[Federal Register Volume 65, Number 3 (Wednesday, January 5, 2000)]
[Proposed Rules]
[Pages 646-670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18]
[[Page 645]]
Part IV
Department of Transportation
_______________________________________________________________________
Maritime Administration
_______________________________________________________________________
46 CFR Part 356
Eligibility of U.S.-Flag Vessels of 100 Feet or Greater in Registered
Length To Obtain a Fishery Endorsement to the Vessel's Documentation;
Proposed Rule
Federal Register / Vol. 65, No. 3 / Wednesday, January 5, 2000 /
Proposed Rules
[[Page 646]]
DEPARTMENT OF TRANSPORTATION
Maritime Administration
46 CFR Part 356
[Docket No. MARAD-99-5609]
RIN 2133-AB38
Eligibility of U.S.-Flag Vessels of 100 Feet or Greater In
Registered Length to Obtain a Fishery Endorsement to the Vessel's
Documentation
AGENCY: Maritime Administration, Department of Transportation.
ACTION: Notice of proposed rulemaking (``NPRM'').
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SUMMARY: The Maritime Administration (``MARAD, we, our, or us'') is
soliciting public comments on implementation of the new U.S.
citizenship requirements set forth in the American Fisheries Act of
1998 (``AFA''), Title II, Division C, Public Law 105-277, for vessels
of 100 feet or greater in registered length for which a fishery
endorsement to the vessel's documentation is sought.
The NPRM implements new statutory requirements of the AFA by
raising the U.S. ownership and control standards for U.S.-flag fishing
vessels of 100 feet or greater in registered length that are operating
in U.S. waters, by eliminating exemptions for fishing vessels that can
not meet current citizenship standards, by phasing out of operation
many of the largest fishing vessels, and by establishing new criteria
to be eligible to hold a preferred mortgage on such vessels. The
regulations set out which transactions are permissible, which
transactions will require prior approval, and which transactions are
impermissible and, to the extent practicable, minimize disruptions to
the commercial fishing industry, to the traditional financing
arrangements of such industry, and to the opportunity to form fishery
cooperatives.
DATES: You should submit your comments early enough to ensure that
Docket Management receives them not later than February 22, 2000. In
order to meet the statutory deadline for publishing final rules in the
Federal Register by April 1, 2000, we are using a shortened 45 day
comment period. However, comments on the information collection
requirements of the NPRM will be accepted until March 6, 2000. In
addition, public meetings at which oral and written comments may be
presented have been scheduled for the dates and locations listed under
SUPPLEMENTARY INFORMATION.
ADDRESSES: Comments should refer to docket number MARAD-99-5609.
Written comments may be submitted by mail to the Docket Clerk, U.S. DOT
Dockets, Room PL-401, Department of Transportation, 400 7th St., S.W.,
Washington, D.C. 20590-0001. You may also send comments electronically
via the Internet at http://smses.dot.gov/submit/. All comments will
become part of this docket and will be available for inspection and
copying at the above address between 10 a.m. and 5 p.m., E.T., Monday
through Friday, except federal holidays. An electronic version of this
document and all documents entered into this docket is available on the
World Wide Web at http://dms.dot.gov.
FOR FURTHER INFORMATION CONTACT: John T. Marquez, Jr. of the Office of
Chief Counsel at (202) 366-5320. You may send mail to John T. Marquez,
Jr., Maritime Administration, Office of Chief Counsel, Room 7228, MAR-
222, 400 Seventh St., S.W., Washington, D.C., 20590-0001, or you may
send e-mail to John.Marquez@marad.dot.gov.
SUPPLEMENTARY INFORMATION:
Will There Be Public Meetings on the NPRM?
Public meetings have been scheduled for the following dates and
locations:
1. January 25, 2000, 9:30 a.m. to 3 p.m.--South Auditorium, Jackson
Federal Building, 915 Second Avenue, Seattle, WA;
2. January 27, 2000, 9:30 a.m. to 3 p.m.--Assembly Room, Z.J. Loussac
Library, 3600 Denali St., Anchorage, AK; and,
3. January 31, 2000, 9:30 a.m. to 3 p.m.--Room 6200, Nassif Building,
400 7th Street, S.W., Washington, DC.
Meeting facilities have been arranged for the entire day to ensure
that all interested parties have an opportunity to comment on the NPRM.
However, if there is not sufficient interest to necessitate an
afternoon session, the public meetings will be adjourned after all
participants have had an opportunity to comment in the morning.
Accordingly, interested parties are advised to attend in the morning
since the meeting will be adjourned after the conclusion of
presentations and will not be reconvened in the afternoon if all
parties present in the morning have had an opportunity to comment.
If you would like to provide oral comments at one of the public
meetings, all that is required is that you be present and offer your
comments. In order for us to have an idea of the level of participation
that can be expected at these meetings, we request, but do not require,
that you notify us at least five working days prior to the meeting that
you plan to attend. You may notify John T. Marquez, Jr. by phone at
(202) 366-5320, by fax at (202) 366-7485, or by e-mail at
John.Marquez@marad.dot.gov.
Who May File Comments?
Anyone may file written comments about proposals made in any
rulemaking document that requests public comments, including any state
government agency, any political subdivision of a State, or any
interested person.
How Do I Prepare and Submit Comments?
Your comments must be written in English. To ensure that your
comments are correctly filed in the Docket, please include the docket
number of this NPRM in your comments.
We encourage you to write your primary comments in a concise
fashion. However, you may attach necessary additional documents to your
comments. There is no limit on the length of the attachments. Please
submit two copies of your comments, including the attachments, to
Docket Management at the address given above under ADDRESSES. If
possible, one copy should be in an unbound format to facilitate copying
and electronic filing.
In addition to comments on the proposed rule, we specifically
request that you address in your comments whether the information
collection in this proposal is necessary for the agency to properly
perform its functions and will have practical utility, the accuracy of
the burden estimates, ways to minimize this burden, and ways to enhance
quality, utility, and clarity of the information to be collected.
How Can I Be Sure That My Comments Were Received?
If you want 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. If you send comments by e-
mail, you will receive a message by e-mail confirming receipt of your
comments. Your e-mail address should be noted with your comments.
Is Information That I Submit to MARAD Made Available to the Public?
When you submit information to us as part of this NPRM, during any
rulemaking proceeding, or for any other reason, we may make that
information publicly available unless you ask that we keep the
information confidential. If you wish to submit any information
[[Page 647]]
under a claim of confidentiality, you should submit three copies of
your complete submission, including the information you claim to be
confidential business information, to the Chief Counsel, Maritime
Administration, at the address given above under FOR FURTHER
INFORMATION CONTACT. You should mark ``CONFIDENTIAL'' on each page of
the original document that you would like to keep confidential.
In addition, you should submit two copies, from which you have
deleted the claimed confidential business information, to Docket
Management at the address given above under ADDRESSES. When you send
comments containing information claimed to be confidential business
information, you should also include a cover letter setting forth with
specificity the basis for any such claim (for example, it is exempt
from mandatory public disclosure under the Freedom of Information Act,
5 U.S.C. 552).
We will decide whether or not to treat your information as
confidential. You will be notified in writing of our decision to grant
or deny confidentiality before the information is publicly disclosed
and you will be given an opportunity to respond.
How Can I Read the Comments Submitted by Other People?
You may read the comments received by Docket Management at the
address and during the hours provided above under ADDRESSES.
Comments may also be viewed on the Internet. To read the comments
on the Internet, take the following steps: Go to the Docket Management
System (``DMS'') Web page of the Department of Transportation (http://
dms.dot.gov/). On that page, click on ``search.'' On the next page
(http://dms.dot.gov/search/), type in the four-digit docket number
shown on the first page of this document. The docket number for this
NPRM is 5609. After typing the docket number, click on ``search.'' On
the next page, which contains docket summary information for the docket
you selected, click on the desired comments. You may download the
comments.
Please note that even after the comment closing date, we will
continue to file relevant information in the Docket as it becomes
available. Accordingly, we recommend that you periodically check the
Docket for new material.
Background
The AFA imposes new citizenship requirements for the owners of
vessels of 100 feet or greater in registered length for which a fishery
endorsement to the vessel's documentation is sought. The AFA, among
other things:
(1) Raises, with some exceptions, the U.S. citizen ownership and
control standards for U.S.-flag Fishing Vessels, Fish Processing
Vessels, and Fish Tender Vessels operating in U.S. waters from a
controlling interest to a 75 percent interest requirement as set forth
in Sec. 2(c) of the Shipping Act, 1916, as amended (``1916 Act'');
(2) Sets forth certain criteria for purposes of determining whether
``control'' of the owner of Fishing Vessels, Fish Processing Vessels,
and Fish Tender Vessels is vested in Citizens of the United States;
(3) Requires state or federally chartered financial institutions to
comply with the Controlling Interest (51%) requirements of Sec. 2(b) of
the 1916 Act in order to hold a preferred mortgage on a Fishing Vessel,
Fish Processing Vessel, or Fish Tender Vessel of 100 feet or more in
registered length;
(4) Requires preferred mortgagees of vessels of 100 feet or more in
registered length that are not state or federally chartered financial
institutions to comply with the requirements of Sec. 2(c) of the 1916
Act which provides that 75% of the interest in the entity must be owned
and controlled by Citizens of the United States, or use an approved
Mortgage Trustee that complies with the citizenship requirements of
Sec. 2(c) of the 1916 Act and other requirements of the AFA;
(5) Prohibits certain foreign-built factory trawlers from
participating in the fisheries of the United States; and,
(6) Prohibits, with some exceptions, vessels above 165 feet or 750
gross tons or with engines of 3,000 horsepower or more from obtaining a
fishery endorsement to the vessel's documentation.
We are required by Sec. 203(c) of the AFA to ``rigorously''
scrutinize any transfers of ownership and control over Fishing Vessels,
Fish Processing Vessels, and Fish Tender Vessels and to pay particular
attention to leases, charters, financings, mortgages, and other
arrangements to determine if they constitute an impermissible
conveyance of control to persons not eligible to own a vessel with a
fishery endorsement. These regulations are to set out which
transactions are permissible, which transactions will require prior
approval, and which transactions are impermissible. Pursuant to
Sec. 203(b) of the AFA, these regulations will also ``to the extent
practicable, minimize disruptions to the commercial fishing industry,
to the traditional financing arrangements of such industry, and to the
opportunity to form fishery cooperatives.''
We are required to promulgate final regulations by April 1, 2000,
regarding the U.S. citizenship requirements for ownership and control
of vessels, unless otherwise exempted, that are 100 feet or greater in
registered length and for which the owner wishes to obtain a fishery
endorsement to the vessel's documentation. The regulations will become
effective on October 1, 2001. Until the final regulations are
published, we may not, pursuant to Sec. 203(b) of the AFA, issue letter
rulings or interim interpretations as to the effect of the AFA on
Fishing Vessels.
We published an Advance Notice of Proposed Rulemaking (``ANPRM'')
in the Federal Register, 64 FR 24311 (May 6, 1999), to solicit comments
from the public and held five public hearings. We have received and
evaluated the comments and are now publishing this NPRM with a request
for comments from the public, as well as providing notice of upcoming
public meetings.
Public Comments on the ANPRM
As the first step in this rulemaking process, we issued an ANPRM
entitled Eligibility of U.S.-Flag Vessels of 100 Feet or Greater To
Obtain Commercial Fisheries Documents, 64 FR 24311 (May 6, 1999). The
ANPRM provided an explanation of the changes in the law and requested
comments, suggestions, and information from the public relating to the
development of regulations necessary to implement the new statutory
requirements to obtain a fishery endorsement for a documented vessel of
100 feet or greater in registered length. In response to this request,
we received 19 written comments. In addition, we held five public
meetings in Seattle, WA, Anchorage, AK, Boston, MA, New Orleans, LA,
and Washington, DC, and met with several interested parties who
requested meetings with us. The written comments, transcripts of the
public meetings, and memoranda summarizing the meetings with interested
parties are available for review in the rulemaking docket. Following is
a summary of those comments and our response.
Several commenters requested that we provide clear guidance to the
fishing industry in the regulations regarding the ownership and control
requirements and that we articulate those fundamental elements of
control and types of agreements with Non-Citizens that are either
acceptable or impermissible. One commenter stated, however, that we
should not attempt to issue regulations which define in advance all
transactions which could
[[Page 648]]
theoretically violate the statutory standards. The commenter suggested
that we should simply recite the statutory standards and make the AFA
prohibitions specific through case-by-case application.
We agree with the commenters that the industry needs clear guidance
regarding how United States Citizen ownership and control will be
determined. For example, in Secs. 356.3-11 of the NPRM, we have defined
the requirements for ownership and control by Citizens of the United
States, spelled out the requirements for filing an Affidavit of United
States Citizenship, identified the methods for demonstrating ownership,
and established factors that we will evaluate for purposes of
determining whether impermissible control over a vessel or vessel-
owning entity has been transferred to a Non-Citizen. In many cases,
control may be the most difficult aspect of demonstrating citizenship.
Accordingly, we have set forth factors that will be deemed an
impermissible transfer of control to a Non-Citizen and therefore
prohibited. We have also identified certain criteria that, while not
prohibited by themselves, may be deemed an impermissible transfer of
control to a Non-Citizen if other indicia of control are also present
in the transaction. Certain types of agreements such as loans,
mortgages, charters, sales agreements, and management agreements are
specifically addressed in the NPRM; however, the factors of foreign
control could conceivably apply to any agreement between a Citizen of
the United States and a Non-Citizen. Finally, while the NPRM does
identify certain parameters and criteria that we will use in
determining ownership and control by Citizens of the United States, we
note that the lists of criteria are not exhaustive and that, depending
on the facts involved, evaluations may be made on a case-by-case basis.
We received many comments relating to the regulation of financing
agreements and mortgages. Commenters noted typical loan covenants that
a lender may impose on the borrower in order to protect its interest
which may involve some degree of control over the vessel's owner and
the vessel. Accordingly, commenters were particularly concerned that a
lack of certainty regarding allowable covenants or overly restrictive
requirements could deter foreign lenders from participating in the
fishing industry. Such uncertainty could potentially limit sources of
financing for vessel owners.
Commenters suggested different approaches regarding how we should
regulate the financing of vessels. The majority of commenters suggested
that we approve, in advance, certain typical loan covenants used by all
lenders who are not affiliated with the vessel owner. This would
minimize disruptions to the commercial fishing industry and to the
traditional financing arrangements of the industry. However, several
commenters expressed concern that if MARAD published a list of loan
covenants that are permissible, it would still leave open the question
whether other restrictive provisions of a loan package would, in the
aggregate, create an impermissible degree of control by Non-Citizens.
One commenter recommended drafting a ``safe harbor'' provision that
achieves certainty by turning on the identity of the lender involved,
thus allowing lenders that are financial institutions to make loans
without having the regulations deal with specific loan covenants. The
commenter noted ramifications for a lender that strays in controlling a
borrower including: (1) Being sued by its borrower for any lost
profits, and (2) being deemed a vessel operator and potentially
becoming subject to strict liability for violations under CERCLA, the
Oil Pollution Act, and various state environmental pollution laws.
Another commenter suggested that we should focus on differentiating
between lenders on the basis of their loan portfolios and whether more
than 50% of the lender's portfolio is in the fishing industry. For such
lenders, the commenter suggested that we should require a signed
affidavit by an officer of the lender stating that 51% of the lender's
outstanding shares are owned by U.S. citizens as a documentation
requirement during the issuance of a preferred ship mortgage. We should
then place these lenders on a list of lenders presumed to be U.S.
citizen lenders, thus creating an irrebuttable presumption that the
lender meets applicable U.S. citizenship requirements. The commenter
continued by stating that all standard categories of covenant
provisions should be approved of in advance for all conventional
lending institutions that are not directly affiliated with a vessel
owner and that are not a fishing company.
One commenter put a slightly different spin on the above approach
and suggested that we grant a blanket lender exemption to domestic and
foreign banks who are (1) publicly traded, (2) under the supervision of
national or state banking authorities, (3) not affiliated with the
vessel owner, and (4) in the case of foreign banks only, who make use
of an approved Mortgage Trustee. According to the commenter, such an
exemption should allow the lender to include in the financing documents
any covenant which it is able to negotiate with the vessel owner.
We agree that certainty is needed in the financing sector in order
to provide a stable financing regime and to ensure that ample financing
exists for vessel owners. Accordingly, we have proposed in Sec. 356.23
a list of loan covenants that are expressly authorized. In addition, we
are proposing in Sec. 356.21 to give general approval to the standard
loan and mortgage agreements of Non-Citizen Lenders that are using an
approved Mortgage Trustee, provided that they meet certain criteria. A
Non-Citizen Lender would be permitted to submit its standard loan
provisions to us for approval. Once these standard loan covenants are
approved, the lender would be able to enter into loan agreements
without obtaining approval from us on a transactional basis. If the
lender later wishes to use additional covenants that were not included
in the general approval, it must submit those covenants to us for
approval. Failure to receive such approval would void the general
approval.
With respect to the use by Non-Citizen Lenders of an approved
Mortgage Trustee, referred to in the ANPRM as a Westhampton Trustee,
several commenters asserted that Congress intended that we resurrect
our prior regulations for trustees to enable a Non-Citizen Lender to
secure its loan with a Preferred Mortgage on a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel. One commenter stated that he
did not believe Congress intended any further regulation of those
mortgages and that any state or federally regulated U.S. bank, whether
U.S. or foreign owned, should be eligible to serve as a Trustee.
We agree that the regulations found in 46 CFR Part 221 should serve
as a model for the NPRM and have patterned our proposed regulations in
Secs. 356.27-37 after the old ``Westhampton Trustee'' regulations.
However, we note that the AFA is quite specific about the requirements
to be a qualified Trustee (referred to as a ``Mortgage Trustee'' in the
NPRM) and does not provide flexibility to allow a state or federally
regulated U.S. bank that does not meet the Controlling Interest
requirements of Sec. 2(b) of the 1916 Act, 46 App. U.S.C. 802(b), or
any other foreign entity, to be a Mortgage Trustee.
A number of commenters focused on management agreements, exclusive
sales or marketing agreements, and other arrangements that may be
considered normal in the day-to-day operations in
[[Page 649]]
the fishing industry, but that may be viewed by us as conveying
impermissible control to a Non-Citizen. One commenter suggested that we
should limit our regulation of the 75% ownership and control
requirement to Persons or entities that have the right to replace or
limit the actions of the chief executive officer, a majority of the
board of directors, any general partner or any person serving in a
management capacity of the entity which owns the vessel. Several
commenters suggested that exclusive sales agreements and management
contracts are common place in the fishing industry and are entered into
on a daily basis. Consequently, the commenters contended that requiring
prior approval or case-by-case review of such traditional agreements or
review of companies that do not own fishing vessels to determine their
citizenship would pose an unreasonable burden on the industry and would
not be a workable business practice.
