(1) In determining the fair and reasonable value of the vessel for the purpose of the allowance, the Administration will consider:

(i) The value of the vessel, determined in accordance with the standards of valuation established pursuant to Executive Order 9387 (3 CFR, 1943 Supp.), as of the date of the application,

(ii) Any liability of the United States for repair and restoration of the vessel, (iii) The utility value of the vessel, (iv) The effect of the act upon the market value of such vessel, and

(v) The public interest in promoting exchanges of vessels as a means of rehabilitating and modernizing the American merchant marine.

(2) In no event will the amount of such allowance, in case of dry-cargo vessels and tankers, exceed:

(i) If the vessel or vessels tendered in exchange are of equal or greater deadweight tonnage than the war-built vessel or vessels being acquired, 331⁄2 percent of the statutory sales price (without taking into account the adjustments provided for in § 299.1 (f) (1) to (5), inclusive), of the war-built vessel or vessels, or

(ii) If the vessel or vessels tendered in exchange are of lesser deadweight tonnage than the war-built vessel or vessels, such proportionate part of 331⁄2 percent of the statutory sales price (without taking into account the adjustments provided for in § 299.1 (f) (1) to (5), inclusive), of such war-built vessel or vessels as the deadweight tonnage of such vessel or vessels, tendered in exchange, bear to the dead-weight tonnage of such war-built vessel or vessels, or

(iii) The liability of the United States in connection with the repair or restoration of such vessel under any charter to which the United States is a party, whichever is the higher.

(3) In the case of passenger vessels tendered in exchange, the amount of the allowance shall not exceed the percentage of the statutory sales price computed under subparagraph (2) (i) and (ii) of this paragraph by gross tons instead of deadweight tons, or such liability for the repair or restoration of such passenger vessel, whichever is the higher.

(4) In any case where the vessel tendered in exchange was acquired from the United States at any time and by any person whomsoever, the allowance of credit shall not exceed the price originally paid the United States therefor

plus the depreciated cost of any improvement thereon.

(5) In the case of any vessel tendered in exchange which has been restored to condition by the United States for the purpose of redelivering such vessel to its owner in compliance with the charter of such vessel with the United States or where, for such restoration a cash allowance has been made to the owner, there will be deducted from the amount of the allowance of credit for such vessel determined by the Administration, an amount equal to the cost incurred by the United States for such restoration, including charter hire paid during the period of restoration, or such cash allowance a has been made to the owner, provided that the cost of, or allowance for, re moval of national defense features shall not be deducted from the amount of the allowance of credit.

(h) Loss of vessel tendered in exchange. If, after an offer for an exchange allowance, pursuant to paragraph (f) of this section, has been executed by the buyer, and before title to applicant's vessel has been transferred to the Administration by a bill of sale, such vessel is lost by reason of causes for which the United States is responsible then, in lieu of paying the applicant any amount on account of such loss, the offer shall, for the purposes of this section, be considered as having been accepted and the applicant's vessel as having been acquired by the Administration immediately prior to such loss. In such event the Administration shall apply the amount set forth in such offer (but not more than the amount to which applicant is entitled under any other agreement with the United States covering the vessel) as an additional down-payment on the purchase price of the Administration vessel, and the seller agrees to accept such allowance of credit in full settlement of any and all claims against the United States in connection with the loss of applicant's vessel. Subsequent to the transfer of title of applicant's vessel to the Administration, such vessel shall be deemed to be the property of the United States, and the amount set forth in the offer shall be applied irrespective of subsequent loss of the vessel from whatsoever cause. The United States shall, whether the vessel is lost before or after execution of the bill of sale, be subrogated with respect to all insurance or other claims arising out of such loss.

"Causes for which the United States is responsible," as used in this paragraph, include liability under contractual obligations of the United States, such as those arising under a charter or policy of insurance, and liability arising from collision or other torts.

$299.25 Sales of war-built vessels to persons not citizens of the United States.

(a) Application. Any person not a citizen of the United States as defined in § 299.1 (h) may apply to the Administration to purchase, at not less than the statutory sales price, a warbuilt vessel other than a P-2 type or other passenger type and other than a Liberty type collier or Liberty type tanker. The application to receive consideration must be substantially in the form prescribed by the Administration in § 299.125. Three executed copies and fifteen conformed copies of the application must be filed with the Secretary, Maritime Administration, Washington, D.C., 20235. Each application should contain sufficient information to enable the Administration to make all necessary determinations including determinations that the applicant has the financial resources, ability and experience necessary to enable him to fulfill all obligations with respect to payment for the vessel on such terms and conditions as the Administration shall approve. Items or parts of items in the application which are inapplicable may be omitted. If any information called for by an applicable item is not furnished, an explanation of the omission shall be given. Detailed descriptions of exhibits need not be given. The applicant may furnish such relevant information as it may desire, in addition to that specified in the form.

