(d) Maintenance reviews. All vessels and facilities for which financing is guaranteed under the Program shall be inspected at least once every three years by a competent and impartial authority acceptable to the Program. A full inspection report, identifying deficiencies and recommending the action necessary for their correction, will be provided to the Obligor and to the Program. Failure to provide this tri-annual inspection, or correct deficiencies identified by it, will constitute a default of the terms and conditions of mortgages securing the Program's guarantee and a cause, at the Program's discretion, for acceleration and liquidation of the debt obligation. Special property inspections may be required whenever the Program deems it necessary to preserve its collateral. All such inspections shall be at the expense of the Obligor. This requirement extends to all supplementary collateral for Program guarantees.

(e) Terms and conditions of Program guarantees. The Program will, on a case-by-case basis, specify in detail the precise terms and conditions prerequisite to the Program's willingness to provide a guarantee. These terms and conditions are at the Program's sole discretion, and an applicant's failure to comply with them will result in nonqualification for a Program guar

antee.

(f) Program Obligees. The applicant may choose the Obligee to fund the debt to be guaranteed by the Program. Obligees may be any financial institution, public agency, or other party. The Program may, however, refuse to guarantee financing unless it has approved the terms and conditions of the financing (including particularly the interest rate and other amortization provisions) before the Obligor makes a firm commitment to an Obligee. Failure to first obtain the Program's approval may result in the Program's refusal to issue the guarantee despite the fact that the Obligor may have created a binding contract with an Obligee, abrogation of which may result in loss to the Obligor. The Program will assist those whose applications for Program guarantees are approved to gain access to the private market for appropriate financing, but only as a

gratuitous service. Arrangements between the Obligor and the Obligee are a matter of private contract between those two parties, and the Program will not in any way be responsible to either for nonperformance by the other.

(g) Closing-(1) Contracts. All debt obligations and associated contractual arrangments which comprise the financing will be documented by standard Program forms, which may not be altered or amended in any way by insertion, deletion, or variation without prior Program approval (which will be sparingly granted).

(2) Closing schedules. The Program will attempt to meet the closing schedules (where reasonable) of Obligors and Obligees. The Program, however, accepts no responsibility for adverse interest-rate fluctuations, loss of commitments, or other consequences of non-compliance with Obligors' or Obligees' closing schedules. Obligors and Obligees should work closely with the Program to assure reasonable closing schedules, since internal workload and personnel considerations sometimes affect the Program's ability to meet otherwise desirable schedules.

(3) Closing vessel financings. The Program will attempt to close guarantees on financings involving fishing vessels with minimal services from private attorneys and/or other private

contractors.

(4) Closing shoreside facilities financings. Closings for guarantees of financing for fisheries shoreside facilities will require substantial services from private attorneys and/or other contractors at the expense of the Obligor. The choice of such private contractors for any portion of the closing process is subject to Program approval. Services required to be provided by private contractors may include: title searches; preparation of legal documents; actual closing, escrow, and disbursement services; and the provision of a legal opinion from acceptable counsel regarding the validity and binding effect of transactions, compliance with procedures specified by the Program, and other assurances.

(5) Paying agents. The Chief, Financial Services Division, in his discretion, may require the use of a paying agent

or trustee. Where paying agents are used, Obligors or Obligees will be responsible for their cost.

§ 255.12 Fees.

(a) Filing and commitment fees. The Program's filing and commitment fee will be 2 of 1 percent of the principal amount of the Program guarantee for which application is made. The fee is due at the time an application is submitted, and no application for guarantee will be accepted unless the full filing and commitment fee accompanies it. The filing fee is 50 percent of the filing and commitment fee, and once an application for a guarantee is accepted, no portion of the filing fee will be returned for any reason. The commitment fee is the remaining 50 percent of the filing and commitment fee, and is returnable only if a refund is requested before the Program issues an Approval in Principle letter or if the application is declined.

