under the terms and conditions thereof and in accordance with the orders, rules, regulations, and instructions of the Maritime Administration issued or adopted by the United States Maritime Administration appertaining thereto; the balance sheets included in the annexed accounting fairly present the financial position of the Charterer as at the dates thereof, including (but not limited to) an adequate statement of all known and ascertainable liabilities, and the income sheet included in the annexed accounting correctly states the operating results of the Charterer for the period covered by such accounting; and that the Charterer to the best of my knowledge and belief, has fully complied with all the terms and conditions of said bareboat charter agreement(s) in the manner and at the times therein required.

Subscribed and sworn to before me, a Notary Public, in and for the aforesaid County and State, this day of

19__.

My Commission expires

(Notary Public)

(b) If an independent certified public accountant or a firm of independent certified public accountants is employed by the Charterer for the purposes of certifying the statements required hereunder, the review and settlement by the Owner of statutory additional charter hire determinations thereby may be facilitated. If, therefore, at the option of the Charterer, the statements required hereunder are certified by an independent certified public accountant or a firm of independent certified public accountants, fair and reasonable payments made by the Charterer to such professional accountants for services and incidental ex

penses relating to such certification may be allocated directly to operations under the bareboat charter agreements involved on the basis prescribed in § 299.203 (c) (2): Provided, That the following minimum conditions are observed:

(1) Such certified public accountants will undertake to make their working papers available for examination by the Owner's auditors upon request and to permit the Owner's auditors to make copies of such papers to the extent they deem necessary;

(2) Such certified public accountants are independent in fact (an accountant will not be considered independent with respect to any person in whom he has any substantial interest, direct or indirect, or with whom he is, or was during the period of the bareboat charter agreements involved, connected as an officer, director, executive, or employee. As used in this subparagraph, the term "any person" shall include the Charterer, and any holding company, subsidiary, affillate, or associate of the Charterer); and

(3) The statements submitted are accompanied, in addition to the affidavit required of the Charterer, by a signed opinion of the independent certified public accountant in the following or substantially similar form:

We (I) have examined the statements comprising the accounting annexed hereto, and have found the statements to have been prepared by the Charterer in accordance with the terms and conditions of the applicable bareboat charter agreement(s) and with the applicable orders, rules, regulations, and instructions issued or adopted by the Maritime Administration.

Our (my) examination of the statements included examination of the underlying books of account and records for the period from----to Our (my) examination was made in accordance with generally accepted auditing standards and included all procedures which we (I) considered necessary in the circumstances (state exceptions if any). In our (my) opinion the annexed statements fairly present the proper determination of the "capital necessarily employed in the business" of the chartered vessels and the calculation of statutory additional charter hire (in the aggregate amount of $------) accrued to the account of the Maritime Administration under bareboat charter agreement (s) No. (s) for the period from

to

(Independent Certified Public Accountant (s))

Upon receipt of statements certified by an independent certified public account

ant or a firm of independent certified public accountants under the conditions prescribed in this paragraph, the Maritime Administration will take into consideration the scope of the audit conducted by such independent certified public accountants of the Charterer's accounts.

(c) (1) In arriving at the amount of net voyage profit for the purpose of calculating statutory additional charter hire under a bareboat charter agreement with the Administration there shall not be taken into account any item of expense, as a deduction from gross income, in any case where such item of expense represents a payment or expenditure or transfer of anything of value, directly or indirectly, to or on behalf of any person or organization or association, in a transaction occurring within the United States, its territories or possessions.

(i) To induce unethically any person, organization or association, to take or refrain from taking any action calculated to affect the relations between the Charterer and its employees, or to influence unethically the manner of performance of his or its employment or calling; or

(ii) Ostensibly as compensation for, but actually for a consideration other than, personal services rendered as an employee.

