§ 299.31

Charter of war-built vessels to citizens of the United States.

(a) Application. Any citizen of the United States, as defined in § 299.1(h), and until July 4, 1946, any citizen of the Commonwealth of the Philippines, may apply to the Administration to charter a war-built dry cargo vessel, including passenger type vessels, for bareboat use. The application to receive consideration must be substantially in the form prescribed by the Administration in § 299.128. Three executed copies and fifteen conformed copies of the application must be filed with the Secretary, Maritime Administration, Washington 25, D. C. Each application shall 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:

(1) Sufficient working capital, as defined in § 299.1 (n), to cover preoperating and operating expenses, as defined in $299.1 (p), of the vessel (in addition to basic charter hire) for a period of 60 days and prepaid insurance for one year.

In determining the amount of such working capital the amount of any securities pledged or to be pledged with the Administration in lieu of a surety bond, as prescribed in paragraph (g) (7) of this section, shall be excluded.

(ii) Net worth, as defined in § 299.1 (o), at least equal to the amount of the annual basic charter hire payable with respect to the war-built 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) That the applicant possesses the ability, experience, and other qualifications, necessary to enable him to fulfill the terms of the charter.

Items are 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.

(4) Applicants for the charter of warbuilt vessel(s) under section 5 (e) of the Merchant Ship Sales Act of 1946, as amended by Public Law 591, 81st Congress, shall in addition to the foregoing, submit a Supplemental Application substantially in the form prescribed in § 299.129.

If applicant has not previously filed a formal charter application pursuant to this section (General Order 60), questions 3, 4, 5, 8, 9, 10, and 11 in the Supplemental Application may be disregarded provided the information required by said questions is fully supplied in the application submitted in compliance with this section (General Order No. 60).

(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 25, D. C. Amendments involving substitu

tion 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 vessels applied for when made at the written 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 rejection by the Administration. The Administration may, in its discretion, either approve or reject the application and will not approve the application unless it determines that the applicant is a citizen of the United States as defined in § 299.1 (h) or in case of an application filed prior to July 4, 1946, is a citizen of the Commonwealth of the Philippines and, in its opinion, the chartering of the vessel to the applicant will be consistent with the policies of the Act and the vessel is available for charter

to the applicant. In determining whether or not to approve the application, the Administration will take into consideration the applicant's financial resources and credit standing, practical experience in the operation of vessels, and any other factors that would be considered by a prudent businessman in entering into a transaction involving a large investment of his capital; and the Administration will not charter a vessel to any person, appearing to lack sufficient capital, credit, and experience to fulfill the terms of the charter. No vessel will be chartered until 60 days after publication of the applicable prewar domestic cost in the FEDERAL REGISTER. If the application is rejected by the Administration, the Secretary will promptly advise the applicant.

(d) Charter party. If the application is approved by the Administration, the Secretary will furnish the applicant five counterparts of a charter party covering the vessel(s) in such form as the Administration may prescribe, which shall be executed by the applicant and redeliv

ered to the Secretary within fifteen (15) days of the date of its receipt by the applicant. After the charter party has been executed on behalf of the Administration, one of the counterparts will be sent to the applicant.

(e) Period of charter. The period of the charter shall be determined by the Administration in each particular case.

(f) Charter hire. The monthly charter hire for any vessel chartered under the provisions of the act shall be one-twelfth of an amount not less than 15 percent of the statutory sales price (computed as of the date of delivery of the vessel under the charter), except upon the affirmative vote of not less than four members of the Administration. Except in the case of vessels having passenger accommodations for not less than eighty passengers, rates of charter hire fixed by the Administration on any war-built vessel which differ from the rate specified in this subsection shall not be less than the prevailing world market charter rates for similar vessels for similar use as determined by the Administration.

(g) Mandatory provisions in charter. Every charter made by the Administration pursuant to the provisions of the act shall provide:

(1) Excess profits of charterer. That whenever, at the end of any calendar year subsequent to the execution of such charter, the cumulative net voyage profits (after payment of the charter hire reserved in the charter and payment of the charterer's fair and reasonable overhead expenses applicable to operation of the chartered vessels) shall exceed 10 percent per annum on the charterer's capital necessarily employed in the business of the vessel or vessels covered by the same charter, the charterer shall pay over to the Administration, an additional charter hire, one-half of such cumulative net voyage profit in excess of 10 percent per annum on such capital: Provided, That the cumulative net profit so accounted for shall not be included in any calculation of cumulative net profit in subsequent years. (Every charter shall contain definitions of the terms "net voyage profit" and "fair and reasonable overhead expenses" and "capital necessarily employed”, as said terms are used in this subparagraph, such definitions to set forth the formulae for determining such profits, overhead expense, and capital necessarily employed.)

