Subtitle V - Merchant Marine

Part A - General

TITLE 46 - US CODE - CHAPTER 501 - POLICY, STUDIES, AND REPORTS

46 USC 50101 - Objectives and policy

(a) Objectives.— 
It is necessary for the national defense and the development of the domestic and foreign commerce of the United States that the United States have a merchant marine
(1) sufficient to carry the waterborne domestic commerce and a substantial part of the waterborne export and import foreign commerce of the United States and to provide shipping service essential for maintaining the flow of the waterborne domestic and foreign commerce at all times;
(2) capable of serving as a naval and military auxiliary in time of war or national emergency;
(3) owned and operated as vessels of the United States by citizens of the United States;
(4) composed of the best-equipped, safest, and most suitable types of vessels and manned with a trained and efficient citizen personnel; and
(5) supplemented by efficient facilities for building and repairing vessels.
(b) Policy.— 
It is the policy of the United States to encourage and aid the development and maintenance of a merchant marine satisfying the objectives described in subsection (a).

46 USC 50102 - Survey of merchant marine

(a) In General.— 
The Secretary of Transportation shall survey the merchant marine of the United States to determine whether replacements and additions are required to carry out the objectives and policy of section 50101 of this title. The Secretary shall study, perfect, and adopt a long-range program for replacements and additions that will result, as soon as practicable, in
(1) an adequate and well-balanced merchant fleet, including vessels of all types, that will provide shipping service essential for maintaining the flow of foreign commerce by vessels designed to be readily and quickly convertible into transport and supply vessels in a time of national emergency;
(2) ownership and operation of the fleet by citizens of the United States insofar as practicable;
(3) vessels designed to afford the best and most complete protection for passengers and crew against fire and all marine perils; and
(4) an efficient capacity for building and repairing vessels in the United States with an adequate number of skilled personnel to provide an adequate mobilization base.
(b) Cooperation With Secretary of Navy.— 
In carrying out subsection (a)(1), the Secretary of Transportation shall cooperate closely with the Secretary of the Navy as to national defense requirements.

46 USC 50103 - Determinations of essential services

(a) Essential Services, Routes, and Lines.— 

(1) In general.— 
The Secretary of Transportation shall investigate, determine, and keep current records of the ocean services, routes, and lines from ports in the United States, or in the territories and possessions of the United States, to foreign markets, which the Secretary determines to be essential for the promotion, development, expansion, and maintenance of the foreign commerce of the United States. In making such a determination, the Secretary shall consider and give due weight to
(A) the cost of maintaining each line;
(B) the probability that a line cannot be maintained except at a heavy loss disproportionate to the benefit to foreign trade;
(C) the number of voyages and types of vessels that should be employed in a line;
(D) the intangible benefit of maintaining a line to the foreign commerce of the United States, the national defense, and other national requirements; and
(E) any other facts and conditions a prudent business person would consider when dealing with the persons own business.
(2) Saint lawrence seaway.— 
For purposes of paragraph (1), the Secretary shall establish services, routes, and lines that reflect the seasonal closing of the Saint Lawrence Seaway and provide for alternate routing of vessels through a different range of ports during that closing to maintain continuity of service on a year-round basis.
(b) Bulk Cargo Carrying Services.— 
The Secretary shall investigate, determine, and keep current records of the bulk cargo carrying services that should be provided by vessels of the United States (whether or not operating on particular services, routes, or lines) for the promotion, development, expansion, and maintenance of the foreign commerce of the United States and the national defense or other national requirements.
(c) Types of Vessels.— 
The Secretary shall investigate, determine, and keep current records of the type, size, speed, method of propulsion, and other requirements of the vessels, including express-liner or super-liner vessels, that should be employed in
(1) the services, routes, or lines described in subsection (a), and the frequency and regularity of the voyages of the vessels, with a view to furnishing adequate, regular, certain, and permanent service; and
(2) the bulk cargo carrying services described in subsection (b).

46 USC 50104 - Studies of general maritime problems

The Secretary of Transportation shall study all maritime problems arising in carrying out the policy in section 50101 of this title.

46 USC 50105 - Studies and cooperation relating to the construction of vessels

(a) Relative Costs and New Designs.— 
The Secretary of Transportation shall investigate, determine, and keep current records of
(1) the relative cost of construction of comparable vessels in the United States and in foreign countries; and
(2) new designs, new methods of construction, and new types of equipment for vessels.
(b) Rules, Classifications, and Ratings.— 
The Secretary shall examine the rules under which vessels are constructed abroad and in the United States and the methods of classifying and rating the vessels.
(c) Collaboration With Owners and Builders.— 
The Secretary shall collaborate with vessel owners and shipbuilders in developing plans for the economical construction of vessels and their propelling machinery, of most modern economical types, giving thorough consideration to all well-recognized means of propulsion and taking into account the benefits from standardized production where practicable and desirable.
(d) Express-Liner and Super-Liner Vessels.— 
The Secretary shall study and cooperate with vessel owners in devising means by which there may be constructed, by or with the aid of the United States Government, express-liner or super-liner vessels comparable to those of other nations, especially with a view to their use in a national emergency, and the use of transoceanic aircraft service in connection with or in lieu of those vessels.

46 USC 50106 - Studies on the operation of vessels

(a) Relative Costs.— 
The Secretary of Transportation shall investigate, determine, and keep current records of the relative cost of marine insurance, maintenance, repairs, wages and subsistence of officers and crews, and all other items of expense, in the operation of comparable vessels under the laws and regulations of the United States and those of the foreign countries whose vessels are substantial competitors of American vessels.
(b) Shipyards.— 
The Secretary shall investigate, determine, and keep current records of the number, location, and efficiency of shipyards in the United States.
(c) Navigation Laws.— 
The Secretary shall examine the navigation laws and regulations of the United States and make such recommendations to Congress as the Secretary considers proper for the amendment, improvement, and revision of those laws and for the development of the merchant marine of the United States.

46 USC 50107 - Studies on marine insurance

The Secretary of Transportation shall
(1) examine into the subject of marine insurance, the number of companies in the United States, domestic and foreign, engaging in marine insurance, the extent of the insurance on hulls and cargoes placed or written in the United States, and the extent of reinsurance of American maritime risks in foreign companies; and
(2) ascertain what steps may be necessary to develop an ample marine insurance system as an aid in the development of the merchant marine of the United States.

46 USC 50108 - Studies on cargo carriage and cargo containers

(a) Studies.— 
The Secretary of Transportation shall study
(1) the methods of encouraging the development and implementation of new concepts for the carriage of cargo in the domestic and foreign commerce of the United States; and
(2) the economic and technological aspects of the use of cargo containers as a method of carrying out the policy in section 50101 of this title.
(b) Restriction.— 
In carrying out subsection (a) and the policy in section 50101 of this title, the United States Government may not give preference as between carriers based on the length, height, or width of cargo containers or the length, height, or width of cargo container cells. This restriction applies to all existing container vessels and any container vessel to be constructed or rebuilt.

46 USC 50109 - Miscellaneous studies

(a) Foreign Subsidies.— 
The Secretary of Transportation shall investigate, determine, and keep current records of the extent and character of the governmental aid and subsidies granted by foreign governments to their merchant marine.
(b) Laws Applicable to Aircraft.— 
The Secretary shall investigate, determine, and keep current records of the provisions of law relating to shipping that should be made applicable to aircraft engaged in foreign commerce to further the policy in section 50101 of this title, and any appropriate legislation in this regard.
(c) Aid for Cotton, Coal, Lumber, and Cement.— 
The Secretary shall investigate, determine, and keep current records of the advisability of enactment of suitable legislation authorizing the Secretary, in an economic or commercial emergency, to aid farmers and producers of cotton, coal, lumber, and cement in any section of the United States in the transportation and landing of their products in any foreign port, which products can be carried in dry-cargo vessels by reducing rates, by supplying additional tonnage to any American operator, or by operation of vessels directly by the Secretary, until the Secretary considers the special rate reduction and operation unnecessary for the benefit of those farmers and producers.
(d) Intercoastal and Inland Water Transportation.— 
The Secretary shall investigate, determine, and keep current records of intercoastal and inland water transportation, including their relation to transportation by land and air.
(e) Obsolete Tonnage and Tramp Service.— 
The Secretary shall make studies and reports to Congress on
(1) the scrapping or removal from service of old or obsolete merchant tonnage owned by the United States Government or in use in the merchant marine; and
(2) tramp shipping service and the advisability of citizens of the United States participating in that service with vessels under United States registry.
(f) Mortgage Loans.— 
The Secretary shall investigate the legal status of mortgage loans on vessel property, with a view to the means of improving the security of those loans and of encouraging investment in American shipping.

46 USC 50110 - Securing preference to vessels of the United States

(a) Possibilities of Promoting Carriage.— 
The Secretary of Transportation shall investigate, determine, and keep current records of the possibilities of promoting the carriage of United States foreign trade in vessels of the United States.
(b) Inducements to Importers and Exporters.— 
The Secretary shall study and cooperate with vessel owners in devising means by which the importers and exporters of the United States can be induced to give preference to vessels of the United States.
(c) Liaison With Agencies and Organizations.— 
The Secretary shall establish and maintain liaison with such other agencies of the United States Government, and with such representative trade organizations throughout the United States, as may be concerned, directly or indirectly, with any movement of commodities in the waterborne export and import foreign commerce of the United States, for the purpose of securing preference to vessels of the United States in the shipment of those commodities.

46 USC 50111 - Reports to Congress

(a) In General.— 
Not later than April 1 of each year, the Secretary of Transportation shall submit a report to Congress. The report shall include, with respect to activities of the Secretary under this subtitle, the results of investigations, a summary of transactions, a statement of all expenditures and receipts, the purposes for which all expenditures were made, and any recommendations for legislation.
(b) Administered and Oversight Funds.— 
The Secretary, in the report under subsection (a) and in the annual budget estimate for the Maritime Administration submitted to Congress, shall state separately the amount, source, intended use, and nature of any funds (other than funds appropriated to the Administration or to the Secretary of Transportation for use by the Administration) administered, or subject to oversight, by the Administration.
(c) Additional Recommendations for Legislation.— 
The Secretary, from time to time, shall make recommendations to Congress for legislation the Secretary considers necessary to better achieve the objectives and policy of section 50101 of this title.

46 USC 50112 - National Maritime Enhancement Institutes

(a) Designation.— 
The Secretary of Transportation may designate National Maritime Enhancement Institutes.
(b) Activities.— 
Activities undertaken by an institute may include
(1) conducting research about methods to improve the performance of maritime industries;
(2) enhancing the competitiveness of domestic maritime industries in international trade;
(3) forecasting trends in maritime trade;
(4) assessing technological advancements;
(5) developing management initiatives and training;
(6) analyzing economic and operational impacts of regulatory policies and international negotiations or agreements pending before international bodies;
(7) assessing the compatibility of domestic maritime infrastructure systems with overseas transport systems;
(8) fostering innovations in maritime transportation pricing; and
(9) improving maritime economics and finance.
(c) Application for Designation.— 
An institution seeking designation as a National Maritime Enhancement Institute shall submit an application under regulations prescribed by the Secretary.
(d) Criteria for Designation.— 
The Secretary shall designate an institute under this section on the basis of the following criteria:
(1) The demonstrated research and extension resources available to the applicant for carrying out the activities specified in subsection (b).
(2) The ability of the applicant to provide leadership in making national and regional contributions to the solution of both long-range and immediate problems of the domestic maritime industry.
(3) The existence of an established program of the applicant encompassing research and training directed to enhancing maritime industries.
(4) The demonstrated ability of the applicant to assemble and evaluate pertinent information from national and international sources and to disseminate results of maritime industry research and educational programs through a continuing education program.
(5) The qualification of the applicant as a nonprofit">nonprofit institution of higher learning.
(e) Financial Awards.— 
The Secretary may make awards on an equal matching basis to an institute designated under subsection (a) from amounts appropriated. The aggregate annual amount of the Federal share of the awards by the Secretary may not exceed $500,000.
(f) University Transportation Research Funds.— 
The Secretary may make a grant under section 5505 of title 49 to an institute designated under subsection (a) for maritime and maritime intermodal research under that section as if the institute were a university transportation center. In making a grant, the Secretary, through the Research and Innovative Technology Administration, shall advise the Maritime Administration on the availability of funds for the grants and consult with the Administration on making the grants.

