with the Administration and "other operations" on the basis of the relation that the vessel operating expenses of the chartered vessels bears to the total vessel operating expenses of all vessels operated by the Charterer. The term "vessel operating expenses", as used in this subparagraph means, for the purposes of this formula, those expenses proper for inclusion in Account 700-Operating Expenses-Terminated Voyages, excepting Account 760-Charter Hire, which shall be eliminated for the purposes of this formula, and Account 765Agency Fees and Commissions, which, for the purposes of this formula, shall be eliminated from "vessel operating expenses" and included in overhead expenses (for the purpose of eliminating the necessity for allocating branch office income and expense, separately, from the allocation of overhead expenses), and Account 800-Inactive Vessel Expense, excepting Account 826-Charter Hire, all as defined in the "Uniform System of Accounts for Maritime Carriers" as adopted by the Maritime Administrator in Part 282 of this chapter (General Order No. 22, Revised): Provided, That for the purposes of this formula there shall be omitted the proportion of such vessel operating expenses represented by the relation that the expired days of voyages in progress at the commencement of the accounting period involved bears to the total days of such voyages and there shall be taken into account the proportion of such expenses represented by the relation that the expired days of voyages in progress at the termination of such period bears to the total days of such voyages, and further, that for the purposes of the formula prescribed herein only, subsequent adjustments of vessel operating expenses, after the original accounting is rendered, covering each contract for each overall accounting period, in which statutory additional charter hire is required to be computed, accounted for, and paid separately, shall neither be permitted nor required, except in instances where such adjustments, in the net aggregate, equal or exceed one (1) percentum of the aggregate overall vessel operating expenses applicable to the accounting period involved: And provided further, That, for the purposes of the formula prescribed herein only, as for example, in any instance where the vessel (s) hereunder is (are) under time charter to the Military

Sea Transportation Service, the term "vessel operating expenses" shall include any similar expenses incurred for account of, and recoverable from such time charter.

(d) Limitation of "capital necessarily employed." (1) (i) If, in any instance, the amount allocated to "capital necessarily employed" under SHIPSALESDEMISE 303, in accordance with the foregoing provisions of this section, is in excess of the greater of (a) the working capital requirements, or (b) the net worth requirements determined in the manner provided in paragraph (2) of Clause H-Special Provisions, of Part I of SHIPSALESDEMISE 303, such allocation shall be disregarded and "capital necessarily employed" shall be determined in accordance with such Special Provisions. In the application of this limitation, for the purpose of determining

(1) The number of vessels involved in instances where they do not remain constant throughout the accounting period, and

(2) The amount of working capital requirements or the net worth requirements (whichever is the greater) in instances where more than one type of vessel is involved,

the following formula is prescribed:

(i) The number of vessels involved shall be deemed to be the result obtained by dividing into the total number of days, for all vessels for the accounting period involved, the number of calendar days within such period. (For the purposes of this calculation the "total number of days' shall be considered as beginning with the delivery date of the vessel during an accounting period to the end of such accounting period or the date on which the vessel is redelivered during the period), and

(ii) The average working capital requirements or net worth requirements per vessel shall be determined by multiplying the greater of such requirements (as modified in subparagraphs (a) and (b) of paragraph (2) of Clause H of Part I of "SHIPSALESDEMISE 303") for each type of vessel involved by the number of days covering all vessels of that type for the accounting period involved, and dividing the sum of the results thus obtained for all types of vessels involved by the aggregate number of days for all types of vessels.

(ii) The amount to be deducted in

(iii) For the purpose of computing the limitation of "Capital Necessarily Employed", as prescribed in this paragraph, the "Working Capital" and/or "Net Worth" requirements (determined pursuant to Clause H, Special Provisions 1 and 2 of Part I of the Agreement), as published in the FEDERAL REGISTER, at the time vessel (s) were applied for, shall remain in full force and effect with respect to such vessel(s) during the entire period of the agreement: Provided, however, If any vessel(s) are redelivered and subsequently rechartered, the application to re-charter the vessel (s) shall be treated as a new application for purposes of determining the "Limitation of Capital Necessarily Employed".

§ 299.204 Net voyage profit.

(a) Fundamental basis. (1) The fundamental basis for the determination of "net voyage profit" is provided in Clause 23(a) of Part II of SHIPSALESDEMISE 303.

(2) The fundamental basis for the determination of "fair and reasonable overhead expenses" (which are deductible from gross income in the determination of "net voyage profit") is prescribed in Clause 23 (b) of Part II of SHIPSALESDEMISE 303.

(3) The fundamental basis with respect to reserves to be taken into account in the determination of "net voyage profit" is prescribed in Clause 27 of Part II of SHIPSALESDEMISE 303.

(b) Allocation among operations under Bareboat Charter Agreements and "other operations". The definition of "net voyage profit" in SHIPSALESDEMISE 303 provides, in effect, among other things, that, in instances where the Charterer engages in other activities in addition to the operation of the vessels thereunder, income and expenses other than those directly and exclusively allocable to the operation of such vessels shall be prorated between these activities

on such basis as the Owner may determine to be fair and reasonable. 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, income and expenses (including, but not necessarily limited to, operating revenues and expenses on terminated voyages, inactive vessels expense, operating-differential subsidy, collections from and contributions to pools for the purpose of equalizing revenue in accordance with pooling agreements) shall be allocated directly to the operation from which they are derived or in which they are incurred.

