PART 272—REQUIREMENTS AND PROCEDURES FOR CONDUCTING CONDITION SURVEYS AND ADMINISTERING MAINTENANCE AND REPAIR SUBSIDY Authority: 46 App. U.S.C. 1114(b), 1173, 1176; 49 CFR 1.66. Source: 55 FR 34919, Aug. 27, 1990, unless otherwise noted. Subpart A—General § 272.1 Purpose. The purpose of this part is to prescribe the requirements and procedures for determining the condition of vessels receiving operating-differential subsidy, to prescribe the requirements for reporting and substantiating maintenance and repair (M&R) expenses, and to establish the criteria and procedures for determining whether a M&R expense is subsidizable. § 272.2 Scope. Except as otherwise provided in subpart B, the provisions of this part apply only to vessels operating under an operating-differential subsidy agreement which provides for the payment of M&R subsidy, except that this part does not apply to any vessel operating under an operating-differential subsidy agreement for the carriage of bulk raw and processed agricultural commodities from the United States to the Union of Soviet Socialist Republics, pursuant to part 294 of this chapter. § 272.3 Definitions. For the purposes of this part: (a) Act et seq. (b) MARAD (c) Board (d) Domestic Origin: (1) Labor. (2) Materials. (e) Eligible Vessel (f) Equipment (g) Expendable equipment (h) Improvement (i) M&R M&R Subsidy (j) ODS ODSA (k) Operator (l) Permanent equipment (m) Region Office (n) Spare parts (o) United States § 272.4 Effective date. The provisions of this part apply to voyages of every Eligible Vessel which terminate on or after September 26, 1990. § 272.5 Prior instructions superseded. The provisions of this part supersede any provisions of MARAD Circular Letters and Accounting Instructions applicable to M&R and dated prior to the effective date of these regulations to the extent that the provisions of this part may be inconsistent with the provisions of such prior instructions. Subpart B—Requirements and Procedures for Determining the Condition of Eligible Vessels § 272.11 Scope. This subpart applies to any Eligible Vessel, other than one operating under an ODSA subject to part 294 of this chapter. § 272.12 Determining the condition of eligible vessels. The Operator of an Eligible Vessel shall make the vessel available whenever MARAD may require, in any of the following instances: (a) At the commencement of the first subsidized voyage, except for a newly constructed vessel which enters subsidized service immediately upon delivery by the shipyard, and for which there is a prior condition survey report. If that subsidized service commences outside the continental limits of the United States, the vessel may be surveyed at the first United States port of call; (b) At the commencement of the first voyage following the effective date for M&R subsidy established by MARAD, if such M&R rate was not established at the commencement of the vessel's first voyage; (c) Upon the discontinuance of a M&R subsidy rate; (d) Upon resumption of subsidized voyages after temporary withdrawal from subsidized operation. The vessel shall not be considered as having been temporarily withdrawn from subsidized service if it performed unsubsidized voyages in a subsidized service of the Operator; (e) Upon withdrawal from subsidized service, either temporarily (subject to the provisions of paragraph (d) of § 272.14), or permanently; (f) During the dry docking period incident to the vessel's American Bureau of Shipping Special Surveys; (g) Upon termination of the last voyage under the ODSA, or at the end of the contract period, with respect to subsidized vessels in idle status at that time; or (h) At any other time that MARAD considers to be appropriate. § 272.13 Operator's responsibilities. Whenever MARAD notifies an Operator that a survey of an Eligible Vessel is required under this section, the Operator shall: (a) Make the vessel immediately available for survey if the vessel is in a port of the United States at the time of notification, or make the vessel available for survey immediately upon arrival at the first port of call in the United States if the vessel is not in a port of the United States at the time of notification; and (b) Furnish to the Secretary of the Board the following: (1) A copy of each American Bureau of Shipping report and every other salvage association or damage survey report; and (2) Copies of certificates or other evidence of compliance with applicable laws, rules, and regulations as to vessel condition and operation, including, but not limited to, those administered by the United States Coast Guard, Environmental Protection Agency, Federal Communications Commission, Public Health Service, or their respective successors, and compliance with all applicable treaties and conventions to which the United States is a signatory. (Approved by the Office of Management and Budget under control number 2133-0007) § 272.14 Survey procedures. (a) Prior to survey. (b) Operator's