(b) Guarantee fee. The Agency guarantee fee is 1 percent of the average unpaid principal balance of the debt obligation for which the guarantee is outstanding during each year of the life of the guarantee. The guarantee fee is due in advance based upon the debt obligation's amortization schedule. The first annual guarantee fee is due at closing of the guarantee. Each subsequent annual guarantee fee is due on the anniversary date of the closing of the guarantee. No refund of guarantee fees will be made regardless of the status of the financing or the guarantee during the year to which the guarantee fee relates.

(c) Refinancing/assumption fee. The Program's refinancing/assumption fee for financings already guaranteed under the Program (other refinancing applicants will be charged fees under paragraph (a) of this section) is 4 of 1 percent of the principal amount of the debt obligation to be refinanced or assumed, and is due upon application for a guarantee for refinancing/assumption. The refinancing/assumption fee is nonreturnable regardless of the subsequent disposition of an application. The Chief, Financial Services Division, may however:

(1) Waive the refinancing/assumption fee where the refinancing/as

sumption is primarily to protect the Program's interest, or

(2) Charge an actual cost fee, where the refinancing/assumption does not substitute a wholly different obligor for the initial obligor.

(d) Where payable. Fees should be paid by check made payable, and mailed, to: “NMFS/FSFF", U.S. Department of Commerce, National Oceanic and Atmospheric Administration, P.O. Box 73004, Chicago, Ill. 60673.

[51 FR 9214, Mar. 18, 1986]

§ 255.13 Demands and payment.

All demands by Obligees, whose debt has been guaranteed under the provisions of this Program, for payment of all or any portion of a guaranteed obligation in default shall be made in writing to the Chief, Financial Services Division, F/UD5, 3300 Whitehaven St., NW., Washington, DC 20235, by certified mail, return receipt requested. In the event the Program does not acknowledge timely receipt of a demand alleged to have been timely made, the demander must possess evidence of the demand's timely delivery to the Program. Payment of demands shall be made within 30 days after receipt of a timely demand by the Chief, Financial Services Division. Demands may be made by Obligees' duly authorized agents or trustees.

§ 255.14 Default/liquidation of collateral.

(a) Default. In the event of default by an Obligor which results in the payment by the Program to an Obligee of the guaranteed debt, the Program shall ordinarily foreclose on its collateral and institute personal collection proceedings against the Obligor and the guarantors of the financing. At the Program's sole discretion, other remedies which are deemed most appropriate to protect the Program's interest may be pursued.

(b) Liquidation of collateral. If the Program is the highest bidder at a foreclosure sale of collateral, the Program (as the new owner of the collateral) may, in its sole discretion, subsequently complete, recondition, reconstruct, renovate, repair, maintain, operate, charter, lease, or sell such collateral. In the event there is a willing

buyer for such collateral at an amount at least equal, or almost equal, to the amount owed the Program, the Program may convey title to such collateral, upon proper payment, without competitive bidding or other contracting procedures. If there is not a willing buyer for such collateral at an amount equal, or almost equal, to the amount owed the Program, the collateral will ordinarily be disposed of by competitive bidding--unless the Program decides that it can best recover without competitive bidding. Any deficiency resulting from the Program's purchase of collateral at a foreclosure sale shall not be offset by receipts from a subsequent sale of such collateral in the event the Program purchases the collateral and sells it for an amount greater than that owed the Program; the original Obligors and guarantors of the guaranteed financing remain liable for such deficiency.

Sec.

259.34 Minimum and maximum deposits; maximum time to deposit.

259.35 Annual deposit and withdrawal reports required.

259.36 CCF accounts.

259.37 Conditional consents to withdrawal qualification.

259.38 Miscellaneous.

AUTHORITY: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114; Pub. L. 91-469, 84 Stat. 1018; sec. 21(a), 84 Stat. 1026. Sections 259.30 to 259.38 also issued under Reorg. Plan No. 4 of 1970, 86 Stat. 9090.

