The purpose of this part is to establish the policy and procedure to be followed by the Maritime Administration, and by the subsidized steamship operators in conducting subsidy condition surveys and accomplishment and reporting of maintenance and repairs on vessels approved for operation under the Maritime Subsidy Board Operating-Differential Subsidy Agreements.

§ 272.2 Subsidy condition survey requirements.

(a) Condition surveys of vessels approved for subsidized operation shall be conducted in the following instances:

(1) At the commencement of the first subsidized voyage of each vessel placed in subsidized operation, except newly constructed vessels which enter subsidized service immediately upon completion of building and for which there is a survey report made by the Trial and

Guarantee Survey Boards of the Maritime Administration or any other condition report satisfactory to the United States.

(2) At the commencement of the first voyage of each vessel after resumption of subsidized operation following temporary withdrawal from subsidized operation. For the purposes of the surveys required by this subparagraph and subparagraph (5) of this paragraph a vessel which is not withdrawn from the agreement, shall not be considered as temporarily withdrawn if it performs unsubsidized voyages in a subsidized service of the same operator.

(3) At the commencement of the first voyage of each vessel following the effective date of the establishment of a maintenance (upkeep) and repair subsidy rate, if such subsidy rate was not established as of subparagraph (1) of this paragraph.

(4) Upon the discontinuance of a maintenance (upkeep) and repair subsidy rate.

(5) Upon the withdrawal of each vessel from subsidized service, either temporarily or permanently. For the purposes of the surveys required by this subparagraph and subparagraph (2) of this paragraph a vessel which is not withdrawn from the Agreement, shall not be considered as temporarily withdrawn if it performs unsubsidized voyages in a subsidized service of the same operator.

(6) Upon the termination of the last voyage of each vessel under the operating-differential subsidy contract or at the end of the contract period with respect to subsidized vessels in idle status at that time, unless such contract is immediately superseded by a new operating-differential subsidy contract with the same operator.

(b) A vessel commencing subsidized operation outside the continental limits of the United States shall be surveyed immediately at her first port of call in the United States, and it shall be incumbent upon the operator to make arrangements with the appropriate Ship Repair and Maintenance Field Office for the conducting of such survey.

[G.O. 20, 2d Rev., 23 F.R. 2920, May 1, 1958, as amended by Amdt. 3, 28 F.R. 3696, Apr. 16, 1963]

§ 272.3

Subsidy condition survey instructions; general.

Instructions and information relative to conducting subsidy condition surveys as outlined in § 272.2 will be furnished the respective Coast Directors by the Office of Government Aid with informative copies of the notifications to the Department Office of the Division of Ship Repair and Maintenance; however, the Ship Repair and Maintenance Field Offices are authorized when requested by subsidized operators, to conduct condition surveys specified in § 272.2. At the time a subsidy condition survey is to be conducted, the operator is to be invited attendance arrange for of his representative; however, such representative is not required to be present.

to

(a) Condition surveys conducted in conformance with requirements of § 272.2 (a) (1), (2), and (3) will be reported on Form MA-58 and shall be prepared in sufficient detail to readily reveal a comprehensive picture of the conditions noted and shall contain indication of the "Record", "Deferred", "Unsighted", and "Builder's and/or Repair Contractor's Responsibility" items. Forms MA-55 Condition Report-Turbine and Gears, MA-56 Tooth Contact Report, MA-57 Drydock Report and MA-59 Diesel Engine Report are to be used as applicable.

(1) Record items. This classification shall be indicated in the survey beside all items revealing conditions which, in conformance with good commercial practice do not require immediate repairs.

(2) Deferred item. This classification shall be indicated in the survey beside all items which, in accordance with good commercial practice, require repairs, but which are postponed, or items which are classification and/or Coast Guard requirements carrying a grace period for performance thereof.

(3) Unsighted items. This classification shall be indicated in the survey beside all items not opened up for internal inspection and those items of the vessel's underwater body which could not be inspected due to the vessel being afloat.

(4) Builder's and/or repair contractor's responsibility. This classification shall indicate those items which have been determined to be the builder's or repair contractor's responsibility.

