Capital Construction Fund Application Instructions

Capital Construction Fund Application
Instructions

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Maritime Administration, DOT

Pt. 390, App. I

(d) Contracting Officer’s decision and
appeals to the Maritime Administrator—
(1) Where there has not been a request to
cure or to be heard. If the Contracting
Officer issues a written notice under
paragraph (b) of this section and the
party does not request within 30 days
an opportunity either to cure its
breach or to be heard and offer evidence in opposition to the tentative
conclusion, the Contracting Officer’s
tentative conclusion shall become the
final decision, which decision shall be
final, conclusive and binding upon the
party, and no appeal therefrom shall be
taken to the Maritime Administrator.
(2) Where there has been a request to
cure or to be heard. If the Contracting
Officer issues a written notice under
paragraph (b) of this section and the
party requests within 30 days an opportunity either to cure its breach or to be
heard and offer evidence in opposition
to the tentative conclusion, the party
shall be offered such an opportunity.
Request to cure must include a proposal to cure the breach. If the Contracting Officer accepts the party’s
proposal to cure its breach, then such
determination shall be final. A party
requesting to be heard and offer evidence in opposition to the Contracting
Officer’s tentative conclusion shall be
permitted to submit, in writing, any
information, evidence or argument
within a period set by the Contracting
Officer after considering the wishes of
the party. The Contracting Officer
shall reduce his final decision to writing and furnish the party a copy, by
certified
mail—return
receipt
requested, which decision shall be final
and conclusive and shall bind the party
unless within 30 days of receipt of the
decision the party appeals from said
decision by personal delivery or by certified mail to the Maritime Administrator with notice to the Contracting
Officer.
(e) Appeals to the Maritime Administrator. Appeals with a request for a
hearing on the record, if desired, are to
be transmitted pursuant to paragraph
(d) of this section and are to be addressed to the Maritime Administrator.
Upon the filing of an appeal, the Contracting Officer shall transmit the entire record and a copy of his final decision to the Maritime Administrator. If

a request for a hearing on the record is
granted, the Maritime Administrator
shall proceed pursuant to the Rules of
Practice and Procedure in Part 201 of
this title. The decision of the Maritime
Administrator on any question of fact
shall be final, conclusive and binding
upon the party unless determined by a
court of competent jurisdiction to be
fraudulent, capricious, or arbitrary, or
so grossly erroneous as necessarily to
imply bad faith or is not supported by
substantial evidence.
[41 FR 4265, Jan. 29, 1976, as amended at 73
FR 56740, Sept. 30, 2008]

§ 390.14 Departmental reports and certification.
(a) In general. For each calendar year,
the Secretary of Transportation shall
provide the Secretary of the Treasury,
within 120 days after the close of such
calendar year, a written report with respect to those capital construction
funds under the Secretary of Transportation’s jurisdiction.
(b) Content of reports. Each report
shall set forth the name and taxpayer
identification number of each person:
(1) Establishing a capital construction fund during such calendar year;
(2) Maintaining a capital construction fund as of the last day of such calendar year;
(3) Terminating a capital construction fund during such calendar year;
(4) Making any withdrawal from or
deposit into (and the amounts thereof)
a capital construction fund during such
calendar year; or
(5) With respect to which a determination has been made during such
calendar year that such person has
failed to fulfill a substantial obligation
under any capital construction fund
agreement to which such person is a
party.
[55 FR 34929, Aug. 27, 1990]

APPENDIX I TO PART 390—U.S. DEPARTMENT OF TRANSPORTATION, MARITIME ADMINISTRATION—APPLICATION
INSTRUCTIONS
INSTRUCTION REGARDING APPLICATION FOR A
CAPITAL CONSTRUCTION FUND

An application for a capital construction
fund under 46 U.S.C. 53501 et seq., the Rules
and Regulations prescribed jointly by the

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46 CFR Ch. II (10–1–08 Edition)

Secretary of the Treasury and the Secretary
of Transportation (26 CFR Part 3 and reprinted in 46 CFR Part 391, the ‘‘Joint Regulations’’) and individually by the Secretary
of Transportation (46 CFR Part 390, the ‘‘SOC
Regulations’’) shall be prepared and submitted in the form specified by these instructions.
The application must be legible and shall
be submitted in six (6) complete sets, including the required Schedules and Exhibits. The
application shall be filed with the Secretary,
Maritime Administration, Washington, DC
20590. Three of these sets must be duly executed and certified by the Applicant. The
name of the Applicant shall be shown on all
accompanying papers for identification.
All questions contained in the application
must be responded to; if a question is not applicable the respondent should so state. Additional information may be requested if
such information is necessary to aid the Contracting Officer in making a determination
to enter into a Capital Construction Fund
Agreement.
U.S. DEPARTMENT OF TRANSPORTATION,
MARITIME ADMINISTRATION

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APPLICATION FOR ESTABLISHMENT OF A CAPITAL CONSTRUCTION FUND UNDER SECTION 607,
MERCHANT MARINE ACT, 1936, AS AMENDED

The undersigned lll (‘‘Applicant’’), a
citizen of the United States within the
meaning of 46 U.S.C. 50501, as amended, hereby applies under section 607 of the Merchant
Marine Act, 1936, as amended (‘‘Act’’), the
Rules and Regulations jointly prescribed by
the Secretary of the Treasury and the Secretary of Transportation (‘‘Joint Regulations’’) and individually by the Secretary of
Transportation (‘‘SOC Regulations’’) to establish a Capital Construction Fund to aid in
the acquisition, construction or reconstruction of a qualified vessel, the acquisition,
construction or reconstruction of barges,
containers or trailers which are part of the
complement of a qualified vessel and the
payment of the principal on indebtedness incurred in connection with the acquisition,
construction or reconstruction of a qualified
vessel or a barge, container or trailer which
is part of the complement of a qualified vessel. The fund hereby applied for will be effective for deposits relating to the taxable year
beginning lllllllll, 20ll and ending llllllll, 20ll, and for subsequent taxable years. In support of this application, the Applicant submits the following
information:
I. As to the identity of and other General Information of the Applicant (the following data
is required to prove the Applicant’s citizenship to the satisfaction of the Secretary; also
see 46 CFR Part 355):

A. Natural Persons. If the Applicant is a
natural person, the following identifying information should be submitted:
1. Name.
2. Address.
3. Date of birth.
4. Place of birth.
5. Citizenship.
6. Principal place of business.
7. Trade name under which business is conducted.
B. Partnerships, Associations, Unincorporated
Companies. If the Applicant is a partnership,
association, or unincorporated company, the
following identifying information should be
submitted:
1. Name of partnership, association, or unincorporated company.
2. Business address.
3. Date and place of organization.
4. Name of all partners (general, limited
and special) of the partnership or trustees
and holders of beneficial interests in the association or company.
5. Share owned by each partner, trustee, or
beneficial owner.
6. Date of birth of each.
7. Place of birth of each.
8. Citizenship of each.
C. Incorporated Companies. If the Applicant
is an incorporated company, the following
identifying information should be submitted:
1. Exact name of Applicant.
2. State in which incorporated and date of
incorporation.
3. Address of principal executive offices,
and of important branch offices, if any.
4. The following information with respect
to each officer and director of the corporation:
a. Name and address.
b. Office.
c. Citizenship.
d. Capital shares owned (specify type,
whether voting or non-voting and percentage
of total of each type issued if five percent
(5%) or more).
5. The name, address and citizenship of and
number of capital shares owned by each person not named in answer to item 4, owning of
record, or beneficially if known, five percent
(5%) or more of the issued capital shares of
any class stock of the Applicant.
6. A brief statement of the general effect of
each voting agreement, voting trust, or
other arrangement whereby the voting
rights in any shares of the Applicant are
owned, controlled, or exercised, or whereby
the control of the Applicant is in any way
held or exercised by any person not the holder of legal title to such shares. (Give the
name, address, citizenship, and business of
any such person, and, if not an individual,
include the form of organization.)
II. As to the Business and Affiliations of the
Applicant. A. A brief description of the principal business activities during the past five

