RESERVES § 299.35 Regulations with respect to reserves to be taken into account in the determination of "Net Voyage Profit" under SHIPSALESDEMISE 303 Bareboat Charter Agreement and Addenda thereto.

By the "Reserves Addendum", insofar as Charterers who have executed such addendum are concerned, subparagraph 1 of paragraph (a) of Clause 28 of Part II of Shipsalesdemise 303 Bareboat Charter Agreement was amended to provide, among other things, that, notwithstanding the provisions of United States Maritime Commission General Order No. 22 (Part 282 of this chapter), such reserves as may be specifically authorized by the Owner shall be taken into account in the determination of "Net Voyage Profit" thereunder or the expenses to provide for which such reserves are SO authorized shall be distributed over the period of use thereunder of the vessels involved commencing with the first voyage terminating after December 31, 1946, in such manner as will accomplish the same result as though such reserves were established, all pursuant to regulations prescribed by the Owner (referred to in this section as the Administration). To implement that provision of the aforesaid "Reserves Addendum", the following regulations are prescribed:

(a) Subject to the conditions provided in this section, upon application of the Charterer, supported by adequate data based on past experience, the inclusion in vessel operating expenses applicable to all voyages terminating after December 31, 1946, of such charges as the Administration determines to be fair and reasonable will be permitted to provide reserves for:

(1) Vessel repair expenses (including voyage and annual or periodic special survey repair expenses as well as expenses of repairs incident to redelivery of vessels).

(2) Vessel redelivery expenses (excepting such expenses specifically excluded in the determination of additional charter hire by the provisions of the first paragraph of Article V of the Foreign Trade Addendum, or otherwise, and excepting also any overhead expenses of the Charterer) incurred during the period from the time of paying off the crew or completion of discharge of cargo or ballast on the last voyage, or from the

date of availability of the vessel for redelivery pursuant to the terms of the bareboat charter agreement, whichever later occurs, to the time of redelivery of the vessel to the Administration, such as (i) wages of crew, (ii) food and stores consumed, (iii) fuel consumed, (iv) basic charter hire, (v) insurance premiums, (vi) port charges, (vii) cleaning, watching, maintenance expenses, shore labor, and miscellaneous expenses incident to redelivery, and (viii) expenses incident to stripping the ship if required and expenses incident to transporting the ship from port of return in the United States upon its last voyage to port of redelivery, and

(3) Reserves for P. & I. insurance deductible average losses.

(b) The reserves for vessel repair expenses and for vessel redelivery expenses shall be adjusted (1) as at December 31, 1948, with respect to vessels redelivered to the Administration on or before that date, (2) as at the end of each succeeding calendar year with respect to vessels redelivered to the Administration during such year, and (3) at the time of final accounting under the bareboat charter agreement with respect to vessels redelivered to the Administration during the period following the end of the last preceding calendar year. Such adjustment shall be accomplished by distributing separately the balances in such reserves applicable to each individual vesssel redelivered to the Administration during each such period in such manner as will have the effect of spreading the actual expenses applicable to each such vessel over the accounting periods involved (with respect to which a separate determination of additional charter hire is required to be made) on the basis of the relation that the number of vessel days of such vessel in each such period bears to the total of such vessel days commencing with the beginning of the first voyage of such vessel terminating after December 31, 1946, and ending with the date of its redelivery to the Administration.

(c) The reserves for P. & I. insurance deductible average losses shall be adjusted at the time of final accounting under the bareboat charter agreement, by distributing separately the balances in such reserves applicable to each individual vessel in such manner as will have the effect of spreading the actual expenses applicable to each individual

vessel over the accounting periods involved (with respect to which a separate determination of additional charter hire is required to be made) on the basis of the relation that the number of vessel days of such vessel in each such period bears to the total of such vessel days commencing with the beginning of the first voyage of such vessel terminating after December 31, 1946, and ending with the date of its redelivery to the Administration.

