Coast Guard Issues Policy on Keel Laying Date

Jonathan K. Waldron and Dana S. Merkel

The U.S. Coast Guard has published new guidance setting forth its interpretation of when a vessel’s keel is considered laid and building progression standards to determine what may be accepted in establishing the build date for a vessel. Shipyards and prospective shipowners and operators should be cognizant of this new guidance and its significant implications on the regulatory requirements applicable to a vessel.

New Development

The U.S. Coast Guard has issued a Work Instruction providing guidance on when a vessel’s keel is considered to be laid or the vessel is at a similar stage of construction. This guidance is intended to address law and regulations that refer to when a vessel is “new” or “existing,” “built,” or “constructed.” The Work Instruction, “Determinations for a Vessel’s Keel Laid Date or Similar Stage of Construction,” CVC-WI 015(1), was published on August 27, 2019, and is available here.

Background

U.S. law and regulation often refers to new or existing vessels or when a vessel is built or constructed to determine the applicability of newer construction, safety, and environmental standards. The definitions of these terms invariably discuss the vessels’ keel laid date or similar stage of construction. However, there has historically been scant guidance addressing when a vessel’s keel is considered laid or when a vessel can be considered at a similar stage of construction and how these terms should be applied for different regulatory purposes.

The Coast Guard has identified issues in the past with undefined structural members being placed in a shipyard without vessel construction plans in place or even intent to build a specific vessel to act as a regulatory placeholder. This is particularly a problem in the period before a newer, more stringent standard will come into effect, and shipbuilders or other companies seek to claim a keel laid date before a new standard takes effect by taking some action to start the building of a vessel with no firm planned completion date.

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Note from the Chair

William R. Bennett III

The central theme of Dan Brown’s best-selling book Origin involves answering the long-debated questions on evolution: Where do we come from? Who are we? And, where are we going? When you think about it, those three simple questions, when answered by any individual, group, or organization, will, in all likelihood, include an assessment of their own evolution. Blank Rome Maritime’s evolution, in and of itself, is quite extraordinary.

Where did we come from? On January 1, 2003, the firm Dyer Ellis & Joseph, P.C. joined Blank Rome, bringing with them a group of talented attorneys that focused on maritime regulatory, environmental, and transactional matters, formally launching Blank Rome Maritime. Three years later, on October 1, 2006, the firm Healy & Baillie, LLP joined Blank Rome, bringing with them a group of attorneys who had a broad array of dispute resolution skills focused on international shipping disputes and transactional matters. Then, on August 1, 2013, the firm Bell, Ryniker & Letourneau, P.C. joined Blank Rome, expanding Blank Rome Maritime’s geographic footprint by adding shipping lawyers in Houston, Texas. In the intervening years since 2003, Blank Rome Maritime has added many talented partners and associates, expanding each office and broadening the scope of matters we presently handle today.

Who are we? With nearly 40 shipping lawyers in New York, Washington, D.C., Houston, and Philadelphia, Blank Rome Maritime has the largest and most comprehensive maritime practice in the United States. Our maritime attorneys include former ship’s officers, U.S. Coast Guard and Navy officers, representatives and senior staff from congressional committees, P&I Club claim executives, and high-level officials of government agencies, including the Department of Justice, Maritime Administration, U.S. Securities and Exchange Commission, and the National Oceanic and Atmospheric Administration. We handle a broad array of issues for our clients operating in the maritime and international trade sector, and routinely represent our clients both in court and in arbitration, as well as before numerous governmental regularity bodies. And, Blank Rome Maritime is nationally recognized and ranked in leading surveys and publications, including The Legal 500 United States and Chambers USA (see here and here for our recently announced 2019 rankings), to name a couple.

Where are we going? Blank Rome Maritime will continue to evolve to meet the ongoing needs of our clients, and has a bright future ahead with our younger colleagues collaborating with our seasoned attorneys on enhancing our maritime services and capabilities.