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years of the Applicant and of any predecessor or predecessors of the Applicant; if
any change is presently contemplated, a
brief statement of the nature and circumstances thereof.
B. A list of all companies or persons that
are related within the meaning of section 482
of the Internal Revenue Code of 1954, as
amended, and the regulations thereunder
(‘‘related companies’’) or that directly or indirectly through one or more intermediaries,
control, are controlled by, or are under common control with the Applicant, together
with an indication of the nature of the business transacted by each, the relationships
between the companies named, and the nature and extent of the control. This information may be furnished in the form of a chart.
C. A statement whether during the past 5
years the Applicant or any predecessor or related company has been in bankruptcy or in
reorganization under II-B of the Bankruptcy
Act or in any other insolvency or reorganization proceedings, and whether any substantial property of the Applicant or any predecessor or related company has been acquired
in any such proceeding or has been subject to
foreclosure or receivership during such period. If so, give details.
D. A statement of whether the Applicant
or any predecessor or related company is
now or during the past 5 years was involved
in any litigation or subject to any outstanding judgments. If so, give details.
E. Describe any contemplated plan of reorganization or recapitalization involving new
capital, the consolidation or mergers of the
Applicant with related or other companies,
debt elimination, or other changes or modifications in the corporate or individual
structure, and indicate by appropriate financial statements the anticipated results
thereof.
III. As to the Management of the Applicant.
A. A brief description of the principal business activities during the past 5 years of
each director and each principal executive
officer of the Applicant.
B. The name and address of each other organization engaged in business activities related to those carried on or to be carried on
by the Applicant with which any person
named in the answer to the preceding item
has any present business connection; the
name of each such person, and briefly the nature of such connection.
IV. Description of Vessels, Barges, Containers
or Trailers which Applicant Proposes to be Incorporated in Capital Construction Fund Agreement for the Purpose of Making Deposits. Vessels must be eligible vessels as that term is
defined in 46 U.S.C. 53501 and § 390.5(b) of the
SOC Regulations. Undocumented barges,
containers or trailers must be part of the
complement of an eligible vessel as that
term is defined in section 607(b) of the Act
and § 390.5(d) of the SOC Regulations:

A. Vessels. Provide in a tabular form headed ‘‘Schedule A’’ (see prescribed format in
appendix II) the vessels owned or leased by
the Applicant which the Applicant proposes
to be designated as ‘‘Eligible Agreement Vessels’’ for the purposes of making deposits
into a Capital Construction Fund pursuant
to the provisions of section 607 of the Act,
giving:
a. Name and official number.
b. Specific type.
c. Capacity (tons of cargo, number of containers, barges, etc.).
d. Whether owned or leased, and if leased
the owner and the owner’s address.
e. Date and place of construction.
f. If reconstructed, date of redelivery and
place of reconstruction.
g. Date documented under laws of the
United States.
h. Area of operation.
i. Full details concerning the service in
which the Applicant operates or will operate
each vessel; if the vessel is used for multiple
purposes indicate the percentage of time in
which the vessel is engaged in each service.
B. Barges, Containers, and Trailers. Provide
in a tabular form headed ‘‘Schedule A’’ (see
prescribed format in appendix II) the barges,
containers, and trailers owned or leased by
the Applicant which the Applicant proposes
to be incorporated in an Agreement for purposes of making deposits into a Capital Construction Fund pursuant to the provisions of
section 607 of the Act, giving:
a. Number of barges, containers or trailers
which are part of the complement of an eligible vessel; name and official number of
barges which are not a part of the complement of an eligible vessel.
b. Specific type.
c. Size or capacity.
d. Whether owned or leased, and if leased
the owner and the owner’s address.
e. Date and place of construction.
f. If reconstructed, date of redelivery and
place of reconstruction.
g. Date documented under the laws of the
United States.
h. Area of operation.
i. The vessel or vessels for which the
barges, containers and trailers are part of
the complement; full details concerning the
service in which the Applicant operates or
will operate each barge which is not a part of
a complement.
V. Purposes for which Qualified Withdrawals
are Proposed. Applicant is advised that information furnished in response to sections A,
B, C and D of this item is for the purpose of
inducing the United States to enter into an
agreement to establish a Capital Construction Fund pursuant to section 607 of the Act.
In connection therewith attention is directed
to 46 U.S.C. 53509(c) which states, ‘‘Under
joint regulations, if the Secretary of Transportation determines that any substantial

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obligation under any agreement is not being
fulfilled, he may, after notice and opportunity for hearing to the person maintaining
the fund, treat the entire fund or any portion
thereof as an amount withdrawn from the
fund in a nonqualified withdrawal.’’ Also see
§ 390.13 of the SOC Regulations.
A. Acquisition or Construction of Vessels.
Provide in form headed ‘‘Schedule B’’ (see
prescribed format in appendix II) the proposed program for the acquisition or construction of vessels, giving:
a. Number, type and commercial characteristics of vessels to be acquired or constructed.
b. Whether vessels will be replacements or
additions, and if replacements identify vessels to be replaced.
c. Projected date of acquisition or award of
construction contract.
d. Projected date of commencing operations.
e. Estimated total cost.
f. Method by which estimated total cost of
project was determined.
g. Estimated amount of Capital Construction Fund monies to be used as down payment by the Applicant.
h. Estimated amount of borrowings and
the amount of such borrowings to be retired
by qualified withdrawals from the Capital
Construction Fund, including anticipated
terms of such financing.
i. Intended area of operation.
j. Full details concerning the use of the
proposed vessel; if the vessel is to be used for
multiple purposes indicate the approximate
percentage of time in which the vessel will
be engaged in each service.
B. Acquisition or Construction of Barges,
Containers and Trailers. Provide in a form
headed ‘‘SCHEDULE B’’ (see prescribed format in appendix II) the proposed program for
acquisition or construction of barges, containers and trailers giving:
a. Number, type and size of barges, containers and trailers.
b. Whether barges, containers and trailers
will be replacements or additions, if replacements, identify barges, containers or trailers
to be replaced.
c. Projected date of acquisition or award of
construction contract.
d. Projected date of introduction into service.
e. Estimated total cost.
f. Method by which estimated total cost of
project was determined.
g. Estimated amount of Capital Construction Fund monies to be used as down payment by the Applicant.
h. Estimated amount of borrowings and
the amount of such borrowings to be retired
by qualified withdrawals from the Capital
Construction Fund including anticipated
terms of such financing.