One commenter noted that if all officers and stockholders of the
companies involved are United States Citizens and are not controlled by
foreign citizens, it should not be necessary for us to scrutinize
management or charter agreements between the United States Citizen
owned and controlled companies. The commenter contended that scrutiny
of management and operating companies should be focused on whether (1)
a catcher vessel's logistics, maintenance, or personnel hiring
operations are controlled by a shore plant or mothership that is owned
or controlled by Non-Citizens, (2) the catcher vessel is obligated to
sell its harvest to a foreign owned or controlled processing plant, or
(3) short-term loan agreements convey management prerogatives to a Non-
Citizen Lender.
Another commenter noted that enforcement of AFA regulations which
preclude the participation of Non-Citizens in the operation of its
companies would erode its ability to compete in international markets
and may ultimately result in the demise of its industry sector. The
commenter indicated that many management companies rely on foreign
advisors to perform many of their functions of providing support in
engineering, repair and maintenance, crew hiring, claims management,
strategic planning, accounting, cash management, banking relationships,
insurance management, marketing, product traffic management, credit
management, quality control, production management, record keeping and
reporting, and government relations.
Several commenters contended that we should not preclude using
contracts for the purchase of all or a significant portion of a
vessel's catch as security for financing various transactions relating
to a specific vessel. Typical long-term contracts for the sale of all
or a large portion of the vessel's catch were suggested by the
commenter to generally involve a mutually beneficial agreement between
the vessel owner and the processor or purchaser of the vessel's catch,
and do not give the purchaser any control over the actual operation of
the vessel or the vessel owner. According to the commenter, preclusion
of these types of sales agreements would: (1) Deny fishing vessel
owners access to traditional sources for marketing their catch; (2)
prejudice U.S. processors and purchasers who happen to be non-section 2
citizens in favor of processors who happen to be section 2 citizens;
and, (3) make the formation of fishery cooperatives in the pollock
fishery virtually impossible as the majority of pollock processors and
purchasers are non-section 2 citizens. The commenter emphasized that
nothing in the AFA attempts to distinguish the sale of a vessel's catch
to a foreign processor or to prohibit a foreign processor from
purchasing the catch of U.S. fishing vessels.
We generally agree with the commenters that case-by-case review of
management contracts, charters or exclusive or long-term sales or
marketing contracts would pose an unreasonable burden. Therefore, we
propose in Sec. 356.41 and Sec. 356.43 to allow owners or bareboat
charterers of vessels to enter into exclusive sales agreements with
Non-Citizens without prior approval from us, provided that these
agreements meet certain criteria. For example, the agreements cannot
contain provisions that would transfer control over the vessel or
vessel-owning entity to a Non-Citizen, including the ability to control
the hiring, management, and disciplining of crew, and the ability to
direct the vessel's operations and harvesting activities. Similarly,
management agreements that are solely administrative in nature and do
not convey control over the vessel's owner or the vessel to a Non-
Citizen are permitted. The owner or bareboat charterer would be
required to identify and provide a summary of the terms of management
agreements within 30 days of execution and to certify to the
Citizenship Approval Officer that the agreement does not convey control
over the vessel or vessel-owning entity to a Non-Citizen.
Long-term or exclusive sales or marketing contracts are authorized
in the proposed rule, provided that they do not convey control over the
vessel or vessel owner to a Non-Citizen. Section 356.43 sets out
certain provisions that are expressly authorized for use in long-term
or exclusive sales or marketing agreements that might otherwise be
construed to convey control over the vessel or vessel owner to a Non-
Citizen. If an owner or bareboat charterer wishes to enter into a long-
term or exclusive sales or marketing agreement that contains other
provisions, the owner or charterer must first obtain approval from the
Citizenship Approval Officer that such provisions do not convey control
to a Non-Citizen.
With respect to charters, we agree that a review of all charters
would be impractical and overly burdensome. Therefore, we propose in
Sec. 356.39 to allow time charters and voyage charters to Non-Citizens
of Fish Processing Vessels and Fish Tender Vessels, provided that the
vessel is not used for harvesting. The time charter or voyage charter
must be a true time charter or voyage charter and may not include
provisions that would transfer control to the charterer, such as the
right to hire or discipline the crew. We will not require review of
charter agreements prior to execution. However, we propose to require a
copy of the charter to be submitted within 30 days of execution in
order to confirm that the charter is not a bareboat charter and that
there is not an impermissible transfer of control. Time charters and
voyage charters of Fishing Vessels, Fish Processing Vessels, or Fish
Tender Vessels used to harvest fish are prohibited. Bareboat charters
to Non-Citizens are also prohibited because a bareboat charter, by
definition, results in a transfer of control to the charterer. Any
charter to a Citizen of the United States is allowed and review of the
charter will not be required. However, because a bareboat charterer
will have possession and control of the vessel, the charterer must
demonstrate that it is a Citizen of the United States.
A number of commenters also noted that loans to owners of Fishing
Vessels may be made by Non-Citizens who have a contractual relationship
with the owner. These loans may be for vessel construction and
modification, as well as for working capital to fund the vessel's
operation and the transportation and sale of the vessel's catch. Many
times these loans are based on a contractual relationship that a vessel
owner or bareboat charterer has with a fish processor, such as an
exclusive sales agreement or some other agreement. On occasion, a
lender may receive a preferred ship mortgage as
[[Page 650]]
security for the financing. The commenters suggested that these loans
are traditional financing arrangements and thus should not be regulated
by us. We recognize that such financing arrangements may be commonplace
in the fishing industry and wish to minimize our involvement, to the
extent practicable. Therefore, we propose in Sec. 356.45 to allow
vessel owners and bareboat charterers who have an exclusive or long-
term sales or marketing agreement with a Non-Citizen to enter into an
agreement with the Non-Citizen for an advance of funds. This approval
is conditioned on the requirements that the funds must be used for
working capital, the agreement may not contain provisions that would
give the Non-Citizen control over the vessel, vessel owner, or bareboat
charterer, and the amount of the advancement cannot exceed the annual
value of the contract. The regulations do not permit a Non-Citizen with
whom a vessel owner or bareboat charterer is conducting business to
loan money to the vessel owner or bareboat charterer where the loan is
for capital improvements to a Fishing Vessel, Fish Processing Vessel,
or Fish Tender Vessel. Such financing from Non-Citizens with whom the
owner or bareboat charterer has an ongoing relationship would convey an
impermissible degree of control to the Non-Citizen. Accordingly,
consistent with our past practice in other programs, such financing for
capital improvements must be obtained from an unrelated third party.
A commenter representing fishery cooperatives stated that the AFA's
ownership and control requirements have no relevance to the
establishment and operation of cooperatives of the catcher/processor
sector for pollock and Pacific whiting fisheries. Other commenters
suggested that: (1) MARAD should not interfere with a Non-Citizen
agreement with the pollock cooperatives, (2) MARAD should not establish
disparate treatment of Non-Citizen processors and Citizen processors,
and (3) the AFA does not require such treatment because it is concerned
with vessel ownership and control and not processing or purchasing.
We do not propose to specifically regulate or interfere with the
formation of fishery cooperatives. However, an owner or bareboat
charterer is prohibited from entering into any agreement that conveys
control over the vessel, vessel-owning entity, or bareboat charterer to
a Non-Citizen. Consequently, a fishery cooperative agreement cannot
contain terms that would convey control to a Non-Citizen such as the
right to select the management company for a vessel, to hire or
discipline crew, or to direct the harvesting operations of a vessel. If
an owner or bareboat charterer enters into an agreement that conveys
control over the vessel, vessel-owning entity, or bareboat charterer,
the Citizenship Approval Officer may determine that the owner is not
eligible to document the vessel with a fishery endorsement.
Several commenters noted that Sec. 213(g) of the AFA provides that
if provisions of the AFA or the regulations are inconsistent with the
obligations of existing international treaties or agreements, the
regulations will not apply to vessel owners or mortgagees that are
nationals of the country with which we have an agreement. The
commenters pointed out that they believe that the Treaty of Friendship,
Commerce and Navigation between the Republic of Korea and the United
States of America, which was signed on November 28, 1956, and entered
into force on November 7, 1957, and the Treaty and Protocol between the
United States of America and Japan Regarding Friendship, Commerce and
Navigation, which was signed on April 2, 1953, and entered into force
on October 30, 1953, are in conflict with the ownership and mortgage
provisions of the AFA. The commenters contend that the regulations
should not apply to vessels owned by nationals of Japan and Korea by
virtue of Sec. 213(g) of the AFA. Accordingly, they request that we
identify which international treaties we deem to be inconsistent with
the provisions of the AFA. Because the exemption applies only to the
particular owner or Mortgagee of a specific vessel, we propose in
Sec. 356.53 to establish a procedural mechanism whereby owners and
Mortgagees of Fishing Vessels, Fish Processing Vessels, or Fish Tender
Vessels can petition us for a decision that they are exempt from the
provisions of the proposed rule. The owner of a vessel that may be
exempt due to an existing Treaty is not required to sell its ownership
interest in order to be in compliance with the United States Citizen
ownership and control requirements of the AFA. However, if the owner
sells part of its ownership interest to another foreign entity the
exemption no longer applies. In addition, if the owner sells part of
its interest to another entity, the requirements of the AFA apply to
the new owner.
One commenter noted that the new provisions of 46 U.S.C.
12102(c)(6), created by Sec. 202(a) of the AFA, will prohibit certain
larger vessels from being eligible for a fishery endorsement unless
they meet certain conditions. These conditions include, among other
things, that a certificate of documentation was issued to the vessel
with a fishery endorsement that was effective on September 25, 1997,
and that in the event of the invalidation of the fishery endorsement
after the date of the enactment of the AFA, application is made for a
new fishery endorsement within 15 business days. The commenter noted
that there are many ``technical violations'' that could cause a
vessel's documentation to lapse. For example, if the vessel owner fails
to notify the Coast Guard of a change in the vessel's home port or if a
change in ownership has occurred, the documentation status of the
vessel is invalid, and therefore the fishery endorsement is invalid. If
the owner does not apply to redocument the vessel within 15 business
days it could permanently lose its right to participate in the fishing
industry. The commenter explained that some violations invalidate a
vessel's documentation for some purposes but not for others, such as
for purposes of a Preferred Mortgage. The commenter suggested that we
take a similar approach for these larger vessels and identify the
specific violations that would cause a vessel to lose its fishery
endorsement.
Violations that would render a vessel's documentation, and
therefore its fishery endorsement, invalid are outlined in the Coast
Guard's regulations at 46 CFR Part 67. We do not intend for the 15-day
period to act as a permanent bar to a vessel's eligibility for a
fishery endorsement where the owner did not have written notice that
the fishery endorsement was invalidated and on what grounds.
Accordingly, we will provide notice to the vessel owner of a violation
of the requirements of part 356 that would cause a vessel owner to lose
the fishery endorsement to a vessel's documentation. The ultimate
determination as to when a violation of the Coast Guard regulations has
occurred and rendered the vessel's documentation and fishery
endorsement invalid remains with the Coast Guard; however, for purposes
of this NPRM the 15-day period will not begin to run until written
notice has been received by the vessel owner.
Discussion of Proposed Rule
The AFA requires us to promulgate regulations implementing the new
United States citizenship and control requirements for certain vessels
of 100 feet or greater in registered length. In order for a vessel of
100 feet or greater in registered length to be eligible for a
[[Page 651]]
fishery endorsement, 75% of the interest in the owner, at each tier of
ownership and in the aggregate, must be owned and controlled by
Citizens of the United States. The AFA also specifies criteria for
mortgagees to be eligible to hold a Preferred Mortgage on a Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel, prescribes
requirements for Non-Citizen Lenders to use an approved Mortgage
Trustee to hold a Preferred Mortgage, and prohibits Charters of Fishing
Vessels to Non-Citizens where the vessel is used to harvest fishery
resources. In determining whether a Fishing Vessel, Fish Processing
Vessel, or Fish Tender Vessel is controlled by Citizens of the United
States, we are required to rigorously scrutinize contracts and
agreements that could result in a conveyance of impermissible control
over the vessel or vessel-owning entity to a Non-Citizen. Accordingly,
the NPRM addresses not only the requirements for an entity to be
eligible to own a vessel with a fishery endorsement, but also
requirements that must be met by Preferred Mortgagees, Mortgage
Trustees, Non-Citizen Lenders, management companies, charterers, and
other entities that engage in contractual or other arrangements with
the owner of a Fishing Vessel, Fish Processing Vessel, or Fish Tender
Vessel and that could result in a transfer of control to a Non-Citizen.
Ownership
In order for an owner of a vessel of 100 feet or greater in
registered length to be eligible to obtain a fishery endorsement to the
vessel's documentation, it must demonstrate that: (1) 75% of the
interest in the entity that owns the vessel is owned by Citizens of the
United States, and (2) 75% of the control of the entity that owns the
vessel is owned by and vested in Citizens of the United States.
Evidence of United States Citizen ownership of a vessel-owning entity
is demonstrated through the filing of an Affidavit of United States
Citizenship as provided for in Sec. 356.5. The Affidavit of U.S.
Citizenship requires the owner to provide relevant information to
demonstrate that it qualifies as a Citizen of the United States within
the meaning of 46 U.S.C. 12102(c), Sec. 2(c) of the 1916 Act, 46 App.
U.S.C. 802(c), and 46 CFR 356.3. The form of this Affidavit is
substantially the same as the one set forth at 46 CFR Part 355, which
is used by applicants and others who must be Citizens of the United
States in order to qualify for various programs administered by MARAD.
There are two methods that an entity required to file an Affidavit
of U.S. citizenship can use to demonstrate that it is owned by Citizens
of the United States. The two methods, direct proof and fair inference,
are described in Sec. 356.7 and have been used since the 1940's as a
means of establishing citizenship. The direct proof method is used for
individuals or entities that have 30 or fewer stockholders, partners,
or members. Under the direct proof method, the owner of a vessel or any
other entity that is required to demonstrate its citizenship must
provide evidence of the citizenship of stockholders, partners and
members owning at least 75% of the interest. The amount of interest,
including the number of shares and the percentage, that is owned by
each stockholder, partner or member must be provided. In addition, the
entity must provide citizenship information for officers and directors
of a corporation or the equivalent persons in a partnership, Limited
Liability Company, or other entity.
The fair inference method provided for in Sec. 356.7(c) stems from
the case Collier Advertising Service, Inc. v. Hudson River Day Line, 14
F. Supp. 335 (S.D.N.Y. 1936). The fair inference method is intended to
be used by corporations that are publicly traded or that have more than
30 stockholders. This method was recognized by the court in the Collier
case as a means for a publicly traded corporation to establish its U.S.
citizenship within the meaning of Sec. 2 of the 1916 Act without
verifying the actual citizenship of each stockholder. The fair
inference method allows a company to ``infer'' United States
Citizenship based on a certain percentage of the stock in each class
being held by persons with a registered U.S. address. Owners of
Vessels, Mortgage Trustees, and bareboat charterers must comply with
the requirement that 75% of the interest in the entity is owned by
Citizens of the United States. Using the fair inference method, they
would have to demonstrate that 95% or more of the stock for each class
is held by stockholders with a registered U.S. address in order to
infer that 75% of the interest in the corporation is owned by Citizens
of the United States. Mortgagees of vessels that must meet the
Controlling Interest requirements of Sec. 2(b) of the 1916 Act, 46 App.
U.S.C. Sec. 802(b), would be required to demonstrate that 65% or more
of the stock for each class of stock is held by stockholders that have
a registered U.S. address in order to infer that at least 51% of the
interest in the corporation is owned by Citizens of the United States.
The stockholder-address information can be supplied through the stock
books and records of the corporation. In addition to the citizenship of
certain officers and directors of the corporation, owners of 5% or more
of the stock in each class must be specifically identified and their
citizenship must be established.
The AFA requires that 75% of the interest in a vessel owner ``at
each tier and in the aggregate'' be owned and controlled by Citizens of
the United States. Therefore, the owner must submit a composite
Affidavit of United States Citizenship demonstrating United States
citizenship for all entities that are being relied upon to establish
the required percentage of U.S. ownership and control, including
entities at subsequent tiers, such as parent corporations.
We have construed the phrase ``in the aggregate'' to mean that a
particular Non-Citizen may not own or control more than 25% of the
vessel or vessel-owning entity through its combined ownership at
multiple tiers. We recognize that this term could be interpreted much
more restrictively to prohibit total foreign interest in the vessel or
vessel-owning entity by all owners from exceeding 25%. However, we
believe that such a restrictive reading would limit the participation
in the fishing industry of publicly traded companies and the ability of
vessel owners to obtain equity participation from other entities that
are Citizens of the United States, but which may have some minor
foreign ownership.
In order for an owner of a Fishing Vessel, Fish Processing Vessel,
or Fish Tender Vessel to qualify for a fishery endorsement by the
effective date of the new ownership requirements of the AFA, an
Affidavit of United States Citizenship must be submitted to the
Citizenship Approval Officer no later than June 1, 2001. An owner may
get a letter ruling from the Citizenship Approval Officer prior to June
1, 2001, by filing an Affidavit of United States Citizenship at any
time after October 1, 2000, accompanied by the other applicable
documentation required to demonstrate U.S. citizenship. An owner that
receives a letter ruling will be required to notify the Citizenship
Approval Officer of any changes before October 1, 2001, and to submit a
certification to the Citizenship Approval Officer within 10 days prior
to October 1, 2001, stating that the information in the Affidavit of
United States Citizenship remains true and accurate, or if any
information has changed, a description of the changes.
[[Page 652]]
Control
As noted above, control is also a factor in our determinations
regarding whether an entity is a Citizen of the United States or meets
the Controlling Interest requirements of Sec. 2(b) of the 1916 Act.
Control is a difficult term to define because control can be exerted
over a vessel or vessel-owning entity through a wide variety of typical
financing and operational arrangements in the fishing industry to which
a Non-Citizen may be a party. For example, where a Non-Citizen owns 25%
of the interest in a vessel or vessel-owning entity, and the other 75%
is owned by Citizens of the United States, control could still be
conveyed to the Non-Citizen through rights granted in the Articles of
Incorporation, By-Laws, or other comparable organizing or operating
documents. Similarly, other contractual arrangements with Non-Citizens,
such as mortgage and financing agreements, management agreements, and
exclusive or long-term sales or marketing agreements, can potentially
result in a conveyance of control to Non-Citizens.
We are required to determine whether control has been transferred
to a Non-Citizen in several contexts. In the case of an owner of a
Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel, 75% of
the control over the vessel and the vessel-owning entity must be owned
by and vested in Citizens of the United States. In the case of a
Mortgagee that holds a Preferred Mortgage on a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel, the Mortgagee must comply
with the 75% ownership and control requirement unless it is a state or
federally chartered financial institution, in which case it must comply
with the Controlling Interest criteria that generally require at least
51% of the ownership and control to be vested in Citizens of the United
States. In the case of a Mortgage Trustee that is holding a mortgage on
a Fishing Vessel for the benefit of a Non-Citizen Lender, 75% of the
control over the Fishing Vessel must be vested in Citizens of the
United States.
The AFA sets forth certain factors that are to be deemed control.
