required for vessels 80-feet registed length or over need not, for the Secretary's purposes, involve in situ inspection by the naval architect during the construction interim (although such is generally more desirable). For vessels less than 80-feet registered length, such certification shall be provided by any competent authority (whose cost may be included in the actual cost for the purpose of guarantee) approved by the Secretary. Regardless of vessel length (or any other factors), however, the Secretary, at his discretion, reserves the right to require such additional tests or proofs as individual circumstances might warrant.

(g) Guarantee fee. The fee fixed by the Secretary for any guarantee shall be:

(1) Three-quarters of 1 percent of the average outstanding principal amount of the guaranteed obligation.

(2) Unless otherwise specified by the Secretary, paid by the obligor's check payable to "NMFS, NOAA, FSFFCommerce" and delivered to the National Marine Fisheries Service addressed to the U.S. Department of Commerce, National Oceanic and Atmospheric Administration, 11420,

Rockville Pike, Attention NBOC 1, Room 122, Rockville, Maryland 20852, together with identification of the specific guarantee to which the fee relates and the period covered by the payment.

(3) Fully earned when first due and no refund of earned fees will be made by the Secretary in the event the guarantee is terminated.

(4) If deficient, fully paid within 30 days of the Secretary's notice to the obligor of the amount of such deficiency.

[39 FR 17555, May 17, 1974; 39 FR 19944, June 5, 1974, as amended at 42 FR 32249, June 24, 1977; 43 FR 9154, Mar. 6, 1978]

§ 255.4 Applications.

(a) Purpose. Applications may be for guarantee of an obligation relating to a vessel to be constructed, reconstructed, or reconditioned; a delivered or redelivered vessel; both, or a commitment to guarantee an obligation for any of the above. Applications need not include a proposed obligee until such a time as the Regional Financial

Assistance Division office requires the

same.

(b) Where filed. Applications shall be filed in duplicate with the Regional office of the National Marine Fisheries Service's Financial Assistance Division corresponding to the region in which the obligor conducts its business on an application form furnished by the Service except that, in the Secretary's discretion, an application made other than by use of the prescribed form may be considered if the application contains information deemed to be sufficient.

(c) Processing of applications. If it is determined on the basis of a preliminary review that the application is complete and appears to be in conformity with the Act and this Part 255, the Regional Financial Assistance Division office will assign the application a Docket Number and forward one copy to the Chief, Financial Assistance Division, National Marine Fisheries Service, Washington, D.C. 20235. The Regional Financial Assistance Division office will then conduct a field investigation of the application. After completion of the field investigation, an appropriate report will be sent to the Chief, Financial Assistance Division, National Marine Fisheries Service, Washington, D.C. 20235 (unless and until such a time as such reports, or any portion of them, are no longer, for certain classes of cases, required to be so sent). The application and all supporting documents must be filed in sufficient time to permit the Secretary to make a full and complete investigation and to take all other action required in respect thereto, and in any event not later than 60 days prior to the date anticipated for closing the transaction.

(d) Books, records, and reports. The Secretary shall have the right to inspect such books and records, including tax returns, of the applicant as the Secretary in his discretion may deem necessary. A commitment to guarantee an obligation shall be made only upon the agreement of the obligee and obligor to furnish the Secretary, promptly upon his request, such reasonable material and pertinent reports, evidence, proof, and information as he may require in connection with a guarantee

granted or applied for, and to permit the Secretary, upon his request, to make such reasonable examination and audit of records and books of account as the Secretary may deem necessary in connection with a guarantee granted or applied for.

(e) Inspection of property. The Secretary or his agent shall have access at all reasonable times to all vessels or other security with respect to which an obligation is guaranteed or for which an application for guarantee has been filed.

(f) (1) Filing Fee. The filing fee for all applications (other than those in paragraph (f)(3) of this section) shall be and amount equal to 1⁄4 of 1 percent of the first $1,000,000 (or portion thereof) of the principal amount of the obligation to be guaranteed and % of 1 percent of the balance of that obligation. This filing fee will be retained by the Secretary regardless of the application's disposition.

(2) Commitment fee. The commitment fee for all approved applications (other than those in paragraph (f)(3) of this section) shall be an amount equal to 4 of 1 percent of the first $1,000,000 (or portion thereof) of the principal amount of the obligation to be guaranteed and % of 1 percent of the balance. This commitment fee is due when the Secretary first advises the applicant that its application for a guarantee has been approved and must be received by the Secretary before the actual commitment is issued. This amount, once the Secretary's commitment is issued, will be retained by the Secretary regardless of the commitment's subsequent disposition.

