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The U.S. Maritime Administration (MARAD) has long adhered to a policy whereby exports of cargo whose financing is backed by a U.S. government agency - often the Export-Import Bank (Eximbank) - must move on U.S.-flagged vessels. If a shipper saw a problem with this, it could apply for a waiver. Then, foreign ships could be used, but only if MARAD certified that boats flying the Stars and Stripes were not available "as to numbers, tonnage, capacity, sailing schedule, or at reasonable times."
This is something of an application of Jones Act principles designed to protect Uncle Sam's merchant marine. It might make sense from a governmental policy perspective, but a coterie of shippers known as the Exporters Competitive Maritime Council (ECMC) concluded that MARAD's requirements were unclear and often unpredictable. A consequence was that American exporters often lost commercial opportunities to their foreign competition.
MARAD heard ECMC's plaintiff cries and rallied to the cause. Issuing its Public Resolution No. 17 last month, MARAD implemented a new policy which, if all goes as planned, should give shippers and their intermediaries a bit more objective and reliable guidance as to when they may use foreign carriers to move Eximbank-backed cargo.
Basically, there now are four species of waiver. These are as follows:
STATUTORY (Non-Availability) WAIVER
This waiver will be granted when U.S. vessels simply are unavailable for the needed transportation. You can't squeeze blood from a turnip! If a shipper applicant makes the proper showing to apply for a statutory waiver (which pertains to specified cargo only), then MARAD will check up on the shipper's assertions, and probably see if it can work something out itself with an American carrier. If MARAD agrees with the shipper, a foreign carrier may make the haul.
GENERAL WAIVER
This waiver is granted for certain trade lanes only, when a "recipient nation's vessels [are] authorized to share in the ocean carriage of government instrumentality financed movements, but not in excess of fifty percent (50%) of the total movement under the credit." This would allow vessels flagged by the recipient nation to bring home up to half of a shipper's cargo backed by Eximbank.
A private shipper may request that the country of its cargo's destination be granted "sponsorship" for a general waiver. The sponsorship would ensure the recipient country extends the same favor to U.S.-flagged vessels for cargo bound for the Land of the Free. By doing so, the shipper may obtain a general waiver enabling it to use foreign carriers for its outbound cargo. This waiver is subject to some pretty complicated provisos, and MARAD can revoke it anytime it concludes the recipient nation isn't living up to its end of the bargain.
COMPENSATORY WAIVER
Okay, so let's say a shipper ships out Eximbank-backed cargo on a foreign boat by an honest mistake. Remorseful after learning of its inadvertent misdeed, the shipper wants to make good and, hat in hand, asks MARAD for an ex post facto waiver. In this instance, MARAD can basically forgive the shipper by issuing it a compensatory waiver.
But it's not quite that simple. First, MARAD will check up on the shipper to make sure the error was indeed honest. Second, MARAD will make the shipper agree, in writing, to ship an equivalent volume of "non-government impelled cargo" on U.S. vessels within a specified period of time. Third, the shipper has to comply with extensive reporting requirements about the subsequently shipped cargo.
CONDITIONAL WAIVER
This waiver pertains to overdimensional cargo needed in overseas projects which no U.S. flagged vessel can accommodate. A conditional waiver is good for up to two years, and will be withdrawn if an American carrier becomes available for the service. The record-keeping requirements for this waiver are daunting, and should be considered well in advance of a shipper making application.
In deciding whether to grant any of these waivers, MARAD will take into account a laundry list of factors, such as how well the shipper followed application procedures and demonstrated the absence of an American carrier able to make the haul; specifics of the subject cargo and whether it presents safety risks; other purposes and functions of the Merchant Marine Act of 1936; how we've been getting along with the country of destination; whether the shipper has been behaving itself in other shipping matters; and other considerations.
Public Resolution No. 17 is an example of the government taking notice of some of the difficulties American shippers face in an evolving international shipping environment. Shippers whose cargo has been backed by Eximbank credits should take advantage of broader shipping options now available on foreign vessels.
Steve Block is an attorney concentrating on maritime, transportation, and fisheries law with the Seattle law firm of Betts, Patterson & Mines. He can be reached at sblock or .
Ref: MARAD's Public Resolution No. 17, available at http://frwebgate.access.gpo.gov/cgi-bingetdoc.cgi?dbname=2001 _register&docid=01-10283-filed.
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