F. Method of adjustment

26. Applicant understands that if the Administration finds that applicant is entitled to an adjustment, applicant will be notified of the adjusted purchase price deterApplicant mined by the Administration.

agrees that unless it notifies the Administration to the contrary within 15 days following the date of receipt by the applicant of the Administration's determination of adjusted purchase price, this adjusted purchase price will be binding upon the applicant and it agrees to execute an addendum to its original contract to purchase, which addendum will be sent to him by the Administration.

G. Liability for use of vessel after March 8, 1946

27. Applicant agrees, in the addendum to its original contract of sale as provided in item 26 above, that it will make an agreement with the Administration binding upon itself and any and all affiliated interests that the liability of the United States for use (exclusive of service, if any, required under the terms of the charter) of the Vessel on and after March 8, 1946 under any charter party shall not exceed 15 per centum per annum of the statutory sales price of the vessel as of such date, and that the liability of the United States under any such charter party for the loss of the Vessel shall be determined on the basis of the statutory sales price as of such date, depreciated to the date of loss at the rate of 5 per centum per annum and that in the event the United States, prior to the termination of the existing national emergency declared by the President on May 27, 1941, uses such vessel pursuant to a taking, or pursuant to a bareboat charter made, on or after March 8, 1946, the compensation to be paid to the purchaser, his receivers, and trustees, shall in no event be greater than 15 per centum per annum of the statutory sales price as of such date."

or charter)

is approved.

(purchase

2. National defense features the removal of which is desired.

3. Indicate for each item the extent of removal desired and reasons therefor and, further, whether the retention of any part is desired.

B. Reconversions or restorations

The applicant desired that the following described reconversion or restoration for normal operation in commercial services be made in the vessel in the event that application for purchase or charter is approved. In order to induce the Administration to act favorably on this application, the applicant submits in support thereof the following information:

4. As to each item requested.

(a) Explicit description.

(b) Estimated cost of work. 5. As to need.

(a) Explain why each item is considered necessary, indicating service and route of operation of vessel, cargo to be carried, volume of traffic expected in terms of trip capacities (each leg), frequency of sailings, and manner in which traffic is now handled. 6. As to desirability

(a) List of vessels owned by the applicant including name, gross tonnage, net tonnage, deadweight tonnage, age, speed, registry, and

indicating presence and extent of items requested.

(b) List other vessels presently in proposed trade, including names, gross tonnage, net tonnage, deadweight tonnage, age, speed, registry, and indicating presence and extent of items requested.

(c) Indicate expected net yearly revenue to be attributable directly to the requested items. (d) Indicate expected added or reduced net yearly operating costs attributable directly to the requested items.

(e) Indicate other benefits, monetary or otherwise, expected from the features requested.

C. Replacements, alterations, modifications, installations of special features

The applicant desires that the following described replacements, alterations, or modifications be made or special features be installed in the event that application for purchase or charter is approved. In order to induce the Administration to act favorably on this application, the applicant submits in support thereof the following information:

7. As to each item. (a) Explicit description. (b) Estimated cost of work.

8. As to need. (a) Explain why each item is considered necessary, indicating service and route of operation of vessel, cargo to be carried, volume of traffic expected in terms of trip capacities (each leg), frequency of sailings, and manner in which traffic is now handled. 9. As to desirability and necessity.

(a) List of vessels owned by the applicant includng name, gross tonnage, net tonnage, deadweight tonnage, age, speed, registry, and indicating presence and extent of features requested.

(b) List other vessels presently in proposed trade, including names, gross tonnage, net tonnage, deadweight tonnage, age, speed, registry and indicating presence and extent of features requested.

(c) Indicate expected net yearly revenue to be attributable directly to the requested features.

(d) Indicate expected added or reduced net yearly operating costs attributable directly to the requested features.

(e) Indicate other benefits monetary or otherwise, expected from the features requested.

terers in the rendition to the Maritime Administration of accountings required under SHIPSALESDEMISE 303 (1956), 1st Amendment, Bareboat Charter Agreements.

§ 299.201 Definitions.