(d) If in any instance either of the reserves specifically authorized in paragraph (a) of this section is not established, or, if established, the amount thereof is not adequate to cover the actual expenses properly chargeable thereto, such expenses, or the excess thereof over the amount of the reserve established to provide therefor, as the case may be, applicable to each individual vessel involved, shall be distributed over the period of use of such vessel under the bareboat charter agreement, commencing with the first voyage terminating after December 31, 1946, in such manner as will accomplish the same result as though adequate reserves were established to provide for such expenses as herein provided.

(e) In the determination of "Net Voyage Profit" under the bareboat charter agreement, there shall not be taken into account (1) any charge resulting from the creation of reserves applicable to voyages terminated prior to January 1, 1947, (2) any charge resulting from the creation of reserves to cover expenses other than those specifically provided for in paragraph (a) of this section, (3) any charge to the period ended December 31, 1946 resulting from the spreading of expenses incurred on voyages terminated thereafter, or (4) any charge resulting from the spreading of expenses other than those with respect to which the creation of reserves is specifically provided for in paragraph (a) of this section.

(f) The establishment of the rules and regulations prescribed in this section is without prejudice to the right of the Administration to determine upon the employment of other bases for allocation of the expenses involved in any instance where, in the judgment of the Administration, the results produced by the application of the regulations prescribed herein are not fair and reasonable and

in accordance with sound accounting practice.

(Sec. 5, 60 Stat. 43, as amended; 50 U. 8. C. App. 1738)

§ 299.36 Regulations with respect to reserves to be taken into account in the determination of "Net Voyage Profit" under SHIPSALESDEMISE Form No. 303 (Military Sea Transportation Service).

Bareboat Charter Agreements.' Clause 27 of Part II of Form No. 303 Shipsalesdemise (Military Sea Transportation Service) bareboat charter agreement (referred to in this section as the "Agreement") provides, among other things, that notwithstanding the provisions of United States Maritime Commission General Order No. 22, as adopted by its successor, the Federal Maritime Board/Maritime Administration, and amended from time to time (Part 282 of this chapter), such reserves as may be specifically authorized by the Owner shall be taken into account in the determination of "Net Voyage Profit" thereunder or the expenses to provide for which such reserves are so authorized shall be distributed over the period of use thereunder of the vessels involved, in such manner as will accomplish the same result as though such reserves were established, all pursuant to regulations prescribed by the Owner. To implement that provision of the aforesaid agreement, the following regulations are prescribed:

(a) Subject to the conditions provided in this section, upon application of the Charterer, supported by adequate data based on past experience, the inclusion in vessel operating expenses applicable to all voyages terminating after June 30, 1950, of such charges as the Maritime Administration determines to be fair and reasonable will be permitted to provide reserves for:

(1) Vessel repair expenses (including voyage and annual or periodic special survey repair expenses as well as expenses of repairs incident to redelivery of vessels).

(2) Vessel redelivery expenses (excepting expenses for which the Charterer is reimbursed by the Owner pursuant to

1 This form of charter is the same as that prescribed by § 299.130 of this chapter except for modifications adapting it for the Military Sea Transportation Service. Copies of this charter will be furnished by the Maritime Administration upon request.

paragraph (b) of Clause 15 of Part II of the aforesaid Agreement, and excepting also any overhead expenses of the Charterer) incurred during the period from the time of paying off the crew or completion of discharge of cargo or ballast on the last voyage, or from the date of availability of the vessel for redelivery pursuant to the terms of the Agreement, whichever later occurs, to the time of redelivery of the vessel to the Maritime Administration, such as (1) wages of crew, (ii) food and stores consumed, (iii) fuel consumed, (iv) basic charter hire, (v) insurance premiums, (vi) port charges, (vii) cleaning, watching, maintenance expenses, shore labor, and miscellaneous expenses incident to redelivery, and (viii) expenses, if any, incident to transporting the ship from port of return in the United States upon its last voyage to port of redelivery, and

(3) Reserves for P. & I. insurance deductible average losses.

