to the operation of the vessels under WARSHIPDEMISEOUT 203 and SHIPSALESDEMISE 303 and "other operations" on the same basis as are the corresponding charges to the Vessel Operating Expense Accounts.

If, conversely, the sum of the gross income derived from the use of such services or facilities by vessels under WARSHIPDEMISEOUT 203, under SHIPSALESDEMISE 303, owned by the Charterer, and chartered from others by the Charterer, is less than the gross income derived from the use of such services or facilities by other vessels,

(1) The amounts credited to the income accounts corresponding to charges in the Vessel Operating Expense Accounts of the vessels under WARSHIPDEMISEOUT 203 and SHIPSALESDEMISE 303 shall be allocated directly to the operation of such chartered vessels and the amounts credited to the income accounts corresponding charges in the accounts of vessels, owned, or chartered from others than the Administration, by the Charterer, and to charges against others for the use of such services or facilities shall be allocated to "other operations," and

to

(2) The expense of maintaining such services or facilities shall be allocated between the operation of vessels under WARSHIPDEMISEOUT 203 and SHIPSALESDEMISE 303 and "other operations" on the basis of the relation that the gross income so derived from the vessels engaged in each such operation bears to the total gross income derived from the furnishing of such services or facilities.

(c) Compensation (other than liquidation fees) earned under Berth Agency, General Agency and Time Charter Agency Service Agreements and subagency fees and commissions paid or payable from such compensation shall be allocated direct to "other operations".

(d) Except in instances involving considerable nonshipping operations, the operation of passenger vessels, substantial dissimilarity between the operations of the vessels chartered from the Administration and those of vessels owned or chartered from others by the Charterer, or agency operations actually carried on as a separate and substantial business activity of the Charterer for its own account and not merely incidental to the operation of the chartered vessels (with

respect to which the Charterer shall submit, for the consideration of the Administration, in advance of the accounting prescribed in this part, its concept of a fair and reasonable formula, addressed in the manner prescribed in § 299.40 (d), overhead expenses (if they are not susceptible to direct allocation), including administrative and general expense, less agency fees, commissions, and brokerage earned, except in instances where the Charterer, through the maintenance of actual cost records or other sound accounting methods, can demonstrate to the satisfaction of the Administration the actual application of costs incurred against such fees, a minimum of 50 percent of liquidation fees accrued during the over-all accounting period involved, the remaining percentage of such fees to be deferred to the next succeeding period, and accounting fees earned by United States principals of supervisory foreign agents; management and operating commissions; advertising expense; and taxes, other than Federal income tax, shall be allocated between operations under the bareboat charter agreements with the Administration and "other operations" on the basis of the relation that the number of days (eliminating fractions by considering twelve hours or more a full day and omitting portions of days amounting to less than twelve hours) of operation of maintenance of vessels under each SHIPSALESDEMISE 303, under each addendum to SHIPSALESDEMISE 303 whereunder additional charter hire is required to be computed, accounted for, and paid separately, under each WARSHIPDEMISEOUT 203, and in "other operations" (including those under service agreements) during the annual or over-all accounting period involved individually bear to the total of such days: Provided, That for the purposes of this calculation only a vessel day shall be valued in the manner described in the following formula:

(1) Vessels owned and operated by the Charterer

Day

1

Day

(7) Vessels under General Agency Agreements where General Agents do not act in capacity of Berth Agent-----(8) Vessels under Berth Agency Agreements where Berth Agent does not act in capacity of General Agent-----Provided, That in instances where more than one berth agent act for the vessel on a single voyage the number of days so calculated shall be divided between the berth agents involved on the basis of the relation that the number of days under the agency of each bears to the total number of days of the voyage.

In this calculation the expired days of voyages in progress at the commencement of the annual or over-all accounting period will be omitted and the expired days of voyages in progress at the termination of such period will be taken into account (in other words, only the vessel days within the annual or over-all accounting period involved will be taken into account).

