1. U.S. CITIZENSHIP REQUIREMENTS FOR THE COASTWISE TRADE Captain Patrick J. McGuire Office of Maritime & International Law U.S. Coast Guard

2. 100 Hundred Years of the Jones Act The Shipping Act of 1916 (39 Stat 728 (1916)) established a standard for U.S. entity citizenship in section 2 of the Act. Section 2, as modified subsequently by the Merchant Marine Act, 1920 (41 Stat 988 (1920)) – established the 75% U.S. citizen equity ownership requirement – remains the standard today – Codified, as amended, at 46 U.S.C. § 50501

3. Statutory Framework 46 U.S.C. § 50501  a corporation, partnership, or association is deemed a US citizen  operating a vessel in the coastwise trade, at least 75 percent of the interest must be owned by U.S. citizens  Additional corporate requirements  Determining Controlling corporate interest  Determining 75% interest by U.S. citizens

4. Statutory Framework 46 U.S.C. § 12103  a vessel COD may be issued only if the vessel is:  Wholly owned by one or more eligible individuals or entities;  At least 5 net tons as measured under part J; and  Not documented under the laws of a foreign country.  Eligible Owners  a U.S. citizen;  An association, trust, joint venture, or other entity if—  A partnership if—  each general partner is a U.S. citizen  controlling interest in the partnership is owned by U.S. citizens  A corporation if—  incorporated under U.S. laws or State law;  CEO and Board Chairman are U.S. citizens; and  No more of its directors are noncitizens than a minority of the number necessary to constitute a quorum

5. Statutory Framework 46 U.S.C. § 12112  A coastwise endorsement may be issued for a vessel that-  Satisfies the requirements of section 12103  Built in the U.S.  Limited exceptions for vessels not built in the U.S.  Otherwise qualifies under the laws of the United States to engage in the coastwise trade.

6. Statutory Framework 46 U.S.C. § 12139  For vessels engaged in the coastwise trade  Owners, masters, charterers, and mortgagees of documented vessels may be required to submit reports to the Coast Guard to ensure compliance with The Jones Act.  46 C.F.R. Part 67

7. Statutory Framework 46 U.S.C. § 12140  Authority to conduct investigations and inspections to ensure compliance  Subpoenas may be issued  For witnesses  For the production of documents or other evidence  Subpoenas enforced through the District Court

8. Regulatory Framework 46 C.F.R. § 67.31  Stock or equity interest requirements to support U.S. citizenship requirements  For an entity comprised, in whole or in part, of other entities which are not individuals  each entity contributing to the stock or equity interest qualifications of the entity holding title must be a U.S. citizen eligible to document vessels in its own right with the trade endorsement sought.

9. Regulatory Framework 46 C.F.R. § 67.39  A corporation meets U.S. citizenship requirements if –  incorporated under U.S. laws or State law;  CEO, by whatever title, is a U.S. citizen;  Chairman of the Board is a U.S. citizen; and  No more of its directors are non-citizens than a minority of the number necessary to constitute a quorum.  75 percent of the stock interest in the corporation is owned by U.S. citizens

10. Regulatory Framework 46 C.F.R. § 67.43  a properly completed original Application for Initial Issue, Exchange, or Replacement of Certificate of Documentation; or Re- documentation (form CG-1258)  establishes a rebuttable presumption that the applicant is a U.S. citizen.

11. Publicly Traded Corporations Burden on the company to employ and administer mechanisms to establish and demonstrate compliance with the law Positive consideration given to a company’s diligent and good faith efforts See NVDC Federal Register notice Nov 26, 2012 (77 FR 70452)

12. Publicly Traded Corporations  Mechanisms used to monitor and determine compliance: Use of the Depository Trust Company segregated account (or ‘‘SEG–100’’) system; Monitoring SEC filings re: 5% holders (Schedules 13D, 13G, Form 13F) and follow-up requests for information from filers; Use of protective provisions in organizational documents in order to guard against and rectify the possibility of what are referred to as excess shares; Communications with Non-Objecting Beneficial Owners (or‘‘NOBOs’’) Analysis of registered stockholders; and Use of dual stock certificates. See NVDC Federal Register notice Nov 26, 2012 (77 FR 70452)

13. Questions? Point of Contact National Vessel Documentation Center Doug Cameron (304) 271-2506