i. Identification of vessels for which the
barges, containers and trailers will be part of
the complement, and the vessel’s area of operation. In the case of barges which are not
a part of the complement of a vessel provide
the barges’ intended area of operation.
j. Full details concerning the use of the
proposed barge; if the barge is to be used for
multiple purposes indicate the approximate
percentage of time in which the barge will be
engaged in each service.
C. Reconstruction of Vessels. Provide in a
form headed ‘‘SCHEDULE B’’ (see prescribed
format in appendix II) the proposed program
for reconstruction of vessels, giving:
a. Identification of vessels to be reconstructed.
b. Nature and extent of proposed reconstruction.
c. Projected date of award of reconstruction contract.
d. Projected date of commencing operations with reconstructed vessels.
e. Estimated total cost.
f. Method by which estimated total cost of
project was determined.
g. Estimated amount of Capital Construction Fund monies to be used as down payment by the Applicant.
h. Estimated amount of borrowings and
amount of such borrowings to be retired by
qualified withdrawals from the Capital Construction Fund, including anticipated terms
of such financing.
i. Intended area of operation.
j. Full details concerning the use of the
proposed vessel; if the vessel is to be used for
multiple purposes indicate the approximate
percentage of time in which the vessel will
be engaged in each service.
D. Reconstruction of Barges, Containers and
Trailers. Provide in a form headed ‘‘SCHEDULE B’’ (see prescribed format in appendix
II) the proposed program for reconstruction
of barges, containers and trailers, giving:
a. Number, type and size of barges, containers and trailers.
b. Nature and extent of proposed reconstruction work.
c. Projected date of award of reconstruction contract.
d. Projected date of completion of reconstruction work.
e. Estimated total cost.
f. Method by which estimated total cost of
project was determined.
g. Estimated amount of Capital Construction Fund monies to be used as down payment by the Applicant.
h. Estimated amount of borrowings and
amount of such borrowings to be retired by
qualified withdrawal from the Capital Construction Fund including anticipated terms
of such financing.
i. Identification of vessels for which the
barges, containers, and trailers will be part
of the complement, and the vessel’s area of

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operations. In the case of barges which are
not a part of the complement of a vessel provide the barges’ area of operation.
j. Full details concerning the use of the
proposed barge; if the barge is to be used for
multiple purposes indicate approximate percentage of time in which the barge will be
engaged in each service.
E. Payment of Principal on Existing Indebtedness Incurred in Connection with the Acquisition, Construction or Reconstruction of a Qualified Vessel or a Barge, Container or Trailer
which is Part of the Complement of a Qualified
Vessel. Provide in a form headed ‘‘Schedule
B’’ (see prescribed format in appendix II) the
proposed program for payments of principal
on existing indebtedness incurred in connection with the acquisition, construction, or
reconstruction of qualified vessels, barges,
containers, or trailers, giving:
a. Name, official number or other identifying information for the vessel, barge, container, or trailer.
b. Whether the debt was incurred for acquisition, construction or reconstruction, demonstrating evidence of a direct connection
between the qualified vessel and the debt
which was incurred.
c. The aggregate principal balance of such
indebtedness as of the date of this application.
d. The dates and amounts of payments of
principal to liquidate the outstanding debt
in accordance with the applicable loan agreements or other documents.
VI. As to the Depository to be Used for the
Capital Construction Fund. Provide in a tabular form headed ‘‘Schedule C’’ (see prescribed format in appendix II) the full name
and complete address of the financial institution which will act as depository. Indicate
the type of account, i.e., checking, savings,
trust, in which the fund will be held.
VII. Proposed Schedule of Minimum Amounts
Available for Deposit into the Capital Construction Fund. Provide in a tabular form headed
‘‘Schedule D’’ (see prescribed format in appendix II) a proposed program for deposits
into the Capital Construction Fund commencing with the beginning of the first taxable year for which the Agreement applies.
The applicant is advised that the purpose of
Schedule D is to insure that a sufficient
commitment has been made to accomplish
the objectives contained in Schedule B. Minimum annual deposits are not required, but a
minimum amount must be deposited for each
3 year period under the Agreement. For each
such 3 year period of the proposed Schedule
D the Applicant will indicate not only the
minimum amount to be deposited, but also
the source of such deposit, giving amounts
expected to be derived from:
a. Ordinary income attributable to the operation of agreement vessels.
b. Net proceeds from the sale or other disposition of agreement vessels.

c. Receipts from the investment or reinvestment of amounts held in the fund.
d. Earned depreciation on agreement vessels.
VIII. Financial Statements and Reports of the
Applicant Including Predecessors. A. Financial
Statements. For each of the past three fiscal
years provide:
1. Statements of Financial Conditions.
2. Statements of Operations.
3. Statements of Retained Earnings.
B. Reports. If the books of the Applicant
were audited by an independent certified
public accountant copies of the public accountant’s reports shall be submitted for
each of the past three fiscal years.
IX. As to Exhibits Furnished. At the time of
original filing, the following exhibits, properly identified, shall be furnished:
Exhibit I—A copy of the Certificate of Incorporation of the Applicant or other organization papers including all amendments
thereto presently in effect.
Exhibit II—A copy of the By-Laws or other
governing instruments of the Applicant, including all amendments thereto presently in
effect.
Exhibit III—Such other financial statements, copies of contracts, schedules and
other required data which the Applicant desires to incorporate by reference.
X. A statement of any additional information which, in the opinion of the Applicant,
is necessary to make the application and attached exhibits true and complete.
XI. A specific written request, pursuant to
5 U.S.C. 552(b)(4), must accompany the application if the Applicant wishes certain trade
secrets, financial and commercial information contained in this application to be withheld from disclosure. The Maritime Administrator, Department of Transportation will
endeavor to respect such a request, acting
within the limits of the applicable provisions
of the Freedom of Information Act.
State
of
lllllllll
County
of
lllllllll ss.:
Dated llllllllllll, 20ll
Name
of
Applicant
lllllllllllllllll
By lll Name and Title
I, lll, do certify that I am the (Title of
Office) of (Exact Name of Applicant), the Applicant on whose behalf I have executed the
foregoing application; that the Applicant is a
citizen of the United States within the
meaning of 46 U.S.C. 50501, as amended (46
U.S.C. 802); that this application is made for
the purpose of inducing the United States of
America to permit the Applicant, pursuant
to section 607 of the Merchant Marine Act,
1936, as amended, the Joint Regulations and
the SOC Regulations to establish a Capital
Construction Fund for the purposes set forth
in subsection 607(f) of the Act; that I have
carefully examined the application and all

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documents submitted in connection therewith and, to the best of my knowledge, information and belief, the statements and representations contained in said application
and related documents are full, complete, accurate, and true.
Subscribed and sworn to before me, a
lllllll in and for the State and County above named, this llllll day of
llllllll, 20ll.
My
Commission
expires
lllllllllll.
NOTE: The United States Criminal Code
makes it a criminal offense to knowingly
and willfully falsify, conceal or cover up by
any trick, scheme, or device, a material fact
from, or make any false, fictitious or fraudulent statements or representations or make
or use any false writing or document knowing the same to contain any false, fictitious
or fraudulent statement to, any department
or government agency of the United States
as to any matter within its jurisdiction (18
U.S.C. 1001).
[41 FR 4265, Jan. 29, 1976, as amended at 73
FR 56740, Sept. 30, 2008]

