations.gov. Follow the online instructions for 
accessing the dockets.
    Please note that, even after the comment closing date, we will 
continue to file relevant information in the Docket as it becomes 
available. Further, some people may submit late comments. Accordingly, 
we recommend that you periodically check the Docket for new material.

List of Subjects in 46 CFR Part 294

    Maritime carriers, Reporting and recordkeeping requirements.

0
For the reasons stated in the preamble, the Maritime Administration 
adds Part 294 to Title 46 to read as follows:

PART 294--TANKER SECURITY PROGRAM (TSP)

Sec.
Subpart A--Introduction
294.1 Purpose.
294.3 Definitions.
294.5 Applications.
294.7 Procedural waivers.
Subpart B--Establishment of a Tanker Security Fleet
294.9 Product tanker vessel eligibility.
294.11 Owner, charterer, and operator citizenship eligibility 
requirements.
294.13 Special rule for Fleet Vessel entry age.
Subpart C--Award of TSP Operating Agreements
294.15 Initial award of TSP Operating Agreements.
294.17 Subsequent award of TSP Operating Agreements.
294.19 Nature of award procedure.
Subpart D--TSP Operating Agreements
294.21 General conditions.
294.23 Special terms.
294.25 National security modifications.
294.27 Financial reporting.
Subpart E--Billing and Payment
294.29 Billing procedures.
294.31 Payments.
Subpart F--Appeals Procedures
294.33 Administrative determinations.

    Authority:  46 U.S.C. chapter 534, 49 CFR 1.93.

Subpart A--Introduction


Sec.  294.1  Purpose.

    This part prescribes regulations implementing subtitle B of Title 
XXXV of the National Defense Authorization Act for Fiscal Year 2021 
(Pub. L. 116-283), section 3511 and the National Defense Authorization 
Act for Fiscal Year 2022 (Pub. L. 117-81), section 3515, codified at 
Chapter 534 of Title 46, United States Code, governing the 
establishment of a Tanker Security Fleet of product tank vessels 
operating in the foreign trade or mixed foreign and domestic commerce 
of the United States permitted under a registry endorsement issued by 
the United States Coast Guard. The Department of Defense (DoD) and the 
Department of Transportation (DOT) have joint responsibility for the 
Tanker Security Fleet, with responsibility delegated to the Commander, 
United States Transportation Command through the Secretary of Defense, 
and the Maritime Administrator through the Secretary of Transportation.


Sec.  294.3  Definitions.

    For the purposes of this part:
    (a) Administrator means the Administrator, Maritime Administration, 
United States Department of Transportation.
    (b) Agreement Holder means the owner or operator of a Fleet Vessel, 
excluding a trust, that:
    (1) Meets the eligibility requirements of 46 U.S.C. 53402(c)(1), 
(2), (3), or (4); and
    (2) Enters into a Tanker Security Program Operating Agreement for 
the Fleet Vessel with the Secretary of Transportation pursuant to 46 
U.S.C. 53403.
    (c) Applicant means a person applying for a Tanker Security Program 
Operating Agreement, excluding trusts.
    (d) Classification society means the American Bureau of Shipping, 
or another classification society accepted by the Commandant of the 
United States Coast Guard.
    (e) CAP means Conditional Assessment Program, a voluntary program 
offered by classification societies intended to measure and document 
the actual technical and functional condition of tankers 15 years of 
age or more.
    (f) Coastwise trade means waterborne trade between points in the 
United States as defined in 46 U.S.C. chapter 551.
    (g) Commandant means the Commandant of the United States Coast 
Guard.
    (h) Commander means Commander, USTRANSCOM.
    (i) CR means continuing resolution.
    (j) Defense Contractor means a person that operates or manages 
United States-documented vessels for SecDef, or charters vessels to 
SecDef, and has entered into a special security agreement with SecDef.
    (k) Documentation Citizen means a person able to document a vessel 
under 46 U.S.C. chapter 121. This definition includes a United States 
Citizen Trust.
    (l) DoD means the United States Department of Defense.
    (m) Emergency Preparedness Agreement means a voluntary agreement 
established by the Maritime Administration (MARAD) under Section 708 of 
the Defense Production Act of 1950, as amended (50 U.S.C. 4558).
    (n) Fiscal Year means an annual period beginning on October 1 and 
ending on September 30.
    (o) Fleet means all Tanker Security Program (TSP) Fleet Vessels at 
any given time.
    (p) Fleet vessel means any product tank vessel operating under a 
Tanker Security Program Operating Agreement on or after January 1, 
2022, that--
    (1) meets the requirements of 46 U.S.C. 53402(b); and
    (2) is no more than 20 years of age.
    (q) Foreign commerce means commerce or trade between the United 
States, its territories or possessions, or the District of Columbia, 
and a foreign country; and commerce or trade between foreign countries.
    (r) Noncontiguous domestic trade means the waterborne 
transportation of cargo between a point in the contiguous 48 states and 
a point in Alaska, Hawaii, or Puerto Rico, other than a point in Alaska 
north of the Arctic Circle.
    (s) Person includes corporations, partnerships, and associations 
existing under, or authorized by, laws of the United States, or any 
State, territory, district, or possession thereof, or any foreign 
country.
    (t) Product tank vessel means a double-hulled tank vessel capable 
of carrying simultaneously more than 2 separated grades of refined 
petroleum products.
    (u) SecDef means the Secretary of Defense.
    (v) Secretary means the Secretary of Transportation unless the 
context indicates otherwise.
    (w) Section 50501 citizen means a person meeting the statutory 
qualifications for United States citizenship designation under 46 
U.S.C. 50501.
    (x) Tanker Security Program Operating Agreement or TSP Operating 
Agreement means the assistance agreement between an Agreement