(b) Amendment of application. Such application may be amended at any time before the Administration has acted upon it. Three executed copies and fifteen conformed copies of the amendment must be filed with the Secretary, Maritime Administration, Washington, D.C., 20235. Amendments involving substitution of a different vessel for the vessel applied for, unless promptly made at the written request of the Administration, shall be effective as of the filing date of the amendment. All other timely amendments (including amendments involving substitutions for the vessel applied for when made at the written request of the Administration shall be effec

tive as of the filing date of the original application. Any information called for by the Administration from time to time shall be furnished as an amendment or amendments to the application. The applicant shall file from time to time as amendments any information necessary to keep current and correct, while the application is pending, the information contained therein or furnished in connection therewith.

(c) Approval or disapproval by the Administration. (1) The Administration may approve the application if it determines:

(1) That the applicant has the financial resources, ability, and experience necessary to enable him to fulfill all obligations with respect to payment for the vessel on such terms and conditions as the Administration shall approve, and that sale of the vessel to him would not be inconsistent with any policy of the United States in permitting foreign sales under section 9 or section 37 of the Shipping Act, 1916, as amended, and

(ii) After consultation with the Secretary of the Navy, that such vessel is not necessary to the defense of the United States, and

(iii) That such vessel is not necessary to the promotion and maintenance of an American merchant marine described in section 2 of the act, and

(iv) That for a reasonable period of time, which in the case of tankers and, except as provided below, "C" type vessels shall not end before ninety days after publication of the applicable prewar domestic cost in the FEDERAL REGISTER, such vessel has been available for sale at the statutory sales price to citizens of the United States, or for charter to citizens of the United States, and that no responsible offer has been made by a citizen of the United States to purchase or charter such vessel.

(v) That such vessel is available for sale to the applicant.

(2) If the application is disapproved by the Administration, the Secretary will promptly advise the applicant.

(d) Contract of sale. If the application is approved by the Administration, the Secretary will furnish the applicant five counterparts of a contract of sale in the form prescribed by the Administration, which shall be executed by the applicant and redelivered to the Secretary within fifteen (15) days of the date of its receipt by the applicant, accompanied by the applicant's check payable in

United States dollars to the order of the United States of America in the amount specified in the contract as the initial payment required to be made upon the execution of the contract of sale, which will be not less than ten per cent of the purchase price and shall be retained as liquidated damages in the event the buyer defaults in his obligations to purchase the vessel under the terms of the contract. The applicant's check shall be certified by a bank or trust company authorized to do business under the laws of the United States, or any state, territory or possession thereof. After the contract of sale has been executed on behalf of the Administration, one of the counterparts will be sent to the applicant. Upon delivery of the vessel to the buyer, the buyer shall pay by certified check as described above a sum equal to the excess of the required down payment over the initial payment referred to above and the buyer shall also give to the Administration, if mortgage aid has been granted, negotiable promissory notes and a mortgage on the vessel equal to the excess of the purchase price over the total down payment. The contract of sale shall require that the balance of the down payment and the amount to be evidenced by the notes and secured by the mortgage and all amounts of insurance required by the mortgage shall be expressed in and payable in United States dollars at the Administration's office in Washington, D. C. The contract of sale shall otherwise be modified by the General Counsel as may be appropriate fully to protect the interest of the Administration with respect to sales to noncitizens.

(e) Other conditions. Notwithstanding any other provision of law, no warbuilt vessel will be sold to any person not a citizen of the United States, except in accordance with this section, or upon terms or conditions more favorable than those at which such war-built vessel is offered to a citizen of the United States, but where the vessel so sold is being transferred to foreign register and flag, the mortgage securing the unpaid balance of the purchase price and interest thereon shall contain provisions according to such mortgage the priorities over other liens and encumbrances accorded such mortgages on merchant vessels under the laws of such registry and flag.

(f) Transfer to foreign flag. If the vessel sold to a person not a citizen of

the United States is to be transferred to foreign register and flag, approval by the Administration of the application for purchase will also constitute approval, under section 9 or section 37 of the Shipping Act, 1916, as amended, to transfer such vessel when purchased, to foreign ownership, registry and flag.