assistance to surveyor. (c) On-subsidy surveys. (1) Vessel survey. (2) On-subsidy survey report. (i) Ship Survey Report, Form MA-58; and (ii) As appropriate for the circumstances of the survey and the respective vessel, Forms MA-55 (Turbines and Gears Report); MA-56 (Tooth Contact Report); MA-57 (Drydock Report); and MA-59 (Measurements of Piston Rings and Grooves). (d) Off-subsidy surveys. (1) Repair specifications. (2) Off-subsidy survey report. § 272.15 Execution of condition survey reports. Every survey report shall be signed by: (a) The Operator's representative, when designated pursuant to § 272.13(a), but only if that representative was in attendance during the survey; (b) The Operator's superintendent engineer or equivalent; (c) The marine surveyor who conducted the survey; and (d) The appropriate representative of the Region Office for the Region in which the survey was conducted. § 272.16 Non-compliance with survey requirements. MARAD may disallow any one or more M&R claims otherwise eligible for subsidy if an Operator fails to: (a) Contact the appropriate Region Office as required by § 272.14(a); (b) Comply with provisions of § 272.14(c)(1) with respect to repair specifications, or to make the vessel reasonably available for inspection before its next sailing; or (c) Comply with any other requirement specified in this subpart B. Subpart C—Eligibility Criteria for M&R Subsidy; Substantiation of M&R Expenses § 272.21 General eligibility criteria. (a) Eligible maintenance and repairs. (1) Performed on an Eligible Vessel; (2) Necessary, because of subsidized operation, for the M&R or replacement of damaged or worn parts of the vessel's hull, machinery, or Permanent Equipment; (3) Uncompensated by insurance; (4) Considered fair and reasonable by the Board; (5) Of Domestic Origin; and (6) Otherwise eligible in accordance with provisions of this part. (b) Off-subsidy survey items. (1) Paragraphs (a) (1) through (6) of this section are met; (2) The work is accomplished by the Operator before or during the next drydocking period (periodic or otherwise); and (3) The vessel is either owned by the same Operator who owned it at the time of the off-subsidy survey, or ownership was transferred to the Federal Government pursuant to section 510 of the Act (46 App. U.S.C. 1160). (c) Operator furnished items. (1) The items for which the cost was incurred are issued by the Operator from ship's inventory or the Operator's shoreside inventory, or are issued by direct purchase to the ship repair yard, other independent contractor, or shore gang labor; and (2) No subsidy, whether M&R or otherwise, has previously been paid for such material, supplies, or both; and (3) The items are of Domestic Origin. (d) Costs associated with shore gang labor. (1) For direct labor charges; (2) For eligible Spare Parts, as described in paragraph (e) of this section; or (3) Incidental to the payment of wages for the direct labor, to the extent that such costs are required by State or Federal law or by collective bargaining agreements. (e) Spare parts. (1) Necessary for eligible M&R; (2) Issued by the Operator from the Operator's shoreside inventory or issued by direct purchase to a U.S. ship repair yard, U.S. independent contractor, or U.S. shore gang labor; and (3) Placed aboard an Eligible Vessel, and (4) Of Domestic Origin. § 272.22 Improvements and other similar work. (a) Eligible expenditures. (b) Capital expenditures. (1) The Operator submits a written request to the Director, Office of Ship Operations, for consideration of the expenditures; (2) The Director determines that the work is an Improvement and is technically acceptable; and (3) The Associate Administrator for Maritime Aids approves M&R subsidy for the work, as appropriate, pursuant to the provisions of title VI of the Act. (c) Improvements performed in more than one repair period. § 272.23 Examples of ineligible expenses. Expenses ineligible for M&R subsidy participation include, but are not limited to, the following examples: (a) Specialized improvements. (b) Convenience items. (c) Unsupported expenses. (d) Untimely requests for review. (e) Untimely appeals. (f) Absence of notice of multi-repair period Improvements. (g) Cargo expenses. (h) Stevedore damage. (i) Rented equipment. (j) Special requirements for trade routes. (k) General operating expenses. (l) Items attributable to unsubsidized operations. (1) In subsidized service, or (2) Upon resumption of subsidized operation following temporary withdrawal. (m) Overdue classification and inspection requirements. (1) In subsidized service, or (2) Upon resumption of subsidized operation following temporary withdrawal, except when such work is attributable to prior subsidized service. (n) Foreign maintenance and repairs. (o) Marine or other loss. (p) Consumables, expendables. (q) Excessive costs. (r) Overhead costs. (s) Guarantee items. [55 FR 34919, Aug. 27, 1990, as amended at 57 FR 34690, Aug. 6, 