United States: U.S. Maritime Administration Proposes Policy Change to Title XI Loan Guarantees



On February 24, 2014, the U.S. Maritime Administration ("MARAD") published a notice in the Federal Register proposing to add new environmental policy considerations to its determination of "economic soundness" for applicants for Title XI loan guarantees. 79 Fed. Reg. 10075 (February 24, 2014). In addition to the six mandatory factors for determining "economic soundness", e.g., the market potential for employment of the vessel over the life of the guarantee, MARAD proposes to add as a contributing factor for Federal decisions to award Title XI loan guarantees "whether approval will help a vessel meet or exceed environmental standards." A copy of the notice is available at: www.gpo.gov/fdsys/pkg/FR-2014-02-24/pdf/2014-03729.pdf.

The notice is open for a 30-day comment period. Comments must be received on or before March 26, 2014. Comments should be filed at: www.regulations.gov, Docket No. MARAD-2014-0011.


Key Points in the Notice

As MARAD states in the notice, the primary purpose of Title XI is to promote the growth and modernization of the U.S. Merchant Marine and U.S. shipyards. MARAD also confirms that, under 36 U.S.C. § 53702(a), the agency has discretion whether to award a Title XI loan guarantee.

The Notice reiterates that the main tenet for awarding a Title XI loan guarantee is the determination whether the project is "economically sound." Under the law, there are six mandatory factors for making this determination. These include: the need in the particular segment of the maritime industry for new or additional capacity; the market potential for employment of the vessel over the life of the guarantee; projected revenues and expenses associated with employment of the vessel; any charter or contract of affreightment; and "other relevant criteria."

MARAD now proposes, as a matter of policy, to include in its consideration of "other relevant criteria" various environmental initiatives that are likely to increase efficiency and lead to future cost savings. Some of these initiatives may include alternative fuel system designs, fuel cells, hybrid propulsion systems, air emissions reduction technologies, ballast water treatment technologies, or other environmentally-friendly designs.

As justification for this proposed policy change, MARAD references an increased demand for such designs, fuels and new technologies, and the requirements to meet new air emission and other discharge standards. MARAD acknowledges, however, that these benefits cannot be quantified in a traditional manner, i.e., through recoupment in freight rates or passenger fees, but may be able to be quantified by economists and environmental experts in qualitative terms.

Analysis of the Notice

It is understandable that MARAD wants to encourage vessels constructed or converted using Title XI loan guarantees to be more environmentally-friendly, and the demand for LNG-fueled vessels is certainly increasing and may be important to the future of the maritime industry. Why this is being done as a component of "economic soundness" is less evident. To the extent that use of environmentally-friendly technologies improves efficiency, that analysis should already be included in the analysis of their effect on reduction in operating costs. Further, the analysis of the use of such technologies must include the impact of incorporation of these technologies on the capital cost of the vessels and the related shore-side infrastructure, which, could, in fact, more than offset any improvement in operating costs.

Therefore, it seems that trying to shoehorn analysis of the effect of certain environmental issues and related social and public benefits into "economic soundness" is questionable. If MARAD wants to provide a basis to consider environmental factors in its evaluation of Title XI applications, it should incorporate a new priority factor that would allow the agency to do so. Attempting to do so moreover as a policy rather than a regulatory change is problematic. A regulatory proposal would allow for a full vetting of the scope of environmental considerations MARAD should include in its evaluation of Title XI applications as well as the criteria that the agency will use to evaluate those considerations.

The other conundrum is how applicants are going to quantify the economic benefits and costs of incorporating certain environmental factors or technologies, such as converting a vessel to LNG, when, as MARAD admits, these benefits (and costs), including social and public impacts, cannot be captured in increased freight or passenger rates. This would almost certainly require adding another economist or expert to the already burdensome process of requiring independent outside financial reviews for each Title XI application.

For FY2014, MARAD has received an appropriation of $38.5M for the Title XI loan guarantee program. These funds can be used for the subsidy cost of a Title XI application, resulting in a multiplier effect of approximately 10:1. The agency now has an opportunity to maximize the use of these appropriated funds by streamlining the application process and reducing the burden on applicants by eliminating unnecessary duplicative reviews.


Shipowners and shipyards should analyze the proposed policy change closely and determine whether it is beneficial to their long-term plans. While adding environmental considerations may have a positive policy benefit, it remains to be seen how it will affect the Title XI loan guarantee process, which is already very lengthy and costly for applicants. Will these new factors become a priority in the application process? If that is the desired outcome, MARAD should undertake a full rulemaking process. Further, if MARAD really wants to help the U.S. maritime industry, it should streamline the application process and reduce the time and costs of evaluating applications, not add to them.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Joan M. Bondareff
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.