(3) Refinancing or assumption fee. The fee for refinancing or assuming previously guaranteed obligations shall be 4 of 1 percent of the principal amount of the guaranteed obligation to be refinanced or assumed. This fee must accompany the application for refinancing or assumption and will be retained by the Secretary regardless of the application's disposition. Where a refinancing or assumption serves mainly to protect the Secretary's interest (rather than principally as a convenience to the parties involved) the assumption fee may, in the Secre

tary's discretion, be waived.Where a refinancing or assumption does not involve the substitution of one wholly different obligor for another (such as, for example, the incorporation of a previously unincorporated obligor rather than the substitution of wholly different obligors which necessitate new credit and feasibility analysis), the refinancing or assumption fee may be in an amount equal to the Secretary's full actual cost (but in no event less than $250).

(4) Where payable. All checks should be made payable to "NMFS, NOAA, FSFF-Commerce" and delivered to the Regional National Marine Fisheries Service Office processing the application involved.

[39 FR 17555, May 17, 1974, as amended at 42 FR 32249, June 24, 1977; 42 FR 52424, Sept. 30, 1977; 45 FR 49083, July 23, 1980]

§ 255.5 Commitment.

A commitment to guarantee an obligation will, subject to the restrictions of the Act, be issued by the Secretary when such a commitment is required prior to the actual execution of the obligation. This commitment will provide that the Secretary will guarantee an obligation and will further state the terms and conditions under which the guarantee will be issued. It will also contain the covenants to be accepted by the obligee and obligor. No commitment, nor any amendment to a commitment, shall exist unless reduced to writing and duly executed by the obligor, the obligee, and the Secretary.

the Secretary's best interest to make such advances. The terms of an advance shall be satisfactory to the Secretary and shall include but not necessarily be limited to:

(a) The interest rate shall be equal to the greater of: (1) the sum of the effective interest rate borne by the guaranteed obligation and a guarantee fee computed

in accordance with § 255.3(g)(1); (2) the sum of the interest rate Treasury would charge the Federal Ship Financing Fund for a similar borrowing of like maturity and a guarantee fee computed in accordance with § 255.3(g)(1); or (3) the New York City prime rate of interest.

(b) The advance may have a maturity date no later than that of the guaranteed obligation.

(c) The advance shall be repayable under conditions satisfactory to the Secretary.

(d) As long as any advance is outstanding, no dividends can be paid without the prior written consent of the Secretary provided, however, that if the obligation and such advance or advances are assumed by a non-affiliated company which was approved by the Secretary, this dividend restriction shall not apply unless it is expressly required by the Secretary.

(e) The advance, both as to principal and interest, shall be secured by the existing First Preferred Ship Mortgage on the financed vessel given by the Obligor to the Secretary and by such other additional collateral as the Secretary may require.

(f) Whether or not to make an advance shall be a matter of the Secretary's discretion and shall be governed by what the Secretary considers to be in his/her own best interest. No advances shall be made where the obligor has alternative resources from which funds sufficient to pay installments on the guaranteed note could be generated.

[45 FR 37853, June 5, 1980]

retary's discretion, immediate foreclosure upon the Secretary's security. If a determination is made that the interest of the United States does not require immediate foreclosure and the obligor demonstrates to the Secretary's satisfaction that all defaults can and will be remedied, the Secretary may, in his discretion and under such terms and conditions as he may prescribe, enter into a written agreement with the obligor allowing it an additional period, ordinarily not to exceed 7 months from the date of the Secretary's payment of the guaranteed obligation (but for such shorter or longer periods as the Secretary may in his discretion prescribe), in which to remedy all defaults and pay to the Secretary the full amount owed the United States. Such an agreement shall provide for the obligor's performance of regular and periodic conditions designed to assure remedy of all defaults and payment to the Secretary of the full amount owed the United States within the period allowed. Such an agreement shall not constitute the Secretary's waiver of any past, present, or future default, but shall merely allow the obligor to possess and operate the Secretary's security at the Secretary's pleasure. If, before expiration of the period allowed, the obligor has substantially remedied all defaults (and the Secretary's payment has been of the whole of the guaranteed obligation), the Secretary in his discretion may entertain an application for the guarantee of another obligation (to the extent otherwise qualified and eligible under the Act and this Part 255) which aids in financing the amount owed the United States. In any event, the Secretary will ordinarily commence foreclosure proceedings or such other action as the Secretary may in his discretion deem necessary or appropriate to recovery of the full amount owed the United States if such amount is not paid to the Secretary on or before expiration of whatever period the Secretary allows.

[39 FR 17555, May 17, 1974. Redesignated at 45 FR 37853, June 5, 1980]

80-182 0-82-10

§ 255.9 Cross references.