(b) The condition surveys prescribed in § 272.2(a) (4), (5), and (6) shall be accomplished as follows:

(1) The subsidized operator shall prepare and furnish the appropriate Ship Repair and Maintenance Field Office detailed repair specifications covering all work outstanding on the vessel after completion of repairs for the voyage immediately preceding the survey requirement. The Ship Repair and Maintenance Field Office shall conduct an inspection of the vessel prior to its next sailing for the purpose of assuring that the operator's specifications cover outstanding defects which require attention and which are attributable to subsidized operation. These specifications, together with the findings of the Ship ReMaintenance Field Office pair and regarding the contents thereof, shall constitute the subsidy condition survey report required by the OperatingDifferential Subsidy Contract.

(2) The Operator shall furnish the Ship Repair and Maintenance Field Office with sufficient copies of the specifications, prepared pursuant to subparagraph (1) of this paragraph, to meet the latter's needs.

(3) In those cases involving discontinuance of a maintenance and repair rate, permanent withdrawal from subsidized service, or contract termination without simultaneous renewal, the work contained in these specifications and verified by the Ship Repair and Maintenance Field Office as defects attributable to subsidized operation, will not be considered for subsidy participation unless it is accomplished not later than the next drydocking period (periodical or otherwise) and the ownership of the vessel is retained by the particular operator; provided, however, that the transfer of ownership of a vessel to the United States pursuant to the provisions of section 510 of the Merchant Marine Act, 1936, as amended, shall not preclude subsidy participation otherwise permitted.

(4) No work except the correction of such defects as are detailed in the specifications will be considered for subsidy participation.

(5) The costs of all maintenance and repair items which are noted on any condition survey report shall be chargeable to the period of operations covered by the report, except that, effective January 1, 1964, the costs of any such items which have been noted on a Recapture condition survey report previously required by section 272.2, and which are properly includable in the subsidized ac

countings, shall be chargeable to the recapture period in which the work is performed.

(c) The operator shall make arrangements with the appropriate Ship Repair and Maintenance Field Office for the conducting of surveys required by this part. The operator shall assist the representative of the Ship Repair and Maintenance Field Office, and shall permit access to all parts of the vessel, its log books and official records.

[G.O. 20, 2d Rev., 23 F.R. 2920, May 1, 1958, as amended by Amdt. 1, 27 F.R. 3203, Apr. 4, 1962; Amdt. 3, 28 F.R. 3696, Apr. 16, 1963; Amdt. 4, 28 F.R. 6458, June 22, 1963]

It shall be the responsibility of the respective Maritime Administrative Field Office to compile sufficient copies of the subsidy surveys in order to make distribution as follows:

(a) One copy to the Departmental Office Division of Ship Repair and Maintenance, Washington, D. C.

(b) One copy to the operator of the subsidized vessel involved.

(c) One copy to be retained in the files of the Field Office of the Division of Ship Repair and Maintenance under whose jurisdiction the survey was conducted. § 272.6 Subsidy maintenance and repair procedure.

(a) The preparation of specifications, the awarding of maintenance and repair contracts, the inspection and approval of maintenance and repairs as to workmanship, quality, materials and satisfactory completion are all the responsibility of the subsidized operator.

(b) Subsidized operators shall in sufficient time, notify the representative of the Division of Ship Repair and Maintenance in the appropriate Maritime Administration Field Office as to the contemplated date and port of arrival of a subsidized vessel, so that a Marine Surveyor of the Division of Ship Repair and Maintenance may make an inspec

tion of proposed maintenance and repairs, and check repair lists as to the necessity for the work involved.

(c) Subsidized maintenance and repairs shall be awarded on a competitive bid basis whenever practicable or advantageous. However, work awarded on a negotiated basis shall be considered for subsidy participation if the operator furnishes satisfactory reasons for the necessity of awarding the work on other than a competitive bid basis. The Division of Ship Repair and Maintenance shall be invited to have a representative present at the negotiation of price for such work and it shall be his responsibility to determine the justification for performance of maintenance and/or repairs by the subsidized operators on a non-competitive basis, as well as reasonableness of negotiated prices. Findings in this respect shall be incorporated in the letters prepared by the Chief, Ship Repair and Maintenance Branch, transmitting to the Departmental Office in Washington, D. C., the maintenance and repair summaries covering the work involved. However, if the operator has given the district representative advance notice of his intention to negotiate the cost of repairs, the absence of such representative during the negotiations, shall not, in itself, prejudice the right of the operator to receive subsidy on such repairs.