APPENDIX II TO PART 390—SAMPLE CAPITAL CONSTRUCTION FUND AGREEMENT

[Contract No. MA/CCF—]

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CAPITAL CONSTRUCTION FUND AGREEMENT WITH

This Capital Construction Fund Agreement
(‘‘Agreement’’), made on the date hereinafter
set forth, by and between the United States
of America, represented by the Maritime Administrator, Department of Transportation
(‘‘Maritime Administrator’’), and lll, a
corporation organized and existing under the
laws of the State of lll (‘‘Party’’), a citizen of the United States of America.
Whereas: 1. The Party has applied for the
establishment of a Capital Construction
Fund (‘‘Fund’’) under section 607 of the Merchant Marine Act, 1936, as amended (‘‘Act’’);
2. The Party is the owner or lessee or has
contracted for the construction of one or
more eligible vessels as defined in section
607(k) of the Act, which vessels are listed in
Schedule A hereof;
3. The Party has a program for the construction or acquisition of qualified agreement vessels as defined in section 607(k) of
the Act, which program is described in
Schedule B hereof;
4. The Maritime Administrator and the
Party desire to enter into an Agreement for
the purpose of providing replacement vessels, additional vessels, or reconstruction
vessels, built in the United States and documented under the laws of the United States
for operation in the United States foreign,

Great Lakes, or noncontiguous domestic
trade;
5. The Maritime Administrator has determined that the Party qualifies for an Agreement under the Act; and
6. The Maritime Administrator has authorized the award of an Agreement upon the
terms and conditions set forth herein subject
to the Act, as it may be amended from time
to time, and such rules and regulations as
shall be prescribed by the Secretary of
Transportation or his delegate, either alone
or jointly with the Secretary of the Treasury, as necessary to carry out the powers,
duties, and functions vested in them by the
Act (‘‘rules and regulations’’).
Now, therefore in consideration of the
premises the Maritime Administrator and
the Party hereby agree as follows:
1. Establishment of a Fund: (A) A Fund is
hereby established for the purposes set forth
in Article 2 hereof, pursuant to such terms
and conditions as shall be prescribed in this
Agreement, the Act, or the rules and regulations.
(B) The Fund shall be established in the depositories listed in Schedule C hereof.
2. Purpose of the Fund: The Fund established hereunder shall be utilized to provide
for replacement vessels, additional vessels,
or reconstructed vessels, built in the United
States and documented under the laws of the
United States for operation in the United
States foreign, Great Lakes, or noncontiguous domestic trade, and to provide for
qualified withdrawals to achieve the program set forth in Schedule B hereof.
3. Term of the Agreement: This Agreement
shall be effective on the date of execution by
the Maritime Administrator and shall continue until terminated under Article 4.
4. Termination of Agreement: (A) This Agreement may be terminated at any time under
any of the following circumstances:
(1) Upon written mutual agreement by the
parties;
(2) Upon written notice by the Party that
a change has been made in the rules and regulations which would have a substantial effect upon the rights or obligations of the
Party.
(B) This Agreement shall terminate upon
completion of the program as set forth in
Schedule B hereof.
(C) Upon termination of this Agreement
pursuant to paragraphs (A) and/or (B) hereof
all amounts remaining in the Fund shall be
treated as if withdrawn in a nonqualified
withdrawal (as that term is defined in the
Act and the rules and regulations) on the
date of termination of this Agreement.
5. Deposits to be made into the Fund: (A)
Subject to any restrictions contained in the
Act, the rules and regulations, or this Agreement, the Party may deposit, for each taxable year to which this Agreement applies,
amounts representing:

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(1) Taxable income attributable to the operation of the vessels listed in Schedule A or
B hereof;
(2) The depreciation allowable under section 167 of the Internal Revenue Code of 1954,
on the vessels listed in Schedule A or B hereof;
(3) The net proceeds from the sale or other
disposition of any of the vessels listed in
Schedule A or B hereof; and
(4) The net proceeds from insurance or indemnity attributable to the vessels listed in
Schedule A or B hereof.
(B) The Party shall deposit for each taxable year to which this Agreement applies:
(1) All receipts from the investment or reinvestment of amounts held in the Fund, except that the Party shall not be permitted to
deposit more than is necessary to complete
its program set out in Schedule B hereof; and
(2) The net proceeds from the mortgage of
any vessel listed in Schedule B hereof for
which qualified withdrawals from the Fund
have been made.
(C) Notwithstanding anything in paragraph
(A) or (B) hereof to the contrary, the Party
shall make the minimum deposits set forth
in Schedule D hereof at the time and in such
amounts as may be set forth therein. The
Party specifically agrees to deposit up to one
hundred percent of allowable taxable income
attributable to the operation of agreement
vessels in order to meet its obligations under
this paragraph.
(D) In the event that any leased vessel listed in Schedule A hereof is included in another capital construction fund agreement,
the maximum amount of depreciation which
the Party may deposit in respect to that vessel shall be calculated by using the allowable
percentage of the depreciation ceiling listed
for that vessel in Schedule A hereof.
6. Withdrawals from the Fund: (A) The Party
may make such qualified withdrawals (as
that term is defined in the Act and the rules
and regulations) as shall be necessary to fulfill the obligations set forth in Schedule B
hereof. Any such qualified withdrawal may
be made without the consent of the Maritime
Administrator, except as required by the
rules and regulations.
(B) Any other withdrawal from the Fund
shall be made only upon the prior written
consent of the Maritime Administrator, as
required by the rules and regulations.
7. Investment of the Fund: (A) The Party, at
its discretion, may invest assets held in the
Fund in accordance with the Act and the
rules and regulations.
(B) The Party agrees that when investing
assets held in the Fund to make such investments as will insure that sufficient cash is
available at the time qualified withdrawals
are required in accordance with the program
described in Schedule B hereof.
8. Pledges, Assignments and Transfers: (A)
The Party agrees not to assign, pledge or

otherwise encumber, either directly or indirectly or through any reorganization, merger, or consolidation, all or any part of this
Agreement, the Fund, or any assets in the
Fund without the prior written consent of
the Maritime Administrator; Provided, however, The Party may transfer the assets of
the Fund, in whole or in part, to an investment trustee, as provided in the rules and
regulations.
(B) The Party shall not obligate any assets
in the Fund as a compensating balance.
(C) The Party may not sell, transfer or
otherwise dispose of any vessel, or part
thereof, described in Schedule B hereof without the prior written consent of the Maritime Administrator.
9. Records and Reports: (A) The Party and
each affiliate, domestic agent, subsidiary or
holding company connected with, or directly
or indirectly controlling or controlled by the
Party shall keep its books, records, and accounts relating to the maintenance, operation, servicing of the vessel(s) and/or service(s) covered by this Agreement in such
form as may be prescribed by the Maritime
Administrator under the rules and regulations.
(B) The Maritime Administrator agrees not
to require the duplication of books, records
and accounts required to be kept in some
other form by the Interstate Commerce Commission or the Secretary of the Treasury, so
long as the information required in paragraph (A) hereof is made available to the
Maritime Administrator.
(C) The Party agrees to file, upon notice
from the Maritime Administrator, balance
sheets, profit and loss statements, and such
other statements of financial operations,
special reports, charters, ships’ logs, memoranda of facts and transactions, as in the
opinion of the Maritime Administrator may
affect the Party’s performance under this
Agreement.
(D) The Maritime Administrator may require by regulation that any of such statements, reports and memoranda shall be certified by independent certified public accountants acceptable to the Maritime Administrator.
(E) The Maritime Administrator may require the Party to establish and maintain
systems of control of expenses and revenues
in connection with the operation of the
agreement vessel(s).
(F) The Party agrees to submit promptly
to the Maritime Administrator any contract
executed in connection with the program described in Schedule B hereof.
(G) The Maritime Administrator is hereby
authorized to examine and audit the books,
records, and accounts of all persons referred
to in this Article whenever he may deem it
necessary or desirable.

