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equity subject to obligations in favor of non-citizens, non- citizen voting power, or non-citizen control exceeds the percentage of the non-citizen interest that is permitted. FOREIGN FINANCING 101: IT?S NOT ROCKET SCIENCEAlthough the requirements to qualify for the leasing company exception might at Þ rst appear to be complex and to offer only a narrow opportunity, they are not in fact dif- Þ cult to meet when a proposed transaction complies with the spirit of what was intended to be achieved. The author has been involved in several transactions in which the leas- ing company exception has in fact made Þ nancing available from foreign sources for the construction of vessels in U.S. shipyards that have been placed under demise charters with U.S. citizen operators for operation in the coastwise trade. One interesting development has been that some Þ nancial institutions that would in fact qualify as coastwise citizen owners have nonetheless opted to structure a vessel lease Þ nancing under the leasing company exception. They have done this either to preserve the option of later transferring their ownership interest to a non-citizen Þ nancial insti- tution, or to avoid complications if they themselves later become the target of an acquisition by another Þ nancial institution that is not a coastwise citizen. Finally, note that a single transaction can take advantage of all of these approachesÑmortgagee ß exibility, the leas- ing company exception, and credit support through a time charterÑto obtain Þ nancing from foreign sources for the construction in U.S. shipyards, and the operation by U.S. citizens, of Jones Act vessels serving the coastwise trade of the United States. FINANCECOLUMNMr. Kearns has represented owners, operators, Þ nancial institutions (as both lessors and lenders), and end users for more than 30 years in the purchase, construction and Þ nancing of vessels engaged in both the foreign and coastwise trades of the United States, including compliance with the requirements of the Jones Act for the ownership, chartering and transfer of vessels. This work has included purchase and sale transactions, construction contracts, loan agreements, preferred ship mortgages, bareboat charters, time charters, contracts of affreightment and a myriad of vessel operating agreements. His Bar and Court Admissions include Missouri, New York, the District of Columbia and he is Patent Attorney registered to practice before the U.S. Patent and Trademark OfÞ ce.December 2013MN Dec2013 Layout 18-31.indd 20MN Dec2013 Layout 18-31.indd 2011/26/2013 12:06:20 PM11/26/2013 12:06:20 PM

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