Section 356.11 spells out these elements of control, as well as other
criteria that we consider in making our determination as to whether
there has been an impermissible transfer of control to a Non-Citizen.
Paragraph (a) lists indicia of control that would be considered
impermissible. Paragraph (b) lists other indicia of control that we may
consider, but that may not be deemed impermissible by themselves. While
we have attempted to list indicia of control that we may consider
permissible or impermissible, the list is not all inclusive, and in
many cases control will be determined on a case-by-case basis.
Mortgages
Mortgages are one of the key agreements in which control over a
vessel could potentially be conveyed to a Non-Citizen. Section 203(b)
of the AFA dictates that a Preferred Mortgage on a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel of 100 feet or more in
registered length can only be held by: (1) A person eligible to own a
vessel with a fishery endorsement under 46 U.S.C. 12102(c); (2) a state
or federally chartered financial institution that satisfies the
Controlling Interest criteria of Sec. 2(b) of the Shipping Act, 1916,
46 App. U.S.C. 802(b); or (3) a Mortgage Trustee that complies with the
requirements of 46 U.S.C. 12102(c)(4), Sec. 2(c) of the 1916 Act, 46
App. U.S.C. 802(c), and Secs. 356.27-37 of this proposal.
A Preferred Mortgage is the primary instrument in the maritime
industry for lenders to secure a vessel as collateral. In order for a
lender to be given ``preferred status'' for its mortgage, it must meet
the requisite citizenship requirements and otherwise qualify to hold a
preferred mortgage filed with the Coast Guard. If a lender is deemed to
be qualified to hold a preferred mortgage, a mortgage filed with the
Coast Guard will be given a preferred status which entitles the
Mortgagee's security interest to a priority over certain types of liens
against the vessel.
In order to provide some certainty for lenders so that they will
know what loan covenants will be allowed, we have proposed in
Sec. 356.23 to authorize Non-Citizen Lenders to use certain restrictive
loan covenants that we have determined do not covey impermissible
control. In addition, we propose to allow Non-Citizen Lenders that will
be using a Mortgage Trustee to get general approval of their standard
loan documents and covenants. If the lender limits its loan agreements
to those covenants for which it has received general approval, it will
not be required to obtain transactional approval from us for its loans.
However, use of restrictive loan covenants that have not been approved
by the Citizenship Approval Officer will render the general approval
void. This could result in a loss of the owner's eligibility to
document the vessel with a fishery endorsement.
Mortgage Trustees
Section 202 of the AFA also revives in principle what was commonly
referred to as a Westhampton Trust arrangement. Under this trust
arrangement, a Non-Citizen Lender that is not eligible to hold a
Preferred Mortgage on a Fishing Vessel, Fish Processing Vessel, or Fish
Tender Vessel may still receive a Preferred Mortgage if it uses an
approved trustee, referred to in the NPRM as a Mortgage Trustee, to
hold the Preferred Mortgage and the debt instrument. The criteria for
an entity to qualify as a Mortgage Trustee are spelled out in
Sec. 356.27 of the NPRM and require that the entity:
(1) Qualify as a Citizen of the United States eligible to own a
Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel;
(2) Be organized as a corporation and doing business under the laws
of the United States or of a State;
(3) Be authorized under the laws of the United States or of the
State under which it is organized to exercise corporate trust powers;
(4) Be subject to supervision or examination by an official of the
United States Government, or of a State;
(5) Have a combined capital and surplus (as stated in its most
recent published report of condition) of at least $3,000,000; and
(6) Meet any other requirements prescribed by the Maritime
Administrator.
To become a qualified Mortgage Trustee, an entity must submit an
application to the Citizenship Approval Officer accompanied by an
Affidavit of United States Citizenship and other required documentation
to demonstrate that it is a Citizen of the United States. Once
approved, the Mortgage Trustee is required to advise the Citizenship
Approval Officer of any changes to its citizenship information as they
occur throughout the year. The Mortgage Trustee must also submit, on an
annual basis, an Affidavit of United States Citizenship, a current
version of its Articles of Incorporation and Bylaws, a copy of its most
recent published report of condition, and a list of the vessels and
lenders for which it is acting as Mortgage Trustee.
Charters
Section 202(a) of the AFA amends 46 U.S.C. 12102(c) by adding a new
paragraph (c) that specifically prohibits charters to Non-Citizens of
Fishing Vessel, Fish Processing Vessel, and Fish Tender Vessels that
are used for fishing. The prohibition on charters to Non-Citizens is,
however, limited to charters
[[Page 653]]
of vessels used for fishing or harvesting of fishery resources.
The position of a bareboat charterer is quite different from that
of a time charterer. It has long been recognized in the law of
admiralty that a bareboat charterer is to be treated as the owner of
the vessel, generally called the owner pro hac vice. Therefore, a
bareboat charter to a Non-Citizen would result in an impermissible
transfer of control over the vessel. A time or voyage charterer has use
of the vessel; however, the charterer merely rents cargo space. Under a
typical time or voyage charter, the owner of the vessel retains
possession of and maintains the vessel, employs and pays the crew and
is responsible for the expenses of running the vessel. The charterer
pays for bunkers, pilots, tugs wharfage, and other port charges arising
at the places to which he directs the vessel, but he would not be
considered to have impermissible control over the vessel.
Accordingly, we propose in Sec. 356.45 to permit time charters and
voyage charters of Fish Processing Vessels and Fish Tender Vessels to
Non-Citizens for purposes other than the harvesting fish or fishery
resources. However, because charters of Fish Processing Vessels and
Fish Tender Vessels to Non-Citizens must still comply with the
requirement that impermissible control over the vessel not be conveyed
to a Non-Citizen, we propose to require submission of time charters and
voyage charters to Non-Citizens within 30 days of execution to confirm
that there is not an impermissible transfer of control. Bareboat
charters of Fishing Vessels, Fish Processing Vessels, and Fish Tender
Vessels to Non-Citizens for any use are prohibited because a bareboat
charter by its very nature results in a transfer of possession and
control over the vessel.
Management Agreements
Section 203(c) of the AFA requires us to scrutinize any agreements
that may convey control over a Fishing Vessel, Fish Processing Vessel,
Fish Tender Vessel, or the vessel's owner to a Non-Citizen. We realize
that owners and bareboat charterers may enter into a variety of
management agreements to provide different services for the vessel
without transferring control over the vessel or vessel-owning entity to
a Non-Citizen. In order to permit owners and bareboat charterers of
Fishing Vessels, Fish Processing Vessels, and Fish Tender Vessels to
conduct business in a timely fashion and with a reasonable degree of
certainty, we propose in Sec. 356.41 to allow them to enter into
certain management contracts and agreements without prior approval from
us. Such contracts must be solely advisory in nature and may not convey
impermissible control over the vessel or the owner of the vessel.
Accordingly, we expressly authorize management contracts in which the
management company solely provides for marketing, technical services,
quality control assurance, and other ministerial services that do not
involve the actual operation of the Fishing Vessel, Fish Processing
Vessel, or Fish Tender Vessel and do not convey any right to the
management company to control the operation of the vessel or the vessel
owner. However, an owner or bareboat charterer of a Fishing Vessel,
Fish Processing Vessel, or Fish Tender Vessel is prohibited from
entering into management contracts with Non-Citizens that would
effectively convey control over the vessel to the Non-Citizen
management company by allowing the Non-Citizen management company to
discipline or replace the crew or the master, direct the operations of
the vessel or to effectively gain control by any other means over the
operation and management of the vessel or vessel owner. The owner or
bareboat charterer is required to provide a description of any
management agreements into which it has entered and to provide a
written declaration and warranty that the management agreement is a
technical services type agreement authorized by us and does not contain
provisions that transfer control over the vessel or the vessel owner to
a Non-Citizen.
Exclusive or Long-Term Sales or Marketing Agreements
Long-term or exclusive sales or marketing contracts for all or a
portion of the catch of a Fishing Vessel or Fish Processing Vessel are
currently entered into between Non-Citizens and owners or bareboat
charterers of the vessels. These contracts may potentially provide a
mechanism under which control over a vessel or vessel-owning entity
could be transferred to a Non-Citizen. Section 203(c) of the AFA
requires that we scrutinize such agreements to ensure that there is not
an impermissible transfer of control to a Non-Citizen. Commenters have
suggested that these contracts are common place in the fishing industry
and generally do not convey any rights to the buyer or marketer to
control the vessel or vessel-owning entity and that too much regulation
by us would be overly burdensome and would prevent owners from entering
into necessary sales and marketing agreements in a timely manner.
Accordingly, we are proposing in Sec. 356.43 to allow owners and
bareboat charterers to enter into such agreements or contracts with
Non-Citizens, without requiring our prior approval, if the contract
does not contain provisions that convey control over the vessel or
vessel-owning entity to the Non-Citizen. Section 356.43(b) specifically
lists provisions which may be included in such agreements that are
expressly authorized and that will not be deemed an impermissible
transfer of control. If an owner or bareboat charterer wishes to enter
into such an agreement that contains provisions other than those listed
in subparagraph 356.43(b), it must obtain the approval of the
Citizenship Approval Officer prior to entering into the agreement.
Financing Arrangements Other Than Vessel Mortgages
Financing of Fishing Vessel, Fish Processing Vessel, and Fish
Tender Vessel operations is not limited to the mortgage of the vessel.
We recognize that owners and bareboat charterers may enter into other
financing arrangements for working capital or to finance improvements
to such vessels. Section 203(c) of the AFA requires that we scrutinize
financing arrangements that could potentially convey control over a
Fishing Vessel, Fish Processing Vessel, Fish Tender Vessel, or a
vessel-owning entity to a Non-Citizen. We do not consider an advance of
funds by a purchaser to whom fish has been sold but not yet delivered,
or by a consignee to whom fish has been delivered for sale under a
consignment agreement but has not yet been sold, to constitute an
impermissible transfer of control and do not restrict such
transactions. We will, however, regulate certain other financing
arrangements, and propose in Sec. 356.45 to allow owners and bareboat
charterers of Fishing Vessels, Fish Processing Vessels, and Fish Tender
Vessels to enter into financing arrangements that are not secured by a
mortgage on the vessel, such as an advance of funds owed under a long-
term or exclusive sales contract that is consistent with Sec. 356.43,
provided that the Non-Citizen Lender is not granted any rights
whatsoever to control the ownership, operation, management, or
harvesting activities of the vessel or its owner. The owner or bareboat
charterer must submit a description of the financing agreement to the
Citizenship Approval Officer within 30 days of execution, accompanied
by a declaration and warranty signed by the owner or bareboat charterer
that the contract or agreement does not contain any covenants that
convey control over the vessel, vessel owner, or bareboat charterer to
a Non-Citizen. The owner is
[[Page 654]]
not authorized in this section or elsewhere in the NPRM to enter into a
financing arrangement for a capital improvement of the vessel with a
related Non-Citizen. An owner may only obtain financing of capital
improvements on the vessel through financing from an unrelated third
party.
Exemptions for Certain Vessels
Section 202(a) of the AFA creates a new paragraph (6) in
Sec. 12102(c) of Title 46 United States Code. The amended 46 U.S.C.
12102(c)(6) prevents large Fishing Vessels, Fish Processing Vessels,
and Fish Tender Vessels from entering U.S. fisheries, including former
U.S.-flag vessels that have reflagged in recent years to fish in waters
outside of the U.S. exclusive economic zone. Section 356.47 implements
the requirement that, unless otherwise exempted, a vessel is not
eligible for a fishery endorsement to its documentation if: (1) it is
greater than 165 feet in registered length, (2) is more than 750 gross
registered tons, or (3) possesses an engine or engines capable of
producing a total of more than 3,000 shaft horsepower.
A Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel
that meets the above criteria will still be eligible for a fishery
endorsement if: (1) a certificate of documentation was issued for the
vessel and endorsed with a fishery endorsement that was effective on
September 25, 1997, (2) the vessel is not placed under foreign registry
after October 6, 1998, (3) in the event of the invalidation of the
fishery endorsement after October 6, 1998, application is made for a
new fishery endorsement within fifteen (15) business days of such
invalidation, or (4) the vessel is engaged exclusively in the menhaden
fishery in the geographic region governed by the South Atlantic
Fisheries Council or the Gulf of Mexico Fisheries Council.
With regard to the third requirement, Part 356 identifies ways in
which a vessel owner may be deemed ineligible to document a vessel with
a fishery endorsement because of excessive ownership or control of the
vessel or vessel owner by a Non-Citizen. If we determine that these
regulations have been violated and that the owner is no longer eligible
to document the vessel, the owner will be notified by us in writing
that it has 15 days to cure the problem or that it will no longer be
eligible to document the vessel with a fishery endorsement. Other
reasons for which a vessel's documentation will be invalidated, thus
causing the fishery endorsement to be invalid, are found in the Coast
Guard regulations at 46 CFR Part 67. We do not believe that failure to
apply to redocument the vessel within the 15-day period is intended to
act as a permanent bar to the vessel being documented with a fishery
endorsement where the owner did not receive written notice that the
vessel's documentation, and therefore the fishery endorsement, was
invalidated. The Coast Guard is the appropriate agency to determine
whether a violation of its regulations has caused the fishery
endorsement to be invalid thus triggering the 15-day period for the
owner to reapply. However, the 15-day period will not begin to run
until the owner has received written notice of the violation.
International Agreements
Section 213(g) of the AFA provides that where there is a conflict
between an international agreement or treaty and the provisions of the
AFA, the provisions of the AFA that are in conflict with the
international agreement will not apply to specific vessels covered by
the agreement. The NPRM establishes a procedural mechanism by which an
owner or Mortgagee can petition for an exemption from the requirements
of the NPRM if it believes that there is a conflict between the AFA and
an international agreement to which a particular vessel is subject.
Violation of Harvesting or Processing Caps
Section 210(e)(3) of the AFA requires MARAD, upon the request of
the North Pacific Fishery Council or the Secretary of Commerce, to
review any allegation that an individual or entity has exceeded the
percentage of its harvesting or processing cap as provided for in
Sec. 203(e)(1) or (2) of the AFA. Section 356.55 of the NPRM sets forth
a process whereby the Citizenship Approval Officer, upon such a
request, will review the allegations and submit a decision to the North
Pacific Fishery Council and the Secretary of Commerce.
Plain Language
This NPRM is one of our first rulemaking documents to be published
under the new plain language directive. We welcome any comments and
suggestions on the use and effectiveness of plain language techniques
in this document or other suggestions to improve our use of plain
language in future rulemakings.
Rulemaking Analysis and Notices
Executive Order 12866 (Regulatory Planning and Review)
This proposed rule is a significant regulatory action under
Sec. 3(f) of Executive Order 12866 and was reviewed by the Office of
Management and Budget. The rule is not economically significant under
Sec. 3(f)(1) of the Executive Order. However, the rule is significant
under the Regulatory Policies and Procedures of the Department of
Transportation (44 FR 11034) because of significant public and
congressional interest.
This NPRM proposes regulations pursuant to the AFA. The AFA raises
the U.S. citizen ownership and control requirements for U.S.-flag
Fishing Vessels, Fish Processing Vessels, and Fish Tender Vessels
operating in U.S. waters from 51% to 75%. The AFA also eliminates
exemptions for vessels that cannot meet current citizenship standards
and phases out of operation many of the largest vessels. Section 203 of
the AFA requires that we promulgate regulations that: (1) prohibit
impermissible transfers of ownership or control, (2) identify
transactions that will require our prior approval, and (3) identify
transactions that will not require our prior approval. To the extent
practicable, the regulations are required to minimize disruptions to
the commercial fishing industry, to the traditional financing
arrangements of such industry, and to the formation of fishery
cooperatives. The statutory changes are intended to give U.S. interests
a priority in the harvest of U.S. fishery resources. The regulations
are required to be issued in final form by April 1, 2000, and will
become effective on October 1, 2001.
The new statutory requirement that 75% of the ownership and control
of an entity owning a documented vessel of 100 feet or greater in
registered length be vested in Citizens of the United States in order
for the vessel to be eligible for a fishery endorsement is expected to
impact a relatively small segment of the fishing industry. There are
over 36,000 vessels that currently have a fishery endorsement. Based on
information from the Coast Guard Vessel Documentation Center, we
believe that less than 550 of these vessels are 100 feet or greater in
registered length and thus subject to these proposed regulations. These
approximately 550 vessels are owned by roughly 400 different entities.
We estimate that less than 6% of the nearly 550 vessels are currently
owned by entities that do not meet the 75% ownership requirement and
that may be required to increase the level of United States Citizen
participation in their ownership structure so as to comply with the
requirements of the AFA.
The AFA also requires that 75% of the control over a vessel or
vessel-owning entity be vested in Citizens of the
[[Page 655]]
United States. Therefore, owners that comply with the ownership
requirements may still be impacted by this NPRM if they have entered
into contracts or agreements that would convey impermissible control to
Non-Citizens. Agreements that convey impermissible control over a
vessel or vessel-owning entity are prohibited by the AFA. However, we
have attempted in this rulemaking to minimize the review of certain
contracts and agreements so as not to unduly interfere with the
operation of Fishing Vessels, Fish Processing Vessels, and Fish Tender
Vessels.
Some lenders financing Fishing Vessels, Fish Processing Vessels, or
Fish Tender Vessels could also be impacted by this NPRM if they do not
meet the requisite United States Citizenship requirements to hold a
Preferred Mortgage on such vessels. A Non-Citizen Lender that does not
qualify to hold a Preferred Mortgage on a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel in its own right may receive a
Preferred Mortgage through the use of an approved Mortgage Trustee that
qualifies as a Citizen of the United States. It has been our experience
that the use of a Mortgage Trustee imposes minimal cost and burden
compared to the overall benefits of receiving a Preferred Mortgage or
security for a loan. Therefore, while the Non-Citizen Lender may incur
some cost associated with using a qualified Mortgage Trustee to hold
the Preferred Mortgage, the burden will be minimal; the Non-Citizen
lender will not be prohibited from financing Fishing Vessels, Fish
Processing Vessels, or Fish Tender Vessels; and, minimal costs should
be passed on to vessel owners.
We do not have estimates of the total cost of the requirements of
the statute or this NPRM at this time because little cost information
was submitted by the industry in response to the ANPRM. The preliminary
regulatory analysis reflects the comments that were received in
response to the ANPRM.
Discussion of Alternatives
The AFA specifically requires that we issue regulations that set
out the requirements for owners of vessels to file, on an annual basis,
a statement of citizenship setting forth all relevant facts regarding
vessel ownership and control that are necessary to demonstrate
compliance with Sec. 2(c) of the Shipping Act of 1916, 46 App. U.S.C.