46 USC 50113 - Use and performance reports by operators of vessels

(a) Filing Requirement.— 
The Secretary of Transportation by regulation may require the operator of a vessel in the waterborne foreign commerce of the United States to file such report, account, record, or memorandum on the use and performance of the vessel as the Secretary considers desirable to assist in carrying out this subtitle. The report, account, record, or memorandum shall be signed and verified, and be filed at the times and in the manner, as provided by regulation.
(b) Civil Penalty.— 
An operator not filing a report, account, record, or memorandum required by the Secretary under this section is liable to the United States Government for a civil penalty of $50 for each day of the violation. A penalty imposed under this section on the operator of a vessel constitutes a lien on the vessel involved in the violation. A civil action in rem to enforce the lien may be brought in the district court of the United States for any district in which the vessel is found. The Secretary may remit or mitigate any penalty imposed under this section.

TITLE 46 - US CODE - CHAPTER 503 - ADMINISTRATIVE

46 USC 50301 - Vessel Operations Revolving Fund

(a) In General.— 
There is a Vessel Operations Revolving Fund for use by the Secretary of Transportation in carrying out duties and powers related to vessel operations, including charter, operation, maintenance, repair, reconditioning, and improvement of merchant vessels under the jurisdiction of the Secretary. The Fund has a working capital of $20,000,000, to remain available until expended.
(b) Relationship to Other Laws.— 
Notwithstanding any other law, rates for shipping services provided under the Fund shall be prescribed by the Secretary and the Fund shall be credited with receipts from vessel operations conducted under the Fund. Sections 1(a) and (c), 3(c), and 4 of the Act of March 24, 1943 (50 App. U.S.C. 1291 (a), (c), 1293 (c), 1294), apply to those operations and to seamen employed through general agents as employees of the United States Government. Notwithstanding any other law on the employment of persons by the Government, the seamen may be employed in accordance with customary commercial practices in the maritime industry.
(c) Advancements.— 
With the approval of the Director of the Office of Management and Budget, the Secretary may advance amounts the Secretary considers necessary, but not more than 2 percent of vessel operating expenses, from the Fund to the appropriation Salaries and Expenses in carrying out duties and powers related to vessel operations, without regard to the limitations on amounts stated in that appropriation.
(d) Transfers.— 
The unexpended balances of working funds or of allocation accounts established after January 1, 1951, for the activities provided for in subsection (a), and receipts received from those activities, may be transferred to the Fund, which shall be available for the purposes of those working funds or allocation accounts.
(e) Limitation.— 

(1) In general.— 
Amounts made available to the Secretary for maritime activities by this section or any other law may not be used to pay for a vessel described in paragraph (2) unless the compensation to be paid is computed under section 56303 of this title as that section is interpreted by the Comptroller General.
(2) Applicable vessels.— 
Paragraph (1) applies to a vessel
(A) the title to which is acquired by the Government by requisition or purchase;
(B) the use of which is taken by requisition or agreement; or
(C) lost while insured by the Government.
(3) Nonapplicable vessels.— 
Paragraph (1) does not apply to a vessel under a construction-differential subsidy contract.
(f) Availability for Additional Purposes.— 
The Fund is available for
(1) necessary expenses incurred in the protection, preservation, maintenance, acquisition, or use of vessels involved in mortgage foreclosure or forfeiture proceedings instituted by the Government, including payment of prior claims and liens, expenses of sale, or other related charges;
(2) necessary expenses incident to the redelivery and lay-up, in the United States, of vessels chartered as of June 20, 1956, under agreements not calling for their return to the Government;
(3) the activation, repair, and deactivation of merchant vessels chartered for limited emergency purposes during fiscal year 1957 under the jurisdiction of the Secretary; and
(4) payment of expenses of custody and maintenance of Government-owned vessels not in the National Defense Reserve Fleet.
(g) Expenses and Receipts Related to Charter Operations.— 
The Fund is available for expenses incurred in activating, repairing, and deactivating merchant vessels chartered under the jurisdiction of the Secretary. Receipts from charter operations of Government-owned vessels under the jurisdiction of the Secretary shall be credited to the Fund.

46 USC 50302 - Port development

(a) General Requirements.— 
With the objective of promoting, encouraging, and developing ports and transportation facilities in connection with water commerce over which the Secretary of Transportation has jurisdiction, the Secretary, in cooperation with the Secretary of the Army, shall
(1) investigate territorial regions and zones tributary to ports, taking into consideration the economies of transportation by rail, water, and highway and the natural direction of the flow of commerce;
(2) investigate the causes of congestion of commerce at ports and applicable remedies;
(3) investigate the subject of water terminals, including the necessary docks, warehouses, and equipment, to devise and suggest the types most appropriate for different locations and for the most expeditious and economical transfer or interchange of passengers or property between water carriers and rail carriers;
(4) consult with communities on the appropriate location and plan of construction of wharves, piers, and water terminals;
(5) investigate the practicability and advantages of harbor, river, and port improvements in connection with foreign and coastwise trade; and
(6) investigate any other matter that may tend to promote and encourage the use by vessels of ports adequate to care for the freight that naturally would pass through those ports.
(b) Submission of Findings to Surface Transportation Board.— 
After an investigation under subsection (a), if the Secretary of Transportation believes that the rates or practices of a rail carrier subject to the jurisdiction of the Surface Transportation Board are detrimental to the objective specified in subsection (a), or that new rates or practices, new or additional port terminal facilities, or affirmative action by a rail carrier is necessary to promote that objective, the Secretary may submit findings to the Board for action the Board considers appropriate under existing law.

46 USC 50303 - Operating property and extending term of notes

(a) General Authority.— 
The Secretary of Transportation may
(1) operate or lease docks, wharves, piers, or real property under the Secretarys control; and
(2) make extensions and accept renewals of
(A) promissory notes and other evidences of indebtedness on property; and
(B) mortgages and other contracts securing the property.
(b) Terms of Transactions.— 
A transaction under subsection (a) shall be on terms the Secretary considers necessary to carry out the purposes of this subtitle, but consistent with sound business practice.
(c) Availability of Amounts.— 
Amounts received by the Secretary from a transaction under this section are available for expenditure by the Secretary as provided in this subtitle.

46 USC 50304 - Sale and transfer of property

(a) Authority To Sell.— 
The Secretary of Transportation may sell property (other than vessels transferred under section 4 of the Merchant Marine Act, 1920 (ch. 250, 41 Stat. 990)) on terms the Secretary considers appropriate.
(b) Transfers From Military to Civilian Control.— 
When the President considers it in the interest of the United States, the President may transfer to the Secretary of Transportation possession and control of property described in the second paragraph of section 17 of the Merchant Marine Act, 1920 (ch. 250, 41 Stat. 994), as originally enacted, that is possessed and controlled by the Secretary of a military department.
(c) Transfers From Civilian to Military Control.— 
When the President considers it necessary, the President by executive order may transfer to the Secretary of a military department possession and control of property described in section 17 of the Merchant Marine Act, 1920 (ch. 250, 41 Stat. 994), as originally enacted, that is possessed and controlled by the Secretary of Transportation. The Presidents order shall state the need for the transfer and the period of the need. When the President decides that the need has ended, the possession and control shall revert to the Secretary of Transportation. The property may not be sold except as provided by law.

46 USC 50305 - Appointment of trustee or receiver and operation of vessels

(a) Appointment of Trustees and Receivers.— 

(1) Appointment of secretary.— 
In a proceeding in a court of the United States in which a trustee or receiver may be appointed for a corporation operating a vessel of United States registry between the United States and a foreign country, on which the United States Government holds a mortgage, the court may appoint the Secretary of Transportation as the sole trustee or receiver (subject to the direction of the court) if
(A) the court finds that the appointment will
(i) inure to the advantage of the estate and the parties in interest; and
(ii) tend to carry out the purposes of this subtitle; and
(B) the Secretary expressly consents to the appointment.
(2) Appointment of other person.— 
The appointment of another person as trustee or receiver without a hearing becomes effective when ratified by the Secretary, but the Secretary may demand a hearing.
(b) Operation of Vessels.— 

(1) In general.— 
If the court is unwilling to allow the trustee or receiver to operate the vessel in foreign commerce without financial aid from the Government pending termination of the proceeding, and the Secretary certifies to the court that the continued operation of the vessel is essential to the foreign commerce of the United States and is reasonably calculated to carry out the purposes of this subtitle, the court may allow the Secretary to operate the vessel, either directly or through a managing agent or operator employed by the Secretary. The Secretary must agree to comply with terms imposed by the court sufficient to protect the parties in interest. The Secretary also must agree to pay all operating losses resulting from the operation. The operation shall be for the account of the trustee or receiver.
(2) Payment of operating losses and other amounts.— 
The Secretary has no claim against the corporation, its estate, or its assets for operating losses paid by the Secretary, but the Secretary may pay amounts for depreciation the Secretary considers reasonable and other amounts the court considers just. The payment of operating losses and the other amounts and compliance with terms imposed by the court shall be in satisfaction of any claim against the Secretary resulting from the operation of the vessel.
(3) Deemed operation by government.— 
A vessel operated by the Secretary under this subsection is deemed to be a vessel operated by the United States under chapter 309 of this title.

46 USC 50306 - Requiring testimony and records in investigations

(a) In General.— 
In conducting an investigation that the Secretary of Transportation considers necessary and proper to carry out this subtitle, the Secretary may administer oaths, take evidence, and subpoena persons to testify and produce documents relevant to the matter under investigation. Persons may be required to attend or produce documents from any place in the United States at any designated place of hearing.
(b) Fees and Mileage.— 
Persons subpoenaed by the Secretary under subsection (a) shall be paid the same fees and mileage paid to witnesses in the courts of the United States.
(c) Enforcement of Subpoenas.— 
If a person disobeys a subpoena issued under subsection (a), the Secretary may seek an order enforcing the subpoena from the district court of the United States for the district in which the person resides or does business. Process may be served in the judicial district in which the person resides or is found. The court may issue an order to obey the subpoena and punish a refusal to obey as a contempt of court.

TITLE 46 - US CODE - CHAPTER 505 - OTHER GENERAL PROVISIONS

46 USC 50501 - Entities deemed citizens of the United States

(a) In General.— 
In this subtitle, a corporation, partnership, or association is deemed to be a citizen of the United States only if the controlling interest is owned by citizens of the United States. However, if the corporation, partnership, or association is operating a vessel in the coastwise trade, at least 75 percent of the interest must be owned by citizens of the United States.
(b) Additional Requirements for Corporations.— 
In this subtitle, a corporation is deemed to be a citizen of the United States only if, in addition to satisfying the requirements in subsection (a)
(1) it is incorporated under the laws of the United States or a State;
(2) its chief executive officer, by whatever title, and the chairman of its board of directors are citizens of the United States; and
(3) no more of its directors are noncitizens than a minority of the number necessary to constitute a quorum.
(c) Determination of Controlling Corporate Interest.— 
The controlling interest in a corporation is owned by citizens of the United States under subsection (a) only if
(1) title to the majority of the stock in the corporation is vested in citizens of the United States free from any trust or fiduciary obligation in favor of a person not a citizen of the United States;
(2) the majority of the voting power in the corporation is vested in citizens of the United States;
(3) there is no contract or understanding by which the majority of the voting power in the corporation may be exercised, directly or indirectly, in behalf of a person not a citizen of the United States; and
(4) there is no other means by which control of the corporation is given to or permitted to be exercised by a person not a citizen of the United States.
(d) Determination of 75 Percent Corporate Interest.— 
At least 75 percent of the interest in a corporation is owned by citizens of the United States under subsection (a) only if
(1) title to at least 75 percent of the stock in the corporation is vested in citizens of the United States free from any trust or fiduciary obligation in favor of a person not a citizen of the United States;
(2) at least 75 percent of the voting power in the corporation is vested in citizens of the United States;
(3) there is no contract or understanding by which more than 25 percent of the voting power in the corporation may be exercised, directly or indirectly, in behalf of a person not a citizen of the United States; and
(4) there is no other means by which control of more than 25 percent of any interest in the corporation is given to or permitted to be exercised by a person not a citizen of the United States.

46 USC 50502 - Applicability to receivers, trustees, successors, and assigns

This subtitle applies to receivers, trustees, successors, and assigns of any person to whom this subtitle applies.

