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(continued) -----------------------------------
Distribution of repairs Country cost
Principal competitor ----------------------------------- differential Weighted cost differentials
Country Percent percent ___ (1) x (2) (percent)
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(1)................. ........... (2) (3)
Liberia.......................... U.K................. 15 19 2.9
Japan............... 20 36 7.2
Singapore........... 65 57 37.1
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Subsidy rate................. .................... ........... ............ 47
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(c) Data submission requirement. The operator is required to submit a Subsidy Repair Summary (Form MA–140) quarterly, in accordance with 46 CFR part 272.
[51 FR 40426, Nov. 7, 1986, as amended at 54 FR 5086, Feb. 1, 1989; 58 FR 17349, Apr. 2, 1993; 61 FR 32706, June 25, 1996]
§ 252.33 Hull and machinery insurance.
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(a) Subsidy items. The fair and reasonable net premium costs (including stamp taxes) of hull and machinery, increased value, excess general average, salvage, and collision liability insurance against risks and liabilities covered under the terms and conditions of policies approved as to form and coverage by MARAD, less lay-up returns, shall be eligible for subsidy and used for determining the U.S.-foreign cost differential. Port risk premiums are eligible for subsidy but not for determining the U.S.-foreign cost differential.
(b) U.S.-foreign cost differential. A U.S.-foreign cost differential shall be calculated for the service. Due to the difficulty of comparing forms and costs of hull and machinery insurance coverages, the following assumptions shall be used for estimating the composite premium cost of the foreign-flag competitor.
(1) Coverage. The foreign competitive vessels have the same types and amounts of insurance coverages and deductible averages as the subsidized vessels.
(2) Premium rate. The foreign competitive vessels are insured in the British market and the rate for such vessels is the same as the British market rate for the subsidized vessels. If the operator carries all of its insurance in the American market, the American market rate shall be assumed to be the same as the British market rate.
(3) Repairs. Insurable repairs of the foreign competitive vessels are performed in the same countries and in the same distribution as non-insurable repairs, and the cost differential for such repairs shall be the same as the maintenance and repair percentage differential.
(4) Particular average. The percentage of particular average repair claims for the foreign competitive vessels is the same as the percentage of particular average repair claims for the subsidized vessels. The particular average portion of the premium cost for the subsidized vessels shall be determined as follows:
(i) Percentage. The particular average portion of the premium cost shall be determined by applying a percentage to the hull and machinery premium cost after deducting the estimated total loss premium. The percentage is based on insured claims experience. The percentage shall be determined by dividing the total of underwriter's absorptions for particular average domestic repair claims paid and estimated by the total of underwriter's absorptions for all claims paid and estimated (excluding total loss and constructive total loss claims) under the hull and machinery portion of the insurance coverage, except that such percentage shall not exceed eighty-five (85) percent. The percentage is based on the claims experience of the subsidized vessels for the five (5) calendar year period preceding the subsidized year. For subsidized operators that do not have five years of claims experience, the average percentage of particular average domestic repair claims for all similar subsidized vessels shall be used unless the operator can submit data to substantiate its own claims cost experience on similar vessels.
(ii) Data submission requirement. The operator shall submit the five year claims experience, invoices showing net premium costs and coverages for the subsidized year, and lay-up returns for the previous year to the Director, Office of Ship Operating Costs, not later than sixty (60) days after the close of each calendar year.
(c) Calculation. In calculating the subsidized premium cost, the following steps shall be taken:
(1) The particular average portion of the premium cost shall be adjusted in order to give effect to the repair cost differential for the foreign competitive vessels by applying the complement of the maintenance and repairs percentage cost differential (100 percent minus the differential) to the particular average portion of the premium cost. The adjusted particular average foreign premium cost shall be added to the net premium cost excluding the particular average portion to determine the composite foreign premium cost.
(2) The foreign premium cost shall be subtracted from the operator's total premium cost to determine the difference in dollars. The percentage differential is determined by dividing the dollar difference by the operator's total premium cost. An example calculation is included in Table 2.
(3) The net premium cost of the subsidized vessels shall be divided by the number of days in the calendar year and the resultant daily insurance cost shall be multiplied by the U.S.-foreign cost differential percentage applicable to the most recent year to determine the daily amount of subsidy for hull and machinery insurance.
Table 2_ABC Bulk Company, Inc., U.S./Foreign Cost Differential for Hull
and Machinery Insurance_1985
-------------------------------------------------------------
1. Foreign
Premium Cost:
A. Hull and $92,741,996....................
Machinery,
Total
coverage....