802(c), and with 46 U.S.C. 12102(c). Section 203(b) of the AFA requires
that the regulations conform, to the extent practicable, with our
regulations establishing the form of citizenship affidavit set forth in
46 CFR part 355, as in effect on September 25, 1997. The form of the
statement is also required to be written in a manner that will allow
the owner of each vessel to satisfy any annual renewal requirements for
a certificate of documentation. Section 203(c) requires transfers of
ownership and control of vessels after October 1, 2001, to be
rigorously scrutinized for violations of the ownership and control
requirements, with particular attention given to leases, charters,
mortgages, financing, contracts for the purchase over time of all or
substantially all of a Fishing Vessel's catch, and other arrangements
that may convey control over the management, sales, financing, or other
operations of an entity. In contrast to the specific requirement of
Sec. 203(c) that we rigorously scrutinize certain transactions, is the
more general mandate of Sec. 203(b) that the regulations, to the extent
practicable, minimize disruptions of the commercial fishing industry,
to the traditional financing arrangements of such industry, and to the
opportunity to form fishery cooperatives.
We have considered various alternatives to implement the AFA and
the impact of these alternatives on the regulated community and on
small business entities in the fishing industry. Although the AFA
grants broad authority to us to regulate transactions related to the
ownership and control of Fishing Vessels, Fish Processing Vessels, and
Fish Tender Vessels, we have attempted to promulgate requirements that
pose the least possible burden on the regulated public, while still
providing us with the information necessary to implement our
responsibilities under the AFA.
The requirements in the NPRM for an entity owning a Fishing Vessel,
Fish Processing Vessel, or Fish Tender Vessel to provide evidence of
United States citizenship are modeled after our existing regulations in
46 CFR part 355. However, the AFA specifically requires that 75% of the
interest in an entity be owned and controlled by Citizens of the United
States ``at each tier of ownership in such entity and in the
aggregate.'' In interpreting the new requirement that 75% of the
interest be owned and controlled ``in the aggregate'' by Citizens of
the United States, we considered two alternatives. The phrase could be
given a very strict construction to prohibit more than 25% of the
ownership structure from being owned or controlled by Non-Citizens.
However, such an interpretation would make it very difficult for
publicly traded companies to participate in the fishing industry or for
companies to enter into partnering arrangements. For example, a
publicly traded company could not enter into a partnership with a Non-
Citizen to own a Fishing Vessel whereby the Non-Citizen would own 25%
of the vessel unless 100% of the publicly traded company was owned by
Citizens of the United States. Under such an arrangement the purchase
of one share of stock in the publicly traded company by a Non-Citizen
could render the owners of the vessel ineligible to obtain a fishery
endorsement to the vessels documentation.
We believe that a more reasonable alternative is to require that no
more than 25% of the interest in a vessel owner must be owned ``in the
aggregate'' by a particular Non-Citizen. This requirement, which is set
forth in Sec. 356.11, would eliminate control of a vessel owned by a
particular Non-Citizen while at the same time permitting more foreign
investment in the fishing industry thus increasing the options for
vessel owners to raise capital.
We have also reviewed alternatives with respect to the approval and
oversight of mortgages and Mortgage Trustees. While Sec. 203(c) of the
AFA requires us to rigorously scrutinize mortgages and financing
agreements, we do not believe that it will be necessary to require
transactional approval of each financing and mortgage transaction.
Accordingly, we propose to allow Non-Citizens, who are in the business
of financing vessels, to obtain general approval of their standard loan
agreement, provided that the standard loan covenants are acceptable to
us. Section 356.21 allows a Non-Citizen Lender to get general approval
for its standard loan documents if it does not include covenants that
would convey impermissible control to the Non-Citizen. Once a Non-
Citizen Lender has received approval for its standard loan agreements,
it may enter into loans for Fishing Vessels, Fish Processing Vessels,
and Fish Tender Vessels without having to obtain the approval of the
Citizenship Approval Officer for each loan agreement. The general
approval should reduce the paperwork required for lenders and owners,
provide certainty regarding the loan covenants that will be considered
permissible, streamline the process for financing Fishing Vessels, Fish
Processing Vessels, and Fish Tender Vessels, and increase the range of
financing options for vessel owners, including small business entities.
A Non-Citizen Lender is required to use an approved Mortgage
Trustee in order to hold a Preferred Mortgage on
[[Page 656]]
the vessel. As with the above general approval for Non-Citizen Lenders,
a Mortgage Trustee may obtain approval from the Citizenship Approval
Officer on an annual basis to act as a Mortgage Trustee and will not be
required to obtain transactional approval. The Mortgage Trustee will be
required to simply provide an annual certification in the form of an
Affidavit of United States Citizenship to demonstrate that it is still
a Citizen of the United States, a current copy of its Articles of
Incorporation and Bylaws, a copy of it most recent published report of
condition, and a list of the vessels and lenders for which it is acting
as Mortgage Trustee. The freedom for Mortgage Trustees to enter into
agreements without being required to get transactional approval will
minimize the burden of using a Mortgage Trustee, will provide certainty
for vessel owners and foreign lenders regarding qualified Mortgage
Trustees, and will simplify the process for owners to obtain foreign-
financing.
We have also sought to minimize regulation of those vessel charters
that the AFA allows. The AFA allows charters of Fish Processing Vessels
and Fish Tender Vessels to Citizens and time charters and voyage
charters to Non-Citizens of Fish Processing and Fish Tender Vessels
that are not used for fishing, provided that such charters to Non-
Citizens comply with the requirement that there not be an impermissible
transfer of ownership and control to a Non-Citizen. While we considered
requiring that all charters to Non-Citizens be submitted to us for
review before being executed in order to ensure that there is not an
impermissible transfer of control, we believe that it will impose less
of a burden on vessel owners and charterers to authorize time charters
and voyage charters to Non-Citizens without our prior approval. This is
consistent with our present practice concerning non-fishing vessels.
Our approval is conditioned upon the requirement that the charter
agreement not include provisions that would convey an impermissible
transfer of ownership or control to the Non-Citizen charterer and that
a copy of the charter be sent to us within 30 days after execution to
confirm that the charter is not in fact a demise of the vessel.
With regard to long-term or exclusive contracts for the sale of all
or a significant portion of a vessel's catch, we again considered
requiring that these agreements be approved on a transactional basis.
However, because we do not wish to impose requirements on owners of
Fishing Vessels that will interfere with their ability to enter into
such agreements in a timely manner, we have elected to authorize such
standard agreements, provided that they do not convey impermissible
control to a Non-Citizen. We have determined that certain standard
provisions do not convey impermissible control to Non-Citizens and may
be included in these agreements. The NPRM will thus permit owners and
bareboat charterers of Fishing Vessels to enter into these agreements
with Non-Citizens in a timely manner without imposing additional costs
or time consuming regulatory requirements.
Finally, with respect to management agreements, rather than
requiring approval of each agreement to determine whether there is an
impermissible transfer of ownership or control over the vessel to a
Non-Citizen, we opted to establish a set of criteria for such
agreements and to generally approve certain management agreements,
provided that they are for technical and administrative services and
are advisory in nature.
Federalism
We analyzed this rulemaking in accordance with the principles and
criteria contained in E.O. 13132 (``Federalism'') and have determined
that it does not have sufficient federalism implications to warrant the
preparation of a federalism summary impact statement. The regulations
have no substantial effects on the States, or on the current Federal-
State relationship, or on the current distribution of power and
responsibilities among the various local officials. Therefore,
consultation with State and local officials was not necessary.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires us
to consider whether our proposals will have a significant economic
impact on a substantial number of small entities. ``Small entities''
include independently owned and operated small businesses that are not
dominant in their field and that otherwise qualify as ``small business
concerns'' under Sec. 3 of the Small Business Act (15 U.S.C. 632). We
believe that the cost of complying with these proposed regulations
would be minimal. Therefore, MARAD certifies that this proposed rule
will not have a significant impact on a substantial number of small
businesses.
In our effort to determine whether there are a substantial number
of small entities that may be impacted by this proposed rule, we issued
an ANPRM entitled Eligibility of U.S.-Flag Vessels of 100 Feet or
Greater to Obtain Fisheries Documents, 64 FR 24311 (May 6, 1999), and
requested input from the public regarding the potential economic impact
of the new citizenship and control requirements of the AFA. We
specifically requested information regarding: (1) any unique issues
within the fishing industry regarding the ownership, operation,
management, control, financing, or mortgaging of Fishing Vessels; and,
(2) costs relating to the new citizenship and control requirements that
would likely be incurred by vessel owners, operators, lending
institutions, Mortgagees, and other participants in the fishing
industry. We conducted five public meetings during the sixty day
comment period to obtain oral and written comments from the public.
Although the comments in response to the ANPRM provided us with some
valuable information, we only received three comments from entities
that identified themselves as small entities, and we did not receive
specific information regarding the economic impact to small entities
that may result from this rulemaking.
This notice of proposed rulemaking may reasonably be expected to
affect small businesses or entities that currently own documented
Fishing Vessels, Fish Processing Vessels, or Fish Tender Vessels, that
have financed such vessels or that are engaging in the fisheries of the
United States with such vessels. The Small Business Administration
defines businesses within the fishing industry that have annual
receipts of $3 million or less as small businesses, 13 CFR 121.201.
While we recognize that a number of vessel owners may be classified
under the Small Business Administration regulations as small entities,
at the present time we do not know whether this proposed rulemaking
will have a significant economic impact on a substantial number of
small entities. We estimate that of the nearly 33,000 vessels that have
a fishery endorsement, less than 550 are 100 feet or greater in
registered length and thus subject to this proposed rule. We further
estimate that there are approximately 400 vessel owners within this
group of 550; however, we have not been able to determine which owners
might be classified as small businesses.
We estimate that less than 6 percent of the 550 vessels potentially
subject to this proposed rule have less than the 75% United States
Citizen ownership required by the AFA. It is possible that some of
these vessel owners, who otherwise meet the 75% United States
[[Page 657]]
citizen ownership requirement, may still be impacted by the proposed
rule if the vessel is mortgaged to an entity that does not qualify to
hold a Preferred Mortgage on the vessel or if the owner does not meet
the requirement that control over 75% of the interest in the entity
owning the vessel be vested in Citizens of the United States. However,
even if the mortgage on the vessel is held by a lender that does not
qualify, the lender will still be able to secure a Preferred Mortgage
on the vessel through the use of an approved Mortgage Trustee. Based on
our 30 years of experience using Mortgage Trustees in other programs,
the use of a Mortgage Trustee imposes minimal cost and burden compared
to the overall benefit of receiving a Preferred Mortgage as security
for a loan. The use of a Mortgage Trustee will allow the Non-Citizen
Lender to continue to receive a First Preferred Mortgage on a Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel. Therefore, the
new citizenship requirements for Mortgagees will have minimal economic
impact.
In our regulatory analysis, we considered a variety of alternatives
in order to find ways to minimize the regulatory burden on the affected
public, specifically on small business entities, and to foster the
ability of vessel owners to obtain financing for their vessels. A
discussion of these alternatives is contained under the above section
marked ``Executive Order 12866 (Regulatory Planning and Review)''.
If you believe that this rulemaking will have a significant
economic impact on your business, please submit a comment (see
ADDRESSES) explaining in what way and to what degree this proposal will
economically affect your business. In addition, if you think that your
business qualifies as a small entity, and that further rulemaking will
have a significant economic impact on your business, please submit a
comment explaining how your business qualifies as a small entity, how
this rulemaking may economically affect your business, and whether you
are aware of other small entities that are similarly situated.
Environmental Impact Statement
We have analyzed this NPRM for purposes of compliance with the
National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) and
have concluded that under the categorical exclusions provision in
section 4.05 of Maritime Administrative Order (``MAO'') 600-1,
``Procedures for Considering Environmental Impacts,'' 50 FR 11606
(March 22, 1985), the preparation of an Environmental Assessment, and
an Environmental Impact Statement, or a Finding of No Significant
Impact for this rulemaking is not required. This rulemaking involves
administrative and procedural regulations which clearly have no
environmental impact.
Paperwork Reduction Act
This NPRM establishes a new requirement for the collection of
information. The Office of Management and Budget (``OMB'') will be
requested to review and approve the information collection requirements
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501, et seq.). We
request that commenters address in their comments whether the
information collection in this proposal is necessary for the agency to
properly perform its functions and will have practical utility, the
accuracy of the burden estimates, ways to minimize this burden, and
ways to enhance quality, utility, and clarity of the information to be
collected.
In accordance with the Paperwork Reduction Act, this notice
announces MARAD's intentions to request approval for three years of the
subject information collection to allow processing of applications to
determine the eligibility of owners of vessels of 100 feet or greater
in registered length to obtain a fishery endorsement to the vessel's
documentation, to determine the eligibility of lending institutions to
hold a Preferred Mortgage on a Fishing Vessel, a Fish Processing
Vessel, or a Fish Tender Vessel of 100 feet or greater in registered
length and to determine the eligibility of Mortgage Trustees to hold a
Preferred Mortgage on such vessels for the benefit of a Non-Citizen
Lender. Copies of this request may be obtained from the Office of Chief
Counsel at the address given above under ADDRESSES.
Title of Collection: [Eligibility of U.S.-Flag Vessels of 100 Feet
or Greater In Registered Length to Obtain a Fishery Endorsement to the
Vessel's Documentation] 46 CFR Part 356.
Type of Request: New request for information.
OMB Control Number:
Form Number: None.
Expiration Date of Approval: Three years following approval by OMB.
Summary of the Collection of Information: Owners of vessels of 100
feet or greater in registered length who wish to obtain a fishery
endorsement to the vessel's documentation will be required to file an
Affidavit of United States Citizenship demonstrating that they comply
with the requirements of Sec. 2(c) of the 1916 Act, 46 App. U.S.C.
802(c) and with the requirements of 46 U.S.C. 12102(c). Other
documentation to be submitted with the Affidavit includes a copy of the
Articles of Incorporation, Bylaws or other comparable documents, a
description of any management agreements entered into with Non-
Citizens, a certification that any management contracts with Non-
Citizens do not convey control in a Fishing Vessel, Fish Processing
Vessel, or Fish Tender Vessel to a Non-Citizen, and a copy of any time
charters or voyage charters with Non-Citizens.
Mortgagees who plan to finance vessels of 100 feet or greater in
registered length that have a fishery endorsement or for which a
fishery endorsement to the vessel's documentation is sought must submit
an Affidavit of United States Citizenship to demonstrate that they
comply with the United States Citizen ownership and control
requirements of Sec. 2(c) of the 1916 Act, 46 App. U.S.C. Sec. 802(c),
or in the case of a state or federally chartered financial institution,
the Controlling Interest requirements of Section 2(b) of the 1916 Act.
If a Mortgagee does not comply with the U.S. citizen ownership and
control requirements set forth above and is deemed a Non-Citizen, it
must use a Mortgage Trustee that qualifies as a Citizen of the United
States to hold the Preferred Mortgage for the benefit of the Non-
Citizen Lender. The Mortgage Trustee must file an application for
approval as a Mortgage Trustee that includes an Affidavit of United
States Citizenship demonstrating compliance with the United States
Citizen ownership and control requirements of Sec. 2(c) of the 1916
Act. In addition to the Affidavit of United States Citizenship,
corporations and other entities must submit documents which demonstrate
that the entity is organized and existing under the laws of the United
States, such as Articles of Incorporation and Bylaws, or other
comparable documents. Annually, owners of vessels, mortgagees and
applicable mortgage trustees must submit prescribed citizenship
information to MARAD's Citizenship Approval Officer.
A Person(s) alleged to have exceeded the authorized harvesting or
processing caps provided for in Sec. 210(e)(1) or (2) of the AFA will
be required to submit to the Citizenship Approval Officer any
information deemed relevant in determining whether such Person(s) have
exceeded the cap.
Need and Use of the Information: The information collection will be
used to verify statutory compliance with the United States Citizen
ownership and control requirements under Sec. 2(b) and Sec. 2(c) of the
1916 Act and 46 U.S.C. 12102(c) for owners, charterers,
[[Page 658]]
Mortgagees, and Mortgage Trustees of vessels of 100 feet or greater in
registered length for which a fishery endorsement to the vessel's
documentation is being sought. Section 203(c) of the AFA requires that
we ``rigorously scrutinize'' transfers of ownership and control of
vessels subject to 46 U.S.C. 12102(c) and that we pay particular
attention to leases, charters, mortgages, financing and similar
arrangements that may result in a transfer of control over an entity
that owns a Fishing Vessel, Fish Processing Vessel, or Fish Tender
Vessel. Without the information it would be impossible to know whether
the vessels and vessel-owning entities are owned and controlled by
Citizens of the United States as required by the AFA.
The information collected from Mortgagees and Mortgage Trustees
will be used to verify that they qualify as United States Citizens as
required by the AFA. A Mortgagee of Fishing Vessels, Fish Processing
Vessels, and Fish Tender Vessels must either be a Citizen of the United
States that complies with section 2(c) of the 1916 Act, or a state or
federally chartered financial institution that complies with the
Controlling Interest requirements of Sec. 2(b) of the 1916 Act. A
Mortgage Trustee, holding a mortgage for an entity that does not
qualify as a Mortgagee under these requirements, must be a Citizen of
the United States that meets the requirements of 46 U.S.C. 12102(c) and
Sec. 2(c) of the 1916 Act, 46 App. U.S.C. 802(c), and that is eligible
to own a vessel with a fishery endorsement. Without the information it
would be impossible to know whether the Mortgagees and Mortgage
Trustees of these vessels are Citizens of the United States as required
by the AFA.
The information collected from Person(s) alleged to have exceeded
the percentage caps for harvesting or processing as provided in
Sec. 203(e)(1) or (2) of the AFA will be used to make a determination
whether the Person(s) has violated section Sec. 210(e) of the AFA.
Description of Respondents: Owners, Bareboat Charterers,
Mortgagees, and Mortgage Trustees of vessels of 100 feet or greater in
registered length for which a fishery endorsement to the Vessel's
documentation is being sought. Person(s) alleged to have exceeded their
percentage cap for harvesting or processing as provided in
Sec. 210(e)(1) or (2) of the AFA.
Annual Responses: Responses will be required on an occasional and
an annual basis. Updates will be required during the year if there are
changes to the ownership or financing of the vessel. There are
approximately 550 vessels and 400 vessel owners that are subject to
this regulation. Approximately 450 responses are expected from owners
and bareboat charterers and less than 50 responses are expected from
Mortgagees and Mortgage Trustees. We estimate that one request per year
might be received alleging that Person(s) have exceeded their
harvesting or processing caps.
Annual Burden: 1000 hours.
Unfunded Mandates Reform Act of 1995
This proposed rule would not impose an unfunded mandate under the
Unfunded Mandates Reform Act of 1995. It would not result in costs of
$100 million or more, in the aggregate, to any of the following: State,
local, or Native American tribal governments, or the private sector.
This proposed rule is the least burdensome alternative that achieves
the objective of the rule.
Impact on Business Processes and Computer Systems
Many computers that use two digits to keep track of dates will, on
January 1, 2000, recognize ``double zero'' not as 2000 but as 1900.
This glitch, the Year 2000 problem, could cause computers to stop
running or to start generating erroneous data. The Year 2000 problem
poses a threat to the global economy in which Americans live and work.