(e) If, in any instance, the amount of overhead expenses allocated against operations under General Agency, Time Charter Agency, and Berth Agency Agreements, in accordance with the foregoing formula, exceeds the amount of compensation earned under such Agreements for the period involved, less subagency fees and commissions paid or payable from such compensation, the amount of such excess shall be reallocated among the other operations of the Charterer (including, but not limited to, those under the bareboat charter agreements) on the basis of the relation that the amount of overhead expenses otherwise allocated to each such operation bears to the total of the overhead expenses otherwise allocated to all such operations.

(f) Subject to the conditions prescribed in § 299.55 (b), in any instance where the statements required to be submitted to the Administration hereunder are certified by an independent certified public accountant or a firm of independent certified public accountants, such fair and reasonable payments as the Administration determines to have been made by the Charterer for the certification of such statements by such certified public accountants may be allocated directly to operations under the bareboat charter agreements involved on the basis of the relation that the number of vessel days applicable to each accounting period under each agree

ment (or addendum with respect to which a separate determination of additional charter hire is required to be made) bears to the total vessel days under all such agreements (or addenda) for all such periods covered by such statements.

(g) The salaries of any additional personnel which the Charterer demonstrates to the satisfaction of the Administration to have been necessarily employed for the exclusive purpose of preparing such statements (irrespective of whether or not they are certified by an independent certified public accountant or a firm of independent certified public accountants) shall be allocated over the entire period covered by such statements on the basis of the relation that the total vessel days applicable to each annual or overall accounting period involved bears to the total vessel days for all such periods, and the proportion of such salaries so determined to be allocable to each such period shall be distributed between operations under the bareboat charter agreements with the Administration and "other operations" in accordance with the formula prescribed in paragraphs (d), (e), and (f) of this section.

(h) In instances where branch offices of the Charterer act as agents for the chartered vessels and if it is impracticable to determine the actual cost of such services, the Charterer may charge in the vessel operating expense accounts of the chartered vessels fair and reasonable amounts for such services (but at not in excess of the "going rates" for the services at the ports involved, or the rates at which such services could be obtained from independent agents, or the rates charged all other vessels for such services), provided similar charges are made in the accounts of all other vessels operated by the Charterer. If the sum of the gross income derived from the furnishing of such services to vessels under WARSHIPDEMISEOUT 203, under SHIPSALESDEMISE 303, owned by the Charterer, and chartered from others by the Charterer, exceeds the gross income derived from the furnishing of such services to other vessels,

(1) The expense of maintaining such branch offices shall be allocated among the operation of vessels under WARSHIPDEMISEOUT 203 and SHIPSALESDEMISE 303 and "other operations" on the basis of the relation that the gross

income so derived from the vessels engaged in each such operation bears to the total gross income derived from the furnishing of such services, except that income derived from the furnishing of such services to vessels neither owned, nor chartered from the Administration or others, by the Charterer shall not be included in the above calculation but shall be prorated between the operation of the vessels under WARSHIPDEMISEOUT 203 and SHIPSALESDEMISE 303 and “other operations" in the same manner as is the expense of maintaining such services as thus determined, and

(2) The amounts credited to Agency Fees, Commissions, and Brokerage Earned shall be allocated directly to the operation of the vessels under WARSHIPDEMISEOUT 203 and SHIPSALESDEMISE 303 and "other operations" on the same basis as are the corresponding charges to the Vessel Operating Expense Accounts.

If, conversely, the sum of the gross income derived from the furnishing of such services to vessels under WARSHIPDEMISEOUT 203, under SHIPSALESDEMISE 303, owned by the Charterer, and chartered from others by the Charterer, is less than the gross income derived from the furnishing of such services to other vessels,

(1) The amounts credited to the income accounts corresponding to charges in the Vessel Operating Expense Accounts of the vessels under WARSHIPDEMISEOUT 203 and SHIPSALESDEMISE 303 shall be allocated directly to the operation of such chartered vessels and the amounts credited to the income accounts corresponding to charges in the accounts of vessels owned, or chartered from others than the Administration, by the Charterer, and to charges against others for the furnishing of such services, shall be allocated to "other operations", and

(2) The expense of maintaining such branch offices shall be allocated between the operation of vessels under WARSHIPDEMISEOUT 203 and SHIPSALESDEMISE 303 and "other operations" on the basis of the relation that the gross income so derived from the vessels in each such operation bears to the total gross income derived from the furnishing of such services.