[[Page 74982]]

Holder and MARAD that provides for payments under this part but is not 
a procurement contract.
    (y) United States Citizen Trust means:
    (1) Subject to paragraph (3) of this definition, a trust that is 
qualified under this definition.
    (2) A trust is qualified only if:
    (i) Each of the trustees is a section 50501 citizen; and
    (ii) The application for documentation of the vessel under 46 
U.S.C. chapter 121, includes the affidavit of each trustee stating that 
the trustee is not aware of any reason involving a beneficiary of the 
trust that is not a section 50501 citizen, or involving any other 
person that is not a section 50501 citizen, as a result of which the 
beneficiary or other person would hold more than 25 percent of the 
aggregate power to influence or limit the exercise of the authority of 
the trustee with respect to matters involving any ownership or 
operation of the vessel that may adversely affect the interests of the 
United States.
    (3) If any person that is not a section 50501 citizen has authority 
to direct or participate in directing a trustee for a trust in matters 
involving any ownership or operation of the vessel that may adversely 
affect the interests of the United States or in removing a trustee for 
a trust without cause, either directly or indirectly through the 
control of another person, the trust instrument provides that persons 
who are not section 50501 citizens may not hold more than 25 percent of 
the aggregate authority to so direct or remove a trustee.
    (4) This definition will not be considered to prohibit a person who 
is not a section 50501 citizen from holding more than 25 percent of the 
beneficial interest in a trust.
    (z) USTRANSCOM means United States Transportation Command.
    (aa) Vessel of the United States means a merchant vessel that has 
been documented under 46 U.S.C. chapter 121.


Sec.  294.5  Applications.

    (a) Applicants. Each applicant for a TSP Operating Agreement is 
required to apply to the Tanker Security Program, Maritime 
Administration, U.S. Department of Transportation, 1200 New Jersey 
Avenue SE, Washington, DC 20590. Electronic submissions must be 
submitted to [email protected]. Application forms are available 
upon request or may be downloaded from MARAD's website. Required 
information includes:
    (1) An Affidavit of section 50501 ctizenship that comports with the 
requirements of 46 CFR part 355, if applying as a section 50501 
citizen. Otherwise, an affidavit which demonstrates that the Applicant 
is qualified to document a vessel under 46 U.S.C. chapter 121 is 
required. If the Applicant is a vessel operator and proposes to employ 
a vessel manager, then the Applicant must supply an affidavit for the 
vessel manager that meets the same citizenship requirements as the 
Applicant;
    (2) Corporate documents, to include the following:
    (i) Certificate of Incorporation or other organization papers, 
including amendments presently in effect;
    (ii) Corporate by-laws or other governing instruments, including 
amendments presently in effect;
    (iii) Form or type of organization, i.e., individual, partnership, 
corporation, etc.;
    (iv) Federal, state, or other laws under which the Applicant is 
organized or incorporated, and the date of organization or 
incorporation;
    (v) Address of principal offices, and of important branch offices, 
if any;
    (vi) Description of domestic and international and corporate 
affiliations, including (but not limited to) parent companies, 
subsidiary companies, and other related companies within its corporate 
structure, along with a description of the nature of the business 
transacted with each affiliated corporation;
    (vii) Concerning each officer and director of the Applicant, 
provide name, address, nationality, number of shares owned and specify 
type of shares whether voting or non-voting;
    (viii) For each individual or entity that owns 5 percent or more of 
the outstanding capital shares of any class of stock of the Applicant, 
include the name, address, nationality, and number of capital shares 
owned and specify type of shares whether voting or non-voting; and
    (ix) A brief statement of the general effect of each voting 
agreement, voting trust, or other arrangement whereby the voting rights 
of 5 percent or more of the outstanding shares of the Applicant are 
owned, controlled, or exercised by any person not the holder of legal 
title to such shares. Give the name, address, nationality, and business 
of any such person, and if not an individual, the form of organization;
    (3) Financial data, to include the following:
    (i) An audited financial statement or a completed MARAD Form MA-172 
dated within 120 days after the close of the most recent fiscal period; 
and
    (ii) Estimated annual forecast of maritime operations for the next 
five years showing revenue and expense, including explanations of any 
significant increase or decrease of these items.
    (4) Maritime related affiliations including carriers or alliances 
with which the Applicant maintains an ongoing relationship;
    (5) Ongoing business relationships with any refineries, terminals, 
distributors, or other entities engaged in refined petroleum production 
and distribution, whether in the United States or in a foreign state, 
both at the time of application and, if applicable, projected to be 
established within the five years following the date of application;
    (6) Diversity of trading patterns. List of countries and trade 
routes serviced or trades in which the product tank vessel is to be 
operated, whether the vessel is to be operated on a voyage charter, or 
time charter, and any specific tanker pools the vessel is associated 
with;
    (7) Applicant's record of owning and/or operating product tank 
vessels, include the following:
    (i) Provide the number, type, and size of product tank vessels 
owned and/or operated in the last ten years, specifying whether owned 
or operated, flag(s) of the individual vessels, trades involved, number 
of employees in your ship operations department, including the number 
of employees directly employed in U.S.-flag operations;
    (ii) Operating experience with product tank vessels in 
international trade;
    (iii) Demonstration of reliability and breadth of services and 
experience;
    (iv) Experience in delivering services in accordance with 
government contracts or in relation to the carriage of DoD or other 
government sponsored cargoes;
    (v) Vessels owned by the applicant and chartered by other persons;
    (vi) Vessels chartered by the applicant from other persons--provide 
vessel name, flag of registry, period of charter, name of charterer or 
owner (as applicable) and area of operation;
    (vii) Vessel or ship managers utilized in the operation of your 
vessels; and
    (viii) Any other information you believe to be relevant to your 
record of owning or operating vessels.
    (8) Product tank vessel details and operational standards:
    (i) Vessel must be a party to the Oil Companies International 
Marine Forum's Ship Inspection Report (SIRE) System and applicant must 
provide date of last SIRE report.