With the help of the President's Council on Year 2000 Conversion,
Federal agencies are reaching out to increase awareness of the problem
and to offer support. We do not want to impose new requirements that
would mandate business process changes when the resources necessary to
implement those requirements would otherwise be applied to the Year
2000 problem. Because this NPRM would not affect the ability of
organizations to respond to the Year 2000 problem, we do not intend to
delay the effectiveness of the proposed requirements in this NPRM.
List of Subjects in 46 CFR Part 356
Citizenship, Fishery endorsement, Fishing vessels, Mortgages,
Mortgage trustee, Penalties, Preferred mortgages.
Accordingly, we propose to add a new 46 CFR Part 356 to read as
follows:
PART 356--REQUIREMENTS FOR VESSELS OF 100 FEET OR GREATER IN
REGISTERED LENGTH TO OBTAIN A FISHERY ENDORSEMENT TO THE VESSEL'S
DOCUMENTATION
Subpart A--General Provisions
Sec.
356.1 Purpose.
356.3 Definitions.
Subpart B--Ownership and Control
356.5 Affidavit of U.S. Citizenship.
356.7 Methods of establishing ownership by United States Citizens.
356.9 Tiered ownership structures.
356.11 Impermissible control by a Non-Citizen.
Subpart C--Requirements for Vessel Owners
356.13 Information required to be submitted by vessel owners.
356.15 Filing of Affidavit of U.S. Citizenship.
356.17 Annual requirements for vessel owners.
Subpart D--Mortgages
356.19 Requirements to hold a Preferred Mortgage.
356.21 General approval of Non-Citizen lender's standard loan or
mortgage agreements.
356.23 Restrictive loan covenants approved for use by Non-Citizen
lenders.
356.25 Operation of Fishing Vessels, Fish Processing Vessels, or
Fish Tender Vessels by Mortgagees.
Subpart E--Mortgage Trustees
356.27 Mortgage Trustee requirements.
356.31 Maintenance of Mortgage Trustee approval.
356.37 Operation of a Fishing Vessel, Fish Processing Vessel, or
Fish Tender Vessel by a Mortgage Trustee.
Subpart F--Charters, Management Agreements and Exclusive or Long-Term
Contracts
356.39 Charters.
356.41 Management agreements.
356.43 Long-term or exclusive sales and/or marketing contracts.
356.45 Advance of funds.
Subpart G--Special Requirements for Certain Vessels
356.47 Special requirements for large vessels.
356.49 Penalties.
356.51 Exemptions for specific vessels.
Subpart H--International Agreements
356.53 Conflicts with International Agreements.
Subpart I--Review of Harvesting and Processing Compliance
356.55 Review of compliance with harvesting and processing quotas.
Authority: 46 App. U.S.C. 12102; Public Law 105-277, Division C,
Title II, Subtitle I, section 203 (46 App. U.S.C. 12102 note),
section 210(e), and section 213(g), 112 Stat. 2681; 46 CFR section
1.66.
Subpart A--General Provisions
Sec. 356.1 Purpose.
Part 356 implements U.S. Citizenship requirements of the American
Fisheries Act of 1998, as amended, Title II, Division C, Pub. L. 105-
277, for owners, Mortgage Trustees, and Mortgagees of
[[Page 659]]
vessels of 100 feet or greater in registered length that have a fishery
endorsement to the vessel's documentation or where a fishery
endorsement to the vessel's documentation is being sought. This part
also addresses ancillary matters of charters, management agreements,
exclusive sales or marketing contracts, conflicts with international
agreements, determinations regarding violations of harvesting or
processing limits, and exceptions for certain vessels, vessel owners
and Mortgagees from the general requirements of the rule.
Sec. 356.3 Definitions.
For the purpose of this part, when used in capitalized form:
(a) 1916 Act refers to section 2 of the Shipping Act of 1916, as
amended, 46 App. U.S.C. 802. The Controlling Interest requirements of
the Shipping Act are found in section 2(b), 46 App. U.S.C. section
802(b). The citizenship requirements for eligibility to own a vessel
with a fisheries endorsement are found in section 2(c), 46 App. U.S.C.
section 802(c), and 46 U.S.C. section 12102(c).
(b) AFA means the American Fisheries Act of 1998, as amended, Title
II, Division C, of Pub. L. 105-277;
(c) Charter means any agreement or commitment by which the
possession or services of a Fishing Vessel, Fish Processing Vessel, or
Fish Tender Vessel are secured for a period of time, or for one or more
voyages, whether or not a bareboat charter of the vessel. A long-term
or exclusive contract for the sale of all or a portion of a Fishing
Vessel's catch is not considered a Charter.
(d) Citizen of the United States, Citizen or U.S. Citizen:
(1) Means an individual who is a Citizen of the United States, by
birth, naturalization or as otherwise authorized by law, or an entity
that in both form and substance, at each tier of ownership and in the
aggregate, satisfies the requirements of 46 U.S.C. 12102(c) and 2(c) of
the 1916 Act, 46 App. U.S.C. 802(c). In order to satisfy the statutory
requirements an entity other than an individual must meet the
requirements of paragraph (2) of this definition and the following
criteria:
(i) The entity must be organized under the laws of the United
States or of a State;
(ii) Seventy five percent (75%) of the ownership and control in the
entity must be owned by and vested in Citizens of the United States
free from any trust or fiduciary obligation in favor of any Non-
Citizen;
(iii) No arrangement may exist, whether through contract or any
understanding, that would allow more than 25% of the voting power of
the entity to be exercised, directly or indirectly, in behalf of any
Non-Citizen; and
(iv) Control of the entity, by any other means whatsoever, may not
be conferred upon or permitted to be exercised by a Non-Citizen.
(2) Other criteria that must be met by entities other than
individuals include:
(i) In the case of a corporation:
(A) The chief executive officer, by whatever title, and chairman of
the board of directors and all officers authorized to act in the
absence or disability of such persons must be Citizens of the United
States; and
(B) No more of its directors than a minority of the number
necessary to constitute a quorum are Non-Citizens;
(ii) In the case of a partnership all general partners are Citizens
of the United States;
(iii) In the case of an association:
(A) All of the members are Citizens of the United States;
(B) The chief executive officer, by whatever title, and the
chairman of the board of directors (or equivalent committee or body)
and all officers authorized to act in their absence or disability are
Citizens of the United States; and,
(C) No more than a minority of the number of its directors, or
equivalent, necessary to constitute a quorum are Non-Citizens;
(iv) In the case of a joint venture:
(A) It is not determined by the Citizenship Approval Officer to be
in effect an association or a partnership; and,
(B) Each coventurer is a Citizen of the United States;
(v) In the case of a Trust that owns a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel:
(A) The Trust is domiciled in the United States or a State;
(B) The Trustee is a Citizen of the United States; and
(C) All beneficiaries of the trust are persons eligible to document
vessels pursuant to the requirements of 46 U.S.C. 12102;
(vi) In the case of a mortgage Trust:
(A) The Trust is domiciled in the United States or a State;
(B) The Mortgage Trustee is a Citizen of the United States; and,
(C) The Mortgage Trustee is authorized to act on behalf of Non-
Citizen beneficiaries pursuant to Sec. 356.5.
(vii) In the case of a Limited Liability Company (LLC) that is not
found to be in effect a general partnership requiring all of the
general partners to be Citizens of the United States:
(A) Any Person elected to manage the LLC or who is authorized to
bind the LLC, and any Person who holds a position equivalent to a Chief
Executive Officer, by whatever title, and the Chairman of the Board of
Directors in a corporation are Citizens of the United States; and,
(B) Non-Citizens do not have authority within a management group,
whether through veto power, combined voting, or otherwise, to exercise
control over the LLC.
(e) Citizenship Approval Officer means MARAD's Citizenship Approval
Officer within the Office of Chief Counsel. The Citizenship Approval
Officer's address is: Maritime Administration, United States Department
of Transportation, Citizenship Approval Officer, MAR-220, Room 7232,
400 7th Street, S.W., Washington, DC 20590.
(f) Controlling Interest:
(1) Means an entity that in both form and substance, at each tier
of ownership and in the aggregate, satisfies the requirements of
section 2(b) of the 1916 Act, 46 App. U.S.C. section 802(b). In order
to satisfy the statutory requirements, an entity other than an
individual must meet the requirements of paragraph (2) of this
definition and the following criteria:
(i) The entity must be organized under the laws of the United
States or of a State;
(ii) A majority of the ownership and control in the entity must be
owned by and vested in Citizens of the United States free from any
trust or fiduciary obligation in favor of any Non-Citizen;
(iii) No arrangement may exist, whether through contract or any
understanding, that would allow a majority of the voting power of the
entity to be exercised, directly or indirectly, in behalf of any Non-
Citizen; and
(iv) Control of the entity, by any other means whatsoever, may not
be conferred upon or permitted to be exercised by a Non-Citizen.
(2) Other criteria that must be met by entities other than an
individual include:
(i) In the case of a corporation:
(A) The Chief Executive Officer, by whatever title, and the
Chairman of the Board of Directors (or equivalent committee or body)
and all officers authorized to act in their absence or disability are
Citizens of the United States; and,
(B) No more than a minority of the number of its directors, or
equivalent, necessary to constitute a quorum are Non-Citizens;
[[Page 660]]
(ii) In the case of a partnership all general partners are Citizens
of the United States;
(iii) In the case of an association:
(A) The Chief Executive Officer, by whatever title, and the
Chairman of the Board of Directors (or equivalent committee or body)
and all officers authorized to act in their absence or disability are
Citizens of the United States; and,
(B) No more than a minority of the number of its directors, or
equivalent, necessary to constitute a quorum are Non-Citizens;
(iv) In the case of a joint venture:
(A) It is not determined by the Citizenship Approval Officer to be
in effect an association or partnership; and
(B) A majority of the equity is owned by and vested in Citizens of
the United States free and clear of any trust or fiduciary obligation
in favor of any Non-Citizen;
(v) In the case of a mortgage trust:
(A) The Trust is domiciled in the United States or a State;
(B) The Mortgage Trustee is a Citizen of the United States;
(C) The Mortgage Trustee is authorized to act on behalf of Non-
Citizen beneficiaries pursuant Sec. 356.5;
(vi) In the case of a Limited Liability Company (LLC) that is not
found to be in effect a general partnership requiring all of the
general partners to be Citizens of the United States:
(A) Any Person elected to manage the LLC or who is authorized to
bind the LLC, and any Person who holds a position equivalent to the
Chief Executive Officer, by whatever title, and the Chairman of the
Board of Directors in a corporation and any Persons authorized to act
in their absence are Citizens of the United States; and,
(B) Non-Citizens do not have authority within a management group,
whether through veto power, combined voting, or otherwise, to exercise
control over the LLC;
(g) Fishing Vessel means a vessel of 100 feet or greater in
registered length that has or for which the owner is seeking a fishery
endorsement to the vessel's documentation and that commercially engages
in the planting, cultivating, catching, taking, or harvesting of fish,
shellfish, marine animals, pearls, shells, or marine vegetation or an
activity that can reasonably be expected to result in the planting,
cultivating, catching, taking, or harvesting of fish, shellfish, marine
animals, pearls, shells, or marine vegetation;
(h) Fish Processing Vessel means a vessel of 100 feet or greater in
registered length that has or for which the owner is seeking a fishery
endorsement to the vessel's documentation and that commercially
prepares fish or fish products other than by gutting, decapitating,
gilling, skinning, shucking, icing, freezing, or brine chilling;
(i) Fish Tender Vessel means a vessel of 100 feet or greater in
registered length that has or for which the owner is seeking a fishery
endorsement to the vessel's documentation and that commercially
supplies, stores, refrigerates, or transports (except in foreign
commerce) fish, fish products, or materials directly related to fishing
or the preparation of fish to or from a Fishing Vessel, Fish Processing
Vessel, or Fish Tender Vessel or a fish processing facility;
(j) Harvest means to commercially engage in the catching, taking,
or harvesting of fish or fishery resources or any activity that can
reasonably be expected to result in the catching, taking or harvesting
of fish or fishery resources;
(k) MARAD means the Maritime Administration within the United
States Department of Transportation. The terms ``we, our, and us'' may
also be used to refer to the Maritime Administration;
(l) Mortgagee means a Person to whom a Fishing Vessel or other
property is mortgaged. (See the definition of Non-Citizen Lender and
Preferred Mortgage in this section)
(m) Mortgage Trustee, for purposes of holding a Preferred Mortgage
on a Fishing Vessel, means a corporation that:
(1) Is organized and doing business under the laws of the United
States or of a State;
(2) Is a Citizen of the United States;
(3) Is authorized under those laws to exercise corporate trust
powers;
(4) Is subject to supervision or examination by an official of the
United States Government, or of a State;
(5) Has a combined capital and surplus (as stated in its most
recent published report of condition) of at least $3,000,000; and
(6) Meets any other requirements prescribed by the Citizenship
Approval Officer.
(n) Non-Citizen means a Person who is not a Citizen of the United
States within the meaning of paragraph (d) of this section, 46 U.S.C.
12102(c) and section 2(c) of the 1916 Act, 46 App. U.S.C. 802(c).
(o) Non-Citizen Lender means a lender that does not qualify as a
Citizen of the United States.
(p) Person includes individuals, corporations, partnerships, joint
ventures, associations, limited liability companies, Trusts, and other
entities existing under or authorized by the laws of the United States
or of a State or, unless the context indicates otherwise, of any
foreign country.
(q) Preferred Mortgage means a mortgage on a Fishing Vessel that
has as the Mortgagee:
(1) A person eligible to own a vessel with a fishery endorsement
under 46 U.S.C. 12102(c);
(2) A state or federally chartered financial institution that
satisfies the Controlling Interest criteria of section 2(b) of the 1916
Act (46 App. U.S.C. 802(b)) and paragraph (f) of this section; or
(3) A person that complies with the provisions of section
12102(c)(4) of title 46, United States Code.
(r) State means a State of the United States, Guam, Puerto Rico,
the Virgin Islands, American Samoa, the District of Columbia, the
Commonwealth of the Northern Mariana Islands, and any other territory
or possession of the United States.
(s) Submitted means sent by mail and postmarked on that date, or
sent by another delivery service or by electronic means, including E-
mail and facsimile, and marked with an indication of the date
equivalent to a postmark;
(t) Trust means:
(1) In the case of ownership of a Fishing Vessel, Fish Processing
Vessel, or Fish Tender Vessel, a trust that is domiciled in and
existing under the laws of the United States or of a State, of which
the Trustee is a Citizen of the United States, and 100% of the interest
in the Trust is held for the benefit of a Citizen of the United States;
or
(2) In the case of a mortgage trust, a trust that is domiciled in
and existing under the laws of the United States, or of a State, of
which the Mortgage Trustee is a Citizen of the United States and for
which the Mortgage Trustee is authorized to act on behalf of Non-
Citizen beneficiaries pursuant to Secs. 356.27-356.37.
(u) United States, when used in the geographic sense, means the
States of the United States, Guam, Puerto Rico, the Virgin Islands,
American Samoa, the District of Columbia, the Commonwealth of the
Northern Mariana Islands, and any other territory or possession of the
United States; when used in other than the geographic sense, it means
the United States Government.
(v) United States Government means the Federal Government acting by
or through any of its departments or agencies.
[[Page 661]]
Subpart B--Ownership and Control
Sec. 356.5 Affidavit of U.S. Citizenship.
(a) In order to establish that a corporation or other entity is a
Citizen of the United States within the meaning of section 2(c) of the
1916 Act, or where applicable, section 2(b) of the 1916 Act, the form
of Affidavit is hereby prescribed for execution in behalf of the owner,
charterer, Mortgagee, or Mortgage Trustee of a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel. Such Affidavit must include
information required of parent corporations and other stockholders
whose stock ownership is being relied upon to establish that the
requisite ownership in the entity is owned by and vested in Citizens of
the United States. A certified copy of the Articles of Incorporation
and Bylaws, or comparable corporate documents, must be submitted along
with the executed Affidavit.
(b) This Affidavit form set forth in paragraph (d) of this section
may be modified to conform to the requirements of vessel owners,
Mortgagees, or Mortgage Trustees in various forms such as partnerships,
limited liability companies, etc. A copy of an Affidavit of U.S.
Citizenship modified appropriately, for limited liability companies,
partnerships (limited and general), and other entities is available on
MARAD's internet home page at http://marad.dot.gov.
(c) As indicated in Sec. 356.17, in order to renew annually the
fishery endorsement on a Fishing Vessel, Fish Processing Vessel, or
Fish Tender Vessel, the owner must submit annually to the Citizenship
Approval Officer evidence of U.S. Citizenship within the meaning of
section 2(c) of the 1916 Act and 46 App. U.S.C. 12102(c).
(d) The prescribed form of the Affidavit of U.S. Citizenship is as
follows:
State of ______ County of ______ SS:
I, ____________, (Name) of ____________, (Residence address) being
duly sworn, depose and say:
1. That I am the ______ (Title of office(s) held) of ______,
(Name of corporation) a corporation organized and existing under the
laws of the State of ______ (hereinafter called the
``Corporation''), with offices at ________, (Business address) in
evidence of which incorporation a certified copy of the Articles or
Certificate of Incorporation (or Association) is filed herewith (or
has been filed) together with a certified copy of the corporate
Bylaws. [Evidence of continuing U.S. citizenship status, including
amendments to said Articles or Certificate and Bylaws, should be
filed within 30 days after the annual meeting of the stockholders or
annually, within 30 days after the original affidavit if there has
been no meeting of the stockholders prior to that time.];
2. That I am authorized by and in behalf of the Corporation to
execute and deliver this Affidavit of U.S. Citizenship;
3. That the names of the Chief Executive Officer, by whatever
title, the Chairman of the Board of Directors, all Vice Presidents
or other individuals who are authorized to act in the absence or
disability of the Chief Executive Officer or Chairman of the Board
of Directors, and the Directors of the Corporation are as follows:
1
---------------------------------------------------------------------------
\1\ Offices that are currently vacant should be noted when
listing Officers and Directors in the Affidavit.
---------------------------------------------------------------------------
----------------------------------------------------------------------
Name
----------------------------------------------------------------------
Title
----------------------------------------------------------------------
Date and Place of Birth
(The foregoing list should include the officers, whether or not they
are also directors, all directors, whether or not they are also
officers.) Each of said individuals is a Citizen of the United
States by virtue of birth in the United States, birth abroad of U.S.
citizen parents, by naturalization, by naturalization during
minority through the naturalization of a parent, by marriage (if a
woman) to a U.S. citizen prior to September 22, 1922, or as
otherwise authorized by law, except (give name and nationality of
all Non-Citizen officers and directors, if any). The By-laws of the
Corporation provide that ____ (Number) of the directors are
necessary to constitute a quorum; therefore, the Non-Citizen
directors named represent no more than a minority of the number
necessary to constitute a quorum.
4. Information as to stock, where Corporation has 30 or more
stockholders: 2
---------------------------------------------------------------------------
\2\ Strike inapplicable paragraph 4.