413

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erowe on PROD1PC63 with CFR

Pt. 390, App. II

46 CFR Ch. II (10–1–08 Edition)

10. Modification and Amendment: This
Agreement may be modified or amended at
any time by mutual written consent.
11. Incorporation of Schedules: The attached
Schedules A, B, C, and D are incorporated
into and made a part of this Agreement.
12. Liquidated Damages: (A) In the event
that the Party operates any qualified agreement vessel described in Schedule B hereof
in geographic trades other than those permitted by section 607 of the Act, this Agreement, and/or the rules and regulations, the
Party shall pay to the United States an
amount of liquidated damages for each day
of such impermissible geographic trading
which shall constitute the time value of the
deferral of Federal income tax which the
Party has received. The amount shall be calculated in accordance with the rules and regulations.
(B) The Party agrees to pay the daily rate
of liquidated damages to the Maritime Administrator, for deposit in the Treasury of
the United States, within the time limits
provided for in the rules and regulations.
(C) Nothing in this Article shall in any
way be construed to diminish or waive any of
the Maritime Administrator’s other remedies for breach under the Act, the Agreement, or the rules and regulations.
(D) Notwithstanding the fact that the
Agreement may be terminated pursuant to
the provisions of Article 4 hereof, or otherwise, the provisions of this Article 12 shall
continue in effect as follows:
(1) In the case of a vessel constructed or
acquired within one year of final delivery
from the shipyard after construction with
the aid of qualified withdrawals, for a period
of twenty (20) years from the date of such
vessel’s final delivery;
(2) In the case of a vessel reconstructed or
acquired more than one year after final delivery from the shipyard after construction
with the aid of qualified withdrawals, for a
period of ten (10) years from the date of such
vessel’s final delivery from the shipyard
after reconstruction or the date of such vessel’s acquisition; and
(3) In the case of a vessel included in
Schedule B hereof as a qualified agreement
vessel in regard to which qualified withdrawals from the Fund have been made to
pay existing indebtedness, for a period of ten
(10) years from the date of the first qualified
withdrawal in regard to such vessel, Provided, however, That if such vessel was more
than fifteen (15) years old on the date of the
first qualified withdrawal in regard thereto,
such conditions shall continue for a period of
five (5) years in regard to such vessel.
13. Warranties and Representations by the
Party: The Party hereby warrants and represents that:
(A) The Party is a citizen of the United
States within the meaning of section 2 of the
Shipping Act, 1916, as amended, and will con-

tinue to be so for the term of this Agreement. The Party agrees that, each year,
within thirty (30) days after the annual
meeting of its stockholders, it shall file a
supplemental affidavit as evidence of its continuing United States citizenship, provided
that any changes in data last furnished with
respect to officers, directors, and stockholders holding five percent or more of the
issued and outstanding stock of each class or
series which would result in a loss of the
Party’s status as a United States citizen
shall be promptly reported to the Maritime
Administrator.
(B) The Party owns, is the lessee, or has
contracted for the construction of one or
more eligible vessels (within the meaning of
section 607(k) of the Act) as listed in Schedule A hereof.
(C) The qualified vessels described in
Schedule B hereof: (1) Were or will be constructed or reconstructed in the United
States, except as provided in the Act and the
rules and regulations;
(2) Are or will be documented under the
laws of the United States and will continue
to remain so documented; and
(3) Will be operated in the foreign, Great
Lakes or noncontiguous domestic trade of
the United States within the meaning of the
Act and the rules and regulations
(D) The Party will meet its deposit obligations as agreed upon in Article 5 of this
Agreement.
(E) The Party will promptly inform the
Maritime Administrator, in writing, of any
change in circumstances which would tend
to adversely affect the ability of the Party
to carry out its obligations under the Agreement.
(F) The Party will faithfully conform to all
rules and regulations governing the Agreement and the Fund.
(G) Nothing of monetary value has been
improperly given, promised, or implied for
entering into this Agreement. The Party further warrants that no improper personal, political or other activities have been used or
attempted in an effort to influence the outcome of the discussions or negotiations leading to the award of this Agreement. Breach
of this warranty shall constitute an event of
default for which the Maritime Administrator shall have the right, notwithstanding
Article 4, to terminate this Agreement without liability to the United States.
14. Default in Obligations: (A) If the Maritime Administrator determines that any
substantial obligation under this Agreement
is not being fulfilled by the Party, he may,
under the rules and regulations and after the
Party has been given notice and an opportunity to be heard, declare a breach and
treat the entire Fund, or any portion thereof, as an amount withdrawn in a nonqualified withdrawal.

414

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Maritime Administration, DOT

Pt. 390, App. II
15. Extension of Federal Income Tax Benefits:
The Maritime Administrator agrees that the
Federal income tax benefits provided in the
Act and the rules and regulations shall be
available to the Party if the Party shall
carry out its obligations under this Agreement.

(B) The Maritime Administrator shall provide an opportunity for the Party to cure a
breach declared pursuant to Paragraph (A) of
this Article 14.
(C) Events of breach by the Party shall include, but shall not be limited to: (1) Failure
in any respect to use due diligence in performing the program set forth in Schedule B
hereof;
(2) Obligating the assets in the Fund as a
compensating balance;
(3) Failure to make deposits required in
Schedule D hereof;
(4) Failure to secure written permission
from the Maritime Administrator when such
permission is required by the rules and regulations;
(5) Failure to submit reports and/or records
on a timely basis as provided in Article 9
hereof;
(6) Any material misrepresentation made
by the Party or any failure by the Party to
disclose material information in connection
with this Agreement whether before or after
execution hereof and whether made in an application, report, affidavit, or otherwise; or
(7) Failure by the Party to comply with
any provisions of section 607 of the Act, the
rules and regulations, or this Agreement.

UNITED STATES OF AMERICA, MARITIME ADMINISTRATOR, DEPARTMENT OF TRANSPORTATION

(SEAL)
Attest:
By lllll
(Secretary)
(SEAL)
By lllll
(Secretary)
Attest:
By llllllllllllllllllllll
(Contracting Officer)
llllllllllllllllll
(Secretary)
Approved as to form:
lll By lll
(Assistant General
Counsel, Maritime
Administration)

(Date of Execution)
(President)

XYZ CO.—SCHEDULE A—ELIGIBLE AGREEMENT VESSELS
(a)

(c)

(d)

(e)

Specific type

Capacity

Owned or leased and
owner is leased

Date and place constructed

SS Smith, official No.
236425..

Tanker ..........................

56,000 dwt ...................

1962, American Steel,
San Francisco, Calif.

SS Brown, official No.
325111.
SS Jones, official No.
190528..
Hercules, official No.
256,125.

......do ...........................

265,000 dwt .................

