PART 296—MARITIME SECURITY PROGRAM (MSP) Authority: Pub. L. 108-136, Pub. L. 109-163, Pub. L. 112-239; 49 U.S.C. 322(a), 46 U.S.C. chapter 531, 49 CFR 1.93. Source: 70 FR 55588, Sept. 22, 2005, unless otherwise noted. Subpart A—Introduction § 296.1 Purpose. This part prescribes regulations implementing the provisions of Subtitle C, Maritime Security Fleet Program, Title XXXV of the National Defense Authorization Act for Fiscal Year 2004, the Maritime Security Act of 2003 (MSA 2003), governing Maritime Security Program (MSP) payments for vessels operating in the foreign trade or mixed foreign and domestic commerce of the United States allowed under a registry endorsement issued under 46 U.S.C. 12105. The MSA 2003 provides for joint responsibility between the Department of Defense (DOD) and the Department of Transportation (DOT) for administering the law. These regulations provide the framework for the coordination between DOD and DOT in implementing the MSA 2003. Implementation of the MSA 2003 has been delegated by the Secretary of Transportation to the Maritime Administrator, U.S. Maritime Administration and by the Secretary of Defense to the Commander, U.S. Transportation Command, respectively. § 296.2 Definitions. For the purposes of this part: Act et seq. Administrator Agreement Vessel Applicant Bulk Cargo Chapter 121 Coastwise Trade Commander Contracting Officer Contractor Defense Contractor Documentation Citizen DOD Domestic Trade Eligible Vessel Emergency Preparedness Agreement Enrollment Fiscal Year Foreign Commerce Militarily Useful MSA 2003 MSP Fleet MSP Operating Agreement MSP Payments Noncontiguous Domestic Trade Operating Day Operator Owner Participating Fleet Vessel (1) On October 1, 2015— (i) Meets the requirements of paragraph (1), (2), (3), or (4) of section 53102(c) of the MSA; and (ii) Is less than 20 years of age if the vessel is a tank vessel, or is less than 25 years of age for all other vessel types; and (2) on December 31, 2014, is covered by an MSP Operating Agreement under 46 U.S.C. chapter 531. Person Roll-on/Roll-off Vessel SecDef Section 2 Citizen Secretary Tank Vessel Transfer of an MSP Operating Agreement United States United States Citizen Trust (1) Subject to paragraph (3) of this definition, a trust that is qualified under this definition. (2) A trust is qualified only if: (i) Each of the trustees is a Section 2 Citizen; and (ii) The application for documentation of the vessel under 46 U.S.C. chapter 121, includes the affidavit of each trustee stating that the trustee is not aware of any reason involving a beneficiary of the trust that is not a Section 2 Citizen, or involving any other person that is not a Section 2 Citizen, as a result of which the beneficiary or other person would hold more than 25 percent of the aggregate power to influence or limit the exercise of the authority of the trustee with respect to matters involving any ownership or operation of the vessel that may adversely affect the interests of the United States. (3) If any person that is not a Section 2 Citizen has authority to direct or participate in directing a trustee for a trust in matters involving any ownership or operation of the vessel that may adversely affect the interests of the United States or in removing a trustee for a trust without cause, either directly or indirectly through the control of another person, the trust instrument provides that persons who are not Section 2 Citizens may not hold more than 25 percent of the aggregate authority to so direct or remove a trustee. (4) This definition shall not be considered to prohibit a person who is not a Section 2 Citizen from holding more than 25 percent of the beneficial interest in a trust. United States Documented Vessel [70 FR 55588, Sept. 22, 2005, as amended at 82 FR 56897, Dec. 1, 2017] § 296.3 Applications. (a) Action by MARAD Time Deadlines. (b) Action by the Applicant. http://www.marad.dot.gov, (1) An Affidavit of Section 2 Citizenship (2) Certificate of Incorporation; (3) Copies of by-laws or other governing instruments; (4) Maritime related affiliations; (5) Financial data: (i) Provide an audited financial statement or a completed MARAD Form MA-172 dated within 120 days after the close of the most recent fiscal period; and (ii) Provide estimated annual forecast of maritime operations for the next five years showing revenue and expense, including explanations of any significant increase or decrease of these items; (6) Intermodal network: (i) If applicable, a statement describing the applicant's operating and transportation assets, including vessels, container