U.S. CITIZENSHIP REQUIREMENTS
FOR THE
COASTWISE TRADE
Captain Patrick J. McGuire
Office of Maritime & International Law
U.S. Coast Guard
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
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
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
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.
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
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
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.
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
Regulatory Framework
• 46 C.F.R. § 67.43
 a properly completed original Application for
Initial Issue, Exchange, or Replacement of
Certificate of Documentation; or Redocumentation (form CG-1258)
establishes a rebuttable presumption that the
applicant is a U.S. citizen.
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)
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)
Questions?
Point of Contact
National Vessel Documentation Center
Doug Cameron
(304) 271-2506