Average 1.00966%.......................
Premium
Rate in
British
Market....
Premium ............................... $936,379
Cost in
British
Market..
(Estimated 431,250).......................
Total Loss
Premium
$92,741,96
6@ .46500%
\1\.......
B. Increased 1,083,325......................
Value, Total
Coverage....
Average .32550%........................
Premium
Rate in
British
Market....
Premium ............................... 3,526
Cost in
British
Market..
C. Excess ............................... None
Liability,
Total
Coverage....
--------------
D. Total ............................... 939,905
Premium Cost
if Insured
100% in
British
Market......
E. Deduct ............................... 313,180
Particular
Average
Portion:
$936,379
Less
$431,250=
$505,129 x
62% \2\.....
F. Net ............................... 626,725
Premium Cost
Exclusive of
Particular
Average.....
==============
G. Particular Worldwide service
Average
Adjustment..
P/A Portion $313,180.......................
of Premium
Cost......
M&R 84.48%.........................
Subsidy
Rate
Complement
\3\.......
---------------------------------
Adjusted P/ 264,574........................
A Foreign
Premium
Cost......
Add: Net 626,725........................
Premium
Cost
(Excluding
P/A)......
---------------------------------
2. Foreign 891,299........................
Premium Cost
3. Total 1,068,998......................
Premium Cost
to Subsidized
Operators
---------------------------------
4. Differential 177,699........................
in Dollars \4\
=================================
5. U.S.-Foreign 16.62%.........................
Cost
Differential
\5\
------------------------------------------------------------------------
\1\ Estimated gross total loss rate adjusted for broker's discounts,
policy tax and other costs, as necessary.
\2\ Percentage of particular average.
\3\ 100% minus M&R subsidy rate of the same calendar year.
\4\ Line 3 less line 2.
\5\ Line 4 divided by line 3.
§ 252.34 Protection and indemnity insurance.
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(a) Subsidy items. Items eligible for determination of subsidizable costs and the U.S.-foreign cost differential are:
(1) Premiums. The fair and reasonable net premium costs (including stamp taxes) of protection and indemnity, excess insurance, second seamen's insurance, “tovalop” or other forms of pollution insurance, bumbershoot (only that portion identified as applicable to P&I insurance), cargo liability if excluded from the primary policy, supplemental calls against liabilities covered under the terms and conditions of policies approved as to form and coverage by MARAD, less lay-up return premiums, shall be eligible for subsidy and used for determining the U.S.-foreign cost differential.
(2) Deductibles. The fair and reasonable cost of crew claims paid by and pending with the operator under the deductible provision of the protection and indemnity insurance policy approved as to form and coverage by MARAD, to the extent that such cost would have been paid by the insurance underwriter under the terms of the policy, except for the fact that it did not exceed the deductible provision of the policy, shall be eligible for subsidy. For subsidy purposes, the deductible absorption shall not exceed $50,000 for each accident or occurrence, provided however, that benefits paid on unearned wages, if excluded from coverage under the protection and indemnity insurance policy, shall be eligible, notwithstanding that the deductible provisions of the policy may be exceeded.
(b) Assumptions made in calculation. For purposes of determining subsidy for protection and indemnity insurance, it shall be assumed that the cost differential between the subsidized vessels and the foreign competitive vessels is limited to those portions of premium costs and deductible absorptions which are related to crew liability and that the cost of all other liabilities is the same for both the subsidized vessels and the foreign competitive vessels.
(c) Calculation. The following is the method of calculating the U.S.-foreign cost differential for premiums:
(1) General. A differential shall be calculated for the service of the vessels. Since the premium cost for all other liabilities is assumed to be the same for both the U.S. and foreign competitive vessels, the calculation of the differential for protection and indemnity insurance premiums is in effect based on the difference between U.S. and foreign premium costs for crew liabilities. Premium costs are determined in costs per gross registered ton (GRT).
(2) Reporting requirement. The operator shall submit the total premium cost for the subsidized year, plus any supplemental calls and lay-up return premiums not previously reported, to the Director, Office of Ship Operating Costs, not later than 60 days after the beginning of such year. The data shall be supported by invoices from the insurance underwriter.
(3) U.S. crew liability cost. the crew liability portion of the total premium cost shall be determined by applying a percentage to the total premium cost based on five (5) years of claims experience for the five years commencing six years prior to January 1 of the subsidized year. The percentage shall be determined by dividing the total of underwriter's absorptions for crew claims, paid and estimated, by the total of underwriter's absorptions for all claims, paid and estimated. The crew claims portion shall be limited to eighty-five (85) percent unless the operator can substantiate a higher percentage as a result of having crew liability and all other liabilities insured with different underwriters. The operator shall submit the five-year claims experience not later than 60 days following the close of each calendar year.