stocks, trucks, railcars, terminal facilities, and systems used to link such assets together; (ii) The number of containers and their twenty-foot equivalent units (TEUs) by size and type owned and/or long-term leased by the applicant distinguishing those that are owned from those that are leased; and (iii) The number of chassis by size and type owned and/or long-term leased by the applicant distinguishing those that are owned from those that are leased; (7) Diversity of trading patterns: (8) Applicant's record of owning and/or operating vessels: (9) Bareboat charter arrangements, (10) Vessel data including vessel type, size, and construction date; (11) Military Utility: e.g. (12) Special Security Agreements: (13) If applicable, Certification from documentation citizen who is the demise charterer of the MSP vessel: “I, ________, Chief Executive Officer of ________, certify to you that there are no treaties, statutes, regulations, or other laws of the foreign country(ies) of ____'s ultimate foreign parent or intermediate parents that would prohibit ____ from performing its obligations under an Operating Agreement with the Maritime Administration pursuant to the Maritime Security Act of 2003.”; (14) Agreement from the ultimate foreign parent of the documentation citizen: “I, ________, am the Chief Executive Officer [or equivalent] of ______, the ultimate foreign parent of ________, a documentation citizen of the United States that is applying for an MSP Operating Agreement. I agree on behalf of the “foreign parent” that neither ________ (the ultimate foreign parent) nor any representative of ________ (the ultimate foreign parent) will in any way influence the operation of the MSP vessel in a manner that will adversely affect the interests of the United States.”; (15) Replacement Vessel Plan and Age Waiver: (16) Anti-Lobbying Certificate: (Approved by the Office of Management and Budget under Control Number 2133-0525) § 296.4 Waivers. In General—In special circumstances, and for good cause shown, the procedures prescribed in this part may be waived in writing by the Secretary, by mutual agreement of the Secretary in consultation with the SecDef, and the Contractor, so long as the procedures adopted are consistent with the MSA 2003 and with the objectives of these regulations. Subpart B—Eligibility § 296.10 Citizenship requirements of owners, charterers and operators. Citizenship requirements are deemed to have been met if during the entire period of an MSP Operating Agreement under this chapter that applies to the vessel, all of the conditions of any of the paragraphs (a), (b), (c), or (d) of this section are met, and subject to conditions in paragraph (e): (a) A vessel to be included in an MSP Operating Agreement is owned and operated by one or more persons that are Section 2 Citizens. (b) A vessel to be included in an MSP Operating Agreement is owned by either a person that is a Section 2 Citizen or a United States Citizen Trust, and the vessel is demise chartered to a non-Section 2 Citizen— (1) That is eligible to document the vessel under 46 U.S.C. chapter 121; (2) Whose chairman of the board of directors, chief executive officer, and a majority of the members of the board of directors are Section 2 Citizens, and are appointed and subject to removal only upon approval by the Secretary as follows: (i) Proposed changes to the chairman of the board, chief executive officer, and membership of the board of directors must be submitted to the Administrator 60 days before scheduled to take effect; and (ii) MARAD must approve or disapprove changes within 30 days of receiving the proposed changes; (3) That certifies to the Secretary in a format substantially similar to the format at § 296.3(b)(13) that there are no treaties, statutes, regulations, or other laws that would prohibit the Contractor from performing its obligations under an MSP Operating Agreement at the time of application for an MSP Operating Agreement; and (4) The ultimate foreign parent of that person proffers, at the time of application for an MSP Operating Agreement, an agreement in a format substantially similar to the format at § 296.3(b)(14) not to influence the vessel's operation in a way that is detrimental to the United States. (c) A vessel to be included in an MSP Operating Agreement is owned and operated by a defense contractor or a related person to include affiliated or related companies within the same corporate group that: (1) Is 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) Has entered into a special security agreement with the SecDef; (4) Certifies to the Secretary, at the