(2) Charterer to insure vessel. That the charterer shall carry in the chartered vessels, at its own expense, policies of insurance covering all marine and port risks, protection and indemnity risks, and all other hazards and liabilities, in such amounts, in such form, and in such insurance companies as the Administration shall require and approve, adequate to cover all insurable damage claims against and losses sustained by the chartered vessels arising during the life of the charterer: Provided, That in accordance with existing law, some or all of such insurance risks may be underwritten by the Administration itself as in its discretion it may determine.

(3) Charterer to maintain and repair vessel. That the charterer shall at its own expense keep the chartered vessel in good state of repair and in efficient operating condition and shall at its own expense make any and all repairs as may be required by the Administration.

(4) Administration inspection of vessel. That the Administration shall have the right to inspect the vessel at any and all times to ascertain its condition.

(5) Books and accounts of charterer; Administration examination and audit. That the charterer shall keep its books and accounts relating to the vessel in such form as the Administration may prescribe, shall file such financial statements as the Administration may require, and shall permit the Administration to examine and audit its books, records and accounts.

(6) Emergency termination of charter. That whenever the President shall proclaim that the security of the national defense makes it advisable, or during any national emergency declared by proclamation of the President, the Administration may terminate the charter without cost to the United States, upon such notice to the charterer as the President shall determine.

(7) Bond of charterer. That, for each vessel chartered under section 5 of the act, the charterer shall deposit with the Administration a bond, in such amount as the Administration shall require but not less than $25,000, to be approved by the Administration both as to form and sufficiency of the sureties, conditioned upon the true and faithful performance of all and singular the covenants and agreements of the charterer contained in the charter, including, but not limited to, the charterer's obligation to pay charter hire and damages, and indemnity against

liens on the chartered vessel. The charterer may, in lieu of furnishing such bond, pledge United States Government securities in the face value of the required amount under an agreement satisfactory in form and substance to the Administration.

(8) Financial limitations. That the charterer agrees 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 charterer) shall be made, either directly or indirectly, to any stockholder, director, officer, or employee of the charterer 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 charterer 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 charter the vessel, shall be repaid in whole or in part, and (vii) no salary at a rate in excess of $25,000.00 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 paragraph (a) of this section.

(h) Operating - differential subsidy. The Administration may, if in its discretion financial aid is deemed necessary, enter into a contract with any citizen of the United States chartering a vessel under the provisions of the act for payment to such charterer of an operatingdifferential subsidy upon the same terms and conditions and subject to the same limitations and restrictions, where applicable, as are provided in the Merchant Marine Act, 1936, as amended, with respect to payments of such subsidies to operators of privately owned vessels.

(1) Application where request is made for an operating-differential subsidy. Where the applicant requests financial aid in the operation of a vessel chartered under the act, pursuant to paragraph (h) of this section, the application provided for in paragraph (a) of this section shall be accompanied by an application for an operating-differential subsidy in substantially the form prescribed in § 251.11 of this chapter (the Administration's General Order No. 13).

(1) If the application to charter is conditioned upon the granting of financial aid pursuant to paragraph (h) of this section, such application to charter shall be considered for the purpose of § 299.2 as having been filed as of the date of approval by the Administration of the application for financial aid.

(2) If the application for financial aid is disapproved by the Administration, the Secretary will promptly advise the applicant. Unless the applicant notifies the Secretary within 15 days that the application for charter is withdrawn, it will be considered as an application to charter without financial aid and for the purpose of § 299.2 shall be considered as filled as of date of disapproval of the application for financial aid.

(j) Sub-chartering. Vessels chartered from the Administration may be subchartered only with the prior written consent of the Administration.

(k) Preliminary determination and payment of “additional charter hire." (1) On or before November 30, 1946 and on or before the end of each succeeding calendar month, every charterer under a bareboat charter agreement Shipsalesdemise 303 shall pay over to the Administration ninety percent (90%) of the amount then indicated to be due the Administration on account of additional charter hire under that agreement and under Warshipdemiseout 203 (if the charterer chartered vessels from the War Shipping Administration under that form of agreement) for the period ending two calendar months prior to that date, after deducting, with respect to such payments made subsequent to November 30, 1946, the amount of any previous payments made on account of additional charter hire for the period and under the agreement involved, Provided, That for the period from January 1, 1951, to June 30, 1951, such payment shall be made on or before August 31, 1951, and that, for each succeeding quarter-annual period (i. e., September 30, December 31, March 31, and June 30), such payments shall be made within sixty (60) days after the close of each such period. Such payments shall be deemed to be preliminary and subject to adjustment upon the completion of audit by the Administration covering the period involved, and neither the tender thereof by the charterer, nor its acceptance by the Administration, shall prejudice the rights of either under the applicable bareboat charter agreement or

otherwise. The amounts of such payments shall be calculated in accordance with the applicable provisions of the respective agreements, particularly Clause (H) "Special Provisions" of Part I and Clauses 13-"Additional Charter Hire" and 23-"Definitions" of Part II of Shipsalesdemise 303, and Clauses 13-"Additional Charter Hire" and 23-"Definitions" of Part II of Warshipdemiseout 203, and in accordance with the regulations in this subpart. In instances where audited financial and operating statements have not been prepared by the charterer from its records or by its public accountants, tentative calculations should be prepared for this purpose.