(d) The repairing and maintenance upkeep of subsidized vessels by any subsidiary company, holding company, affiliate company, or associate company of the operator, as differentiated from directly hired shore gang labor, is subject to written approval by the Maritime Administration pursuant to section 803, Merchant Marine Act, 1936, as amended. Requests for such approval shall be addressed to the appropriate Coast Director. When such work is performed on subsidized vessels by any subsidiary company, holding company, affiliate company, or associate company of the operator, the specifications shall be itemized in detail and item priced.

(e) Maintenance and repair specifications, including those covering work to be performed by operator's shore gang are to be prepared in sufficient detail to permit determination of the reasonableness of prices, and are to include the items necessary for maintaining the vessel in a seaworthy condition, and in an efficient state of maintenance and repair. Contractor's invoices shall contain the

starting and completion dates of each job, the contractor's price on each individual item contained in the specifications, and whenever applicable, the item numbers contained in the applicable subsidy survey shall be indicated against the respective corrective items in the maintenance and repair specifications. Itemized prices shall be furnished for work performed by shore gangs and such item prices shall be further segregated between labor and material charges.

(f) In all cases wheer the operator furnishes material to the contractor from (1) ship's stores, (2) operator's warehouse, or (3) direct purchase for a specified job, he shall note on the invoice, requisition slip, expenditure voucher, or other form of transfer memorandum, the contract number and item number on which said material was used. The following form is suggested:

Requisitioned Materials-Received and Installed in connection with: Voyage No.

Order No.

Item No.

(Operator's representative) (g) A priced copy of the certified invoice, requisition slip, expenditure voucher, or other form of transfer memorandum shall be attached by operator to the contract referred to and submitted in support of the "Subsidy Repair Summary" (Form MA-140).

[G.O. 20, 2d Rev., 23 F.R. 2920, May 1, 1958, as amended by Amdt. 3, 28 F.R. 3696, Apr. 16, 1963; Amdt. 5, 30 F.R. 1983, Feb. 12, 1965] § 272.7 Subsidy repair summaries.

(a) The subsidized operators shall prepare Repair Summary (Form MA140) for each terminated voyage, including the voyages of vessels which have been temporarily withdrawn from subsidized service. This summary must be carefully prepared, and certified by a responsible official of the Company, as follows:

This to certify that, to the best of my knowledge and belief, and based on recorded entries thru --. this is a true and correct statement of repair and maintenance expenditures for the period stated and that the repair and maintenance items indicated as eligible for subsidy participation are reasonably attributable to service subsequent to commencement of the first voyage under the Operating Differential Subsidy Agreement and were necessary, satisfactorily completed, and the price is fair and reasonable (exceptions are listed on separate page).

and must cover all expenditures both domestic and foreign made on requisitions for maintenance and repairs. On vessels which have been permanently withdrawn from the Operating-Differential Subsidy Contract, the operators shall submit repair summaries properly supported by the documents referred to in paragraph (b) of this section, covering only the correction of defects noted in off-subsidy survey reports. Each operator shall furnish his own required supply of this form.

(b) The subsidized operator shall submit the repair summary, as well as supplements thereto, supported by copies of all documents pertinent thereto, such as repair specifications, requisitions, invoices, underwriters and classification society surveys, property transfer notice, scrap credit or other forms of credit memoranda, etc., to the appropriate Ship Repair and Maintenance Field Office upon completion of repairs charged to the terminating voyage, and within 120 days after the vessel involved has sailed from her last U.S. port of call on the next outward voyage.

(c) The appropriate field representative of the Division of Ship Repair and Maintenance shall make a review of the Repair Summary for the purpose of ascertaining that all pertinent and required information and data are attached and in order, and shall transmit the Repair Summary with all supporting data to the Chief, Division of Ship Repair and Maintenance, Washington, D. C.