1992] § 272.24 Subsidy repair summaries. (a) Filing requirements. (1) The close of the calendar quarter in which a voyage is terminated, or (2) The date the reported vessel is temporarily or permanently withdrawn from subsidized service. (b) Form requirements. This is to certify that, to the best of my knowledge and belief, and based on recorded entries through ( Date (c) Categorization. (1) Claimed for subsidy. (i) M&R (ii) Spare Parts (iii) Improvements (2) Marine loss. (3) Non-subsidized items. (d) Required supporting documents and information General. (2) U.S. Independent contractors. (3) Operator's shore gang. (4) Operator furnished material. (5) Spare parts. (6) Foreign repairs. (Approved by the Office of Management and Budget under control number 2133-0007) § 272.25 Requirements for subsidy repayment. (a) Repayment of M&R subsidy for compensated marine or other loss. (b) Repayment of M&R subsidy for Improvements—three year service requirement. (c) Repayment of M&R subsidy due to allocation of costs. (d) Administrative action. Subpart D—Penalties § 272.31 Determination of penalty. Operators whose Eligible Vessels have undergone foreign repairs, which MARAD determines are non-emergency in nature, may be subject to a penalty in an amount equal to the total cost (exclusive of applicable U.S. Customs duties) of such foreign repairs and purchases, such penalty to be effected by a deduction from the Operator's total ODS otherwise accrued. The Director, Office of Ship Operating Assistance, shall notify the Operator by letter with respect to: (a) MARAD's determination of a penalty and the reasons therefore; and (b) Whether the determination is final or subject to the submission of additional information. § 272.32 Mitigation of penalty. The Director, Office of Ship Operating Assistance, may decide, after a non-emergency foreign repair occurs, to mitigate the penalty. Any mitigation of penalty shall be based on a determination that special circumstances existed at the time of repair. The Director shall not consider the difference in the price of foreign and domestic repair work in making this determination, and shall not grant prior approval of foreign repairs. In determining whether special circumstances existed, the Director shall consider, among others, the following factors: (a) The trading area of the vessel both before and after the repair was performed; (b) Loss of revenue and effect on vessel utilization if the vessel had returned to the United States for repairs; (c) The additional operating expense which would have resulted from a return to the United States to repair the vessel; and (d) Whether the repairs could have been deferred until return to the United States, taking into consideration the Coast Guard requirements for dry docking and special surveys. § 272.33 Appeals. The Operator may appeal final penalty determinations of the Director, Office of Ship Operating Assistance, to the Board, as provided in § 272.43(c) of this part. Subpart E—Examination, Audit, Review and Appeal Procedures § 272.41 Requirements for examination and allocation of M&R expenses. (a) Examination requirement. (b) Operator's responsibility. (c) Notification of examination results. (d) Record retention requirements. (1) Limitation on approval. (2) Status report on approved marine loss items. (i) The date on which all repairs for damage attributed to the “Policy Voyage” (as defined in the Operator's insurance policy) are completed, when the amount for such repairs does not exceed the franchise or deductible of the policy, or (ii) The date of the underwriter's rejection of the Operator's marine loss insurance claim or claims. (Reporting and recordkeeping requirements contained in paragraph (d) introductory text were approved by the Office of Management and Budget under control number 2133-0007) [55 FR 34919, Aug. 27, 1990, as amended at 61 FR 32706, June 25, 1996] § 272.42 Audit requirements and procedures. (a) Required audit. (b) Notification of audit results. [57 FR 34690, Aug. 6, 1992] § 272.43 Review and appeal procedures. (a) Exclusive procedures. (b) Request for review. (1) The Director, Office of Ship Operations, with respect to any disallowance by the Region office of a claimed M&R expense, after receiving the notification required by § 272.41(c); or (2) The Director, Office of Financial Approvals, with respect to any disallowance of a claimed M&R expense, after receiving the notification required by § 272.42(b). (c) Timeliness of request. (d) Notification of review determination. (e) Appeal to the Maritime Subsidy Board Right to appeal. (2) Contents and timeliness. § 272.44 Dates. The dates noted on the letters or notifications sent to the Operator by officials of the Region Office, any Director or any other official or MARAD, pursuant to the provisions of this part, shall be conclusive for the purposes of determining the timeliness of any requests for review made under the provisions of this part.