MarAd, Coast Guard eye lease financing for coastwise vessels

MarAd, Coast Guard eye lease financing for coastwise vessels    In a joint rulemaking, the U.S. Maritime Administration and Coast Guard have proposed to amend the lease-financing provisions for vessel operators engaged in the coastwise trades.
   MarAd’s proposed regulatory amendment would require the agency’s approval of all transfers of the use of a leased-financed vessel engaged in the coastwise trade back to the vessel’s foreign owner, the parent of the owner, a subsidiary or affiliate of the parent, or an officer, director, or shareholder of one of them.
   In 1992, MarAd changed its rules to allow general approval for time charters of U.S.-flag vessels to charterers that were not U.S. citizens, and to eliminate MarAd’s review of these time charters. However, MarAd is concerned the lease-financing provisions could allow “a non-citizen to exert additional control over a vessel operated in the coastwise trade by becoming the owner of the vessel and time chartering the vessel back to itself or to a related entity through an intermediate U.S. citizen bareboat charterer.”
   MarAd said its review of charter arrangements under limited circumstances where the time charterer is related to the non-citizen vessel owner will “ensure that U.S. citizens maintain control over vessels operating in the coastwise trade.”
   In the same proposed rulemaking, the Coast Guard will amend its regulations on documentation under the lease-financing provisions for vessels operating in the coastwise trades.
   One of the Coast Guard’s proposals considers whether the agency should “prohibit or restrict the chartering back (whether by time charter, voyage charter, space charter, contract of affreightment, or other contract for the use of a vessel) of a leased-finance vessel to the parent of the vessel owner or to a subsidiary or affiliate of the parent.”
   A second Coast Guard proposal would create a limit on the time that a coastwise endorsement issued before Feb. 4, would run.
   Lease financing is commonly used in the maritime industry to finance capital assets. Many vessel operators choose to acquire or build ships through lease financing, instead of through the traditional mortgage financing, because of possible cost benefits.
   Both MarAd and the Coast Guard will accept comments for their proposed rulemaking through May 4. For more information, access online: https://a257.g.akamaitech.net/7/257/2422/14mar20010800/edocket.access.gpo.gov /2004/04-2231.htm.