[[Page 74983]]

    (ii) Applicant must confirm acceptances received and/or retained by 
the vessel since the last SIRE report.
    (iii) Applicant must confirm that the vessel has not been rejected 
or refused by any Charterer since the inspections leading to the said 
SIRE report.
    (iv) Applicant must provide a current Intertanko Standard Tanker 
Chartering Questionnaire 88 (Q-88) (no more than 60 days old).
    (v) Applicant must confirm vessel has vetting approval from at 
least two oil majors providing date of vetting and name of oil major, 
at least one vetting approval must be less than 6 months old at time of 
application.
    (vi) Applicant must provide a copy of vessel's current Class 
Society issued Safety Management Certificate.
    (vii) Applicant must provide a copy of vessel's current Flag State 
issued International Ship Security Certificate.
    (viii) Applicant must confirm vessel's ability to carry one 
complete un-decanted tank washing in dedicated slop tanks.
    (ix) Applicant must submit a General Arrangement Plan, trim and 
stability booklet, and a set of the ship's capacity and stowage plans. 
This is to include cargo piping. Applicants are to provide narrative 
descriptions to accompany the drawings indicating proposed locations of 
all required spaces and compartments listed in the military 
requirements.
    (x) Applicant must provide evidence of the vessel's most recent 
U.S. Coast Guard (USCG) and American Bureau of Shipping (ABS) (or other 
classification society accepted by the Commandant of the Coast Guard), 
inspections conducted within 12 months of the application.
    (xi) Applicant must warrant vessel meets, or will meet, before the 
start of a TSP Operating Agreement, the requirements of a Quality 
Management System (QMS). If an applicant does not currently have the 
required systems in place it will provide a narrative describing how it 
will have these required systems in place.
    (9) Provide an assessment of the utility of the product tank 
vessel(s) to DoD fuel transportation requirements including any 
specific national defense sealift features. Provide characteristics 
that indicate the utility of the product tank vessel(s) to DoD 
including items of specific value.
    (i) Applicant must provide an assessment of the vessel's ability to 
install CONSOL and the proposed locations for installation. CONSOL 
details may be found on the Maritime Administration's Tanker Security 
Program website at: https://www.maritime.dot.gov/national-security/tanker-security-program.
    (ii) Owner must confirm vessel's ability to sustain warranted speed 
of 14 knots, fully laden, in moderate weather (Force 4 on the Beaufort 
Scale).
    (iii) Provide the number and location of available berths for 
additional personnel beyond the ship crew.
    (10) Provide an assessment of the commercial viability of your 
proposed product tank vessel(s).
    (11) Provide any charters or management agreements that would 
govern the operation of the vessel if selected (pro forma copies are 
acceptable), including but not limited to the following:
    (i) Demise or bareboat charter;
    (ii) Vessel management agreement; and
    (iii) Crewing agreement.
    (12) Special security agreements. If applicable, provide a copy of 
any special security agreement.
    (13) Documentation Citizen. If applicable, the Documentation 
Citizen must submit a signed certification as the demise charterer of 
the proposed Fleet Vessel. The certification must provide a statement 
that there are no treaties, statutes, regulations, or other laws of the 
foreign country of the parent that would prohibit the proposed 
Agreement Holder from performing its obligations under a TSP Operating 
Agreement.
    (14) if operating under a foreign parent, the ultimate foreign 
parent of the Documentation Citizen demise charterer must submit a 
signed certification. The certification must provide a statement that 
the foreign parent will not influence the operation of the Fleet Vessel 
in a manner that will adversely affect the interests of the United 
States.
    (15) For a United States Citizen Trust agreement, ff the Applicant 
intends to place the vessel in a United States Citizen Trust during its 
operation in the fleet, provide a copy of any such trust agreement (pro 
forma copies are acceptable).
    (16) If applicable, provide a replacement product tank vessel plan 
if your product tank vessel is a fleet vessel over 10 years of age. The 
replacement product tank vessel plan must include:
    (i) The vessel's characteristics as applicable in items (8-9) 
above;
    (ii) A letter of intent or other document indicating agreement for 
purchase of product tank vessel; and
    (iii) A forecast of operations for five years for the replacement 
product tank vessel.
    (17) Special rule regarding age of participating fleet vessel. Age 
restrictions will not apply during the first 30-month period beginning 
on the date the vessel begins operating under the TSP Operating 
Agreement if the Secretary determines that the participant has entered 
an arrangement to obtain a replacement vessel that will be eligible to 
be included in a TSP Operating Agreement.
    (18) Provide an anti-lobbying certificate as required by 49 CFR 
part 20 stating that no funds provided under the TSP have been used for 
lobbying to obtain a TSP Operating Agreement.
    (b) Procedures for applications. (1) Address. Owners or operators 
of an eligible vessel may apply to MARAD for inclusion of that vessel 
in the fleet. Applications may be submitted electronically to 
[email protected] or in hard copy to the Tanker Security Program, 
Maritime Administration, U.S. Department of Transportation, 1200 New 
Jersey Avenue SE, Washington, DC 20590.
    (2) Time deadlines. Within 90 days after the close of the 
application period, the Secretary will approve an application, in 
conjunction with the SecDef, or provide in writing the reason for 
denial of that application.
    (3) Existing maritime security fleet vessels. The Secretary may 
approve a completed application from an Applicant that, on the date of 
its application, is operating a product tank vessel in the Maritime 
Security Fleet in accordance with 46 U.S.C. chapter 531 and 46 CFR part 
296.