With this overview of Blank Rome Maritime’s evolution, we hope you enjoy our summer edition of Mainbrace and the timely topics discussed, ranging from current congressional updates to discussions on evolving maritime policies, laws, and trends, and we welcome your feedback, as always.

EDITOR, Mainbrace
THOMAS H. BELKNAP, JR.
Partner
212.885.5270
tbelknap@blankrome.com

Vessel Charters and the Stipulated Loss Value Clauses in U.S. Chapter 11 Reorganization

Michael B. Schaedle and Jose F. Bibiloni

In complex long-term charters for vessels or finance leases in respect of vessels under the U.S. Uniform Commercial Code (“UCC”) and its Article 2A (governing commercial matters relating to finance leases) and under other similar law, a charterer’s or lessor’s damages under a charter or lease—both generally upon a payment default or in the event of a casualty—are often liquidated in stipulated loss value (“SLV”) provisions. These provisions ensure that the lessor/charterer gets the benefit of its bargain. It insulates the lessor/charterer, in part, from unusual market downturns impacting vessel value or casualties.

A typical SLV calculation enables the present value recovery of the charterer’s/lessor’s unrecovered investment, residual value in the vessel, and the recapture of tax benefits and certain fees and costs, less a credit for the value of the vessel, if the stipulated loss value is repaid by the charter party/lessee, a net proceeds measure.1 Schedules to identify the stipulated loss are a common feature of such charters and leases.2 Now, any SLV provision under Article 2A of the U.S. U.C.C., for example, must be reasonable as of lease/charter commencement.3 Oftentimes, these kinds of charters and leases are backed by absolute, unconditional guaranties of such loss value from affiliates of the charter parties.4 Continue reading “Vessel Charters and the Stipulated Loss Value Clauses in U.S. Chapter 11 Reorganization”

Keeping up with the Jones Act

Dana S. Merkel

In the last several weeks, the Jones Act has drawn headlines over how it has shaped the U.S. and worldwide shipping industry. After almost 100 years as a part of federal law, there’s much misunderstanding as to what the law actually does.

The Jones Act requires that all merchandise loaded at one U.S. port and unloaded at another U.S. port be transported on vessels that are:

      • built in the United States;
      • documented under the laws of the United States;
      • owned by U.S. citizens; and
      • never sold to a foreign citizen.

The Jones Act only applies to domestic U.S. trade. It has no impact on vessels transporting cargo to or from another country. Similar laws also apply to domestic transportation of passengers, towing, dredging, salvage, and fishing. Continue reading “Keeping up with the Jones Act”

Blank Rome Maritime Highly Ranked in The Legal 500 United States 2019

Blank Rome’s maritime practice and attorneys were highly ranked and recommended in The Legal 500 United States 2019, receiving the following rankings:

Top-Tier Firm

Transport: Shipping – Finance
Transport: Shipping – Litigation
Transport: Shipping – Regulation

Leading Lawyers

Brett M. Esber (Transport: Shipping – Finance)
Jeanne M. Grasso (Transport: Shipping – Regulation)
John D. Kimball (Transport: Shipping – Litigation)
Anthony Salgado (Transport: Shipping – Finance)
Jonathan K. Waldron (Transport: Shipping – Regulation)

Next Generation Lawyers

Jeremy A. Herschaft (Transport: Shipping – Litigation)

Rising Stars

Lauren B. Wilgus (Transport: Shipping – Litigation)

Recommended Lawyers

TRANSPORT: SHIPPING – FINANCE: Brett M. EsberR. Anthony Salgado

TRANSPORT: SHIPPING – LITIGATION: Thomas M. Belknap, Jr.Michael K. BellWilliam R. BennettJeremy A. HerschaftJay T. HuffmanJohn D. KimballKeith B. LetourneauJeffrey S. MollerDouglas J. ShoemakerRichard V. SingletonLauren B. Wilgus

TRANSPORT: SHIPPING – REGULATORY: Kate B. BelmontJeanne M. GrassoGregory F. LinsinMatthew J. ThomasJonathan K. Waldron

Blank Rome also received high rankings and recommendations for our Energy Regulation: Oil and Gas, Government Contracts, Insurance: Advice to Policyholders, and M&A/Corporate and Commercial – M&A: Middle-Market (sub-$500M) practices, as well as for attorneys in those practices.