(i) Depreciation expense shall be allocated between the operation of the

chartered vessels and "other operations" on the same basis as the net book value of the property involved is allocated in the determination of "capital employed", except depreciation on general office furniture and fixtures, which shall be allocated on the same basis as that prescribed with respect to overhead expenses in paragraphs (d), (e), (f), and (g) of this section.

(j) Income in the form of interest earned and dividends shall be allocated between the operation of the chartered vessels and "other operations" on the same basis as the value of the investments and securities from which such income is derived is allocated in the determination of "capital employed".

(k) Interest expense shall be allocated between the operation of the chartered vessels and "other operations" on the same basis as the liabilities in connection with which such expense was incurred are allocated in the determination of "capital employed".

(1) Miscellaneous operating income, miscellaneous operating expense, miscellaneous other income, and miscellaneous other deductions from income, if, and to the extent that they are not susceptible to direct allocation, but are derived from, or incurred in, the general conduct of the shipping business shall be allocated on the same basis as that prescribed with respect to overhead expenses in paragraphs (d), (e), (f), and (g) of this section.

(m) Income derived from, and expenses incurred in, nonshipping operations shall be allocated directly to "other operations".1

§ 299.49 Calculation of net voyage profit on cumulative basis.

In providing for the calculation of additional charter hire based on the cumulative net voyage profit of the Charterer, Clause 13 of Part II of SHIPSALESDEMISE 303 provides also that such cumulative net profit so accounted for shall not be included in the calculation of cumulative net profit in any subsequent year or period. Pursuant to these provisions of the bareboat charter agreements, only deficiencies in net voyage

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.

profits may be carried forward, and then only under the following conditions:

(a) In any instance where a net voyage loss is sustained as a result of operations under SHIPSALESDEMISE 303 during any accounting period terminating at the end of a calendar year and a net voyage profit is realized thereunder in the next succeeding accounting period, the net voyage loss and the net voyage profit for the respective periods may be combined and additional charter hire may be computed on the basis of the net result using the number of days consumed on terminal voyages during the combined period (together with the number of days during which any of the chartered vessels were inactive during that period) in determining the applicable percentages in accordance with the table set forth in Clause 13 of Part II of the said form of charter.

(b) In any instance where the net voyage profit realized as a result of operations under SHIPSALESDEMISE 303 during any accounting period terminating at the end of a calendar year is less than 10 percent per annum of "capital necessarily employed" during that period and the net voyage profit realized thereunder in the next succeeding accounting period is in excess of 10 per cent per annum of "capital necessarily employed" during such succeeding period, the net voyage profits for the respective periods may be combined and additional charter hire may be computed on the basis of the combined result, using the number of days consumed on terminated voyages during the combined period (together with the number of days during which any of the chartered vessels were inactive during that period) in determining the applicable percentages in accordance with the table set forth in Clause 13 of Part II of the said form of charter,

Provided, however, That in any such instance involving any addendum to SHIPSALESDEMISE 303 whereunder additional charter hire is required to be computed, accounted for, and paid separately, the net voyage profits and net voyage losses thereunder likewise shall be treated separately for these purposes and shall not be combined with those under SHIPSALESDEMISE 303 or any other addendum thereto.

§ 299.50

Adjustments in absence of physical inventories.