(b) The reserves for vessel repair expenses and for vessel redelivery expenses shall be adjusted (1) as at December 31, 1950, with respect to vessels redelivered to the Maritime Administration on or before that date, (2) as at the end of each succeeding calendar year with respect to vessels redelivered to the Maritime Administration during such year, and (3) at the time of final accounting under the Agreement with respect to vessels redelivered to the Maritime Administration during the period following the end of the last preceding calendar year. Such adjustment shall be accomplished by distributing separately the balances in such reserves applicable to each individual vessel redelivered to the Maritime Administration during each such period in such manner as will have the effect of spreading the actual expenses applicable to each such vessel over the accounting periods involved (with respect to which a separate determination of additional charter hire is required to be made) on the basis of the relation that the number of vessel days of such vessel in each such period bears to the total of such vessel days commencing with the beginning of the first voyage of such vessel terminating after June 30, 1950, and ending with the date of its redelivery to the Maritime Administration.

(c) The reserves for P. & I. insurance deductible average losses shall be ad

justed at the time of final accounting under the Agreement, by distributing separately the balances in such reserves applicable to each individual vessel in such manner as will have the effect of spreading the actual expenses applicable to each individual vessel over the accounting periods involved (with respect to which a separate determination of additional charter hire is required to be made) on the basis of the relation that the number of vessel days of such vessel in each such period bears to the total of such vessel days commencing with the beginning on the first voy. age of such vessel terminating after June 30, 1950, and ending with the date of its redelivery to the Maritime Administration.

(d) If in any instance either of the reserves specifically authorized in paragraph (a) of this section is not established, or, if established, the amount thereof is not adequate to cover the actual expenses properly chargeable thereto, such expenses, or the excess thereof over the amount of the reserve established to provide therefor, as the case may be, applicable to such individual vessel involved, shall be distributed over the period of use of such vessel under the Agreement, commencing with the first voyage terminating after June 30, 1950, in such manner as will accomplish the same result as though adequate reserves were established to provide for such expenses as provided in this section.

(e) In the determination of "Net Voyage Profit" under the Agreement, there shall not be taken into account (1) any charge resulting from the creation of reserves to cover expenses other than those specifically provided for in paragraph (a) of this section, or (2) any charge resulting from the spreading of expenses other than those with respect to which the creation of reserves is specifically provided for in paragraph (a) of this section.

(f) The establishment of the rules and regulations prescribed in this section is without prejudice to the right of the Maritime Administration to determine upon the employment of other bases for allocation of the expenses involved in any instance where, in the judgment of the Maritime Administration, the results produced by the application of the regulations prescribed by this section are not fair and reasonable and in ac

(a) Every Charterer, under the form of bareboat charter agreement known as WARSHIPDEMISEOUT 203, and/or the form of bareboat charter agreement known as SHIPSALESDEMISE 303, shall within ninety (90) days after publication of this order in the FEDERAL REGISTER prepare and submit to the Maritime Administration, in the form and manner prescribed in the annexed "Procedure to be Followed by Charterers in the Rendition to the Commission of Final Accountings under WARSHIPDEMISEOUT 203 and SHIPSALESDEMISE 303 Bareboat Charter Agreements" (§§ 299.38 to 299.56, inclusive), an accounting covering the entire period of operations under the WARSHIPDEMISEOUT 203 Agreement and accountings covering all operations under the SHIPSALESDEMISE Agreement (including addenda thereto) through December 31, 1949: Provided, however, That, upon application of the Charterer the Administration may extend, for such further period as in its judgment is warranted by the circumstances in any instance, the time limit prescribed in this paragraph for the submission of such accounting.

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(b) Every Charterer, under the form of bareboat charter agreement known as SHIPSALESDEMISE 303, shall prepare and submit to the Maritime Administration a similar accounting for each subsequent annual or overall accounting period (as defined in the procedure mentioned in paragraph (a) of this section) within ninety (90) days after the expiration of such accounting period, as provided in the said agreement and addenda thereto: Provided, however, That, upon application of the Charterer the Administration may extend, for such further period as in its judgment is warranted by the circumstances in any instance, the time limit prescribed in this paragraph for the submission of such accounting.

(e) "Other operations" refers to the operation by the charterer of vessels other than those chartered from the Administration, or the furnishing by the charterer of services and facilities to such other vessels, and all other business activities of the charterer.

(f) "Uniform System of Accounts" refers to the "Uniform System of Accounts for Operating-Differential Subsidy Contractors" prescribed by the Administration February 4, 1938 in General Order No. 22 (Part 282 of this chapter).

