(a) Number of agreements. The Secretary may enter into up to ten TSP Operating Agreements for vessels that were either selected in accordance with § 294.15 or which, on the effective date of a TSP Operating Agreement, were operating under an MSP Operating Agreement in accordance with 46 U.S.C. chapter 531 and 46 CFR part 296, for fiscal year 2022 and any prior fiscal year.

(b) Term of agreements. All TSP Operating Agreements will be effective for one fiscal year and subject to the availability of appropriations, may be renewed for each subsequent fiscal year through the end of fiscal year 2035.

(c) Replacement vessels. An Agreement Holder may replace a vessel under a TSP Operating Agreement with another vessel that is eligible to be included in the fleet under § 294.9, if the Secretary, in conjunction with SecDef, approves the replacement vessel.

(d) Termination by the Secretary. If an Agreement Holder fails to comply with the terms of a TSP Operating Agreement:

(1) The Secretary will notify the Agreement Holder and provide a reasonable opportunity for the Agreement Holder to comply with the terms and conditions of the TSP Operating Agreement; and

(2) The Secretary will terminate the TSP Operating Agreement if the Agreement Holder fails to achieve such compliance.

(e) Termination by the Secretary for long-term charter. If an Agreement Holder time charters a vessel enrolled in the TSP to the United States Government for a period that together with options, occurs for more than 180 continuous days, then the Secretary will terminate the TSP Operating Agreement.

(f) Early termination by an Agreement Holder. The Agreement Holder must notify the Secretary no later than 60 days before the proposed effective termination date that the Agreement Holder intends to terminate the TSP Operating Agreement. Even after early termination of the Operating Agreement, the Agreement Holder will remain bound by the provisions related to vessel documentation and national security requirements, including any commitments under an Emergency Preparedness Agreement, for the full term of the TSP Operating Agreement.

(g) Nonrenewal for lack of funds. If only partial funding is appropriated by the 60th day of the fiscal year, then the Secretary, in consultation with SecDef, will select the vessels to retain under TSP Operating Agreements, based on the Secretaries' determinations of the most militarily useful and commercially viable vessels. If no funds are appropriated by the 60th day of such fiscal year, and notwithstanding any other provision, then all TSP Operating Agreements will be terminated, and each Agreement Holder will be released from its obligations under the TSP Operating Agreement. Final payments under the terminated TSP Operating Agreements will be made in accordance with § 294.31. To the extent that funds are appropriated in a subsequent fiscal year, former TSP Operating Agreements may be reinstated if mutually acceptable to the Administrator and the Agreement Holder, provided the TSP vessel remains eligible.

(h) Release of vessels from obligations. For Agreement Holders who have been released from their obligations under a TSP Operating Agreement due to lack of funds in any fiscal year by the 60th day of that fiscal year,

(1) The Agreement Holder may transfer and register each vessel covered by a terminated TSP Operating Agreement to a foreign registry that is acceptable to the Secretary and SecDef, notwithstanding 46 U.S.C. chapter 561 and 46 CFR part 221;

(2) If 46 U.S.C. chapter 563 is applicable to a vessel that has been transferred to foreign registry due to the termination of a TSP Operating Agreement, then that vessel remains available to be requisitioned by the Secretary pursuant to 46 U.S.C. chapter 563; and

(3) The provisions of this section do not apply to vessels under TSP Operating Agreements that have been terminated for any other reason.

(i) Transfers of TSP Operating Agreements. An Agreement Holder may transfer a TSP Operating Agreement, including all rights and obligations under the TSP Operating Agreement, to any person that is eligible under § 294.11 to enter into a TSP Operating Agreement, if the Secretary and SecDef jointly determine that the transfer is in the best interests of the United States. A transaction is not considered a transfer of a TSP Operating Agreement if the same legal entity with the same vessels remains the Agreement Holder under the TSP Operating Agreement.

(a) TSP Operating Agreement. Each TSP Operating Agreement will require that, during the period a fleet vessel is operating under that TSP Operating Agreement, the fleet vessel must:

(1) Be documented as a vessel of the United States under 46 U.S.C. chapter 121;

(2) Operate exclusively in:

(i) Foreign commerce;

(ii) Mixed foreign commerce and domestic trade permitted under a registry endorsement issued under 46 U.S.C. 12111,and.S.C. 55101(b);

(iii) Foreign-to-foreign commerce; or

(iv) Under charter to the United States, except as provided in 46 U.S.C. 53404(b); and

(3) Not otherwise operate in the coastwise trade of the United States;

(4) Not receive payments during a period in which the Agreement Holder owns, operates, or charters a vessel engaged in noncontiguous domestic trade, unless the Agreement Holder is a section 50501 citizen, applying the 75 percent ownership requirements of 46 U.S.C. 50501; and

(5) Enroll, for vessels 15 years or older, in their classification society's CAP and maintain a CAP rating of 2 or better.

(b) Operating agreement as an obligation of the United States government. The amounts payable to an Agreement Holder under a TSP Operating Agreement constitute a contractual obligation of the United States Government to the extent of actual appropriations.

(c) Operating under a Continuing Resolution. In the event funds are available under a Continuing Resolution (CR), the terms and conditions of the TSP Operating Agreements will be in force provided sufficient funds are available to fully meet obligations under TSP Operating Agreements, and only for the period stipulated in the applicable CR. If funds are not appropriated under a CR at sufficient levels for any portion of a fiscal year, the Secretary will select the vessels to retain within the funding level of the previous fiscal year, in consultation with the SecDef, based on the Secretaries' determination of the most militarily useful and commercially viable vessels. For any Agreement Holder with a TSP Operating Agreement that does not receive funds, the terms and conditions of any applicable TSP Operating Agreement may be voided, and the Agreement Holder may request termination of the TSP Operating Agreement.

(d) National security. Each TSP Operating Agreement will require the Agreement Holder to enter into a Voluntary Tanker Agreement (VTA), as approved by the Secretary and the SecDef, or other agreement approved by the Secretaries.

(e) United States Merchant Marine Academy cadet training. The Agreement Holder must agree:

(1) To carry on the fleet vessel two United States Merchant Marine Academy cadets, if available, on each voyage; and

(2) To implement prior to accepting an Operating Agreement appropriate policies, programs, and criteria necessary to comply with all MARAD cadet safety guidelines that address sexual harassment, sexual assault, and other inappropriate conduct.

(3) Upon a finding of non-compliance, the Administrator may require the Agreement Holder to take corrective actions or find such failure to constitute a violation of the TSP Operating Agreement.

A participant agrees to the installation onboard its Fleet Vessel of militarily useful features for national defense purposes as approved by U.S. Coast Guard and the vessel's classification society.

The Agreement Holder must submit the following reports to MARAD, including management footnotes where necessary to make a fair financial presentation:

(a) Vessel operating cost information. Not later than 120 days after the close of the Agreement Holder's semiannual accounting period, a Form MA-172 on a semiannual basis, in accordance with 46 CFR 232.6; and

(b) Financial statement. Not later than 120 days after the close of the Agreement Holder's annual accounting period, an audited financial statement in accordance with 46 CFR 232.6 and the most recent vessel operating cost data submitted as part of its Emergency Preparedness Agreement, or if not current year data, a Schedule 310 of the MA-172.