section_id,title_number,title_name,chapter,subchapter,part_number,part_name,subpart,subpart_name,section_number,section_heading,agency,authority,source_citation,amendment_citations,full_text 14:14:4.0.1.1.48.1.8.1,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,A,Subpart A—General,,§ 298.1 Applicability of part.,FAA,,,,"This part establishes classifications of air carriers known as “air taxi operators” and “commuter air carriers,” provides certain exemptions to them from some of the economic regulatory provisions of Subtitle VII of Title 49 of the United States Code (Transportation), specifies procedures by which such air carriers may obtain authority to conduct operations, and establishes rules applicable to their operations in interstate and/or foreign air transportation in all States, Territories and possessions of the United States. This part also establishes reporting requirements for commuter air carriers and small certificated air carriers." 14:14:4.0.1.1.48.1.8.2,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,A,Subpart A—General,,§ 298.2 Definitions.,FAA,,,"[70 FR 25768, May 16, 2005, as amended by DOT-OST-2014-0140, 84 FR 15934, Apr. 16, 2019]","As used in this part: Air taxi operator means an air carrier as established by § 298.3(a). Air transportation means interstate air transportation, foreign air transportation, or the transportation of mail by aircraft as defined by the Statute. 1 1 Interstate air transportation is defined in section 40102(a)(25) as the transportation of passengers or property by aircraft as a common carrier for compensation, or the transportation of mail by aircraft (1) between a place in (i) a State, territory, or possession of the United States and a place in the District of Columbia or another State, territory, or possession of the United States; (ii) Hawaii and another place in Hawaii through the airspace over a place outside Hawaii; (iii) the District of Columbia and another place in the District of Columbia; or (iv) a territory or possession of the United States and another place in the same territory or possession; and (2) when any part of the transportation is by aircraft. Note: Operations wholly within the geographic limits of a single State are not considered interstate air transportation if in those operations the carrier transports no more than a de minimis volume of passengers or property moving as part of a continuous journey to or from a point outside the State. Foreign air transportation is defined in section 40102(a)(23) of 49 U.S.C. Subtitle VII as the transportation of passengers or property by aircraft as a common carrier for compensation, or the transportation of mail by aircraft, between a place in the United States and a place outside the United States when any part of the transportation is by aircraft. Air transportation also is defined to include the transportation of mail by aircraft. Section 5402 of the Postal Reorganization Act, 39 U.S.C. 5402, authorizes the carriage of mail by air taxi operators and commuter air carriers in some circumstances under contract with the U.S. Postal Service. Aircraft-hours means the airborne hours of aircraft computed from the moment an aircraft leaves the ground until it touches the ground at the end of a flight stage. Aircraft miles means the miles (computed in airport-to-airport distances) for each flight stage actually completed, whether or not performed in accordance with the scheduled pattern. Certificated air carrier means an air carrier holding a certificate issued under section 41102 of 49 U.S.C. Subtitle VII. Citizen of the United States means: (1) An individual who is a citizen of the United States; (2) A partnership each of whose partners is an individual who is a citizen of the United States; or (3) A corporation or association organized under the laws of the United States or a state, the District of Columbia, or a territory or possession of the United States, of which the president and at least two-thirds of the board of directors and other managing officers are citizens of the United States, which is under the actual control of citizens of the United States, and in which at least 75 percent of the voting interest is owned or controlled by persons that are citizens of the United States. Commuter air carrier means an air carrier as established by § 298.3(b) that carries passengers on at least five round trips per week on at least one route between two or more points according to its published flight schedules that specify the times, days of the week, and places between which those flights are performed. Departure means takeoff from an airport. Eligible place means a place in the United States that meets the specified criteria outlined in 49 U.S.C. Chapter 417. Flight stage means the operation of an aircraft from takeoff to landing. Large aircraft means any aircraft originally designed to have a maximum passenger capacity of more than 60 seats or a maximum payload capacity of more than 18,000 pounds. Maximum certificated takeoff weight means the maximum takeoff weight authorized by the terms of the aircraft airworthiness certificate. 2 2 This weight may be found in the airplane operating record or in the airplane flight manual, which is incorporated by regulation into the airworthiness certificate. Maximum passenger capacity means the maximum number of passenger seats for which an aircraft is configured. Maximum payload capacity means: (1) The maximum certificated take-off weight of an aircraft, less the empty weight, 3 less all justifiable aircraft equipment, and less the operating load (consisting of minimum fuel load, oil, flight crew, steward's supplies, etc.). For purposes of this part, the allowance for the weight of the crew, oil, and fuel is as follows: 3 Empty weight is defined in section 03 of part 241 as follows: the weight of the airframe, engines, propellers, and fixed equipment. Empty weight excludes the weight of the crew and payload, but includes the weight of all fixed ballast, unusable fuel supply, undrainable oil, total quantity of engine coolant, and total quantity of hydraulic fluid. (i) Crew—200 pounds per crew member required under FAA regulations in 14 CFR chapter I, (ii) Oil—350 pounds, (iii) Fuel—the minimum weight of fuel required under FAA regulations in 14 CFR chapter I for a flight between domestic points 200 miles apart, 4 4 Assumes VFR weather conditions and flights not involving extended overwater operations. (2) Provided, however , That in the case of aircraft for which a maximum zero fuel weight is prescribed by the FAA, 5 maximum payload capacity means the maximum zero fuel weight, less the empty weight, less all justifiable aircraft equipment, and less the operating load (consisting of minimum flight crew, steward's supplies, etc., but not including disposable fuel or oil). 5 The maximum zero fuel weight is the maximum permissible weight of an airplane with no disposable fuel or oil. The zero fuel weight figure may be found in the FAA's type certificate data sheets, and/or in FAA-approved flight manuals. Mile means a statute mile, i.e. , 5,280 feet. Nonrevenue passenger means a person traveling free or under token charges, except those expressly named in the definition of revenue passenger; a person traveling at a fare or discount available only to employees or authorized persons of air carriers or their agents or only for travel on the business of the carriers; and an infant who does not occupy a seat. (This definition is for 14 CFR part 298 traffic-reporting purposes and may differ from the definitions used in other parts by the Federal Aviation Administration and the Transportation Security Administration for the collection of Passenger Facility Charges and Security Fees.) The definition includes, but is not limited to, the following examples of passengers when traveling free or pursuant to token charges: (1) Directors, officers, employees, and others authorized by the air carrier operating the aircraft; (2) Directors, officers, employees, and others authorized by the air carrier or another carrier traveling pursuant to a pass interchange agreement; (3) Travel agents being transported for the purpose of familiarizing themselves with the carrier's services; (4) Witnesses and attorneys attending any legal investigation in which such carrier is involved; (5) Persons injured in aircraft accidents, and physicians, nurses, and others attending such persons; (6) Any persons transported with the object of providing relief in cases of general epidemic, natural disaster, or other catastrophe; (7) Any law enforcement official, including any person who has the duty of guarding government officials who are traveling on official business or traveling to or from such duty; (8) Guests of an air carrier on an inaugural flight or delivery flights of newly-acquired or renovated aircraft; (9) Security guards who have been assigned the duty to guard such aircraft against unlawful seizure, sabotage, or other unlawful interference; (10) Safety inspectors of the National Transportation Safety Board or the FAA in their official duties or traveling to or from such duty; (11) Postal employees on duty in charge of the mails or traveling to or from such duty; (12) Technical representatives of companies that have been engaged in the manufacture, development or testing of a particular type of aircraft or aircraft equipment, when the transportation is provided for the purpose of in-flight observation and subject to applicable FAA regulations in 14 CFR chapter I; (13) Persons engaged in promoting air transportation; (14) Air marshals and other Transportation Security officials acting in their official capacities and while traveling to and from their official duties; and (15) Other authorized persons, when such transportation is undertaken for promotional purpose. Passengers carried means passengers on board each flight stage. Point when used in connection with any territory or possession of the United States, or the States of Alaska and Hawaii, means any airport or place where aircraft may be landed or taken off, including the area within a 25-mile radius of such airport or place; when used in connection with the continental United States, except Alaska, it shall have the same meaning except be limited to the area within a 3-mile radius of such airport or place: Provided, That for the purposes of this part, West 30th Street Heliport and Pan Am Building Heliport, both located in New York City, shall be regarded as separate points. Reporting carrier for Schedule T-100 purposes means the air carrier in operational control of the flight, i.e. , the carrier that uses its flight crews under its own FAA operating authority. Revenue passenger means a passenger for whose transportation an air carrier receives commercial remuneration. (This definition is for 14 CFR part 298 traffic-reporting purposes and may differ from the definitions used in other parts by the Federal Aviation Administration and the Transportation Security Administration for the collection of Passenger Facility Charges and Security Fees.) This includes, but is not limited to, the following examples: (1) Passengers traveling under publicly available tickets including promotional offers (for example two-for-one) or loyalty programs (for example, redemption of frequent flyer points); (2) Passengers traveling on vouchers or tickets issued as compensation for denied boarding or in response to consumer complaints or claims; (3) Passengers traveling at corporate discounts; (4) Passengers traveling on preferential fares (Government, seamen, military, youth, student, etc.); (5) Passengers traveling on barter tickets; and (6) Infants traveling on confirmed-space tickets. Revenue passenger-mile means one revenue passenger transported one mile. Revenue passenger-miles are computed by multiplying the aircraft miles flown on each flight stage by the number of revenue passengers carried on that flight stage. Revenue seat-miles available means the aircraft-miles flown on each flight stage multiplied by the number of seats available for sale on that flight stage. Revenue ton-mile means one ton of revenue traffic transported one mile. Revenue ton-miles are computed by multiplying the aircraft-miles flown on each flight stage by the number of pounds of revenue traffic carried on that flight stage and converted to ton-miles by dividing total revenue pound-miles by 2,000 pounds. Revenue ton-miles available means the aircraft-miles flown on each flight stage multiplied by the number of pounds of aircraft capacity available for use on that stage and converted to ton-miles by dividing total pound-miles available by 2,000 pounds. Scheduled service means transport service operated over routes pursuant to published flight schedules or pursuant to mail contracts with the U.S. Postal Service. Small aircraft means any aircraft originally designed to have a maximum passenger capacity of 60 seats or less or a maximum payload capacity of 18,000 pounds or less. Small certificated air carrier means an air carrier holding a certificate issued under section 41102 of 49 U.S.C. Subtitle VII that provides scheduled passenger air service within and between only the 50 States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands with small aircraft as defined in this section. Ton means a short ton, i.e. , 2,000 pounds. Wet-Lease Agreement means an agreement under which one carrier leases an aircraft with flight crew to another air carrier." 14:14:4.0.1.1.48.1.8.3,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,A,Subpart A—General,,§ 298.3 Classification.,FAA,,,,"(a) There is hereby established a classification of air carriers, designated as “air taxi operators,” which directly engage in the air transportation of persons or property or mail or in any combination of such transportation and which: (1) Do not directly or indirectly utilize large aircraft in air transportation; (2) Do not hold a certificate of public convenience and necessity and do not engage in scheduled passenger operations as specified in paragraph (b) of this section; (3) Have and maintain in effect liability insurance coverage in compliance with the requirements set forth in part 205 of this chapter and have and maintain a current certificate of insurance evidencing such coverage on file with the Department; (4) If operating in foreign air transportation or participating in an interline agreement, subscribe to Agreement 18900 (OST Form 4523 or OST Form 4507) and comply with all other requirements of part 203 of this chapter; and (5) Have registered with the Department in accordance with subpart C of this part. (b) There is hereby established a classification of air carriers, designated as “commuter air carriers,” which directly engage in the air transportation of persons, property or mail, and which: (1) Do not directly or indirectly utilize large aircraft in air transportation; (2) Do not hold a certificate of public convenience and necessity; (3) Carry passengers on at least five round trips per week on at least one route between two or more points according to its published flight schedules that specify the times, days of the week, and places between which those flights are performed; (4) Have and maintain in effect liability insurance coverage in compliance with the requirements set forth in part 205 of this chapter and have and maintain a current certificate of insurance evidencing such coverage on file with the Department; (5) Have and maintain in effect and on file with the Department a signed counterpart of Agreement 18900 (OST Form 4523) and comply with all other requirements of part 203 of this chapter; and (6) Hold a Commuter Air Carrier Authorization issued in accordance with subpart E of this part. (c) A person who does not observe the conditions set forth in paragraph (a) or (b) of this section shall not be an air taxi operator or commuter air carrier within the meaning of this part with respect to any operations conducted while such conditions are not being observed, and during such periods is not entitled to any of the exemptions set forth in this part." 14:14:4.0.1.1.48.1.8.4,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,A,Subpart A—General,,§ 298.4 Requests for statement of authority.,FAA,,,,"In any instance where an air taxi operator or commuter air carrier is required by a foreign government to produce evidence of its authority to engage in foreign air transportation under the laws of the United States, the Director, Office of Aviation Analysis (X-50), Office of the Secretary, 1200 New Jersey Avenue, SE., Washington, DC 20590, will, upon request, furnish the carrier with a written statement, outlining its general operating privileges under this part for presentation to the proper authorities of the foreign government." 14:14:4.0.1.1.48.2.8.1,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,B,Subpart B—Exemptions,,§ 298.11 Exemption authority.,FAA,,,,"Air taxi operators and commuter air carriers are hereby relieved from the following provisions of 49 U.S.C. Subtitle VII only if and so long as they comply with the provisions of this part and the conditions imposed herein, and to the extent necessary to permit them to conduct air taxi or commuter air carrier operations: (a) Section 41101; (b) Section 41504; except that the requirements of that section shall apply to: (1) Tariffs for through rates, fares, and charges filed jointly by air taxi operators or commuter air carriers with air carriers or with foreign air carriers subject to the tariff-filing requirements of Chapter 415; and (2) Tariffs required to be filed by air taxi operators or commuter air carriers which embody the provisions of the counterpart to Agreement 18900 as specified in part 203 of this chapter; (c) Section 41702, except for the requirements that air taxi operators and commuter air carriers shall: (1) Provide safe service, equipment, and facilities in connection with air transportation; (2) Provide adequate service insofar as that requires them to comply with parts 252 and 382 of this chapter; (3) Observe and enforce just and reasonable joint rates, fares, and charges, and just and reasonable classifications, rules, regulations and practices as provided in tariffs filed jointly by air taxi operators or commuter air carriers with certificated air carriers or with foreign air carriers; and (4) Establish just, reasonable, and equitable divisions of such joint rates, fares, and charges as between air carriers participating therein which shall not unduly prefer or prejudice any of such participating air carriers; (d) Section 41310, except that the requirements of that subsection shall apply to through service provided pursuant to tariffs filed jointly by air taxi operators or commuter air carriers with certificated air carriers or with foreign air carriers and to transportation of the handicapped to the extent that that is required by part 382 of this chapter; (e) Section 41902; (f) Section 41708." 14:14:4.0.1.1.48.2.8.2,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,B,Subpart B—Exemptions,,§ 298.12 Duration of exemption.,FAA,,,,"The exemption from any provision of 49 U.S.C. Subtitle VII provided by this part shall continue in effect only until such time as the Department shall find that enforcement of that provision would be in the public interest, at which time the exemption shall terminate or be conditioned with respect to the person, class of persons, or service (e.g., limited-entry foreign air transportation market) subject to the finding." 14:14:4.0.1.1.48.3.8.1,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,C,Subpart C—Registration for Exemption by Air Taxi Operators,,§ 298.21 Filing for registration by air taxi operators.,FAA,,,"[70 FR 25768, May 16, 2005, as amended by DOT-OST-2014-0140, 84 FR 15935, Apr. 16, 2019]","(a) Every air taxi operator who plans to commence operations under this part shall register with the Department not later than 30 days prior to the commencement of such operations, unless, upon a showing of good cause satisfactory to the Manager, Technical Programs Branch (AFS-260), Federal Aviation Administration, registration within a lesser period of time is allowed. (b) The registration of an air taxi operator shall remain in effect until it is amended by the carrier or canceled by the Department. (c) Registration by all air taxi operators shall be accomplished by filing with the Department at the address specified in paragraph (d) of this section the following: (1) Air Taxi Registration (OST Form 4507), executed in duplicate. 6 This form shall be certified by a responsible official and shall include the following information: 6 OST Form 4507 can be obtained from the Manager, Technical Programs Branch, Federal Aviation Administration, AFS-260 at (202) 267-8166, or on the internet at https://www.faa.gov/about/office_org/headquarters_offices/avs/offices/afx/afs/afs200/afs260/exemptions/ (i) The name of the carrier and its mailing address; (ii) The carrier's principal place of business, if different from its mailing address, and its telephone number and fax number; (iii) The carrier's FAA certificate number, if any, and the address and telephone number of the carrier's local FAA office; (iv) The type of service the carrier will offer (scheduled passenger, 7 scheduled cargo, mail under a U.S. Postal Service contract, on-demand passenger, on-demand cargo, or other service such as air ambulance operations, firefighting or seasonal operations); 7 Companies proposing to provide scheduled passenger service at the level established by this Part for commuter air carriers are not permitted to conduct such operations under their air taxi registration; such companies must first be found fit, willing and able to operate and be issued a Commuter Air Carrier Authorization by the Department. (v) A list of the aircraft that the carrier proposes to operate, or, in the case of an amendment to the registration, the aircraft that it is currently operating in its air taxi operations, and the aircraft type, FAA registration number and passenger capacity of each aircraft; (vi) For initial registration, the proposed date of commencement of air taxi operations; (vii) For amendments, whether the carrier has carried passengers in foreign air transportation during the previous 12 months; (viii) Whether the carrier is a citizen of the United States; and (ix) A certification that the registration is complete and accurate and that, if the carrier is engaged in foreign air transportation, or participating in an interline agreement, it subscribes to the terms of Agreement 18900 ( see OST Form 4523). (2) A certificate of insurance (OST Form 6410) which is currently effective (or in case of initial registration, is to become effective), as defined in part 205 of this chapter; (3) An 8 dollar ($8) registration filing fee in the form of a check, draft, or postal money order payable to the Department of Transportation. (d) Registrations required in paragraph (c) of this section shall be submitted to the Department of Transportation, Federal Aviation Administration,Technical Programs Branch (AFS-260), 800 Independence Avenue SW, Room 831, Washington, DC 20591. For those air taxi operators that have a mailing address in the State of Alaska, the registrations shall be filed with the Department of Transportation, Federal Aviation Administration, Alaskan Region Headquarters (AAL-230), 222 West 7th Avenue, Box 14, Anchorage, Alaska 99513." 14:14:4.0.1.1.48.3.8.2,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,C,Subpart C—Registration for Exemption by Air Taxi Operators,,§ 298.22 Processing by the Department.,FAA,,,,"After examination of the OST Form 4507 submitted by the carrier, the Department will stamp the effective date of the registration on the form and return the duplicate copy to the carrier to confirm that it has registered with the Department as required by this part. The effective date of the registration shall not be earlier than the effective date of the insurance policy or policies named in the certificate of insurance filed by the carrier under § 298.21(c)(2)." 14:14:4.0.1.1.48.3.8.3,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,C,Subpart C—Registration for Exemption by Air Taxi Operators,,§ 298.23 Notifications to the Department of change in operations.,FAA,,,"[70 FR 25768, May 16, 2005, as amended by DOT-OST-2014-0140, 84 FR 15935, Apr. 16, 2019]","(a) If any of the information contained on its registration changes, an air taxi operator shall submit an amendment reflecting the updated information. This amendment shall be filed no later than 30 days after the change occurs. There is no filing fee for submitting an amendment. (b) An amendment shall be made by resubmitting OST Form 4507 to the Department of Transportation, Federal Aviation Administration, Technical Programs Branch (AFS-260), 800 Independence Avenue SW, Room 831, Washington, DC 20591. If the air taxi operator has a mailing address in the State of Alaska, the form shall be mailed to the Department of Transportation, Federal Aviation Administration, Alaskan Region Headquarters Technical Standards Branch, (AAL-231), 222 West 7th Avenue, Box 14, Anchorage, Alaska 99513." 