Sec.  294.7  Procedural waivers.

    In consultation with DoD, MARAD may, at MARAD's own initiation or 
in response to a request by an interested party, after a finding of 
good cause to suspend, revoke, amend, or waive any requirement of the 
regulations in this part, subject to the provisions of the 
Administrative Procedure Act and any statutory limitations.

Subpart B--Establishment of a Tanker Security Fleet


Sec.  294.9  Product tanker vessel eligibility requirements.

    (a) Eligibility. To be eligible to be included in the fleet, the 
vessel must:
    (1) Meet the requirements of Sec.  294.11;
    (2) Operate (or in the case of a vessel to be constructed, will be 
operated) in providing transportation in United States foreign 
commerce;
    (3) Be self-propelled;
    (4) Be not more than 10 years of age on the date the vessel is 
first included in the Fleet;
    (5) Be suitable for use by the United States for national defense 
or military purposes in time of war or national emergency, as 
determined by the Secretary of Defense;

[[Page 74984]]

    (6) Be commercially viable, as determined by the Secretary of 
Transportation; and
    (7) Be--
    (i) A vessel of the United States; or
    (ii) Not a vessel of the United States, but the owner of the vessel 
has demonstrated that--
    (A) The vessel is eligible for a USCG certificate of inspection; 
and
    (B) The vessel owner intends to have the vessel documented under 46 
U.S.C. chapter 121 at the time the vessel is to be included in the 
fleet.
    (b) Telecommunications and other electronic equipment. The 
telecommunications and other electronic equipment on an existing vessel 
that is redocumented under the laws of the United States for operation 
under a TSP Operating Agreement will satisfy all Federal Communications 
Commission equipment certification requirements if:
    (1) The equipment complies with all applicable international 
agreements and associated guidelines as determined by the country in 
which the vessel was documented immediately before becoming documented 
under the laws of the United States;
    (2) The country has not been identified by the Secretary as 
inadequately enforcing international regulations as to that vessel; and
    (3) The equipment, at the end of its useful life, will be replaced 
with equipment that meets Federal Communications Commission equipment 
certification standards.


Sec.  294.11  Owner, charterer, and operator citizenship eligibility 
requirements.

