sion of Ship Repair and Maintenance, Washington, D.C.

(d) After review of the Repair Summary and supporting papers, the Division of Ship Repair and Maintenance, Washington, D.C., shall furnish the operator with a letter (one copy of which shall be forwarded to the Region Finance Office), setting forth determinations as to eligibility of those costs for subsidy participation which are claimed in the "Subsidizable" total of the Form MA-140. This letter will also contain qualified approvals on Marine Loss items as outlined in paragraphs (e) and (f) of this section. The operator is to retain this letter with his copy of the repair summary for reference when audit is made of the repair accounts of the respective vessel. Such repair summary, together with the said letter, and documents pertinent thereto shall be retained for not less than 6 years after audit and approval by the Maritime Administration and Maritime Subsidy Board of a final accounting for the last year of a recapture period and settlement of such recapture period.

(e) To eliminate the necessity of the operators resubmitting domestic repair costs incident to marine losses for technical review and approval, such repair costs shall be listed on the Form MA-140 under a separate column headed "Marine Loss", and not included in either the "Subsidizable" or "Non-Subsidizable" totals. The letter referred to in paragraph (d) of this section will contain the determinations as to approval of such Marine Loss items for subsidy participation; such approvals will be qualified to cover the items providing they are not recoverable from insurance.

(f) Within 120 days after all damage applicable to the "policy voyage" as defined in the operator's insurance policy is repaired, in the case of franchise or deductible not being reached, or within 120 days from the date of Underwriters' rejection of insurance claim, the subsidized operator shall advise the respective Region Finance Officer, by letter, of those costs previously reported on Form MA-140 as Marine Losses which have been qualifiedly approved by the Division of Ship Repair and Maintenance and

which are not recoverable from insurance. The respective Region Finance Officer will verify that such costs have not been recovered.

(g) Within 30 days from the date of the Division of Ship Repair and Maintenance letter mentioned in paragraph (d) of this section, the subsidized operator shall refer to the Chief, Division of Ship Repair and Maintenance, Washington, D.C., for reconsideration any and all cases in which he does not agree with the decisions that a particular maintenance or repair expense shall not participate in subsidy. All decisions, unless appealed to the Chief, Office of Ship Operations, Washington, D.C., within the prescribed 30 days, shall be final. In his response to such appeals the Chief, Office of Ship Operations, will indicate whether the decision rendered therein is final.

(h) The operator may appeal to the Maritime Subsidy Board pursuant to the provisions of section 6 of Administrator's Order No. 184, if after exercising the appeal provisions stipulated above he does not accept the final determination of the Chief, Office of Ship Operations.

(Approved by the Office of Management and Budget under control number 21330007)

[G.O. 20, 3rd Rev., 35 FR 4048, Mar. 4, 1970, as amended at 47 FR 25530, June 14, 1982] § 272.8 Categorizing and allocating

charges.

(a) The operator shall exercise due diligence and accuracy in categorizing and identifying, both in specifications and in Form MA-140 those items on which subsidy is requested. The categories of work listed on the Form MA140 are as follows:

(1) Claimed for subsidy;
(i) M and R.
(ii) Spare parts.
(iii) Improvements.
(2) Marine Loss.

(3) Not claimed for subsidy.
(4) Grand total.

(b) In the event a vessel to which this part is applicable shall have terminated voyages during the calendar year which:

(1) Were made in more than one subsidized service, or

do

(2) Where made in subsidized service, as well as unsubsidized service while under the Operating Subsidy Agreement, or

(3) Were made in services requiring a reduction of subsidy due to operations in domestic trades, or

(4) Were made in a subsidized service which was affected by subsidy rate changes, the operator shall be reequired to allocate the total mainte

nance and repair costs of the vessel which have been approved by the Division of Ship Repair and Maintenance Ato all voyages terminating during the ▸ calendar year on the ratio which the number of days in each such voyage (determined in accordance with Part 281 of this chapter) bears to the total of the voyage days of the vessel during the year.