14:14:4.0.1.1.48.3.8.4,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,C,Subpart C—Registration for Exemption by Air Taxi Operators,,§ 298.24 Cancellation of the registration.,FAA,,,,"The registration of an air taxi operator may be canceled by the Department if any of the following occur: (a) The operator ceases its operations; (b) The operator's insurance coverage changes or lapses; (c) The operator fails to file an amended registration when required by § 298.23; (d) The operator's Air Carrier Certificate and/or Operations Specifications is revoked by the Federal Aviation Administration; (e) The operator fails to qualify as a citizen of the United States; (f) The Department determines that it is otherwise in the public interest to do so." 14:14:4.0.1.1.48.4.8.1,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,D,Subpart D—Limitations and Conditions on Exemptions and Operations,,§ 298.30 Public disclosure of policy on consumer protection.,FAA,,,,"(a) Every air taxi and commuter air carrier shall cause to be displayed continuously in a conspicuous public place at each desk, station and position in the United States that is in charge of a person employed exclusively by it, or by it jointly with another person, or by any agent employed by it to sell tickets to passengers, a sign located so as to be clearly visible and readable to the traveling public, containing a statement setting forth the air taxi and commuter air carrier's policy on baggage liability and denied boarding compensation. (b) An air taxi or commuter air carrier shall provide a written notice on or with a passenger's ticket concerning baggage liability as provided in § 254.5 of this chapter. These ticket notices are required only for passengers whose ticket includes a flight segment that uses large aircraft (more than 60 seats). (c) If the substantive terms of the counter sign and ticket notice required by this section differ, the terms contained in the required ticket notice govern." 14:14:4.0.1.1.48.4.8.2,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,D,Subpart D—Limitations and Conditions on Exemptions and Operations,,§ 298.31 Scope of service and equipment authorized.,FAA,,,,"Nothing in this part shall be construed as authorizing the operation of large aircraft in air transportation, and the exemption provided by this part to air taxi operators and commuter air carriers that register with the Department extends only to the direct operation in air transportation in accordance with the limitations and conditions of this part of aircraft originally designed to have a maximum passenger capacity of 60 seats or less or a maximum payload capacity of 18,000 pounds or less." 14:14:4.0.1.1.48.4.8.3,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,D,Subpart D—Limitations and Conditions on Exemptions and Operations,,§ 298.32 Limitations on operations to eligible places.,FAA,,,,"No person shall provide scheduled passenger service as a commuter air carrier at an eligible place unless it has been found by the Department to be fit, willing, and able to conduct such service and issued a Commuter Air Carrier Authorization as provided in subpart E of this part." 14:14:4.0.1.1.48.4.8.4,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,D,Subpart D—Limitations and Conditions on Exemptions and Operations,,§ 298.33 Security requirements.,FAA,,,,"In conducting operations under this part, an air taxi operator or a commuter air carrier is required to adhere to all security requirements established by the Department of Transportation and the Department of Homeland Security applicable to such operations." 14:14:4.0.1.1.48.4.8.5,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,D,Subpart D—Limitations and Conditions on Exemptions and Operations,,§ 298.34 [Reserved],FAA,,,, 14:14:4.0.1.1.48.4.8.6,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,D,Subpart D—Limitations and Conditions on Exemptions and Operations,,§ 298.35 Limitations on carriage of mail.,FAA,,,,An air taxi operator or commuter air carrier is not authorized to carry mail except pursuant to contract with the U.S. Postal Service entered into pursuant to section 5402 of the Postal Reorganization Act (39 U.S.C. 5402). 14:14:4.0.1.1.48.4.8.7,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,D,Subpart D—Limitations and Conditions on Exemptions and Operations,,§ 298.36 Limitations on use of business name.,FAA,,,,"(a) An air taxi operator or commuter air carrier in holding out to the public and in performing its services in air transportation shall do so only in the name or names in which its air carrier certificate is issued pursuant to section 44702 of 49 U.S.C. Subtitle VII by the Federal Aviation Administration, and in which it is registered with the Department under this part, or in which its Commuter Air Carrier Authorization is issued or other trade name is registered. (b) Slogans shall not be considered names for the purposes of this section, and their use is not restricted hereby. (c) Commuter air carriers are subject to the provisions of part 215 of this chapter with regard to the use and change of air carrier names. (d) Neither the provisions of this section nor the grant of a permission hereunder shall preclude Department intervention or enforcement action should there be evidence of a significant potential for, or of actual, public confusion." 14:14:4.0.1.1.48.4.8.8,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,D,Subpart D—Limitations and Conditions on Exemptions and Operations,,§ 298.37 Prohibition of services not covered by insurance.,FAA,,,,An air taxi operator or commuter air carrier shall not operate in air transportation or provide or offer to provide air transportation unless there is in effect liability insurance which covers such transportation and which is evidenced by a current certificate of insurance on file with the Department as required by part 205 of this chapter. 14:14:4.0.1.1.48.4.8.9,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,D,Subpart D—Limitations and Conditions on Exemptions and Operations,,§ 298.38 Financial security arrangements for operating Public Charters.,FAA,,,,"When an air taxi operator or commuter air carrier performs a Public Charter under part 380 of this chapter, either: (a) The air taxi operator or commuter air carrier shall meet the bonding or escrow requirements applicable to certificated air carriers as set forth in § 212.8 of this chapter; or (b) The air taxi operator or commuter air carrier shall ensure that it does not receive any payments for the charter until after the charter has been completed. In this case, its contracts with the charter operator and the charter operator's depository bank, if any, shall state that the charter operator or bank, as applicable, shall retain control of and responsibility for all participant funds intended for payment for air transportation until after the charter has been completed, notwithstanding any provision of part 380 of this chapter." 14:14:4.0.1.1.48.5.8.1,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,E,Subpart E—Commuter Air Carrier Authorizations,,§ 298.50 Application.,FAA,,,"[70 FR 25768, May 16, 2005, as amended by DOT-OST-2014-0140, 84 FR 15935, Apr. 16, 2019]","(a) Any person desiring to provide air transportation as a commuter air carrier must first obtain a Commuter Air Carrier Authorization. This shall be accomplished by filing with the Department— (1) An application in accordance with the requirements of parts 201 and 302 of this chapter; (2) Data in accordance with part 204 of this chapter to support a determination by the Department that the person is “fit, willing, and able” to operate the proposed commuter service; and (3) A $670 filing fee submitted in accordance with the provisions of § 389.21 of this chapter. (b) An executed original and two true copies of an application for a Commuter Air Carrier Authorization shall be filed with Docket Operations Office, U.S. Department of Transportation, 1200 New Jersey Avenue, SE., Washington, DC 20590." 14:14:4.0.1.1.48.5.8.2,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,E,Subpart E—Commuter Air Carrier Authorizations,,§ 298.51 Processing by the Department.,FAA,,,,"In processing applications filed in accordance with § 298.50, the Department will generally follow the procedures set forth in §§ 302.207 through 302.211 of this chapter." 14:14:4.0.1.1.48.5.8.3,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,E,Subpart E—Commuter Air Carrier Authorizations,,§ 298.52 Air taxi operations by commuter air carriers.,FAA,,,,"(a) A commuter air carrier that holds an effective Commuter Air Carrier Authorization and otherwise meets the requirements of this part is also authorized to conduct air taxi operations (e.g., scheduled cargo, mail under a U.S. Postal Service contract, on-demand passenger, on-demand cargo, or other service such as air ambulance operations, firefighting or seasonal operations) without having to meet the registration requirements of subpart C of this part, except as provided in paragraph (b) of this section. (b) Should a commuter air carrier cease conducting all scheduled passenger operations and its Commuter Air Carrier Authorization is suspended pursuant to §§ 298.53 and/or 204.7 of this chapter, it may continue to conduct air taxi operations provided that the carrier maintains in effect liability insurance coverage as required for such operations by part 205 of this chapter and, within 10 days of the cessation of scheduled passenger operations, registers as an air taxi operator in accordance with subpart C of this part; and provided further that the carrier continues to hold authority from the Federal Aviation Administration to conduct such air taxi operations." 14:14:4.0.1.1.48.5.8.4,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,E,Subpart E—Commuter Air Carrier Authorizations,,§ 298.53 Suspension or revocation of authority.,FAA,,,,"A Commuter Air Carrier Authorization may be suspended or revoked if any of the following occur: (a) The operator fails to maintain insurance coverage as required by part 205 of this chapter for commuter operations; (b) The scheduled passenger authority under the operator's Air Carrier Certificate is suspended or revoked by the Federal Aviation Administration; (c) The operator does not commence operations for which it has been found fit, or the operator ceases those operations as provided in § 204.7 of this chapter; (d) The Department finds that the carrier is not fit, willing, and able to conduct scheduled service or fails to qualify as a citizen of the United States; or (e) The Department determines that it is otherwise in the public interest to do so." 14:14:4.0.1.1.48.6.8.1,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,F,Subpart F—Reporting Requirements,,§ 298.60 General reporting instructions.,FAA,,,"[ER-1399, 50 FR 19, Jan. 2, 1985, as amended by Doc. No. 47939, 57 FR 40104, Sept. 2, 1992; 60 FR 66726, Dec. 26, 1995; 67 FR 49231, July 30, 2002; 75 FR 41585, July 16, 2010; DOT-OST-2014-0140, 84 FR 15935, Apr. 16, 2019; DOT-OST-2018-0132, 88 FR 6164, Jan. 31, 2023]","(a) Each commuter air carrier and each small certificated air carrier shall file the applicable schedules of Form 298-C, “Report of Financial and Operating Statistics for Small Aircraft Operators,” Schedule T-100, “U.S. Air Carrier Traffic and Capacity Data by Nonstop Segment and On-Flight Market,” and the “Passenger Origin—Destination Survey” prescribed in part 241, Sec. 19-8, of this subchapter. (b) A single copy of the BTS Form 298-C report shall be filed quarterly with the Office of Airline Information (OAI) for the periods ended March 31, June 30, September 30 and December 31 of each year to be received on or before May 10, August 10, November 10, and February 10, respectively. An electronic filing of the monthly Schedule T-100 is due at OAI within 30 days after the end of each month. Due dates falling on a Saturday, Sunday or Federal holiday will become effective on the next work day. (c) Reports required by this section shall be submitted to the Bureau of Transportation Statistics in a format specified in accounting and reporting directives issued by the Bureau of Transportation Statistics' Director of Airline Information." 14:14:4.0.1.1.48.6.8.2,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,F,Subpart F—Reporting Requirements,,§ 298.61 Reporting of traffic statistics.,FAA,,,"[Doc. No. OST-98-4043, 67 FR 49231, July 30, 2002, as amended by Doc. No. OST-2006-26053, 75 FR 41585, July 16, 2010; DOT-OST-2014-0140, 84 FR 15935, Apr. 16, 2019]","(a) Each commuter air carrier and small certificated air carrier shall file Schedule T-100, U.S. Air Carrier Traffic and Capacity Data by Nonstop Segment and On-Flight Market.” (b) Schedule T-100 shall be filed monthly as set forth in§ 298.60. (1) Schedule T-100 collects summarized flight stage data and on-flight market data from revenue flights. All traffic statistics shall be compiled in terms of each flight stage as actually performed. The detail T-100 data shall be maintained in such a manner as to permit monthly summarization and organization into two basic groupings. The first grouping, the nonstop segment information, is to be summarized by equipment type, within class of service, within pair-of-points, without regard to individual flight number. The second grouping requires that the enplanement/deplanement information be broken out into separate units called on-flight market records, which shall be summarized by class of service, within pair-of-points, without regard for equipment type or flight number. (2) Joint-service operations. The Department may authorize joint service operations between two direct air carriers. Examples of these joint-service operations are: blocked-space agreements; part-charter agreements; code-sharing agreements; wet-lease agreements, and similar arrangements. (i) Joint-service operations are reported by the carrier in operational control of the flight, i.e., the carrier that uses its flight crews under its own FAA operating authority. The traffic moving under these agreements is reported on Schedule T-100 the same way as any other traffic on the aircraft. (ii) If there are questions about reporting a joint-service operation, contact the BTS Assistant Director—Airline Information (fax no. 202 366-3383, telephone no. 202 366-4373). Joint-service operations are reported in Schedule T-100 in accordance with this paragraph (b). (iii) Operational control. The air carrier in operational control of the aircraft (the carrier that uses its flight crews under its own FAA operating authority) must report joint-service operations. (c) Service classes. (1) The statistical classifications are designed to reflect the operating characteristics attributable to each distinctive type of service offered. The combination of scheduled and nonscheduled operations with passenger, all-cargo, and military services are placed into service classes as follows: (2) Scheduled services include traffic and capacity elements applicable to air transportation provided pursuant to published schedules and extra sections of scheduled flights. Scheduled Passenger/Cargo (Service Class F) is a composite of first class, coach, and mixed passenger/cargo service. (3) Nonscheduled services include all traffic and capacity elements applicable to the performance of nonscheduled aircraft charters, and other air transportation services not constituting an integral part of services performed pursuant to published flight schedules. (d) Air transport traffic and capacity elements. (1) Within each of the service classifications, carriers shall report air transport traffic and capacity elements. The elements are reported on segment or market records as follows: *CFD = Computed by DOT from detail Schedule T-100 and T-100(f) data. (2) [Reserved] (e) These reported items are further described as follows: (1) Reporting period date. The year and month to which the reported data are applicable. (2) Carrier, Carrier entity code. Each air carrier shall report its name and entity code (a five digit code assigned by BTS that identifies both the carrier and its entity) for its particular operations. The Office of Airline Information (OAI) will assign or confirm codes upon request; OAI's address is Office of Airline Information, BTS, DOT, RTS-42, 1200 New Jersey Avenue, SE., Washington, DC 20590-0001. (3) Service class code. The service class codes are prescribed in section 298.61(c). In general, classes are divided into two broad categories, either scheduled or nonscheduled, where scheduled = F + G and nonscheduled = L + N + P + R. (4) Record type code. This code indicates whether the data pertain to non-stop segment (record type S) or on-flight market (record type M). (5) Aircraft type code. This code represents the aircraft types, as described in the BTS' Accounting and Reporting Directives. (6) Origin, Destination airport code(s). These codes represent the industry designators. An industry source of these industry designator codes is the Official Airline Guide (OAG). OAI assigns codes upon request if not listed in the OAG. (7) 110 Revenue passengers enplaned. The total number of revenue passengers enplaned at the origin point of a flight, boarding the flight for the first time; an unduplicated count of passengers in a market. Under the T-100 system of reporting, these enplaned passengers are the sum of the passengers in the individual on-flight markets. In the domestic entity, report only the total revenue passengers enplaned in item 110. (8) 130 Revenue passengers transported. The total number of revenue passengers transported over a single flight stage, including those already on the aircraft from a previous flight stage. In the domestic entity, report only the total revenue passengers transported in item 130. (9) 140 Revenue passenger-miles. Computed by multiplying the inter-airport distance of each flight stage by the number of passengers transported on that flight stage. (10) 210 Revenue cargo tons enplaned. The total number of cargo tons enplaned. This data element is a sum of the individual on-flight market figures for each of the following categories: 217 Freight and 219 Mail. This element represents an unduplicated count of the revenue traffic in a market. (11) 217 Enplaned freight. The total weight of revenue freight enplaned at the origin point of a flight, loaded onto the flight for the first time; an unduplicated count of freight in a market. (12) 219 Enplaned mail. The total weight of mail enplaned at the origin point of a flight, loaded onto the flight for the first time; an unduplicated count of mail in a market. (13) 230 Revenue tons transported. The number of tons of revenue traffic transported. This element is the sum of the following elements: 231 Passengers transported-total, 237 Freight, and 239 Mail. (14) 237 Transported freight. The total weight of freight transported over a single flight stage, including freight already on the aircraft from a previous flight stage. (15) 239 Transported mail. The total weight of mail transported over a single flight stage, including mail already on the aircraft from a previous flight stage. (16) 240 Revenue ton-miles—total. Ton-miles are computed by multiplying the revenue aircraft miles flown (410) on each flight stage by the number of tons transported on that stage. This element is the sum of 241 through 249. (17) 241 Revenue ton-miles—passenger. Equals the number of passengers times 200, times inter-airport distance, divided by 2000. A standard weight of 200 pounds per passenger, including baggage, is used for all operations and service classes. (18) 247 Revenue ton-miles—freight. Equals the volume of freight in whole tons times the inter-airport distance. (19) 249 Revenue ton-miles—mail. Equals the volume of mail in whole tons times the inter-airport distance. (20) 270 Available capacity-payload. The available capacity is collected in pounds. This figure shall reflect the payload or total available capacity for passengers, mail, and freight applicable to the aircraft with which each flight stage is performed. (21) 280 Available ton-miles. The aircraft miles flown on each flight stage multiplied by the available capacity on the aircraft in tons. (22) 310 Available seats. The number of seats available for sale. This figure reflects the actual number of seats available, excluding those blocked for safety or operational reasons. In the domestic entity, report the total available seats in item 130. Scheduled and nonscheduled available seats are reported in item 130. (23) 320 Available seat-miles. The aircraft miles flown on each flight stage multiplied by the seat capacity available for sale. (24) 410 Revenue aircraft miles flown. Revenue aircraft miles flown are computed based on the airport pairs between which service is actually performed; miles are generated from the data for scheduled aircraft departures (Code 520) times the inter-airport distances (Code 501). (25) 430 Revenue aircraft miles scheduled. The number of revenue aircraft miles scheduled. All such data shall be maintained in conformity with the airport pairs between which service is scheduled, whether or not in accordance with actual performance. (26) 501 Inter-airport distance. The great circle distance, in official statute miles as prescribed in part 247 of this chapter, between airports served by each flight stage. Official inter-airport mileage may be obtained from the Office of Airline Information. (27) 510 Revenue aircraft departures performed. The number of revenue aircraft departures performed. (28) 520 Revenue aircraft departures scheduled. The number of revenue aircraft departures scheduled, whether or not actually performed. (29) 610 Revenue aircraft hours (airborne). The elapsed time, computed from the moment the aircraft leaves the ground until its next landing. (30) 630 Aircraft hours (ramp-to-ramp). The elapsed time, computed from the moment the aircraft first moves under its own power from the boarding ramp at one airport to the time it comes to rest at the ramp for the next point of landing. This data element is also referred to as ‘block’ and ‘block-to-block’ aircraft hours. (31) 650 Total aircraft hours (airborne). The elapsed time, computed from the moment the aircraft leaves the ground until it touches down at the next landing. This includes flight training, testing, and ferry flights. (f) Public availability of Schedule T-100 data. Detailed domestic on-flight market and nonstop segment data in Schedule T-100, except military data, shall be publicly available after processing. Domestic data are defined as data from air transportation operations from a place in any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico and the Virgin Islands, or a U.S. territory or possession to a place in any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico and the Virgin Islands, or a U.S. territory or possession." 14:14:4.0.1.1.48.6.8.3,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,F,Subpart F—Reporting Requirements,,§ 298.62 Reporting of financial data.,FAA,,,"[ER-1399, 50 FR 20, Jan. 2, 1985, as amended by 53 FR 48528, Dec. 1, 1988; 60 FR 43528, Aug. 22, 1995; 60 FR 66726, Dec. 26, 1995; 67 FR 49234, July 30, 2002; DOT-OST-2014-0140, 84 FR 15935, Apr. 16, 2019]","(a) Each commuter air carrier and each small certificated air carrier shall file BTS Form 298-C, Schedule F-1 “Report of Financial Data.” This report shall be filed quarterly as set forth in § 298.60 of this part. (b) Each carrier shall indicate in the space provided, its full corporate name and the quarter for which the report is filed. (c) This schedule shall be used to report financial data for the overall or system operations of the carrier. At the option of the carrier, the data may be reported in whole dollars by dropping the cents. Financial data shall be reported in the following categories: (1) Line 1 “Total Operating Revenues” shall include gross revenues accruing from services ordinarily associated with air transportation and air transportation-related services. This category shall include revenue derived from scheduled service operations, revenue derived from nonscheduled service operations, amounts of compensation paid to the carrier under section 41732 of 49 U.S.C. Subtitle VII and other transport-related revenue such as in-flight sales, restaurant and food service (ground), rental of property or equipment, limousine service, cargo pick-up and delivery charges, and fixed-base operations involving the selling or servicing of aircraft, flying instructions, charter flights, etc. (2) Line 2 “Total Operating Expenses” shall include expenses of a character usually and ordinarily incurred in the performance of air transporation and air transportation services. This category shall include expenses incurred: directly in the in-flight operation of aircraft; in the holding of aircraft and aircraft personnel in readiness for assignment to an in-flight status; on the ground in controlling and protecting the in-flight movement of aircraft; landing, handling or servicing aircraft on the ground; selling transportation; servicing and handling traffic; promoting the development of traffic; and administering operations generally. This category shall also include expenses which are specifically identifiable with the repair and upkeep of property and equipment used in the performance of air transportation, all depreciation and amortization expenses applicable to property and equipment used in providing air transportation services, all expenses associated with the transport-related revenues included on line 1 of this schedule, and all other expenses not specifically mentioned which are related to transport operations. Interest expense and other nonoperating expenses attributable to financing or other activities which are extraneous to and not an integral part of air transportation or its incidental services shall not be included in this category. (3) Line 3 “Net Income or (Loss)” shall reflect all operating and nonoperating items of profit and loss recognized during the period except for prior period adjustments. (4) Line 4 “Passenger Revenues-Scheduled Service” shall include revenue generated from the transportation of passengers between pairs of points which are served on a regularly scheduled basis. (d) Data reported on this schedule shall be withheld from public release for a period of 3 years after the close of the calendar quarter to which the report relates." 