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MARITIME INDUSTRIES

Q: What are the citizenship requirements for companies operating in the coastwise trade?
A: In addition to the documentation citizen requirements discussed in the Fisheries section, a "coastwise citizen" must also satisfy the following according to the Jones Act:
  • Both 75% of the voting power and 75% of the economic interest must be held by U.S. citizens;
  • The interest must be held for the ultimate benefit of a U.S. citizen if it's to be counted toward the 75% requirement; and
  • The test is generally applied separately to each class of stock. These regulations do not apply to an association or a joint venture, as the Coast Guard’s regulations do not require them to be coastwise citizens, only documentation citizens.
Q: How far does the coastwise trade extend?
A: It extends to the outer continental shelf and includes the transportation of materials or personnel from the U.S. mainland to offshore oil and gas facilities on the outer continental shelf.

Q: Does the Jones Act apply to towing vessels?
A: No, it only applies to a vessel that carries merchandise.

Q: What are the permissible roles for noncitizens in the coastwise trade?
A: Noncitizens and any who do not qualify as coastwise citizens may participate in the direction of a coastwise citizen's business and the operations of a coastwise-operated vessel on a minority basis and make loans to the company.

Q: How does coastwise citizenship apply to subsidiaries?
A: Each upstream entity in the chain of ownership must be a coastwise citizen to count toward the ultimate downstream entity that seeks to document a vessel with a coastwise endorsement. Each entity must satisfy the 75% requirement.

Q: What about publicly-traded companies? How do they determine whether 75% of their stockholders are coastwise citizens?
A: The Maritime Administration allows these companies to use the "fair inference" rule, but the Coast Guard has not adopted this rule for establishing citizenship.

Q: Are there any exceptions to the normal citizenship requirements to document a vessel for the coastwise trade?
A: Yes, there are three:
  1. companies that carry their own proprietary cargo and meet certain tests;
  2. oil spill response vessels – only 50% ownership by documentation citizens required;
  3. lease finance companies.
Q: What are the tests for the companies that carry their own proprietary cargo?
A: To qualify a corporation must certify that:
  1. It is incorporated under the laws of the U.S. or any American state, territory, district or possession;
  2. A majority of its officers and directors are U.S. citizens;
  3. No less than 90% of its employees are U.S. residents;
  4. It's engaged primarily in a manufacturing or mineral industry in the U.S.;
  5. The aggregate book value of its vessels does not exceed 10% of the aggregate book value of all the corporation's assets; and
  6. No less than 75% of the raw materials used or sold by the corporation are purchased or produced in the U.S.
Q: What are the requirements for vessels owned by leasing or finance companies?
A: An entity may document a vessel operated in the coastwise trade if:
  1. That entity, its parent or a subsidiary of its parent is primarily engaged in leasing or financing; and
  2. The vessel is bareboat chartered to a coastwise-eligible citizen for a period of at least three years.
Q: Once a vessel is documented under the U.S. flag, does it become subject to other restrictions?
A: Yes, depending on the ability of its owner to transfer the vessel or interest in the vessel to a noncitizen. A person may not sell, lease, charter, deliver or in any manner transfer a vessel to a noncitizen without the approval of the Secretary of Transportation. The Secretary's permission is also required to place a documented vessel under the authority of a foreign country.

Q: What other regulations might affect potential foreign investors in the maritime industry?
A: Regulations on cruise vessels, passenger vessels and dredge and salvage operations.

Q: Are there any direct federal restrictions in foreign investment in domestic shipyards or ship repair facilities?
A: Not at this time, but the Maritime Administration prohibits the transfer of any interest in a shipyard to a noncitizen without its prior approval which is usually only necessary in times of war or a declared national emergency. Foreign investors should also look closely at CFIUS and FINSA restrictions concerning potential national security issues.