(g) "Allowable return" refers to the amount, at the rate of ten per centum per annum of "capital necessarily employed," which, to the extent earned, the charterer is permitted to deduct from the cumulative net voyage profit in the computation of additional charter hire.

(h) "Accounting period" or "other accounting period" refers to a period with respect to which a separate determination of additional charter hire due the Administration is required to be made pursuant to the provisions of the applicable bare boat charter agreement, commencing with the first day of the calendar year, or the first day of the month during which the first vessel is delivered to the charterer under the agreement involved, or the first day of the month during which an addendum requiring a separate determination of

additional charter hire becomes effective, and ending with the last day of the calendar year or the last day of the month in which the last vessel is redelivered to the Administration under the agreement (or addendum) involved.

(i) "Over-all accounting period" refers to a period from the earliest commencement of an accounting period to the latest termination of an accounting period during the same calendar year.

ACCOUNTING REQUIREMENTS

§ 299.39 Contract provisions and applicable orders and instructions.

(a) Clause 13 of Part II of WARSHIPDEMISEOUT 203 and SHIPSALESDEMISE 303 prescribes the fundamental bases for the calculation and payment to the Administration of additional charter hire. These clauses provide, among other things, for preliminary payments by the Charterer to the Owner on account of additional charter hire, subject to adjustment upon completion of final audit by the Owner, at which time such payments will be made by or to the Owner as such final audit may show to be due.

(b) Section 229.31 (k) prescribes the times at which and the manner and amounts in which such preliminary payments are required by the Owner to be made by the Charterer. To implement these provisions of General Order 60, on or about November 25, 1946, instructions were issued for the guidance of Charterers in the preparation of the statements required to accompany preliminary payments on account of additional charter hire, upon the express understanding that neither their issuance by the Administration nor their observance by the Charterer would prejudice the rights of either under the applicable agreement or otherwise, and that the Administration reserved the right to prescribe other bases for the determination of additional charter hire at the time of the annual or final accounting under the respective agreements. Such instructions have been supplemented from time to time.

(c) Clause 13 of Part II of WARSHIPDEMISEOUT 203 and Clause 28 of Part II of SHIPSALESDEMISE 303 provide, among other things, that the Charterer:

(1) Shall keep its books, records and accounts relating to the management, operation, conduct of the business of and maintenance of the vessels covered by the agreement in accordance with the

"Uniform System of Accounts" and under such regulations as may be prescribed by the Owner: Provided, however, That, if the Charterer is subject to the jurisdiction of the Interstate Commerce Commission, the Owner shall not require the duplication of books, records, and accounts required to be kept in some other form by that Administration; and

(2) Shall file, upon notice from the Owner, balance sheets, profit and loss statements, and such other statements of financial operations, special reports, memoranda of any facts and transactions, which in the opinion of the Owner affect the financial results in, the performance of, or transactions or operations under, the agreement.1

CROSS REFERENCE: For regulations of the Interstate Commerce Commission affecting carriers by water, see 49 CFR, Chapter I, Subchapter C.

§ 299.40 Annual and final accountings.

(a) Pursuant to the applicable provisions of the bareboat charter agreements, the Administration hereby requires that each Charterer submit a separate final accounting of additional charter hire accrued to the owner during the entire period of operations under WARSHIPDEMISEOUT 203 and for each annual or overall accounting period under SHIPSALESDEMISE 303 and addenda thereto. Each such accounting shall be submitted in sextuplicate and shall include the basic statements prescribed in § 299.54.

(b) With respect to each such accounting, if the amount of additional charter hire shown thereby to have accrued to the Owner is in excess of the total of the payments theretofore made to the Administration (less any refunds theretofore made by the Administration on account of such payments) on account of additional charter hire for the period involved, such accounting shall be accompanied by the Charterer's check payable to "Treasurer of United States for account of Maritime Administration" in the amount of such excess.

(c) If, conversely, in any instance the amount of additional charter hire shown by such accounting to have accrued to the Owner is less than the total of the

1 The books, records and accounts referred to in this section shall be retained two years after a final release or settlement agreement is completed between the Maritime Administration and the charterer.