14:14:4.0.1.1.48.6.8.4,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,F,Subpart F—Reporting Requirements,,§ 298.63 Reporting of aircraft operating expenses and related statistics by small certificated air carriers.,FAA,,,"[ER-1399, 50 FR 20, Jan. 2, 1985, as amended by Doc. No. 47939, 57 FR 40104, Sept. 2, 1992; 60 FR 66726, Dec. 26, 1995; 67 FR 49234, July 30, 2002]","(a) Each small certificated air carrier shall file BTS Form 298-C, Schedule F-2 “Report of Aircraft Operating Expenses and Related Statistics.” This schedule shall be filed quarterly as prescribed in § 298.60. Data reported on this report shall be for the overall or system operations of the air carrier. (b) Each carrier shall indicate in the space provided its full corporate name and the quarter for which the report is filed. (c) This schedule shall show the direct and indirect expenses incurred in aircraft operations. Direct expense data applicable to each aircraft type operated by the carrier shall be reported in separate columns of this schedule. Each aircraft type reported shall be identified at the head of each column in the space provided for “Aircraft Type.” “Aircraft Type” refers to aircraft models such as Beech-18, Piper PA-32, etc. Aircraft Type designations are prescribed in the Accounting and Reporting Directives, which is available from the BTS' Office of Airline Information. In the space provided for “Aircraft Code” carriers shall insert the three digit code prescribed in the Accounting and Reporting Directives for the reported aircraft type. ( Note: Aircraft of the same type but different cabin configuration may be grouped into a single classification; therefore, carriers are not required to report the fourth digit of an aircraft code indicating cabin configuration.) (d) Line 1 Direct aircraft operating expenses shall be reported in the following categories: (1) Line 2 “Flying Operations (Less Rental)” shall be subdivided as follows: (i) Line 3 “Pilot and Copilot” expense shall include pilots' and copilots' salaries, and related employee benefits, pensions, payroll taxes and personnel expenses. (ii) Line 4 “Aircraft Fuel and Oil” expense shall include the cost of fuel and oil used in flight operations and nonrefundable aircraft fuel and oil taxes. (iii) Line 5 “Other” expenses shall include general (hull) insurance, and all other expenses incurred in the in-flight operation of aircraft and holding of aircraft and aircraft operational personnel in readiness for assignment to an in-flight status, which are not provided for otherwise on this schedule. (2) Line 6 “Total Flying Operations (Less Rentals)” shall equal the sum of lines 3, 4 and 5. (3) Line 7 “Maintenance-Flight Equipment” shall include the cost of labor, material and related overhead expended by the carrier to maintain flight equipment, general services purchased for flight equipment maintenance from associated or other outside companies, and provisions for flight equipment overhauls. (4) Line 8 “Depreciation and Rental-Flight Equipment” expense shall include depreciation of flight equipment, amortization of capitalized leases for flight equipment, provision for obsolescence and deterioration of spare parts, and rental expense of flight equipment. (5) Line 9 “Total Direct Expense” shall equal the sum of lines 6, 7 and 8. (e) Line 10 Indirect aircraft operating expenses shall be reported only in total for all aircraft types and shall be segregated according to the following categories: (1) Line 11 “Flight Attendant Expense” shall include flight attendants' salaries, and related employee benefits, pensions, payroll taxes and personnel expenses. (2) Line 12 “Traffic Related Expense” shall include traffic solicitor salaries, traffic commissions, passenger food expense, traffic liability insurance, advertising and other promotion and publicity expenses, and the fringe benefit expenses related to all salaries in this classification. (3) Line 13 “Departure Related (Station) Expense” shall include aircraft and traffic handling salaries, landing fees, clearance, customs and duties, related fringe benefit expenses and maintenance and depreciation on ground property and equipment. (4) Line 14 “Capacity Related Expense” shall include salaries and fringe benefits for general management personnel, recordkeeping and statistical personnel, lawyers and law clerks, and purchasing personnel; legal fees and expenses; stationery; printing; uncollectible accounts; insurance purchased-general; memberships; corporate and fiscal expenses; and all other expenses which cannot be identified or allocated to some other specifically identified indirect cost category. (f) Line 15 “Total Indirect Expense” shall equal the sum of lines 11, 12, 13 and 14. (g) Line 16 “Total Operating Expense” shall equal the sum of lines 9 and 15. (h) Line 17 “Total Gallons of Fuel Issued” shall include the gallons of fuel used in flight operations related to fuel cost reported in total and by aircraft type on Line 4." 14:14:4.0.1.1.48.6.8.5,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,F,Subpart F—Reporting Requirements,,§ 298.65 Requests for extensions of time within which to file reports or for waivers from reporting requirements.,FAA,,,"[ER-1399, 50 FR 21, Jan. 2, 1985, as amended by Doc. No. 47939, 57 FR 40104, Sept. 2, 1992; 60 FR 66726, Dec. 26, 1995]","(a) If circumstances prevent the filing of BTS Form 298-C on or before the due date, a written request for an extension may be submitted. Except in cases of emergency, the request must be delivered to the BTS's Office of Airline Information in writing at least three days in advance of the due date. The request must state good and sufficient reason to justify the granting of the extension and the date when the reports can be filed. If the request is denied, the air carrier remains subject to the filing requirements to the same extent as if no request for extension of time had been made. (b) The Office of Airline Information may waive any reporting requirements contained in §§ 298.61, 298.62, 298.63 and 298.64 of this part, upon its own initiative or upon written request from any air carrier if the waiver is in the public interest and the request demonstrates that: (1) Unusual circumstances warrant such a departure; (2) A specifically defined alternative procedure or technique will result in a substantially equivalent or more accurate portrayal; and (3) The application of the alternative procedure will maintain or improve uniformity in reporting between air carriers." 14:14:4.0.1.1.48.6.8.6,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,F,Subpart F—Reporting Requirements,,§ 298.66 Reporting exemption for State collection of data.,FAA,,,"[ER-1399, 50 FR 21, Jan. 2, 1985, as amended by Doc. No. 47939, 57 FR 40104, Sept. 2, 1992; 60 FR 66726, Dec. 26, 1995]","(a) The Office of Airline Information may exempt a commuter air carrier from the reporting requirements of § 298.61 of this part if a State government collects the information specified in that section and provides it to the Department by the dates specified. The data provided to the Department in this manner must be at least as reliable as if they were collected by the Department directly. (b) The Office of Airline Information will provide assistance to any State agency interested in participating in this exemption program." 14:14:4.0.1.1.48.7.8.1,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,G,Subpart G—Public Disclosure of Data,,§ 298.70 Public disclosure of data.,FAA,,,"[Doc. No. OST-98-4043, 67 FR 49234, July 30, 2002, as amended by DOT-OST-2014-0140, 84 FR 15935, Apr. 16, 2019]","(a) Detailed domestic on-flight market data and nonstop segment data except military data shall be made publicly available after processing. Domestic data are defined as data from air transportation operations from a place in any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico and the Virgin Islands, or a U.S. territory or possession to a place in any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico and the Virgin Islands, or a U.S. territory or possession. Domestic military operations are reported under service codes N or R. (b) Detailed international on-flight market and nonstop segment data in Schedule T-100 and Schedule T-100(f) reports, except military data, shall be publicly available immediately following the Department's determination that the database is complete, but no earlier than six months after the date of the data. Military operations are reported under service codes N or R. Data for on-flight markets and nonstop segments involving no U.S. points shall not be made publicly available for three years. Industry and carrier summary data may be made public before the end of six months or the end of three years, as applicable, provided there are three or more carriers in the summary data disclosed. The Department may, at any time, publish international summary statistics without carrier detail. (c) Schedule F-1 “Report of Financial Data” shall be withheld from public release for a period of 3 years after the close of the calendar quarter to which the report relates. (d) The Department may release nonstop segment and on-flight market detail data by carrier or individual Schedule F-1 “Report of Financial Data” before the end of the confidentiality period as follows: (1) To foreign governments as provided in reciprocal arrangements between the foreign country and the U.S. Government for exchange of on-flight market and/or nonstop segment data submitted by air carriers of that foreign country and U.S. carriers serving that foreign country. (2) To parties to any proceeding before the Department under 49 U.S.C. Subtitle VII (Transportation), as required by an Administrative Law Judge or other decision-maker of the Department. Parties may designate agents or consultants to receive the data in their behalf, provided the agents or consultants agree to abide by the disclosure restrictions. Any data to which access is granted pursuant to this provision may be introduced into evidence, subject to the normal rules of admissibility. (3) To agencies or other components of the U.S. Government for their internal use only." 14:14:4.0.1.1.48.8.8.1,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,H,Subpart H—Violations,,§ 298.80 Disclosures.,FAA,,,"[Dockt. No. DOT-OST-2007-27057, 83 FR 46877, Sept. 17, 2018]","(a) Before entering a contract for a specific flight or series of flights with charterers, air taxi operators and commuter air carriers must disclose to the charterer the information in paragraphs (a)(1) and (2) of this section. Before entering a contract for a specific flight or series of flights with charterers, air taxi operators and commuter air carriers must, upon request of the charterer, disclose to the charterer the information in paragraphs (a)(3), (4), and (5) of this section. The disclosures may be accomplished through electronic transmissions. (1) That the flight will be performed by another direct air carrier or direct foreign air carrier if that is the case. The corporate name of the direct air carrier or direct foreign air carrier in operational control of the aircraft on which the air transportation is to be performed and any other names in which that direct carrier holds itself out to the public. (2) If the flight is to be performed by another direct air carrier or direct foreign air carrier, the capacity in which the air taxi operator or commuter air carrier is acting in contracting for the air transportation, i.e., as a principal, as an agent of the charterer, or as an agent of the direct air carrier that will be in operational control of the flight. (3) If the flight is to be performed by another direct air carrier or foreign direct air carrier and the air taxi operator or commuter air carrier is acting as the agent of the charterer, the air taxi operator or commuter air carrier must disclose the existence of any corporate or business relationship, including a preexisting contract, between the air taxi operator or commuter air carrier and the direct carrier that will be in operational control of the flight that may have a bearing on the air taxi operator's or commuter air carrier's selection of the direct carrier that will be in operational control of the flight. (4) The total cost of the air transportation paid by the charterer to or through the air taxi operator or commuter air carrier, including any carrier-imposed fees or government-imposed taxes and fees. Specific individual fees, taxes, or costs may, but are not required to be itemized. (5) The existence of any fees and their amounts collected by third parties, if known (or a good faith estimate if not known), including fuel, landing fees, and aircraft parking or hangar fees for which the charterer will be responsible for paying directly. (b) If any of the information in paragraph (a) of this section that is required to be disclosed to the charterer or requested by the charterer to be disclosed is not known at the time the contract is entered into or changes thereafter, air taxi operators and commuter air carriers must provide the information to the charterer within a reasonable time after such information becomes available to the air taxi operator or commuter air carrier, such that the charterer has enough time to make an informed decision as to whether to accept the additional information or accept the change. (c) If the information in paragraph (a) of this section that is required to be disclosed to the charterer or requested by the charterer to be disclosed is not provided to the charterer within a reasonable time after such information becomes available to the air taxi operator or commuter air carrier, air taxi operators and commuter air carriers must provide the charterer with the opportunity to cancel the contract for air transportation, including any services in connection with such contract, and receive a full refund of any monies paid for the charter air transportation and services. (d) Except in exigent circumstances particular to a passenger, air taxi operators and commuter air carriers must disclose prior to the start of the air transportation the information in paragraph (a) of this section that is required or requested to be disclosed. (e) If the information in paragraph (a) of this section that is required to be disclosed to the charterer or requested by the charterer to be disclosed changes after the air transportation covered by the contract has begun, air taxi operators and commuter air carriers must provide information regarding any such changes to the charterer within a reasonable time after such information becomes available to the air taxi operator or commuter air carrier. (f) If the changes in information described in paragraph (e) of this section are not provided to the charterer within a reasonable time after becoming available to the air taxi operator or commuter air carrier, air taxi operators and commuter air carriers must provide the charterer with the opportunity to cancel the remaining portion of the contract for charter air transportation, including any services paid for in connection with such contract, and receive a full refund of any monies paid for the charter air transportation and services not yet provided." 14:14:4.0.1.1.48.9.8.1,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,I,Subpart I—Violations,,§ 298.90 Prohibited unfair or deceptive practices or unfair methods of competition.,FAA,,,,"(a) Violations of this Part shall be considered to constitute unfair or deceptive practices or unfair methods of competition in violation of 49 U.S.C. 41712. (b) In addition to paragraph (a) of this section, the following enumerated practices, among others, by an air taxi operator or commuter air carrier are unfair or deceptive practices or unfair methods of competition in violation of 49 U.S.C. 41712: (1) Misrepresentations that may induce members of the public to reasonably believe that the air taxi operator or commuter air carrier will be, or is, in operational control of a flight when that is not the case. (2) Misrepresentations as to the quality or kind of service or type of aircraft. (3) Misrepresentations as to the time of departure or arrival, points served, route to be flown, stops to be made, or total trip-time from point of departure to destination. (4) Misrepresentations as to the qualifications of pilots or safety record or certification of pilots, aircraft, or air carriers. (5) Misrepresentations that passengers are directly insured when they are not so insured. For example, where the only insurance in force is that protecting the air taxi operator or commuter air carrier in the event of liability. (6) Misrepresentations as to fares or charges for air transportation or services in connection therewith. (7) Misrepresentations as to membership in or involvement with an organization that audits direct air carriers or that the direct air carrier to be used for a flight meets a standard set by an auditing organization. (8) Representing that a contract for a specified direct air carrier, aircraft, flight, or time has been arranged without a binding commitment with a direct air carrier for the furnishing of such transportation as represented. (9) Selling or contracting for air transportation while knowing or having reason to know or believe that such air transportation cannot be legally performed by the direct air carrier or foreign direct air carrier that is to perform the air transportation. (10) Misrepresentations as to the requirements that must be met by charterers in order to qualify for charter flights. (11) Using or displaying or permitting or suffering to be used or displayed the name, tradename, slogan or any abbreviation thereof, of an air charter broker in advertisements, on or in places of business, or on or in aircraft or any other place in connection with the name of the air taxi or commuter air carrier in such manner that it may mislead or confuse potential consumers with respect to the status of the air charter broker." 14:14:4.0.1.1.48.9.8.2,14,Aeronautics and Space,II,A,298,PART 298—EXEMPTIONS FOR AIR TAXI AND COMMUTER AIR CARRIER OPERATIONS,I,Subpart I—Violations,,§ 298.92 Enforcement.,FAA,,,"[Doc. No. DOT-OST-2007-27057, 83 FR 46877, Sept. 17, 2018, as amended by DOT-OST-2014-0140, 84 FR 15935, Apr. 16, 2019]","In case of any violation of the provisions of 49 U.S.C. Subtitle VII, or this part, or any other rule, regulation, or order issued under the Statute, the violator may be subject to a proceeding pursuant to section 46101 of 49 U.S.C. Subtitle VII before the Department, or sections 46106 through 46108 of 49 U.S.C. Subtitle VII before a U.S. District Court, as the case may be, to compel compliance therewith; or to civil penalties pursuant to the provisions of section 46301 of 49 U.S.C. Subtitle VII; or, in the case of a willful violation, to criminal penalties pursuant to the provisions of section 46316 of 49 U.S.C. Subtitle VII; or other lawful sanctions including revocation of operating authority." 46:46:8.0.1.4.20.1.3.1,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,A,Subpart A—Introduction,,§ 298.1 Purpose.,FMC,,,,"This part prescribes regulations implementing Title XI of the Merchant Marine Act, 1936, as amended, governing Federal ship financing assistance (46 App. U.S.C. 1271 et seq. ). This part uses “you” and “we” throughout. You and your refer to the applicant for Title XI financing assistance unless we note or imply otherwise. We, us, and our refer to the Maritime Administration, the Secretary of the Maritime Administration, or the Secretary of Transportation, as applicable." 46:46:8.0.1.4.20.1.3.2,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,A,Subpart A—Introduction,,§ 298.2 Definitions.,FMC,,,"[65 FR 45152, July 20, 2000, as amended at 67 FR 61282, Sept. 30, 2002]","For the purpose of this part: Act means the Merchant Marine Act, 1936, as amended (46 App. U.S.C. 1101 through 1294). Actual Cost of a Vessel or Shipyard Project means, as of any specified date, the aggregate, as determined by us, of all amounts paid by or for the account of the Obligor on or before that date and all amounts which the Obligor is then obligated to pay from time to time thereafter, for the construction, reconstruction or reconditioning of such Vessel or Shipyard Project. Advanced Shipbuilding Technology means: (1) Numerically controlled machine tools, robots, automated process control equipment, computerized flexible manufacturing systems, associated computer software, and other technology for improving shipbuilding and related industrial production which advance the state-of-the-art; and (2) Novel techniques and processes designed to improve shipbuilding quality, productivity, and practice, and to promote sustainable development, including engineering design, quality assurance, concurrent engineering, continuous process production technology, energy efficiency, waste minimization, design for recyclability or parts reuse, inventory management, upgraded worker skills, and communications with customers and suppliers; and (3) Other elements contributing to a shipyard's efficiency or productivity assisting it to more effectively operate in the shipbuilding industry. Citizen of the United States means a person who, if an individual, is a Citizen of the United States by birth, naturalization or as otherwise authorized by law or, if other than an individual, meets the requirements of Section 2 of the Shipping Act, 1916, as amended (46 App. U.S.C. 802), as further described at 46 CFR 221.3(c). Closing means a meeting of various participants or their representatives in a Title XI financing, at which a commitment to issue Guarantees is executed, or at which all or part of the Obligations are authenticated and issued and the proceeds are made available for a purpose set forth in section 1104(a) of the Act, or at which a Vessel is delivered and a Mortgage is executed as security to us or a Shipyard Project is completed and a Mortgage or other security is executed to us. Commitment Closing means a meeting of various participants or their representatives in a Title XI financing at which a commitment to issue Guarantees is executed and the forms of the Obligations and the related Title XI documents are also either agreed upon or executed. Depository means the U.S. Department of Treasury, acting in its capacity under Section 1109 of the Act. Depreciated Actual Cost of a Vessel or Shipyard Project means the Actual Cost of the Vessel or Shipyard Project, as defined in this section (less a residual value of 2 1/2 percent of United States shipyard construction cost or, in the case of Shipyard Project, a residual value as appropriate), depreciated on a straightline basis over the useful life of the Vessel or Shipyard Project as determined by us, not to exceed twenty-five years from the date the Vessel or Shipyard Project was delivered by the shipbuilder or manufacturer or, if the Vessel or Shipyard Project has been reconstructed or reconditioned, the Actual Cost of the Vessel or Shipyard Project depreciated on a straightline basis from the date the Vessel or Shipyard Project was delivered by the shipbuilder or manufacturer to the date of such reconstruction or reconditioning, on the basis of the original useful life of the Vessel or Shipyard Project, and from the date of said reconstruction or reconditioning on a straightline basis and on the basis of a useful life of the Vessel or Shipyard Project determined by us, plus all amounts paid or obligated to be paid for the reconstruction or reconditioning, depreciated on a straightline basis and on the basis of a useful life of the Vessel or Shipyard Project determined by us. Documentation means all or part of the agreements relating to an entire Title XI financing which must be furnished to us, irrespective of whether we are a party to each agreement. Eligible Export Vessel means a Vessel constructed, reconstructed, or reconditioned in the United States for use in world-wide trade which will, upon delivery or redelivery, be placed under or continued to be documented under the laws of a country other than the United States. Eligible Shipyard means a private shipyard located in the United States. General