    Eligibility determination. For a vessel to be eligible to be 
included in the Fleet, vessel owners, charterers, and operators must 
evidence that, during the period of a TSP Operating Agreement, one of 
the following must be true:
    (a) The vessel is owned and operated by one or more persons that 
are citizens of the United States in accordance with 46 U.S.C. 50501.
    (b) The vessel is owned by a citizen of the United States in 
accordance with 46 U.S.C. 50501, or United States Citizen Trust, and 
the following conditions are met:
    (1) The vessel is demise chartered to a person or entity that:
    (i) Is eligible to document the vessel under 46 U.S.C. chapter 121;
    (ii) Is organized such that the chairman of the board of directors, 
chief executive officer, and most of the members of the board of 
directors are citizens of the United States, and are appointed and 
subjected to removal only upon approval by the Secretary;
    (iii) Certifies to the Secretary that there are no treaties, 
statutes, regulations, or other laws that would prohibit the program 
participant for the vessel from performing its obligations under a TSP 
Operating Agreement; and
    (iv) In the case of a vessel that is demise chartered to an entity 
that is owned or controlled by another person or entity that is not a 
citizen of the United States under 46 U.S.C. 50501, that other person 
or entity certifies to the Secretary that there are no treaties, 
statutes, regulations, or other laws that would prohibit the person or 
entity from performing its obligations under a TSP Operating Agreement 
and enters into an agreement with the Secretary not to influence the 
vessel's operation in any way that would be detrimental to the United 
States.
    (2) The Secretary and SecDef notify the Committee on Armed Services 
and the Committee on Commerce, Science, and Transportation of the 
Senate and the Committee on Armed Services and the Committee on 
Transportation and Infrastructure of the House of Representatives that 
the Secretaries concur with the certifications by the documentation 
citizen required under Sec.  294.5(a)(13), and any ultimate foreign 
parent corporation under Sec.  294.5(a)(14), and after a review, agree 
that there are no legal, operational, or other impediments that would 
prohibit the owner or operator of the vessel from performing its 
obligations under a TSP Operating Agreement.
    (c) The vessel is owned and operated by a defense contractor, 
including affiliated or related companies within the same corporate 
group, that meets the following requirements:
    (1) Eligible to document the vessel under 46 U.S.C. chapter 121;
    (2) Operates or manages other United States-documented vessels for 
the SecDef, or charters other vessels to the SecDef;
    (3) Enters into a special security agreement with the SecDef;
    (4) Certifies to the Secretary, at the time of application and 
consistent with Sec.  294.5(a)(13), that there are no treaties, 
statutes, regulations, or other laws that would prohibit the Agreement 
Holder from performing its obligations under a TSP Operating Agreement; 
and
    (5) Any foreign corporate parent company of the Defense Contractor 
proffers, at the time of application for a TSP Operating Agreement, an 
agreement consistent with Sec.  294.5(a)(14), not to influence the 
vessel's operation in a way that is detrimental to the United States.
    (d) The vessel is owned by a Documentation Citizen in accordance 
with 46 U.S.C. Chapter 121 and demise chartered to a Citizen of the 
United States in accordance with 46 U.S.C. 50501.


Sec.  294.13  Special rule for fleet vessel entry age.

    An Applicant may apply for a TSP Operating Agreement with a vessel 
that exceeds the maximum entry age requirement of Sec.  294.9(a)(4), if 
it satisfies the following conditions:
    (a) The Applicant demonstrates their intent to replace the non-
compliant vessel within 30 months after the commencement of operations 
under a TSP Operating Agreement;
    (b) Nominated vessels 15 years or older must be enrolled in a 
classification society's CAP and be rated equivalent to ABS CAP 2 or 
better; and
    (c) The Secretary determines that the Applicant has entered into an 
agreement to obtain and operate a replacement product tank vessel 
which, upon commencing operation under the same TSP Operating Agreement 
for the non-compliant vessel, will be eligible to be included in the 
fleet under Sec.  294.9.

Subpart C--Award of TSP Operating Agreements


Sec.  294.15  Initial award of TSP Operating Agreements.

    (a) Number of agreements. The Secretary, in concurrence with 
SecDef, may award up to ten TSP Operating Agreements for the operation 
of product tank vessels from among those applications submitted by 
qualified Applicants. If the Secretary and SecDef are unable to select 
ten vessels for inclusion in the Fleet from their initial review of 
applications, they may accept additional applications for review to 
ensure that the Secretary can award ten TSP Operating Agreements.
    (b) Vessel selection priority. In consideration of the 
applications, the Secretary and SecDef will consider each Applicant's 
vessel(s)'s qualifications as they relate to subpart B and will give 
priority to applications based on the criteria in paragraphs (b)(1) 
through (3) of this section:
    (1) Vessel capabilities, as established by SecDef;
    (2) Applicant's record of vessel ownership and operation of tanker 
vessels; and
    (3) Applicant's citizenship, with preference for section 50501 
citizens.
    (c) Consideration of applications requesting an age waiver. If an 
Applicant applies for a TSP Operating Agreement under the provisions of 
Sec.  294.15, the Secretary and SecDef will consider:
    (1) Whether the vessel is enrolled in its class society's CAP and 
has

[[Page 74985]]

maintained a rating equivalent to ABS CAP 2 or better;
    (2) The vessel priority factors in Sec.  294.15(b) for both the 
proposed non-compliant vessel and the vessel proposed to replace the 
non-compliant vessel within the initial 30 months of the TSP Operating 
Agreement; and
    (3) The feasibility of the Applicant's plan to obtain and operate 
the compliant replacement vessel within the initial 30 months of the 
TSP Operating Agreement.
    (d) Notification to Applicants. After the Secretary, in concurrence 
with SecDef, has selected those vessels to be included in the Fleet, 
the Secretary will notify all Applicants as to whether their 
applications were successful or unsuccessful.
    (1) For each successful application, the Secretary will extend an 
offer to the Applicant to enter into one or more TSP Operating 
Agreements, based on the number of vessels selected from the 
Applicant's application for inclusion into the Fleet. Successful 
Applicants will have up to 90 days in which to accept or decline the 
Secretary's offer.
    (2) For each unsuccessful application, the Secretary will inform 
the Applicant of the reason(s) why the application was unsuccessful.


Sec.  294.17  Subsequent award of TSP Operating Agreements.