(2) Every such remittance to the Administration on account of “additional charter hire" shall be accompanied by a separate statement in quadruplicate, reflecting the charterer's calculation of "capital necessarily employed", "net voyage profit", and "fair and reasonable overhead expenses" on which the amount of such "additional charter hire" under each agreement is based. This statement shall be certified by a duly authorized officer of the charterer to the following effect:

This statement correctly sets forth, to the best of my knowledge and belief, the "capital necessarily employed" in the business and "net voyage profit" of the chartered vessels, and the amount of “additional charter hire" due the Maritime Administration for the above stated period, pursuant to the provisions of the bareboat charter agreement Warshipdemiseout 203/Shipsalesdemise 303 (delete inapplicable reference) dated

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and in accordance with the rules and regulations prescribed in General Order 60 of the Administration, based on the records of the undersigned charterer at this date.

Name of Charterer

Title Date

(3) In instances where the charterer engages in other activities in addition to the operation of vessels under Shipsalesdemise 303, the statements reflecting the charterer's calculation of "capital necessarily employed", "net voyage profit" and "fair and reasonable overhead expenses" shall reflect the distribution of such capital, profit, and expenses, as between (1) operations under Shipsalesdemise 303, (ii) operations (if any) under Warshipdemiseout 203, and (iii) other operations,

together with a complete explanation of the manner in which such distribution was made.

(4) The statements for the period ended September 30, 1946 (required to be submitted on or before November 30, 1946) shall include also (1) the balance sheet of the charterer as of the close of the month preceding the date of delivery of the first vessel under Shipsalesdemise 303, (2) the balance sheet of the charterer as of the close of the month preceding the date of delivery of the first vessel under Warshipdemiseout 203 (if the charterer chartered vessels from the Maritime Commission or Administration under that form of agreement), and (3) the income sheet of the charterer for the fiscal period ended September 30, 1946. (If such fiscal period commenced subsequent to the month during which delivery of the first vessel under the agreement involved was made, the charterer shall submit also its income sheet for the preceding fiscal period.) Thereafter, the statements reflecting the preliminary determination of additional charter hire shall be accompanied by the income sheet of the charterer reflecting its cumulative operating results for the fiscal period ending two calendar months prior to the date when such statements are required to be submitted (e. g., statements required to be submitted on or before December 31, 1946 should be accompanied by an income sheet for the fiscal period ending October 31, 1946). The balance sheets and income sheets herein required shall be certified in the manner prescribed in § 299.8 (b).

(5) If in any instance a statement reflecting the preliminary determination of additional charter hire shall indicate that ninety percent (90%) of the cumulative total of such additional charter hire for the expired portion of the periods involved (which periods under Shipsalesdemise 303 shall end December 31, 1946, at the end of any subsequent calendar year, and at the termination of the agreement; and under Warshipdemiseout 203 shall end only upon redelivery of all vessels under the agreement) is less than the total of the payments theretofore made to the Administration on account of additional charter hire for such period, the charter may apply to the Administration for refund of such overpayment and, if such application is found

to be in order, the amount of the overpayment will be refunded by the Administration.

(6) The application should be made on a public voucher (form 1034-Revised), in quintuplicate, supported by three copies of the statement reflecting the preliminary determination of additional charter hire for the period involved and prepared to read substantially as follows: Claim for refund of excess of preliminary payments made to the Maritime Administration, on account of additional charter hire, over ninety percent (90%) of the amount of such additional charter hire indicated to be due the Commission for the period ended___. under bare

boat charter agreement Warshipdemiseout 203/Shipsalesdemise 303 (delete inapplicable

reference), dated__.

as per attached statement which by this reference is incorporated in this claim for refund. Payment by the Maritime Administration of all or any part of the amounts claimed herein will not be construed as an approval of the correctness of the amounts stated to be due the claimant nor as a waiver of any of the rights or remedies of either party under the terms of the said agreement or otherwise.

(7) Upon application of the Charterer the Administration may extend for a period of not to exceed thirty (30) days in any instance the time limit prescribed in this paragraph for the preliminary determination and payment of additional charter hire.

(8) In instances where income sheets covering operations under a Bareboat Charter Agreement Shipsalesdemise 303 and addenda thereto from the commencement of an accounting period show cumulative net voyage losses, it will not be necessary for the charterer to submit statements reflecting its calculation of "capital necessarily employed" unless income sheets covering a previous portion of such period reflected net voyage profits with respect to which the charterer made preliminary payment on account of additional charter hire and seeks a refund thereof: Provided, however, That in any event the charterer shall continue to submit income sheets reflecting its cumulative operating results in the manner and at the times required by this paragraph.1

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.