Leased: ABC Ships,
Inc., San Diego,
Calif., 50 percent of
depreciation ceiling.
Owned ..........................

Container ship ..............

30,000 dwt, 500 400-ft
containers.
105 ft 2,000 hp ............

erowe on PROD1PC63 with CFR

Name of vessel

(b)

Oceangoing tugboat ....

......do ...........................
......do ...........................

XYZ–1, official No.
257,164.

Roll-on, roll-off barge ...

1,200 gr ton, 45 40-ft
containers.

......do ...........................

XYZ–2, official No.
260,138.

......do ...........................

......do ...........................

......do ...........................

OTC–35, official No.
262,170.

......do ...........................

1,500 gr ton, 60 40-ft
containers.

200 trailers, Nos.
111032–A–10677B–
1M through 11032–
A–10877B–1M.

Dry cargo .....................

40 ft ..............................

1,500 containers, Nos.
312 A through 1312
A..

Refrigerated dry cargo.

......do ...........................

Leased; Oregon Towing Co., Portland,
Oreg., 100 percent of
depreciation ceiling.
Leased; International
Leasing Co., New
York, N.Y. 0 percent
of depreciation ceiling.
Owned ..........................

1974, Southern Shipyards, Mobile, Ala.
1954, Bond Shipyard,
New York, N.Y.
1968, Washington Iron
Works, Seattle,
Wash.
1968, Washington Iron
Works, Seattle,
Wash.
1969, Washington Iron
Works, Seattle,
Wash.
1969, J. & J. Shipyard,
Portland, Oreg.

1968, Acme Container
Corp., New York,
N.Y.

1969, Aluminum Products, Inc., Dallas,
Tex.

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Pt. 390, App. II

46 CFR Ch. II (10–1–08 Edition)

XYZ CO.—SCHEDULE A—ELIGIBLE AGREEMENT VESSELS (CONTINUED)
(f)

(g)

(h)

(i)

Date and place reconstructed

Date documented

Area of operation

Details of service

SS Smith, official No.
236425.

Not available ..............

1962

Noncontiguous domestic trade.

SS Brown, official No.
325111.
SS Jones, official No.
190528.
Hercules, official No.
256,125.
XYZ–1, official No.
257,164.

......do .........................

1974

U.S. foreign trade ......

1970, Litton Systems,
Mississippi.
Not available ..............

1954
1968

U.S. foreign and noncontiguous trade.
Domestic ....................

......do .........................

1968

......do .........................

......do .........................

1969

......do .........................

......do .........................

1969

......do .........................

......do .........................

NA

......do .........................

For use on Barges XYZ–1, XYZ–2, and
OTC–35.

......do .........................

NA

U.S. foreign noncontiguous domestic trade.

For use as complement of SS Jones.

XYZ–2, official No.
260,138.
OTC–35, official No.
262,170.
200 trailers, Nos.
111032–A–10677B–
1M through 11032–
A–10877B–1M.
1,500 containers, Nos.
312 A through 1312
A..

Carriage of crude oil from Valdez, Alaska,
to west coast of the continental United
States.
Worldwide carriage of crude oil.
Container service between Japan and
California via Hawaii.
Towing roll-on, roll-off barges from Puget
Sound to San Francisco.
Carriage of trailer type containers between Puget Sound and San Francisco.
Do.
Do.

XYZ CO., PROGRAM OBJECTIVES—I. ACQUISITION OR CONSTRUCTION OF VESSELS
Vessel name,
and official number

General characteristics

Approximate
cost

Amount to be
withdrawn from
fund

Approximate date of—
Contract

Anticipated area
of operation

Delivery

XYZ CO., PROGRAM OBJECTIVES—II. RECONSTRUCTION OF VESSELS
Vessel name,
and official number

General characteristics

Approximate
cost

Amount to be
withdrawn from
fund

Approximate date of—
Contract

Anticipated area
of operation

Delivery

XYZ CO., PROGRAM OBJECTIVES—III. PAYMENT OF PRINCIPAL ON EXISTING INDEBTEDNESS
Vessel name and official number

Purpose of indebtedness

Amount to be paid from fund

XYZ CO., SCHEDULE C—DEPOSITORIES FOR CAPITAL CONSTRUCTION FUND
Name

Address

1. First American Bank checking account .......................................................
2. Southern California National Bank investment trustee established pursuant to sec. 390.7 of the SOC regulations.

2001 Park Ave., San Francisco, Calif. 94109.
1 Waterfront Place, San Francisco, Calif. 94101.

XYZ CO. SCHEDULE D—MINIMUM DEPOSITS
[In thousands]
Ordinary income

erowe on PROD1PC63 with CFR

Taxable year
1973 to 1975 .............................................
1976 to 1978 .............................................
1979 to 1981 .............................................

$3,150
2,900
3,000

Net proceeds
1 $2,400
2 1,500

........................

Fund interest
$250
325
350

Depreciation
........................
........................
85

416

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Total
$5,800
4,725
3,435

Maritime Administration, DOT

Pt. 390, App. III

XYZ CO. SCHEDULE D—MINIMUM DEPOSITS—Continued
[In thousands]
Ordinary income

Taxable year
1982
1985
1988
1991
1994
1997
2000

Net proceeds

Fund interest

Depreciation

Total

to 1984 .............................................
to 1987 .............................................
to 1990 .............................................
to 1993 .............................................
to 1996 .............................................
to 1999 .............................................
..........................................................

2,800
2,850
2,900
3,000
3,100
3,250
3,200

........................
........................
........................
........................
........................
........................
........................

74
90
100
100
110
120
120

125
60
........................
........................
........................
........................
........................

3,000
3,000
3,000
3,100
3,210
3,370
3,320

Total ................................................

........................

........................

........................

........................

35,960

1 Net

proceeds from sale of barges XYZ–1 and XYZ–2 for $1,200,000 each.
2 Net proceeds from sale of tug Hercules.

[41 FR 4265, Jan. 29, 1976, as amended at 42 FR 43632, Aug. 30, 1977]
EDITORIAL NOTE: At 73 FR 56741, Sept. 30, 2008, appendix II to part 390 was amended; however, the amendment could not be incorporated due to inaccurate amendatory instruction.

EXHIBIT A—XYZ CO., SUMMARY OF CASH, SECURITIES, AND STOCK ON DEPOSIT AND NET
ACCRUED DEPOSITS TO AND ACCRUED WITH-

APPENDIX III TO PART 390—U.S. DEPARTMENT
OF
TRANSPORTATION,
MARITIME
ADMINISTRATION—SAMPLE SEMIANNUAL REPORT
[Illustrative sample of the report required by
the Maritime Administration pursuant to
46 CFR part 390 prescribing the capital construction fund reporting requirements to
be followed by those companies which are
party to a capital construction fund agreement]

EXHIBIT A—XYZ CO., SUMMARY OF CASH, SECURITIES, AND STOCK ON DEPOSIT AND NET
ACCRUED DEPOSITS TO AND ACCRUED WITHDRAWALS FROM THE CAPITAL CONSTRUCTION
FUND AS OF JUNE 30, 19ll

DRAWALS FROM THE CAPITAL CONSTRUCTION
FUND AS OF JUNE 30, 19ll—Continued
Thousands
Fund total (agrees with balance sheet submitted at this date) on deposit for book
purposes—June 30, 19ll .......................
Portion of fund total for tax purposes as of
June 30, 19ll, which represents a
‘‘CCF: Security amount’’ pursuant to an
agreement covering the dual use of a capital construction fund
Balance brought forward ...............................
Deposits .........................................................