---------------------------------------------------------------------------
That I have access to the stock books and records of the
Corporation; that said stock books and records have been examined
and disclose (a) that, as of ______, (Date) the Corporation had
issued and outstanding ____ (Number) shares of ____, (Class) the
only class of stock of the Corporation issued and outstanding [if
such is the case], owned of record by ____ (Number) stockholders,
said number of stockholders representing the ownership of the entire
issued and outstanding stock of the Corporation, and (b) that no
stockholder owned of record as of said date five per centum (5%) or
more of the issued and outstanding stock of the Corporation of any
class. [If different classes of stock exist, give the same
information for each class issued and outstanding, showing the
monetary value and voting rights per share in each class. If there
is an exception to the statement in clause (b), the name, address,
and citizenship of the stockholder and the amount and class of stock
owned should be stated and the required citizenship information on
such stockholder must be submitted.] That the registered addresses
of ____ owners of record of ____ shares of the issued and
outstanding ____ (Class) stock of the Corporation are shown on the
stock books and records of the Corporation as being within the
United States, said ____ shares being ____ per centum (____%) of the
total number of shares of said stock (each class). [The exact figure
as disclosed by the stock books of the corporation must be given and
the per centum figure must not be less than 65 per centum for a
state or federally chartered financial institution holding a
Preferred Mortgage, or not less than 95 per centum for an entity
that is demonstrating ownership in a vessel for which a fishery
endorsement is sought or a Mortgage Trustee. These per centum
figures apply to corporate stockholders as well as to the primary
corporation.] (The same statement should be made with reference to
each class of stock, if there is more than one class.) or
4. Information as to stock, where Corporation has less than 30
stockholders: That the information as to stock ownership, upon which
the Corporation relies to establish that 75% of the stock ownership
is vested in Citizens of the United States, is as follows:
----------------------------------------------------------------------
Name of Stockholder
----------------------------------------------------------------------
Number of shares owned (each class)
----------------------------------------------------------------------
Percentage of shares owned (each class)
and that each of said individual stockholders is a Citizen of the
United States by virtue of birth in the United States, birth abroad
of U.S. citizen parents, by naturalization during minority through
the naturalization of a parent, by marriage (if a woman) to a U.S.
citizen prior to September 22, 1922, or as otherwise authorized by
law. Note: If a corporate stockholder, give information with respect
to State of incorporation, the names of the officers, directors, and
stockholders and the appropriate percentage of shares held, with
statement that they are all U.S. citizens. Nominee holders of record
of 5 percent or more of any class of stock and the beneficial owners
thereof should be named and their U.S. citizenship information
submitted to MARAD.
5. That 75% of the interest in (each) said Corporation, as
established by the 3 information hereinbefore set forth,
is owned by Citizens of the United States; that the title to 75% of
the stock of (each) of the stock of (each) said Corporation is
vested in Citizens of the United States free from any trust or
fiduciary obligation in favor of any person not a Citizen of the
United States; that such proportion of the voting power of (each)
said Corporation is vested in Citizens of the United States; that
through no contract or understanding is it so arranged that more
than 25% the voting power of (each) said Corporation may be
exercised, directly or indirectly, in behalf of any person who is
not a Citizen of the United States; and that by no means whatsoever,
is any interest in said Corporation in excess of 25% conferred upon
or permitted to be exercised by any person who is not a Citizen of
the United States; and
\3\ Strike inappropriate Paragraph 5.
---------------------------------------------------------------------------
Note: For state or federally chartered financial institutions
acting as Mortgagees, the Controlling Interest language, which is
set forth below, is applicable.
5. That the Controlling Interest in (each) said Corporation, as
established by the information hereinbefore set forth, is owned by
Citizens of the United States; that the title to a majority of the
stock of (each) said
[[Page 662]]
Corporation is vested in Citizens of the United States free from any
trust or fiduciary obligation in favor of any person not a Citizen
of the United States; that such proportion of the voting power of
(each) said Corporation is vested in Citizens of the United States;
that through no contract or understanding is it so arranged that the
majority of the voting power of (each) said Corporation may be
exercised, directly or indirectly, in behalf of any person who is
not a Citizen of the United States; and that by no means whatsoever,
is control of (each) said Corporation conferred upon or permitted to
be exercised by any person who is not a Citizen of the United
States; and
6. That affiant has carefully examined this affidavit and
asserts that all of the statements and representations contained
therein are true to the best of his knowledge, information, and
belief.
----------------------------------------------------------------------
----------------------------------------------------------------------
(Name and title of affiant)
----------------------------------------------------------------------
(Signature of affiant)
----------------------------------------------------------------------
Date
Penalty for False Statement: A fine or imprisonment, or both, are
provided for violation of the proscriptions contained in 18 U.S.C.
1001 (see also 18 U.S.C. 286, 287).
(e) The format for an Affidavit of United States Citizenship,
modified appropriately for limited liability companies, partnerships,
etc., will be available from the Citizenship Approval Officer and on
MARAD's internet web site at http://www.marad.dot.gov.
(f) The same criteria should be observed in obtaining information
to be furnished for stockholders named (direct ownership of required
percentage of shares of stock of each class) in the Affidavit as those
observed for the owner of the Fishing Vessel, Fish Processing Vessel,
or Fish Tender Vessel. If, on the other hand, the ``fair inference
rule'' is applied with respect to stock ownership as outlined in 46 CFR
356.7(c), the extent of U.S. Citizen ownership of stock should be
ascertained in the requisite percentage (65 percent for state or
federally chartered financial institutions and 95 percent for Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel owners, bareboat
charterers, trustees, as well as entities owning 5 percent or more of
the stock of owners, bareboat charterers. Any entity that must
establish its U.S. citizenship has to submit proof of U.S. citizenship
of any five percent stockholder of each class of stock in order that
the veracity of the statutory statements made in the Affidavit
(paragraph 5) may be relied upon by MARAD.
(g) It shall be incumbent upon the parties filing affidavits under
this part to notify the Citizenship Approval Officer in writing within
30 calendar days of any changes in information last furnished with
respect to the officers, directors, and stockholders, including 5
percent or more stockholders of the issued and outstanding stock of
each class, together with information concerning their citizenship
status. If other than a corporation, comparable information must be
filed by other entities owning Fishing Vessels, Fish Processing
Vessels, or Fish Tender Vessels, including any entity whose ownership
interest is being relied upon to establish 75 percent ownership by
Citizens of the United States.
(h) If additional material is determined to be essential to clarify
or support the evidence of U.S. citizenship, such material shall be
furnished by the owner of the Fishing Vessel, Fish Processing Vessel,
or Fish Tender Vessel upon request by the Citizenship Approval Officer.
Sec. 356.7 Methods of establishing ownership by United States
Citizens.
(a) An entity may demonstrate that the interest in the entity (75%
for Citizens of the United States or 51% for entities meeting the
Controlling Interest requirements) is owned by Citizens of the United
States either by direct proof or through the fair inference method
depending on the size of the entity.
(b) The ``direct proof'' method is used for closely held companies
that have 30 or fewer stockholders. Under the direct proof method, the
following information must be set forth in paragraph four of the
Affidavit of U.S. Citizenship:
(1) The identity of the holders of stock or other equitable
interests;
(2) The amount of stock or interest that each stockholder owns;
(3) A representation as to the citizenship of the stockholder; and,
(4) If the stockholder is a corporation or other entity, the names
and citizenship of officers, directors, stockholders, etc. must be set
out in the Affidavit of U.S. Citizenship.
(c) The ``fair inference method'' is used by corporations whose
stock is publicly traded (more than 30 stockholders). Use of the fair
inference method requires that:
(1)(i) At least 95% of the stock (each class) of the corporation be
held by Persons having a registered U.S. address in order to infer at
least 75% ownership by U.S. Citizens, or
(ii) At least 65% of the stock (each class) of the corporation be
held by Persons having a registered U.S. address in order to infer at
least 51% ownership by U.S. Citizens in the case of a state or
federally chartered financial institution acting as a Mortgagee; and,
(2) Disclosure be made in the Affidavit of U.S. Citizenship of the
names and citizenship of any stockholders who holds five percent or
more of the corporation's stock (including all classes of stock, voting
and non-voting), officers, and directors.
(d) If the owner of a Fishing Vessel, Fish Processing Vessel, or
Fish Tender Vessel is consecutively owned by several ``parent''
corporations, the facts revealing the stock ownership of each entity
must be set forth in the Affidavit of U.S. Citizenship.
Sec. 356.9 Tiered ownership structures.
(a) A Non-Citizen may not own or control, either directly through
the first tier of ownership or in the aggregate through an interest in
other entities at various tiers, more than 25% of the interest in an
entity which owns a Fishing Vessel, Fish Processing Vessel, or Fish
Tender Vessel. The prohibition against any Non-Citizen owning or
controlling more than 25%, in the aggregate, of the interest in an
entity that owns a Fishing Vessel, Fish Processing Vessel, or Fish
Tender Vessel means, for example, that:
(1) A Non-Citizen that owns or controls a 25% stake in the
ownership entity of a Fishing Vessel, Fish Processing Vessel, or Fish
Tender Vessel at the first tier may not have any interest whatsoever in
any entity that is being relied upon to establish the required 75% U.S.
Citizen ownership;
(2) A Non-Citizen that owns or controls less than a 25% stake at
the first tier may participate in the ownership and control of other
entities that are being relied upon to establish the required 75% U.S.
Citizen ownership and control at the first tier. However, that Non-
Citizen's total ownership and control of the entity owning a Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel may not exceed
25% in the aggregate as computed by MARAD; and,
(3) Where a Non-Citizen owns or controls 25% of the interest in the
entity owning a Fishing Vessel, Fish Processing Vessel, or Fish Tender
Vessel at the first tier and is thus precluded from owning or
controlling any interest in an entity being relied upon to establish
the required 75% U.S. Citizen ownership and control, other unrelated
Non-Citizens may still participate in the ownership structure at
subsequent tiers; provided, that their interest does not exceed 25% in
the aggregate and that each entity meets the 75% U.S. ownership and
control requirement.
(b) The Citizenship Approval Officer may determine that an
ownership structure with a large number of tiers
[[Page 663]]
does not qualify as a Citizen of the United States if through excessive
tier structures, Non-Citizen participation is deemed to dilute the U.S.
ownership and control of the entity owning a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel to an unacceptable level.
Sec. 356.11 Impermissible control by a Non-Citizen.
(a) An impermissible transfer of control exists where a Non-
Citizen, whether by agreement, contract, influence, or any other means
whatsoever:
(1) Has the right to direct the business of the entity which owns
the Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel;
(2) Has the right to limit the actions of or replace the chief
executive officer, a majority of the board of directors, any general
partner or any person serving in a management capacity of the entity
which owns the Fishing Vessel, Fish Processing Vessel, or Fish Tender
Vessel;
(3) Has the right to direct the transfer, operation, or manning of
a Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel;
(4) Has the right to unduly restrict the day to day business
activities and management policies of the entity owning a Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel through loan
covenants or other means;
(5) Has the right to derive through a minority shareholder a
disproportionate amount of the economic benefits from the ownership and
operation of the Fishing Vessel, Fish Processing Vessel, or Fish Tender
Vessel;
(6) Has the right to control the management of or to be a
controlling factor in the entity owning a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel;
(7) Has the right to cause the sale of a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel, other than through approved
loan covenants where there is a Preferred Mortgage on the vessel;
(8) Absorbs all of the costs and normal business risks associated
with ownership and operation of the Fishing Vessel, Fish Processing
Vessel, or Fish Tender Vessel;
(9) Has the responsibility for the procurement of insurance on the
Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel, or
assumes any liability in excess of insurance coverage; or,
(10) Has the ability through any other means whatsoever to control
the entity that owns a Fishing Vessel, Fish Processing Vessel, or Fish
Tender Vessel.
(b) In addition to the actions in paragraph (a) of this section
that are considered absolute indicia of control, we will consider other
factors which, in combination with other elements of foreign
involvement, may be deemed impermissible control. The following factors
may be considered indicia of control:
(1) If a Non-Citizen minority stockholder takes the leading role in
establishing an entity that will own a Fishing Vessel, Fish Processing
Vessel, or Fish Tender Vessel;
(2) If a Non-Citizen has the right to preclude the owner of a
Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel from
engaging in other business activities;
(3) If a Non-Citizen and owner use the same legal representation,
accounting firm, etc.;
(4) If a Non-Citizen and owner share the same office space, phones,
administrative support, etc.;
(5) If a Non-Citizen absorbs many of the costs and normal business
risks associated with ownership and operation of the Fishing Vessel,
Fish Processing Vessel, or Fish Tender Vessel;
(6) If a Non-Citizen provides the start up capital for the owner or
bareboat charterer on less than an arms-length basis;
(7) If a Non-Citizen has the general right to inspect the books and
records of the owner or bareboat charterer of the Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel; or,
(8) If the owner or bareboat charterer uses the same insurance
agent or broker of any Non-Citizen with whom the owner or a bareboat
charterer has entered into a mortgage, long-term or exclusive sales or
marketing agreement, unsecured loan agreement, or management agreement.
(c) In most cases, any single factor listed in paragraph (b) of
this section will not be sufficient to deem an entity a Non-Citizen.
However, a combination of several factors listed in paragraph (b) of
this section may increase our concern as to whether the entity complies
with the U.S. Citizen ownership and control provisions of the AFA and
any single factor listed in paragraph (b) of this section may be the
basis for a request from us for further information.
(d) If we have a concern regarding control by a Non-Citizen, we
will notify the entity of the concern and work with the entity toward a
satisfactory resolution. Resolution of any control issues may result in
a request by us for additional information to clarify the intent of the
provision or to amend or delete the provision in question.
(e) Information that is specifically required to be submitted for
our consideration is set out in Sec. 356.13. However, in determining
whether an entity has control over a Fishing Vessel, Fish Processing
Vessel, or Fish Tender Vessel, we may review any contract or agreement
that may, by any means whatsoever, result in a transfer of control to a
Non-Citizen.
Subpart C--Requirements for Vessel Owners
Sec. 356.13 Information required to be submitted by vessel owners.
(a) In order to be eligible to document a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel with a fishery endorsement,
the entity that owns the vessel must submit documentation to
demonstrate that 75 percent (75%) of the interest in such entity is
owned and controlled by Citizens of the United States. Unless otherwise
exempted, the following documents must be submitted to the Citizenship
Approval Officer in support of a request for a determination of U.S.
Citizenship:
(1) An Affidavit of U.S. Citizenship. This affidavit, set out in
Sec. 356.5, must contain all required facts, at all tiers of ownership,
needed for determining the citizenship of the owner of the Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel.
(2) A certified copy of the Articles of Incorporation and Bylaws of
the owner of the Fishing Vessel, Fish Processing Vessel, or Fish Tender
Vessel, and any parent corporation, must be submitted. The
certification must be by the Secretary of State in which the
corporation is incorporated or by the Secretary of the corporation. For
entities other than corporations, comparable certified documents must
be submitted. For example, for a limited liability company, a copy of
the Certificate of Formation filed with a State must be submitted,
along with a certified copy of the Limited Liability Company Operating
Agreement;
(3) An Affidavit of U.S. Citizenship for each charterer of a
Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel, with the
exception of time or voyage charterers of Fish Processing Vessels and
Fish Tender Vessels permitted under Sec. 356.39(b)(2);
(4) A copy of any time charter or voyage charter to a Non-Citizen
of a Fish Tender Vessel or Fish Processing Vessel;
(5) Any loan agreements or other financing documents applicable to
a Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel where
the lender
[[Page 664]]
has not been granted approval from the Citizenship Approval Officer
pursuant to Sec. 356.21 to enter into loans without transactional
approval from MARAD;
(6) A description of any operating and/or management agreements
entered into by the owner or bareboat charterer of a Fishing Vessel,
Fish Processing Vessel, or Fish Tender Vessel accompanied by a
representation and warranty that the agreement does not contain any
provisions that convey control over the vessel or vessel-owning entity
to a Non-Citizen;
(7) Identification of any sales, purchase or marketing agreements,
including the parties to those agreements, that relate to the sale or
purchase of all or a significant portion of a vessel's catch and copies
of such agreements if the agreement contains provisions that could
convey control to a Non-Citizen other than those expressly authorized
in Sec. 356.43;
(8) Any stockholder's agreement, voting trust agreements, or any
other pooling agreements, including any proxy appointment, relating to
the ownership of all classes of stock, whether voting or non-voting of
the owner of the Fishing Vessel, Fish Processing Vessel, or Fish Tender
Vessel, including any parent corporation or other stockholder whose
stock is being relied upon to establish 75 percent U.S. Citizen
ownership;
(9) Any agreements relating to an option to buy or sell stock or
other comparable equity interest in the owner of the Fishing Vessel,
Fish Processing Vessel, or Fish Tender Vessel, or any agreement that
restricts the sale of such stock or equity interests in the owner of
the Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel,
including any parent corporation or other stockholder whose stock is
being relied upon to establish 75 percent U.S. Citizen ownership;
(10) Any documents relating to a merger, consolidation, liquidation
or dissolution of the owner of the Fishing Vessel, Fish Processing
Vessel, or Fish Tender Vessel, including any parent corporation; and
(11) Disclosure of any interlocking directors or other officials by
and between the owner of a Fishing Vessel, Fish Processing Vessel, or
Fish Tender Vessel (including any parent corporation) and any Non-
Citizen minority stockholder of the owner and any parent corporation.
This requirement is also applicable to any lender, purchaser of fish
catch, or other entity that is a Non-Citizen.
(b) In the event the owner or bareboat charterer of a Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel enters into any
agreement reflected in any of the documents set forth in paragraph (a)
of this section after the submission of the Affidavit of U.S.
Citizenship, the owner or bareboat charterer must notify the
Citizenship Approval Officer within 30 calendar days. Failure to notify
the Citizenship Approval Officer of such agreements within the
prescribed time may result in the vessel owner being deemed ineligible
to document the vessel with a fishery endorsement.
Sec. 356.15 Filing of affidavit of U.S. Citizenship.
(a) Between October 1, 2000, and June 1, 2001, the owner of a
Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel may
obtain a letter ruling from the Citizenship Approval Officer prior to
the effective date of the regulations that the owner is a U.S. Citizen
eligible to own a vessel with a fishery endorsement. The owner must
submit to the Citizenship Approval Officer a request for a letter
ruling that includes an Affidavit of U.S. Citizenship and all other
documentation required by Sec. 356.13. The Citizenship Approval Officer
will issue a letter ruling within 120 days of receiving all applicable
documents.
(b) An owner that receives a letter ruling pursuant to paragraph
(a) of this section must submit, within 10 business days prior to
October 1, 2001, a certification that the information contained in the
Affidavit of U.S. Citizenship and in documents submitted in support of
the request for a letter ruling remains true and accurate. If changes
in the information have occurred between the time of the request for
the letter ruling and the time of the certification, the owner must
notify the Citizenship Approval Officer of those changes as required by
Sec. 356.5 and Sec. 356.17. The owner is still required to inform the
Citizenship Approval Officer of any changes as they occur as required
by Sec. 356.17 and not merely at the time of the certification.
