the profit and loss statement should be to the effect that, to the best of the knowledge and belief of the person making the certification, such statement correctly states the operating results of the applicant for the period covered thereby.

(c) Administration examination of books and accounts. The Administration shall have the right to examine the books, records, and accounts of applicants if and to the extent deemed necessary to verify financial statements submitted to it pursuant to this subpart.

§ 299.9 Exceptions and exemptions to rules and regulations.

(a) The Administration reserves the right to amend, modify, or terminate the regulations in this part at any time, either as a whole or with respect to any particular case or classes of cases, but without the consent of the applicant, no amendment or modification of this part shall be binding upon any transaction approved by the Administration prior to the date of publication in the FEDERAL REGISTER of such amendment or modification.

(b) Any of the forms set forth in this part may be modified to meet the requirements of the Administration in any particular case.

(c) The Administration, in any instance where it deems it necessary or desirable to do so, may employ bases other than those expressed in §§ 299.21, 299.25 and 299.31 in determining financial responsibility.

§ 299.10 Termination date.

No contract of sale will be made under the regulations in this part after January 15, 1951.

Subpart B-Sales of War-Built Vessels § 299.21

Sales of war-built vessels to citizens of the United States. (a) Application. Any citizen of the United States as defined in § 299.1 (h) may apply to the Administration to purchase a war-built vessel at the statutory sales price (or price floor if higher). The application to receive consideration must be substantially in the form prescribed by the Administration in § 299.125. Three executed copies and fifteen conformed copies of the application must be filed with the Secretary, Maritime Administration, Washington, D.C., 20235. Each application must contain sufficient information to enable the Administration

to make all necessary determinations including the following:

(1) Citizenship of the applicant. (2) That the applicant possesses the following minimum financial requisites:

(i) Sufficient working capital as defined in § 299.1 (n) and unrestricted special funds to enable it to make payment for, or the down payment on, the war-built vessel (the down payment to be not less than 25 percent of the statutory sales price (or price floor if higher) of such vessel);

(ii) After such payment, the sum of (a) sufficient working capital and/or available special funds to provide for payment of one annual installment on the deferred portion (if any) of the purchase price of the vessel and (b) suffcient working capital alone to provide for payment of (1) interest on the deferred portion (if any) of the purchase price of the vessel for one year at the rate of 32 percent per annum and (2) all required insurance on the vessel for one year in the amount stipulated in § 299.1 (p); and

(ii) Net worth, as defined in § 299.1 (o), at least equal to the sum of (a) 25 percent of the purchase price of the warbuilt vessel or such higher percentage as the Administration may require, and (b) one annual installment on the deferred portion (if any) of the purchase price of such vessel, such requirements to be maintained on each vessel until such time as the outstanding mortgage balance on each such vessel is reduced to an amount whereby the net worth requirement exceeds such balance by at least 10 percent, thereafter the minimum net worth requirement with respect to such vessel shall be 110 percent of the outstanding balance of the mortgage on that vessel.

Such minimum financial requirements shall be applicable with respect to each vessel applied for. In instances where the applicant is engaged in the operation of other vessels or in activities other than the operation of vessels, the amount of working capital and net worth required for such purposes will be taken into account in addition to such minimum financial requirements in determining whether the applicant possesses the required financial resources.

(3) The applicant's ability, experience, and other qualifications, necessary to enable him to operate and maintain the

vessel under normal competitive conditions. Items or parts of items in the application which are inapplicable may be omitted. If any information called for by an applicable item is not furnished, an explanation of the omission shall be given. Detailed descriptions of exhibits need not be given. The applicant may furnish such relevant information as it may desire, in addition to that specified in this section and in the form.

(b) Amendment of application. Such application may be amended at any time before the Administration has acted upon it. Three executed copies and fifteen conformed copies of the amendment must be filed with the Secretary, Maritime Administration, Washington, D.C., 20235. Amendments involving substitution of a different vessel for the vessel applied for, unless made promptly at the written request of the Administration shall be effective as of the filing date of the amendment. All other timely amendments (including amendments involving substitutions for the vessels applied for when at the request of the Administration) shall be effective as of the filing date of the original application. Any information called for by the Administration from time to time shall be furnished as an amendment or amendments to the application. The applicant shall file from time to time as amendments any information necessary to keep current and correct, while the application is pending, the information contained therein or furnished in connection therewith.