Except when the context clearly indicates otherwise, as used in this subpart: (a) "Administration" or "owner" refers to the United States of America acting by and through the United States Department of Commerce, Maritime Administration.

(b) "Charterer" refers to a person, firm, or corporation that has chartered vessels from the Administration under a bareboat charter agreement known as SHIPSALESDEMISE 303, as hereinafter

defined.

(c) "SHIPSALESDEMISE 303" refers to Form 303 SHIPSALESDEMISE (1956), 1st Amendment, published in the FEDERAL REGISTER on January 30, 1957, § 299.130, and to any future modifications of such 303 SHIPSALESDEMISE charter forms which may be adopted.

(d) "Other operations" refers to the operation by the Charterer of vessels other than those chartered from the Administration or the furnishing by the Charterer of services and facilities to such other vessels, and all other business activities of the Charterer.

(e) "Uniform System of Accounts" refers to the "Uniform System of Accounts for Maritime Carriers" prescribed by the Maritime Administration, United States Department of Commerce, in Part 282 of this chapter General Order 22, Revised (Issue of 1950), effective January 1, 1951, published in the FEDERAL REGISTER, November 21, 1950.

(f) "Statutory additional charter hire", which is required to be paid under Clause 13, Part II, shall be one-half (50%) of the cumulative net voyage profits in excess of ten per centum per annum, as provided in Section 709 of the Merchant Marine Act, 1936, as amended, computed on the basis as set forth in paragraph (c) of § 299.204.

(g) "Allowable return" refers to the amount, at the rate of ten per centum per annum of "capital necessarily employed", which, to the extent earned, the Charterer is permitted to deduct from the cumulative net voyage profit in the computation of statutory additional charter hire.

(h) "Accounting period" or "other accounting period" refers to a period with

respect to which a separate determination of statutory additional charter hire due the Administration is required to be made pursuant to the provisions of the applicable bareboat charter agreement, commencing with the first day of the calendar year, or the first day of the month during which the first vessel is delivered to the Charterer under the agreement involved, or the first day of the month during which an addendum requiring a separate determination of statutory additional charter hire becomes effective, and ending with the last day of the calendar year or the last day of the month during the calendar year in which the last vessel is redelivered to the Administration under the agreement (or addendum) involved.

(i) "Overall accounting period" refers to a period from the earliest commencement of an accounting period to the latest termination of an accounting period during the same calendar year.

§ 299.202 Accounting requirements.

(a) Contract provisions and applicable instructions—(1) Preliminary payments, statutory additional charter hire. (i) Clause 13, Part II, SHIPSALESDEMISE 303, which provides that the Charterer shall pay the Owner statutory additional charter hire, as required by section 709, Merchant Marine Act, 1936, as amended, also provides that the time of payment of such hire shall be as provided by regulations of the Owner.

(ii) The Administration hereby requires that the Charterer make preliminary payments to the Owner on account of such statutory additional charter hire, which shall be deemed to be preliminary and subject to adjustment either at the time of the rendition of preliminary statements or upon completion of each final audit by the Owner, at which times such payments will be made to the Owner as such preliminary statements or final audit may show to be due, or such overpayments refunded to the Charterer as may be required. Accordingly, preliminary statements as prescribed in paragraph (a) of § 299.205 shall be prepared and forwarded to the Owner at Washington 25, D. C., within sixty (60) days after the close of each semiannual period, i. e., June 30 and December 31, Provided, however, that in the event the Charterer can submit final accountings within one hundred twenty (120) days after the close of the annual accounting year or by April 30 or within

one hundred twenty (120) days after the end of the month in which the last vessel is redelivered to the Owner, such preliminary statements as are required may be waived upon written request of the Charterer to the Owner. Each such preliminary statement and/or final accounting showing the computation of statutory additional charter hire due the Owner shall be accompanied by the Charterer's check payable to "Maritime Adm.-Commerce", on account of statutory additional charter hire for the period involved.

