Why German K/G Funds Can Now Lease U.S. Flag Assets

For many years U.S. citizen operators in our domestic trades seeking to acquire vessels in lease financing transactions have been limited to leasing companies that met the citizenship requirements of section 2 of the Shipping Act, 1916 (the“1916 Act”). This limitation prevented U.S. domestic operators from accessing many non-citizen banks and financing sources that were actively engaged in vessel leasing elsewhere in the world. Congress acted to remedy this situation in the Coast Guard Authorization Act of 1996 (the “1996 Act”), amending section 12106 of title 46 U.S. Code, by adding a new subsection (e), that permitted foreign ownership of vessels that were demised to U.S. citizen operators for a period of at least three years lease financing transactions. [Clayton Cook, Marine Money, July/August 2004]

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