Parties considering a Title XI guarantee should be aware of the following:

(a) Part 259 of this chapter establishes the conditions under which Capital Construction Funds for fishing vessels may be established under the provisions of section 21 of the Merchant Marine Act of 1970 (84 Stat. 1018) which amended section 607 of the Merchant Marine Act, 1936, as amended (46 U.S.C. 1177). These provisions allow deferment of taxation on certain income, including that derived from fishing operations, when such income is deposited into a Capital Construction Fund for subsequent qualification as a withdrawal for acquisition, construction, or reconstruction of, among other things, fishing vessels. Such income may, for example, under certain circumstances be deposited and withdrawn for the purpose of paying the installments of an obligation guaranteed under this Part 255.

(b) Part 251 of this chapter establishes certain fisheries for which the availability of both Title XI guarantees and Capital Construction Funds may, from time to time, be restricted under certain conditions to certain purposes.

[39 FR 17555, May 17, 1974. Redesignated at 45 FR 37853, June 5, 1980]

(a) Secretary. The Secretary of the Interior or his authorized representative.

(b) Administrator. The Maritime Administrator in the Department of Commerce or his authorized representative.

(c) Director. The Director, Bureau of Commercial Fisheries, Department of the Interior, or his authorized representative.

(d) Person. Individual, association partnership or corporation, or any one or all as the context requires.

(e) Fishery. A segment of the commercial fishing industry engaged in the catching of a single species or a group of species of fish and shellfish. Any other species taken must be caught incidentally while fishing for and using gear designed for the capture of the species comprising the fishery.

(f) Expanded areas. Fishing grounds not usually fished by the majority of the vessels operating in the fishery for which the proposed vessel is designed.

(g) Newly developed gear. The most modern gear available that is suitable for use in the fishery for which the proposed vessel is designed.

§ 256.3 Eligibility requirements.

(a) Vessel will be of advance design: In order to be considered to be of advance design, the vessel must be designed to have significant advantages in utility and efficiency over a significant number of vessels engaged in the fishery in which the proposed vessel is designed to operate.

(b) No economic hardship to efficient vessel operators: The determination that operation of a proposed vessel will not cause economic hardship to efficient vessel operators already operating in that fishery shall be made by the Secretary after notice and hearing, taking into consideration the condition of the resource, the efficiency of the vessels and gear being operated in that fishery compared with the proposed vessel, the prospects of the market for the species caught, and the degree and duration of any anticipated economic hardship.

(c) Aid in the development of the U.S. fisheries: For the vessel to aid in the development of the U.S. fisheries under conditions that the Secretary considers to be in the public interest, the vessel must be a modern vessel which will upgrade the fleet. Special consideration will be given to vessels which will provide a significant contribution in helping the domestic fishery meet foreign competition.

(d) The applicant possesses the ability, experience, resources and other qualifications necessary to enable him to operate and maintain the proposed new fishing vessel. In making this determination, the Secretary will inquire into the economic feasibility of the fishing venture and will require reasonable assurance that the applicant can operate the vessel profitably.

§ 256.4 Applications.

Applications for a subsidy shall be made on forms prescribed by the Secretary and shall be filed with the Director, Bureau of Commercial Fisheries, Washington, D.C. The applications must be accompanied by three copies of the cross section, deck arrangement, outboard profile, and specifications of the proposed vessel. The Secretary may require such additional complete detailed construction plans as may be necessary after a review of the appli

cation and accompanying plans and specifications.

§ 256.5 Notice and hearing.

After receipt of an application eligible on its face for a construction differential subsidy the Director will publish a Notice of Hearing on a Subsidy Application in the FEDERAL REGISTER and hold hearings in accordance therewith. The purpose of the hearing will be to provide any person who feels he will be economically injured by the construction of the proposed vessel to cross-examine witnesses and/or present evidence that the operation of such vessel will cause economic hardship to efficient vessel operators already operating in the fishery for which the vessel is designed. Hearing procedures will be held in accordance with Part 257 of this subchapter.

§ 256.6 Subsidy contract.

(a) A contract for the payment of the subsidy will take effect when all contracts for the construction of such vessel, have been approved by the Administrator and the subsidy contract has been signed by the Secretary and the applicant; and

(b) The contract shall contain a finding of the useful life of the vessel as determined by the Secretary to be used in computing the amount of the total depreciated construction subsidy to be repaid to the Secretary in accordance with section 9 of the Act.

§ 256.7 Vessel operations.

(a) If the owner of a fishing vessel constructed with the aid of a subsidy desires to operate it in a different fishery than the one for which is was designed because of an actual decline in that particular fishery, he shall submit an application to the Secretary for permission to transfer the operations of the vessel to a different fishery. The application shall contain data showing the decline in the fishery for which the vessel was designed, how this decline is making the operation of the vessel uneconomical or less economical, and why the transfer will not cause economic hardship or injury to efficient vessel operators already oper