    (a) Availability. When a TSP Operating Agreement becomes available 
through termination by the Secretary or early termination by an 
Agreement Holder, and no transfer under 46 U.S.C. 53405(e) is involved, 
MARAD will accept applications for a new TSP Operating Agreement 
pursuant to paragraphs (a)(1) through (3) of this section:
    (1) The proposed vessel must meet the requirements of Sec.  294.9;
    (2) The Applicant must meet the requirements of Sec.  294.11; and
    (3) The Applicant must apply in accordance with the requirements of 
Sec.  294.5.
    (b) Consideration of applications. The Secretary and SecDef will 
consider all applications within the priority structure of Sec.  
294.15(b).
    (c) Notification and award of a new TSP Operating Agreement. Upon 
selection of the best-qualified vessel(s) from among the applications 
received, MARAD will enter into a new TSP Operating Agreement with the 
successful Applicant as soon as is practicable. Successful Applicants 
must notify the Secretary of their acceptance of an offer to enter into 
a TSP Operating Agreement within 90 days.


Sec.  294.19  Nature of award procedure.

    TSP furthers a public purpose and MARAD does not acquire goods or 
services through TSP. Therefore, the selection process for awarding TSP 
Operating Agreements does not constitute an acquisition subject to 
procurement law or the Federal Acquisition Regulation.

Subpart D--TSP Operating Agreements


Sec.  294.21  General conditions.

    (a) Number of agreements. The Secretary may enter into up to ten 
TSP Operating Agreements for vessels that were either selected in 
accordance with Sec.  294.15 or which, on the effective date of a TSP 
Operating Agreement, were operating under an MSP Operating Agreement in 
accordance with 46 U.S.C. chapter 531 and 46 CFR part 296, for fiscal 
year 2022 and any prior fiscal year.
    (b) Term of agreements. All TSP Operating Agreements will be 
effective for one fiscal year and subject to the availability of 
appropriations, may be renewed for each subsequent fiscal year through 
the end of fiscal year 2035.
    (c) Replacement vessels. An Agreement Holder may replace a vessel 
under a TSP Operating Agreement with another vessel that is eligible to 
be included in the fleet under Sec.  294.9, if the Secretary, in 
conjunction with SecDef, approves the replacement vessel.
    (d) Termination by the Secretary. If an Agreement Holder fails to 
comply with the terms of a TSP Operating Agreement:
    (1) The Secretary will notify the Agreement Holder and provide a 
reasonable opportunity for the Agreement Holder to comply with the 
terms and conditions of the TSP Operating Agreement; and
    (2) The Secretary will terminate the TSP Operating Agreement if the 
Agreement Holder fails to achieve such compliance.
    (e) Termination by the Secretary for long-term charter. If an 
Agreement Holder time charters a vessel enrolled in the TSP to the 
United States Government for a period that together with options, 
occurs for more than 180 continuous days, then the Secretary will 
terminate the TSP Operating Agreement.
    (f) Early termination by an Agreement Holder. The Agreement Holder 
must notify the Secretary no later than 60 days before the proposed 
effective termination date that the Agreement Holder intends to 
terminate the TSP Operating Agreement. Even after early termination of 
the Operating Agreement, the Agreement Holder will remain bound by the 
provisions related to vessel documentation and national security 
requirements, including any commitments under an Emergency Preparedness 
Agreement, for the full term of the TSP Operating Agreement.
    (g) Nonrenewal for lack of funds. If only partial funding is 
appropriated by the 60th day of the fiscal year, then the Secretary, in 
consultation with SecDef, will select the vessels to retain under TSP 
Operating Agreements, based on the Secretaries' determinations of the 
most militarily useful and commercially viable vessels. If no funds are 
appropriated by the 60th day of such fiscal year, and notwithstanding 
any other provision, then all TSP Operating Agreements will be 
terminated, and each Agreement Holder will be released from its 
obligations under the TSP Operating Agreement. Final payments under the 
terminated TSP Operating Agreements will be made in accordance with 
Sec.  294.31. To the extent that funds are appropriated in a subsequent 
fiscal year, former TSP Operating Agreements may be reinstated if 
mutually acceptable to the Administrator and the Agreement Holder, 
provided the TSP vessel remains eligible.
    (h) Release of vessels from obligations. For Agreement Holders who 
have been released from their obligations under a TSP Operating 
Agreement due to lack of funds in any fiscal year by the 60th day of 
that fiscal year,
    (1) The Agreement Holder may transfer and register each vessel 
covered by a terminated TSP Operating Agreement to a foreign registry 
that is acceptable to the Secretary and SecDef, notwithstanding 46 
U.S.C. chapter 561 and 46 CFR part 221;
    (2) If 46 U.S.C. chapter 563 is applicable to a vessel that has 
been transferred to foreign registry due to the termination of a TSP 
Operating Agreement, then that vessel remains available to be 
requisitioned by the Secretary pursuant to 46 U.S.C. chapter 563; and
    (3) The provisions of this section do not apply to vessels under 
TSP Operating Agreements that have been terminated for any other 
reason.
    (i) Transfers of TSP Operating Agreements. An Agreement Holder may 
transfer a TSP Operating Agreement, including all rights and 
obligations under the TSP Operating Agreement, to any person that is 
eligible under Sec.  294.11 to enter into a TSP Operating Agreement, if 
the Secretary and SecDef jointly determine that the transfer is in the 
best interests of the United States. A transaction is not considered a 
transfer

[[Page 74986]]

of a TSP Operating Agreement if the same legal entity with the same 
vessels remains the Agreement Holder under the TSP Operating Agreement.