(c) Approval or disapproval by the Administration. The Administration will approve the application if it determines that the applicant is a citizen of the United States as defined in § 299.1 (h) and possesses the ability, experience, financial resources, and other qualifications, necessary to enable him to operate and maintain the vessel under normal competitive conditions, and that such sale will aid in carrying out the policies of the act, and that the vessel is available for sale to the applicant. If the application is disapproved by the Administration, the Secretary will promptly advise the applicant.

(d) Contract of sale. If the application is approved by the Administration, the Secretary will furnish the applicant five counterparts of a contract of sale in form prescribed by the Commission which shall be executed by the applicant and redelivered to the Secretary within

fifteen (15) days of the date of its receipt by the applicant, accompanied by the applicant's certified check payable to the order of the United States of America in the amount specified in the contract as the initial payment required to be made upon the execution of the contract of sale, which will be not less than ten per cent of the purchase price and shall be retained as liquidated damages in the event the buyer defaults in his obligation to purchase the vessel under the terms of the contract. Such contract of sale (other than a sale for cash in full) and the mortgage given thereunder shall include provisions whereunder the purchaser shall agree, for a period corresponding to that during which any part of the purchase price of the vessel remains unpaid:

(1) That (i) no capital shall be withdrawn, (ii) no share capital shall be redeemed or converted into debt, (iii) no dividend shall be paid, (iv) no loan or advance (except advances to cover current expenses of the purchaser) shall be made, either directly or indirectly, to any stockholder, director, officer, or employee of the purchaser or to any related company (as defined in § 299.1 (q)), (v) no investment shall be made in the securities of any related company (as defined in § 299.1 (q)), (vi) no indebtedness to any stockholder, director, officer, or employee of the purchaser or to any related company (as defined in § 299.1 (q)), which was classified as long-term or noncurrent in the balance sheet submitted with the application (or amendment thereto) to purchase the vessel, shall be repaid in whole or in part, and (vii) no salary at a rate in excess of $25,000 per annum shall be paid, if, after such transaction, the amount of working capital or the amount of net worth thereby would be reduced below the minima prescribed in or required under paragraph (a) (2) (ii) and (iii) of this section; and

(2) That the purchaser shall file such financial and operating statements as the Administration may require, and shall permit the Administration to examine and audit its books, records and accounts. After the contract of sale has been executed on behalf of the Administration, one of the counterparts will be sent to the applicant. Upon delivery of the vessel to the buyer, the buyer shall pay by certified check a sum equal to the excess of the required down payment over the initial payment referred

to above and the buyer shall also give to the Administration negotiable promissory notes and a first preferred mortgage on the vessel equal to the excess of the statutory sales price over the sum of the total down payment and the tradein allowance, if any.*

§ 299.22 Allowance of credit for exchange of vessel.

(a) In general. (1) The Administration is authorized to acquire in exchange for an allowance of credit on the sales price of a vessel purchased by a citizen of the United States, any vessel owned by a citizen of the United States or by a foreign corporation, subject to the provisions of paragraphs (b) and (c) of this section. The allowance may not be applied in reduction of the down payment required to be made by the applicant, but may be applied in reduction of any unpaid balance remaining after applying the credit resulting from the down payment.

(2) A war-built vessel shall be deemed a "new vessel" for the purpose of section 511 (construction reserve fund and tax provisions) of the Merchant Marine Act, 1936, as amended. Section 510 (e) (tax provisions) of such act shall be applicable with respect to vessels exchanged under this section of the regulations to the same extent as it is applicable to obsolete vessels exchanged under section 510 of such act.

(b) Vessels ineligible for exchange. No vessel (1) which was purchased under the act, or (2) which is less than one thousand three hundred and fifty (1,350) gross tons, provided that the Administration may under special circumstances declare a smaller vessel eligible, or (3) which is not owned by a citizen of the United States except as provided in paragraph (c) of this section, will be accepted by the Administration in exchange for an allowance on the purchase price of any war-built vessel.

(c) Exchange of vessel owned by foreign corporation. Except as provided in paragraph (b) of this section, any vessel owned by a foreign corporation is eligible for an exchange allowance, if:

(1) The vessel was constructed in the United States, and was after December

* The books, records and accounts referred to in this section shall be retained until a final release or settlement agreement is completed between the Maritime Administration and the purchaser.