(c) During any such year or shorter to period, the operator shall be entitled to receive payments on account of Opnerating-Differential Subsidy on repairs I charged to each voyage at the rates determined by the Maritime Subsidy Board as applicable to the service and on the basis authorized by the Operating-Differential Subsidy Agreements; necessary adjustments shall be made following the close of the year or shorter period, after giving effect to the adjustments required by paragraph (b) of this section.

§ 272.9 Modifications, alterations, additions, and betterments.

(a) Any modification, alteration, addition, or betterment (work of such nature being herein called "Improvements"), effected during any one or a series of repair periods, whether or not in conjunction with other repairs, the aggregate cost of which does not exceed $100,000, if otherwise eligible, shall be considered for operating-differential subsidy participation, provided that the vessel is not permanently withdrawn from the subsidy contract (except under circumstances beyond the control of the operator) within a period of 3 years after completion of the work.

(b) An improvement effected during any one or a series of repair periods involving an aggregate cost in excess of $100,000 is ordinarily considered a capital expenditure. Expenditures of this

nature in excess of $100,000 shall be given consideration for operating-differential subsidy participation, if application is made to the Chief, Division of Ship Management, for such consideration prior to the award of such work and it is found that the work involved constitutes an improvement. The Assistant Administrator for Maritime Aids will approve, as appropriate, such subsidy under the provisions of Title VI, Merchant Marine Act, 1936, as amended. In the event that a determination is made that the expenditure does not constitute an improvement, but in fact constitutes reconditioning or reconstruction, consideration will be given for the award of construction-differential subsidy upon recommendation by the Assistant Administrator for Maritime Aids pursuant to the provisions of Title V, Merchant Marine Act, 1936, as amended, provided that the Maritime Subsidy Board grants such subsidy prior to the award of such work.

(c) When the operator desires to spread the work incident to any improvement over more than one repair period, he shall notify the Chief, Division of Ship Management, in writing, as to the scope of work involved, expected benefits, number of voyages over which the work will be spread and the estimated total cost, and shall report the actual total cost of such work in the Subsidy Repair Summary, covering the repair period in which it is finally completed, and shall attach a copy of the acknowledgment of the above mentioned notification to the appropriate Subsidy Repair Summary (Form MA-140).

(d) The provisions of this section shall not be applicable to improvements required to alter, outfit, or otherwise equip a vessel for its intended subsidized service which in the opinion of the Administration should have been effected prior to the initial entry of the vessel into subsidized service.

(e) The procurement cost of furniture, furnishings, fixtures or any other item in the category of expendable or portable equipment utilized in connection with alterations or additions to a vessel is not eligible for subsidy participation at the maintenance and repair rate.

(f) Subsidized operators of vessels having terminations of subsidized voyages prior to March 4, 1970, the effective date of this order, are hereby eligible for the payment of all unamortized operating-differential subsidy remaining to be paid on such vessels for all improvement costs eligible for subsidy participation incurred and set up as deferred charges: Provided, That such payments shall not exceed the amounts otherwise deemed payable under the provisions of General Order 20, 2d Revision, as determined by the Maritime Administration.

[G.O. 20, 3d, Rev., 35 FR 4048, Mar. 4, 1970, as amended by Amdt. 1, 37 FR 11578, June 9, 1972; G.O. 20, 3d. Rev., Amdt. 2, 38 FR 15078, June 8, 1973]

§ 272.10 Maintenance and repairs; definition.