time of application, in a format substantially similar to the format of § 296.3(b)(13), that there are no treaties, statutes, regulations, or other laws that would prohibit the Contractor from performing its obligations under an MSP Operating Agreement; and (5) Has its ultimate foreign parent proffer, at the time of application for an MSP Operating Agreement, an agreement in a format substantially similar to the format of § 296.3(b)(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 and demise chartered to a Section 2 Citizen. (e) Where applicable, the Secretary and the SecDef shall notify the Senate Committees on Armed Services, and Commerce, Science, and Transportation and the House of Representatives Committee on Armed Services that they concur with the certifications by the documentation citizens under § 296.3(b)(13) and that they have reviewed the agreements proffered by the ultimate foreign parent under § 296.3(b)(14), and agree that there are no other legal, operational, or other impediments that would prohibit the contractors for the vessels from performing their obligations under MSP Operating Agreements. § 296.11 Vessel requirements. (a) Eligible vessel. (1) The vessel is: (i) Determined by the SecDef to be suitable for use by the United States for national defense or military purposes in time of war or national emergency; and (ii) Determined by the Secretary to be commercially viable; (2) The vessel is operated or, in the case of a vessel to be purchased or constructed, will be operated to provide transportation in the foreign commerce; (3) The vessel is self-propelled and— (i) Is a tank vessel that is 10 years of age or less on the date the vessel is included in the Fleet; or (ii) Is any other type of vessel that is 15 years of age or less on the date the vessel is included in the Fleet; (4) The vessel is: (i) A United States documented vessel under 46 U.S.C. chapter 121; or (ii) Not a United States-documented vessel under 46 U.S.C. chapter 121, but the owner of the vessel has demonstrated an intent to have the vessel documented under 46 U.S.C. chapter 121 at the time the vessel is to be included in the MSP fleet; and (A) The vessel is eligible for a certificate of inspection if the Secretary of the Department in which the United States Coast Guard is operating determines that: ( 1 ( 2 ( 3 (B) [Reserved] (b) Waiver of age restriction of vessels. (1) Is in the national interest; (2) Is appropriate to allow the maintenance of the economic viability of the vessel and any associated operating network; and (3) Is necessary due to the lack of availability of other vessels and operators that comply with the requirements of the MSA 2003. (c) Telecommunications and other electronic equipment. (1) Such 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) That country has not been identified by the Secretary as inadequately enforcing international regulations as to that vessel; and (3) At the end of its useful life, such equipment will be replaced with equipment that meets Federal Communications Commission equipment certification standards ( see [70 FR 55588, Sept. 22, 2005; 70 FR 59400, Oct. 12, 2005; 82 FR 56897, Dec. 1, 2017] § 296.12 Applicants. Applicant. Subpart C—Priority for Granting Applications § 296.20 Tank vessels. (a) First priority for the award of MSP Operating Agreements under MSA 2003 shall be granted to a tank vessel that is constructed in the United States after October 1, 2004. (b) First priority for the award of MSP Operating Agreements under the MSA 2003 may be granted to a tank vessel that is less than ten years of age on the date it enters an MSP Operating Agreement: (1) Provided: (ii) A tank vessel under this section is eligible to be included in the MSP under § 296.11(a); and (iii) A tank vessel under this section is owned and operated during the period of the MSP Operating Agreement by one or more persons that are Section 2 Citizens; (2) No payment can be made for an existing tank vessel granted priority one status after the earlier of: (i) Four years following the date this MSP Operating Agreement is effective, except if amounts are available for construction of a minimum of three tank vessels under the National Defense Tank Vessel Construction Assistance Program (NDTVCP) by October 1, 2007, then no payments shall be made for the existing “tank vessel” after four years following the date such amounts are available; or (ii) The date of delivery of the replacement tank vessel constructed in the United States after October 1, 2004. (3) The Secretary will not enter into more than five MSP Operating Agreements for