7, 1941, chartered to, or otherwise taken for use by, the United States;

(2) The controlling interest in such corporation is, at the time of the exchange, owned by a citizen or citizens of the United States, and has been so owned for a period of at least three years immediately prior to the time of exchange; and

(3) Such corporation agrees that the war-built vessel purchased with the use of such credit shall be owned by such citizen or citizens and shall be documented under the laws of the United States.

(d) Application for determination of an allowance of credit. An application for determination of an allowance of credit for exchange of a vessel must be in substantially the form prescribed by the Administration in § 299.126. Three executed copies and fifteen conformed copies of the application must be filed with the Secretary, United States Maritime Commission, Washington, D.C., 20235. Items or parts of items in the application which are inapplicable may be omitted. If any information called for by an applicable item is not furnished, an explanation of the omission shall be given. Detailed description of exhibits need not be given.

(e) Amendment of application. Such application may be amended at any time before the Administration has acted upon it. Three executed copies and fifteen conformed copies of the amendment must be filed with the Secretary, Maritime Administration, Washington, D.C., 20235.

(f) Determination by Administration of allowance of credit for exchange of vessel and offer of applicant. Upon determination by the Administration of the amount which it will allow as credit for exchange of a vessel, the applicant may execute a firm offer in substantially the form provided in § 299.127, binding for at least 90 days, to transfer the vessel to the Administration in exchange for an allowance of credit which offer must be filed by the applicant with the Administration within 15 days from the date of receipt of the determination of allowance and in any event not later than December 31, 1946.

(g) Amount of allowance. The amount of the allowance shall be the fair and reasonable value of the vessel as determined by the Administration and shall be subject to the following considerations and limitations:

(1) In determining the fair and reasonable value of the vessel for the purpose of the allowance, the Administration will consider:

(i) The value of the vessel, determined in accordance with the standards of valuation established pursuant to Executive Order 9387 (3 CFR, 1943 Supp.), as of the date of the application,

(ii) Any liability of the United States for repair and restoration of the vessel, (iii) The utility value of the vessel, (iv) The effect of the act upon the market value of such vessel, and

(v) The public interest in promoting exchanges of vessels as a means of rehabilitating and modernizing the American merchant marine.

(2) In no event will the amount of such allowance, in case of dry-cargo vessels and tankers, exceed:

(1) If the vessel or vessels tendered in exchange are of equal or greater deadweight tonnage than the war-built vessel or vessels being acquired, 33% percent of the statutory sales price (without taking into account the adjustments provided for in § 299.1 (f) (1) to (5), inclusive), of the war-built vessel or vessels, or

(1) If the vessel or vessels tendered in exchange are of lesser deadweight tonnage than the war-built vessel or vessels, such proportionate part of 331⁄2 percent of the statutory sales price (without taking into account the adjustments provided for in 299.1 (f) (1) to (5), inclusive), of such war-built vessel or vessels as the deadweight tonnage of such vessel or vessels, tendered in exchange, bear to the dead-weight tonnage of such war-built vessel or vessels, or

(iii) The liability of the United States in connection with the repair or restoration of such vessel under any charter to which the United States is a party, whichever is the higher.

(3) In the case of passenger vessels tendered in exchange, the amount of the allowance shall not exceed the percentage of the statutory sales price computed under subparagraph (2) (1) and (ii) of this paragraph by gross tons instead of deadweight tons, or such liability for the repair or restoration of such passenger vessel, whichever is the higher.

(4) In any case where the vessel tendered in exchange was acquired from the United States at any time and by any person whomsoever, the allowance of credit shall not exceed the price originally paid the United States therefor

plus the depreciated cost of any improvement thereon.

(5) In the case of any vessel tendered in exchange which has been restored to condition by the United States for the purpose of redelivering such vessel to its owner in compliance with the charter of such vessel with the United States or where, for such restoration a cash allowance has been made to the owner, there will be deducted from the amount of the allowance of credit for such vessel determined by the Administration, an amount equal to the cost incurred by the United States for such restoration, including charter hire paid during the period of restoration, or such cash allowance as has been made to the owner, provided that the cost of, or allowance for, removal of national defense features shall not be deducted from the amount of the allowance of credit.