(2) Except in instances where the Charterer maintains its accounts on an actual cost basis respecting the operations covered herein below, the "Uniform System of Accounts for Maritime Carriers" provided in Part 282 of this chapter (General Order 22, Revised), provides, among other things, that Accounts Nos. 891-Credits from Terminal Operations, 892-Credits from Cargo Handling Operations, 893-Credits from Tug and Lighter Operations, 894-Credits from Other Shipping Operations (in instances where such services or facilities are maintained by the Charterer), shall be credited with "agreed amounts" for the use of such services or facilities by vessels owned by the Charterer, with corresponding charges to Vessel Operating Expense. In instances where the Charterer maintains such services or facilities and they are used by the chartered vessels, the Charterer shall charge in the Vessel Operating Expense Accounts of the chartered vessels fair and reasonable amounts for the use of such services or facilities (but not in excess of (i) the "going rates" for the services or facilities at the ports involved, or (ii) the rates at which such services or facilities could be obtained from independent suppliers, or (iii) the rates charged all other vessels using them): Provided, Similar charges are made in the accounts of all other vessels operated by the Charterer. If the sum of the gross income derived from the use of such services or facilities by vessels (i) under SHIPSALESDEMISE 303, (ii) owned by the Charterer, and (iii) chartered from others by the Charterer, exceeds the gross income derived from the use of such services or facilities by other vessels,

(a) The expense of maintaining such services or facilities shall be included in

Accounts Nos. 855--Expense of Terminal Operations, 865-Expense of Cargo Handling Operations, 875-Expense of Tug and Lighter Operations, and 885-Expense of Other Shipping Operations, and shall be allocated among the operation of the vessels under SHIPSALESDEMISE 303 and "Other Operations" on the basis of the relation that the gross income so derived from the vessels engaged in each such operation bears to the total gross income derived from the furnishing of such services or facilities, except that income derived from the furnishing of such services or facilities to vessels neither owned, nor chartered from the Administration or others, by the Charterer shall not be included in the above calculation but shall be prorated between the operation of the vessels under SHIPSALESDEMISE 303 and "Other Operations" in the same manner as is the expense of maintaining such services or facilities as thus determined, and

(b) The amounts credited to the income accounts shall be allocated directly to the operation of the vessels under SHIPSALESDEMISE 303 and "Other Operations" on the same basis as are the corresponding charges to the Vessel Operating Expense Accounts.

If, conversely, the sum of the gross income derived from the use of such services or facilities by vessel (i) under SHIPSALESDEMISE 303, (ii) owned by the Charterer, and (iii) chartered from others by the Charterer, is less than the gross income derived from the use of such services or facilities by other vessels,

(a) The amounts credited to the income accounts corresponding to charges in the Vessel Operating Expense Accounts of the vessels under SHIPSALESDEMISE 303 shall be allocated directly to the operation of such chartered vessels and the amounts credited to the income accounts corresponding (1) to charges in the accounts of vessels, owned, or chartered from others than the Administration, by the Charterer, and (2) to charges against others for the use of such services or facilities shall be allocated to "other operations", and

(b) The expense of maintaining such services or facilities shall be allocated between the operation of vessels under SHIPSALESDEMISE 303 and "Other Operations" on the basis of the relation that the gross income so derived from

the vessels engaged in each such operation bears to the total gross income derived from the furnishing of such services or facilities.

(3) Compensation, including compensation for liquidating the activities and business of vessels earned by general agents (as determined by District Comptrollers), under NSA Order No. 47 (AGE-4 and amendments thereto, 32A CFR, Ch. XVIII, AGE-4) shall be allocated 20 percent direct to "Other Operations"; the remaining 80 percent of the total compensation earned under the applicable order shall be deducted from the total overhead expenses of the Charterer before allocation of such expenses between SHIPSALESDEMISE 303 and "Other Operations".

(4) In instances where branch offices of the Charterer act as agents for the chartered vessels and if it is impracticable to determine the actual cost of such services, the Charterer may charge in the vessel operating expense accounts of the chartered vessels fair and reasonable amounts for such services (but at not in excess of (i) the "going rates" for the services at the ports involved, or (ii) the rates at which such services could be obtained from independent agents, or (iii) the rates charged all other vessels for such services): Provided, Similar charges are made in the accounts of all other vessels operated by the Charterer. Such credits shall be accumulated in Account No. 895-Credits from Branch House Operations, in the manner prescribed in Part 282 of this chapter (General Order No. 22, Revised), and deducted from overhead expense as prescribed in subparagraph (5) of this paragraph.