tank vessels under this priority. If the five tank vessel MSP Operating Agreement slots are not fully subscribed, the Secretary, in consultation with the SecDef, may award the non-subscribed slots to lower priority vessels, if deemed appropriate. If the Secretary determines that no funds are, or are likely to be, allocated for any tank vessel construction in the United States, the five slots may nevertheless be awarded to existing tank vessels or the slots may be awarded permanently to any eligible vessels. The Secretary may temporarily award a slot reserved for a tank vessel under construction to a lower priority vessel during the construction period of that vessel if an existing tank vessel offered by the tank vessel Contractor is not eligible for priority for that slot. If no existing tank vessel is offered by the tank vessel Contractor, the Secretary may temporarily award an MSP Operating Agreement to any eligible vessel of another Contractor until a new tank vessel's construction is completed in the United States. Such temporary MSP Operating Agreements may be terminated under terms set forth in the temporary MSP Operating Agreement. §§ 296.21-296.23 [Reserved] § 296.24 Subsequent awards of MSP Operating Agreements. (a) MARAD intends to ensure that all available MSP Operating Agreements are fully utilized at all times in order to maximize the benefit of the MSP. Accordingly, when an MSP Operating Agreement becomes available through termination by the Secretary or early termination by the MSP contractor, and no transfer under 46 U.S.C. 53105(e) is involved, MARAD will reissue the MSP Operating Agreement pursuant to the following criteria: (1) The proposed vessel shall meet the requirements for vessel eligibility in 46 U.S.C. 53102(b); (2) The applicant shall meet the vessel ownership and operating requirements for priority in 46 U.S.C. 53102(c); and (3) Priority will be assigned on the basis of vessel type established by military requirements specified by the Secretary of Defense. After consideration of military requirements, priority shall be given to an applicant that is a United States citizen under section 50501 of this title. (b) MARAD shall allow an applicant at least 30 days to submit an application for a new MSP Operating Agreement. (c) MARAD and USTRANSCOM will determine if the applications received form an adequate pool for award of a reissued MSP Operating Agreement. If so, MARAD will award a reissued MSP Operating Agreement from that pool of qualified applicants in its discretion according to the procedures of paragraph (a) of this section, subject to approval of the Secretary of Defense. MARAD and USTRANSCOM may decide to open a new round of applications. MARAD shall provide written reasons for denying applications. In as much as MSP furthers a public purpose and MARAD does not acquire goods or services through MSP, the selection process for award of MSP Operating Agreements does not constitute an acquisition process subject to any procurement law or the Federal Acquisition Regulations. [82 FR 56897, Dec. 1, 2017] Subpart D—Maritime Security Program Operating Agreements § 296.30 General conditions. (a) Approval. (b) Effective date General rule. (2) Exceptions. (i) The expiration or termination date of the Government charter covering the vessel; or (ii) Any earlier date on which the vessel is withdrawn from that charter, but not before October 1, 2005. (c) Replacement vessels. (d) Termination by the Secretary. (1) The Secretary shall notify the Contractor and provide a reasonable opportunity for the Contractor to comply with the MSP Operating Agreement; (2) The Secretary shall terminate the MSP Operating Agreement if the Contractor fails to achieve such compliance; and (3) Upon such termination, any funds obligated by the relevant MSP Operating Agreement shall be available to the Secretary to carry out the MSP. (e) Early termination by Contractor, generally. (f) [Reserved] (g) Non-renewal for lack of funds. (h) Release of vessels from obligations. (1) Each vessel covered by a terminated MSP Operating Agreement is released from any further obligation under the MSP Operating Agreement; (2) The owner and operator of a non-tank vessel may transfer and register the applicable vessel under foreign registry deemed acceptable by the Secretary and the SecDef, notwithstanding 46 U.S.C. chapter 561 and 46 CFR part 221; (3) If section 902 of the Act is applicable to a vessel that has been transferred to a foreign registry due to a terminated MSP Operating Agreement, then that vessel is available to be requisitioned by the Secretary pursuant