(h) Loss of vessel tendered in exchange. If, after an offer for an exchange allowance, pursuant to paragraph (1) of this section, has been executed by the buyer, and before title to applicant's vessel has been transferred to the Administration by a bill of sale, such vessel is lost by reason of causes for which the United States is responsible, then, in lieu of paying the applicant any amount on account of such loss, the offer shall, for the purposes of this section, be considered as having been accepted and the applicant's vessel as having been acquired by the Administration immediately prior to such loss. In such event the Administration shall apply the amount set forth in such offer (but not more than the amount to which applicant is entitled under any other agreement with the United States covering the vessel) as an additional down-payment on the purchase price of the Administration vessel, and the seller agrees to accept such allowance of credit in full settlement of any and all claims against the United States in connection with the loss of applicant's vessel. Subsequent to the transfer of title of applicant's vessel to the Administration, such vessel shall be deemed to be the property of the United States, and the amount set forth in the offer shall be applied irrespective of subsequent loss of the vessel from whatsoever cause. The United States shall, whether the vessel is lost before or after execution of the bill of sale, be subrogated with respect to all insurance or other claims arising out of such loss.

"Causes for which the United States is responsible," as used in this paragraph, include liability under contractual obligations of the United States, such as those arising under a charter or policy of insurance, and liability arising from collision or other torts.

$299.25 Sales of war-built vessels to persons not citizens of the United States.

(a) Application. Any person not a citizen of the United States as defined in § 299.1 (h) may apply to the Administration to purchase, at not less than the statutory sales price, a warbuilt vessel other than a P-2 type or other passenger type and other than a Liberty type collier or Liberty type tanker. The application to receive consideration must be substantially in the form prescribed by the Administration in § 299.125. Three executed copies and fifteen conformed copies of the application must be filed with the Secretary, Maritime Administration, Washington, D.C., 20235. Each application should contain sufficient information to enable the Administration to make all necessary determinations including determinations that the applicant has the financial resources, ability and experience necessary to enable him to fulfill all obligations with respect to payment for the vessel on such terms and conditions as the Administration shall approve. Items or parts of items in the application which are inapplicable may be omitted. If any information called for by an applicable item is not furnished, an explanation of the omission shall be given. Detailed descriptions of exhibits need not be given. The applicant may furnish such relevant information as it may desire, in addition to that specified in the form.

(b) Amendment of application. Such application may be amended at any time before the Administration has acted upon it. Three executed copies and fifteen conformed copies of the amendment must be filed with the Secretary, Maritime Administration, Washington, D.C., 20235. Amendments involving substitution of a different vessel for the vessel applied for, unless promptly made at the written request of the Administration, shall be effective as of the filing date of the amendment. All other timely amendments (including amendments involving substitutions for the vessel applied for when made at the written request of the Administration shall be effec

tive as of the filing date of the original application. Any information called for by the Administration from time to time shall be furnished as an amendment or amendments to the application. The applicant shall file from time to time as amendments any information necessary to keep current and correct, while the application is pending, the information contained therein or furnished in connection therewith.

(c) Approval or disapproval by the Administration. (1) The Administration may approve the application if it determines:

(1) That the applicant has the financial resources, ability, and experience necessary to enable him to fulfill all obligations with respect to payment for the vessel on such terms and conditions as the Administration shall approve, and that sale of the vessel to him would not be inconsistent with any policy of the United States in permitting foreign sales under section 9 or section 37 of the Shipping Act, 1916, as amended, and

(ii) After consultation with the Secretary of the Navy, that such vessel is not necessary to the defense of the United States, and

(1) That such vessel is not necessary to the promotion and maintenance of an American merchant marine described in section 2 of the act, and

(iv) That for a reasonable period of time, which in the case of tankers and, except as provided below, "C" type vessels shall not end before ninety days after publication of the applicable prewar domestic cost in the FEDERAL REGISTER, such vessel has been available for sale at the statutory sales price to citizens of the United States, or for charter to citizens of the United States, and that no responsible offer has been made by a citizen of the United States to purchase or charter such vessel.

(v) That such vessel is available for sale to the applicant.

(2) If the application is disapproved by the Administration, the Secretary will promptly advise the applicant.

(d) Contract of sale. If the application is approved by the Administration, the Secretary will furnish the applicant five counterparts of a contract of sale in the form prescribed by the Administration, which shall be executed by the applicant and redelivered to the Secretary within fifteen (15) days of the date of its receipt by the applicant, accompanied by the applicant's check payable in