Except in instances where physical inventories satisfactory to the Owner were taken at the end of each accounting period with respect to which a separate determination of additional charter hire is required to be made,

(a) The value of the inventory of subsistence stores, consumable stores, fuel, water, and slop chest items on board at the time of delivery of the vessel to the Charterer shall be charged in Account 060-Stores, Supplies and Equipment Aboard Vessels and the value of the inventory of subsistence stores, consumable stores, fuel, water, and slop chest items on board at the time of redelivery of the vessel to the Owner shall be credited in the same account, and

(b) The difference between the value of such delivery inventory and the value of such redelivery inventory shall be distributed proportionately on a daily basis over the entire period commencing with the date of delivery of the vessel to the Charterer and ending with the date of its redelivery to the Owner,

Provided, That, if in any instance the application of this procedure produces a disproportionate result with respect to expenses chargeable to the first voyage following delivery of a vessel to the Charterer or the last voyage preceding its redelivery to the Owner, the Maritime Administration will determine in each such instance the fair and reasonable basis for the allocation of the difference between the delivery and redelivery inventory.

(c) For the purpose of §§ 299.47299.53, the value of the delivery inventory shall be the price at which such inventory was purchased by the Charterer from the Owner, on delivery, and the value of the redelivery inventory shall be computed at the market price current at the port and the time of redelivery, unless the vessel is redelivered at a port other than the port of original redelivery pursuant to the terms of the addendum permitting the Owner, at its option, to require redelivery at a port other than the port of delivery, in which case the redelivery inventory shall be priced on the basis of the market price current at the original port of redelivery as at the time redelivery at such port would have been effected if the Owner had not exercised

ment.

Post redelivery overhead expenses, to the extent determined by the Maritime Administration to have been reasonably and necessarily incurred in connection with the conduct of the operation of the chartered vessels after redelivery of the last vessel under the last Warshipdemiseout 203 or Shipsalesdemise 303 Agreement in effect prior to July 1, 1950 (excluding charters covering only passenger vessels), will be taken into account in the determination of "net voyage profit" thereunder, subject to the following conditions:

(a) That the charterer shall demonstrate to the satisfaction of the Maritime Administration, by presentation of statements fully supported by actual cost records or other sound accounting evidence, that such expenses were, in fact, necessarily and properly incurred in the conduct of the business of the chartered vessels and were not attributable to the conduct of other business of the charterer.

(b) That post redelivery overhead expenses shall be deemed to include only such overhead expenses as are directly attributable to the completion and finalization of accounting for bareboat charter operations (excluding any cost of submitting final statements of additional charter hire for which allowances are elsewhere provided), the processing and settlement of inventories, and the processing of and accounting for claims.

(c) That post redelivery overhead expenses, to the extent allowed here

under, may be allocated directly to operations under the bareboat charter agreements involved on the basis of the relation that the number of vessel days applicable to each accounting period under each agreement (or addendum with respect to which a separate determination of additional charter hire is required to be made) bears to the total vessel days under all such agreements (or addenda) for all such periods.

(d) That statements of post redelivery overhead expenses shall be submitted to the Maritime Administration not later than June 30, 1951, or within six (6) months after redelivery of the last vessel under the bareboat charter agreement involved, whichever later occurs: 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 statements.

(e) Statements of post redelivery overhead expenses may be integrated into the statements required by § 299.54 if the submission of the latter mentioned statements will not thereby be delayed; otherwise, supplementary accountings embodying statements of post redelivery overhead expense should be submitted.1 § 299.53 Post redelivery overhead ex

penses under Form No. 303 SHIPSALESDEMISE agreements entered into subsequent to June 30, 1950; exception.

(a) Post redelivery overhead expenses, to the extent determined by the Maritime Administration to have been reasonably and necessarily incurred in connection with the conduct of the operation of the chartered vessels, during a period not in excess of six (6) months (unless otherwise determined by the Owner) after redelivery of the last vessel under the last of any and all Form No. 303 SHIPSALESDEMISE bareboat charter agreements entered into subsequent to June 30, 1950, which, collectively, had been continuously in effect, without interruption (excepting bareboat charter agreements which contain specific provisions with respect to the amount of allowable overhead) will be taken into account in the determination of "net voyage profit"

1 See footnote 1, p. 265.