Shipyard Facility means: (1) For operations on land, any structure or appurtenance thereto designed for the construction, repair, rehabilitation, refurbishment, or rebuilding of any Vessel, including graving docks, building ways, ship lifts, wharves and pier cranes; the land necessary for any structures or appurtenances; and equipment necessary for the performance of any function referred to in this definition; and (2) For operations other than on land, any Vessel, floating drydock, or barge constructed in the United States, within the meaning of § 298.11(a), and used for, or a type that is usually used for, activities referred to in paragraph (1) of this definition. Guarantee means the contractual commitment of the United States of America, represented by us, endorsed on each Obligation, to make payment to the Obligee or an agent, upon demand, of the unpaid interest on, and the unpaid balance of the principal of such Obligation, including interest accruing between the date of default and the date of payment. Guarantee Fee means the fee payable to us in consideration for the issuance of the Guarantees. Indenture Trustee means a bank with corporate trust powers, or a trust company, with a capital and surplus of at least $25,000,000, which is located in and organized and doing business under the laws of the United States, any State or territory thereof, the District of Columbia or the Commonwealth of Puerto Rico, which has duties under the terms of a Trust Indenture, entered into with the Obligor, providing for the issuance and registration of the ownership and transfer of Obligations, the disbursement of funds held in trust by the Indenture Trustee for the redemption and payment of interest and principal with respect to Obligations, demands by the Indenture Trustee for payment under the Guarantees in the event of default and the remittance of payments received to the Obligees. Pursuant to our specific authorization, the Indenture Trustee may also authenticate the Guarantees. Letter Commitment means a letter from us to you, setting forth specific determinations made by us with respect to your proposed project, as required by the Act and regulations of this part, and stating our commitment to execute Guarantees, subject to compliance by you with any conditions specified therein. Maritime Administration means the agency created within the Department of Transportation by Reorganization Plan No. 21 of 1950 (64 Stat. 1273), amended by Reorganization Plan No. 7 of 1961 (75 Stat. 840), as amended by Public Law 91-469 (84 Stat. 1036). Modern Shipbuilding Technology means a technology to be introduced into the shipyard that is comprised of the best available proven technology, techniques, and processes appropriate to advancing the state-of-the-art of the applicant shipyard, or exceeds the best available processes of American shipbuilding, and that will enhance its productivity and make it more competitive internationally. Mortgage means a first Preferred Mortgage on any Vessel or a first mortgage with respect to a Shipyard Project. Obligation means any note, bond, debenture, or other evidence of indebtedness, as defined in section 1101(c) of the Act, issued for one of the purposes specified in section 1104(a) of the Act. Obligee means the holder of an Obligation. Obligor means any party primarily liable for payment of principal of or interest on any Obligation. Paying Agent means any Person appointed by the Obligor to pay the principal of or interest on the Obligations on behalf of the Obligor. Person means any individual, estate, foundation, corporation, partnership, limited partnership, joint venture, association, joint-stock company, trust, unincorporated organization or other acceptable legal business entity, government, or any agency or political subdivision thereof. Preferred Mortgage means: (1) In the case of a mortgage on a Vessel documented under United States law, whenever made, a mortgage that— (i) Includes the whole of a Vessel; (ii) Is filed in substantial compliance with 46 U.S.C. 31321; (iii) Covers a documented Vessel or a Vessel for which an application for documentation has been filed that is in substantial compliance with the requirements of 46 U.S.C. Ch. 121 and the regulations prescribed under that Chapter by the United States Coast Guard; and (iv) Is otherwise in compliance with the provisions of Chapter 313 of Title 46 of the U.S. Code.; and (2) In the case of a mortgage on an Eligible Export Vessel, whenever made, a mortgage that— (i) Constitutes a mortgage that is established as security on an Eligible Export Vessel under the laws of a foreign country; (ii) Was executed under the laws of that foreign country and under which laws the ownership of the Vessel is documented; (iii) Is registered under the laws of that foreign country in a public register at the port of registry of the Vessel or at a central office; (iv) Otherwise satisfies the requirements of 46 U.S.C. 31301(6)(B) to constitute a Preferred Mortgage; and (v) Has us as the mortgagee, or such other mortgagee as is permitted by the applicable foreign law and approved by us. Related Party means as that term is defined by generally accepted accounting principles outlined in paragraph 24 of Statement of Financial Accounting Standards No. 57, Related Party Disclosures. Secretary means the Secretary of Transportation, acting by and through the Maritime Administrator, Department of Transportation, the Maritime Administrator or any official of the Maritime Administration to whom is duly delegated the authority, from time to time, to perform the functions of the Secretary of Transportation or the Maritime Administrator, Department of Transportation. Secretary's Note means a promissory note from the Obligor to the Secretary in an amount equal to the aggregate amount of the Obligations, which is issued simultaneously with the Guarantees. Security Agreement means the primary contract between the Obligor and the Secretary, providing for the transfer to the Secretary by the Obligor of all right, title and interest of the Obligor in certain described property (including rights under contracts in existence or to be entered into), and containing other provisions relating to representations and responsibilities of the Obligor to the Secretary as security for the issuance of Guarantees. Shipyard Project means Advanced Shipbuilding Technology and Modern Shipbuilding Technology or both unless otherwise specified. Vessel means all types of vessels, whether in existence or under construction, including passenger, cargo and combination passenger-cargo carrying vessels, tankers, towboats, barges and dredges which are or will be documented under the laws of the United States, floating drydocks which have a capacity of at least thirty-five thousand or more lifting tons and a beam of one hundred and twenty-five feet or more between the wing walls and oceanographic research or instruction or pollution treatment, abatement or control vessels, which are owned by citizens of the United States; except that an Eligible Export Vessel will not be documented under the laws of the United States." 46:46:8.0.1.4.20.1.3.3,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,A,Subpart A—Introduction,,§ 298.3 Applications.,FMC,,,"[65 FR 45152, July 20, 2000, as amended at 68 FR 62538, Nov. 5, 2003; 69 FR 61451, Oct. 19, 2004]","(a) Process and certification. When you apply for a commitment to execute Guarantees, you must: (1) Complete Form MA-163 and send it to the Secretary, Maritime Administration, U.S. Department of Transportation, 400 Seventh Street, SW., Washington, DC 20590. [Note: MARAD will accept electronic options (such as facsimile and Internet) for transmission of required information (excluding closing documents and documents submitted in connection with defaults) to MARAD, if practicable.] (2) Certify the application in the manner that Form MA 163 prescribes. (b) Required information. You must include all required information on Form MA 163 or in attached exhibits and schedules submitted with the application. You must also include the following regarding the Vessel or Vessels, if applicable: (1) Any demise charters, (2) Time charters in excess of six months, (3) Contracts of affreightment, (4) Drilling contracts, and/or (5) Other contractual arrangements. (c) Declaration of Lobbying form. You must also file the Declaration of Lobbying form as required by 31 U.S.C. 1352 with the initial application as part of the formal submission. (d) Attachments. Each exhibit, schedule, and attachment must contain a statement, on the first page clearly identifying the document as an attachment to the application. You must state on each attachment the: (1) Name of the applicant; and (2) Date of the application. (e) Amendment. You must mark “Amendment,” on any amendment of data contained in the application. Each first page must contain a statement clearly identifying the document as an amendment to your application and must include the: (1) Name of the applicant; (2) Date of application; and (3) Certification required on Form MA 163. (f) Application time schedule. You must submit each application to us at least four (4) months prior to the anticipated date by which you require a Letter Commitment. (1) We may consider applications with less than four (4) months notice, prior to the anticipated date by which you require a Letter Commitment, if you submit written documentation to us that extenuating circumstances exist. (2) During the first fifteen (15) calendar days after you submit your application, we will preliminarily review your application for adequacy and completeness. (i) If we find that your application is incomplete, or if we require additional data, we will notify you promptly in writing, and you will have fifteen (15) calendar days, from the date of each request for additional information, to correct deficiencies. (ii) If you have not corrected the deficiencies or have not made substantial progress toward correcting them, within the 15 calendar days, then we may terminate the processing of your application without prejudice. (3) Once we consider your Title XI application complete, we will act on the application within a period of 60 calendar days, unless for good cause, we find it necessary to extend the 60 day period. (4) If you do not complete your application and we do not act upon your application within four (4) months from the submission date, unless we extend the time period, we will notify you in writing that processing of the application is terminated and that you may reapply at a later date. (i) If we terminate your application without prejudice, we will not require you to pay a new filing fee for a later application for a similar project that you file within one year of the termination date. (ii) If you submit an application for a substantially different project, you must pay a new filing fee. We will determine whether the application is substantially different on a case-by-case basis. (5) If we issue you a Letter Commitment, you must submit two (2) sets of the Closing documentation to us for review at least six (6) weeks prior to the anticipated Closing. The six weeks time period will give us time to complete an adequate review of the documentation. You must use our standard form of documentation. (g) Degrees of risk. When processing applications, we will consider the different degrees of risk involved with different applications. (h) Additional assurances. Before we approve your application, we may require additional assurances if you are not a well established firm with strong financial qualifications and strong market shares seeking financing guarantees for replacement vessels in an established market in which projected demand exceeds supply. The additional assurances may include: (1) Firm charter commitments; (2) Parent company guarantees; (3) Greater equity participation; (4) Private financing participation; (5) Security interest on other property; and (6) Similar arrangements to any of these additional assurances. (i) Filing Fee. When you submit your application, you must include a $5,000 filing fee, which will be non-refundable, irrespective of whether we issue a Letter Commitment. However, the $5,000 filing fee is credited toward the investigation fee described in § 298.15(b). (j) Confidential Information. (1) If we receive a request for release of your information, we will notify you. If you believe that your application, including attachments, contains information you consider to be trade secrets or commercial or financial information and privileged or confidential, or otherwise exempt from disclosure under the Freedom of Information Act (FOIA) (5 U.S.C. 552), you may assert a claim of confidentiality. When submitting your application, you should mark “Confidential” on the pages that you consider confidential. The same requirement applies to any amendment to the application. (2) FOIA requests. We will apply the procedures contained in the Department of Transportation's regulations at 49 CFR 7.17 regarding FOIA requests for information that the submitter has designated as confidential. We will consider your claim of confidentiality at the time someone requests the information under FOIA. (3) Statement of objections. If we receive a request for release of your information, we will notify you. We will give you a reasonable period of time to give us a written, detailed statement explaining your objections to our release of the information. We will not give you notice if: (i) We determine that we should not disclose the information; (ii) The information has been lawfully published or made available to the public; or (iii) Law (other than 5 U.S.C. 552) requires us to disclose the information. (4) Our notification of intent to disclose. If your objections to release of the information do not persuade us, we will notify you of our intent to disclose in a reasonable number of days before we intend to disclose the information. The written notice will include: (i) A statement explaining our reasons for not accepting the submitter's disclosure objections; (ii) A description of the business information that we will disclose; and (iii) A specific disclosure date. (k) Priority. We will give priority for processing applications to: (1) Vessels capable of serving as a United States naval and military auxiliary in time of war or national emergency, (2) Requests for financing construction of equipment or vessels less than one year old as opposed to the refinancing of existing equipment or vessels that are one year old or older, (3) Any applications involving the purchase of vessels currently financed under Title XI if the purpose is to process the assumption of the obligations, (4) Applications from those willing to take guarantees for less than the normal term for that class of vessel. (5) Eligible Export Vessels. We may issue a commitment to guarantee Obligations for an Eligible Export Vessel if we determine, in our sole discretion, that the issuance of a commitment to guarantee Obligations for an Eligible Export Vessel will not cause us to deny an economically sound application to issue a commitment to guarantee Obligations for vessels documented under the laws of the United States operating in the domestic or foreign commerce of the United States, after considering: (i) The status of pending applications for commitments to guarantee obligations for vessels documented under the laws of the United States and operating or to be operated in the domestic or foreign commerce of the United States; (ii) The economic soundness of the applications referred to in paragraph (k)(5)(i) of this section; and (iii) The amount of guarantee authority available." 46:46:8.0.1.4.20.2.3.1,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,B,Subpart B—Eligibility,,§ 298.10 Citizenship.,FMC,,,,"(a) Applicability. Before you receive a legal or beneficial interest in a Vessel financed under Title XI of the Act which is operating in or will be operated in the U.S. coastwise trade, you and any other Person, (including the shipowner and any bareboat charterer), must establish your United States citizenship, within the definition of “Citizen of the United States” in § 298.2. (b) Prior to Letter Commitment. Before we issue the Letter Commitment, you and any Person identified in paragraph (a) of this section, who is required to establish United States citizenship must establish United States citizenship in the form and manner stated in 46 CFR part 355. (c) Commitment Closing. (1) Within 10 days before every Commitment Closing, unless we waive this requirement for good cause, you and all Persons identified with the project who have previously established United States citizenship in accordance with paragraphs (a) and (b) of this section, must submit pro forma Supplemental Affidavits of Citizenship which we have approved for Closing as to form and substance, and (2) On the date of the Closing, three (3) executed copies of Supplemental Affidavits of Citizenship that: (i) Show evidence of the continuing United States citizenship of the Persons in paragraph (a) of this section; and (ii) Bear the date of the Closing. (d) Additional information. If we request additional material essential to clarify or support evidence of U.S. citizenship, you, the Obligor, or any Person identified in paragraph (a) of this section must submit the additional information." 46:46:8.0.1.4.20.2.3.10,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,B,Subpart B—Eligibility,,§ 298.19 Financing Eligible Export Vessels.,FMC,,,,"(a) Notification to Secretary of Defense. (1) We will provide prompt notice of our receipt of an application for a loan Guarantee for an Eligible Export Vessel to the Secretary of Defense. (2) During the 30-day period, beginning on the date on which the Secretary of Defense receives such notice, the Secretary of Defense may disapprove the loan guarantee if the Secretary of Defense makes an assessment that the Vessel's potential use may cause harm to United States national security interests. (3) The Secretary of Defense may not disapprove a loan Guarantee under this section solely on the basis of the type of vessel to be constructed with the loan Guarantee. The authority of the Secretary of Defense to disapprove a loan Guarantee under this section may not be delegated to any official other than a civilian officer of the Department of Defense appointed by the President, by and with the advice and consent of the Senate. We will not approve a loan guarantee disapproved by the Secretary of Defense. (b) Vessel eligibility. We may not approve a Guarantee for an Eligible Export Vessel unless: (1) We find that the construction, reconstruction, or reconditioning of the Vessel will aid in the transition of United States shipyards to commercial activities or will preserve shipbuilding assets that would be essential in time of war or national emergency; (2) The owner of the Vessel agrees with us that the Vessel shall not be transferred to any country designated by the Secretary of Defense as a country whose interests are hostile to the interests of the United States; and (3) We determine that the countries in which the shipowner, its charterers, guarantors, or other financial interests supporting the transaction, if any, have their chief executive offices or have located a substantial portion of their assets, present an acceptable financial or legal risk to our collateral interests. Our determination will be based on confidential risk assessments provided by the Inter-Agency Country Risk Assessment System and will take into account any other factors related to the loan guarantee transaction that we deem pertinent." 46:46:8.0.1.4.20.2.3.2,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,B,Subpart B—Eligibility,,§ 298.11 Vessel requirements.,FMC,,,,"When you apply for a Guarantee, the Vessel for which you intend to receive financing for construction, reconstruction, or reconditioning must meet the following criteria: (a) United States Construction. A Vessel, including an Eligible Export Vessel, financed by an Obligation Guarantee must be constructed in the United States. United States construction means that the Vessel is assembled in a shipyard geographically located within the United States. (1) A U.S.-flag Vessel must meet the applicable United States Coast Guard requirements. (2) An Eligible Export Vessel must be constructed in accordance with the requirements of the International Maritime Organization and must meet the applicable: (i) Laws, rules, and regulations of its country of documentation, (ii) Treaties, conventions on international agreements to which that country is a signatory, and (iii) Laws of the ports it serves. (b) Actual Cost. We must approve your estimated Actual Cost for the construction, reconstruction, or reconditioning of a Vessel as a condition for issuance of the Letter Commitment. The estimated cost of the Vessel may include escalation for the anticipated construction period of the Vessel. We may contact the shipyard directly and may require you to have the shipyard that has contracted to build the Vessel to submit additional technical data, backup cost details, and other evidence if we have insufficient data. (c) Class, condition, and operation. The Vessel must be constructed, maintained, and operated so as to meet the highest classification, certification, rating, and inspection standards for vessels of the same age and type imposed by: (1) The American Bureau of Shipping (ABS), or (2) Another classification society that also meets the inspection standards of the United States Coast Guard with respect to the documentation of U.S.-flag vessels, or (3) In the case of an Eligible Export Vessel, such standards as may be imposed by a member of the International Association of Classification Societies (IACS), classification societies to be ISO 9000 series registered or Quality Systems Certificate Scheme qualified IACS members who have been recognized by the United States Coast Guard as meeting acceptable standards with such recognition including, at a minimum, that the society meets the requirements of IMO Resolution A.739(18) with appropriate certificates required at delivery, so long as the home country of the IACS member accords equal reciprocity, as determined by us, to United States classification societies. (4) Except in the case of an Eligible Export Vessel, the Vessel must be in compliance with all applicable laws, rules, and regulations as to condition and operation, including, but not limited to, those administered by the: (i) United States Coast Guard, (ii) Environmental Protection Agency, (iii) Federal Communications Commission, (iv) Public Health Service, or (v) Their respective successor agencies, and (vi) All applicable treaties and conventions to which the United States is a signatory, including, but not limited to, the International Convention for Safety of Life at Sea. (d) Documentation. (1) An Eligible Export Vessel must be documented in a country that is party to the International Convention for Safety of Life at Sea, or other treaty, convention, or international agreement governing vessel inspection to which the United States is a signatory, and must comply with the applicable laws, rules, and regulations of its country of documentation, all applicable treaties, conventions on international agreements to which that country is a signatory, and the laws of the ports it serves. (2) All other Eligible Vessels must be documented under U.S. registry. (e) Reconstruction or reconditioning. Repairs necessary for the Vessel to meet the classification standards approved by us, or any regulatory body, or for previous inadequate maintenance and repair, will not constitute reconstruction or reconditioning within the meaning of this paragraph. (f) Condition survey. If your application involves a reconstructed or reconditioned Vessel, you must make the Vessel available at a time and place acceptable to us so that we may conduct a condition survey. You must: (1) Pay the cost of the condition survey. (2) Ensure that the scope and extent of the condition survey will not be less effective than that required by the last ABS special survey completed (if the Vessel is classified), next due or overdue, whichever date is nearest in accordance with the Vessel's age. (3) Ensure that the Vessel meets the standard of the survey necessary for retention of class (if the Vessel is classified), and (4) Ensure that the operating records of the Vessel reflect normal operation of the Vessel's main propulsion and other machinery and equipment, consistent with accepted commercial experience and practice. (g) Metric Usage. Our preferred system of measurement and weights for Vessels and Shipyard Projects is the metric system." 