(a) All costs not compensated by insurance, if deemed fair and reasonable by the Maritime Subsidy Board, and otherwise eligible under the provisions of this part, or as it may be subsequently amended, applicable to work performed by domestic ship repair yards or other domestic independent contractors, including work performed by shore gang labor to the extent set forth hereinafter under paragraphs (a)(2), (3), and (4) of this section, which are necessary to the maintenance, repair or replacement by duplication of, or restoration to satisfactory condition of, damaged or worn parts of vessels, their machinery and equipment (including spare parts) installed as integral parts of vessels, as distinguished from items of a portable or removable nature, shall be eligible for subsidy at the maintenance and repair subsidy rate. (The word "domestic," as used herein, is defined as meaning within the continental limits of the United States and Hawaii and Alaska.)

(1) Spare propellers and tailshafts, self-contained operable units of machinery or equipment (integral parts of the vessel) as distinguished from portable, expendable, and/or consumable items, and spare parts purchased to be installed as integral parts of the vessel, shall be eligible for subsidy at the applicable maintenance and repair subsidy rate when placed aboard a subsidized vessel, provided re

imbursement therefor be made by the operator to the Government in the event such items are not eventually utilized or installed in the subsidized vessel. Each invoice covering spare parts shall indicate the piece of equipment to which the spare's end use is related.

(2) Expenses eligible for subsidy under the maintenance and repair category for work performed by shore gang labor shall be limited to direct labor charges, spare parts, materials, and/or supplies as indicated in paragraph (a)(3) of this section, and other costs incurred as the result of the payment of direct wages, such as payroll taxes and workmen's compensation insurance required by law, and welfare, pension, and vacation fund payments required as a result of collective bargaining, if deemed fair and reasonable by the Maritime Subsidy Board. Such expenses shall be limited to those directly attributable to items of work that would be eligible for subsidy at the maintenance and repair subsidy rate if performed by an independent contractor aboard or for the subsidized vessel(s).

(3) Materials and/or supplies issued by the operator from ship's inventory, warehouse, or direct purchase to domestic ship repair yards, other domestic independent contractors, or shore gangs which are necessary to the maintenance, repair or replacement by duplication of or restoration to satisfactory condition of, damaged or worn parts of vessels, their machinery and equipment installed as integral parts of vessels, as distinguished from items of a portable, expendable or consumable nature, shall be eligible for subsidy.

(4) Spare parts issued by the operator from his warehouse or direct purchase to domestic ship repair yards, other domestic independent contractors or shore gangs, shall be eligible for subsidy.

§ 272.11 Examples of expenses ineligible for subsidy participation at the maintenance and repair rate.

The following are primary examples of expenses (but not limited to) which

are ineligible for subsidy participation at the maintenance and repair rate:

(a) Repair items correcting conditions noted in "On-Subsidy Surveys" where repairs clearly should have been made prior to the departure from last U.S. continental port on the first voyage in subsidized service, or prior to the first voyage upon resumption of operation under the respective Operating-Differential Subsidy Agreement, are not eligible for participation in I subsidy. The Chief, Division of Ship Repair and Maintenance, Washington, 2 D.C., shall determine whether repairs = performed in connection with an item unsighted in the initial "On-Subsidy Survey" are due to attrition after commencement of subsidized operation, or to prior non-subsidized operation, which determination shall be final. It is not the intent to prorate, between the periods before and after a vessel initially commences subsidized operation, the cost of individual repairs made or materials supplied.

(b) Overdue classification and inspection requirements: These are items required by the Classification Society or a Government Bureau which were due (grace periods not included) and not completed prior to the I first voyage in subsidized service, or prior to the first voyage upon resumption of operation under the respective Operating-Differential Subsidy Agree

ment.

(c) Foreign repairs: Items of maintenance or repair of whatsoever nature, including insurance repairs, performed outside the continental limits of the United States.

(d) Marine loss: Repairs recoverable from insurance.

(e) Cargo expense: Special cargo fittings of a temporary nature (as differentiated from installations of a permanent nature), dunnage, ceiling, battens, cleaning cargo holds and tanks for cargo, reading and certification of temperatures for refrigerated cargoes,

etc.