(4) All other liabilities cost—U.S. and foreign. The all other liabilities portion of the U.S. premium cost shall be determined by subtracting the crew liability portion from the total premium cost. The same cost shall be used for the all other liabilities portion of the foreign-flag competitor's premium cost.
(5) Foreign crew liability cost. The crew liability cost of each principal foreign-flag competitor shall be used, if reliable cost data can be obtained. If such data cannot be obtained for a principal competitor, and it is determined that such competitor has a non-national crew, the crew liability cost for similar vessels registered under the flag of the crew's nationality may be used, at the Board's discretion, provided reliable cost data are obtained. If no reliable cost data are obtained for a competitor, the crew liability cost for that competitor shall be estimated by multiplying the subsidized operator's crew liability portion of the total premium cost by the ratio of that competitor's wage costs (FC) to the subsidized operator's wage costs (WC), as determined in the calculation of the wage differential.
(6) U.S.-Foreign cost differential. The U.S.-foreign cost differential shall be the excess of the operator's total premium cost over the principal foreign-flag competitor's estimated total premium cost, expressed as a percentage, calculated in the following manner.
ABC Bulk Company, Inc., Protection and Indemnity Insurance Premiums,
1985
------------------------------------------------------------------------
United
Premium cost (per GRT) States Liberia
------------------------------------------------------------------------
Crew liability................................ \1\ $3.98 \2\ $1.27
All other liability........................... $1.06 $1.06
-------------------------
Total cost................................ $5.04 $2.33
Differential_Excess of U.S. cost over foreign ........... $2.71
cost.........................................
U.S.-foreign cost differential (pct).......... ........... 53.77
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\1\ Determined by applying 79.03% (based on 5-year claims experience) to
total GRT premium rate of $5.04.
\2\ Crew Liability data obtained by Maritime Administration.
Note: The unweighted percentage of foreign to U.S. wage costs would be
used to estimate the foreign cost if the foreign crew liability data
were not available.
(d) Daily subsidy rate. The daily subsidy rate shall be calculated in the following manner:
(1) Premiums. The net premium costs per calendar day for the subsidized year shall be multiplied by the U.S.-foreign cost differential percentage determined for the most recent year. The product shall be the daily amount of subsidy for P&I premiums.
(2) Deductibles. (i) The eligible illness and injury crew claims paid and pending for each calendar year of a three-year period commencing six years prior to January 1 of the subsidized year, shall be recalculated, if necessary, to reflect the operator's current deductible levels. These expenses, after audit, shall be multiplied by the percentage wage differential, and determined in the calculation of wage subsidy for the appropriate fiscal period. The resulting calendar period P&I deductible subsidy for the three-year period shall be divided by the voyage days for the period to arrive at an aggregate daily P&I deductible subsidy. The aggregate fiscal period wage subsidy accrued for the three-year period shall be divided by the voyage days for the period to arrive at an aggregate daily wage subsidy amount. The aggregate daily P&I deductible subsidy for the three-year calendar period shall be divided by the aggregate daily wage subsidy for the three-year period. The P&I deductible differential shall be divided by the fiscal period wage differential in the service for the three-year period, and the resulting percentage shall be applied to the wage per diem calculated for each ship type in the service to derive the daily amount of subsidy for P&I deductibles. As to pending claims previously recognized in the historical period, only the amount of changes in cost with respect to such claims shall be subsequently recognized. The following methodology shall determine subsidy for P&I deductibles.
Determination of Daily Amount of Subsidy for P&I Deductibles
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Calendar Calendar Calendar
Item year 1979 year 1980 year 1981 Total
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P&I deductible C.Y. expenses............................... $1,680,000 $1,220,000 $1,400,000
Diff. foreign/U.S. wage cost (pct)............................. 26.00 23.00 20.00
Subsidy........................................................ $436,800 $280,600 $280,000 $997,400
Voyage days.................................................... 1,140 1,100 1,225 3,465
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Average subsidy per voyage day ($997,400÷3,465 days)=$287.85.
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Fiscal Fiscal Fiscal
year 1979 year 1980 year 1981 Total
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Wages fiscal year per diem rate................................ $7,660 $7,700 $8,050
Voyage days.................................................... 1,090 1,180 1,230 3,500
Subsidy........................................................ $8,349,400 $9,086,000 $9,901,500 $27,336,900
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Average subsidy per voyage day ($27,336,900÷3,500 days)=$7,810.54.
