ant or a firm of independent certified public accountants under the conditions prescribed in this paragraph, the Maritime Administration will take into consideration the scope of the audit conducted by such independent certified public accountants of the Charterer's accounts.

(c) (1) In arriving at the amount of net voyage profit for the purpose of calculating statutory additional charter hire under a bareboat charter agreement with the Administration there shall not be taken into account any item of expense, as a deduction from gross income, in any case where such item of expense represents a payment or expenditure or transfer of anything of value, directly or indirectly, to or on behalf of any person or organization or association, in a transaction occurring within the United States, its territories or possessions.

(i) To induce unethically any person, organization or association, to take or refrain from taking any action calculated to affect the relations between the Charterer and its employees, or to influence unethically the manner of performance of his or its employment or calling; or

(1) Ostensibly as compensation for, but actually for a consideration other than, personal services rendered as an employee.

(2) Accordingly, an affidavit in the form following shall be submitted with each accounting rendered by a Charterer:

that it is his duty to have supervision over the hooks of account of the said Company and to control, in accordance with applicable regulations of the Maritime Administration, the manner in which such books are kept and the said Company's accountings to the Maritime Administration under any bareboat charter party agreement are prepared, and that in the preparation of the accounting rendered by the said Company for the period ended 19, there has not been taken into account. to the best of his knowledge and belief, and so far as appears from diligent efforts he has made to ascertain the facts, any item of expense as a deduction from gross income in arriving at the amount of net voyage profits for the purpose of calculating statutory additional charter hire

under the provisions of such bareboat charter party agreement in any case where such item of expense represents a payment or expenditure or transfer of anything of value, directly or indirectly, to or on behalf of any person or any organization or association, in a transaction occurring within the United States, its territories or possessions.

(1) to induce unethically any person, organization or association, to take or refrain from taking any action calculated to affect the relations between the Charterer and its employees, or to influence unethically the manner of performance of his or its employment or calling; or

(11) ostensibly as compensation for, but actually for a consideration other than, personal services rendered as an employee.

The terms "employee" and employees", as used herein, include in the case of a bareboat charterer, employees of the Charterer and of any interested person or related company as defined in the bareboat charter.

(b) The receipt and consideration of such accountings by the Owner shall be subject to the following reservations:

(1) That all working papers (irrespective of by whom prepared) in support of the various statements comprising such accountings, shall be available for examination by the Owners auditors upon request and that the Owner's auditors shall be permitted to make copies of such papers to the extent they deem necessary; and

(2) That the Owner reserves the right to conduct such audits, examinations, or checks of the Charterer's accounts as it may deem necessary before approving final settlement of statutory additional charter hire for any period under the bareboat charter agreements; and

(3) That the examples to be supplied by the said Office of the Comptroller of the statements required by the Administration are for illustrative purposes only

and are based on hypothetical figures; that no implications should be drawn from the relative magnitude of the figures used in these examples; and that if, in any instance, an example should conflict with the text of this procedure, the latter should govern; and

(4) That, provided whenever the accounting period is less than a full calendar year (that is, either at the commencement or at the termination of a charter period), the Charterer may, at the discretion of the Owner, for the pur-” pose of preparing the income sheet required hereunder, in the calculation of "Net Voyage Profit" pursuant to § 299.204, submit such income sheet on the basis of the Charterer's normal annual accounting period, adjusted, pursuant to sound accounting practices and standards, to reflect the results of less than a full calendar year, all as in the judgment of the Administration produces fair and reasonable results. All requests to employ such adjusted income sheets shall be made in writing direct to the local District Comptroller; and

(5) That, provided whenever "capital necessarily employed" (determined on the basis of net worth as prescribed in $299.203 (b) and (c)) exceeds the "limitation of capital necessarily employed" (determined on the basis prescribed in § 299.203 (d)), such excess shall be regarded as being composed of the various assets and liabilities comprising "capital necessarily employed" (determined on the basis of net worth as prescribed in § 299.203 (b) and (c)), in the relation, percentagewise, that such excess bears to "capital necessarily employed" (determined on the basis of net worth as prescribed in § 299.203 (b) and (c)), without regard to Clause H of Part I of the Agreement; and, further, as items of income and expense are required by this Order to be allocated on the same basis as are the corresponding assets and liabilities involved, likewise the proportion of such income and expense corresponding percentagewise to the proportion of assets and liabilities included in the excess of "capital necessarily employed" over the "limitation" should be allocated to "Other Operations"; and

