- How exactly does MARAD calculate the civil penalty? Is the penalty essentially $25,000 per day of the shipment?
- Do shippers/ suppliers have to ship on a US flagged vessel and under a US flag carrier bill of lading or can they also ship on a foreign flagged vessel under a US flag bill of lading? When am I able to apply for a waiver?
- How do I apply for a waiver?
- Why do I need to report?
- How do I report?
- What is a shipping plan?
- When do I report?
- To whom do I report?
- What documents are sufficient to report?
- Will my rate information be revealed to my customer?
- Will a rated House B/L suffice?
- Do I need a waiver when using P2 service?
- What is the difference between P1, P2, P3 service?
- How many USF carriers should I check with?
- Do I need to report shipments on non-US flag vessels?
- Title XI: At what point does cargo preference apply with Title XI projects?
- MARAD enforces cargo preference from the time of application.
Export Import Bank Questions
- When should we submit the Form F and bills of lading?
- Does the Cargo Preference Act of 1904 (04 Act) cover US Military cargo movements only?
- What is the definition of US Military (DOD) cargo?
- Does US Military (DOD) cargo include Military Household Goods (HHGs) and service members Privately Owned Vehicles (POVs)?
- What percentage of US Military (DOD) cargo must be shipped on US Flag vessels?
- Does it include FMF (for Foreign Military Financed by U.S) Cargo?
How exactly does MARAD calculate the civil penalty? Is the penalty essentially $25,000 per day of the shipment?
MARAD views civil penalties as an absolute last resort. We are far more interested in working with agencies and their contractors/recipients to identify opportunities for compensatory cargo to be carried on U.S.-flag vessels. This corrective action is far more cost-effective for the contractor/recipient and ultimately serves the actual purposes of cargo preference – getting cargo aboard U.S.-flag vessels.
The actual amount of the civil penalty would be based upon the consideration of a number of factors:
(1) the facts underlying the specific violation,
(2) the gravity of the violation,
(3) the degree of culpability,
(4) the existence of any prior violations,
(5) the respondent’s ability to pay a civil penalty,
(6) the effect of a penalty on the respondent’s ability to continue to do business, and
(7) any other relevant considerations.
These factors would all be taken into consideration when setting any actual penalty for a knowing and willful cargo preference violation.
Do shippers/ suppliers have to ship on a US flagged vessel and under a US flag carrier bill of lading or can they also ship on a foreign flagged vessel under a US flag bill of lading?
Under the Cargo Preference laws and regulations, a shipper/supplier cannot ship the US flag portion of preference cargo on a foreign-flagged vessel, regardless of whether the bill of lading is issued by a foreign-flag carrier or a U.S.-flag ocean carrier. A shipper/supplier must ship the US flag portion of preference cargo via a U.S.-flag vessel, and receive the US flag carrier’s master ocean bill of lading. Copies of ocean carrier master bills of lading for both US flag and foreign flag shipments should be submitted to MARAD.
Export Import Bank Questions
When should we submit the Form F and bills of lading?
Federal Regulations require submission of bill of lading copies within 20 working days of the date of loading for shipments originating in the United States, or within 30 working days for shipments originating outside the United States. For one-time Ex-Im Bank shipments, the Form F should be submitted within these parameters. For multiple shipments, The Form F should be submitted at the beginning of each calendar month and include all of the bills of lading received for the month just ending. Required to submit together. For more information on the Export-Import Bank process click here.
Please confirm that PR 17s application is restricted to EXIM Bank Cargoes which meet the current threshold of “7 years in length and USD20.0M loan amount”.
- PR-17 as codified under 46 USC 55304 covers exports financed by the U.S. Government including Ex-Im Bank cargo. Ex-Im Bank is presently the only program operating under 46 USC 55304 but it is not exclusively limited to the Ex-Im Bank program.
- 46 USC 55304 technically applies to all Ex-Im Bank cargo moves however for the Loan Guarantee program a special compromise was put in place that provided for the “threshold” concept, but this is only for the Loan Guarantee program. Direct Loans require the application of the U.S.-flag requirement from the first dollar on up.