JOINT TAX REGULATIONS

§ 259.1 Execution of agreements and deposits made in a Capital Construction Fund.

In the case of a taxable year of a taxpayer beginning after December 31, 1969, and before January 1, 1972, the rules governing the execution of agreements and deposits under such agreements shall be as follows:

fund

(a) A capital construction agreement executed and entered into by the taxpayer on or prior to the due date, with extensions, for the filing of his Federal income tax return for such taxable year or years will be deemed to be effective on the date of the execution of such agreement or as of the close of business of the last regular business day of each such taxable year or years to which such deposit relates, whichever day is earlier.

(b) Notwithstanding the provisions of paragraph (a) of this section, where: (1) For taxable years beginning after December 31, 1969, and prior to January 1, 1971, an application for a capital construction fund agreement is filed by a taxpayer prior to January 1, 1972, and a capital construction fund agreement is executed and entered into by the taxpayer prior to March 1, 1972, and (2) for taxable years beginning after December 31, 1970, and prior to January 1, 1972, an application for a capital construction fund agreement is filed by a taxpayer prior to January 1, 1973, and a capital construction fund agreement is executed and entered into by the taxpayer prior to March 1, 1973 (or, if earlier, 60 days after the publication of final joint regulations under section 607 of the Merchant Marine Act, 1936, as amended);

then such a capital construction fund agreement will be deemed to be effective as of the close of business of the last regular business day of each such taxable year or years to which such deposit related.

(c) (1) Deposits made in a capital construction fund pursuant to such an agreement within 60 days after the date of execution of the agreement, or on or prior to the due date, with extensions, for the filing of his Federal income tax return for such taxable year or years, whichever date shall be later, shall be deemed to have been made on the date of the actual deposit or as of the close of business of the last regular business day of each such taxable year or years to which such deposit relates, whichever day is earli

er.

Notwithstanding

paragraph

(2) (c)(1) of this section, for taxable years beginning after December 31, 1970, and ending prior to January 1, 1972, deposits made later than the last date permitted under paragraph (c)(1) of this section but on or before January 9, 1973, in a capital construction fund pursuant to an agreement with the Secretary of Commerce, acting by and through the Administrator of the National Oceanic and Atmospheric Administration, shall be deemed to have been made on the date of the actual deposit or as of the close of business of the last regular business day of such taxable year, whichever is earlier.

(d) Nothing in this section shall alter the rules and regulations governing the timing of deposits with respect to existing capital and special reserve funds or with respect to the treatment of deposits for any taxable year or years other than a taxable year or years beginning after December 31, 1969, and before January 1, 1972.1

[37 FR 25025, Nov. 25, 1972, as amended at 38 FR 8163, Mar. 29, 1973]

'The phrase "existing capital and special reserve funds” does not refer to the Capital Construction Fund program but rather to funds established with the Maritime Administration prior to the amendment of the Merchant Marine Act, 1936, which authorized the Capital Construction Fund program.

CAPITAL CONSTRUCTION FUND
AGREEMENT

SOURCE: Sections 259.30 to 259.38 appear at 39 FR 33675, Sept. 19, 1974, unless otherwise noted.

§ 259.30 Application for Interim Capital Construction Fund Agreement (“Interim CCF Agreement").

(a) General qualifications. To be eligible to enter into an Interim CCF Agreement an applicant must:

(1) Be a citizen of the United States (citizenship requirements are those for documenting vessels in the coastwise trade within the meaning of section 2 of the Shipping Act, 1916, as amended);

(2) Own or lease one or more eligible vessels (as defined in sec. 607(k)(1) of the Act) operating in the foreign or domestic commerce of the United States.