46:46:8.0.1.4.20.2.3.3,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,B,Subpart B—Eligibility,,§ 298.12 Applicant and operator's qualifications.,FMC,,,,"(a) Operator's qualifications. We will not issue a Letter Commitment without a prior determination that you, the bareboat charterer, or other Person identified in the application as the operator of the Vessel(s) or Shipyard Project, possesses the necessary experience, ability and other qualifications to properly operate and maintain the Vessel(s) or Shipyard Project which serve as security for the Guarantees. You must also comply with all requirements of this part. (b) Identity and ownership of applicant. In order for us to assess the likelihood that the project will be successful, we need information about you and the proposed project. To permit this assessment, you must provide the following information in your application for Title XI guarantees: (1) Incorporated companies. If you or any bareboat charterer is an incorporated company, you must submit the following identifying information: (i) Name of company, place and date of incorporation, and tax identification number, or if appropriate, international identification number of the company; (ii) Address of principal place of business; and (iii) Certified copy of certificate of incorporation and bylaws. (2) Partnerships, limited partnerships, limited liability companies, joint ventures, associations, unincorporated companies. If you or any bareboat charterer is a partnership, limited partnership, limited liability company, joint venture, association, or unincorporated company, you must submit the following identifying information: (i) Name of entity, place and date of formation, and tax identification number, or if appropriate, international identification number of entity; (ii) Address of principal place of business; and (iii) Certified copy of certificate of formation, partnership agreement or other documentation forming the entity. (3) Other entities. For any entity that does not fit the descriptions in paragraphs (b)(1) and (b)(2) of this section, we will specify the information that the entity must submit regarding its identity and ownership. (4) You and any bareboat charterer must provide a brief statement of the general effect of each voting agreement, voting trust or other arrangement whereby the voting rights of any interest in you or the bareboat charterer are controlled or exercised by any person who is not the holder of legal title to such interest. (5) You and any bareboat charterer must provide the following information regarding the entity's officers, directors, partners or members: (i) Name and address; (ii) Office or position; and (iii) Nationality and interest owned (for example, shares owned and whether voting or non-voting). (c) Business and affiliations of applicants. You must include: (1) A brief description of your principal business activities during the past five years. (2) A list of all business entities that directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with you. (3) The nature of the business transacted by each listed entity and the relationship between these entities. This information may be presented in the form of a chart. (4) Whether any of the affiliated entities have previously applied for or received Title XI assistance. (5) A statement indicating whether the applicant, any predecessor or affiliated entity has been in bankruptcy or reorganization under any insolvency or reorganization proceeding and if so, give details. (6) A statement indicating whether the applicant or any predecessor or affiliated entity is now, or during the past five years has been, in default under any agreement or undertaking with others or with the United States of America, or is currently delinquent on any Federal debt, and if so, provide explanatory information. (7) A list of your banking references: (i) Principal bank(s) or lending institutions(s)—name and address; (ii) Nature of relationship; and (iii) Individual references—name(s), telephone and fax number of banking officer(s). (d) Management of applicant. You must include: (1) A brief description of the principal business activities during the past five years of each officer, director, partner or member you listed in paragraph (b)(5) of this section and if these persons (have) act(ed) as executive officers in other entities, indicate the names of these entities and whether such entities have defaulted on any U.S. Government debt, and (2) The name and address of each organization engaged in business activities which have a direct financial relationship to those carried on or to be carried on by you with which any person listed in paragraph (d)(1) of this section has any present business connection, the name of each such person and, briefly, the nature of such connection. (e) Applicant's property and activity. You must provide: (1) A brief description of the general character and location of the principal assets employed in your business and those of your affiliate, other than vessels. Describe financial encumbrances, if any; (2) A general description of the vessels currently owned and/or operated by you or your affiliates and a description of the areas of operation; and, (3) In the case of an Eligible Shipyard which is an applicant for a guarantee for a Shipyard Project, a brief description of the general character (that is, the number of building ways, launch method, drydocks and size) and location (that is, water depth, length of riverfront) of the principal properties of the applicant employed in its business. You must also describe any financial encumbrances. (f) Operating ability. (1) You must submit a detailed statement showing your ability to successfully operate the financed Vessel(s). (2) If a company other than you will operate the Vessel(s), then the information in paragraph (f)(1) of this section must be provided for the operating company together with a copy of the operating agreement. (3) You must submit a copy of any management agreement(s) between you and any related or unrelated organization(s) which will affect the management of the Title XI Vessel or shipyard. (4) In the case of an Eligible Shipyard, which is an applicant for a guarantee for a Shipyard Project, a detailed statement must be submitted showing your ability to successfully operate the Shipyard Project and construct/reconstruct Vessels, including name, education, background of, and licenses held by, all senior supervisory personnel concerned with the physical operation of the Shipyard Project. (5) Where an operator has an historical performance record, we will consider this record in evaluating your operating ability. For newly formed entities, we will evaluate the performance of affiliates and/or companies associated with the principals (where the principals have a significant degree of control) in determining your operating ability. However, unless the affiliates or principals have an obligation with respect to the debt, we will not consider historical performance in evaluating your creditworthiness." 46:46:8.0.1.4.20.2.3.4,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,B,Subpart B—Eligibility,,§ 298.13 Financial requirements.,FMC,,,"[65 FR 45152, July 20, 2000, as amended at 68 FR 62538, Nov. 5, 2003; 69 FR 61451, Oct. 19, 2004; 88 FR 86611, Dec. 14, 2023]","(a) In general. To be eligible for guarantees, you and/or your parent organization (when applicable), and any other participants in the project having a significant financial or contractual relationship with you must submit information, respectively, on their financial condition. You must submit this information at the time of the application. You must supplement this information if we require it in subsequent requests. You must submit information satisfactory to us to show that financial resources are available to support the Title XI project. (b) Cost of the project. You must submit the following cost information with respect to the project: (1) Vessel financing Guarantees. A detailed statement of the estimated Actual Cost of construction, reconstruction, or reconditioning of the Vessel(s) including those items which would normally be capitalized as Vessel construction costs. Net interest during construction is the total estimated construction period interest on non-equity funds less estimated earnings from the escrow fund, if such fund is to be established prior to Vessel(s) delivery. (2) Foreign components. (i) You must exclude each item of foreign components and services from Actual Cost, unless we specifically grant a waiver for the item. We will not grant a waiver for major foreign components of the hull and superstructure. (ii) In deciding whether to grant a waiver for foreign components and services, we will consider your certification, to be reviewed by us, stating that: (A) A foreign item or service is not available in the United States on a timely or price-competitive basis, or (B) The domestic item or service is not of sufficient quality. (iii) Although excluded from Actual Cost, foreign components of the hull and superstructure can be regarded as owner-furnished equipment that may be used in satisfying your equity requirements imposed by paragraph (f) of this section. (3) Costs incurred by written contracts. If any of the costs have been incurred by written contracts such as shipyard contract, management or operating agreement, you should forward signed copies with the application. We may require you to have the contracting shipyard submit back-up cost details and technical data. You must submit this information in the format given in the Title XI application procedures. (4) Shipyard Project. In the case of Shipyard Project, a detailed statement of the actual cost of such technology, including those items which would normally be capitalizable. If you incurred any of the costs through written contracts, you should forward signed copies of the contract with the application. We may require you to have manufacturers submit back-up cost details and technical data. You must submit this information in the format given in the Title XI application procedures. (5) Shore facilities, cargo containers, etc. A detailed statement showing the actual cost of any shore facilities, cargo containers, etc., required to be purchased in conjunction with the project. (6) Additional project costs. A detailed statement showing any other costs associated with the project which were not included in paragraphs (b)(1) through (5) of this section, such as: (i) Legal and accounting fees; (ii) Printing costs; (iii) Vessel insurance; (iv) Underwriting fees; (v) Fee to a Related Party; and (vi) Other fees. (7) Request for Actual Cost Approval and Reimbursement. If the project involves refinancing, you must also submit the exhibit entitled Request for Actual Cost Approval and Reimbursement, its summary sheet and supplemental schedules at the time of filing the application. (c) Financing. (1) You must: (i) Describe, in detail, how the costs of the project (sums referred to in paragraph (b) of this section) will be funded and the timing of such funding. (ii) Include any vessel trade-ins, related or third party financings, etc. (iii) Provide the proposed terms and conditions of all private funding, from both equity and debt sources and clearly identify all parties involved. (iv) Obtain our approval of the terms and conditions for co-financing (involving a blend of Title XI and private financing for the debt portion), including the ability of the co-financiers to exercise their rights against collateral shared with us for any transaction. (v) Demonstrate with financial statements that at least 12 1/2 percent, or 25 percent as applicable, of the construction or reconstruction costs of the Vessel(s) or the cost of the Shipyard Project will be in the form of equity and not additional debt, except to the extent allowed by paragraph (h) of this section. (vi) Disclose all of the Vessel(s), Shipyard Project financing in the format given in the Title XI application procedures. (2) Financial information. You must provide us with financial statements, prepared in accordance with U.S. generally accepted accounting principles (GAAP), and include notes that explain the basis for arriving at the figures except that for Eligible Export Vessels, your financial statements must be in accordance with GAAP if formed in the U.S., or reconciled to GAAP if formed in a foreign country unless a satisfactory justification is provided explaining the inability to reconcile. The financial statements must include the following [Note: MARAD will accept electronic options (such as facsimile and Internet) for transmission of required information to MARAD, if practicable.]: (i) The most recent financial statements for you, your parent company and other significant participants, as applicable (year end or intermediate), and the three most recent audited statements with details of all existing debt. If you are a new entity and are to be funded from or guaranteed by external source(s), you must provide such statements for such source(s); (ii) Your pro forma balance sheet and that of any guarantor (if applicable) as of the estimated date of execution of the Guarantees reflecting the assumption of the Title XI Obligations, including the current liability; and (iii) Your pro forma balance sheets and that of the guarantor (if applicable) for five years after the Closing. (d) Financial definitions. For the purpose of this section and §§ 298.35, 298.36, and 298.42 of this part: (1) “Company” means any Person subject to financial requirements imposed under paragraph (f) of this section and in § 298.35, as well as the reporting requirements imposed by § 298.42. (2) “Working Capital” means the excess, if any, of current assets over current liabilities, both determined in accordance with GAAP and adjusted as follows: (i) In determining current assets you must exclude: (A) Any securities, obligations or evidence of indebtedness of a Related Party or of any stockholder, director, officer or employee (or any member of his family) of the Company or of such Related Party, except advances to agents required for the normal current operation of the Company's vessels and current receivables arising out of the ordinary course of business and not outstanding for more than 60 days; and (B) An amount equal to any excess of unterminated voyage revenue over unterminated voyage expenses. (ii) In determining current liabilities, you must deduct any excess of unterminated voyage expenses over unterminated voyage revenue. (3) “Equity” or “Net Worth” means, as of any date, (the total of paid-in-capital stock, paid-in surplus, earned surplus, retained earnings, and appropriated surplus,) and all other amounts that would be included in net worth in accordance with GAAP, but does not include: (i) Any receivables from any stockholder, director, Officer or employee (or their family) of the Company or from any Related Party (other than current receivables arising out of the ordinary course of business and not outstanding for more than 60 days), and (ii) Any increment resulting from the reappraisal of assets. (4) “Long-Term Debt” means, as of any date, the total notes, bonds, debentures, equipment obligations and other evidence of indebtedness that would be included in long term debt in accordance with GAAP. You must include any guarantee or other liability for the debt of any other Person not otherwise included on the balance sheet. (5) “Capitalizable Cost” means the aggregate of the Actual Cost of the Vessel or Shipyard Project and those other items which customarily would be capitalized as Vessel costs or Shipyard Project costs under GAAP. (6) “Depreciated Capitalizable Cost” means the Capitalizable Cost of a Vessel or Shipyard Project, depreciated on a straightline basis over the same useful life as determined by us for Actual Cost, and depreciated as required by § 298.21(g). (e) Applicability. The financial resources must be adequate to meet the financial terms MARAD requires pursuant to paragraph (f) of this section. (1) The various financial requirements shall be met by the owner of the Vessel or Vessels or Shipyard Project to be security to us for the Guarantees, except that if the owner is not the operator, the overall financial requirements will be allocated among the owner, the operator and other parties as determined by us. (2) The Company must satisfy the applicable financial requirements, in addition to any other financial requirements already imposed or which may be imposed upon it in connection with other Vessels financed under the Title XI program or in connection with other Shipyard Project financed under the Title XI program. (3) A determination as to whether the Company has satisfied all financial requirements shall be based on the assumption that the projected financing has been completed. Accordingly, you must submit: (i) A pro forma balance sheet at the time of the application; and (ii) A revised pro forma balance sheet, reflecting the completion of the projected financing, at least five business days before the first Closing at which the Obligations are issued. (f) Financial requirements at Closing. As a condition of disbursement of a guaranteed loan, the Company must demonstrate financial performance that supports a reasonable prospect of repayment taking into account foreseeable negative economic conditions. (1) The financial requirements of this section are applicable to Companies qualifying under one of the following three categories: (i) Owner as vessel operator, where the owner is to be the vessel operator; (ii) Lessee or charterer as operator, where the lessee or charterer is to be the vessel operator; or (iii) Owner as general shipyard facility, where the owner of a shipyard project is a general shipyard facility. (2) Qualifying financial performance will be substantiated by financial results over at least the trailing 12 quarters and/or demonstrated by pro-forma financial performance that is underpinned by reasonable assumptions. (3) Qualifying creditworthiness will be substantiated by reviewing and evaluating applicants based on revenue metrics which include the following non-exhaustive list: (i) Market factors; (ii) Strategic positioning; (iii) Management and governance; (iv) Pro-forma financial strength; (v) Project specific factors; and (vi) Loan terms. (g) Adjustments to financial requirements at Closing. If the owner, although not operating a vessel, assumes any of the operating responsibilities, MARAD may adjust the financial requirements of the owner and operator by increasing the requirements of the owner and decreasing those of the operator. (h) Subordinated debt considered to be equity. With MARAD approval, part of the equity requirements applicable under paragraph (c) of this section may be satisfied by debt, fully subordinated by a subordination agreement with MARAD, as to the payment of principal and interest on the Secretary's Note and any claims secured as provided for in the Security Agreement or the Mortgage. Repayment of subordinated debt may be made only from funds available for payment of dividends or for other distributions, in accordance with requirements of the Title XI Reserve Fund and Financial Agreement (described in section 298.35). Such subordinated debt must not be secured by any interest in property that is security for Guarantees under Title XI, unless the obligor and the lender enter into a written agreement approved by MARAD. The written agreement must provide, among other things, that if any Title XI financing or advance by us to the obligor occurs in the future, such security interest of the lender must become subordinated to any indebtedness to MARAD incurred by the obligor and to any security interest obtained by MARAD in that property or other property, with respect to the subsequent indebtedness. (i) Modified requirements. MARAD may waive or modify the financial terms or requirements otherwise applicable under sections 298.35 and 298.42, upon determining that there is adequate security for the guarantees or that such waiver or modification is in the best interests of the United States. MARAD may impose similar financial requirements on any person providing other security for the guarantees." 46:46:8.0.1.4.20.2.3.5,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,B,Subpart B—Eligibility,,§ 298.14 Economic soundness.,FMC,,,,"(a) Economic evaluation. We shall not issue a Letter Commitment for guarantees unless we find that the proposed project, regarding the Vessel(s) or Shipyard Project for which you seek Title XI financing or refinancing, will be economically sound. The economic soundness and your ability to repay the Obligations will be the primary basis for our approval of a Letter Commitment. We will consider the value of the collateral for which we will issue the Obligations as only a secondary consideration in determining your ability to repay the Obligations. (b) Basic feasibility factors. In making the economic soundness findings, we shall consider all relevant factors, including, but not limited to: (1) The need in the particular segment of the maritime industry for new or additional capacity, including any impact on existing equipment for which a guarantee under this title is in effect; (2) The market potential for the employment of the Vessel or utilization of the Shipyard Project of a General Shipyard Facility over the life of the guarantee; (3) Projected revenues and expenses associated with employment of the Vessel or utilization of the Shipyard Project of a General Shipyard Facility; (4) Any charters, contracts of affreightment, transportation agreements, or similar agreements or undertakings relevant to the employment of the Vessel or utilization of the Shipyard Project of a General Shipyard Facility; (5) For inland waterways, the need for technical improvements including but not limited to increased fuel efficiency, or improved safety; and (6) Other relevant criteria. (c) Project feasibility. To demonstrate the economic feasibility of the project over the Guarantee period, you must submit the following information: (1) Purpose. A detailed purpose for the obligations to be guaranteed. (2) Necessary exhibits. Necessary exhibits to support your project feasibility as supplements to the application. (3) Relevant market information. Information regarding the relevant market including a written narrative of the market (or potential market) for the project including full details on the following, as applicable: (i) Nature and amount of cargo/passengers available for carriage and your projected share (provide also the number of units; that is containers, trailers, etc.); (ii) Services or routes in which the Vessel(s) will be employed, including an itinerary of ports served, with the arrival and departure times, sea time, port time, hours working or idle in port, off hire days and reserve or contingency time, proposed number of annual sailings and number of annual working days for the Vessel(s) or, with respect to Shipyard Project, how the equipment will be employed; (iii) Suitability of the Vessel(s) or Shipyard Project for their anticipated use; (iv) Significant factors influencing your expectations for the future market for the Vessel(s) or Shipyard Project, for example, competition, government regulations, alternative uses, and charter rates; and (v) Particulars of any charters, contracts of affreightment, transportation agreements, etc. You should supplement the narrative by providing copies of any marketing studies and/or supporting information (for instance, existing or proposed charters, contracts of affreightment, transportation agreements, and letters of intent from prospective customers). (vi) The potential for purchasing existing equipment of a reasonable condition and age from another source, including information regarding: (A) Market assessment concerning the availability and cost of existing equipment that may be an alternative to new construction or the new Shipyard Project; (B) The cost of modification, reconditioning, or reconstruction of existing equipment to make it suitable for intended use; and (C) Descriptions of any bids or offers which you had made to purchase existing equipment, especially Vessels which currently are financed with Title XI Obligations including date of offer, Vessels, and amount of offer. (4) Revenues. A detailed statement of the revenues expected to be earned from the project based upon the information in paragraph (c) of this section. Vessel revenue projections shall include shipping/hire rates for current market conditions or market conditions expected to exist at the time of Vessel delivery taking into account seasonal or temporary fluctuations. The revenues shall be based on a realistic estimate of the Vessel(s) or the new Shipyard Project utilization rate and at a breakeven rate for the project. A justification for the utilization rate shall be supplied and should indicate the number of days per year allowed for maintenance, drydocking, inspection, etc. (5) Expenses for Vessel financing. For applications for Vessel financing, a detailed statement of estimated Vessel expenses including the following (where applicable): (i) Estimated Vessel daily operating expenses, including wages, insurance, maintenance and repair, fuel, etc. and a detailed projection of anticipated costs associated with long term maintenance of the Vessel(s) such as drydocking and major mid-life overhauls, with a time frame for these events over the period of the Guarantee; (ii) If applicable, a detailed breakdown of those expenses associated with the Vessel(s) voyage, such as port fees, agency fees and canal fees that are assessed as a result of the voyage; and (iii) A detailed breakdown of annual capital costs and administrative expenses, segregated as to: (A) Interest on debt; (B) Principal amortization; and (C) Salaries and other administrative expenses (indicate basis of allocation). (6) Expenses for a Shipyard Project. For applications for a Shipyard Project, a statement of estimated expenses related to the Shipyard Project, including the following (where applicable): (i) A detailed breakdown of estimated daily operating expenses for the shipyard, such as wages, including staffing, and segregated as to straight-time, overtime and fringe benefits; utility costs; costs of stores, supplies, and equipment; maintenance and repair cost; insurance costs; and, other expenses (indicate items included); and (ii) A detailed breakdown of annual capital costs and administrative expenses, segregated as to: (A) Interest on debt; (B) Principal amortization; and (C) Salaries and other administrative expenses (indicate basis of allocation). (7) Forecast of operations. Utilizing the revenues and expenses provided in paragraphs (c)(4),(5) and (6) of this section, you shall provide a forecast of operating cash flow, as defined in paragraph (d)(4) of this section, for the Title XI project for the first full year of operations and the next four years. The cash flow statements should be footnoted to explain the assumptions used. (d) Objective criteria. We must make a finding of economic soundness as to each project based on an assessment of the entire project. In order for the project to receive approval, we must determine that a project meets the following criteria: (1) The projected long-term demand (equal to length of time that you request financing) for the particular Vessel(s) or new Shipyard Project to be financed must exceed the supply of similar vessels or new shipyard project in the applicable markets. We will determine the supply of similar vessels and similar shipyard projects based on: (i) Existing equipment, (ii) Similar vessels or new shipyard project under construction, and (iii) The projected need for new equipment in that particular segment of the maritime industry. (2) We will base our determination of the project's economic soundness on the following: (i) Conformity of your projections with our supply and demand analyses; (ii) Availability of charters, letters of intent, outstanding contractual commitments, contracts of affreightment, transportation agreements or similar agreements or undertakings; and (iii) Your existing market share compared with the market share necessary to meet projected revenues. (3) In cases where market conditions are temporarily inadequate for you to service the Obligation indebtedness at the time of Vessel delivery, or completion of the Shipyard Project, we may approve your application only if you have sufficient outside sources of cash flow to service your indebtedness during this temporary period. (4) With respect to the asset for which Obligations are to be issued, the operating cash flow to Obligation debt service ratio over the term of the Guarantee must be in excess of 1:1. Operating cash flow means revenues less operating and capital expenses including taxes paid but exclusive of interest, accrued taxes, depreciation and amortization for the Title XI asset. Debt service means interest plus principal." 