To view Blank Rome’s full Legal 500 rankings, please click here.

For more information on The Legal 500 United States 2019, please visit legal500.com.

Blank Rome Expands to Chicago with Addition of Four-Partner Group

June 11, 2019 – Blank Rome LLP is pleased to announce that the Firm is expanding its national platform to Chicago, with the addition of a four-partner group. The Firm expects the new office will launch this week, upon the completion of certain regulatory requirements.

The Chicago office will be led by Kenneth J. Ottaviano. Prior to joining Blank Rome, Ken served as a partner in the insolvency and restructuring group at Katten Muchin Rosenman LLP where he recently served on Katten’s Board of Directors. Also joining from Katten in Chicago are Karin H. Berg, William J. Dorsey, and Paige Barr Tinkham. Ken, Karin, and Paige join as partners in the Firm’s Finance, Restructuring, and Bankruptcy group. Will joins as a partner in Blank Rome’s Corporate Litigation group. They will also be members of the Financial Services Industry group, which has welcomed eight attorneys to date in 2019 and has more than 100 attorneys throughout the United States. Collectively, the group’s experience spans the financial services sector with Ken, Karin, and Paige focusing their practices on financing, insolvency, and restructuring transactions, and Will focusing his practice on commercial finance litigation, real estate disputes, and contested merger and acquisition transactions.

“Ken, Karin, Will, and Paige are outstanding people and we are thrilled to have them join us as the founding partners of our new Chicago office,” said Grant S. Palmer, Blank Rome’s Managing Partner and CEO. “They are the epitome of Blank Rome lawyers—premier practitioners in their fields who work collaboratively in teams with a singular focus on clients’ needs. Providing truly exceptional client service is our top priority, and we are committed to expanding our depth, breadth, and capabilities across offices to continue to serve our clients at the highest levels.” Continue reading “Blank Rome Expands to Chicago with Addition of Four-Partner Group”

Congress at Work on Maritime Programs

Joan M. Bondareff and Jonathan K. Waldron

While much attention is being paid to the Mueller report and the internal Democratic fight regarding impeachment procedures for President Donald Trump, the 116th Congress and its respective committees are trying to do their regular work in the meantime—including passing both authorization bills and appropriation bills for fiscal year 2020. Here are some key legislative developments relevant to the marine industry.

Maritime Administration Authorization Bill

On May 15, 2019, the Senate Committee on Commerce, Science, and Transportation reported S. 1439, the “Maritime Administration Authorization and Enhancement Act for Fiscal Year 2020,” sponsored by Senator Roger Wicker (R-MS), Chairman of the Committee. S. 1439 hopes to accomplish a multitude of goals, including a 10-year reauthorization of the Maritime Security Program, a U.S.-flagged fleet of commercial ships deemed critical for defense sealift operations; and codifying President Trump’s “military to mariner” executive order (E.O. 13860), aimed at streamlining the transition of active duty and retired military into civilian maritime jobs. Additionally, the bill includes the Port Operations, Research, and Technology (“PORT”) Act, which authorizes $600 million for the secretary of transportation to make grants for port and intermodal infrastructure projects; the Maritime SAFE Act, aimed at combatting illegal fishing; increased funding—up to $40 million for FY2020—for the Small Shipyard Grant Program; and full funding ($33 million) for the Title XI maritime guaranteed loan program to support the maritime industrial base. The bill requires that all components used in grant-funded projects are American-made and American-bought (a Baldwin amendment). The bill also authorizes a program to support infrastructure development at Department of Defense-designated Strategic Ports, and enacts reforms at the U.S. Merchant Marine Academy regarding sexual harassment and assault prevention. Continue reading “Congress at Work on Maritime Programs”