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Proposed Rule

Vessel Documentation: “Sold Foreign”

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Coast Guard, DOT.


Request for comments.


The Coast Guard seeks comments from the public on its interpretation of the term “sold foreign”. Its current interpretation may disqualify from eligibility for coastwise trade certain vessels whose ownership has become “foreign” in technical ways. Some affected parties feel that this interpretation imposes a harsh penalty for slight, often unintended foreign involvement while others feel that it just preserves the privilege of coastwise trade for the domestic fleet.


Comments and related material must reach the Docket Management Facility on or before December 11, 2001.


To make sure your comments and related material do not enter the docket (USCG 2001-10048) more than once, please refer them to the docket and submit them by only one of the following means:

(1) By mail to the Docket Management Facility, U.S. Department of Transportation, room PL-401, 400 Seventh Street SW., Washington, DC 20590-0001.

(2) By hand delivery to room PL-401 on the Plaza level of the Nassif Building, 400 Seventh Street SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The telephone number is 202-366-9329.

(3) By fax to the Facility at 202-493-2251.

(4) Electronically through the Web Site for the Docket Management System at

The Docket Management Facility maintains the public docket for this notice. Comments and material received from the public, as well as documents mentioned in this preamble as being available in the docket, will become part of this docket and will be available for inspection or copying at room PL-401 on the Plaza level of the Nassif Building at the same address, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. You may also find this docket on the Internet at

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For questions on this Request for Comments, call LCDR Don Darcy, Project Manager, Office of Standards Evaluation and Development Division, Coast Guard Headquarters, 202-267-1200. For questions on viewing or submitting material to the docket, call Dorothy Beard, Chief, Dockets, Department of Transportation, 202-366-5149.

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Request for Comments

We encourage you to submit comments and related material. If you do so, please include your name and address, identify the docket number of this Request for Comments (USCG 2001-10048), indicate the specific question(s) listed under Questions of this document to which each comment applies, and give the reason for each comment. You may submit your comments and material by mail, hand delivery, fax, or electronic means to the Docket Management Facility at the address under ADDRESSES; but please submit them by only one means. If you submit them by mail or delivery, submit them in an unbound format, no larger than 81/2 by 11 inches, suitable for copying and electronic filing. If you submit them by mail and would like to know they reached the Facility, please enclose a stamped, self-addressed postcard or envelope. Your comments and materials may influence the interpretation that we propose. We will consider all of them received during the comment period.

The Coast Guard may hold a public meeting. Whether it does will depend on the response to this notice. You may seek a meeting by submitting a request to the address under ADDRESSES. The request should include the reasons why a meeting would be beneficial. If the Coast Guard determines that it should hold a public meeting, it will hold one at a time and place announced by a later notice in the Federal Register.

Background and Purpose

The first proviso of section 27 of the Merchant Marine Act, 1920 (46 App. U.S.C. 883), as amended, provides, among other things, that a vessel of more than 200 gross tons as measured under chapter 143 of Title 46, United States Code (46 U.S.C. 14301 et seq.), and otherwise qualified for coastwise trade, may not be documented for coastwise trade if it has been “* * * sold foreign in whole or in part * * *”. The Coast Guard has interpreted the term “sold foreign” to mean that the vessel has transferred from one business entity, to a newly restructured business entity, to (1) an owner who is no longer a U.S. citizen or (2) an owner who is no longer eligible to document a vessel under the laws of the U.S. If the owner is a business entity, it must meet the requirements for documentation under § 12102 of Title 46 U.S.C., and for a coastwise-trade endorsement under § 12106. (There are limited exceptions under the Oil Pollution Act of 1990 (33 U.S.C. 1321) and under the Act of September 2, 1958 (46 App. U.S.C. 883-1).) The Coast Guard has held that, once a business entity no longer meets these statutory requirements, its vessels have “sold foreign.” In the case of a corporation, any vessel transferred to a business entity that does not meet the quorum requirements for a board of directors or that has a noncitizen chairman of the board is permanently barred from coastwise trade. The Coast Guard has held that no business entity can reverse or cure the loss of the privilege of coastwise trade by reorganizing so as to satisfy 46 U.S.C. 12102. The only way a vessel which has run afoul of the strictures of the first proviso has regained the privilege has been through enactment of special legislation.


We especially need the public's assistance in answering the following questions, and welcome any added information on this topic. In responding to each question, please explain your reasons for each answer as specifically as possible so that we can carefully weigh the consequences and impacts of any actions we may take.

At this time the Coast Guard is reconsidering its interpretation of the effect of the first proviso. For it to do so, it invites comments on the following questions:

1. Should the Coast Guard issue a formal letter-ruling addressing the proposed reorganization of a business entity before the entity undertakes the reorganization?

2.a. If a qualified owner sells a vessel to an owner unqualified because foreign, should the unqualified owner be able to cure the defect through its own reorganization?

b. Should the Coast Guard count as accomplishing a “sale” the Start Printed Page 47432reorganization of an owner that, until the reorganization, qualified to document vessels in accordance with 46 U.S.C. 12102? If so, should the owner be able to cure the defect through a second reorganization?

c. If a business entity can reorganize to satisfy 46 U.S.C. 12102, so as to avoid a permanent loss of the privilege of coastwise trade, should a vessel sold to a natural person other than a citizen be able to regain the privilege upon the naturalization of that person?

3. Should there be a time by which the reorganization posited in paragraph 2.a, the second reorganization posited in paragraph 2.b, or the naturalization posited in paragraph 2.c must either start or finish?

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Dated: June 27, 2001.

Joseph J. Angelo,

Acting Assistant Commandant for Marine, Safety and Environmental Protection.

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[FR Doc. 01-22815 Filed 9-11-01; 8:45 am]