(c) An owner of a Fishing Vessel, Fish Processing Vessel, or Fish
Tender Vessel that does not request a letter ruling prior to June 1,
2001, and who wishes to be eligible to obtain a fishery endorsement on
a Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel on
October 1, 2001, must submit the required Affidavit of U.S. Citizenship
and all other documentation required by Sec. 356.13 to the Citizenship
Approval Officer no later than June 1, 2001. If a completed Affidavit
of U.S. Citizenship and all required documentation is not submitted by
June 1, 2001, the owner may not be considered eligible to own a Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel on October 1,
2001, and the Vessel may be prohibited from operating in the fisheries
of the United States until an eligibility determination is made by the
Citizenship Approval Officer.
(d) New owners of Fishing Vessels, Fish Processing Vessels, or Fish
Tender Vessels after October 1, 2001, must file the Affidavit of U.S.
Citizenship and other required documentation with the Citizenship
Approval Officer in order for the Citizenship Approval Officer to make
a determination as to whether the owner is eligible for a fishery
endorsement to the vessel's documentation.
Sec. 356.17 Annual requirements for vessel owners.
(a) An owner of a Fishing Vessel, Fish Processing Vessel, or Fish
Tender Vessel must submit a certification in the form of an Affidavit
of United States Citizenship to the Citizenship Approval Officer on an
annual basis as provided in paragraph (b) of this section. This annual
certification requirement does not excuse the owner from the
requirements of Sec. 356.5 to notify the Citizenship Approval Officer
throughout the year when changes in the citizenship information occur.
(b) For owners that hold annual meetings, the annual certification
must be filed within 30 calendar days of the annual meeting. For owners
that do not hold an annual meeting, the annual filing date will be the
date of the original filing of the Affidavit of U.S. Citizenship with
the Citizenship Approval Officer.
(c) Failure to file the annual certification in a timely manner may
result in the expiration of the vessel's fishery endorsement, which
will prohibit the vessel from operating in the fisheries of the United
States.
Subpart D--Mortgages
Sec. 356.19 Requirements to hold a Preferred Mortgage.
(a) In order for Mortgagee to be eligible to obtain a Preferred
Mortgage on a Fishing Vessel, Fish Processing Vessel, or Fish Tender
Vessel, it must be:
(1) A Citizen of the United States;
(2) A state or federally chartered financial institution that
complies with the Controlling Interest requirements of section 2(b) of
the 1916 Act, 46 App. U.S.C. 802(b); or
(3) A Mortgage Trustee that qualifies as a Citizen of the United
States and that has satisfied the requirements of Secs. 356.27-356.31.
[[Page 665]]
(b) The Mortgagee must file an Affidavit of United States
Citizenship demonstrating that it complies with the citizenship
requirements that correspond to the provisions of paragraph (a) of this
section under which the Mortgagee qualifies.
(c) In addition to the Affidavit of U.S. Citizenship, a certified
copy of the Articles of Incorporation and Bylaws, or other comparable
corporate documents must be submitted to the Citizenship Approval
Officer.
(d) A Preferred Mortgagee must provide an annual certification to
the Citizenship Approval Officer in the form of an Affidavit of United
States Citizenship evidencing its continued status as a Citizen of the
United States or, if a state or federally chartered financial
institution, that it complies with the Controlling Interest
requirements of section 2(b) of the 1916 Act, 46 App. U.S.C. 802(b),
during the period that it holds a Preferred Mortgage on a Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel. The
certification must be submitted within 30 days of the one year
anniversary of the original filing.
Sec. 356.21 General approval of Non-Citizen lender's standard loan or
mortgage agreements.
(a) A Non-Citizen Lender that is a financial institution engaged in
the business of financing Fishing Vessels, Fish Processing Vessels, and
Fish Tender Vessels may apply to the Citizenship Approval Officer for
general approval of its standard loan and mortgage agreements for such
vessels. In order to obtain general approval for its standard loan and
mortgage agreements, a Non-Citizen Lender using an approved Mortgage
Trustee must submit to the Citizenship Approval Officer:
(1) A copy of its standard loan or mortgage agreement for Fishing
Vessels, Fish Processing Vessels, and Fish Tender Vessels, including
all covenants that may be included in the loan or mortgage agreement;
and,
(2) A certification that it will not use covenants or restrictions
in the loan or mortgage agreement outside of those approved by the
Citizenship Approval Officer without obtaining the prior approval of
the Citizenship Approval Officer.
(b) A Non-Citizen Lender that receives general approval may enter
into loans and mortgages on Fishing Vessels, Fish Processing Vessels,
and Fish Tender Vessels without prior approval from us of each
individual loan or mortgage; provided, that the loan or mortgage
conforms to the standard agreement approved by the Citizenship Approval
Officer and does not include any other covenants that have not been
approved by the Citizenship Approval Officer.
(c) The Non-Citizen Lender must provide an annual certification to
the Citizenship Approval Officer certifying that all loans and
mortgages on Fishing Vessels, Fish Processing Vessels, and Fish Tender
Vessels entered into under this general approval conform to the
standard agreement approved by us and do not contain covenants that
were not reviewed and approved by the Citizenship Approval Officer. The
certification must be submitted within 30 days of the one year
anniversary of the previous approval.
(d) If the Non-Citizen Lender wishes to use covenants that were not
approved pursuant to this section, it must submit the new covenants to
the Citizenship Approval Officer for approval.
(e) A Non-Citizen Lender that has received general approval for its
lending program and that uses covenants in a loan or mortgage on a
Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel that have
not been approved by the Citizenship Approval Officer or that files a
false certification with the Citizenship Approval Officer will be
subject to loss of its general approval and civil and criminal
penalties pursuant to 18 U.S.C. Sec. 1001. In addition, the Citizenship
Approval Officer may determine that there has been an impermissible
transfer of control to a Non-Citizen and the vessel owner is not
eligible to document the vessel with a fishery endorsement.
Sec. 356.23 Restrictive loan covenants approved for use by non-citizen
lenders.
(a) We approve the following standard loan covenants which may
restrict the activities of the borrower without the lender's consent
and which may be included in loan agreements or other documents,
between an owner of a Fishing Vessel, Fish Processing Vessel, or Fish
Tender Vessel and an unrelated Non-Citizen Lender that is using an
approved Mortgage Trustee to hold the mortgage and debt instrument for
the benefit of the Non-Citizen Lender, so long as the lender's consent
is not unreasonably withheld:
(1) Borrower cannot sell part or all of its assets;
(2) Borrower cannot merge, consolidate, reorganize, dissolve, or
liquidate;
(3) Borrower cannot undertake new borrowing or contingent
liabilities;
(4) Borrower cannot insure, guaranty or become otherwise liable for
debt obligations of any other entity, Person, etc.;
(5) Borrower cannot Charter or lease a vessel which is collateral
for the loan;
(6) Borrower cannot incur liens, except any permitted liens that
may be set forth in the loan or other financing documents;
(7) Borrower must limit its investments to marketable investments
guaranteed by the United States or a State, or commercial paper with
the highest rating of a generally recognized rating service;
(8) Borrower cannot make structural alterations or any other major
alteration to the vessel;
(9) Borrower, if in arrears in its debt obligations to the lender,
cannot make dividend payments on its capital stock; and,
(10) Borrower, if in arrears in its debt obligations to the lender,
may not make excessive contributions to pension plans, payment of
employee bonuses, or make excessive contributions to stock option
plans, or provide other major fringe benefits in terms of dollar amount
to its employees, officers, and directors, such as loans, etc.
(b) The mortgage may not include covenants that allow the Mortgagee
to operate the vessel except as provided for in Sec. 356.25.
Sec. 356.25 Operation of fishing vessels, fish processing vessels, or
fish tender vessels by mortgagees.
(a) A Mortgagee that has demonstrated to MARAD that it qualifies as
a Citizen of the United States and is eligible to own a vessel with a
fishery endorsement may operate a Fishing Vessel, Fish Processing
Vessel, or Fish Tender Vessel.
(b) A Mortgagee not eligible to own a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel cannot operate, or cause
operation of, the vessel in the fisheries of the United States. Except
as provided in paragraph (c) of this section, the vessel may not be
operated for any purpose without the prior written approval of the
Citizenship Approval Officer.
(c) A Mortgagee not eligible to own a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel may operate the vessel for a
non-commercial purpose to the extent necessary for the immediate safety
of the vessel or for repairs, drydocking or berthing changes; provided,
that the vessel is operated under the command of a Citizen of the
United States and for no longer than 15 calendar days.
(d) A Mortgagee that is holding a Preferred Mortgage on a Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel but that is not
eligible to own a Fishing Vessel, Fish Processing Vessel,
[[Page 666]]
or Fish Tender Vessel may take possession of the vessel in the event of
default by the mortgagor other than by foreclosure pursuant to 46
U.S.C. 31329, if provided for in the mortgage or a related financing
document. However, the vessel may not be operated, or caused to be
operated in commerce, except as provided in paragraph (c) of this
section or with the approval of the Citizenship Approval Officer.
(e) A Non-Citizen Lender that has brought a civil action in rem for
enforcement of a Preferred Mortgage lien on a Citizen-owned Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel pursuant to 46
U.S.C. 31325(b)(1) may petition the court pursuant to 46 U.S.C.
31325(e)(1) for appointment of a receiver, and, if the receiver is a
Person eligible to own a Fishing Vessel, Fish Processing Vessel, or
Fish Tender Vessel, to authorize the receiver to operate the mortgaged
vessel pursuant to terms and conditions consistent with 46 CFR part
356. If the receiver is not a Citizen of the United States that meets
the requirements of section 2(c) of the 1916 Act, 46 App. U.S.C.
802(c), and 46 U.S.C. 12102(c), the vessel may not be operated in the
fisheries of the United States.
Subpart E--Mortgage Trustees
Sec. 356.27 Mortgage trustee requirements.
(a) A lender who does not qualify as a Citizen of the United States
or is not a state or federally chartered financial institution that
meets the Controlling Interest requirements of section 2(b) of the 1916
Act and Sec. 356.3(f) can obtain a Preferred Mortgage on a Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel by using an
approved Mortgage Trustee to hold the mortgage and the debt instrument
that the mortgage is securing.
(b) In order to qualify as an approved Mortgage Trustee, the
Mortgage Trustee must:
(1) Qualify as a Citizen of the United States eligible to own a
Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel;
(2) Be organized as a corporation and doing business under the laws
of the United States or of a State;
(3) Be authorized under the laws of the United States or of the
State under which it is organized to exercise corporate trust powers;
(4) Be subject to supervision or examination by an official of the
United States Government, or of a State;
(5) Have a combined capital and surplus (as stated in its most
recent published report of condition) of at least $3,000,000; and
(6) Meet any other requirements prescribed by the Citizenship
Approval Officer.
(c) The Mortgage Trustee must submit to the Citizenship Approval
Officer the following documentation in order to be an approved Mortgage
Trustee:
(1) An application for approval as a Mortgage Trustee as set out in
paragraph (g) of this section;
(2) An Affidavit of U.S. Citizenship setting forth the required
information necessary to determine that the applicant qualifies as a
Citizen of the United States;
(3) A certified copy of the Articles of Incorporation and Bylaws,
or other comparable documents;
(4) A copy of the most recent published report of condition of the
Mortgage Trustee; and,
(5) A certification that the Mortgage Trustee is authorized under
the laws of the United States or of a State to exercise corporate trust
powers and is subject to supervision or examination by an official of
the United States or of a State;
(d) Any right set forth in a mortgage on a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel cannot be issued, assigned, or
transferred to a person who is not eligible to be a Mortgagee without
the approval of the Citizenship Approval Officer.
(e) Mortgage Trustees approved by the Citizenship Approval Officer
must not assume any fiduciary obligations in favor of Non-Citizen
lenders that are in conflict with the U.S. Citizen ownership and
control requirements set forth in the AFA, without the approval of the
Citizenship Approval Officer.
(f) We will periodically publish a list of Approved Mortgage
Trustees in the Federal Register, but current information as to the
status of any particular Mortgage Trustee must be obtained from the
Citizenship Approval Officer.
(g) An application to be approved as a Mortgage Trustee should
include the following: The undersigned (the ``Mortgage Trustee'')
hereby applies for approval as Mortgage Trustee pursuant to 46 U.S.C.
12102(c)(4) and the Regulation (46 CFR part 356), prescribed by the
Maritime Administration (``MARAD''). All terms used in this application
have the meaning given in the Regulation.
In support of this application, the Mortgage Trustee certifies to
and agrees with MARAD as hereinafter set forth:
The Mortgage Trustee certifies:
(a) That it is acting or proposing to act as Mortgage Trustee on
a Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessels
documented, or to be documented under the U.S. registry;
(b) That it--
(1) Is organized as a corporation under the laws of the United
States or of a State and is doing business in the United States;
(2) Is authorized under those laws to exercise corporate trust
powers;
(3) Is a Citizen of the United States eligible to own a Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel within the
meaning of 46 U.S.C. 12102(c) and section 2(c) of the 1916 Act, as
amended, (46 App. U.S.C. 802(c)) and is eligible to own a Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel;
(4) Is subject to supervision or examination by an official of
the United States Government or a State; and
(5) Has a combined capital and surplus of at least $3,000,000 as
set forth in its most recent published report of condition, a copy
of which, dated ________, is attached.
The Mortgage Trustee agrees:
(a) That it will, so long as it shall continue to be on the List
of Approved Mortgage Trustees referred to in the Regulation:
(1) Notify the Citizenship Approval Officer in writing, within
20 days, if it shall cease to be a corporation which:
(i) Is organized under the laws of the United States or of a
State, and is doing business under the laws of the United States or
of a State;
(ii) Is authorized under those laws to exercise corporate trust
powers;
(iii) Is a Citizen of the United States;
(iv) Is subject to supervision or examination by an authority of
the U.S. Government or of a State;
(v) has a combined capital and surplus (as set forth in its most
recent published report of condition) of at least $3,000,000.
(2) notify the Citizenship Approval Officer in writing, of any
changes in its name, address, officers, directors, stockholders,
articles of incorporation or bylaws as such changes occur;
(3) furnish to the Citizenship Approval Officer on an annual
basis:
(i) an Affidavit of U.S. Citizenship demonstrating compliance
with the U.S. citizenship requirements of the AFA;
(ii) a current copy of the Articles of Incorporation and Bylaws,
or other comparable corporate documents;
(iii) a copy of the most recent published report of condition of
the Mortgage Trustee; and,
(iv) a list of the Fishing Vessels, Fish Processing Vessels, and
Fish Tender Vessels and the respective lenders for which it is
acting as Mortgage Trustee.
(4) furnish to the Citizenship Approval Officer any further
relevant and material information concerning its qualifications as
Mortgage Trustee under which it is acting or proposing to act as
Mortgage Trustee, as the Citizenship Approval Officer may from time
to time request; and,
(5) permit representatives of the Maritime Administration, upon
request, to examine its books and records relating to the matters
referred to herein;
(b) That it will not issue, assign, or in any manner transfer to
a person not eligible to
[[Page 667]]
own a documented vessel, any right under a mortgage of a Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel, or operate
such vessel without the approval of the Citizenship Approval
Officer; except that it may operate the vessel to the extent
necessary for the immediate safety of the vessel, for its direct
return to the United States or for its movement within the United
States for repairs, drydocking or berthing changes, but only under
the command of a Citizen of the United States for a period not to
exceed 15 calendar days;
(c) That after a responsible official of such Mortgage Trustee
obtains knowledge of a foreclosure proceeding, including a
proceeding in a foreign jurisdiction, that involves a documented
Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel on
which it holds a mortgage pursuant to approval under the Regulation
and to which 46 App. U.S.C. 802(c) and 46 U.S.C. 12102(c) are
applicable, it shall promptly notify the Citizenship Approval
Officer with respect thereto, and shall ensure that the court or
other tribunal has proper notice of those provisions; and
(d) That it shall not assume any fiduciary obligation in favor
of Non-Citizen beneficiaries that is in conflict with any
restrictions or requirements of the Regulation.
This application is made in order to induce the Maritime
Administration to grant approval of the undersigned as Mortgage
Trustee pursuant to 46 App. U.S.C. 802(c) and 46 U.S.C. 12102(c) and
the Regulation, and may be relied on by the Citizenship Approval
Officer for such purposes. False statements in this application may
subject the applicant to fine or imprisonment, or both, as provided
for violation of the proscriptions contained in 18 U.S.C. 286, 287,
and 1001.
Dated this____ day of____, 20____.
ATTEST:
MORTGAGE TRUSTEE'S NAME & ADDRESS
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(Print or type name below)
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(SEAL)
By:--------------------------------------------------------------------
(Print or type name below)
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TITLE
Sec. 356.31 Maintenance of Mortgage Trustee approval.
(a) A Mortgage Trustee that holds a Preferred Mortgage on a Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel must submit the
following information to the Citizenship Approval Officer during each
year that it is acting as a Mortgage Trustee:
(1) An Affidavit of U.S. Citizenship demonstrating compliance with
the U.S. citizenship requirements of the AFA;
(2) A current copy of the Articles of Incorporation and Bylaws, or
other comparable corporate documents;
(3) A copy of the most recent published report of condition of the
Mortgage Trustee; and,
(4) A list of the Fishing Vessels, Fish Processing Vessels, and
Fish Tender Vessels and the respective lenders for which it is acting
as Mortgage Trustee.
(b) The Mortgage Trustee must file the documents required in
paragraph (a) of this section within thirty (30) days of the annual
stockholder's meeting of the Mortgage Trustee, or if no annual meeting
is held, then the filing must be within thirty (30) days of the
anniversary date of the original Affidavit of U.S. Citizenship filed
with MARAD.
(c) If at any time the Mortgage Trustee fails to meet the statutory
requirements set forth in the AFA, the Mortgage Trustee must notify the
Citizenship Approval Officer of such failure to qualify as a Mortgage
Trustee not later than twenty (20) days after the event causing such
failure. We will publish in the Federal Register a disapproval notice
and will so notify the U.S. Coast Guard and the Mortgage Trustee of
such disapproval by providing them a copy of the disapproval notice.
Within thirty (30) days of such publication in the Federal Register,
the disapproved Mortgage Trustee must transfer its fiduciary
responsibilities to a successor Mortgage Trustee, approved by the
Citizenship Approval Officer.
Sec. 356.37 Operation of a Fishing Vessel, Fish Processing Vessel, or
Fish Tender Vessel by a Mortgage Trustee.
An approved Mortgage Trustee cannot operate a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel without the approval of the
Citizenship Approval Officer, except where non-commercial operation is
necessary for the immediate safety of the vessel and the vessel is
operated under the command of a Citizen of the United States for a
period of no more than 15 calendar days.
Subpart F--Charters, Management Agreements and Exclusive or Long-
Term Contracts
Sec. 356.39 Charters.
(a) Charters to Citizens of the United States:
(1) Bareboat charters may be entered into with Citizens of the
United States subject to approval by the Citizenship Approval Officer
that the charterer is a Citizen of the United States. The bareboat
charterer of the Fishing Vessel, Fish Processing Vessel, or Fish Tender
Vessel must submit an Affidavit of U.S. Citizenship to the Citizenship
Approval Officer for review and approval prior to entering into such
charter.