46 USC 50503 - Oceanographic research vessels

An oceanographic research vessel (as defined in section 2101 of this title) is deemed not to be engaged in trade or commerce.

46 USC 50504 - Sailing school vessels

(a) Definitions.— 
In this section, the terms sailing school instructor, sailing school student, and sailing school vessel have the meaning given those terms in section 2101 of this title.
(b) Not Seamen.— 
A sailing school student or sailing school instructor is deemed not to be a seaman under
(1) parts B, F, and G of subtitle II of this title; or
(2) the maritime law doctrines of maintenance and cure or warranty of seaworthiness.
(c) Not Merchant Vessel or Engaged in Trade or Commerce.— 
A sailing school vessel is deemed not to be
(1) a merchant vessel under section 11101 (a)(c) of this title; or
(2) a vessel engaged in trade or commerce.
(d) Evidence of Financial Responsibility.— 
The owner or charterer of a sailing school vessel shall maintain evidence of financial responsibility to meet liability for death or injury to sailing school students and sailing school instructors on a voyage on the vessel. The amount of financial responsibility shall be at least $50,000 for each student and instructor. Financial responsibility under this subsection may be evidenced by insurance or other adequate financial resources.

Part B - Merchant Marine Service

TITLE 46 - US CODE - CHAPTER 511 - GENERAL

46 USC 51101 - Policy

It is the policy of the United States that merchant marine vessels of the United States should be operated by highly trained and efficient citizens of the United States and that the United States Navy and the merchant marine of the United States should work closely together to promote the maximum integration of the total seapower forces of the United States.

46 USC 51102 - Definitions

In this part:
(1) Academy.— 
The term Academy means the United States Merchant Marine Academy located at Kings Point, New York, and maintained under chapter 513 of this title.
(2) Cost of education provided.— 
The term cost of education provided means the financial costs incurred by the United States Government for providing training or financial assistance to students at the Academy and the State maritime academies, including direct financial assistance, room, board, classroom academics, and other training activities.
(3) Merchant marine officer.— 
The term merchant marine officer means an individual issued a license by the Coast Guard authorizing service as
(A) a master, mate, or pilot on a documented vessel that
(i) is of at least 1,000 gross tons as measured under section 14502 of this title or an alternate tonnage measured under section 14302 of this title as prescribed by the Secretary under section 14104 of this title; and
(ii) operates on the oceans or the Great Lakes; or
(B) an engineer officer on a documented vessel propelled by machinery of at least 4,000 horsepower.
(4) State maritime academy.— 
The term State maritime academy means
(A) a State maritime academy or college sponsored by a State and assisted under chapter 515 of this title; and
(B) a regional maritime academy or college sponsored by a group of States and assisted under chapter 515 of this title.

46 USC 51103 - General authority of Secretary of Transportation

(a) Education and Training.— 
The Secretary of Transportation may provide for the education and training of citizens of the United States for the safe and efficient operation of the merchant marine of the United States at all times, including operation as a naval and military auxiliary in time of war or national emergency.
(b) Surplus Property for Instructional Purposes.— 

(1) In general.— 
The Secretary may cooperate with and assist the institutions named in paragraph (2) by making vessels, shipboard equipment, and other marine equipment, owned by the United States Government and determined to be excess or surplus, available to those institutions for instructional purposes, by gift, loan, sale, lease, or charter on terms the Secretary considers appropriate.
(2) Institutions.— 
The institutions referred to in paragraph (1) are
(A) the United States Merchant Marine Academy;
(B) a State maritime academy; and
(C) a nonprofit">nonprofit training institution jointly approved by the Secretary of Transportation and the Secretary of the department in which the Coast Guard is operating as offering training courses that meet Federal regulations for maritime training.
(c) Assistance From Other Agencies.— 

(1) In general.— 
The Secretary of Transportation may secure directly from an agency, on a reimbursable basis, information, facilities, and equipment necessary to carry out this part.
(2) Detailing personnel.— 
At the request of the Secretary, the head of an agency (including a military department) may detail, on a reimbursable basis, personnel from the agency to the Secretary to assist in carrying out this part.
(d) Academy Personnel.— 
To carry out this part, the Secretary may
(1) employ an individual as a professor, lecturer, or instructor at the Academy, without regard to the provisions of title 5 governing appointments in the competitive service; and
(2) pay the individual without regard to chapter 51 and subchapter III of chapter 53 of title 5.

46 USC 51104 - General authority of Secretary of the Navy

The Secretary of the Navy, in cooperation with the Maritime Administrator and the head of each State maritime academy, shall ensure that
(1) the training of future merchant marine officers at the United States Merchant Marine Academy and at State maritime academies includes programs for naval science training in the operation of merchant vessels as a naval and military auxiliary; and
(2) naval officer training programs for future officers, insofar as possible, are maintained at designated maritime academies consistent with Navy standards and needs.

TITLE 46 - US CODE - CHAPTER 513 - UNITED STATES MERCHANT MARINE ACADEMY

46 USC 51301 - Maintenance of the Academy

The Secretary of Transportation shall maintain the United States Merchant Marine Academy to provide instruction to individuals to prepare them for service in the merchant marine of the United States.

46 USC 51302 - Nomination and competitive appointment of cadets

(a) Requirements.— 
An individual may be nominated for a competitive appointment as a cadet at the United States Merchant Marine Academy only if the individual
(1) is a citizen or national of the United States; and
(2) meets the minimum requirements that the Secretary of Transportation shall establish.
(b) Nominators.— 
Nominations for competitive appointments for the positions allocated under subsection (c) may be made as follows:
(1) A Senator may nominate residents of the State represented by that Senator.
(2) A Member of the House of Representatives may nominate residents of the State in which the congressional district represented by that Member is located.
(3) A Delegate to the House of Representatives from the District of Columbia, the Virgin Islands, Guam, or American Samoa may nominate residents of the jurisdiction represented by that Delegate.
(4) The Resident Commissioner to the United States from Puerto Rico may nominate residents of Puerto Rico.
(5) The Governor of the Northern Mariana Islands may nominate residents of the Northern Mariana Islands.
(6) The Panama Canal Commission may nominate
(A) residents, or sons or daughters of residents, of an area or installation in Panama and made available to the United States under the Panama Canal Treaty of 1977, the agreements relating to and implementing that Treaty, signed September 7, 1977, and the Agreement Between the United States of America and the Republic of Panama Concerning Air Traffic Control and Related Services, concluded January 8, 1979; and
(B) sons or daughters of personnel of the United States Government and the Panama Canal Commission residing in Panama.
(c) Allocation of Positions.— 
Positions for competitive appointments shall be allocated each year as follows:
(1) Positions shall be allocated for residents of each State nominated by the Members of Congress from that State in proportion to the representation in Congress from that State.
(2) Four positions shall be allocated for residents of the District of Columbia nominated by the Delegate to the House of Representatives from the District of Columbia.
(3) One position each shall be allocated for residents of the Virgin Islands, Guam, and American Samoa nominated by the Delegates to the House of Representatives from the Virgin Islands, Guam, and American Samoa, respectively.
(4) One position shall be allocated for a resident of Puerto Rico nominated by the Resident Commissioner to the United States from Puerto Rico.
(5) One position shall be allocated for a resident of the Northern Mariana Islands nominated by the Governor of the Northern Mariana Islands.
(6) Two positions shall be allocated for individuals nominated by the Panama Canal Commission.
(d) Competitive System for Appointment.— 

(1) Establishment of system.— 
The Secretary shall establish a competitive system for selecting individuals nominated under subsection (b) to fill the positions allocated under subsection (c). The system must determine the relative merit of each individual based on competitive examinations, an assessment of the individuals academic background, and other effective indicators of motivation and probability of successful completion of training at the Academy.
(2) Appointments by jurisdiction.— 
The Secretary shall appoint individuals to fill the positions allocated under subsection (c) for each jurisdiction in the order of merit of the individuals nominated from that jurisdiction.
(3) Remaining unfilled positions.— 
If positions remain unfilled after the appointments are made under paragraph (2), the Secretary shall appoint individuals to fill the positions in the order of merit of the remaining individuals nominated from all jurisdictions.

46 USC 51303 - Non-competitive appointments

The Secretary of Transportation may appoint each year without competition as cadets at the United States Merchant Marine Academy not more than 40 qualified individuals with qualities the Secretary considers to be of special value to the Academy. In making these appointments, the Secretary shall try to achieve a national demographic balance at the Academy.

46 USC 51304 - Additional appointments from particular areas

(a) Other Countries in Western Hemisphere.— 
The President may appoint individuals from countries in the Western Hemisphere other than the United States to receive instruction at the United States Merchant Marine Academy. Not more than 12 individuals may receive instruction under this subsection at the same time, and not more than 2 individuals from the same country may receive instruction under this subsection at the same time.
(b) Other Countries Generally.— 

(1) Appointment.— 
The Secretary of Transportation, with the approval of the Secretary of State, may appoint individuals from countries other than the United States to receive instruction at the Academy. Not more than 30 individuals may receive instruction under this subsection at the same time.
(2) Reimbursement.— 
The Secretary of Transportation shall ensure that the country from which an individual comes under this subsection will reimburse the Secretary for the cost (as determined by the Secretary) of the instruction and allowances received by the individual.
(c) Panama.— 

(1) Appointment.— 
The Secretary of Transportation, with the approval of the Secretary of State, may appoint individuals from Panama to receive instruction at the Academy. Individuals appointed under this subsection are in addition to those appointed under any other provision of this chapter.
(2) Reimbursement.— 
The Secretary of Transportation shall be reimbursed for the cost (as determined by the Secretary) of the instruction and allowances received by an individual appointed under this subsection.
(d) Allowances and Regulations.— 
Individuals receiving instruction under this section are entitled to the same allowances and are subject to the same regulations on admission, attendance, discipline, resignation, discharge, dismissal, and graduation, as cadets at the Academy appointed from the United States.

46 USC 51305 - Prohibited basis for appointment

Preference may not be given to an individual for appointment as a cadet at the United States Merchant Marine Academy because one or more members of the individuals immediate family are alumni of the Academy.

46 USC 51306 - Cadet commitment agreements

(a) Agreement Requirements.— 
A citizen of the United States appointed as a cadet at the United States Merchant Marine Academy must sign, as a condition of the appointment, an agreement to
(1) complete the course of instruction at the Academy;
(2) fulfill the requirements for a license as an officer in the merchant marine of the United States before graduation from the Academy;
(3) maintain a valid license as an officer in the merchant marine of the United States for at least 6 years after graduation from the Academy, accompanied by the appropriate national and international endorsements and certification required by the Coast Guard for service aboard vessels on domestic and international voyages;
(4) apply for, and accept if tendered, an appointment as a commissioned officer in the Naval Reserve (including the Merchant Marine Reserve, Naval Reserve), the Coast Guard Reserve, or any other reserve unit of an armed force of the United States, and, if tendered the appointment, to serve for at least 6 years after graduation from the Academy;
(5) serve the foreign and domestic commerce and the national defense of the United States for at least 5 years after graduation from the Academy
(A) as a merchant marine officer on a documented vessel or a vessel owned and operated by the United States Government or by a State;
(B) as an employee in a United States maritime-related industry, profession, or marine science (as determined by the Secretary of Transportation), if the Secretary determines that service under subparagraph (A) is not available to the individual;
(C) as a commissioned officer on active duty in an armed force of the United States, as a commissioned officer in the National Oceanic and Atmospheric Administration, or in other maritime-related Federal employment which serves the national security interests of the United States, as determined by the Secretary; or
(D) by a combination of the service alternatives referred to in subparagraphs (A)(C); and
(6) report to the Secretary on compliance with this subsection.
(b) Failure To Complete Course of Instruction.— 

(1) Active duty.— 
If the Secretary of Transportation determines that an individual who has attended the Academy for at least 2 years has failed to fulfill the part of the agreement described in subsection (a)(1), the individual may be ordered by the Secretary of Defense to serve on active duty in one of the armed forces of the United States for a period of not more than 2 years. In cases of hardship as determined by the Secretary of Transportation, the Secretary of Transportation may waive this paragraph in whole or in part.
(2) Recovery of cost.— 
If the Secretary of Defense is unable or unwilling to order an individual to serve on active duty under paragraph (1), or if the Secretary of Transportation determines that reimbursement of the cost of education provided would better serve the interests of the United States, the Secretary of Transportation may recover from the individual the cost of education provided by the Government.
(c) Failure To Carry Out Other Requirements.— 

(1) Active duty.— 
If the Secretary of Transportation determines that an individual has failed to fulfill any part of the agreement described in subsection (a)(2)(6), the individual may be ordered to serve on active duty for a period of at least 3 years but not more than the unexpired period (as determined by the Secretary) of the service required by subsection (a)(5). The Secretary of Transportation, in consultation with the Secretary of Defense, shall determine in which service the individual shall serve. In cases of hardship as determined by the Secretary of Transportation, the Secretary of Transportation may waive this paragraph in whole or in part.
(2) Recovery of cost.— 
If the Secretary of Defense is unable or unwilling to order an individual to serve on active duty under paragraph (1), or if the Secretary of Transportation determines that reimbursement of the cost of education provided would better serve the interests of the United States, the Secretary of Transportation may recover from the individual the cost of education provided. The Secretary may reduce the amount to be recovered to reflect partial performance of service obligations and other factors the Secretary determines merit a reduction.
(d) Actions To Recover Cost.— 
To aid in the recovery of the cost of education provided by the Government under a commitment agreement under this section, the Secretary of Transportation may
(1) request the Attorney General to bring a civil action against the individual; and
(2) make use of the Federal debt collection procedures in chapter 176 of title 28 or other applicable administrative remedies.