Ratio P&I deductible ODS to wage ODS $287.85÷$7,810.54=3.69%.
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Ratio
Daily P&I Daily
wage ded. to P&I
T.R. 98 ship type ODS 1/1/ wage ded. ODS 1/
85 ODS 1/85
(pct)
------------------------------------------------------------------------
C4-A..................................... $9,000 x3.69 $332.10
C5-B..................................... 9,300 x3.69 343.17
C6-C..................................... 9,600 x3.69 354.34
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(ii) In cases where national insurance schemes cover crew claims costs in their entirety, resulting in no cost to the foreign competitor for deductible absorptions, the composite percentage differential for wages shall be adjusted by substituting a zero cost for such foreign competitor in the calculation of the differential. The adjustment of the wage percentage differential shall not be used for Japan, where operators incur minimal costs for deductible absorptions, rather than no costs. For Japan, the insurance related costs which are normally included in the calculation of Japanese wage costs shall be excluded in adjusting the wage percentage differential for this purpose.
(3) Data submission requirement. The operator is required to submit annually a certified statement of eligible and audited crew claims as identified in paragraph (d)(2) of this section for the historical period identified therein. The report shall be submitted to the Director, Office of Ship Operating Costs, no later than January 1 of the subsidized year.
Subpart E—Subsidy Payment and Billing Procedures
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Source: 51 FR 40432, Nov. 7, 1986, unless otherwise noted.
§ 252.40 Payment of subsidy.
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(a) Submission of voucher. At the close of each calendar month, the subsidized operator may submit a voucher, and include for payment in such voucher the amount of ODS accrued for the voyages terminated during the period.
(b) Maintenance and repair subsidy. In the case of payments for maintenance and repair subsidy only, the subsidized operator shall submit an initial voucher and include for payment in such voucher a percentage of the ODS payable for the period covered by the voucher, which percentage shall be negotiated between MARAD and the subsidized operator, but in no instance shall exceed 90 percent. Upon the completion of MARAD's determinations that the expenses are fair and reasonable, MARAD's computation of the ratio of subsidized vs. nonsubsidized days during the calendar year in which the last voyage terminated, and the Office of the Inspector General's audit of subsidizable expenses, the subsidized operator shall submit a final voucher for an adjustment of the amount of subsidy paid.
[51 FR 40432, Nov. 7, 1986, as amended at 58 FR 17349, Apr. 2, 1993]
§ 252.41 Subsidy billing procedures.
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(a) Subsidy voucher—(1) Form. Requests for payment of ODS shall be submitted on a public voucher, Standard Forms 1034 and 1034A, which can be obtained from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC. 20402.
(2) Copies. The operator shall submit the original and 3 copies of the voucher to the MARAD Region Director for payment. The original and 2 copies must be supported by schedules and an affidavit. The third copy is the payee's copy and need not be supported.
(b) Schedules and affidavit. (1) The following schedules shall be used for calculating the amount of ODS payable:
Schedule A
(Company)____________________
ODSA No.____________________
ODS Accrued During Fiscal Year 19__
ODS Payable for the Month of ___________
------------------------------------------------------------------------
Current Previous
voucher voucher Total
------------------------------------------------------------------------
Total accrued ODS (sched. B)........... $___
Les ODS reductions: reduced crew ___
(sched. C)............................
Net ODS accrued........................ ___ $___ $___
--------------------------------
Less previous payments................. ......... ......... ___
ODS payable............................ ......... ......... ___
------------------------------------------------------------------------
Schedule B
(Company)____________________
ODS Accrued for the Month of ___
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Voyage dates
Vessel name Voy. ---------------- Voy. Per diem Accrued
No. From To days rates subsidy
----------------------------------------------------------------------------------------------------------------
..... ...... ...... ...... $___ $___
ODS payable for unpredictably timed expenses not included in ..... ...... ...... ...... ........ $___
daily amount (attach supporting supporting information).....
Total accured subsidy (enter on Schedule A).................. ..... ...... ...... ...... ........ $___
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Schedule C
(Company)____________________
Reduced Crew Periods
----------------------------------------------------------------------------------------------------------------
Reduced crew No. of
dates reduced No. of Man- Man-day Reduced
Vessel ---------------- crew crew days amount crew
From To days (a) reduced reduction
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...... ...... ........ x ........ = ...... x $___ = $___
...... ...... ........ x ........ = ...... x ___ = ___
...... ...... ........ x ........ = ...... x ___ = ___
...... ...... ........ x ........ = ...... x ___ = ___
----------
Total reduced crew ...... ...... ........ .. ........ .. ...... .. ___
reduction (enter on
Schedule A)...............