(2) Time charters, voyage charters and other charter arrangements
that do not constitute a bareboat charter of the Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel may be entered into with
Citizens of the United States. The charterer must submit an Affidavit
of U.S. Citizenship to the Citizenship Approval Officer within 30 days
of execution of the charter.
(b) Charters to Non-Citizens:
(1) Bareboat or demise charters to Non-Citizens of Fishing Vessel,
Fish Processing Vessel, or Fish Tender Vessels, including Fish Tender
Vessels and Fish Processing Vessels, are prohibited.
(2) Time charters, voyage charters and other charters that are not
a demise of the vessel may be entered into with Non-Citizens for the
charter of dedicated Fish Tender Vessels and Fish Processing Vessels
that are not engaged in the Harvesting of fish or fishery resources. A
copy of the charter must be submitted to the Citizenship Approval
Officer prior to being executed in order for the Citizenship Approval
officer to verify that the charter is not in fact a demise of the
vessel.
(3) Time charters, voyage charters and other charters of Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessels to Non-Citizens
are prohibited if the Fishing Vessel, Fish Processing Vessel, or Fish
Tender Vessel will be used to Harvest fish or fishery resources.
(c) We reserve the right to request a copy of any time charter,
voyage charter, contract of affreightment or other Charter of a Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel in order to
confirm that the Charter is not a bareboat charter of the Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel.
(d) Any violation of this section will render the vessel's fishery
endorsement immediately invalid.
Sec. 356.41 Management agreements.
(a) An owner or bareboat charterer of a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel may enter into a management
agreement with a Non-Citizen in which the management company provides
marketing services, consulting services or other services that are
ministerial in nature and do not convey control of the vessel to the
Non-Citizen.
(b) An owner or bareboat charterer of a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel may not enter into a
management agreement that allows the Non-Citizen to appoint, discipline
or replace the crew or the master, direct the operations of the vessel
or to otherwise effectively gain control over the management and
[[Page 668]]
operation of the vessel or vessel-owning entity.
(c) The owner or bareboat charterer must file with the Citizenship
Approval Officer a description of any management agreement entered into
with a Non-Citizen. The description must be submitted within 30 days of
the execution and must include:
(1) A description of the agreement with a summary of the terms and
conditions, and,
(2) A representation and warranty that the agreement does not
contain any provisions that convey control over the vessel or vessel-
owning entity to a Non-Citizen.
(d) The Citizenship Approval Officer may request a copy of any
management agreement to determine if it contains provisions that convey
control over the vessel or vessel-owning entity to a Non-Citizen.
Sec. 356.43 Long-term or exclusive sales and/or marketing contracts.
(a) An owner or bareboat charterer of a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel may enter into an agreement or
contract with a Non-Citizen for the sale and/or marketing of all or a
significant portion of its catch where the contract or agreement is
solely for the purpose of employment of certain vessels on an exclusive
basis for a specified period of time. Such contracts or agreements will
not require our prior approval; provided, that the contract or
agreement does not convey control over the owner or bareboat charterer
of the vessel or the vessel's operation, management and harvesting
activities.
(b) Provisions of a long-term or exclusive contract or agreement
for the sale and/or marketing of all or a significant portion of a
vessel's catch entered into pursuant to paragraph (a) of this section
that are not considered to convey impermissible control to a Non-
Citizen and do not require our approval include provisions that:
(1) Specify that the owner or bareboat charterer agrees to sell and
purchaser agrees to procure, on a preferential basis, certain fish
caught on a specific vessel;
(2) Specify that the services of the vessel are being employed for
catching and supplying a specific type of fish to off loading points
designated by the purchaser;
(3) Provide for the replacement of vessels covered by the contract
or agreement in the event of loss or damage;
(4) Specify refrigeration criteria;
(5) Provide that the owner or bareboat charterer has to comply with
fishing schedules that specify the maximum age of fish to be delivered
and a method to coordinate delivery to the purchaser;
(6) Provide for methods of calculating price per pound or other
price schedules and a schedule for payment for delivered fish;
(7) Provide for an arbitration mechanism in the event of dispute;
and
(8) Provide for the purchaser to furnish off loading crew, but no
vessel crew members.
(c) An owner or bareboat charterer of a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel must obtain the approval of
the Citizenship Approval Officer prior to entering into any agreement
or contract with a Non-Citizen for the sale and/or marketing of all or
a significant portion of a vessel's catch if the agreement or contract
contains provisions which in any way convey to the purchaser of the
vessel's catch control over the operation, management or harvesting
activities of the vessel, vessel owner, or bareboat charterer other
than as provided for in paragraph (b) of this section.
(d) An owner or bareboat charterer must submit, with its Affidavit
of United States Citizenship and annually thereafter, a list of any
long-term or exclusive sales or marketing agreements to which it is a
party and the principle parties to those agreements. If requested, a
copy of such agreements must be provided to the Citizenship Approval
Officer.
Sec. 356.45 Advance of funds.
(a) A Non-Citizen may advance funds to the owner or bareboat
charterer of a Fishing Vessel, Fish Processing Vessel, or Fish Tender
Vessel where the basis of the advancement is an agreement between the
Non-Citizen and the vessel owner or bareboat charterer to sell all or a
portion of the vessel's catch to the Non-Citizen if:
(1) The funds are used for working capital and not for capital
expenditures on the Fishing Vessel, Fish Processing Vessel, or Fish
Tender Vessel;
(2) The amount of the advancement does not exceed the annual value
of the sales contract;
(3) The Non-Citizen is not granted any rights whatsoever to control
the operation, management and harvesting activities of the Fishing
Vessel, Fish Processing Vessel, or Fish Tender Vessel;
(4) The owner or bareboat charterer submits to the Citizenship
Approval Officer within 30 days of execution a description of the
arrangement and a certification and warranty that the agreement or
contract with the Non-Citizen does not convey control over the vessel,
the vessel owner or bareboat charterer in any manner whatsoever; and,
(5) No security interest in the vessel is conveyed as collateral
for the advance of funds.
(b) An owner or bareboat charterer may enter into an unsecured
letter of credit or promissory note with a U.S. branch of a Non-Citizen
Lender if:
(1) The Non-Citizen Lender is not affiliated with any party with
whom the owner or bareboat charter has entered into a mortgage, long-
term or exclusive marketing, sales or purchase agreement, or other
similar contract;
(2) The Non-Citizen Lender is not granted any rights whatsoever to
control the owner or the operation, management and harvesting
activities of the Fishing Vessel, Fish Processing Vessel, or Fish
Tender Vessel; and,
(3) The owner or bareboat charterer submits to the Citizenship
Approval Officer within 30 days of execution a description of the
arrangement and a certification and warranty that the agreement or
contract with the Non-Citizen Lender does not convey control over the
vessel, the vessel owner or bareboat charter in any manner whatsoever.
(c) The Citizenship Approval Officer may request a copy of any
agreement for an advance of funds or letter of credit in order to
determine if it contains an impermissible conveyance of control to a
Non-Citizen.
Subpart G--Special Requirements for Certain Vessels
Sec. 356.47 Special requirements for large vessels.
(a) Unless exempted in paragraph (b) of this section, a vessel is
not eligible for a fishery endorsement under 46 U.S.C. 12108 if:
(1) It is greater than 165 feet in registered length;
(2) It is more than 750 gross registered tons; or
(3) It possesses an engine or engines capable of producing a total
of more than 3,000 shaft horsepower.
(b) A vessel that meets one or more of the conditions in paragraph
(a) of this section may still be eligible for a fishery endorsement if:
(1) A certificate of documentation was issued for the vessel and
endorsed with a fishery endorsement that was effective on September 25,
1997;
(2) The vessel is not placed under foreign registry after October
6, 1998;
(3) In the event of the invalidation of the fishery endorsement
after October 6, 1998, application is made for a new fishery
endorsement within fifteen (15) business days of such invalidation; or
[[Page 669]]
(4) The Vessel is engaged exclusively in the menhaden fishery in
the geographic region governed by the South Atlantic Fisheries Council
or the Gulf of Mexico Fisheries Council.
(c) A vessel that is prohibited from receiving a fishery
endorsement under paragraph (a) of this section will be eligible if the
owner of such vessel demonstrates to MARAD that the regional fishery
management council of jurisdiction established under section 302(a)(1)
of the Magnuson-Stevens Fishery Conservation and Management Act (16
U.S.C. section 1852(a)(1)) has recommended after October 6, 1998, and
the Secretary of Commerce has approved, conservation and management
measures in accordance with the American Fisheries Act of 1998, Title
II, Division C, Pub. L. 105-277, to allow such vessel to be used in
fisheries under such council's authority.
Sec. 356.49 Penalties.
If the owner or the representative or agent of the owner knowingly
falsified or concealed a material fact or knowingly made a false
statement or representation with respect to the eligibility of the
vessel under section 12102(c) of Title 46, United States Code, in
applying for or applying to renew the vessel's fishery endorsement, the
following penalties may apply:
(a) The vessel's fishery endorsement shall be revoked;
(b) A fine of up to $100,000 may be assessed against the vessel
owner for each day in which such vessel has engaged in fishing (as such
term is defined in section 3 of the Magnuson-Stevens Fishery
Conservation and Management Act (16 U.S.C. 1802)) within the exclusive
economic zone of the United States; and
(c) The owner, representative or agent may be subject to additional
fines, penalties or both for violation of the proscriptions of 18
U.S.C. 1001 (see also 18 U.S.C. 286, 287).
Sec. 356.51 Exemptions for specific vessels.
(a) Vessels listed in paragraph (b) of this section are exempt from
the requirements of section 12102(c) of Title 46, United States Code,
and this part, until such time after October 1, 2001, as more than 50
percent of the interest owned and controlled in the vessel changes;
provided, that the vessel maintains eligibility for a fishery
endorsement under the federal law that was in effect on October 1,
1998.
(b) The following vessels are exempt from the requirements of 46
U.S.C. 12102(c):
(1) EXCELLENCE (United States official number 296779);
(2) GOLDEN ALASKA (United States official number 651041);
(3) OCEAN PHOENIX (United States official number 296779);
(4) NORTHERN TRAVELER (United States official number 635986); and
(5) NORTHERN VOYAGER (United States official number 637398) or a
replacement for the NORTHERN VOYAGER that complies with paragraphs 2,
5, and 6 of section 208(g) of the AFA.
(c) The NORTHERN VOYAGER and NORTHERN TRAVELER must be used in a
fishery under the authority of a regional fishery management council
other than the New England Fishery Management Council or Mid-Atlantic
Fishery Management Council established, respectively, under
subparagraphs (A) and (B) of section 302(a)(1) of the Magnuson-Stevens
Fishery Conservation and Management Act (16 U.S.C. 1852(a)(1)(A) and
(B).
(d) The EXCELLENCE, GOLDEN ALASKA, and OCEAN PHOENIX may not be
used to Harvest fish.
(e) The following Fishing Vessels, Fish Processing Vessels, or Fish
Tender Vessels are exempt from the ownership and Mortgagee requirements
of the AFA and part 356:
(1) Fishing Vessels, Fish Processing Vessels, or Fish Tender
Vessels engaged in fisheries in the exclusive economic zone under the
authority of the Western Pacific Fishery Management Council established
under section 302(a)(1)(H) of the Magnuson-Stevens Fishery Conservation
and Management Act (16 U.S.C. Sec. 1852(a)(1)(H)), and
(2) Purse seine vessels when they are engaged in tuna fishing in
the Pacific Ocean outside the exclusive economic zone of the United
States or pursuant to the South Pacific Regional Fisheries Treaty.
(f) Owners of vessels exempt from the requirements of the AFA and
part 356 by paragraphs (b) and (e) of this section must still comply
with the requirements for a fishery endorsement under the federal law
that was in effect on October 1, 1998. The owners must also submit to
the Citizenship Approval Officer on an annual basis an Affidavit of
United States Citizenship in accordance with Sec. 356.15 demonstrating
that they comply with the Controlling Interest requirements of the
section 2(b) of the 1916 Act. In addition:
(1) The owners of the Fishing Vessels, Fish Processing Vessels, or
Fish Tender Vessels listed in paragraph (b) of this section that are
exempt from the new requirements of 46 U.S.C. section 12102(c) must
specifically outline the current ownership structure, any changes in
the ownership structure that have occurred since the filing of the last
Affidavit, and a chronology of all changes that have occurred since
October 6, 1998; and,
(2) The owners of Fishing Vessels, Fish Processing Vessels, or Fish
Tender Vessels exempted under paragraph (e) of this section must note
on the Affidavit that the owner is claiming an exemption from the
requirements of part 356 pursuant to Sec. 356.51(e).
Subpart H--International Agreements
Sec. 356.53 Conflicts with international agreements.
(a) If the owner or Mortgagee of a Fishing Vessel, Fish Processing
Vessel, or Fish Tender Vessel believes that there is a conflict between
46 CFR part 356 and any international treaty or agreement to which the
United States is a party on October 1, 2001, and to which the United
States is currently a party, the owner or Mortgagee may petition the
Citizenship Approval Officer for a ruling that all or part of the
requirements of part 356 do not apply to that particular owner or
particular Mortgagee with respect to a specific vessel; provided, the
petitioner had an ownership interest in the Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel, or a mortgage on the vessel
in the case of a Mortgagee, on October 1, 2001, and is covered by the
international agreement. Petitions may be filed prior to October 1,
2001 by owners or Mortgagees with respect to international treaties or
agreements in effect at the time of the petition which are not
scheduled to expire prior to October 1, 2001.
(b) A petition for exemption from the requirements of part 356 must
include:
(1) Evidence of the ownership structure of the Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel as of October 1, 2001, (or on
the date of the petition for petitions filed prior to October 1, 2001),
and any subsequent changes to the ownership structure of the vessel;
(2) A copy of the provisions of the international agreement or
treaty which the owner believes are in conflict with the regulations;
(3) A detailed description of how the provisions of the
international agreement or treaty and the regulations are in conflict;
(4) A certification in all petitions filed on or after October 1,
2001, that no interest in the vessel-owning entity has been transferred
to a Non-Citizen after September 30, 2001; and,
(5) For all petitions filed prior to October 1, 2001, a
certification that the owner intends to transfer no interest in
[[Page 670]]
the vessel-owning entity to a Non-citizen for the succeeding year.
(c) A separate petition must be filed for each Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel unless the Citizenship
Approval Officer authorizes consolidated filing. Petitions should
include two copies of all materials and should be sent to the following
address: Maritime Administration, Office of Chief Counsel, Citizenship
Approval Officer, Room 7228, 400 7th Street, S.W., Washington, DC
20590.
(d) Upon receipt of a complete petition, the Citizenship Approval
Officer will review the petition to determine whether the international
agreement and the requirements of Part 356 are in conflict. To the
extent that it is determined that an international agreement covering
the petitioner is in conflict with the requirements of part 356, and 46
U.S.C. 12102(c) will not be applied to the petitioner with respect to
the specific vessel. The petitioner will be required to comply with the
documentation requirements as in effect on October 5, 1998, prior to
passage of the AFA.
(e) The owner of a Fishing Vessel, Fish Processing Vessel, or Fish
Tender Vessel that is determined through the petition process to be
exempt from all or part of the requirements of part 356 must submit
evidence of its ownership structure to the Citizenship Approval Officer
on an annual basis. The owner must specifically set forth:
(1) Its current ownership structure;
(2) The identity of all Non-Citizen owners and the percentage
owned,
(3) Any changes in the ownership structure that have occurred since
the filing of the last Affidavit; and,
(4) A certification that no interest in the vessel was transferred
to a Non-Citizen after September 30, 2001.
(f) The provisions of part 356 shall apply:
(1) To all owners and Mortgagees of a Fishing Vessel, Fish
Processing Vessel, or Fish Tender Vessel who acquired an interest in
the vessel after October 1, 2001; and
(2) To the owner of a Fishing Vessel, Fish Processing Vessel, or
Fish Tender Vessel on October 1, 2001, if any ownership interest in
that owner is transferred to or otherwise acquired by a Non-Citizen
after such date.
Subpart I--Review of Harvesting and Processing Compliance
Sec. 356.55 Review of compliance with harvesting and processing
quotas.
(a) Upon the request of either the North Pacific Fishery Council or
the Secretary of Commerce, the Citizenship Approval Officer will review
any allegation that an individual or entity has exceeded the allowable
percentage for harvesting or processing pollock as provided for in
section 210(e)(1) or (2) of the AFA.
(b) The Citizenship Approval Officer will require a Person(s)
alleged to have exceeded the cap to submit any information that is
deemed relevant in determining whether such Person(s) have exceeded the
cap.
(c) The Citizenship Approval Officer will make a finding as soon as
practicable and will submit it to the North Pacific Fishery Council and
the Secretary of Commerce.
(d) For purposes of this section, if 10 percent or more of the
interest in an entity is owned or controlled either directly or
indirectly by another individual or entity, the two entities will be
considered the same entity for purposes of applying the harvesting and
processing caps.
(1) For purposes of this subsection, an entity will be deemed to
have an ownership interest in a pollock harvesting or processing entity
if it either owns a percentage of the pollock harvesting or processing
entity directly or if ownership of can be traced through intermediate
entities to the pollock harvesting or processing entity. To determine
the percentage of ownership interest that an entity has in a pollock
harvesting or processing entity where the ownership interest passes
through one or more intermediate entities, the entity's percentage of
direct interest in an intermediate entity is multiplied by the
intermediate entity's percentage of direct or indirect interest in the
pollock harvesting or processing entity.
(2) For purposes of this subsection, an entity will be deemed to
exercise 10 percent or greater control over a pollock harvesting or
processing entity if:
(i) It has the right to direct the business of the pollock
harvesting or processing entity;
(ii) It has the right to appoint members to the management team of
the pollock harvesting or processing entity such as the directors of a
corporation or is a general partner or joint venturer in a harvesting
or processing entity;
(iii) It has the right to direct the business of an entity that
directly or indirectly owns or controls 10 percent of a harvesting or
processing entity; or
(iv) It owns 50% or more of an entity that owns or controls 10
percent of a pollock harvesting or processing entity.
(e) If the Citizenship Approval Officer determines that a Person
has violated Sec. 210(e) of the AFA, the Person is entitled to notice
and an opportunity for a hearing before the Secretary of Commerce in
accordance with section 554 of title 5, United States Code.
(f) Violations of section 210(e) of the AFA will be considered the
commission of an act prohibited by section 307 of the Magnuson-Stevens
Fisheries Act, 16 U.S.C. section 1857, and may subject the individual
to:
(1) Civil penalties;
(2) Permit sanctions applicable under section 308 of the AFA; and
(3) Forfeiture to the Secretary of Commerce of any fish harvested
or processed during the commission of such act.
Dated: December 27, 1999.
By Order of the Maritime Administrator.
Joel C. Richard,
Secretary, Maritime Administration.
[FR Doc. 00-18 Filed 1-4-00; 8:45 am]
BILLING CODE 4910-81-P