46 USC 51307 - Places of training

The Secretary of Transportation may provide for the training of cadets at the United States Merchant Marine Academy
(1) on vessels owned or subsidized by the United States Government;
(2) on other documented vessels, with the permission of the owner; and
(3) in shipyards or plants and with industrial or educational organizations.

46 USC 51308 - Uniforms, textbooks, and transportation allowances

The Secretary of Transportation shall provide cadets at the United States Merchant Marine Academy
(1) all required uniforms and textbooks; and
(2) allowances for transportation (including reimbursement of traveling expenses) when traveling under orders as a cadet.

46 USC 51309 - Academic degree

(a) Bachelor’s Degree.— 

(1) In general.— 
The Superintendent of the United States Merchant Marine Academy may confer the degree of bachelor of science on an individual who
(A) has met the conditions prescribed by the Secretary of Transportation; and
(B) if a citizen of the United States, has passed the examination for a merchant marine officers license.
(2) Effect of physical disqualification.— 
An individual not allowed to take the examination for a merchant marine officers license only because of physical disqualification may not be denied a degree for not taking the examination.
(b) Master’s Degree.— 
The Superintendent of the Academy may confer a masters degree on an individual who has met the conditions prescribed by the Secretary. A masters degree program may be funded through non-appropriated funds. To maintain the appropriate academic standards, the program shall be accredited by the appropriate accreditation body. The Secretary may prescribe regulations necessary to administer such a program.
(c) Graduation Not Entitlement To Hold License.— 
Graduation from the Academy does not entitle an individual to hold a license authorizing service on a merchant vessel.

46 USC 51310 - Deferment of service obligation under cadet commitment agreements

The Secretary of Transportation may defer the service commitment of an individual under section 51306 (a)(5) of this title (as specified in the cadet commitment agreement) for not more than 2 years if the individual is engaged in a graduate course of study approved by the Secretary. However, deferment of service as a commissioned officer under section 51306 (a)(5) must be approved by the Secretary of the military department that has jurisdiction over the service or by the Secretary of Commerce for service with the National Oceanic and Atmospheric Administration.

46 USC 51311 - Midshipman status in the Naval Reserve

(a) Application Requirement.— 
Before being appointed as a cadet at the United States Merchant Marine Academy, a citizen of the United States must agree to apply for midshipman status in the Naval Reserve (including the Merchant Marine Reserve, Naval Reserve).
(b) Appointment.— 

(1) In general.— 
A citizen of the United States appointed as a cadet at the Academy shall be appointed by the Secretary of the Navy as a midshipman in the Naval Reserve (including the Merchant Marine Reserve, Naval Reserve).
(2) Rights and privileges.— 
The Secretary of the Navy shall provide for cadets of the Academy who are midshipmen in the United States Naval Reserve to be
(A) issued an identification card (referred to as a military ID card); and
(B) entitled to all rights and privileges in accordance with the same eligibility criteria as apply to other members of the Ready Reserve of the reserve components of the armed forces.
(3) Coordination.— 
The Secretary of the Navy shall carry out paragraphs (1) and (2) in coordination with the Secretary of Transportation.

46 USC 51312 - Board of Visitors

(a) In General.— 
A Board of Visitors to the United States Merchant Marine Academy shall be established, for a term of 2 years commencing at the beginning of each Congress, to visit the Academy annually on a date determined by the Secretary of Transportation and to make recommendations on the operation of the Academy.
(b) Appointment.— 

(1) In general.— 
The Board shall be composed of
(A) 2 Senators appointed by the chairman of the Committee on Commerce, Science, and Transportation of the Senate;
(B) 3 Members of the House of Representatives appointed by the chairman of the Committee on Armed Services of the House of Representatives;
(C) 1 Senator appointed by the Vice President;
(D) 2 Members of the House of Representatives appointed by the Speaker of the House of Representatives; and
(E) the chairmen of the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Armed Services of the House of Representatives, as ex officio members.
(2) Substitute appointment.— 
If an appointed member of the Board is unable to visit the Academy as provided in subsection (a), another individual may be appointed as a substitute in the manner provided in paragraph (1).
(c) Staff.— 
The chairmen of the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Armed Services of the House of Representatives may designate staff members of their committees to serve without reimbursement as staff for the Board.
(d) Travel Expenses.— 
When serving away from home or regular place of business, a member of the Board or a staff member designated under subsection (c) shall be allowed travel expenses, including per diem in lieu of subsistence, as authorized by section 5703 of title 5.

46 USC 51313 - Advisory Board

(a) In General.— 
An Advisory Board to the United States Merchant Marine Academy shall be established to visit the Academy at least once during each academic year, for the purpose of examining the course of instruction and management of the Academy and advising the Maritime Administrator and the Superintendent of the Academy.
(b) Appointment and Terms.— 
The Board shall be composed of not more than 7 individuals appointed by the Secretary of Transportation. The individuals must be distinguished in education and other fields related to the Academy. Members of the Board shall be appointed for terms of not more than 3 years and may be reappointed. The Secretary shall designate one of the members as chairman.
(c) Travel Expenses.— 
When serving away from home or regular place of business, a member of the Board shall be allowed travel expenses, including per diem in lieu of subsistence, as authorized by section 5703 of title 5.
(d) Relationship to Other Law.— 
The Federal Advisory Committee Act (5 App. U.S.C.) does not apply to the Board.

46 USC 51314 - Limitation on charges and fees for attendance

(a) Prohibition.— 
Except as provided in subsection (b), no charge or fee for tuition, room, or board for attendance at the United States Merchant Marine Academy may be imposed unless the charge or fee is specifically authorized by a law enacted after October 5, 1994.
(b) Exception.— 
The prohibition specified in subsection (a) does not apply with respect to any item or service provided to cadets for which a charge or fee is imposed as of October 5, 1994. The Secretary of Transportation shall notify Congress of any change made by the Academy in the amount of a charge or fee authorized under this subsection.

TITLE 46 - US CODE - CHAPTER 515 - STATE MARITIME ACADEMY SUPPORT PROGRAM

46 USC 51501 - General support program

(a) Assistance to State Maritime Academies.— 
The Secretary of Transportation shall cooperate with and assist State maritime academies in providing instruction to individuals to prepare them for service in the merchant marine of the United States.
(b) Course Development.— 
The Secretary shall provide to each State maritime academy guidance and assistance in developing courses on the operation and maintenance of new vessels, on equipment, and on innovations being introduced to the merchant marine of the United States.

46 USC 51502 - Detailing of personnel

At the request of the Governor of a State, the President may detail, without reimbursement, personnel of the Navy, the Coast Guard, and the Maritime Service to a State maritime academy to serve as a superintendent, professor, lecturer, or instructor at the academy.

46 USC 51503 - Regional maritime academies

The Governors of the States cooperating to sponsor a regional maritime academy shall designate in writing one of those States to conduct the affairs of that academy. A regional maritime academy is eligible for assistance from the United States Government on the same basis as a State maritime academy sponsored by a single State.

46 USC 51504 - Use of training vessels

(a) Applications To Use Vessels.— 
The Governor of a State sponsoring a State maritime academy (or the Governor of the State designated to conduct the affairs of a regional maritime academy) may apply in writing to the Secretary of Transportation to obtain the use of a training vessel for the academy. A vessel provided under this section remains the property of the United States Government.
(b) General Authority.— 
Subject to subsection (c), the Secretary may provide to a State maritime academy, for use as a training vessel, a suitable vessel under the control of the Secretary or made available to the Secretary under subsection (e). If a suitable vessel is not available, the Secretary may build and provide a suitable vessel.
(c) Approval Requirements.— 
The Secretary may provide a vessel under this section only if
(1) an application has been made under subsection (a);
(2) the State maritime academy satisfies section 51506 (a) of this title; and
(3) a suitable port will be available for the safe mooring of the vessel while the academy is using the vessel.
(d) Preparation and Maintenance.— 
A vessel provided under this section shall be
(1) repaired, reconditioned, and equipped (with all apparel, charts, books, and instruments of navigation) as necessary for use as a training vessel; and
(2) maintained in good repair by the Secretary.
(e) Agency Vessels.— 
An agency may provide to the Secretary, for use by a State maritime academy, a vessel (including equipment) that
(1) is suitable for training purposes; and
(2) can be provided without detriment to the service to which the vessel is assigned.
(f) Fuel Costs.— 
The Secretary may pay to a State maritime academy the costs of fuel used by a vessel provided under this section while used for training.
(g) Removing Vessels From Service and Vessel Sharing.— 
The Secretary may not
(1) take a vessel, currently in use as a training vessel under this section, out of service to implement an alternative program (including vessel sharing) unless the vessel is incapable of being maintained in good repair as required by subsection (d); or
(2) implement a program requiring a State maritime academy to share its training vessel with another State maritime academy, except with the express consent of Congress.

46 USC 51505 - Annual payments for maintenance and support

(a) Payment Agreements.— 
The Secretary of Transportation may make an agreement (effective for not more than 4 years) with the following academies to provide annual payments to those academies for their maintenance and support:
(1) One State maritime academy in each State that satisfies section 51506 (a) of this title.
(2) Each regional maritime academy that satisfies section 51506 (a) of this title.
(b) Payments.— 

(1) In general.— 
Subject to paragraph (2), an annual payment to an academy under subsection (a) shall be at least equal to the amount given to the academy for its maintenance and support by the State in which it is located, or, for a regional maritime academy, by all States cooperating to sponsor the academy.
(2) Maximum.— 
The amount under paragraph (1) may not be more than $25,000. However, if the academy satisfies section 51506 (b) of this title, the amount shall be
(A) $100,000 for a State maritime academy; and
(B) $200,000 for a regional maritime academy.

46 USC 51506 - Conditions to receiving payments and use of vessels

(a) General Conditions.— 
As conditions of receiving an annual payment or the use of a vessel under this chapter, a State maritime academy must
(1) provide courses of instruction on navigation, marine engineering (including steam and diesel propulsion), the operation and maintenance of new vessels and equipment, and innovations being introduced to the merchant marine of the United States;
(2) agree in writing to conform to the standards for courses, training facilities, admissions, and instruction that the Secretary of Transportation may establish after consultation with the superintendents of State maritime academies; and
(3) agree in writing to require, as a condition for graduation, that each individual who is a citizen of the United States and who is attending the academy in a merchant marine officer preparation program pass the examination required for the issuance of a license under section 7101 of this title.
(b) Additional Condition to Payments of More Than $25,000.As a condition of receiving an annual payment of more than $25,000 under section 51505 of this title, a State maritime academy also must agree to admit each year a number of citizens of the United States who meet its admission requirements and reside in a State not supporting that academy. The Secretary shall determine the number of individuals to be admitted by each academy under this subsection. The number may not be more than one-third of the total number of individuals attending the academy at any time.

46 USC 51507 - Places of training

The Secretary of Transportation may provide for the training of students attending a State maritime academy
(1) on vessels owned or subsidized by the United States Government;
(2) on other documented vessels, with the permission of the owner; and
(3) in shipyards or plants and with industrial or educational organizations.