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(a) If licensed crew, indicate (a).
(b) If unlicensed crew, indicate (b).
(2) A notorized affidavit as shown below shall be signed by an official of the subsidized operator who is familiar with the ODSA, these regulations, the operation of the subsidized vessel, and the accounts, books, records, and disbursements of the subsidized operator relating to such operation:
Affidavit
State of____________________
City of____________________
County/Parish of____________________
I, ___, being duly sworn, depose and say that I am ___ (title) of the ___ (herein referred to as the “Operator”), and as such am familiar with (a) provisions of the Operating-Differential Subsidy Agreement, Contract No. ___, dated as of ___, as amended, to which the Operator is a party; and (b) the regulations governing the payment of operating-differential subsidy for bulk cargo vessels, PART 252, Title 46, CFR: and (c) the operation of the vessels covered by said Agreement and regulations; and (d) the accounts, books, records, and disbursements of the Operator relating to such operation.
Referring to the public voucher dated ___, covering voyage days allowed for subsidy during the periods commencing ___, and ending ___, and attached, submitted by said Operator concurrent herewith for a payment on account in the sum of ___, under said Agreement, I further depose and say that, to the best of my knowledge and belief, the Operator has fully complied with the terms and conditions of said Agreement and regulations, applicable orders, rulings and provisions of the Merchant Marine Act, 1936, as amended, and is entitled, under the provisions of said Agreement and regulations, orders and rulings applicable thereto, to the amount of the payment on account requested; and further depose and say that the vessels named in the attached schedules were in authorized service for the vessel operating days on which the payment is requested and has not included in the calculation of the amount of subsidy claimed in the attached voucher any costs of a character that the Maritime Administration, or Secretary of Transportation acting by and through the Maritime Subsidy Board or any predecessor or successor, had advised the Operator to be ineligible to be so included, or any costs collectible from insurance, or from any other source.
Payment by the Maritime Administration of all or part of the amount claimed herein shall not be construed as approval of the correctness of the amount stated to have been due, nor a waiver of any right of remedy the Maritime Administration, or Secretary of Transportation, acting by and through the Maritime Subsidy Board, or any predecessor or successor, may have under the terms of said Agreement, or otherwise.
I further depose and say that this affidavit is made for and on behalf and at the direction of the Operator for the purpose of inducing the Maritime Administration to make a payment pursuant to the provisions of the aforesaid Operating-Differential Subsidy Agreement, as amended.
____________________
Subscribed and sworn to before me, a Notary Public, in and for the aforesaid County and State, this ___ day of ___,
My commission expires____________________
Notary Public____________________
(3) The subsidized operator shall furnish its own supply of supporting schedules and affidavit.
§ 252.42 Appeals procedures.
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(a) Appeals of annual or special audits. An operator who disagrees with the findings, interpretations or decisions in connection with audit reports of the Office of the Inspector General and who cannot settle said differences by negotiation with the Contracting Officer may submit an appeal to the Maritime Administrator from such findings, interpretations or decisions in accordance with Part 205 of this chapter.
(b) Appeals of administrative determinations—(1) Policy. An operator who disagrees with the findings, interpretations or decisions of the Contracting Officer with respect to the administration of this part may submit an appeal from such findings, interpretations or decisions as follows:
(i) Appeals shall be made in writing to the Secretary, Maritime Subsidy Board, Maritime Administration, within 60 days following the date of the document notifying the operator of the administration determination of the Contracting Officer. In his appeal to the Secretary the operator shall indicate whether or not he desires a hearing.
(ii) The appellant will be notified in writing if a hearing is to be held and whether he is required to submit additional facts for consideration in connection with the appeal.
(iii) When a decision has been rendered by the Board, the appellant will be notified in writing.
(2) Appeal to the Secretary of Transportation. An operator who disagrees with the Board may appeal such findings and determinations by filing a written petition for review of the Board's action with the Secretary of Transportation. The petition shall be filed in accordance with provisions of the Department of Transportation pertaining to Secretarial review.
(3) Hearings, The Rules of Practice and Procedures, 46 CFR part 201, subpart M, shall be followed for all hearings granted under 46 U.S.C. 1176 and 46 CFR 252.42.