Sec.  294.23  Special terms.

    (a) TSP Operating Agreement. Each TSP Operating Agreement will 
require that, during the period a fleet vessel is operating under that 
TSP Operating Agreement, the fleet vessel must:
    (1) Be documented as a vessel of the United States under 46 U.S.C. 
chapter 121;
    (2) Operate exclusively in:
    (i) Foreign commerce;
    (ii) Mixed foreign commerce and domestic trade permitted under a 
registry endorsement issued under 46 U.S.C. 12111, and to those points 
identified in 46 U.S.C. 55101(b);
    (iii) Foreign-to-foreign commerce; or
    (iv) Under charter to the United States, except as provided in 46 
U.S.C. 53404(b); and
    (3) Not otherwise operate in the coastwise trade of the United 
States;
    (4) Not receive payments during a period in which the Agreement 
Holder owns, operates, or charters a vessel engaged in noncontiguous 
domestic trade, unless the Agreement Holder is a section 50501 citizen, 
applying the 75 percent ownership requirements of 46 U.S.C. 50501; and
    (5) Enroll, for vessels 15 years or older, in their classification 
society's CAP and maintain a CAP rating of 2 or better.
    (b) Operating agreement as an obligation of the United States 
government. The amounts payable to an Agreement Holder under a TSP 
Operating Agreement constitute a contractual obligation of the United 
States Government to the extent of actual appropriations.
    (c) Operating under a Continuing Resolution. In the event funds are 
available under a Continuing Resolution (CR), the terms and conditions 
of the TSP Operating Agreements will be in force provided sufficient 
funds are available to fully meet obligations under TSP Operating 
Agreements, and only for the period stipulated in the applicable CR. If 
funds are not appropriated under a CR at sufficient levels for any 
portion of a fiscal year, the Secretary will select the vessels to 
retain within the funding level of the previous fiscal year, in 
consultation with the SecDef, based on the Secretaries' determination 
of the most militarily useful and commercially viable vessels. For any 
Agreement Holder with a TSP Operating Agreement that does not receive 
funds, the terms and conditions of any applicable TSP Operating 
Agreement may be voided, and the Agreement Holder may request 
termination of the TSP Operating Agreement.
    (d) National security. Each TSP Operating Agreement will require 
the Agreement Holder to enter into a Voluntary Tanker Agreement (VTA), 
as approved by the Secretary and the SecDef, or other agreement 
approved by the Secretaries.
    (e) United States Merchant Marine Academy cadet training. The 
Agreement Holder must agree:
    (1) To carry on the fleet vessel two United States Merchant Marine 
Academy cadets, if available, on each voyage; and
    (2) To implement prior to accepting an Operating Agreement 
appropriate policies, programs, and criteria necessary to comply with 
all MARAD cadet safety guidelines that address sexual harassment, 
sexual assault, and other inappropriate conduct.
    (3) Upon a finding of non-compliance, the Administrator may require 
the Agreement Holder to take corrective actions or find such failure to 
constitute a violation of the TSP Operating Agreement.


Sec.  294.25  National security modifications.

    A participant agrees to the installation onboard its Fleet Vessel 
of militarily useful features for national defense purposes as approved 
by U.S. Coast Guard and the vessel's classification society.


Sec.  294.27  Financial reporting.

    The Agreement Holder must submit the following reports to MARAD, 
including management footnotes where necessary to make a fair financial 
presentation:
    (a) Vessel operating cost information. Not later than 120 days 
after the close of the Agreement Holder's semiannual accounting period, 
a Form MA-172 on a semiannual basis, in accordance with 46 CFR 232.6; 
and
    (b) Financial statement. Not later than 120 days after the close of 
the Agreement Holder's annual accounting period, an audited financial 
statement in accordance with 46 CFR 232.6 and the most recent vessel 
operating cost data submitted as part of its Emergency Preparedness 
Agreement, or if not current year data, a Schedule 310 of the MA-172.

Subpart E--Billing and Payment


Sec.  294.29  Billing procedures.

    All Agreement Holders must submit a voucher to the Maritime 
Administration for payment. For Agreement Holders operating under more 
than one TSP Operating Agreement, the Agreement Holder may submit a 
single monthly voucher applicable to all its TSP Operating Agreements. 
Each voucher submission must include a certification that the vessel(s) 
for which payment is requested were operated in accordance with Sec.  
294.23(a) and applicable TSP Operating Agreements. All submissions must 
be forwarded to the Tanker Security Program, Maritime Administration, 
via email to [email protected]. Payments will be paid and 
processed under the terms and conditions of the Prompt Payment Act, 31 
U.S.C. 3901, et seq.


Sec.  294.31  Payments.