46 USC 51508 - Allowances for students

Under regulations prescribed by the Secretary of Transportation, a student at a State maritime academy shall receive from the Secretary allowances for transportation (including reimbursement of traveling expenses) when traveling under orders to receive training under section 51507 of this title.

46 USC 51509 - Student incentive payment agreements

(a) General Authority.— 
If a State maritime academy has an agreement with the Secretary of Transportation under section 51505 of this title, the Secretary may make an agreement with a student at the academy who is a citizen of the United States to make student incentive payments to the individual. An agreement with a student may not be effective for more than 4 academic years. The Secretary shall allocate payments under this section among the various State maritime academies in an equitable manner.
(b) Payments.— 
Payments under an agreement under this section shall be equal to $4,000 each academic year and be paid, as prescribed by the Secretary, while the individual is attending the academy. The payments shall be used for uniforms, books, and subsistence.
(c) Midshipman and Enlisted Reserve Status.— 
An agreement under this section shall require the student to accept midshipman and enlisted reserve status in the Naval Reserve (including the Merchant Marine Reserve, Naval Reserve) before receiving any payments under the agreement.
(d) Agreement Requirements.— 
An agreement under this section shall require the student to
(1) complete the course of instruction at the academy the individual is attending;
(2) take the examination for a license as an officer in the merchant marine of the United States before graduation from the academy and fulfill the requirements for such a license within 3 months after graduation from the academy;
(3) maintain a valid license as an officer in the merchant marine of the United States for at least 6 years after graduation from the academy, accompanied by the appropriate national and international endorsements and certification required by the Coast Guard for service aboard vessels on domestic and international voyages;
(4) accept, if tendered, an appointment as a commissioned officer in the Naval Reserve (including the Merchant Marine Reserve, Naval Reserve), the Coast Guard Reserve, or any other reserve unit of an armed force of the United States, and, if tendered the appointment, to serve for at least 6 years after graduation from the academy;
(5) serve the foreign and domestic commerce and the national defense of the United States for at least 3 years after graduation from the academy
(A) as a merchant marine officer on a documented vessel or a vessel owned and operated by the United States Government or by a State;
(B) as an employee in a United States maritime-related industry, profession, or marine science (as determined by the Secretary), if the Secretary determines that service under subparagraph (A) is not available to the individual;
(C) as a commissioned officer on active duty in an armed force of the United States, as a commissioned officer in the National Oceanic and Atmospheric Administration, or in other maritime-related Federal employment which serves the national security interests of the United States, as determined by the Secretary; or
(D) by a combination of the service alternatives referred to in subparagraphs (A)(C); and
(6) report to the Secretary on compliance with this subsection.
(e) Failure To Complete Course of Instruction.— 

(1) Active duty.— 
If the Secretary of Transportation determines that an individual who has accepted the payments described in subsection (b) for a minimum of 2 academic years has failed to fulfill the part of the agreement described in subsection (d)(1), the individual may be ordered by the Secretary of Defense to serve on active duty in the armed forces of the United States for a period of not more than 2 years. In cases of hardship as determined by the Secretary of Transportation, the Secretary of Transportation may waive this paragraph in whole or in part.
(2) Recovery of cost.— 
If the Secretary of Defense is unable or unwilling to order an individual to serve on active duty under paragraph (1), or if the Secretary of Transportation determines that reimbursement of the cost of education provided would better serve the interests of the United States, the Secretary of Transportation may recover from the individual the amount of student incentive payments, plus interest and attorney fees. The Secretary may reduce the amount to be recovered to reflect partial performance of service obligations and other factors the Secretary determines merit a reduction.
(f) Failure To Carry Out Other Requirements.— 

(1) Active duty.— 
If the Secretary of Transportation determines that an individual has failed to fulfill any part of the agreement described in subsection (d)(2)(6), the individual may be ordered to serve on active duty for a period of at least 2 years but not more than the unexpired period (as determined by the Secretary) of the service required by subsection (d)(5). The Secretary of Transportation, in consultation with the Secretary of Defense, shall determine in which service the individual shall serve. In cases of hardship as determined by the Secretary of Transportation, the Secretary of Transportation may waive this paragraph in whole or in part.
(2) Recovery of cost.— 
If the Secretary of Defense is unable or unwilling to order an individual to serve on active duty under paragraph (1), or if the Secretary of Transportation determines that reimbursement of the cost of education provided would better serve the interests of the United States, the Secretary of Transportation may recover from the individual the amount of student incentive payments, plus interest and attorney fees. The Secretary may reduce the amount to be recovered to reflect partial performance of service obligations and other factors the Secretary determines merit a reduction.
(g) Actions To Recover Cost.— 
To aid in the recovery of the cost of education provided by the Government under a commitment agreement under this section, the Secretary of Transportation may
(1) request the Attorney General to bring a civil action against the individual; and
(2) make use of the Federal debt collection procedures in chapter 176 of title 28 or other applicable administrative remedies.

46 USC 51510 - Deferment of service obligation under student incentive payment agreements

The Secretary of Transportation may defer the service commitment of an individual under section 51509 (d)(5) of this title (as specified in the agreement under section 51509) for not more than 2 years if the individual is engaged in a graduate course of study approved by the Secretary. However, deferment of service as a commissioned officer on active duty must be approved by the Secretary of the affected military department (or the Secretary of Commerce, for service with the National Oceanic and Atmospheric Administration).

46 USC 51511 - Midshipman status in the Naval Reserve

A citizen of the United States attending a State maritime academy may be appointed by the Secretary of the Navy as a midshipman in the Naval Reserve (including the Merchant Marine Reserve, Naval Reserve).

TITLE 46 - US CODE - CHAPTER 517 - OTHER SUPPORT FOR MERCHANT MARINE TRAINING

46 USC 51701 - United States Maritime Service

(a) General Authority.— 
The Secretary of Transportation may establish and maintain a voluntary organization, to be known as the United States Maritime Service, for the training of citizens of the United States to serve on merchant vessels of the United States.
(b) Specific Authority.— 
The Secretary may
(1) determine the number of individuals to be enrolled for training and reserve purposes in the Service;
(2) fix the rates of pay and allowances of the individuals without regard to chapter 51 or subchapter III of chapter 53 of title 5;
(3) prescribe the course of study and the periods of training for the Service; and
(4) prescribe the uniform of the Service and the rules on providing and wearing the uniform.
(c) Ranks, Grades, and Ratings.— 
The ranks, grades, and ratings for personnel of the Service shall be the same as those prescribed for personnel of the Coast Guard.
(d) Medals and Awards.— 
The Secretary may establish and maintain a medals and awards program to recognize distinguished service, superior achievement, professional performance, and other commendable achievement by personnel of the Service.

46 USC 51702 - Civilian nautical schools

(a) Definition.— 
In this section, the term civilian nautical school means a school operated in the United States (except the United States Merchant Marine Academy, a State maritime academy, or another school operated by the United States Government) that offers instruction to individuals quartered on a vessel primarily to train them for service in the merchant marine.
(b) Inspection.— 
Each civilian nautical school is subject to inspection by the Secretary of Transportation.
(c) Rating and Certification.— 
The Secretary may, under regulations the Secretary may prescribe, provide for the rating and certification of civilian nautical schools as to the adequacy of their course of instruction, the competence of their instructors, and the suitability of the equipment used in their course of instruction.

46 USC 51703 - Additional training

(a) General Authority.— 
The Secretary of Transportation may provide additional training on maritime subjects to supplement other training opportunities and make the training available to the personnel of the merchant marine of the United States and individuals preparing for a career in the merchant marine of the United States.
(b) Equipment, Supplies, and Contracts.— 
The Secretary may
(1) prepare or buy equipment or supplies required for the additional training; and
(2) without regard to section 3709 of the Revised Statutes (41 U.S.C. 5), make contracts for services the Secretary considers necessary to prepare the equipment and supplies and to supervise and administer the additional training.

46 USC 51704 - Training for maritime oil pollution prevention, response, and clean-up

(a) Assistance in Establishing Program.— 
The Secretary of Transportation shall assist maritime training institutions approved by the Secretary in establishing a training program for maritime oil pollution prevention, response, and clean-up.
(b) Providing Training Vessels.— 
Subject to subsection (c), the Secretary may provide, with title free of all liens, to maritime training institutions that have a program established under subsection (a), offshore supply vessels and tug/supply vessels that were built in the United States and are in the possession of the Maritime Administration because of a default on a loan guaranteed under chapter 537 of this title.
(c) Requirements.— 
In addition to any other requirements the Secretary considers appropriate, the following requirements apply to vessels provided under this section:
(1) The vessel shall be offered to the institution at a location selected by the Secretary.
(2) The institution shall use the vessel to train students and appropriate maritime industry personnel in oil spill prevention, response, clean-up, and related skills.
(3) The institution shall make the vessel and qualified students available to appropriate Federal, State, and local oil spill response authorities when there is a maritime oil spill.
(4) The institution may not sell, trade, charter, donate, scrap, or in any way alter or dispose of the vessel without prior approval of the Secretary.
(5) The institution may not use the vessel in competition with a privately-owned vessel documented under chapter 121 of this title or titled under the law of a State, unless necessary to carry out this section.
(6) When the institution can no longer use the vessel for its training program, the institution shall return the vessel to the Secretary. The Secretary shall take possession at the institution and thereafter may provide the vessel to another institution under this section or dispose of the vessel.

TITLE 46 - US CODE - CHAPTER 519 - MERCHANT MARINE AWARDS

46 USC 51901 - Awards for individual acts or service

(a) General Authority.— 
The Secretary of Transportation may award decorations and medals of appropriate design (including ribbons, ribbon bars, emblems, rosettes, miniature facsimiles, plaques, citations, or other suitable devices or insignia) for individual acts or service in the merchant marine of the United States. The design may be similar to the design of a decoration or medal authorized for members of the armed forces for similar acts or service.
(b) Specific Authority.— 
The Secretary may award
(1) a Merchant Marine Distinguished Service Medal to an individual for outstanding acts, conduct, or valor beyond the line of duty;
(2) a Merchant Marine Meritorious Service Medal to an individual for meritorious acts, conduct, or valor in the line of duty, but not of the outstanding character that would warrant the award of the Merchant Marine Distinguished Service Medal;
(3) a decoration or medal to an individual for service during a war, national emergency proclaimed by the President or Congress, or operations by the armed forces outside the continental United States under conditions of danger to life and property; and
(4) a decoration or medal to an individual for other acts or service of conspicuous gallantry, intrepidity, and extraordinary heroism under conditions of danger to life and property that would warrant a similar decoration or medal for a member of the armed forces.

46 USC 51902 - Gallant Ship Award

(a) Awards to Vessels.— 
The Secretary of Transportation may award a Gallant Ship Award and a citation to a vessel (including a foreign vessel) participating in outstanding or gallant action in a marine disaster or other emergency to save life or property at sea. The Secretary may award a plaque to the vessel, and a replica of the plaque may be preserved as a permanent historical record.
(b) Awards to Crews.— 
The Secretary of Transportation may award an appropriate citation ribbon bar to the master and each individual serving, at the time of the action, on a vessel issued an award under subsection (a).
(c) Consultation.— 
The Secretary of Transportation shall consult with the Secretary of State before awarding an award or citation to a foreign vessel or its crew under this section.

46 USC 51903 - Multiple awards

An individual may not be awarded more than one of any type of decoration or medal under this chapter. For each succeeding act or service justifying the same decoration or medal, a suitable device may be awarded to be worn with the decoration or medal.

46 USC 51904 - Presentation to representatives

If an individual to be issued an award under this chapter is unable to accept the award personally, the Secretary of Transportation may present the award to an appropriate representative.

46 USC 51905 - Flags and grave markers

Except as authorized under another law, the Secretary of Transportation may issue, at no cost, a flag of the United States and a grave marker to the family or personal representative of a deceased individual who served in the merchant marine of the United States in support of the armed forces of the United States or its allies during a war or national emergency.

46 USC 51906 - Special certificates for civilian service to armed forces

(a) General Authority.— 
The Maritime Administrator may issue a special certificate to an individual, or the personal representative of an individual, in recognition of service of that individual in the merchant marine of the United States, if the service has been determined to be active duty under section 401 of the GI Bill Improvement Act of 1977 (Public Law 95202; 38 U.S.C. 106 note ).
(b) Relationship to Other Laws.— 
Issuance of a certificate under subsection (a) does not entitle an individual to any rights, privileges, or benefits under a law of the United States.