§ 299.26 Spare parts and vessel equipment, stores, fresh water, and fuel. The Administration will provide and equip all vessels sold under the act both to citizens and non-citizens, unless otherwise agreed, in accordance with the following:

(a) Machinery spare parts—(1) Ezcept for vessels sold "as is". Except for vessels sold "as is", the American Bureau of Shipping requirements, outstanding as of the date of the contract of sale, for on board machinery spare parts as contained in their publication, “Rules for Building and Classing Steel Vessels", will be met by the Administration.

The cost with respect to supplying deficiencies or repairing or renewing damaged parts already on board, shall be borne,

(i) On sales to citizens of the United States, in full by the Administration.

(ii) On sales to non-citizens, 50 percent by the Administration and 50 percent by the purchaser.

(2) Vessels sold "as is". For vessels sold "as is", the Administration will not comply with the American Bureau of Shipping requirements for machinery spare parts to the extent of insuring that the parts are actually aboard the vessels, but will, as to all such requirements outstanding as of the date of the contract of sale, grant an allowance based upon the estimated cost of supplying deficiencies or repairing or renewing damaged parts already on board, within the limits of section 3 (d) of the Merchant Ship Sales Act of 1946,

(1) On sales to citizens of the United States, equal to such estimated cost.

(ii) On sales to non-citizens, equal to 50 percent of such estimated cost.

(3) Spare parts list. Paragraph (e) of this section contains a listing of the American Bureau of Shipping required spare parts for steam reciprocating engines, steam turbines, internal combustion engines, boilers, machinery for refrigerated vessels, and for electrically driven vessels.

(b) Allowance list items, consumable stores, fresh water, and fuel-(1) Con

struction of "unbroached". For the purpose of this section, the following provisions shall apply in respect to the term "unbroached":

(i) Unbroached consumable stores except subsistence stores. In general, any item of consumable stores, which at the time of inventory may be given a condition valuation of 100 percent by the Administration's standards, i. e., that the item has not been used and has not lost any of its original value through age, rust, decay, or improper stowage, shall be considered unbroached. With respect to the contents of opened packages and containers, items normally supplied to vessels in bulk shall be considered first on the basis of condition and if meeting the above qualifications, the quantities as found shall be considered as unbroached. With respect to items normally packaged in small quantities of nominal value they shall be considered as broached where the containers have been opened and contents partially consumed. (ii) Unbroached subsistence stores. All subsistence stores which are in 100 percent condition by the Administration's standards, as set forth in subdivision (i) of this subparagraph, shall be considered unbroached, regardless of whether stored in original packages or containers or whether part of the original amounts have been consumed.

(2) Vessels in operation. As to vessels in operation, the Administration assumes no obligation on sales to either citizens or non-citizens for delivery of vessels to purchasers fully equipped with items of an allowance list nature, expendables, or consumable stores (Spare machinery parts will be furnished as prescribed in paragraph (a) of this section). In this respect the vessels will be sold "as is", with the Administration neither adding or removing any such items, except as provided in paragraph (c) of this section. However, purchasers will be required to pay to the Administration an amount reflecting the full value, as indicated by the prevailing rate at the port where delivery is being made, for all unbroached consumable stores, fresh water, and fuel.

(3) Vessels from the reserve fleet or inactive status. As to vessels sold out of the reserve fleet or from inactive status, the Administration, when such vessels have been stripped of expendable equipment, will undertake to re-equip the vessels at its expense in accordance with the appropriate minimum standard allow

ance lists attached entitled "Standard Allowance List for Reoutfitting EC2, ZET1, VC2, C1, C2, C3, C4, R2, T2 and T3 Class Vessels sold under the Merchant Ship Sales Act of 1946" (paragraph (f) of this section) and "Standard Allowance List for Reoutfitting N3 and T1 Class Vessels sold under the Merchant Ship Sales Act of 1946" (paragraph (g) of this section). These allowance lists provide, in general, those minimum items of equipment and material necessary for the berthing of officers and crew, for the operation of pantries and galleys, and for instruments necessary for the safe navigation of the vessel. The Administration will not assume any obligations over and beyond those set forth in this paragraph on inoperative vessels. Purchasers will be required to pay to the Administration an amount reflecting the full value, as indicated by the prevailing rate at the port where delivery is being made, for all unbroached consumable stores, fresh water, and fuel.

(c) Removal of excesses. Items in the category of propellers, tailshafts, sections of line shafting, pinions and reduction gears for main propulsion units, bearings where found in quantity (except roller and ball types), rotors and rotating elements for turbines, and complete spare machinery components where in excess of American Bureau of Shipping requirements, will be removed. As to other items, where vessels are found to be stocked in excess of American Bureau of Shipping requirements or in excess of the standard allowance lists attached, such excesses will not be removed except where it is found that specific items or parts are of high intrinsic value or are in very short supply, thereby justifying the Administration's incurring expenditures for their removal and storage.

