B-124318, JULY 29, 1955, 35 COMP. GEN. 55

B-124318, JULY 29, 1955, 35 COMP. GEN. 55

VESSELS - SALES - TRADE-IN ALLOWANCES - OWNERSHIP REQUIREMENTS IN A CASE OF COMMON OWNERSHIP, A CORPORATION MAY TRADE IN OBSOLETE VESSELS OWNED BY AN AFFILIATE CORPORATION IN EXCHANGE FOR THE ALLOWANCE OF CREDIT AGAINST THE PURCHASE PRICE OF NEW VESSELS AUTHORIZED BY SECTION 510 OF THE MERCHANT MARINE ACT, 1936, PROVIDED EACH OF THE AFFILIATES MEETS THE CITIZENSHIP REQUIREMENTS FOR THE THREE-YEAR PERIOD IMMEDIATELY PRIOR TO THE DATE OF ACQUISITION OF THE OBSOLETE VESSELS AND THERE ARE NO INTER- AFFILIATE TRANSACTIONS WHICH WOULD INCREASE SUCH ALLOWANCE.

TO THE ADMINISTRATOR, MARITIME ADMINISTRATION, JULY 29, 1955:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 14, 1955, RELATIVE TO THE APPLICATION BY PAN-ATLANTIC STEAMSHIP CORPORATION TO TRADE IN SEVEN CARGO VESSELS IN EXCHANGE FOR AN ALLOWANCE OF CREDIT AGAINST THE PURCHASE PRICE OF SEVEN NEW VESSELS OF THE SO-CALLED "ROLL-ON, ROLL OFF" TYPE, PURSUANT TO THE PROVISIONS OF SECTION 510 OF THE MERCHANT MARINE ACT, 1936, 46 U.S.C. 1160.

OF THE SEVEN "OBSOLETE" CARGO VESSELS TO BE TRADED IN, YOU ADVISE THAT ONLY ONE IS OWNED BY THE APPLICANT AND THE OTHER SIX ARE OWNED BY ITS AFFILIATE, WATERMAN STEAMSHIP CORPORATION. ALSO, YOU REPORT THAT THE CORPORATE RELATIONSHIP OF THE APPLICANT TO THE WATERMAN STEAMSHIP CORPORATION IS THAT THE APPLICANT IS A WHOLLY OWNED SUBSIDIARY OF MCCLEAN SECURITIES CORPORATION WHEREAS WATERMAN IS 99 PERCENT OWNED BY C. LEE COMPANY, INC., A NON-OPERATING COMPANY WHICH IS ALSO A WHOLLY OWNED SUBSIDIARY OF MCCLEAN SECURITIES CORPORATION. IN ADDITION, YOU NOTE THAT THE APPLICANT HAD BEEN A WHOLLY OWNED SUBSIDIARY OF WATERMAN UNTIL THE FORMER WAS PURCHASED BY MCCLEAN.

THE QUESTION PRESENTED IS WHETHER THE TRADE-IN BY PAN-ATLANTIC OF SIX VESSELS OWNED BY ITS AFFILIATE, WATERMAN, WILL SATISFY THE OWNERSHIP REQUIREMENT OF SECTION 510 (A) WHICH PROVIDES, IN PERTINENT PART, AS FOLLOWS:

WHEN USED IN THIS SECTION---

(1) THE TERM "OBSOLETE VESSEL" MEANS A VESSEL OR VESSELS, EACH OF WHICH * * * (C) IS OWNED BY A CITIZEN OR CITIZENS OF THE UNITED STATES AND HAS BEEN OWNED BY SUCH CITIZEN OR CITIZENS FOR AT LEAST THREE YEARS IMMEDIATELY PRIOR TO THE DATE OF ACQUISITION HEREUNDER. ( ITALICS SUPPLIED.)

THE LEGISLATIVE HISTORY OF THE REQUIREMENT OF THREE-YEAR OWNERSHIP BY UNITED STATES CITIZENS INDICATES THAT THE PURPOSE THEREOF WAS TO PROVIDE PROTECTION FROM SPECULATIVE PURCHASES FOR THE SAKE OF "TRADE INS.'

ACCORDINGLY, IF EACH OF THE AFFILIATED COMPANIES MEET THE CITIZENSHIP REQUIREMENTS FOR THE THREE-YEAR PERIOD IMMEDIATELY PRIOR TO THE DATE OF ACQUISITION OF THE OBSOLETE VESSELS, AND PROVIDED THERE ARE NO INTER- AFFILIATE TRANSACTIONS INVOLVING SUCH VESSELS WHICH WILL INCREASE THE TRADE-IN ALLOWANCES AUTHORIZED BY SECTION 510 (D), WE PERCEIVE NO OBJECTION TO CONSIDERING OWNERSHIP BY WATERMAN AS OWNERSHIP BY PAN- ATLANTIC FOR THE PURPOSE OF SATISFYING THE OWNERSHIP REQUIREMENT OF SECTION 510.