Thousands
$403
82

Total ‘‘CCF: Security Amount’’ ............

485

Thousands
Cash (exhibit A–1 and B) ..............................
Securities and stock—adjusted basis (exhibit
A–2 and B) .................................................

4,035

EXHIBIT A–1—XYZ COMPANY

$1,025

SUMMARY OF CASH ON DEPOSIT IN CAPITAL CONSTRUCTION FUND
AS OF JUNE 30, 19ll

2,560
Thousands

Fund total for tax purposes on deposit (exhibit C) ........................................................
Net accrued deposits and withdrawals (exhibit A–3) ....................................................

3,585
450

First American Bank, San Francisco, Calif.,
checking account No. 654–0876–211 .......
Total cash in capital construction fund at
June 30, 19ll .........................................

$1,025
1,025

EXHIBIT A–2—XYZ CO., SUMMARY OF SECURITIES AND STOCK (ADJUSTED BASIS AND FAIR MARKET
VALUE) IN CAPITAL CONSTRUCTION FUND AS OF JUNE 30, 19ll(IN THOUSANDS)
Adjusted
basis

erowe on PROD1PC63 with CFR

Treasury notes—due July 4, 19ll, $800,000 face value, 1st American Bank, San Francisco,
Calif., trust account No. 610–2135 ............................................................................................
Negotiable certificate of deposit—due July 31, 19ll, $500,000 at 8 percent, 1st American
Bank, San Francisco, Calif., CD No. 186007 ............................................................................
U.S.A. Motors, Inc.—class A common stock, 5,000 shares, Southern California National Bank,
trust account No. 358–21 ..........................................................................................................
Energy Co., Inc.—1st preferred, 4,100 shares, Southern California National Bank, trust account No. 358–21 ......................................................................................................................

$760

$760

500

500

625

725

205

255

417

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Fair market
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214195

Pt. 390, App. III

46 CFR Ch. II (10–1–08 Edition)

EXHIBIT A–2—XYZ CO., SUMMARY OF SECURITIES AND STOCK (ADJUSTED BASIS AND FAIR MARKET
VALUE) IN CAPITAL CONSTRUCTION FUND AS OF JUNE 30, 19ll(IN THOUSANDS)—Continued
Adjusted
basis

Fair market
value

Boon Corp.—class A common stock, 10,000 shares, Southern California National Bank, San
Francisco, Calif., trust account No. 358–21 ..............................................................................

470

520

Total securities and stock in capital construction fund at June 30, 19ll ......................

2,560

2,760

EXHIBIT A–3—XYZ CO., SUMMARY OF NET ACCRUED DEPOSITS AND WITHDRAWALS IN CAPITAL
CONSTRUCTION FUND AS OF JUNE 19ll
Thousands
Accrued deposits:
19ll income (6 mos. ended June 30, 19lll ..............................................................................................
Depreciation .......................................................................................................................................................

$500
200

Total .........................................................................................................................................................
Accrued withdrawals: Progress payment made from general fund—hull 210 ..........................................................

700
250

Net accrued deposits and withdrawals in capital construction fund at June 30, 19ll ..............................

450

EXHIBIT B—XYZ CO., TRANSCRIPT OF TRANSACTIONS IN THE CAPITAL CONSTRUCTION FUND FOR
THE 6 MOS. ENDED JUNE 30, 19ll
Cash
Date

Jan.
Jan.
Jan.
Jan.

1,
1,
3,
4,

19ll
19ll
19ll
19ll

Feb. 29,
19ll
Mar. 15,
19ll
Apr. 4, 19ll
Apr. 4, 19ll
Apr. 15,
19ll
May 15,
19ll
June 15,
19ll

Securities and stock (at
adjusted basis)

Description of transaction

Detail

Debit

Credit

Balances brought forward ...........
Bond debt payment—SS Smith.
Deposit 19ll depreciation .......
Purchased Treasury notes—90
days at 6-percent discount..
Dividends earned ........................

$1,500,000
..................
300,000
..................

................
$250,000

$2,000,000

752,000

752,000

................

4,500

................

....................

................

Progress payment No. 3 hull
210..
Sale of Treasury notes—cost .....
Income from sale ........................
Purchased Treasury notes 90
days at 5-percent discount.
Deposit from 19ll earnings ....

..................

172,500

752,000
48,000
..................

................

....................

752,000

760,000

760,000

................

Debit

Credit

$800,000 at 6-percent
discount.
$0.45 per share on
10,000 shares
Boon Corp.

$800,000 at 5-percent
discount.

310,000

Progress payment No. 4—hull
210..
Sale of stock—cost .....................

..................

180,000

200,000

................

....................

200,000

Gain on sale of stock ..................

..................
25,000

................

....................

................

Balances carried forward ............

1,025,000

................

2,560,000

4,000 shares at
$56.25 per share.
Energy Co., Inc.

erowe on PROD1PC63 with CFR

EXHIBIT C—XYZ CO., SUMMARY OF TOTAL TRANSACTION AFFECTING THE TAX ACCOUNT BALANCES
IN THE CAPITAL CONSTRUCTION FUND FOR THE 6 MOS. ENDED JUNE 30, 19ll
Ordinary income

Capital gain

Opening balance, Jan. 1, 19ll .........................................................
Deposits, income, transfers in, etc .......................................................

$1,000,000
362,500

$1,000,000
25,000

$1,500,000
300,000

$3,500,000
687,500

Total ............................................................................................
Withdrawals, losses, transfers out, etc .................................................

1,362,500
....................

1,025,000
....................

1,800,000
602,500

4,187,500

Balance at June 30, 19ll ..................................................................

1,362,500

1,025,000

1,197,500

3,585,000

Capital

418

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Total

Maritime Administration, DOT

Pt. 390, App. V

EXHIBIT D—XYZ COMPANY
SUMMARY BY VESSEL OF QUALIFIED WITHDRAWALS FROM THE FUND FOR THE SIX
MONTHS ENDING JUNE 30, 19ll

A. Acquisition or Construction of Vessels
(1) 80,000 dwt tanker: No qualified withdrawals have been made to date; construction is presently scheduled to commence in mid-1977.
(2) 130-foot ocean tug hull No. 210:
Balance brought forward ...................................
Qualified withdrawals during period ..................

$700,000
352,500

Total qualified withdrawals to date ......

1,052,500

130-foot ocean tug hull No. 211: No
withdrawals have been made to date;
construction is presently scheduled to
commence in November 1975
B. Acquisition or Construction of Barges,
Containers and Trailers
250-foot tank barge: No qualified withdrawals have been made to date; construction presently scheduled to commence in November 1975.