46 USC 51907 - Manufacture and sale of awards and replacements

The Secretary of Transportation may
(1) authorize private persons to manufacture decorations and medals authorized under this chapter or a prior law; and
(2) provide at cost, or authorize private persons to sell at reasonable prices, replacements for those decorations and medals.

46 USC 51908 - Prohibition against unauthorized manufacture, sale, possession, or display of awards

(a) Prohibition.— 
Except as authorized under this chapter, a person may not manufacture, sell, possess, or display a decoration or medal provided for in this chapter.
(b) Civil Penalty.— 
A person violating this section is liable to the United States Government for a civil penalty of not more than $2,000.

TITLE 46 - US CODE - CHAPTER 521 - MISCELLANEOUS

46 USC 52101 - Reemployment rights for certain merchant seamen

(a) In General.— 
An individual who is certified by the Secretary of Transportation under subsection (c) shall be entitled to reemployment rights and other benefits substantially equivalent to the rights and benefits provided for by chapter 43 of title 38 for any member of a reserve component of the armed forces of the United States who is ordered to active duty.
(b) Time for Application.— 
An individual may submit an application for certification under subsection (c) to the Secretary not later than 45 days after the date the individual completes a period of employment described in subsection (c)(1)(A) with respect to which the application is submitted.
(c) Certification Determination.— 
Not later than 20 days after the date the Secretary receives from an individual an application for certification under this subsection, the Secretary shall
(1) determine whether the individual
(A) was employed in the activation or operation of a vessel
(i) in the National Defense Reserve Fleet maintained under section 11 of the Merchant Ship Sales Act of 1946 (50 App. U.S.C. 1744) in a period in which the vessel was in use or being activated for use under subsection (b) of that section;
(ii) requisitioned or purchased under chapter 563 of this title; or
(iii) owned, chartered, or controlled by the United States Government and used by the Government for a war, armed conflict, national emergency, or maritime mobilization need (including for training purposes or testing for readiness and suitability for mission performance); and
(B) during the period of that employment, possessed a valid license, certificate of registry, or merchant mariners document issued under chapter 71 or 73 of this title; and
(2) if the Secretary makes affirmative determinations under subparagraphs (A) and (B) of paragraph (1), certify that individual under this subsection.
(d) Equivalence to Military Selective Service Act Certificate.— 
For purposes of reemployment rights and benefits provided by this section, a certification under subsection (c) shall be considered to be the equivalent of a certificate described in section 9(a) of the Military Selective Service Act (50 App. U.S.C. 459 (a)).

Part C - Financial Assistance Programs

TITLE 46 - US CODE - CHAPTER 531 - MARITIME SECURITY FLEET

46 USC 53101 - Definitions

In this chapter:
(1) Bulk cargo.— 
The term bulk cargo means cargo that is loaded and carried in bulk without mark or count.
(2) Contractor.— 
The term contractor means an owner or operator of a vessel that enters into an operating agreement for the vessel with the Secretary under section 53103.
(3) Fleet.— 
The term Fleet means the Maritime Security Fleet established under section 53102 (a).
(4) Foreign commerce.— 
The term foreign commerce
(A) subject to subparagraph (B), means
(i) commerce or trade between the United States, its territories or possessions, or the District of Columbia, and a foreign country; and
(ii) commerce or trade between foreign countries; and
(B) includes, in the case of liquid and dry bulk cargo carrying services, trading between foreign ports in accordance with normal commercial bulk shipping practices in such manner as will permit United States-documented vessels freely to compete with foreign-flag bulk carrying vessels in their operation or in competing for charters, subject to rules and regulations promulgated by the Secretary of Transportation pursuant to this chapter or subtitle D of the Maritime Security Act of 2003.
(5) LASH vessel.— 
The term LASH vessel means a lighter aboard ship vessel.
(6) Participating fleet vessel.— 
The term participating fleet vessel means any vessel that
(A) on October 1, 2005
(i) meets the requirements of paragraph (1), (2), (3), or (4) of section 53102 (c); and
(ii) is less than 25 years of age, or less than 30 years of age in the case of a LASH vessel; and
(B) on December 31, 2004, is covered by an operating agreement under subtitle B of title VI of the Merchant Marine Act, 1936 (46 App. U.S.C. 1187 et seq.).[1]
(7) Person.— 
The term person includes corporations, partnerships, and associations existing under or authorized by the laws of the United States, or any State, Territory, District, or possession thereof, or of any foreign country.
(8) Product tank vessel.— 
The term product tank vessel means a double hulled tank vessel capable of carrying simultaneously more than 2 separated grades of refined petroleum products.
(9) Secretary.— 
The term Secretary means the Secretary of Transportation.
(10) Tank vessel.— 
The term tank vessel has the meaning that term has under section 2101 of this title.
(11) United states.— 
The term United States includes the District of Columbia, the Commonwealth of Puerto Rico, the Northern Mariana Islands, Guam, American Samoa, the Virgin Islands.
(12) United states citizen trust.— 

(A) Subject to subparagraph (C), the term United States citizen trust means a trust that is qualified under this paragraph.
(B) A trust is qualified under this paragraph with respect to a vessel only if
(i) each of the trustees is a citizen of the United States; and
(ii) the application for documentation of the vessel under chapter 121 of this title includes the affidavit of each trustee stating that the trustee is not aware of any reason involving a beneficiary of the trust that is not a citizen of the United States, or involving any other person that is not a citizen of the United States, as a result of which the beneficiary or other person would hold more than 25 percent of the aggregate power to influence or limit the exercise of the authority of the trustee with respect to matters involving any ownership or operation of the vessel that may adversely affect the interests of the United States.
(C) If any person that is not a citizen of the United States has authority to direct or participate in directing a trustee for a trust in matters involving any ownership or operation of the vessel that may adversely affect the interests of the United States or in removing a trustee for a trust without cause, either directly or indirectly through the control of another person, the trust is not qualified under this paragraph unless the trust instrument provides that persons who are not citizens of the United States may not hold more than 25 percent of the aggregate authority to so direct or remove a trustee.
(D) This paragraph shall not be considered to prohibit a person who is not a citizen of the United States from holding more than 25 percent of the beneficial interest in a trust.
(13) United states-documented vessel.— 
The term United States-documented vessel means a vessel documented under chapter 121 of this title.
[1] See References in Text note below.

46 USC 53102 - Establishment of Maritime Security Fleet

(a) In General.— 
The Secretary of Transportation, in consultation with the Secretary of Defense, shall establish a fleet of active, commercially viable, militarily useful, privately owned vessels to meet national defense and other security requirements and maintain a United States presence in international commercial shipping. The Fleet shall consist of privately owned, United States-documented vessels for which there are in effect operating agreements under this chapter, and shall be known as the Maritime Security Fleet.
(b) Vessel Eligibility.— 
A vessel is eligible to be included in the Fleet if
(1) the vessel meets the requirements of paragraph (1), (2), (3), or (4) of subsection (c);
(2) the vessel is operated (or in the case of a vessel to be constructed, will be operated) in providing transportation in foreign commerce;
(3) the vessel is self-propelled and is
(A) a roll-on/roll-off vessel with a carrying capacity of at least 80,000 square feet or 500 twenty-foot equivalent units and that is 15 years of age or less on the date the vessel is included in the Fleet;
(B) a tank vessel that is constructed in the United States after the date of the enactment of this chapter;
(C) a tank vessel that is 10 years of age or less on the date the vessel is included in the Fleet;
(D) a LASH vessel that is 25 years of age or less on the date the vessel is included in the Fleet; or
(E) any other type of vessel that is 15 years of age or less on the date the vessel is included in the Fleet;
(4) the vessel is
(A) determined by the Secretary of Defense to be suitable for use by the United States for national defense or military purposes in time of war or national emergency; and
(B) determined by the Secretary to be commercially viable; and
(5) the vessel
(A) is a United States-documented vessel; or
(B) is not a United States-documented vessel, but
(i) the owner of the vessel has demonstrated an intent to have the vessel documented under chapter 121 of this title if it is included in the Fleet; and
(ii) at the time an operating agreement for the vessel is entered into under this chapter, the vessel is eligible for documentation under chapter 121 of this title.
(c) Requirements Regarding Citizenship of Owners, Charterers, and Operators.— 

(1) Vessel owned and operated by section 50501 citizens.— 
A vessel meets the requirements of this paragraph if, during the period of an operating agreement under this chapter that applies to the vessel, the vessel will be owned and operated by one or more persons that are citizens of the United States under section 50501 of this title.
(2) Vessel owned by section 50501 citizen or united states citizen trust, and chartered to documentation citizen.— 
A vessel meets the requirements of this paragraph if
(A) during the period of an operating agreement under this chapter that applies to the vessel, the vessel will be
(i) owned by a person that is a citizen of the United States under section 50501 of this title or that is a United States citizen trust; and
(ii) demise chartered to a person
(I) that is eligible to document the vessel under chapter 121 of this title;
(II) the chairman of the board of directors, chief executive officer, and a majority of the members of the board of directors of which are citizens of the United States under section 50501 of this title, and are appointed and subjected to removal only upon approval by the Secretary; and
(III) that certifies to the Secretary that there are no treaties, statutes, regulations, or other laws that would prohibit the contractor for the vessel from performing its obligations under an operating agreement under this chapter;
(B) in the case of a vessel that will be demise chartered to a person that is owned or controlled by another person that is not a citizen of the United States under section 50501 of this title, the other person enters into an agreement with the Secretary not to influence the operation of the vessel in a manner that will adversely affect the interests of the United States; and
(C) the Secretary and the Secretary of Defense notify the Committee on Armed Services and the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Armed Services of the House of Representatives that they concur with the certification required under subparagraph (A)(ii)(III), and have reviewed and agree that there are no other legal, operational, or other impediments that would prohibit the contractor for the vessel from performing its obligations under an operating agreement under this chapter.
(3) Vessel owned and operated by defense contractor.— 
A vessel meets the requirements of this paragraph if
(A) during the period of an operating agreement under this chapter that applies to the vessel, the vessel will be owned and operated by a person that
(i) is eligible to document a vessel under chapter 121 of this title;
(ii) operates or manages other United States-documented vessels for the Secretary of Defense, or charters other vessels to the Secretary of Defense;
(iii) has entered into a special security agreement for purposes of this paragraph with the Secretary of Defense;
(iv) makes the certification described in paragraph (2)(A)(ii)(III); and
(v) in the case of a vessel described in paragraph (2)(B), enters into an agreement referred to in that paragraph; and
(B) the Secretary and the Secretary of Defense notify the Committee on Armed Services and the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Armed Services of the House of Representatives that they concur with the certification required under subparagraph (A)(iv), and have reviewed and agree that there are no other legal, operational, or other impediments that would prohibit the contractor for the vessel from performing its obligations under an operating agreement under this chapter.
(4) Vessel owned by documentation citizen and chartered to section 50501 citizen.— 
A vessel meets the requirements of this paragraph if, during the period of an operating agreement under this chapter that applies to the vessel, the vessel will be
(A) owned by a person that is eligible to document a vessel under chapter 121 of this title; and
(B) demise chartered to a person that is a citizen of the United States under section 50501 of this title.
(d) Request by Secretary of Defense.— 
The Secretary of Defense shall request the Secretary of Homeland Security to issue any waiver under section 501 of this title that is necessary for purposes of this chapter.
(e) Vessel Standards.— 

(1) Certificate of inspection.— 
A vessel used to provide oceangoing transportation which the Secretary of the department in which the Coast Guard is operating determines meets the criteria of subsection (b) of this section but which, on the date of enactment of the Maritime Security Act of 2003, is not documented under chapter 121 of this title, shall be eligible for a certificate of inspection if the Secretary determines that
(A) the vessel is classed by and designed in accordance with the rules of the American Bureau of Shipping, or another classification society accepted by the Secretary;
(B) the vessel complies with applicable international agreements and associated guidelines, as determined by the country in which the vessel was documented immediately before becoming documented under chapter 121; and
(C) that country has not been identified by the Secretary as inadequately enforcing international vessel regulations as to that vessel.
(2) Continued eligibility for certificate.— 
Paragraph (1) does not apply to a vessel after any date on which the vessel fails to comply with the applicable international agreements and associated guidelines referred to in paragraph (1)(B).
(3) Reliance on classification society.— 

(A) In general.— 
The Secretary may rely on a certification from the American Bureau of Shipping or, subject to subparagraph (B), another classification society accepted by the Secretary to establish that a vessel is in compliance with the requirements of paragraphs (1) and (2).
(B) Foreign classification society.— 
The Secretary may accept certification from a foreign classification society under subparagraph (A) only
(i) to the extent that the government of the foreign country in which the society is headquartered provides access on a reciprocal basis to the American Bureau of Shipping; and
(ii) if the foreign classification society has offices and maintains records in the United States.
(f) Waiver of Age Restriction.— 
The Secretary of Defense, in conjunction with the Secretary of Transportation, may waive the application of an age restriction under subsection (b)(3) if the Secretaries jointly determine that the waiver
(1) is in the national interest;
(2) is appropriate to allow the maintenance of the economic viability of the vessel and any associated operating network; and
(3) is necessary due to the lack of availability of other vessels and operators that comply with the requirements of this chapter.