(2) Clause 27 of Part II of SHIPSALESDEMISE 303 provides, among other things, that the Charterer

(i) Shall keep its books, records and accounts relating to the management, operation, conduct of the business of and maintenance of the Vessels covered by this Agreement in accordance with the "Uniform System of Accounts for Maritime Carriers" prescribed by the Maritime Administration, U. S. Department of Commerce, in Part 282 of this chapter (General Order 22, Revised (Issue of 1950), effective January 1, 1951), and under such regulations as may be prescribed by the Owner, Provided, That, notwithstanding the provisions of said Part 282, such reserves as may be specifically authorized by the Owner shall be taken into account in the determination of "Net Voyage Profit" hereunder or the expenses to provide for which such reserves are so authorized shall be distributed over the period of use hereunder of the Vessels involved in such manner as will accomplish the same results as though such reserves were established, as prescribed in paragraph (b) (9) of § 299.204; and

(ii) Shall file, upon notice from the Owner, balance sheets, profit and loss statements, and such other statements of financial operations, special reports, memoranda of any facts and transactions, which in the opinion of the Owner affect the financial results in, the performance of, or transactions or operations under, this Agreement. The Owner reserves the right to require that all annual and final accountings, related financial statements, and other documents related thereto deemed necessary by the Owner, shall be certified by independent certified public accountants acceptable to the Owner.

(b) Annual and final accountings. (1) Pursuant to the applicable provisions of the bareboat charter agreements, the

Administration hereby requires that each Charterer submit a final accounting of statutory additional charter hire accrued to the Owner for each annual or overall accounting period under SHIPSALESDEMISE 303. Each such accounting shall be submitted in quadruplicate and shall include the basic statements prescribed in § 299.205 (Statements Required by the Administration). (When Charterer is located in Outports where branch of the principal coastal office of the Administration is maintained, e. g., Seattle Area Office, statements will be required in quintuplicate.)

(2) Each such accounting, if the amount of statutory additional charter hire shown thereby to have accrued to the Owner is in excess of the total of the payments theretofore made to the Administration (less any refunds theretofore made by the Administration on account of such payments) on account of statutory additional charter hire for the period involved, shall be accompanied by the Charterer's check payable to "Maritime Adm.-Commerce" on account of statutory additional charter hire for the period involved.

(3) If, conversely, in any instance the amount of statutory additional charter hire shown by such accounting to have accrued to the Owner is less than the total of the payments theretofore made to the Administration (less any refunds theretofore made by the Administration on account of such payments) on account of statutory additional charter hire for the period involved, the Charterer may apply to the Administration for refund of such overpayment and, if such application is found to be in order, the amount of the overpayment will be refunded by the Administration. The application should be made on a public voucher (Form 1034-Revised), in quintuplicate (When Charterer is located in Outports where branch of the principal coastal office of the Administration is maintained, e. g., Seattle Area Office, vouchers will be required in sextuplicate.), bearing language substantially as follows:

Claim for refund of excess of preliminary payments made to Maritime Adm.-Commerce, on account of statutory additional charter hire, over the amount of such statutory additional charter hire indicated to be due the Administration for the period from to under Bareboat Charter Agreement SHIPSALESDEMISE 303 No. as per accounting

rendered pursuant to General Order No. 60, Supplement 23, which, by this reference, is incorporated in this claim for refund.

(4) The accounting comprising the statements and accompanying remittance or voucher required in this subpart shall be submitted to the Administration through the local District Comptroller and/or the Area or Port Auditor in the district, area, or port in which the home office of the Charterer is located.

(c) Subsequent adjustments. (1) In instances where operations under SHIPSALESDEMISE 303 continue beyond the end of a calendar year or other accounting period, at the time of the submission of the accounting for each succeeding annual or overall accounting period as required hereunder, the Charterer shall submit also a revised accounting for the previous period including all adjustments affecting that period that occurred subsequent to the rendition of the accounting therefor.

(2) If, in any instance, at the time of the submission of an accounting for an annual or overall accounting period, no adjustment affecting any preceding period has occurred subsequent to the submission of the accounting for such period, the Charterer shall submit to the Administration an appropriate certification to that effect, over the signature of a duly authorized officer.1

§ 299.203 Capital necessarily employed.

(a) Fundamental basis. The fundamental basis for the determination of "capital necessarily employed" is provided in Clause 23 (c) of Part II of SHIPSALESDEMISE 303.