46:46:8.0.1.4.20.2.3.6,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,B,Subpart B—Eligibility,,§ 298.15 Investigation fee.,FMC,,,,"(a) In general. Before we issue a Letter Commitment, you shall pay us an investigation fee. The Letter Commitment will state the fee which is based on the formula in paragraph (b) of this section. (1) The investigation fee covers the cost of the investigation of the project described in the application and the participants in the project, the appraisal of properties offered as security, Vessel inspection during construction, reconstruction, or reconditioning (where applicable) and other administrative expenses. (2) If, for any reason, we disapprove the application, you shall pay one-half of the investigation fees. (b) Base Fee. (1) The investigation fee shall be one-half ( 1/2 ) of one percent on Obligations to be issued up to and including $10,000,000, plus (2) One-eighth ( 1/8 ) of one percent on all Obligations to be issued in excess of $10,000,000. (c) Credit for filing fee. You will receive credit for the $5,000 filing fee that you paid upon filing the original application (described in § 298.3) towards the investigation fee." 46:46:8.0.1.4.20.2.3.7,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,B,Subpart B—Eligibility,,§ 298.16 Substitution of participants.,FMC,,,,"(a) You may request our permission to substitute participants to a Mortgage and/or Security Agreement in a financing that is receiving assistance authorized by Title XI of the Act. (b) A non-refundable fee of $3,000 is due, payable at the time of the request. The fee defrays all costs of processing and reviewing a joint application by a mortgagor and/or Obligor and a proposed transferee of a Vessel or Shipyard Project, which is security for Title XI debt, if the proposed transferee is to assume the Mortgage and/or the Security Agreement." 46:46:8.0.1.4.20.2.3.8,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,B,Subpart B—Eligibility,,§ 298.17 Evaluation of applications.,FMC,,,,"(a) In evaluating project applications, we shall also consider whether the application provides for: (1) The capability of the Vessel(s) serving as a naval and military auxiliary in time of war or national emergency. (2) The financing of the Vessel(s) within one year after delivery. (3) The acquisition of Vessel(s) currently financed under Title XI by assumption of the total obligation(s). (4) The Guarantees extend for less than the normal term for that class of vessel. (5) In the case of an Eligible Shipyard, the capability of the shipyard to engage in naval vessel construction in time of war or national emergency. (6) In the case of Shipyard Project, the Guarantees extend for less than the technological life of the asset. (b) In determining the amount of equity which you must provide, we will consider, among other things, the following: (1) Your financial strength; (2) Adequacy of collateral; and (3) The term of the Guarantees." 46:46:8.0.1.4.20.2.3.9,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,B,Subpart B—Eligibility,,§ 298.18 Financing Shipyard Projects.,FMC,,,,"(a) Initial criteria. We may issue Guarantees to finance a Shipyard Project at a General Shipyard Facility. We may approve such Guarantees after we consider whether the Guarantees will result in shipyard modernization and support increased productivity. (b) Detailed statement. You must provide a detailed statement, with the Guarantee application, which will provide the basis for our consideration. (c) Required conditions. We shall approve your application for loan guarantees under this section if we determine the following: (1) The term for such Guarantees will not exceed the reasonable economic useful life of the collective assets which comprise this Shipyard Project; (2) There is sufficient collateral to secure the Guarantee; and (3) Your application will not prevent us from guaranteeing debt for a Shipyard Project that, in our sole opinion, will serve a more desirable use of appropriated funds. In making this determination, we will consider: (i) The types of vessels which will be built by the shipyard, (ii) The productivity increases which will be achieved, (iii) The geographic location of the shipyard, (iv) The long-term viability of the shipyard, (v) The soundness of the financial transaction, (vi) Any financial impact on other Title XI transactions, and (vii) The furtherance of the goals of the Shipbuilding Act." 46:46:8.0.1.4.20.3.3.1,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,C,Subpart C—Guarantees,,"§ 298.20 Term, redemptions, and interest rate.",FMC,,,,"(a) In general. The maturity date of the Obligations must be satisfactory to us and must not exceed the anticipated physical and economic life of the Vessel or Vessels or Shipyard Project, and may be less than but no more than: (1) Twenty-five years from the date of delivery from the shipbuilder of a single new Vessel which is to be security for Guarantees; (2) Twenty-five years from the date of delivery from the shipyard of the last of multiple Vessels which are to be security for the Guarantees but that the amount of the Guarantees will relate to the amount of the depreciated actual cost of the multiple Vessels as of the Closing; (3) The later of twenty-five years from the date of original delivery of a reconstructed, or reconditioned Vessel which is to be security for the Guarantees, or at the expiration of the remaining useful life of the Vessel, as we determine; or (4) The technological life of the Shipyard Project. (b) Required redemptions. Where multiple Vessels or multiple Shipyard Project assets are to be used as security for the Guarantees, as set forth in paragraph (a) of this section, we may require payments of principal prior to maturity (redemptions) regarding all related Obligations, as we may deem necessary to maintain adequate security for the Guarantees. (c) Interest rate. We will make a determination as to the reasonableness of the interest rate of each Obligation, taking into account the range of interest rates prevailing in the private market for similar loans and the risks that we assume." 46:46:8.0.1.4.20.3.3.2,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,C,Subpart C—Guarantees,,§ 298.21 Limits.,FMC,,,"[65 FR 45152, July 20, 2000, as amended at 67 FR 61282, Sept. 30, 2002; 88 FR 86612, Dec. 14, 2023]","(a) Actual Cost basis. We will issue a guarantee on an amount of the Obligation satisfactory to us based on the economic soundness of the transaction. The Obligation amount may be less than but not more than 75 percent or 87 1/2 percent, whichever is applicable, under the provisions of section 1104A(b)(2) or section 1104B(b)(2) of the Act of the Actual Cost of the Vessel or Vessels or Shipyard Project asset(s). (1) If minimum horsepower of the main engine is a requirement for Guarantees up to 87 1/2 percent of the Actual Cost, the standard for the horsepower will be continuous rated horsepower. (2) Where we refinance existing debt, the amount of new Obligations we issue for the existing debt may not exceed the lesser of: (i) The amount of outstanding debt being refinanced (whether or not receiving assistance under Title XI); or (ii) Seventy-five or 87 1/2 percent, whichever is applicable, of the Depreciated Actual Cost of the Vessel or Shipyard Project with respect to which the new Obligations are being issued. (b) Actual Cost items. Actual Cost is comprised essentially of those items which would customarily be capitalized as Vessel or Shipyard Project construction costs such as designing, engineering, constructing (including performance bond premiums that we approve), inspecting, outfitting and equipping. (1) Cost items include those items usually specified in Vessel or Shipyard Project construction contracts, e.g., changes and extras, cost of owner furnished equipment, shoreside spare parts and commitment fees and interest on the Obligations or other borrowings incurred during the construction period (excluding interest paid on subordinated debt considered to be equity), and less income realized from investment of Escrow Fund deposits during the construction period. (2) Commissions (which represent a portion of the total shipyard contract price) may be included in the foreign equipment and services amount of the Actual Cost of an export project, provided: (i) A majority of the work done by the parties receiving the commissions is in the form of design and engineering work, and (ii) The commissions represent a small amount of the total contract price. (3) You may include Guarantee Fees determined in accordance with the provisions of section 1104(e) of the Act as an item of Actual Cost. (4) In approving an item of Actual Cost, we will consider all pertinent factors. (c) Items excludible from Actual Cost. Actual Cost shall not include any other costs such as the following: (1) Legal fees or expenses; (2) Accounting fees or expenses; (3) Commitment fees or interest other than those specifically allowed; (4) Fees, commissions or charges for granting or arranging for financing; (5) Fees or charges for preparing, printing and filing an application for Title XI Guarantees and supporting documents, for services rendered to obtain approval of the application and for preparing, printing and processing documents relating to the application for Guarantees; (6) Underwriting or trustee's fees; (7) Foreign, federal, state or local taxes, user fees, or other governmental charges; (8) Investigation fee determined in accordance with section 1104(f) of the Act and § 298.15; (9) Predelivery Vessel operating expenses, Vessel insurance premiums and other items which may not be properly capitalized by the owner as costs of the Vessel under GAAP; (10) The cost of the condition survey required by § 298.11(f) and all work necessary to meet the standards set forth in that paragraph; (11) The cost to the Shipowner of a Vessel which is to be reconstructed, or reconditioned, e.g., cost of acquisition or repair work; (12) Generally, any amount payable to the shipyard for early delivery of the Vessel; (13) Generally, any amount payable to the manufacturer of the Shipyard Project for early delivery of the equipment to the General Shipyard Facility; (14) Predelivery Shipyard Project expenses which may not be properly capitalized by the General Shipyard Facility as costs of the Shipyard Project under GAAP; and (15) The cost of major foreign components and other foreign components for which there is no waiver and their assembly when comprising any part of the hull and superstructure of a Vessel. (d) Substantiation of Actual Cost. (1) Before we make distribution from the Escrow Fund or Construction Fund (described in §§ 298.33 and 298.34), and prior to our final Actual Cost determination for each Vessel or Shipyard Project, you must submit to us documents substantiating all claimed costs eligible under paragraph (b) of this section or, alternatively, appropriate certification of such costs by an agent who has received our approval. (2) These documents may include, but need not be limited to, copies of invoices, change orders, subcontracts, and where we require, statements from independent certified or independent licensed public accountants that the costs for which you seek payment or reimbursement were actually paid or are payable for the construction of a Vessel or Shipyard Project. (3) You must summarize, index and arrange these documents according to cost categories by following the directions contained in our forms. (e) Escalation as part of Actual Cost. Escalation clauses in construction contracts shall be subject to our approval. After a review of the base contract price and the escalation clauses, we shall, in order to estimate the Actual Cost amount to be stated in the Letter Commitment, add to the approved base contract price the amount of estimated escalation as approved by us. We must subsequently approve the amount of escalation cost you claimed as a component of Actual Cost. (f) Monies received in respect of construction. (1) If you or any Person acting on your behalf, from time to time receives moneys due for construction of a Vessel or Shipyard Project (described in the Security Agreement) from the shipbuilder, guarantors, sureties or other Persons, you shall give us written notice of such fact. (2) As long as we have not paid the Guarantees, you or other recipient shall promptly deposit these moneys with us to be held by the Depository in accordance with the Depository Agreement. (3) We will determine the extent to which Actual Cost is to be reduced by these moneys. (4) In no event shall Actual Cost be reduced with respect to payments by the shipyard to a Vessel or Shipyard Project owner of liquidated damages for late delivery of the Vessel or Shipyard Project . (5) If we have paid the Guarantees, you or other recipient must promptly pay these moneys, including any liquidated damages, to us for deposit into the Maritime Guaranteed Loans account. (g) Depreciated Actual Cost. After a Vessel or Shipyard Project has been delivered or redelivered (in the case of reconstruction or reconditioning), the limitation on the amount of Guarantees will be 75 or 87 1/2 percent, whichever is applicable, of the Depreciated Actual Cost of the Vessel or Shipyard Project." 46:46:8.0.1.4.20.3.3.3,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,C,Subpart C—Guarantees,,§ 298.22 Amortization of Obligations.,FMC,,,"[65 FR 45152, July 20, 2000, as amended at 67 FR 61282, Sept. 30, 2002; 88 FR 86612, Dec. 14, 2023]","(a) Generally, after delivery or completion of Shipyard Project, and until maturity of the Obligations, provisions of the Trust Indenture or other part of the Documentation require you to make periodic payment of principal and interest on the Obligations. (b) Usually, the payment of principal (amortization) must be made semi-annually, but in no event less frequently than on an annual basis, and in either case the amortization must be in equal payments of principal (level principal), unless MARAD approves the periodic payment of a constant aggregate amount, comprised of both interest and principal components that are variable in amount (level payment). No other method of amortization will be allowed that would reduce the amount of periodic amortization below that determined under the level principal or level payment basis at any time prior to maturity of the obligations, except where a third-party expert approved or engaged by MARAD conducts an independent analysis and review of a project and structure of an obligation and demonstrates that such other method is in the best interests of the United States." 46:46:8.0.1.4.20.3.3.4,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,C,Subpart C—Guarantees,,§ 298.23 Refinancing.,FMC,,,,"(a) We may approve guarantees of Obligations to be secured by one or more Vessels or a Shipyard Project issued to refinance existing Title XI debt for either Vessels or for Shipyard Project and existing non-Title XI debt, so long as the existing debt has been previously issued for one of the purposes set forth in sections 1104(a)(1) through (4) of the Act. Section 1104 (a) (1) of the Act requires that, if the existing indebtedness was incurred more than one year after the delivery or redelivery of the related Vessel or Shipyard Project, the proceeds of such Obligations will be applied to the construction, reconstruction or reconditioning of other Vessels or Shipyard Project or as provided in § 298.24. (b) We shall require any security lien on the Vessel(s) or Shipyard Project to be discharged immediately before we place a Mortgage or other security interest on any of the above assets. You must satisfy all necessary eligibility requirements as set forth in subpart B of this part, including economic soundness." 46:46:8.0.1.4.20.3.3.5,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,C,Subpart C—Guarantees,,§ 298.24 Financing a Vessel more than a year after delivery.,FMC,,,,"(a) We may approve Guarantees for a Vessel which has been delivered (or redelivered in the case of reconstruction or reconditioning of a Vessel) more than one year prior to the issuance of the Guarantees only if: (1) The issuance of the Guarantees would otherwise satisfy the requirements of the Act and the regulations in this part, and (2) The proceeds of the Obligation financing such existing Vessel are used to finance: (i) The construction, reconstruction, or reconditioning of a different Vessel within one year of that Vessel's delivery or redelivery, as the case may be, or (ii) Facilities or equipment pertaining to marine operations. Such facilities or equipment must be of a specialized nature, used principally for servicing vessels and in handling waterborne cargo in the close proximity of the berthing area, excluding over-the-road equipment (other than chassis and containers), permanent or semipermanent structures and real estate, as well as new or less than one year old. (b) At the Closing of Guarantees covered by this section, you must deposit the proceeds of the Obligation into an Escrow Fund established to pay for the cost unless you demonstrate to our satisfaction that all such costs have been paid." 46:46:8.0.1.4.20.3.3.6,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,C,Subpart C—Guarantees,,§ 298.25 Excess interest or other consideration.,FMC,,,,"We shall not execute Guarantees if any agreement in the Documentation directly or indirectly provides for: (a) The payment to an Obligee of interest, or other compensation for services which have not been performed, in a manner that such compensation or payment is being provided as interest in excess of the rate approved by us; or (b) Grants of security to an Obligee in addition to the Guarantees." 46:46:8.0.1.4.20.3.3.7,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,C,Subpart C—Guarantees,,§ 298.26 Lease payments.,FMC,,,,"You must obtain our approval of the amount and conditions of lease or charter hire payments if the payment of principal and interest on Obligations would be dependent, in any way, upon the lease or charter hire payments for a Vessel or Shipyard Project." 46:46:8.0.1.4.20.3.3.8,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,C,Subpart C—Guarantees,,§ 298.27 Advances.,FMC,,,,"(a) In general. (1) In accordance with section 207 and Title XI of the Act, we have the discretion to make or commit to make an advance or payment of funds to, or on behalf of the owner, or operator or directly to any other person or entity for items, including, but not limited to: (i) Principal, (ii) Interest, (iii) Insurance, and (iv) Other vessel-related expenses or fees. (2) We will make advances or payments only to protect, preserve or improve the collateral held as our security for Title XI debt. (3) When requesting an advance, you must demonstrate that: (i) Your problems are short term (less than two years) by using market and cash flow analysis and other projections. (ii) An advance(s), would assist you over temporary difficulties; and (iii) There is adequate collateral for the advance. (b) Filing requirements. (1) You shall apply for an advance or other payment as early as is reasonably possible. (2) Principal and interest payments. We must receive a request for an advance for principal and interest payments at least 30 days before the initial payment date. (3) Insurance payments. We must receive a request for an advance of insurance payments at least 30 days before a renewal or termination date. (4) Extenuating circumstances. We may consider requests for assistance with less notice, upon written documentation of extenuating circumstances. (5) Supporting data. Any requests for assistance must be accompanied by supporting data regarding: (i) Need for the advance, (ii) Financial assistance you sought from other sources, (iii) The measures that you are taking and have taken to alleviate the situation, (iv) Financial projections, (v) Proposed term of the repayment, (vi) Current and projected market conditions, (vii) Information on other available collateral, (viii) Liens and other creditor information, and (ix) Any other information which we may request." 46:46:8.0.1.4.20.4.3.1,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,D,Subpart D—Documentation,,§ 298.30 Nature and content of Obligations.,FMC,,,,"(a) Single page. An Obligation, in the form of a note, bond of any type, or other debt instrument, when engraved, printed or lithographed on a single sheet of paper must include on its face the: (1) Name of the Obligor, (2) Principal sum, (3) Rate of interest, (4) Date of maturity, and (5) Guarantee of the United States, authenticated by the Indenture Trustee, if any. (b) Several pages. If the Obligation is typewritten, printed or reproduced by other means on several pages of paper, the Guarantee of the United States and the authentication certificate of the Indenture Trustee, if any, may appear at the end of the typewritten Obligation. (c) Rights and responsibilities. The instrument which is evidence of indebtedness shall also contain all information necessary to apprise the Obligees of their rights and responsibilities including, but not limited to: (1) Time and manner for payment of principal and interest, (2) Redemptions, (3) Default procedure, and (4) Notification (in case of registered Obligations) of sale or other transfer of the instruments." 46:46:8.0.1.4.20.4.3.10,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,D,Subpart D—Documentation,,§ 298.39 Exemptions.,FMC,,,,"We may exempt an applicant from any requirement of this part, unless required by statute or other regulations, in exceptional cases, on written findings that: (a) The case materially involves factors not considered in the promulgation of this part; (b)(1) A national emergency makes it necessary to approve the exemption, or (2) The exemption will substantially relieve the financial liability of the United States; (c) The exemption will not substantially impact effective regulation of the Title XI program, consistent with the objectives of this part; (d) The exemption will not be unjustly discriminatory; and (e) For Eligible Export Vessels, such exemption would assist in creating financing terms that would be compatible with export credit terms for the sale of vessels built in shipyards other than those in the United States." 