- Under the PR-17 agreement the U.S.-flag requirement is applied at 100% where it is applicable.
PR 17 had the impact of waiving the 3 year waiting period for US Flag, Foreign built vessel participation criteria and had the impact of permitting a Project Manager(NVOCC) Bill of Lading to be considered the Over Carriage Bill of Lading vs the US Flag Carrier Bill of Lading, while still maintaining the requirement to produce the US Flag Carrier Bill of Lading. (CBoggs added comments: until PR 17 was initiated, the US flag carrier ocean bl was the document required by EXIM/MARAD to validate US Flag shipping requirement; after PR 17, the project mgr, TO, PANALPINA or others could issue their own house bl as the over carriage bl supported by a US Flag ocean carrier bl as the under carriage or supporting document.
- PR 17 agreement did not waive the three (3) year waiting period, it simply did not specify that would be one.
- MARAD policy on NVOCC Bs/L requires the NVOCC B/L to supported by the underlying ocean carrier B/L
- Ex-Im Bank initially would not accept NVOCC B/L but 3-4 years ago they have changed their policy and will now accept them. The NVOCC Bs/L must be signed and dated “On Board”.
PR-17 Were there other impacts concerning the US Flag Carrier eligibility and participation levels?
- The following transactions are not subject to the provisions of PR 17:
- Credit Guarantee Facilities, regardless of amount;
- Short-term insurance, regardless of amount;
- Medium-Term Insurance, regardless of amount or term;
- Guarantees of up to $20,000,000 (excluding Ex-Im Bank Exposure Fee) and the repayment period of seven (7) years or less; and
- Guarantees of up to $20,000,000 under the Environmental Exports Program, Transportation Security Export Program, or Medical Equipment Initiative, regardless of term.
PR –17 Are there any other limiting factors of US Flag Participation? US Citizenry vs Foreign Ownership?
Leaving aside the issues as to who can properly be called a U.S.-flag company, once a vessel is flagged U.S.-flag vessel the ownership structure does not affect the application of, or eligibility for, cargo preference programs.
Does the Cargo Preference Act of 1904 (04 Act) cover US Military cargo movements only?
Yes, the 04 Act covers military cargo movements and movements by DOD contractors and subcontractors. Specifically, 10 U.S.C. 2631 states that “Only vessels of the United States or belonging to the United States may be used in the transportation by sea of supplies bought for the Army, Navy, Army, Air Force or Marine Corps.”
What is the definition of US Military (DOD) cargo?
DOD Cargo is cargo destined to or from, or routed by, the DOD with the cargo intended for use, or had been used, by the DOD.
The Cargo Preference Act of 1904 (04 Act) and Defense Federal Acquisition Regulations Supplement (DFARS) defines DOD Cargo as “supplies”. “Supplies” means all property, except land and interests in land, that is clearly identifiable for eventual use by or owned by the DoD at the time of transportation by sea. “Supplies” includes (but is not limited to) public works; buildings and facilities; ships; floating equipment and vessels of every character, type, and description, with parts, subassemblies, accessories, and equipment; machine tools; material; equipment; stores of all kinds; end items; construction materials; and components of the foregoing. (DFARS 252.247-7023 Transportation of Supplies by Sea).
Does US Military (DOD) cargo include Military Household Goods (HHGs) and service members Privately Owned Vehicles (POVs)?
Yes, Military HHGs and POV’s move under laws similar to the 1904 Act. For example, House Hold Goods (HHG’s) are covered under 46 U.S.C. 55302 requiring all government personnel to ship personal effects aboard U.S.-flag ships when available. POV’s are covered under the similar 46 U.S.C. 55303
What percentage of US Military (DOD) cargo must be shipped on US Flag vessels?
Cargo Preference Act of 1904 cargo (military supplies) . . . 100%. This has also been extended to military HHGs and POVs, if U.S.-flag ships are available. The regulations implementing the 100% U.S.-flag requirements of the Cargo Preference Act of 1904 (10 U.S.C. 2631) can be found at DEFENSE FEDERAL ACQUISITION REGULATIONS SUPPLEMENT (DFARS) 247.5 (instructions for Contracting Officers) and at DFARS 252.247-7023 (instructions for contractors), which is made clause in every DOD contract in which transportation of supplies by sea may occur.