46 USC 53103 - Award of operating agreements

(a) In General.— 
The Secretary shall require, as a condition of including any vessel in the Fleet, that the person that is the owner or operator of the vessel for purposes of section 53102 (c) enter into an operating agreement with the Secretary under this section.
(b) Procedure for Applications.— 

(1) Acceptance of applications.— 
Beginning no later than 30 days after the effective date of this chapter, the Secretary shall accept applications for enrollment of vessels in the Fleet.
(2) Action on applications.— 
Within 90 days after receipt of an application for enrollment of a vessel in the Fleet, the Secretary shall approve the application in conjunction with the Secretary of Defense, and shall enter into an operating agreement with the applicant, or provide in writing the reason for denial of that application.
(3) Participating fleet vessels.— 

(A) In general.— 
The Secretary shall accept an application for an operating agreement for a participating fleet vessel under the priority under subsection (c)(1)(B) only from a person that has authority to enter into an operating agreement for the vessel with respect to the full term of the operating agreement.
(B) Vessel under demise charter.— 
For purposes of subparagraph (A), in the case of a vessel that is subject to a demise charter that terminates by its terms on September 30, 2005 (without giving effect to any extension provided therein for completion of a voyage or to effect the actual redelivery of the vessel), or that is terminable at will by the owner of the vessel after such date, only the owner of the vessel shall be treated as having the authority referred to in paragraph (1).
(C) Vessel owned by united states citizen trust.— 
For purposes of subparagraph (B), in the case of a vessel owned by a United States citizen trust, the term owner of the vessel includes a beneficial owner of the vessel with respect to such trust.
(c) Priority for Awarding Agreements.— 

(1) In general.— 
Subject to the availability of appropriations, the Secretary shall enter into operating agreements according to the following priority:
(A) New tank vessels.— 
First, for any tank vessel that
(i) is constructed in the United States after the effective date of this chapter;
(ii) is eligible to be included in the Fleet under section 53102 (b); and
(iii) during the period of an operating agreement under this chapter that applies to the vessel, will be owned and operated by one or more persons that are citizens of the United States under section 50501 of this title,

except that the Secretary shall not enter into operating agreements under this subparagraph for more than 5 such vessels.

(B) Participating fleet vessels.— 
Second, to the extent amounts are available after applying subparagraph (A), for any participating fleet vessel, except that the Secretary shall not enter into operating agreements under this subparagraph for more than 47 vessels.
(C) Certain vessels operated by section 50501 citizens.— 
Third, to the extent amounts are available after applying subparagraphs (A) and (B), for any other vessel that is eligible to be included in the Fleet under section 53102 (b), and that, during the period of an operating agreement under this chapter that applies to the vessel, will be
(i) owned and operated by one or more persons that are citizens of the United States under section 50501 of this title; or
(ii) owned by a person that is eligible to document the vessel under chapter 121 of this title, and operated by a person that is a citizen of the United States under section 50501 of this title.
(D) Other eligible vessels.— 
Fourth, to the extent amounts are available after applying subparagraphs (A), (B), and (C), for any other vessel that is eligible to be included in the Fleet under section 53102 (b).
(2) Reduction in number of slots for participating fleet vessels.— 
The number in paragraph (1)(B) shall be reduced by 1
(A) for each participating fleet vessel for which an application for enrollment in the Fleet is not received by the Secretary within the 90-day period beginning on the effective date of this chapter; and
(B) for each participating fleet vessel for which an application for enrollment in the Fleet received by the Secretary is not approved by the Secretary and the Secretary of Defense within the 90-day period beginning on the date of such receipt.
(3) Discretion within priority.— 
The Secretary
(A) subject to subparagraph (B), may award operating agreements within each priority under paragraph (1) as the Secretary considers appropriate; and
(B) shall award operating agreements within a priority
(i) in accordance with operational requirements specified by the Secretary of Defense;
(ii) in the case of operating agreements awarded under subparagraph (C) or (D) of paragraph (1), according to applicants records of owning and operating vessels; and
(iii) subject to the approval of the Secretary of Defense.
(4) Treatment of tank vessel to be replaced.— 

(A) For purposes of the application of paragraph (1)(A) with respect to the award of an operating agreement, the Secretary may treat an existing tank vessel that is eligible to be included in the Fleet under section 53102 (b) as a vessel that is constructed in the United States after the effective date of this chapter, if
(i) 
(I) a binding contract for construction in the United States of a replacement vessel to be operated under the operating agreement is executed by not later than 9 months after the first date amounts are available to carry out this chapter; and
(II) the replacement vessel is eligible to be included in the Fleet under section 53102 (b); or
(ii) 
(I) not later than 9 months after the first date amounts are available to carry out this chapter, the operator of the existing tank vessel enters into an agreement to charter one or more tank vessels to be built in the United States and operated as a documented vessel or documented vessels;
(II) the combined tonnage of the vessels required to be chartered under subclause (I) is equal to or greater than the tonnage of the existing tank vessel subject to an operating agreement;
(III) the operator enters into an agreement with the Secretary that is substantially the same as an Emergency Preparedness Agreement under section 53107 of this title, under which the operator shall make available commercial transportation resources as provided in that section;
(IV) if the person that is the owner or operator of the existing tank vessel owns or operates more than one existing tank vessel subject to an operating agreement, the combined tonnage of those vessels required to be chartered under subclause (I) by that person is equal to or greater than the combined tonnage of all such existing tank vessels owned or operated by such person that are subject to operating agreements.
(B) No payment under this chapter may be made for an existing tank vessel with respect to which a binding contract is entered into under subparagraph (A)(i) for which an operating agreement is awarded under this paragraph after the earlier of
(i) 4 years after the first date amounts are available to carry out this chapter; or
(ii) the date of delivery of the replacement tank vessel.
(C) For purpose of subparagraph (A)(ii), tonnage shall be measured under section 14502 of this title, or an alternate tonnage measured under section 14302 of this title as prescribed by the Secretary under section 14104 of this title.
(D) No payment under this chapter may be made for an existing tank vessel with respect to which an agreement is entered into under subparagraph (A)(ii) for any period occurring
(i) after the date that is 5 years after the first date that amounts became available to carry out this chapter, if the vessel or vessels required to be chartered under subparagraph (A)(ii) have not been delivered; or
(ii) after delivery of the vessel or vessels required to be chartered under such subparagraph, if any of such vessels is not chartered by the operator of the existing tank vessel.
(d) Limitation.— 
The Secretary may not award operating agreements under this chapter that require payments under section 53106 for a fiscal year for more than 60 vessels.

46 USC 53104 - Effectiveness of operating agreements

(a) Effectiveness, Generally.— 
The Secretary may enter into an operating agreement under this chapter for fiscal year 2006. Except as provided in subsection (b), the agreement shall be effective only for 1 fiscal year, but shall be renewable, subject to the availability of appropriations, for each subsequent fiscal year through the end of fiscal year 2015.
(b) Vessels Under Charter to United States.— 
Unless an earlier date is requested by the applicant, the effective date for an operating agreement with respect to a vessel that is, on the date of entry into an operating agreement, on charter to the United States Government, other than a charter pursuant to an Emergency Preparedness Agreement under section 53107, shall be the expiration or termination date of the Government charter covering the vessel, or any earlier date the vessel is withdrawn from that charter.
(c) Termination.— 

(1) Termination by secretary.— 
If the contractor with respect to an operating agreement materially fails to comply with the terms of the agreement
(A) the Secretary shall notify the contractor and provide a reasonable opportunity to comply with the operating agreement;
(B) the Secretary shall terminate the operating agreement if the contractor fails to achieve such compliance; and
(C) upon such termination, any funds obligated by the agreement shall be available to the Secretary to carry out this chapter.
(2) Early termination by contractor, generally.— 
An operating agreement under this chapter shall terminate on a date specified by the contractor if the contractor notifies the Secretary, by not later than 60 days before the effective date of the termination, that the contractor intends to terminate the agreement.
(3) Early termination by contractor, with available replacement.— 
An operating agreement under this chapter shall terminate upon the expiration of the 3-year period beginning on the date a vessel begins operating under the agreement, if
(A) the contractor notifies the Secretary, by not later than 2 years after the date the vessel begins operating under the agreement, that the contractor intends to terminate the agreement under this paragraph; and
(B) the Secretary, in conjunction with the Secretary of Defense, determines that
(i) an application for an operating agreement under this chapter has been received for a replacement vessel that is acceptable to the Secretaries; and
(ii) during the period of an operating agreement under this chapter that applies to the replacement vessel, the replacement vessel will be
(I) owned and operated by one or more persons that are citizens of the United States under section 50501 of this title; or
(II) owned by a person that is eligible to document the vessel under chapter 121 of this title, and operated by a person that is a citizen of the United States under section 50501 of this title.
(d) Nonrenewal for Lack of Funds.— 
If, by the first day of a fiscal year, sufficient funds have not been appropriated under the authority provided by this chapter for that fiscal year, then the Secretary shall notify the Committee on Armed Services and the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Armed Services of the House of Representatives that operating agreements authorized under this chapter for which sufficient funds are not available will not be renewed for that fiscal year if sufficient funds are not appropriated by the 60th day of that fiscal year.
(e) Release of Vessels From Obligations.— 
If an operating agreement under this chapter is terminated under subsection (c)(3), or if funds are not appropriated for payments under an operating agreement under this chapter for any fiscal year by the 60th day of that fiscal year, then
(1) each vessel covered by the operating agreement is thereby released from any further obligation under the operating agreement;
(2) the owner or operator of the vessel may transfer and register such vessel under a foreign registry that is acceptable to the Secretary of Transportation and the Secretary of Defense, notwithstanding section 56101 of this title; and
(3) if chapter 563 of this title is applicable to such vessel after registration of the vessel under such a registry, then the vessel is available to be requisitioned by the Secretary of Transportation pursuant to chapter 563.

46 USC 53105 - Obligations and rights under operating agreements

(a) Operation of Vessel.— 
An operating agreement under this chapter shall require that, during the period a vessel is operating under the agreement
(1) the vessel
(A) shall be operated exclusively in the foreign commerce or in mixed foreign commerce and domestic trade allowed under a registry endorsement issued under section 12111 of this title; and
(B) shall not otherwise be operated in the coastwise trade; and
(2) the vessel shall be documented under chapter 121 of this title.
(b) Annual Payments by Secretary.— 

(1) In general.— 
An operating agreement under this chapter shall require, subject to the availability of appropriations, that the Secretary make a payment each fiscal year to the contractor in accordance with section 53106.
(2) Operating agreement is obligation of united states government.— 
An operating agreement under this chapter constitutes a contractual obligation of the United States Government to pay the amounts provided for in the agreement to the extent of actual appropriations.
(c) Documentation Requirement.— 
Each vessel covered by an operating agreement (including an agreement terminated under section 53104 (c)(2)) shall remain documented under chapter 121 of this title, until the date the operating agreement would terminate according to its terms.
(d) National Security Requirements.— 

(1) In general.— 
A contractor with respect to an operating agreement (including an agreement terminated under section 53104 (c)(2)) shall continue to be bound by the provisions of section 53107 until the date the operating agreement would terminate according to its terms.
(2) Emergency preparedness agreement.— 
All terms and conditions of an Emergency Preparedness Agreement entered into under section 53107 shall remain in effect until the date the operating agreement would terminate according to its terms, except that the terms of such Emergency Preparedness Agreement may be modified by the mutual consent of the contractor, the Secretary of Transportation, and the Secretary of Defense.
(e) Transfer of Operating Agreements.— 

(1) In general.— 
A contractor under an operating agreement may transfer the agreement (including all rights and obligations under the agreement) to any person that is eligible to enter into that operating agreement under this chapter, if the transfer is approved by the Secretary and the Secretary of Defense.
(2) Limitation.— 
The Secretary of Defense may not approve under paragraph (1) transfer of an operating agreement to a person that is not a citizen of the United States under section 2 of the Shipping Act, 1916 (46 App. U.S.C. 802),[1] unless the Secretary of Defense determines that there is no person who is a citizen under such section and is interested in obtaining the operating agreement for a vessel that is otherwise eligible to be included in the Fleet under section 53102 (b) and meets the requirements of the Department of Defense.
(f) Replacement Vessel.— 
A contractor may replace a vessel under an operating agreement with another vessel that is eligible to be included in the Fleet under section 53102 (b), if the Secretary, in conjunction with the Secretary of Defense, approves replacement of the vessel.
[1] See References in Text note below.

