MARAD Cuts Its Title XI Application Fee by 80% in a First Overhaul Since 1978

The US Maritime Administration has cut the application fee for its federal vessel and shipyard financing programme by 80 percent to $1,000, as part of a wider overhaul of the Title XI rules that had remained substantially unchanged since 1978.

The interim final rule took effect on 28 August and removes 14 of the existing regulation's 34 sections. Alongside the reduction in the application fee from $5,000, the agency has replaced the previous investigation fee with a non-refundable commitment fee payable before financing documents are executed. That fee will be the lower of 0.25 percent of the debt approved for a government guarantee or $250,000, minus the professional services fees that applicants are required to pay during due diligence.

The rules governing foreign-sourced equipment and services have also changed. Applications can now be processed and approved while waiver requests for foreign components are still under consideration. If a waiver is approved, the relevant costs can be included in the eligible project cost; if it is rejected, they are excluded. Waivers remain unavailable for major foreign components forming part of a vessel's hull or superstructure, which keeps the central domestic content requirement intact while removing the sequencing problem that previously held an application behind a waiver decision.

The revised rules remove obsolete submission requirements and introduce expedited processing for priority projects. Priority goes to qualifying vessels that address shortfalls in US sealift capacity or capability, followed by Vessels of National Interest. The overhaul follows a federal maritime action plan released in February that called for Title XI administration to be streamlined and for the application process to be made less costly and burdensome. Comments on the interim rule are open until 27 October.

Title XI provides government-backed financing for eligible US-flag vessel construction, reconstruction, repair and reconditioning at American shipyards, as well as for qualifying investment in privately owned yards. The programme can finance up to 87.5 percent of eligible costs for most vessel and shipyard modernisation projects, with repayment terms of up to 25 years or the useful life of the asset, whichever is shorter. Since 1993 it has issued 114 loan commitments worth more than $7.9bn for domestic vessel construction and shipyard modernisation.

Set against the cost of a single newbuilding, a $4,000 reduction in an application fee is immaterial. What is not immaterial is the removal of 14 sections of a regulation written before the current generation of applicants existed, and the introduction of a queue that puts sealift capability at the front of it.