(d) After review of the Repair Summary and supporting papers, the Departmental Office of the Division of Ship Repair and Maintenance, Washington, D. C., shall furnish the operator with a letter (one copy of which shall be forwarded to the Division of Audits), setting forth determinations as to eligibility of those costs for subsidy participation which are claimed in the "Subsidizable" Total of the MA-140. This letter will also contain qualified approvals on Marine Loss items as outlined in paragraphs (e) and (f) of this section. The operator is to retain this letter with his copy of the repair summary for reference when audit is made of the repair accounts of the respective vessel. Such repair summary, together with the said letter and documents pertinent thereto, shall be retained for not less than six years after audit and approval by the Maritime Administration and Maritime Subsidy Board of a final accounting for

the last year of a recapture period and settlement of such recapture period.

(e) To eliminate the necessity of the operators resubmitting domestic repair costs incident to marine losses for technical review and approval by the Departmental Office of the Division of Ship Repair and Maintenance, such repair costs shall be listed on the MA-140 under a separate column headed "Marine Loss", and not included in either the "Subsidizable" or "Non-Subsidizable" totals. The letter referred to in paragraph (d) of this section will contain the determinations as to approval of such marine loss items for subsidy participation; such approvals will be qualified to cover the items providing they are not recoverable from insurance.

(f) Within 120 days after all damage applicable to the "policy voyage" as defined in the operator's insurance policy is repaired, in the case of franchise or deductible not being reached, or within 120 days from the date of underwriters' rejection of insurance claim, the subsidized operator shall advise the respective District Comptroller, by letter, of those costs previously reported on Form MA-140 as Marine Losses which have been qualifiedly approved by the Departmental Office of the Division of Ship Repair and Maintenance and which are not recoverable from insurance. The respective District Comptrollers will verify that such costs have not been recovered.

(g) Within 90 days from the date of the Division of Ship Repair and Maintenance letter mentioned in paragraph (d) of this section, the subsidized operator shall refer to the Chief, Division of Ship Repair and Maintenance, Washington, D. C., for reconsideration any and all cases in which he does not agree with the decisions that a particular maintenance or repair expense shall not participate in subsidy. All decisions, unless appealed to the Division of Ship Repair and Maintenance, Washington, D. C., within the prescribed 90 days, shall be final. In his response to such appeals the Chief, Division of Ship Repair and Maintenance will indicate whether the decision rendered therein is final. Such "final determination" letters will have the concurrence of the Chief, Office of Ship Operations.

(h) The operator may appeal to the Maritime Subsidy Board pursuant to the provisions of section 6 of Administrator's Order No. 184, if after exercising

the appeal provisions stipulated above he does not accept the "final determination" of the Chief, Division of Ship Repair and Maintenance.

(i) The subsidized operator shall prepare an Annual Repair Summary utilizing Form MA-140A,1 Revised, covering all voyages of subsidized Cargo, Combination-Passenger and Cargo, and Passenger vessels terminated during the calendar year. Separate summaries for each of these types of vessels are to be prepared and submitted in duplicate to the Chief, Division of Operating Costs, Office of Government Aid, within 30 days after submission of the Voyage Repair Summary (Form MA-140) covering the final voyage termination of the calendar year. Expenditures reported shall reflect the cumulative results of individual voyage repair summaries including supplements and/or adjustments thereto at hand when the Annual Repair Summaries are prepared. Such expenditures shall be allocated insofar as identifiable to the categories described in § 272.8(a) (1) through (10), except that with respect to § 272.8(a) (2) Boiler and Machinery Repairs (B–1) expenditures for Boiler Repairs shall be separated from Machinery Repairs and designated as item 2-B-1(a) while Machinery Repairs shall be reported separately as item 2-B-1(b). It shall be the responsibility of the operator to reproduce and furnish his own required supply of Form MA-140A, Revised.

The above reporting requirements shall apply beginning with annual reports required for voyages terminated during the calendar year 1962.

[G.O. 20, 2d Rev., 23 F.R. 2920, May 1, 1958, as amended by Amdt. 2, 28 F.R. 2917, Mar. 23, 1963; Amdt. 5, 30 F.R. 1983, Feb. 12, 1965; 30 F.R. 12356, Sept. 28, 1965]

§ 272.8 Categorizing and

charges.

allocating

(a) The operator shall exercise due diligence and accuracy in categorizing and identifying, both in specifications and in Form MA-140, those items on which subsidy is requested. The categories of work listed on the Form MA140 are as follows:

(1) Drydocking and underwater repairs (A-1 and A-2). To include all expenditures for drydocking and underwater repairs including tailshaft, rudder,

1 Filed as part of original document.