Can the U.S.-flag vessel requirement be waived?
Yes, however only the DOD contracting officer can waive the requirement for U.S.-flag vessels. The conditions under which a waiver can be granted are described in DFARS 252.247-7023. If you have questions on the waiver process, please contact the Maritime Administration at 202-366-4610, press 4 for the Department of Defense team.
Does it include FMF (for Foreign Military Financed by U.S) Cargo?
No. FMF cargo and Excess Defense Articles (EDA) provide to a foreign country comes under the 1954 ACT. Regs covering FMF as administered by the Defense Security Cooperation Agency are found under the SAMM. There is now FMF cargo moving outside of the DSCA program and this is generally referred to as “pseudo-FMF”.
It is reported that the 1954 ACT identifies US Flag Shipping requirements for other US Government owned or otherwise controlled Cargo shipments. Can you identify those agencies and the requirements?
46 CFR 381.2 details the application of the Cargo Preference Act of 1954 and offers a list of potential agencies that are subject to the ACT. The list is not complete and is, for example, missing DHS as a new agency. And it includes the U.S. Post Office which is no longer subject to the ACT. But otherwise the list is representative.
As a general rule, the 1954 ACT applies to all U.S. Government entities. The 1954 ACT in implemented through FAR and the cargo preference regulations. DOD is first subject to the Cargo Preference ACT of 1904 and the DEFENSE FEDERAL ACQUISITION REGULATIONS SUPPLEMENT (DFARS).
Requirements are essentially the same with two notable exceptions, both for reasons independent of the 54 ACT:
- Foreign Military Financed U.S. (FMF) – in addition to the 50% U.S.-flag required under the 54 ACT, there is an added 50% required under the Defense Security Cooperation Agency (DSCA) regulations as found in the Security Assistance Management Manual (SAMM)
- Ex-Im Bank – EXIM operates under Public Resolution 17 (PR-17) that calls for 100% of a portion of the Banks traffic whereas the ’54 Act calls for 50% of all traffic.
Based upon US Flag, US Built and US Flag, Foreign Built concepts are the eligibility standards the same?
46 USC 55305 specifies that vessels built or rebuilt outside of the U.S. , or vessels documented under the laws of a foreign country are not qualified vessels.
- U.S.-flag /U.S. build is eligible.
- Foreign flag/foreign build is not eligible.
- Foreign flag/foreign build reflagging under U.S. will be under the 3 year wait.
- Foreign flag/U.S. build reflagging under U.S. will also be under the 3 year wait.
Are there any differences relative to when a vessel becomes eligible after US Flagging?
Some agencies indicate that unless there is specific legislation to modify the eligibility, that US Flag, Foreign Built must always going thru a 3 year wait to be eligible to lift US Flag Preference cargo with three exceptions-MSA/MSP, specific legislative exceptions on a once off basis-ie the constructed Liberty Bulk Vessels whose eligibility rights were purchased from ISH, or PR17?
- Vessels under MSP are not bound by the 3 year rule.
- Vessel seized by the U.S. Government and then purchased for commercial service are also not bound by the 3 year rule.
What is the process to accomplish a General Waiver vs a Specific Voyage Waiver?
- General Waiver
- Under the PR-17 Program a General waiver can be requested by any of the specific credit stakeholders but must be under the acknowledged routing control of a U.S. located party.
- For General waivers we require that the recipient nation has not discriminated against any U.S.-flag carrier operation.
- General waivers are Ex-Im Bank credit specific and run the length of the credit.
- General waivers require 50% U.S.-flag and 50% recipient nation flag but U.S.-flag portion is to move first.
- Other Waivers
- All other PR–17 waivers are incident specific.
- We do not use the term “voyage waiver” since the incident specific waivers can and do sometimes span several voyages.
- Other waivers could cover more than one voyage
Are the US Flag Carrier participation levels the same for a “Loan, Grant or Guarantee”? (C Boggs clarifies “is there a difference in the flag requirement of a grant vs. a loan vs a guarantee”?