(b) Interim additions and deductions. The definition of "capital necessarily employed" in SHIPSALESDEMISE 303 provides, among other things, that additional capital in the form of cash or tangible property paid in during the charter period shall be included in the computation of "capital necessarily employed" from the date paid in and that

1 The books, records and accounts referred to in this section shall be retained until a final release or settlement agreement is completed between the Maritime Administration and the Charterer. Compliance with Maritime Administration retention period will not exempt the Charterer from other statutory requirements for retention of records or documents for periods longer than those herein prescribed.

In

any withdrawals of capital shall be deducted from the date withdrawn. the determination of "capital necessarily employed" additional capital, in the form of cash or tangible property paid in, and any withdrawals of capital during an annual or overall accounting period thereunder shall be included or deducted (as the case may be), pro rata, on the basis of the proportion of such additions or withdrawals represented by the relation that the number of days from the date thereof to the end of the calendar year or overall accounting period involved bears to the total number of days within such period, such proportion to be allocated to or between "capital necessarily employed" under SHIPSALESDEMISE 303 and "other operations" in the manner prescribed in paragraph (c) of this section.

(c) Allocation among operations under Bareboat Charter Agreements and "other operations". The definition of "capital necessarily employed" in SHIPSALESDEMISE 303 provides, among other things, that if the Charterer engages in other activities in addition to the operation of the vessels thereunder, the Owner shall determine the proper allocation of capital as between such activities. To implement this provision of the bareboat charter agreements, the following bases of allocation are prescribed:

(1) Wherever practicable and the result will not be disproportionate, "capital necessarily employed" in the business of the vessel(s) chartered from the Administration shall be determined upon the basis of the "net worth" reported by the Charterer in its balance sheet as of the close of the month preceding the date of delivery of the first vessel (s) under the contract (or at the end of the calendar year or other accounting period, deemed by the Owner to fairly present the financial position of the Charterer, but adjusted to take into account such subsequent changes in net worth and such other changes as the Owner may deem essential to a proper determination of "capital necessarily employed" at the end of such month), and as at each succeeding December 31st during the effective period of the agreement, adjusted in such manner as the Owner may determine to be fair and reasonable, including (1) such other adjustments as are consistent with sound accounting principles; (ii) pro rata reduction of any amounts in any instances where the accounting

period involved is less than a calendar year, and (iii) the elimination of assets and applicable liabilities not necessarily employed in the operation of the chartered vessels, if $10,000, or in excess thereof as to each category ((a), (b), (c), etc.), e. g.:

(a) Marketable securities pledged, except for penal bonds-bareboat charter contract;

(b) Non-shipping inventories;

(c) Replacement and similar special funds (including contractual and statutory reserve funds of subsidized operators, less mortgage indebtedness due within one year payable from such funds);

(d) Deferred Operating-Differential Subsidy Receivable (less-recapturable profits-M. A.);

(e) Amounts on deposit under purchase contracts;

(f) Securities of related companies and other non-marketable securities;

(g) Advances and loans to and deposits with related companies;

(h) Non-current receivables from and payables (not in excess of receivables) to, related companies;

(i) Cash value of life insurance;

(j) Net book value of vessels and of non-shipping property and equipment, less the portion of any long-term debt arising from the acquisition of such assets due more than one year after the date of the balance sheet involved;

(k) Construction work in progress;

(1) Notes and accounts receivable from and payables (not in excess of receivables) to officers and employees and others;

(m) Goodwill and other intangible assets; and

(n) Appreciation, etc.

(2) Except in instances involving (i) considerable non-shipping operations, (ii) substantial dissimilarity between the operations of the vessels chartered from the Administration and those of vessels managed, owned or chartered from others by the Charterer (with respect to which the Charterer shall submit for the consideration of the Administration, in advance of the accounting herein prescribed, its concept of a fair and reasonable formula, addressed in the manner prescribed in § 299.202 (b) (4), if and to the extent that the "net worth" of the Charterer is employed in the general conduct of the shipping business, it shall be allocated between operations under the bareboat charter agreements