(2) Accordingly, an affidavit in the form following shall be submitted with each accounting rendered by a Charterer:

that it is his duty to have supervision over the books of account of the said Company and to control, in accordance with applicable regulations of the Maritime Administration, the manner in which such books are kept and the said Company's accountings to the Maritime Administration under any bareboat charter party agreement are prepared, and that in the preparation of the accounting rendered by the said Company for the period ended. ---, 19--, there has not been taken into account, to the best of his knowledge and belief, and so far as appears from diligent efforts he has made to ascertain the facts, any item of expense as a deduction from gross income in arriving at the amount of net voyage profits for the purpose of calculating statutory additional charter hire

under the provisions of such bareboat charter party agreement in any case where such item of expense represents a payment or expenditure or transfer of anything of value, directly or indirectly, to or on behalf of any person or any organization or association, in a transaction occurring within the United States, its territories or possessions.

(1) to induce unethically any person, organization or association, to take or refrain from taking any action calculated to affect the relations between the Charterer and its employees, or to influence unethically the manner of performance of his or its employment or calling; or

(ii) ostensibly as compensation for, but actually for a consideration other than, personal services rendered as an employee.

The terms "employee" and employees", as used herein, include in the case of a bareboat charterer, employees of the Charterer and of any interested person or related company as defined in the bareboat charter.

(a) The purpose of the procedure in this subpart is to establish the means for uniform application to expedite and facilitate the rendition by Charterers to the Administration of annual and final accountings under SHIPSALESDEMISE 303.

(b) The receipt and consideration of such accountings by the Owner shall be subject to the following reservations:

(1) That all working papers (irrespective of by whom prepared) in support of the various statements comprising such accountings, shall be available for examination by the Owners auditors upon request and that the Owner's auditors shall be permitted to make copies of such papers to the extent they deem necessary; and

(2) That the Owner reserves the right to conduct such audits, examinations, or checks of the Charterer's accounts as it may deem necessary before approving final settlement of statutory additional charter hire for any period under the bareboat charter agreements; and

(3) That the examples to be supplied by the said Office of the Comptroller of the statements required by the Administration are for illustrative purposes only

and are based on hypothetical figures; that no implications should be drawn from the relative magnitude of the figures used in these examples; and that if, in any instance, an example should conflict with the text of this procedure, the latter should govern; and

(4) That, provided whenever the accounting period is less than a full calendar year (that is, either at the commencement or at the termination of a charter period), the Charterer may, at the discretion of the Owner, for the purpose of preparing the income sheet required hereunder, in the calculation of "Net Voyage Profit" pursuant to § 299.204, submit such income sheet on the basis of the Charterer's normal annual accounting period, adjusted, pursuant to sound accounting practices and standards, to reflect the results of less than a full calendar year, all as in the judgment of the Administration produces fair and reasonable results. All requests to employ such adjusted income sheets shall be made in writing direct to the local District Comptroller; and

(5) That, provided whenever "capital necessarily employed" (determined on the basis of net worth as prescribed in § 299.203 (b) and (c)) exceeds the "limitation of capital necessarily employed" (determined on the basis prescribed in § 299.203 (d)), such excess shall be regarded as being composed of the various assets and liabilities comprising "capital necessarily employed" (determined on the basis of net worth as prescribed in § 299.203 (b) and (c)), in the relation, percentagewise, that such excess bears to "capital necessarily employed" (determined on the basis of net worth as prescribed in § 299.203 (b) and (c)), without regard to Clause H of Part I of the Agreement; and, further, as items of income and expense are required by this Order to be allocated on the same basis as are the corresponding assets and liabilities involved, likewise the proportion of such income and expense corresponding percentagewise to the proportion of assets and liabilities included in the excess of "capital necessarily employed" over the "limitation" should be allocated to "Other Operations"; and

(6) That the establishment of the rules and regulations prescribed in this procedure is without prejudice to the right of the Administration to determine upon the employment of other bases for allocation and calculation in any instance where, upon the completion of any an

nual or final accounting, the results produced by the application of the rules and regulations prescribed herein do not, in the judgment of the Administration, produce fair and reasonable results; and

(7) That if, in any instance, the rules and regulations prescribed in this subpart should conflict with the provisions of an applicable statute or agreement, such provisions shall govern and entitle the Government to its full statutory rights;

and

(8) That requests for interpretive rulings concerning the application of this subpart shall be presented in writing. All such requests shall be made direct to the local District Comptroller with a copy to the Comptroller, Maritime Administration, Washington 25, D.C.; and