- Under an Ex-Im Bank direct loan U.S.-flag participation is 100% with no eligibility threshold.
- Under an Ex-Im Bank loan guarantee U.S.-flag participation is at 100% but only for loans that are in excess of $20 million or 7 years in length.
- There are no Grant programs under the Ex-Im Bank structure.
Would there be any negative impacts on the eligibility of US Flag vessel % of participation in the EXIM Program if PR 17 were to be permitted to expire?
- A number of studies have been done as to which program would yield better results but the results of the studies are inconclusive as accurate data on the full range of Ex-Im Bank potential is not available.
Under what authority is a compensatory waiver permitted?
- Waivers under the PR-17 program are issued under the MARAD statement of Policy
The MSA established a criteria and subsidy for eligibility and selection by the US Military to utilize(have access to privately owned) US Flag vessel asset and infrastructure. It established US citizenry and non-US Citizenry ownership processes.
Leaving aside the waiving of the 3 year wait for Foreign Built, US Flag Vessels eligibility were there other significant implications brought about by MSA?
(1) it established the MSA, Section 17, Great Lakes Program application to the Title II Cargoes;
(2) exempted MSP vessels from participation in PL480 Bulk Commodities Lift and
(3) capped the single voyage lift of PL480 Cargo at a level not to exceed 7500mt for MSP vessels.
Did MSA exempt all MSP vessels from the 3-year waiting period with all cargoes moving in conjunction with the 1954 ACT?
Does the “BY Country, By Program, By Vessel Type” criteria apply only to PL480 cargo shipments?
- 54 Act / non food aid – we monitor by Program by Country. We assume all cargo moving essentially by “dry cargo Liner” and o not monitor by vessel type.
SMALL VESSEL WAIVER PROGRAM
What is the Small Vessel Waiver Program –This program is essentially an administrative waiver of the U.S.-build requirement of the Jones Act.
Why do I need the waiver?
This waiver is required to obtain a coastwise endorsement from the U.S. Coast Guard. This endorsement is needed for foreign vessels or vessels of unknown build to operate in the U.S. as commercial passenger vessels.
How do I apply for the waiver?
Applicants should apply on-line at MarAd’s website:
What is the process?
There are eligibility requirements for a vessel to qualify for a waiver under this program:
- The vessel must be at least three years old
- The vessel, when in service, cannot carry more than 12 passengers
- The intended use must be to carry passengers only. Activities such as carriage of cargo, commercial fishing, towing, dredging, and salvage do not qualify for this program. Sport fishing is permitted as long as any fish caught are not sold commercially.
- The vessel must be owned by a U.S. citizen The application fee for the small vessel waiver is $500.00 and the waiver process takes approximately two-three months. I have a waiver for one vessel that I own and plan on purchasing another boat to operate in the same area. Do I need a waiver for the new boat? The waiver will transfer and stay with the boat. However, the terms of the waiver will limit the area of operation to that listed on the waiver. If you intend to operate in a state not listed on the waiver, you will need to obtain a waiver. I currently have a waiver for my boat that I operate in Florida. I want to be also able to operate commercially in Puerto Rico. Can you issue a new letter or do I need to submit an application? —
- You will need to submit a new application to include Puerto Rico or any other state not listed on the original waiver letter.
- I am thinking of purchasing a boat and the current owner tells me they have a small vessel waiver. Will I need to apply for a new waiver if I purchase this boat and rename it?
- Yes, a separate waiver is required for each boat
- Is there a cost and how long does the process take?
- Once the application is completed and the application fee is paid, MARAD will process and review the application. A notice will be published in the Federal Register for a period of 30 days to allow public comment. At the end of that period and assuming no comments are received, the waiver letter will be prepared. After review and signature, the effective date of the waiver is the 6th working day after date of signature. The original letter will be mailed to the applicant and a signed pdf copy will be e-mailed to the applicant. The applicant’s next step would be to contact the U.S. Coast Guard National Vessel Documentation Center to obtain a coastwise endorsement.