to section 902 of the Act; and (4) Paragraph (h) of this section is not applicable to vessels under MSP Operating Agreements that have been terminated for any other reason. (i) Foreign transfer of vessel. (1) Of equal or greater military capability and of a capacity that is equivalent or greater as measured in deadweight tons, gross tons, or container equivalent units, as appropriate; (2) That is a documented vessel under 46 U.S.C. chapter 121 by the owner of the vessel to be placed under a foreign registry; and (3) That is not more than 10 years of age on the date of that documentation. (j) Transfer of MSP Operating Agreements. [82 FR 56897, Dec. 1, 2017] § 296.31 MSP assistance conditions. (a) Term of MSP Operating Agreement. (b) Terms under a Continuing Resolution (CR). (c) National security requirements. (d) Vessel operating agreements. (1) Documentation: (2) Operation: (3) Noncontiguous Domestic Trade: i.e. (e) Obligation of the U.S. Government. (f) U.S. Merchant Marine Academy cadets. [70 FR 55588, Sept. 22, 2005, as amended at 82 FR 56898, Dec. 1, 2017] § 296.32 Reporting requirements. The Contractor shall submit to the Director, Office of Financial Approvals, Maritime Administration, 2nd Floor, West Building, 1200 New Jersey Ave. SE., Washington, DC 20590, one of the following reports, including management footnotes where necessary to make a fair financial presentation: (a) Form MA-172: (b) Financial Statement: (Approved by the Office of Management and Budget under Control Number 2133-0005) [70 FR 55588, Sept. 22, 2005, as amended at 82 FR 56898, Dec. 1, 2017] Subpart E—Billing and Payment Procedures § 296.40 Billing procedures. Submission of voucher. [82 FR 56898, Dec. 1, 2017] § 296.41 Payment procedures. (a) Amount payable. (b) Reductions in amount payable. (i) Is not operated exclusively in the foreign commerce, except for tank vessels, which may be operated in foreign-to-foreign commerce; (ii) Is operated in the coastwise trade; or (iii) Is not documented under 46 U.S.C. chapter 121. (2) To the extent that a Contractor operates MSP vessels less than 320 days under the provisions of § 296.31(d), payments will be reduced for each day less than 320 days. (c) No payment. (i) For any day that an Agreement Vessel is engaged in transporting more than 7,500 tons (using the U.S. English standard of short tons, which converts to 6,696.75 long tons, or 6,803.85 metric tons) of civilian bulk preference cargoes pursuant to section 901(a), 901(b), or 901b of the Act, provided that it is bulk cargo; (ii) During a period in which the Contractor participates in noncontiguous domestic trade, unless that Contractor is a Section 2 Citizen; (iii) While under charter to the United States Government other than a charter pursuant to an EPA under § 53107 of the MSA 2003. A voyage charter that is essentially a contract of affreightment will not be considered to be a charter; (iv) For a vessel in excess of 25 years of age, except for a LASH vessel in excess of 30 years of age or a tank vessel which is limited to 20 years of age, unless the vessel is a Participating Fleet Vessel meeting the requirements of § 296.21(e); (v) For days in excess of 30 days in a fiscal year in which a vessel is drydocked or undergoing survey, inspection, or repair unless prior to the expiration of the vessel's 30-day period, approval is obtained from MARAD for an extension beyond 30 days. Drydocking, survey, inspection, or repair periods of 30 days or less are considered operating days; and (vi) If the contracted vessel is not operated or maintained in accordance with the terms of the MSP Operating Agreement. (2) To the extent that non-payment days under paragraph (c) of this section are known, Contractor payments shall be reduced at the time of the current billing. The daily reduction amounts shall 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. Daily reduction amounts shall be applied. (3) MARAD may require, for good cause, that a portion of the funds payable under this section be withheld if the provisions of § 296.31(d) have not been met. (4) Amounts owed to MARAD for reductions applicable to a prior billing period shall be electronically transferred using MARAD's prescribed format, or a check may be forwarded to the Maritime Administration, P.O. Box 845133, Dallas, Texas 75284-5133, or the amount owed can be credited to MARAD by offsetting amounts payable in future billing periods. [70 FR 55588, Sept. 22, 2005, as amended at 82 FR 56898, Dec. 1, 2017] Subpart F—Appeals Procedures § 296.50 Administrative determinations. (a) Policy. (b) DOD determinations. (c) Process.