46:46:8.0.1.4.20.4.3.2,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,D,Subpart D—Documentation,,§ 298.31 Mortgage.,FMC,,,,"(a) In general. Under normal circumstances, a Guarantee shall not be endorsed on any Obligation until we receive satisfactory evidence that we hold a Mortgage in one or more Vessels or a Mortgage or other security interest in the Shipyard Project. During construction of a new Vessel or any Shipyard Project, a security interest may be perfected by a filing under the Uniform Commercial Code. (b) Ensuring validity of security interest. In order to ensure that our Mortgages or other security interests are valid and enforceable, we shall require that the Obligor obtain legal opinions, in form and substance satisfactory to us, from independent, outside legal counsel satisfactory to us, including foreign independent outside legal Counsel for Eligible Export Vessels, which opinions shall state, among other things, that the Mortgage or other security interest(s) are valid and enforceable: (1) In the country in which the Vessel is documented (or, in the case of a security interest, in jurisdictions acceptable to us); (2) In the United States; and (3) For vessels operating on specified trade routes, in the country or countries involved in this service, unless we determine that those destinations are too numerous, in which case, we will instead require an opinion of foreign validity and enforceability in the Vessel's primary port of operation. (c) Alternative forms of security. In the case where a Mortgage or security interest on the financed assets may not be available or enforceable, we will require alternative forms of security. (d) Mortgage in our favor. The Security Agreement shall provide that upon delivery of a new Vessel or upon final completion of the Shipyard Project, or at the time Guarantees are issued with respect to an existing Vessel or the Shipyard Project, a Mortgage on the Vessel and a Mortgage or other security interest on the Shipyard Project will be executed in our favor, unless we determine that a Mortgage or a security interest is not available or enforceable in accordance with paragraph (c) of this section. (e) Filing. You must file the Mortgage with the United States Coast Guard's National Vessel Documentation Center. You must file the Mortgage for an Eligible Export Vessel with the proper foreign authorities. For assets of a General Shipyard Facility, you must file a Mortgage and security interest with the proper authorities within the appropriate state for recording. After you have recorded the Mortgage, you must deliver to us the Mortgage and evidence of the filing of the security interest. (f) Mortgage secured by multiple Vessels. (1) When two or more Vessels are to be security for Guarantees, the Security Agreement may provide that one Mortgage relating to all the Vessels (Fleet Mortgage) shall be executed, perfected and delivered to us by the Obligor. (2) If the Fleet Mortgage relates to undelivered Vessels, the Fleet Mortgage will be executed upon delivery of the first vessel. At the time of each subsequent Vessel delivery, the Obligor shall execute a supplement to the Fleet Mortgage which makes that Vessel subject to our Mortgage lien. (3) The Fleet Mortgage shall provide that payment by the Obligor of the entire amount of Obligations covered or to be covered by Guarantees shall be required to discharge the Fleet Mortgage, regardless of the amount of the Secretary's Note or Notes issued and outstanding at the time of execution and delivery of the Fleet Mortgage or the number of Vessels covered by the Fleet Mortgage. (4) The discharge date of the Fleet Mortgage shall be the maturity date of the Secretary's Note. We may require, as authorized by section 1104(c)(2) of the Act, such payments of principal prior to maturity (redemptions), regarding all related Obligations, as deemed necessary to maintain adequate security for the Guarantees. (5) Each Fleet Mortgage shall provide that in the event of constructive total loss, requisition of title or sale of any Vessel covered by the Fleet Mortgage, indebtedness represented by the Obligations shall be paid, unless we otherwise determine that there remains adequate security for the Guarantees, and the Vessel shall be discharged from the Mortgage lien. (g) Adequacy of collateral. (1) Under normal circumstances, a First Preferred Mortgage on the Vessel(s) or Shipyard Project will be adequate security for the Guarantees. (2) If, however, we determine that the Mortgage on the Vessel(s) or Shipyard Project is not sufficient to provide adequate security, as a condition to approving the Letter Commitment or processing the application, we may require additional collateral, such as a mortgage(s) on other vessel(s) or Shipyard Project or on other assets, special escrow funds, pledges of stock, charters, contracts, notes, letters of credit, accounts receivable assignments, and guarantees." 46:46:8.0.1.4.20.4.3.3,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,D,Subpart D—Documentation,,§ 298.32 Required provisions in documentation.,FMC,,,,"(a) Performance under shipyard and related contracts. Generally, shipyard and related contracts must contain provisions for: (1) Furnishing by the shipyard or contractor of the Shipyard Project of satisfactory insurance and a satisfactory performance bond where Obligations are issued during the construction period, except that if the shipyard or contractor of the Shipyard Project demonstrates to our satisfaction that it has sufficient financial resources and operational capacity to complete the project, posting of a bond will not be required; (2) Allowing access to the Vessel or Shipyard Project, as well as all related work projects being performed by the contractor and subcontractors, to our representative, at all reasonable times, to inspect performance of the work and to observe trials and other tests for the purpose of determining that the Vessel or Shipyard Project is being constructed, reconstructed, or reconditioned in accordance with contract plans and specifications approved by us; (3) Submitting to us, upon request, one set of shipyard plans, in form and substance satisfactory to us, for the Vessel or Shipyard Project as built; (4) Making periodic payments for the work in accordance with an agreed schedule, submitted by the shipyard or contractor, as appropriate, in a form acceptable to us, based on percentage of completion, after such percentage and satisfactory performance are certified by the Obligor, shipyard or contractor, as appropriate, and our representative as to each payment; (5) Prohibiting the use of proceeds from the sale of Obligations for the payment of work performed outside the shipyard, unless we consent in writing to such use; and (6) Requiring that all components of the hull and superstructure of a U.S.-documented Vessel and an Eligible Export Vessel shall be assembled in the United States. (7) If Obligation will not be issued during the construction period of the Vessel and Shipyard Project, requiring that shipyard-related contracts shall generally include the provisions specified in paragraphs (a)(2), (a)(3) and (a)(6) of this section. (b) Assignments and general covenants from Obligor to us. The Obligor shall assign rights and shall covenant with us, as we require, including, but not limited to, the following: (1) Assignment of all or part of the right, title and interest under the construction contract and related contracts, except those rights expressly reserved therein by the Obligor relating to such things as patent infringement and liquidated damages; (2) Assignment of rights to receive all moneys which from time to time become due regarding Vessel or Shipyard Project construction; (3) Assignment, where applicable, of all or a part of the bareboat charter, time charter, contracts of affreightment or other agreements relating to the use of the Vessel or Shipyard Project and all hire payable to the Obligor, and delivery to us of required consents by appropriate parties to any such assignments; (4) Covenants relating to the filing of satisfactory evidence of continuing United States citizenship, in accordance with 46 CFR part 355, with the exception of Eligible Export Vessels and shipyards with Shipyard Projects; warranty of Vessel or Shipyard Project title free from all liens other than those specifically excepted; maintaining United States documentation of the Vessel or documentation under the laws of a country other than the United States with regard to an Eligible Export Vessel; compliance with the provisions of 46 U.S.C. 31301-31343, except that Eligible Export Vessels shall comply with the definition of a “preferred mortgage” in 46 U.S.C. 31301(6)(B), requiring, among other things, that the Mortgage shall comply with the mortgage laws of the foreign country where the Vessel is documented and shall have been registered under those laws in a public register; Notice of Mortgage, payment of all taxes (except if being contested in good faith); annual financial statements audited by independent certified or independent licensed public accountant. (5) Covenants to keep records of construction costs paid by or for the Obligor's account and to furnish us with a detailed statement of those costs, distinguishing between: (i) Items paid or obligated to be paid, attested to by independent certified public accountants unless otherwise verified by us; and (ii) Costs of American and foreign materials (including services) in the hull and superstructure. (6) Covenants to maintain Marine and War Risk Hull and Machinery insurance on the Vessel or Eligible Export Vessel in an amount equal to 110% of the outstanding Obligations or up to the full commercial value of the Vessel or Eligible Export Vessel, whichever is greater; Marine and War Risk Protection and Indemnity insurance; Interim War Risk Binders for Hull and Machinery, and Protection and Indemnity coverages underwritten by us as authorized by Title XII of the Act; and such additional insurance as may be required by us. All insurance required to be maintained shall be placed with the United States Government and American and/or British (and/or other foreign, if permitted by us by prior written notice) insurance companies, underwriters' associations or underwriting funds approved by us through marine insurance brokers and/or underwriting agents approved by us. All insurance required to be maintained shall be placed under the latest (at the time of issue) forms of American Institute of Marine Underwriters policies approved by us and/or under such other forms of policies which we may approve in writing and/or policies issued by or for us insuring the Vessel or Eligible Export Vessel against the usual risks provided for under such forms, including such amounts of increase value or other forms of “that total loss only” insurance permitted by the Hull and Machinery insurance policies; (7) Collateralize other debt due to us under other Title XI financings; (8) Covenants to maintain shipyard insurance on the Shipyard Project in an amount equal to 110% of the outstanding Obligations or up to the full commercial value of the Shipyard Project, whichever is greater, and such additional insurance as may be required by us; and (9) Covenants to maintain additional types of insurance as may be required by us with respect to Eligible Export Vessels, i.e. political risk insurance, to cover such items as the political, financial, and/or economic risk in a foreign country." 46:46:8.0.1.4.20.4.3.4,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,D,Subpart D—Documentation,,§ 298.33 Escrow fund.,FMC,,,"[65 FR 45152, July 20, 2000, as amended at 67 FR 61282, Sept. 30, 2002]","(a) Escrow Fund Deposits. At the time of the sale of the Obligations, the Obligor shall deposit with the Depository in an escrow fund (the “Escrow Fund”) all of the proceeds of that sale unless the Obligor is entitled to withdraw funds under paragraph (b) of this section. The Obligor must also deposit into the Escrow Fund on the Closing date an amount equal to six months interest at the rate borne by the Obligations, unless we find the existence of adequate consideration or accept other consideration in lieu of the interest deposit. (b) Escrow Fund Withdrawals. You, as Obligor, may make a written request for us to disburse funds from the Escrow Fund. Within a reasonable time thereafter, we shall disburse directly to the Indenture Trustee, any Paying Agent for such Obligations, or any other Person entitled to payment any amount which you are obligated to pay or have paid, on account of the items and amounts or any other item approved by us, provided that we are satisfied with the accuracy and completeness of the information contained in the following submissions: (1) A responsible officer of the Obligor shall deliver an officer's certificate, in form and substance satisfactory to us, stating that: (i) There is no default under the construction contract or the Security Agreement; (ii) There have been no occurrences which have or would adversely and materially affect the condition of the Vessel, its hull or any of its component parts, or the Shipyard Project; (iii) The amounts of the request are in accordance with the construction contract including the approved disbursement schedule and each item in these amounts is properly included in our approved estimate of Actual Cost; (iv) With respect to the request, once the contractor is paid there will be no liens or encumbrances on the applicable Vessel, its hull or component parts, or the Shipyard Project for which the withdrawal is being requested except for those already approved by us; and (v) If the Vessel or Shipyard Project has already been delivered or completed, it is in class, if required, and is being maintained in the highest and best condition. The Obligor must also attach an officer's certificate of the shipyard and other general contractors, in form and substance satisfactory to us, stating that there are no liens or encumbrances as provided in paragraph (b)(1)(iv) of this section and attaching the invoices and receipts supporting each proposed withdrawal to our satisfaction. (2) No payment or reimbursement under this section shall be made: (i) To any Person until the total amount paid by or for the account of the Obligor from sources other than the proceeds of such Obligations equals at least 12 1/2 percent or 25 percent as applicable, of the Actual Cost of the Vessel or Shipyard Project is made; (ii) To the Obligor which would have the effect of reducing the total amounts paid by the Obligor pursuant to paragraph (b)(2)(ii) of this section; or (iii) To any Person on account of items, amounts or increases representing changes and extras or owner furnished equipment, if any, unless such items, amounts and increases shall have been previously approved by us; provided, however, that when the amount guaranteed by us equals 75 percent or less of the Actual Cost and the Obligor demonstrates to our satisfaction the ability to pay in the remaining 25 percent, or more, then after the initial 12 1/2 percent of Actual Cost has been paid by or on behalf of the Obligor for such Vessel or completed Shipyard Project and up to 37 1/2 percent of Actual Cost has been withdrawn from the Escrow Fund for such Vessel or Shipyard Project, the Obligor must pay the remaining Obligor's equity of at least 12 1/2 percent (as determined by us) before additional monies can be withdrawn from the Escrow Fund relating to such Vessel or Shipyard Project. (3) We will not be required to make any disbursement except out of the cash available in the Escrow Fund. If any sale or payment on maturity results in a loss in the principal amount of the Escrow Fund invested in securities so sold or matured, the requested disbursement from the Escrow Fund shall be reduced by an amount equal to such loss, and the Obligor must pay to any Person entitled thereto, the balance of the requested disbursement from the Obligor's funds other than the proceeds of such Obligations. (4) If we assume the Obligor's rights and duties under the Obligations or we pay the Guarantees, all amounts in the Escrow Fund (including realized income which has not yet been paid to the Obligor), shall be paid to us and be credited against any amounts due or to become due to us under the Security Agreement and the Secretary's Note. (5) Other rights and duties with respect to withdrawals from the Escrow Fund shall be set out in the closing documentation in form and substance satisfactory to us. (c) Investment and liquidation of the Escrow Fund. We may invest the Escrow Fund in obligations of the United States. We will deposit amounts in the Escrow Fund into an account with the U.S. Treasury Department and upon agreement with the Obligor, shall deliver to the U.S. Treasury Department instructions for the investment, reinvestment and liquidation of the Escrow Fund. We will have no liability to the Obligor for acting in accordance with such instructions. (d) Income on the Escrow Fund. Unless there is an existing default, any income realized on the Escrow Fund shall be paid to the Obligor upon our receipt of such income. (e) Termination date of the Escrow Fund. The Escrow Fund shall terminate 90 days after the delivery date of the last Vessel or Shipyard Project covered by the Security Agreement (the “Termination Date”). In the event that on such date the payment of the full amount of the aggregate Actual Cost of all of the Vessels or Shipyard Project has not been made or the amounts with respect to such Actual Cost are not then due and payable, then we and the Obligor by written agreement shall extend the Termination Date for such period as we and the Obligor shall determine is sufficient to allow for such contingencies. Any amounts remaining in the Escrow Fund on the Termination Date which are in excess of 87 1/2 percent or 75 percent of Actual Cost, as the case may be, shall be applied to retire a pro rata portion of the Obligations." 46:46:8.0.1.4.20.4.3.5,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,D,Subpart D—Documentation,,§ 298.34 [Reserved],FMC,,,, 46:46:8.0.1.4.20.4.3.6,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,D,Subpart D—Documentation,,§ 298.35 Title XI Reserve Fund and Financial Agreement.,FMC,,,"[65 FR 45152, July 20, 2000, as amended at 67 FR 61282, Sept. 30, 2002; 88 FR 86612, Dec. 14, 2023]","(a) Purpose. In order to provide us with further security and to ensure payment of the interest and principal due on the Obligations, we will require the Company to enter into a Title XI Reserve Fund and Financial Agreement (Agreement) at the first Closing at which the Company issues Obligations. We may waive or modify provisions of the Agreement based on our evaluation of the aggregate security for the Guarantees. (b) Financial covenants. There will be two sets of covenants. One set of covenants will be imposed regardless of the Company's financial condition (primary covenants). The other set of covenants will be imposed only if the Company does not meet specific financial conditions (supplemental covenants). The primary and supplemental covenants are to be set forth in the Agreement. Covenants shall be imposed on the Company as follows: (1) Primary covenants. So long as Guarantees are in effect the Company shall not, without our prior written consent: (i) Make any distribution of earnings, except as may be permitted as follows: (A) From retained earnings in an amount specified in paragraph (b)(1)(i)(C) of this section, provided that, in the fiscal year in which the distribution of earnings is made there is no operating loss to the date of such payment of such distribution of earnings, and there was no operating loss in the immediately preceding three fiscal years, or there was a one-year operating loss during the immediately preceding three fiscal years, but such loss was not in the immediately preceding fiscal year, and there was positive net income for the three year period; (B) If distributions of earnings may not be made under paragraph (b)(1)(i)(A) of this section, a distribution can be made in an amount equal to the total operating net income for the immediately preceding three fiscal year period, provided that: ( 1 ) There were no two successive years of operating losses; ( 2 ) There is no operating loss to the date of such distribution in the fiscal year in which such distribution is made; and ( 3 ) The distribution of earnings made would not exceed an amount specified in paragraph (b)(1)(i)(C) of this section; (C) Distributions of earnings may be made from earnings of prior years in an aggregate amount equal to 40 percent of the Company's total net income after tax for each of the prior years, less any distributions that were made in such years; or the aggregate of the Company's total net income after tax for such prior years, provided that, after making such distribution, the Company's Long-Term Debt does not exceed its Net Worth. In computing net income for purposes of this paragraph (b)(1)(i)(C), extraordinary gains, such as gains from the sale of assets, will be excluded; (ii) Enter into any service, management or operating agreement for the operation of the Vessel or the Shipyard Project (excluding husbanding type agreements), or appoint or designate a managing or operating agent for the operation of the Vessel or the Shipyard Project (excluding husbanding agents) unless approved by us; (iii) Sell, mortgage, transfer, or demise charter the Vessel or the Shipyard Project or any assets to any non-Related Party except as permitted in paragraph (b)(1)(vii) of this section or sell, mortgage, transfer, or demise charter the Vessel or any assets to a Related Party, unless such transaction is at a fair market value as determined by an independent appraiser acceptable to us, and is a total cash transaction; (iv) Enter into any agreement for both sale and leaseback of the same assets so sold unless the proceeds from such sale are at least equal to the fair market value of the property sold; (v) Guarantee, or otherwise become liable for the obligations of any other Person, except with respect to any undertakings as to the fees and expenses of the Indenture Trustee, except endorsement for deposit of checks and other negotiable instruments acquired in the ordinary course of business and except as otherwise permitted in this section; (vi) Directly or indirectly embark on any new enterprise or business activity not directly connected with the business of shipping or other activity in which the Company is actively engaged; (vii) Enter into any merger or consolidation or convey, sell, demise charter, or otherwise transfer, or dispose of any portion of its properties or assets (any and all of which acts are encompassed within the words “sale” or “sold” as used in this section), provided that, the Company will not be deemed to have sold such properties or assets if the net book value of the aggregate of all the assets sold by the Company during any period of 12 consecutive calendar months does not exceed ten percent of the total net book value of all of the Company's assets; the Company retains the proceeds of the sale of assets for use in accordance with the Company's regular business activities; and the sale is not otherwise prohibited by paragraph (b)(1)(iii) of this section. The Company may not consummate such sale without our prior written consent if the Company has not, prior to the time of such sale, submitted to us, as required, its most recently audited financial statements referred to in § 298.42(a) and any attempt to consummate a sale absent such approval will be null and void ab initio. (2) Supplemental covenants which may become applicable. Unless, after giving effect to such transaction or transactions, during any fiscal year of the Company, the Company must remain in compliance with financial terms and requirements specified by MARAD based on the agency's evaluation for financial performance and creditworthiness and appropriate to protect the interest of the United States. The Company must not, without prior MARAD written consent: (i) Withdraw any capital; (ii) Redeem any share capital or convert any of the same into debt; (iii) Pay any dividend (except dividends payable in capital stock of the Company); (iv) Make any loan or advance (except advances to cover current expenses of the Company), either directly or indirectly, to any stockholder, director, officer, or employee of the Company, or to any other Related Party; (v) Make any investments in the securities of any Related Party; (vi) Prepay in whole or in part any indebtedness to any stockholder, director, officer, or employee of the Company, or to any Related Party, which has a stated maturity of more than one year from such date; (vii) Increase any direct employee compensation (as defined in this paragraph) paid to any employee in excess of $100,000 per annum; nor increase any direct employee compensation which is already in excess of $100,000 per annum; nor initially employ or re-employ any person at a direct employee