(6) That the establishment of the rules and regulations prescribed in this procedure is without prejudice to the right of the Administration to determine upon the employment of other bases for allocation and calculation in any instance where, upon the completion of any an

nual or final accounting, the results produced by the application of the rules and regulations prescribed herein do not, in the judgment of the Administration, produce fair and reasonable results; and

(7) That if, in any instance, the rules and regulations prescribed in this subpart should conflict with the provisions of an applicable statute or agreement, such provisions shall govern and entitle the Government to its full statutory rights;

and

(8) That requests for interpretive rulings concerning the application of this subpart shall be presented in writing. All such requests shall be made direct to the local District Comptroller with a copy to the Comptroller, Maritime Administration, Washington 25, D.C.; and

(9) That if, in any instance, the rules and regulations prescribed in this subpart should conflict with any other General Order issued by the Administration, the question as to which shall take precedence should be referred to the Administration for decision; and

(10) That nothing contained in this subpart shall be construed as a waiver of any right reserved to the Administration by statute or under SHIPSALESDEMISE 303; and

(11) Upon written application of the Charterer to the local District Comptroller (with a copy to the Comptroller, Maritime Administration, Washington 25, D.C.), the Administration may extend for such further period as in its judgment is warranted by the circumstances, in any instance, the time limit prescribed in this subpart for the submission of accountings.

Subpart -Assumption of Mortgage by New Mortgagor

§ 299.301 Application to transfer a vessel, subject to mortgage.

(a) Application for permission to transfer title to a vessel, subject to a mortgage in favor of the United States of America, and to have the mortgage assumed by a new mortgagor, may be made by the mortgagor joined by the proposed transferee, to the Secretary, Maritime Administrator, Washington 25, D.C.

(b) Fee: Such application shall be accompanied by the sum of $400, which sum will be retained to recover the cost of processing the application. [Amdt. 1, 27 FR. 1169, Feb. 8, 1962]

Sec.

308.522 Collateral deposit fund, letter of

transmittal, Form MA-802.

308.523 Application for revision of open cargo policy, Form MA-303. 308.524 Application for cancellation of open cargo policy, Form MA-804. 308.525 Application for decrease in amount of cash collateral fund, Form MA-305.

308.526 Certificate for repayment of decrease of collateral deposit fund, Form MA-306.

308.527 Application for return premium, Form MA-307.

S08.528 Surety bond A, Form MA-308. 308.529 Surety bond B, Form MA-309. 308.530 Letter requesting increase or decrease in amount of surety bond, Form MA-310.

308.531 Endorsement of surety bond increasing or decreasing amount of coverage, Form MA-311. 308.532 Release of surety bond, Form MA-312.

308.533 Closing report, Form MA-313. 308.534

Certificate to be attached to closing report, Form MA-313-A. 808.535 Certificate to be attached to final closing report, Form MA-318-B. 308.536 Declaration where failure to comply with Clause 21 was inadvertent, Form MA-314.

308.537 Effective date of endorsement. III-FACULTATIVE WAR RISK CARGO INSURANCE

808.548 Standard form of underwriting agency agreement for cargo; Form MA-318.

308.549 Application for appointment of cargo Underwriting Agent, Form MA-319.

308.550 308.551 War Risk insurance clearing agency agreement for cargo.

Certificate, Form MA-320.

308.552 Effective date.

AUTHORITY: The provision of this Part 308 issued under sec. 204, 49 Stat. 1987, as amended, secs. 1202 and 1209, 64 Stat. 773 and 775; 46 U.S.C. 1114, 1282 and 1289.

SOURCE: The provisions of this Part 808 contained in G.O. 75, 2d Rev., 26 F.R. 4541, May 26, 1961, unless otherwise noted.

Subpart A-General

§ 308.1 Eligibility of a vessel and its owner for insurance.

Interim insurance is available on any vessel specified in this subpart provided applications for interim insurance are submitted as required in Subparts B, C, and D of this part; and such vessel shall be eligible for insurance, unless the Maritime Administrator determines otherwise, within one of the following categories:

(a) A vessel registered, enrolled or licensed under the laws of the United States; any tug or barge or other watercraft (documented under the laws of the United States, or undocumented) owned by a citizen of the United States, used in essential water transportation within the territorial waters of the United States; and United States citizen-owned watercraft in the fishing trade or industry, except when used exclusively in or for sport fishing.