(d) Procedure—(1) Deficiencies in machinery spare parts. Within five days after a purchaser signs a contract of sale or an addendum to an existing contract of sale, involving the purchase of a vessel, or (if the vessel is at sea on the date of such signing or makes a voyage other than under bareboat charter to the purchaser after such signing) within five days after the return of the vessel to the United States port of final discharge, whichever is the later, the purchaser of such vessel shall furnish to the Local Head, Inventory Section, Office of Property and Supply, at the port nearest that of the vessel, a list of deficiencies

in machinery spare parts within the limlus of paragraph (a) of this section. The Local Head, Inventory Section, shall verify whether or not such parts are on board. He shall promptly notify the purchaser in writing of the disapproval of such list or any portion thereof. Upon approval of such list or any portion thereof, he shall

(i) Except for a vessel sold "as is," forward such approved list to the nearest District Purchasing Officer, Office of Property and Supply, who shall obtain and deliver to such vessel such required spare parts.

(ii) For a vessel sold "as is," proceed as set forth in subparagraph (3) of this paragraph.

(2) Parts in need of repair. Within five days after a purchaser signs a contract of sale or an addendum to an existing contract of sale, involving the purchase of a vessel, or (if the vessel is at sea on the date of such signing or makes a voyage other than under bareboat charter to the purchaser after such signing) within five days after the return of the vessel to the United States port of final discharge, whichever is later, the purchaser of such vessel shall furnish to the Local Manager, Maintenance and Repair Division, at the port nearest that of the vessel, a list of damaged machinery spare parts, within the limits of paragraph (a) of this section. Such Local Manager shall verify whether or not such parts are damaged as alleged. He shall promptly notify the purchaser in writing of the disapproval of such list or any portion thereof. Upon approval of such list or any portion thereof, he shall

(1) Except for a vessel sold "as is," arrange, consistent with existing Maintenance and Repair Division requirements and instructions, for the effecting of the necessary repairs. If the expenditures for such repairs will exceed the cost of replacing any of the damaged parts, such Local Manager shall furnish to the nearest District Purchasing Officer, Office of Property and Supply, a list of such damaged parts to be replaced as deficiencies in the manner prescribed in subparagraph (1) (i) of this paragraph.

(ii) For a vessel sold "as is", proceed as set forth in subparagraph (3) of this paragraph.

(3) Allowance for deficiencies in and repairs of machinery spare parts for vessels sold "as is". In the case of a vessel sold "as is", upon approval of the pur

chaser's list of deficiencies in machinery spare parts, or any portion thereof, pursuant to subparagraph (1) of this paragraph, the Local Head, Inventory Section, Office of Property and Supply, shall furnish to the Local Manager, Maintenance and Repair Division, an estimate of the cost of supplying such approved deficiencies. Such Local Manager, upon approval of the purchaser's list of damaged machinery spare parts, or any portion thereof, pursuant to subparagraph (2) of this paragraph, shall furnish to the Chief, Office of Ship Construction and Repair, an estimate of the cost of repairing such damaged parts, and the estimate of the cost of supply deficiencies. The Chief, Office of Ship Construction and Repair, shall furnish such estimates to the Chief, Office of Property and Supply so that allowances in accordance with paragraph (a) (2) of this section may be determined.

(4) Allowance list items, consumables, and expendables—(i) Operating vessels. When an operating vessel is sold, the Local Head, Inventory Section, Office of Property and Supply, at the port nearest to that of the vessel, shall make a full inventory consistent with the provisions of paragraph (b) (2) of this section, and shall prepare an estimate of the value, at rates prevailing at such vessel's port of delivery, for all the unbroached consumable stores, fresh water, and fuel aboard the vessel, which estimate shall be furnished by the Chief, Inventory Section, Office of Property and Supply to the Chief, Ship Sales Branch, who shall be responsible for carrying out the provisions of paragraph (b) (2) of this section.

(ii) Vessels from the reserve fleet or inactive status. When a vessel is sold out of the reserve fleet or inactive status, the Local Head, Inventory Section, Office of Property and Supply, Maritime Administration, at the port nearest to that of the vessel, shall make a full inventory consistent with the provisions of paragraph (b) (3) of this section and shall check and compare such inventory against the allowance lists attached. He shall furnish the nearest District Purchasing Officer the resulting list of deficiencies. Such Purchasing Officer shall obtain and deliver to such vessel such allowance list items.

The Local Head, Inventory Section, shall prepare an estimate of the value, at rates prevailing at such vessel's port of delivery, of all the unbroached con