(f) Stevedore damage: Any damage to the vessel or cargo gear directly attributable to the stevedore proper. (Damage occurring during stevedoring operations, but due to ship's personnel or equipment for which the stevedore is not liable, will, if satisfactorily sup

ported by documentary evidence and if otherwise acceptable, be considered for subsidy participation.)

(g) Special trade requirements: Initial installations of (other than replacement of existing worn or damaged) equipment necessary for the vessel's particular trade route, such as Suez Canal Davit, etc. New requirements coming into effect after vessel's entry into the particular subsidized service, as differentiated from previously established requirements, shall be considered for subsidy participation.

(h) Procurement cost of any consumables, expendables or portable equipment when used or installed by crew, or furnished for inclusion in ship's inventory.

(i) Procurement costs, maintenance and repair costs, or replacement costs, incident to portable or expendable equipment.

(j) Apparent excessive maintenance and/or repair costs after operator has had an opportunity to present to the Administration all relevant facts pertinent thereto. Any such costs determined to be excessive shall not be taken into account for reserve fund or recapture purposes as provided in Part 286 of this chapter as amended from time to time.

(k) Costs included in shore gang labor charges which the Chief, Office of Finance, Maritime Administration, determines to be "overhead" as prescribed in § 282.900 of this chapter.

(1) Rental of equipment; e.g., compressors, paint floats, etc. for use by shore gangs or ship's crew in carrying out repairs or other work.

(m) Items included in repair summaries and/or supplements not submitted to Region Ship Repair and Maintenance Offices within 120 days after the end of the quarter in which the item occurred, unless such nonsubmittal can be shown by the operator to be due to circumstances beyond his control.

(n) Items included in appeals to an original determination not submitted by the operator to the Chief, Office of Ship Operations, within 30 days of the date of the original determination.

(0) Items included in appeals to the Maritime Subsidy Board which are not

submitted by the operator within 60 days after the date of the "final determination" of the Chief, Office of Ship Operations.

(p) Operational: In general, the types of items disallowed from repair and maintenance subsidy participation under this classification are those where no actual maintenance or repairs in the literal sense of the word are involved, e.g., loading stores, landing and sorting laundry, pilot service, tug charges, removing surplus equipment to warehouses, etc.

(q) Builder's and/or Repair Contractor's liability: Those items adjudged or noted as being Builder's and/or Repair Contractor's Guarantee items.

(r) Items of repair that can be definitely and entirely attributed to nonsubsidized operation.

(s) Work incident to an improvement spread over more than one repair period for which application to the Chief, Division of Ship Repair and Maintenance, was not submitted as required by paragraph (c) of § 272.9.

(t) Costs incident to Marine Loss not compensated by insurance which are not reported to the Region Finance Office in the manner and within the time specified in § 272.7(f).

§ 272.12 Definition of "consumables", "expendables", and "expendable equipment".

The words "consumables", "expendables", and/or "expendable equipment", as used in this part are defined in section 3, Part I of Maritime Administration Inventory Manual, Vessel Inventories (issued July-1957 under Authority Management Order No. 627) and as implemented by Maritime Administration Inventory Books-Deck Department Consumable Stores and Expendable Equipment (Form MA 4736A-March 1951), Engine Department Consumable Stores (Form MA 4736B-March 1951), Engine Department Expendable Equipment (Form MA 4736C-March 1951), Steward Department Consumable Stores and Expendable Equipment (Form MA 4736D-March 1951).

In case of any conflict between this definition and the other provisions of this part the other provisions shall control.

§ 275.2 Allowance purchases by Contractor and by Applicant.

(a) The Applicant's proposed plans and specifications for the construction of the vessel for which aid is applied or the proposed plans and specifications for the reconstruction or reconditioning work for which aid is applied shall state what, if any, materials or equipment will be furnished by the Contractor upon the basis of a contract price "allowance" and what, if any, materials or equipment will be furnished to the Contractor by the Applicant (without charge to the Con