(b) A foreign-flag vessel under Panamanian, Honduran or Liberian registry, 1,500 gross tons and over, self-propelled, and not over twenty years of age (unless authorized by the Maritime Administration), which is subject to an unqualified Contract of Commitment with the United States in form as required by the Maritime Administration, and which is:

(1) Owned by a U.S. corporation, or a foreign corporation in which a majority of the stock is owned and controlled by United States citizens, whether direct or through intervening corporations, foreign or domestic. Where such intervening corporations are foreign, the ultimate majority ownership and control of the stock of such corporations must be vested in a citizen or citizens of the United States as defined in section 1201 (d), Merchant Marine Act, 1936, as amended; or

(2) Owned by a foreign corporation which is not directly or beneficially owned by United States citizens or corporations, but which vessel is under a long-term charter or other long-term contract covering the use of the vessel on terms deemed by the Maritime Administration to subject the vessel to U.S. control in the event of emergency. The charterer of such a vessel must be either a U.S. corporation or a foreign corporation in which a majority of the stock is owned and controlled by U.S. citizens, whether direct or through intervening corporations, foreign or domestic. Where

such intervening corporations are foreign, ultimate majority ownership and control of the stock of such corporations must be vested in a citizen or citizens of the United States as defined in section 1201 (d), Merchant Marine Act, 1936, as amended.

(c) All other vessels will be insured at the sole discretion of the Maritime Administrator but only when engaged in a service which has been determined by the Maritime Administrator to be in the interest of the national defense or the national economy of the United States. § 308.2 Change in status of a vessel after interim binders have been issued.

(a) It is the intention of the parties that any breach of the warranty prescribed hereunder as to vessels in all categories with respect to compliance with Department of Commerce Transportation Orders T-1 and T-2, and the additional warranties prescribed as to vessels in categories (b) (1) and (b) (2) with respect to maintenance of eligibility for insurance, and availability of the insured vessels to the U.S. Government in time of emergency and vessels in category (c) as to operation in approved service, shall terminate the binder and any insurance attaching thereunder.

(b) In the event of the sale, demise charter, requisition, confiscation, change of flag or total loss thereof, or any other change in the status which, by the terms of the binder, causes same to terminate. prompt notice shall be given in writing to the underwriting agent that issued the binder.

§ 308.3

Applications for insurance, sup. porting documents and payment of binding fees.

(a) Separate applications shall be filed for war risk hull insurance, war risk protection and indemnity insurance, and Second Seamen's war risk insurance, for each vessel to be covered by such insurance. Disbursements insurance, limited to consumable and subsistence stores, slop chests, bar stock and bunker fuel, is available as added coverage upon application for war risk hull insurance. All applications for war risk hull insurance shall be accompanied by information in required form, in duplicate, relating to the vessel for use by the Maritime Administrator in determining the value thereof pursuant to Maritime Administration General Order 82, as amended from time to time, as published in the FEDERAL REGISTER.

(b) An applicant submitting more than one insurance application at the same time is only required to submit a single citizenship certificate or single set of citizenship certificates, as the case may be, pursuant to §§ 308.101, 308.201, and 308.301.

(c) Applications for war risk hull and protection and indemnity insurance in all eligible categories under this General Order, as revised shall include a warranty that at all times during the effective period of the binder and any insurance issued thereunder, the insured vessel will comply with Department of Commerce Transportation Orders T-1 and T-2 or any modification thereof so long as they remain in force; and, without prior approval of the Maritime Administration, the insured vessel will not be chartered for a period of longer than six (6) months, or for a voyage or voyages the duration of which will probably exceed six (6) months, to any person not a citizen of the United States, nor be chartered to such a non-citizen under a demise or bareboat form of charter, nor be chartered to such a non-citizen for the carriage of cargoes of any kind to or from any of the countries listed in Maritime Administration General Order 59 or any modification thereof, so long as it remains in force, or for use in the fisheries.

EXPLANATORY NOTE: Inasmuch as the warranties described in subparagraph (c) are in effect during the entire period of the binder and any insurance issued thereunder, the requirement of "prior approval" by the Maritime Administration of charters to noncitizens in the categories therein described is applicable to any such charters in existence at the time applicant applies for such insurance. Existing charters which are subject to this requirement include charters or contracts of affreightment to non-citizens which will extend for a period of more than six (6) months subsequent to the date of application or under which the insured vessel is committed to make a voyage or voyages which will extend for more than six (6) months subsequent to such date.

(d) Applications on a vessel in category (a) shall contain a warranty that at and from the date of issuance of the interim binder and for and during the term of any insurance attaching thereunder, such vessel will remain eligible within its category.

(e) In addition, on vessels in categories (b) (1) and (b)(2), the applica