(3) Have an acceptable program for the acquisition, construction, or reconstruction of one or more qualified vessels (as defined in section 607(k)(2) of the Act). Qualified vessels must be for commercial operation in the fisheries of the United States. If the qualified vessel is 5 net tons or over, it must be documented in the fisheries of the United States. Dual documentation in both the fisheries and the coastwise trade of the United States is permissible. Any vessel which will carry fishing parties for hire must be inspected and certified (under 46 CFR Part 176) by the U.S. Coast Guard as qualified to carry more than six passengers or demonstrate to the Secretary's satisfaction that the carrying of fishing parties for hire will constitute its primary activity. The program must be a firm representation of the applicant's actual intentions. Vague or contingent objectives will not be acceptable.

(b) Content of application. Applicants seeking an Interim CCF Agreement may make application by letter providing the following information:

(1) Proof of U.S. citizenship;

(2) The first taxable year for which the Interim CCF Agreement is to apply (see § 259.33 for the latest time at which applications for an Interim CCF Agreement relating to a previous taxable year may be received);

(ii) Official number, or, in the case of vessels under 5 net tons, the State registration number where required,

(iii) Type of vessel (i.e., catching vessel, processing vessel, transporting vessel, charter vessel, barge, passenger carrying fishing vessel, etc.),

(iv) General characteristic (i.e., net tonnage, fish-carrying capacity, age, length, type of fishing gear, number of passengers carried or in the case of vessels operating in the foreign or domestic commerce the various uses of the vessel, etc.),

(v) Whether owned or leased and, if leased, the name of the owner, and a copy of the lease,

(vi) Date and place of construction, (vii) If reconstructed, date of redelivery and place of reconstruction,

(viii) Trade (or trades) in which vessel is documented and date last documented,

(ix) If a fishing vessel, the fishery of operation (which in this section means each species or group of species-each species must be specifically identified by acceptable common names-of fish, shellfish, or other living marine resources which each vessel catches, processes, or transports or will catch, process, or transport for commercial purposes such as marketing or processing the catch),

(x) If a fishing vessel, the area of operation (which for fishing vessels means the general geographic areas in which each vessel will catch, process, or transport, or charter for each species or group of species of fish, shellfish, or other living marine resources).

(4) The specific objectives to be achieved by the accumulation of assets in a Capital Construction Fund (to be incorporated in Schedule B of the Interim CCF Agreement) including:

(i) Number of vessels,

(ii) Type of vessel (i.e., catching, processing, transporting, or passenger carrying fishing vessel),

(iii) General characteristics (i.e., net tonnage, fish-carrying capacity, age,

length, type of fishing gear, number of passengers carried), (iv) Cost of projects,

(v) Amount of indebtedness to be paid for vessels to be constructed, acquired, or reconstructed (all notes, mortgages, or other evidences of the indebtedness must be submitted as soon as available, together with sufficient additional evidence to establish that full proceeds of the indebtedness to be paid from a CCF under an Interim CCF Agreement, were used solely for the purpose of the construction, acquisition, or reconstruction of Schedule B vessels),

(vi) Date of construction, acquisition, or reconstruction,

(vii) Fishery of operation (which in this section means each species or group of species-each species must be specifically identified by acceptable common name-of fish, shellfish, or other living marine resources),

(viii) Area of operation (which in this section means the general geographic areas in which each vessel will will operate for each species or group of species of fish, shellfish, or other living marine resources).

(c) Filing. The application must be signed and submitted in duplicate to the Regional Office of the National Marine Fisheries Service's Financial Assistance Division corresponding to the region in which the party conducts its business. As a general rule, the Interim CCF Agreement must be executed and entered into by the taxpayer on or prior to the due date, with extensions, for the filing of the Federal tax return in order to be effective for the tax year to which that return relates. It is manifestly in the Applicant's best interest to file at least 45 days in advance of such date.

(Approved by the Office of Management and Budget under control number 06480090)

[39 FR 33675, Sept. 19, 1974, as amended at 42 FR 65185, Dec. 30, 1978; 48 FR 57302, Dec. 29, 1983]

§ 259.31 Acquisition, construction, or re

construction.

(a) Acquisition. No vessel having previously been operated in a fishery of the United States prior to its acqui