    (a) Amount payable. A TSP Operating Agreement will provide for each 
Fleet Vessel, an annual payment, subject to the availability of 
appropriations, equal to $6,000,000 for each of fiscal years 2022 to 
2035. This amount will be paid in equal monthly installments at the end 
of each month. The annual amount payable will not be reduced except as 
provided in paragraphs (b) and (c) of this section.
    (b) Reductions in amount payable. The annual amount otherwise 
payable under a TSP Operating Agreement will be reduced on a pro rata 
basis for each day less than 320 days in a fiscal year that a Fleet 
Vessel is not operated in accordance with Sec.  294.23(a)(1) through 
(3).
    (c) No payment. (1) Regardless of whether the Agreement Holder has 
or will operate the Fleet vessel for 320 days a year, the Agreement 
Holder will not be paid:
    (i) For any day in which the TSP Vessel is engaged in transporting 
more than 7,500 tons of civilian bulk preference cargoes pursuant to 46 
U.S.C. 55302(a), 55305, or 55314 (using the United States standard of 
short tons, which is equivalent to 6,803.85 metric tons or 6,696.75 
long tons);
    (ii) During a period in which the Agreement Holder participates in 
noncontiguous domestic trade, unless that Agreement Holder is a Section 
50501 Citizen, applying the 75 percent ownership requirement of that 
Section;
    (iii) For any days in which the Agreement Holder operates a TSP 
Vessel that is 15 years or older which is not enrolled in their 
classification society's CAP or is not maintaining a CAP rating of 2 or 
better;
    (iv) For any day in which the Agreement Holder operates a TSP 
Vessel that is in excess of 20 years of age;
    (v) For days in excess of 30 days in a fiscal year in which a 
vessel is drydocked or undergoing survey,

[[Page 74987]]

inspection, or repair, unless, prior to the expiration of the vessel's 
30-day drydock and repair period, the Agreement Holder obtains approval 
from MARAD for an extension beyond 30 days;
    (vi) For any day in which the Agreement Holder does not, at the 
request of the Administrator, carry up to two United States Merchant 
Marine Academy cadets onboard; and
    (vii) If the Agreement Holder does not operate or maintain the 
Fleet Vessel in accordance with the terms of the TSP Operating 
Agreement.
    (2) To the extent that non-payment days under paragraph (c) of this 
section are known, Agreement Holder payments will be reduced at the 
time of the current billing. The daily reduction amounts will be based 
on the annual amounts in paragraph (a) of this section divided by 365 
days (366 days in leap years) and rounded to the nearest cent.
    (3) MARAD may require, for good cause, that a portion of the funds 
payable under this section be withheld if the provisions of Sec.  
294.23(a) have not been met.
    (4) Amounts owed to MARAD for reductions applicable to a prior 
billing period must be electronically transferred using MARAD's 
prescribed format, or the amount owed can be credited to MARAD by 
offsetting amounts payable in future billing periods.

Subpart F--Appeals Procedures


Sec.  294.33  Administrative determinations.

    (a) Policy. An Agreement Holder who disagrees with the findings, 
interpretations, or decisions of MARAD with respect to the 
administration of this part or any other dispute or complaint 
concerning the Agreement Holder's TSP Operating Agreement(s) may submit 
an appeal to the Administrator. The appeals must be made in writing to 
the Maritime Administrator, within 60 days following the date of the 
document notifying the Agreement Holder of the administrative 
determination of MARAD. Such an appeal should be addressed to the 
Maritime Administrator, Attn.: TSP Operating Agreement Appeals, 
Maritime Administration, 1200 New Jersey Avenue SE, Washington, DC 
20590 or via email to [email protected]. An appeal is a 
prerequisite to exhausting administrative remedies.
    (b) DoD determinations. 46 U.S.C. chapter 534 assigns joint and 
separate roles and responsibilities to the Secretary and the SecDef. 
The Administrator and the Commander will make joint and separate 
findings, interpretations, and decisions necessary to implement 46 
U.S.C. chapter 534. An Agreement Holder who disagrees with the initial 
findings, interpretations, or decisions regarding the implementation of 
46 U.S.C. chapter 534--whether joint or separate in nature--must 
communicate such disagreement to MARAD. Any disagreement or dispute of 
an Agreement Holder may, where determined appropriate by MARAD, be 
transferred to the Director of Policy and Plans, USTRANSCOM for 
resolution. An Agreement Holder who disagrees with the findings, 
interpretations, or decisions of the Director of Policy and Plans, 
USTRANSCOM, with respect to the administration of this part, may submit 
an appeal to the Commander. Such an appeal must be made in writing to 
the Commander within 60 days following the date of the document 
notifying the Agreement Holder of the administrative determination of 
the Director of Policy and Plans. Such an appeal should be addressed to 
the Commander, United States Transportation Command, 508 Scott Drive, 
Scott Air Force Base, IL 62225-5357. or via email to 
[email protected].
    (c) Process. The Administrator, or the Commander in the case of a 
DoD determination, may require the person making the request to furnish 
additional information, or proof of factual allegations, and may order 
any proceeding appropriate in the circumstances. The decision of the 
Administrator, or the Commander in the case of a DoD determination, 
will be administratively final.

(Authority: 46 U.S.C. chapter 534, 49 CFR 1.93)


    By order of the Maritime Administrator.
T. Mitchell Hudson, Jr.,
Secretary, Maritime Administration.
[FR Doc. 2022-26358 Filed 12-6-22; 8:45 am]
BILLING CODE 4910-81-P