(9) That if, in any instance, the rules and regulations prescribed in this subpart should conflict with any other General Order issued by the Administration, the question as to which shall take precedence should be referred to the Administration for decision; and

(10) That nothing contained in this subpart shall be construed as a waiver of any right reserved to the Administration by statute or under SHIPSALESDEMISE 303; and

(11) Upon written application of the Charterer to the local District Comptroller (with a copy to the Comptroller, Maritime Administration, Washington 25, D.C.), the Administration may extend for such further period as in its judgment is warranted by the circumstances, in any instance, the time limit prescribed in this subpart for the submission of accountings.

Subpart 1-Assumption of Mortgage by New Mortgagor

to

(a) Application for permission transfer title to a vessel, subject to a mortgage in favor of the United States of America, and to have the mortgage assumed by a new mortgagor, may be made by the mortgagor joined by the proposed transferee, to the Secretary, Maritime Administrator, Washington 25, D.C.

(b) Fee: Such application shall be accompanied by the sum of $400, which sum will be retained to recover the cost of processing the application. [Amdt. 1, 27 F.R. 1169, Feb. 8, 1962]

Sec.

308.522 Collateral deposit fund, letter of

transmittal, Form MA-302.

308.523 Application for revision of open cargo policy, Form MA-303. 808.524 Application for cancellation of open cargo policy, Form MA-304. 308.525 Application for decrease in amount of cash collateral fund, Form MA-305.

308.526 Certificate for repayment of decrease of collateral deposit fund, Form MA-306.

308.527 Application for return premium, Form MA-307.

S08.528 Surety bond A, Form MA-308. 308.529 Surety bond B, Form MA-309. 308.530 Letter requesting increase or decrease in amount of surety bond, Form MA-310.

308.531

Endorsement of surety bond increasing or decreasing amount of coverage, Form MA-311. 308.532 Release of surety bond, Form MA-312.

308.533 Closing report, Form MA-313. 308.534

Certificate to be attached to closing report, Form MA-313-A. 308.535 Certificate to be attached to final closing report, Form MA-313-B.

308.536 Declaration where failure to comply with Clause 21 was inadvertent, Form MA-314.

308.537 Effective date of endorsement. III-FACULTATIVE WAR RISK CARGO INSURANCE

§ 308.1

Subpart A-General

Eligibility of a vessel and its owner for insurance.

Interim insurance is available on any vessel specified in this subpart provided applications for interim insurance are submitted as required in Subparts B, C, and D of this part; and such vessel shall be eligible for insurance, unless the Maritime Administrator determines otherwise, within one of the following categories:

(a) A vessel registered, enrolled or licensed under the laws of the United States; any tug or barge or other watercraft (documented under the laws of the United States, or undocumented) owned by a citizen of the United States, used in essential water transportation within the territorial waters of the United States; and United States citizen-owned watercraft in the fishing trade or industry, except when used exclusively in or for sport fishing.

(b) A foreign-flag vessel under Panamanian, Honduran or Liberian registry, 1,500 gross tons and over, self-propelled, and not over twenty years of age (unless authorized by the Maritime Administration), which is subject to an unqualified Contract of Commitment with the United States in form as required by the Maritime Administration, and which is:

(1) Owned by a U.S. corporation, or a foreign corporation in which a majority of the stock is owned and controlled by United States citizens, whether direct or through intervening corporations, foreign or domestic. Where such intervening corporations are foreign, the ultimate majority ownership and control of the stock of such corporations must be vested in a citizen or citizens of the United States as defined in section 1201 (d), Merchant Marine Act, 1936, as amended; or

(2) Owned by a foreign corporation which is not directly or beneficially owned by United States citizens or corporations, but which vessel is under a long-term charter or other long-term contract covering the use of the vessel on terms deemed by the Maritime Administration to subject the vessel to U.S. control in the event of emergency. The charterer of such a vessel must be either a U.S. corporation or a foreign corporation in which a majority of the stock is owned and controlled by U.S. citizens, whether direct or through intervening corporations, foreign or domestic. Where