(5) (i) Except in instances involving (a) considerable non-shipping operations, and (b) 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, or (c) agency operations actually carried on as a separate and substantial business activity of the Charterer for its own account and not merely incidental to the operation of the chartered vessels (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 subparagraph (4) of § 299.202 (b)), overhead expenses (if

not directly allocable to a particular operation, i. e., bareboat or other), including (1) administrative and general expense and (2) expenses incurred in the operation and maintenance of branch houses; less (i) 80 percent of the total agency fees, commissions, and brokerage earned from outside agency activities (the remaining 20 per cent to be allocated direct to "Other Operations"), and (ii) credits from branch house operations (Account No. 895); (3) management and operating commissions, advertising expenses (other than that directly allocable to a particular operation, i. e., bareboat or other), taxes, other than Federal; income tax, and (4) agency fees and commissions transferred from vessel operating expense (Account No. 765); ail as described in the "Uniform System of Accounts for Maritime Carriers" as adopted by the Maritime Administration in Part 282 of this chapter (General Order No. 22, Revised), and as the Owner may determine to be fair and reasonable and properly included, shall be allocated between operations under the SHIPSALESDEMISE 303 and "Other Operations" on the basis of the relation that the "vessel operating expense" (as herein before defined in § 299.203 (c) (2)) of the chartered vessel (s) bears to the total vessel operating expenses of all vessels operated by the Charterer during the annual or overall accounting period involved.

(ii) Subject to the conditions prescribed in § 299.206 (b), in any instance where the statements required to be submitted to the Administration hereunder are certified by an independent certified public accountant or a firm of independent certified public accountants, such fair and reasonable payments as the Administration determines to have been made by the Charterer for the certification of such statements by such certified public accountants may be allocated directly to operations under the bareboat charter agreements involved on the basis of the relation that the total vessel operating expenses (determined similarly as defined in § 299.203 (c) (2)) of the chartered vessel (s) applicable to each accounting period under each agreement bears to the total vessel operating expenses of the chartered vessel(s) under all such agreements for all such periods covered by such statements.

(iii) The salaries of any additional personnel which the Charterer demonstrates to the satisfaction of the Admin

istration to have been necessarily employed for the exclusive purpose of preparing such statements (irrespective of whether or not they are certified by an independent certified public accountant or a firm of independent certified public accountants) shall be allocated over the entire period covered by such statements on the basis of the relation that the total vessel operating expenses (determined similarly as defined in § 299.203 (c) (2)) of the chartered vessel(s) applicable to each accounting period under each agreement bears to the total vessel operating expenses of the chartered vessel (s) under all such agreements for all such periods covered by such statements.

(iv) Post redelivery overhead expense shall be allowed, as additional expense in computing statutory additional charter hire, in an amount equal to ten dollars ($10.00) per day for each day each vessel is under the bareboat charter agreement for a maximum period of 180 days. Such post redelivery overhead expense shall be allocated directly to operations under the bareboat charter (s) on the basis of the relation that the total vessel operating expense (determined similarly as defined in § 299.203 (c) (2)) of the chartered vessel (s) applicable to each accounting period under each agreement bears to the total vessel operating expenses of the chartered vessel(s) under all such agreements for all such periods covered by such statements, Provided, that such allowance so accounted for, shall (in the event an additional agreement (or agreements) is (are) entered into and vessels delivered thereunder subsequent to redelivery of the last vessel under the preceding agreement, during the same calender year), be deducted from overhead expense before allocation thereof under all or any succeeding agreements.

furniture, fixtures and equipment and Amortization of Leaseholds (to the extent not subject to direct allocation) shall be allocated among the various operations on the same relative basis as are Fair and Reasonable Overhead Expenses pursuant to the formula prescribed in § 299.203 (c) (2).

(7) Income in the form of interest earned and dividends, interest expense (except interest expense on mortgage notes covering vessels purchased, construction commitments, mortgage bonds, debentures, and other long-term debt, if not specifically employed in the operation of the chartered vessel(s), shall be allocated direct to "Other Operations"), miscellaneous operating income and expense, miscellaneous other income and miscellaneous other deductions from income if and to the extent they are not susceptible to direct allocation, but are derived from and incurred in the general conduct of the shipping business, shall be allocated among the various operations on the same relative basis as are Fair and Reasonable Overhead Expenses pursuant to the formula prescribed in § 299.203 (c) (2).

(8) Income derived from, and expenses incurred in, non-shipping operations shall be allocated directly to "Other Operations".

(9) Reserves to be taken into account in the determination of "net voyage profit":

(i) Subject to the conditions provided in this paragraph, upon application of the Charterer, supported by adequate data based on past experience, the inclusion in vessel operating expenses applicable to all terminated voyages of such charges as the Administration determines to be fair and reasonable will be permitted to provide reserves for:

(a) Vessel repair expenses (including voyage and annual or periodic special survey repair expenses as well as expenses of repairs incident to deactivation and/or redelivery of vessels).

(b) Vessel redelivery expenses (excepting such expenses, if any, for which the Charterer is reimbursed by the Owner, and excepting also any overhead expenses of the Charterer) incurred during the period from the time of paying off the crew or completion of discharge of cargo or ballast on the last voyage, or from the date of availability of the vessel for redelivery pursuant to the terms of the Agreement, whichever later occurs, to the time of redelivery of the