compensation rate in excess of $100,000 per annum; provided, however, that beginning with January 1, 2000 the $100,000 limit may be increased annually based on the previous years' closing Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics. For the purpose of this paragraph, the term “direct employee compensation” is the total amount of any wage, salary, bonus commission, or other form of direct payment to any employee from all companies with guarantees under the Act as reported to the Internal Revenue Service for any fiscal year. (viii) Acquire any fixed assets other than those required for the maintenance of the Company's existing assets, including normal maintenance and operation of any vessel or vessels owned or chartered by the Company; (ix) Either enter into or become liable (directly or indirectly) under charters and leases (having a term of six months or more) for the payment of charter hire and rent on all such charters and leases which have annual payments aggregating in excess of an amount specified by us; (x) Pay any indebtedness subordinated to the Obligations or to any other Title XI obligations; (xi) Create, assume, incur, or in any manner become liable for any indebtedness, except current liabilities, or short term loans, incurred or assumed in the ordinary course of business as such business presently exists; (xii) Make any investment whether by acquisition of stock or indebtedness, or by loan, advance, transfer of property, capital contribution, guarantee of indebtedness or otherwise, in any Person, other than obligations of the United States, bank deposits or investments in securities of the character permitted for monies in the Title XI Reserve Fund; and, (xiii) Create, assume, permit or suffer to exist or continue any mortgage, lien, charge or encumbrance upon, or pledge of, or subject to the prior payment of any indebtedness, any of its property or assets, real or personal, tangible or intangible, whether now owned or thereafter acquired, or own or acquire, or agree to acquire, title to any property of any kind subject to or upon a chattel mortgage or conditional sales agreement or other title retention agreement, except loans, mortgages and indebtedness guaranteed by us under Title XI of the Act or related to the construction of a vessel approved for Title XI by us, and liens incurred in the ordinary course of business as such business presently exists. (c) Title XI Reserve Fund Net Income. The Agreement shall provide that within 105 days after the end of its accounting year, the Company will compute its net income attributable to the operation of the Vessel(s) that were constructed, reconstructed, reconditioned or refinanced with Title XI financing assistance (Title XI Reserve Fund Net Income). The computation utilizes a ratio expressed as a percentage, and applies this percentage to the Company's total net income after taxes. The numerator of the ratio is be the total original capitalized cost of all Company Vessels (whether leased or owned) which were constructed, reconstructed, reconditioned or refinanced with the assistance of Guarantees. The denominator shall be the total original capitalized cost of all the Company's fixed assets. In the case of Shipyard Project, the Agreement shall provide that within 105 days after the end of its accounting year, the Company shall submit its audited financial statements showing its net cash flow in a manner acceptable to us, in lieu of any other computation of Reserve Fund Net Income specified in this section for Vessels. The net income after taxes, computed in accordance with GAAP, will be adjusted as follows: (1) The depreciation expense applicable to the accounting year shall be added back. (2) There shall be subtracted: (i) An amount equal to the principal amount of debt required to be paid or redeemed, and actually paid or redeemed by the Company (other than from the Title XI Reserve Fund) during the year; and (ii) The principal amount of Obligations retired or paid (as defined in the Security Agreement), prepaid or redeemed, in excess of the required redemptions or payments which may be used by the Company as a credit against future required redemptions or other required payments with respect to the Obligations. (d) Deposits. Unless the Company, as of the close of its accounting year, was subject to and in compliance with the financial terms required by paragraph (b)(2) of this section, the Company must make one or more deposits to MARAD to be held by the Depository (the Title XI Reserve Fund), as further provided for in the depository agreement. The amount of deposit for any year, or period less than a full year, where applicable, will be determined as follows: (1) Fifty percent of the Title XI Reserve Fund Net Income, less an amount equal to 10% of the Company's total original equity investment in the Vessel or Vessels, (if the Company is the owner of the assets), will be deposited into the Title XI Reserve Fund. (2) In the case of Shipyard Project, the shipyard shall make a deposit at two percent of its net cash flow, as defined by GAAP, and as shown on its audited financial statements. (3) Any additional amounts that may be required pursuant to the Security Agreement or any other agreement in the documentation to which the Company is a party. (4) Any additional amounts that may be required, pursuant to provisions of the Security Agreement or any other agreement in the documentation to which the Company is a party. (5) Irrespective of the Company's deposit requirement, as stated in paragraphs (d) (1) through (4) of this section, the Company will not be required to make any deposits into the Title XI Reserve Fund if any of the following events will have occurred: (i) The Company will have discharged the Obligations and related Secretary's Note and will have paid other sums secured under the Security Agreement and Preferred Mortgage; (ii) All Guarantees with respect to outstanding Obligations will have terminated pursuant to the provisions of the Security Agreements, other than by reason of payment of the Guarantees; or (iii) The amount in the Title XI Reserve Fund, (including any securities at market value), is equal to, or in excess of 50 percent of the principal amount of outstanding Obligations. (e) Fund in lieu of Title XI Reserve Fund. If the Company has established a Capital Construction Fund (CCF), pursuant to section 607 of the Act, whether interim or permanent, at any time when a deposit would otherwise be required to be made into the Title XI Reserve Fund, and the Company elects to make such deposits to the CCF, the Company must enter into an agreement, satisfactory to us, providing that all such deposits of assets therein will be security (CCF Security Amount) to the United States in lieu of the Title XI Reserve Fund. The deposit requirements of the Title XI Reserve Fund and Financial Agreement will be deemed satisfied by deposits of equal amounts in the CCF, and withdrawal of the CCF Security Amount will be subject to our prior written consent. If, for any reason, the CCF terminates prior to the payment of the Obligations, the Secretary's Note and all other amounts due under or secured by the Security Agreement or Mortgage, the CCF Security Amount will be deposited or redeposited in the Title XI Reserve Fund." 46:46:8.0.1.4.20.4.3.7,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,D,Subpart D—Documentation,,§ 298.36 Guarantee Fee.,FMC,,,,"(a) Rates in general. (1) For annual periods, beginning with the date of the Security Agreement and prior to the delivery date of a Vessel or Shipyard Project, we shall charge a Guarantee Fee set at a rate of not less than 1/4 of 1 percent and not more than 1/2 of 1 percent of the excess of the average principal amount of the Obligations estimated to be outstanding during the annual periods covered by said Guarantee Fee over the average principal amount, if any, on deposit in the Escrow Fund during said annual period (Average Principal Amount of Obligations Outstanding). (2) For annual periods beginning with the delivery date of a Vessel or Shipyard Project, the Guarantee Fee shall be set at an annual rate of not less than 1/2 of 1 percent and not more than 1 percent of the Average Principal Amount of Obligations Outstanding during the annual periods covered by the Guarantee Fee. You will be responsible for payment of the Guarantee Fee. (b) Rate calculation. (1) The Guarantee Fee rate generally shall vary inversely with the ratio of Equity to Long-Term Debt (Variable Rate) of the Person who we consider to be the primary source of credit in the transaction (Credit Source), for example, (i) The long term time charterer (where the charter hire represents the source of payment of interest and principal with respect to the Obligations), (ii) The guarantor of the Obligations, (iii) The Obligor, or (iv) The bareboat charterer. (2) Where the Variable Rate is used, we may make such adjustments to the computation of Equity and Long-Term Debt considered necessary to reflect more accurately the financial condition of the Credit Source. (3) We shall base our determination of Equity and Long-Term Debt on information contained in forms or statements on file with us prior to the date on which the Guarantee Fee is to be paid. (4) With our consent, you may include in Equity and exclude from Long-Term Debt, any subordinated indebtedness representing loans from any credit source. (5) We may establish a fixed rate or other method of calculation of the Guarantee Fee, upon an evaluation of the aggregate security for the Guarantees. (c) Variable Rate prior to Vessel or Shipyard Project. For annual periods beginning prior to the delivery date of a Vessel or Shipyard Project being constructed, reconstructed, or reconditioned, the Guarantee Fee shall be determined as follows: (1) If the Equity is less than 15 percent of the Long-Term Debt, the Guarantee Fee rate shall be 1/2 of 1 percent of the Average Principal Amount of Obligations Outstanding during the annual period covered by the Guarantee Fee. (2) If the Equity is at least 15 percent of the Long-Term Debt, but less than the Long-Term Debt, the Guarantee Fee rate shall be 3/8 of 1 percent of the Average Principal Amount of Obligations Outstanding during the annual period covered by the Guarantee Fee. (3) If the Equity is equal to or exceeds the Long-Term Debt, the Guarantee Fee rate shall be 1/4 of 1 percent of the Average Principal Amount of Obligations Outstanding during the annual period covered by the Guarantee Fee. (d) Variable Rate after Vessel or Shipyard Project delivery or completion. For annual periods beginning on or after the Vessel or Shipyard Project delivery date, the Guarantee Fee shall be determined as follows: (1) If the Equity is less than 15 percent of the Long-Term Debt, the Guarantee Fee rate shall be 1 percent of the Average Principal Amount of Obligations Outstanding during the annual period covered by the Guarantee Fee. (2) If the Equity is at least 15 percent of the Long-Term Debt but less than 60 percent of the Long-Term Debt, the Guarantee Fee rate shall be 3/4 of 1 percent of the Average Principal Amount of Obligations Outstanding during the annual period covered by the Guarantee Fee. (3) If the Equity is at least 60 percent of the Long-Term Debt, but less than the Long-Term Debt, the Guarantee Fee rate shall be 5/8 of 1 percent of the Average Principal Amount of Obligations outstanding during the annual period covered by the Guarantee Fee. (4) If the Equity is equal to or exceeds the Long-Term Debt, the Guarantee Fee rate shall be 1/2 of 1 percent of the Average Principal Amount of Obligations outstanding during the annual period covered by the Guarantee Fee. (e) Payment of Guarantee Fee. (1) The Guarantee Fee covering the full period of the stated maturity of the Obligations commencing with the date of the Security Agreement shall be paid to us concurrently with the execution and delivery of said Agreement. The project's entire Guarantee Fee payment shall be made by you to us in an amount equal to the sum of the present value of the separate products obtained by applying the pertinent pre or post delivery Guarantee Fee rate or rates to the projected amount of the Average Principal Amount of Obligations Outstanding for each year of the stated maturity of the Obligations. In calculating the present value used in determining the amount of the Guarantee Fee to be paid, we shall use a discount rate based on information contained in the President's most recently submitted budget. (2) The Guarantee Fee may be included in Actual Cost, is eligible to be financed, and is non-refundable. (f) Proration of Guarantee Fee. The Guarantee Fee shall be prorated where a Vessel delivery is scheduled to occur during the annual period with respect to which payment of said Guarantee Fee is being made, as follows: (1) Undelivered Vessel. If the Guarantee Fee relates to an undelivered Vessel, the predelivery rate is applicable to the Average Principal Amount of Obligations Outstanding for the period from the date of the Security Agreement to the delivery date, and the delivered Vessel rate is applicable for the balance of the annual period in which the delivery occurs. (2) Multiple Vessels. If the Guarantee Fee relates to more than one Vessel, the amount of outstanding Obligations will be allocated to each Vessel in the manner prescribed in § 298.33(d), and an amount shall be determined for each Vessel by using the rate that is applicable under paragraph (c) or (d) of this section. The Guarantee Fee shall be the aggregate of the amounts calculated for each Vessel." 46:46:8.0.1.4.20.4.3.8,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,D,Subpart D—Documentation,,§ 298.37 Examination and audit.,FMC,,,,"(a)(1) We shall have the right to examine and audit the books, records (including original logs, cargo manifests and similar records) and books of account, which pertain directly to the project, of the Obligor, bareboat charterer, time charterer or any other Person who has an agreement with respect to control of, or a financial interest in, a Vessel or Shipyard Project, as well as records of a Related Party and domestic agents connected with such Persons, and shall have full, free and complete access to these items at all reasonable times. (2) We shall have the right to full, free and complete access, at all reasonable times, to each Vessel or Shipyard Project for which Guarantees are in force. (3) When a Vessel is in port or undergoing repairs, we may make photostatic or other copies of any books, records and other relevant documents or papers being examined or audited. (b) The Person in control of the premises where we conduct the examination or audit must furnish, without charge, adequate office space and other facilities that we reasonably require in performing the examination, audit or inspection." 46:46:8.0.1.4.20.4.3.9,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,D,Subpart D—Documentation,,§ 298.38 Partnership agreements and limited liability company agreements.,FMC,,,,"Partnership and limited liability company agreements must be in form and substance satisfactory to us prior to any Guarantee Closing, especially relating, but not limited to: (a) Duration of the entity; (b) Adequate partnership or limited liability company funding requirements and mechanisms; (c) Dissolution of the entity and withdrawal of a general partner or member; (d) The termination, amendment, or other modification of the entity without our prior written consent; and (e) Distribution of funds or ownership interest." 46:46:8.0.1.4.20.5.3.1,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,E,"Subpart E—Defaults and Remedies, Reporting Requirements, Applicability of Regulations",,§ 298.40 Defaults.,FMC,,,,"(a) In General. Provisions concerning the existence and declaration of a default and demand for payment of the Obligations (described in paragraphs (b) and (c) of this section) shall be included in the Security Agreement and in other parts of the Documentation. (b) Principal and interest Payment Default. Unless we have assumed the Obligor's rights and duties under the Obligation and agreements and have made any payments in default under terms in the Obligation or related agreements, the following procedures regarding principal and interest payment default shall apply: (1) No demand shall be made for payment under the Guarantees unless the default shall have continued for 30 days (Payment Default). (2) After the expiration of said 30-day period, demand for payment of all amounts due under the Guarantees must be made no later than 60 days afterward. (3) After demand for payment is made by or on behalf of the Obligees, we shall make payment under the Guarantees, except if we determine that a Payment Default has not occurred or that such Payment Default has been remedied prior to demand being made. (c) Security Default. If a default occurs under the Security Agreement which is other than a Payment Default (Security Default), section 1105(b) of the Act allows us, in our sole discretion, to declare such default a Security Default, and we may notify the Obligee or agent of the Obligee of such Security Default, stating that demand for payment under the Guarantees must be made no later than 60 days after the date of such notification. (d) Payment of Guarantees. If we receive notice of demand for payment of the Guarantees, we shall, no later than 30 days after the date of such demand (provided that we shall not have, upon such terms as may be provided in the Obligations or related agreements, prior to that demand, assumed the Obligor's rights and duties under the Obligation and agreements and shall have made any payments in default), make payment to the Obligees, Indenture Trustee or any other agent of the unpaid principal amount of Obligations and unpaid interest accrued and accruing thereon up to, but not including, the date of payment." 46:46:8.0.1.4.20.5.3.2,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,E,"Subpart E—Defaults and Remedies, Reporting Requirements, Applicability of Regulations",,§ 298.41 Remedies after default.,FMC,,,,"(a) In general. The Security Agreement or other parts of the Documentation shall include provisions governing remedies after a default, which relate to our rights and duties, the rights and duties of the Obligor, and other appropriate Persons. (b) Action by the Secretary. (1) We may take the Vessel or Shipyard Project and hold, lease, charter, operate or use the Vessel or Shipyard Project, accounting only for the net profits to the Obligor after a default has occurred and is continuing and before making payment required under the Guarantees. (2) After making payment required under the Guarantees, we may initiate or otherwise participate in legal proceedings of every type, or take any other action considered appropriate, to protect rights and interests granted to us under: (i) Sections 1105(c), 1105(e) and 1108(b) of the Act, (ii) The Security Agreement, (iii) Other applicable provisions of law, and (iv) The Documentation. (c) Security proceeds to Secretary. Our interest in proceeds realized from the disposition of or collection regarding the security granted to us in consideration for the Guarantees (except all proceeds from the sale, requisition, charter or other disposition of property purchased by us at a foreclosure or other public sale, which proceeds shall belong to and vest exclusively in us), shall be an amount equal to, but not in excess of, the sum of (in order of priority of application of the proceeds): (1) All moneys due and unpaid and secured by the Mortgage or Security Agreement; (2) All advances, including interest thereon, by us, under the Security Agreement and all our reasonable charges and expenses; (3) The accrued and unpaid interest on the Secretary's Note; (4) The accrued and unpaid balance of the principal of the Secretary's Note; and (5) To the extent of any collaterization by the Obligor of other debt due to us from the Obligor under other Title XI financings, such other Title XI debt. (d) Security proceeds to Obligor. You shall be entitled to the proceeds from the sale or other disposition of security, described in paragraph (c) of this section, if and to the extent that the proceeds realized are in excess of the amounts described in paragraphs (c)(1) through (5) of this section." 46:46:8.0.1.4.20.5.3.3,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,E,"Subpart E—Defaults and Remedies, Reporting Requirements, Applicability of Regulations",,§ 298.42 Reporting requirements—financial statements.,FMC,,,,"(a) In general. The financial statements of the Company shall be audited at least annually, in accordance with generally accepted auditing standards, by independent certified public accountants licensed to practice by the regulatory authority of a State or other political subdivision of the United States or, licensed public accountants licensed to practice by the regulatory authority or other political subdivision of the United States on or before December 31, 1970. (b) Eligible Export Vessels. In the case of Eligible Export Vessels, the accounts of the Company shall be audited at least annually, and unless otherwise agreed to by us, we shall require that the financial statements be in accordance with generally accepted accounting principles, by accountants as described in paragraph (a) of this section or by independent public accountants licensed to practice by the regulatory authority or other political subdivision of a foreign country, provided such accountants are satisfactory to us. The accountants performing such audits may be the regular auditors of the Company. (c) Reports of Company and other Persons. Except as we require otherwise, the Company must file a semiannual financial report and an annual financial report, prepared in accordance with generally accepted accounting principles, with us as specified in the Documentation. You must include: (1) The balance sheet and a statement of paid-in-capital and retained earnings at the close of the required reporting period, (2) A statement of income for the period, and (3) Any other statement that we consider necessary to accurately reflect the Company's financial condition and the results of its operations. (d) Required form. We will specify in a letter to the Company the form required for reporting and the number of copies that you must submit (e) Other Persons. We may after providing the Company notice, also require the Company to submit financial statements of any other Person, directly or indirectly participating in the project, if the financial condition of that Person affects our security for the Guarantees. (f) Timeliness. The required financial report for the annual period will be due within 105 days after the close of each fiscal year of the Company, commencing with the first fiscal year ending after the date of the Security Agreement. The required semiannual report will be due within 105 days after each semiannual period, commencing with the first semiannual period ending after the date of the Security Agreement. (g) Public accountant's report. The annual report will be accompanied by the public accountant's report based on an audit of the company's financial statements. We may require an audit by the public accountants of the financial statements contained in the company's semiannual report. We also may require certification of the semiannual report by the accountants. Where independent certification is not required, a responsible corporate officer will attach a certification that such report is based on the accounting records and, to the best of that officer's knowledge and belief, is accurate and complete. (h) Leveraged lease financing. If the method of financing involved is a leveraged lease financing, or a trust is the owner of the Vessels, we may modify the requirements for annual and semiannual accounting reports of the Obligor accordingly. (i) Letter of confirmation. The Company must furnish, along with its financial report, a letter of confirmation issued by its insurance underwriter(s) or broker(s) that the Company has paid premiums on insurance applicable to the preservation, protection and operation of the asset, which information must state the term for which the insurance is in force." 46:46:8.0.1.4.20.5.3.4,46,Shipping,II,D,298,PART 298—OBLIGATION GUARANTEES,E,"Subpart E—Defaults and Remedies, Reporting Requirements, Applicability of Regulations",,§ 298.43 Applicability of the regulations.,FMC,,,,"(a) The regulations in this part are effective August 21, 2000, and apply to all applications made, Letter Commitments, Commitments to Guarantee Obligations or Guarantees issued or entered into on or after August 21, 2000, under section 1104(a) of the Merchant Marine Act, 1936, as amended. (b) The regulations in this part do not apply to any applications made, Letter Commitments, Commitments to Guarantee Obligations, or Guarantees issued under those regulations in effect before August 21, 2000. See 46 CFR, parts 200 to 499, edition revised as of October 1, 1996 and 46 CFR, parts 200 to 499, edition revised as of October 1, 1999 for regulations that apply to applications made, Letter Commitments, Commitments to Guarantee Obligations, or Guarantees issued before August 21, 2000."