Now, therefore, in consideration of the
premises the Maritime Administrator and
the Party agree as follows:
Notwithstanding the provisions of Article
4(A)(2) of the Agreement, the Party may,
within sixty (60) days after notice appears in
the FEDERAL REGISTER that the Regulations
jointly prescribed by the Secretary of the
Treasury and the Secretary of Transportation have been finalized, terminate the
Agreement, if such Regulations have a substantial effect on the rights or obligations of
the Party. Upon termination of the Agreement pursuant to this Addendum No. ll
the provisions of the Internal Revenue Code
of 1954, the Act, and the rules and regulations shall apply to all funds remaining in
the Fund as if such funds were withdrawn in
a non-qualified, withdrawal, as that term is
defined in the Act and the rules and regulations.
In witness whereof, the Secretary and the
Party have executed this addendum, in quadruplicate, effective as of the date indicated
below.
UNITED STATES OF AMERICA,
Secretary of Transportation,
Maritime Administrator,
Department of Transportation

C. Reconstruction of Vessels

By ...........................................
(Contracting Officer)
Date .......................................
Attest:
By ...........................................
(Secretary)
...........................................
(SEAL)
Approved as to form:
................................................
(Assistant Chief Counsel
Maritime Administration)

None.
D. Reconstruction of Barges, Containers, and
Trailers
None.
E. Payment of Principal on Existing
Indebtedness
SS Smith—Official No. 236425:
Balance brought forward ...................................
Qualified withdrawals during period ...........

$500,000
250,000

Total qualified withdrawals to date ......

750,000

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APPENDIX IV TO PART 390—SAMPLE ADDENDUM TO MARITIME ADMINISTRATION CAPITAL CONSTRUCTION FUND
AGREEMENT
This Agreement, made by the Maritime
Administrator, Department of Transportation (‘‘Maritime Administrator’’) and
lll (‘‘Party’’), a citizen of the United
States of America, as an Addendum to that
certain agreement, Contract No. MA/CCF–
Whereas: 1. On lll, the parties hereto
entered into a Capital Construction Fund
Agreement (‘‘Agreement’’) under section 607
of the Merchant Marine Act, 1936, as amended (‘‘Act’’);
2. The parties hereto desire to modify that
Agreement in the manner hereinafter set
forth;
3. The parties hereto have agreed to said
amendment and desire to incorporate the
same into the Agreement.

By.................
Title.................
Attest:
By....................
Title................
(SEAL)

[G.O. 109, Rev., Amdt. 6, 42 FR 43634, Aug. 30,
1977, as amended at 73 FR 56741, Sept. 30,
2008]
EDITORIAL NOTE: At 73 FR 56741, Sept. 30,
2008, appendix IV to part 390 was amended;
however, a portion of the amendment could
not be incorporated due to inaccurate
amendatory instruction.

APPENDIX V TO PART 390—SAMPLE
QUALIFIED TRADE AFFIDAVIT
AFFIDAVIT

State of lllllllllllllllllll
County of llllllllllllllllll
I, lll, (Name) being duly sworn, depose
and say:
1. That I am the lll (Title) of lll.
(Name of party)
2. That I am fully acquainted with and
have knowledge of the operations of all
qualified agreement vessels owned or operated by my company and identified in Capital Construction Fund Agreement, MA/CCF
lll.

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Pt. 391

46 CFR Ch. II (10–1–08 Edition)

3. That I have full knowledge of the trading restrictions and liquidated damages provisions pertaining to qualified agreement
vessels, as stipulated in section 607 of the
Merchant Marine Act, 1936, as amended, and
in the rules and regulations of 46 CFR Part
390.
4. That based on my inspection of Company
records and to the best of my knowledge and
belief, except as noted below in statement 5
of this affidavit, during the period lllll
(Beginning
of
taxable
year)
through
lllll (End of taxable year) my company
operated its qualified agreement vessels only
in the United States, foreign, Great Lakes,
and noncontiguous domestic trade in accordance with Capital Construction Fund Agreement, MA/CCF lll.
5. Exceptions to statement 4 of this Affidavit are as follows (indicate exceptions
below or attach a supplemental statement if
additional space is needed; if there are no exceptions, write ‘‘none’’):
(Affiant)
Subscribed and sworn to before me, a Notary Public in and for the State, City and
County above named, this llllll day of
llllllll, 19ll.
(Notary Public)
My
commission
llllllllllll, 19ll

expires

[41 FR 39751, Sept. 16, 1976]

PART 391—FEDERAL INCOME TAX
ASPECTS OF THE CAPITAL CONSTRUCTION FUND

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Sec.
391.0 Statutory provisions; section 607, Merchant Marine Act, 1936, as amended.
391.1 Scope of section 607 of the Act and the
regulations in this part.
391.2 Ceiling on deposits.
391.3 Nontaxability of deposits.
391.4 Establishment of accounts.
391.5 Qualified withdrawals.
391.6 Tax treatment of qualified withdrawals.
391.7 Tax treatment of nonqualified withdrawals.
391.8 Certain corporate reorganizations and
changes in partnerships, and certain
transfers on death. [Reserved]
391.9 Consolidated returns. [Reserved]
391.10 Transitional rules for existing funds.
391.11 Definitions.
AUTHORITY: Secs. 204(b) and 607(l), Merchant Marine Act, 1936, as amended (46
U.S.C. 1114, 1177), Reorganization Plans No.
21 of 1950 (64 Stat. 1273) and No. 7 of 1961 (75
Stat. 840) as amended by Pub. L. 91–469 (84

Stat. 1036), Dept. of Commerce Organization
Order 10–8 (38 FR 19707), July 23, 1973.
SOURCE: 41 FR 23960, June 14, 1976, unless
otherwise noted.

§ 391.0 Statutory provisions; section
607, Merchant Marine Act, 1936, as
amended.
SEC. 607 (a) Agreement Rules.
Any citizen of the United States owning or
leasing one or more eligible vessels (as defined in subsection (k)(1)) may enter into an
agreement with the Secretary of Transportation under, and as provided in, this section
to establish a capital construction fund
(hereinafter in this section referred to as the
‘‘fund’’) with respect to any or all of such
vessels. Any agreement entered into under
this section shall be for the purpose of providing replacement vessels, additional vessels, or reconstructed vessels, built in the
United States and documented under the
laws of the United States for operation in
the United States foreign, Great Lakes, or
noncontiguous domestic trade or in the fisheries of the United States and shall provide
for the deposit in the fund of the amounts
agreed upon as necessary or appropriate to
provide for qualified withdrawals under subsection (f). The deposits in the fund, and all
withdrawals from the fund, whether qualified
or nonqualified, shall be subject to such conditions and requirements as the Secretary of
Transportation may by regulations prescribe
or are set forth in such agreement; except
that the Secretary of Transportation may
not require any person to deposit in the fund
for any taxable year more than 50 percent of
that portion of such person’s taxable income
for such year (computed in the manner provided in subsection (b)(1)(A)) which is attributable to the operation of the agreement vessels.
(b) Ceiling on Deposits.
(1) The amount deposited under subsection
(a) in the fund for any taxable year shall not
exceed the sum of:
(A) That portion of the taxable income of
the owner or lessee for such year (computed
as provided in chapter 1 of the Internal Revenue Code of 1954 but without regard to the
carryback of any net operating loss or net
capital loss and without regard to this section) which is attributable to the operation
of the agreement vessels in the foreign or domestic commerce of the United States or in
the fisheries of the United States.
(B) The amount allowable as a deduction
under section 167 of the Internal Revenue
Code of 1954 for such year with respect to the
agreement vessels.
(C) If the transaction is not taken into account for purposes of subparagraph (A), the
net proceeds (as defined in joint regulations)
from (i) the sale or other disposition of any

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