46 USC 53106 - Payments

(a) Annual Payment.— 

(1) In general.— 
The Secretary, subject to the availability of appropriations and the other provisions of this section, shall pay to the contractor for an operating agreement, for each vessel that is covered by the operating agreement, an amount equal to
(A) $2,600,000 for each of fiscal years 2006, 2007, and 2008;
(B) $2,900,000, for each of fiscal years 2009, 2010, and 2011; and
(C) $3,100,000 for each fiscal years 2012, 2013, 2014, and 2015.
(2) Timing.— 
The amount shall be paid in equal monthly installments at the end of each month. The amount shall not be reduced except as provided by this section.
(b) Certification Required for Payment.— 
As a condition of receiving payment under this section for a fiscal year for a vessel, the contractor for the vessel shall certify, in accordance with regulations issued by the Secretary, that the vessel has been and will be operated in accordance with section 53105 (a)(1) for at least 320 days in the fiscal year. Days during which the vessel is drydocked, surveyed, inspected, or repaired shall be considered days of operation for purposes of this subsection.
(c) General Limitations.— 
The Secretary of Transportation shall not make any payment under this chapter for a vessel with respect to any days for which the vessel is
(1) under a charter to the United States Government, other than a charter pursuant to an Emergency Preparedness Agreement under section 53107;
(2) not operated or maintained in accordance with an operating agreement under this chapter; or
(3) more than
(A) 25 years of age, except as provided in subparagraph (B) or (C);
(B) 20 years of age, in the case of a tank vessel; or
(C) 30 years of age, in the case of a LASH vessel.
(d) Reductions in Payments.— 
With respect to payments under this chapter for a vessel covered by an operating agreement, the Secretary
(1) except as provided in paragraph (2), shall not reduce any payment for the operation of the vessel to carry military or other preference cargoes under section 55302 (a), 55304, 55305, or 55314 of this title, section 2631 of title 10, or any other cargo preference law of the United States;
(2) shall not make any payment for any day that the vessel is engaged in transporting more than 7,500 tons of civilian bulk preference cargoes pursuant to section 55302 (a), 55305, or 55314 of this title that is bulk cargo; and
(3) shall make a pro rata reduction in payment for each day less than 320 in a fiscal year that the vessel is not operated in accordance with section 53105 (a)(1), with days during which the vessel is drydocked or undergoing survey, inspection, or repair considered to be days on which the vessel is operated.
(e) Limitation Regarding Noncontiguous Domestic Trade.— 

(1) In general.— 
No contractor shall receive payments pursuant to this chapter during a period in which it participates in noncontiguous domestic trade.
(2) Limitation on application.— 
Paragraph (1) shall not apply to any person that is a citizen of the United States within the meaning of section 50501 of this title, applying the 75 percent ownership requirement of that section.
(3) Participates in a noncontiguous domestic trade defined.— 
In this subsection the term participates in a noncontiguous domestic trade means directly or indirectly owns, charters, or operates a vessel engaged in transportation of cargo between a point in the contiguous 48 States and a point in Alaska, Hawaii, or Puerto Rico, other than a point in Alaska north of the Arctic Circle.
(f) Priority in Allocation of Available Amounts.— 
If the amount available for a fiscal year for making payments under operating agreements under this chapter is not sufficient to pay the full amount authorized under each agreement pursuant to this section for such fiscal year, the amount available shall be allocated among such agreements in a manner that gives priority to payments for vessels that are subject to agreements under section 3517 of the Maritime Security Act of 2003 (46 U.S.C. 53101 note ).

46 USC 53107 - National security requirements

(a) Emergency Preparedness Agreement Required.— 
The Secretary shall establish an Emergency Preparedness Program under this section that is approved by the Secretary of Defense. Under the program, the Secretary, in conjunction with the Secretary of Defense, shall include in each operating agreement under this chapter a requirement that the contractor enter into an Emergency Preparedness Agreement under this section with the Secretary. The Secretary shall negotiate and enter into an Emergency Preparedness Agreement with each contractor as promptly as practicable after the contractor has entered into an operating agreement under this chapter.
(b) Terms of Agreement.— 

(1) In general.— 
An Emergency Preparedness Agreement under this section shall require that upon a request by the Secretary of Defense during time of war or national emergency, or whenever determined by the Secretary of Defense to be necessary for national security or contingency operation (as that term is defined in section 101 of title 10, United States Code), a contractor for a vessel covered by an operating agreement under this chapter shall make available commercial transportation resources (including services).
(2) Basic terms.— 

(A) The basic terms of the Emergency Preparedness Agreement shall be established (subject to subparagraph (B)) by the Secretary and the Secretary of Defense.
(B) In any Emergency Preparedness Agreement, the Secretary and a contractor may agree to additional or modifying terms appropriate to the contractors circumstances if those terms have been approved by the Secretary of Defense.
(c) Participation After Expiration of Operating Agreement.— 
Except as provided by section 53105 (d), the Secretary may not require, through an Emergency Preparedness Agreement or operating agreement, that a contractor continue to participate in an Emergency Preparedness Agreement after the operating agreement with the contractor has expired according to its terms or is otherwise no longer in effect. After expiration of an Emergency Preparedness Agreement, a contractor may volunteer to continue to participate in such an agreement.
(d) Resources Made Available.— 
The commercial transportation resources to be made available under an Emergency Preparedness Agreement shall include vessels or capacity in vessels, intermodal systems and equipment, terminal facilities, intermodal and management services, and other related services, or any agreed portion of such nonvessel resources for activation as the Secretary of Defense may determine to be necessary, seeking to minimize disruption of the contractors service to commercial shippers.
(e) Compensation.— 

(1) In general.— 
The Secretary shall include in each Emergency Preparedness Agreement provisions approved by the Secretary of Defense under which the Secretary of Defense shall pay fair and reasonable compensation for all commercial transportation resources provided pursuant to this section.
(2) Specific requirements.— 
Compensation under this subsection
(A) shall not be less than the contractors commercial market charges for like transportation resources;
(B) shall be fair and reasonable considering all circumstances;
(C) shall be provided from the time that a vessel or resource is required by the Secretary of Defense until the time that it is redelivered to the contractor and is available to reenter commercial service; and
(D) shall be in addition to and shall not in any way reflect amounts payable under section 53106.
(f) Temporary Replacement Vessels.— 
Notwithstanding section 55302 (a), 55304, 55305, or 55314 of this title, section 2631 of title 10, or any other cargo preference law of the United States
(1) a contractor may operate or employ in foreign commerce a foreign-flag vessel or foreign-flag vessel capacity as a temporary replacement for a United States-documented vessel or United States-documented vessel capacity that is activated by the Secretary of Defense under an Emergency Preparedness Agreement or under a primary Department of Defense-approved sealift readiness program; and
(2) such replacement vessel or vessel capacity shall be eligible during the replacement period to transport preference cargoes subject to sections 55302 (a), 55304, 55305, and 55314 of this title and section 2631 of title 10 to the same extent as the eligibility of the vessel or vessel capacity replaced.
(g) Redelivery and Liability of United States for Damages.— 

(1) In general.— 
All commercial transportation resources activated under an Emergency Preparedness Agreement shall, upon termination of the period of activation, be redelivered to the contractor in the same good order and condition as when received, less ordinary wear and tear, or the Secretary of Defense shall fully compensate the contractor for any necessary repair or replacement.
(2) Limitation on liability of u.s.Except as may be expressly agreed to in an Emergency Preparedness Agreement, or as otherwise provided by law, the Government shall not be liable for disruption of a contractors commercial business or other consequential damages to a contractor arising from activation of commercial transportation resources under an Emergency Preparedness Agreement.

46 USC 53108 - Regulatory relief

(a) Operation in Foreign Commerce.— 
A contractor for a vessel included in an operating agreement under this chapter may operate the vessel in the foreign commerce of the United States without restriction.
(b) Other Restrictions.— 
The restrictions of section 55305 (a) of this title concerning the building, rebuilding, or documentation of a vessel in a foreign country shall not apply to a vessel for any day the operator of that vessel is receiving payments for operation of that vessel under an operating agreement under this chapter.
(c) Telecommunications Equipment.— 
The telecommunications and other electronic equipment on an existing vessel that is redocumented under the laws of the United States for operation under an operating agreement under this chapter shall be deemed to satisfy all Federal Communications Commission equipment certification requirements, if
(1) such equipment complies with all applicable international agreements and associated guidelines as determined by the country in which the vessel was documented immediately before becoming documented under the laws of the United States;
(2) that country has not been identified by the Secretary as inadequately enforcing international regulations as to that vessel; and
(3) at the end of its useful life, such equipment will be replaced with equipment that meets Federal Communications Commission equipment certification standards.

46 USC 53109 - Special rule regarding age of participating fleet vessel

Any age restriction under section 53102 (b)(3) or 53106 (c)(3) shall not apply to a participating fleet vessel during the 30-month period beginning on the date the vessel begins operating under an operating agreement under this title, if the Secretary determines that the contractor for the vessel has entered into an arrangement to obtain and operate under the operating agreement for the participating fleet vessel a replacement vessel that, upon commencement of such operation, will be eligible to be included in the Fleet under section 53102 (b).

46 USC 53110 - Regulations

The Secretary and the Secretary of Defense may each prescribe rules as necessary to carry out their respective responsibilities under this chapter.

46 USC 53111 - Authorization of appropriations

There are authorized to be appropriated for payments under section 53106, to remain available until expended
(1) $156,000,000 for each of fiscal years 2006, 2007, and 2008;
(2) $174,000,000 for each of fiscal years 2009, 2010, and 2011; and
(3) $186,000,000 for each fiscal year thereafter through fiscal year 2015.

TITLE 46 - US CODE - CHAPTER 533 - CONSTRUCTION RESERVE FUNDS

46 USC 53301 - Definitions

(a) In General.— 
In this chapter:
(1) Construction contract.— 
The term construction contract includes, for a taxpayer constructing a new vessel in a shipyard owned by that taxpayer, an agreement between the taxpayer and the Secretary of Transportation for that construction containing provisions the Secretary considers advisable to carry out this chapter.
(2) New vessel.— 
The term new vessel means
(A) a vessel
(i) constructed in the United States after December 31, 1939, constructed with a construction-differential subsidy under title V of the Merchant Marine Act, 1936, or constructed with financing or a financing guarantee under chapter 537 or 575 of this title;
(ii) documented or agreed with the Secretary to be documented under the laws of the United States; and
(iii) 
(I) of a type, size, and speed that the Secretary determines is suitable for use on the high seas or Great Lakes in carrying out this subtitle, but not less than 2,000 gross tons or less than 12 knots speed unless the Secretary certifies in each case that a vessel of lesser tonnage or speed is desirable for use by the United States Government in case of war or national emergency; or
(II) constructed to replace a vessel bought or requisitioned by the Government; and
(B) a vessel reconstructed or reconditioned for use only on the Great Lakes, including the Saint Lawrence River and Gulf, if the Secretary finds that the reconstruction or reconditioning will promote the objectives of this subtitle.
(b) Additional Tax-Related Terms.— 
Other terms used in this chapter have the same meaning as in chapter 1 of the Internal Revenue Code of 1986 (26 U.S.C. ch. 1).

46 USC 53302 - Authority for construction reserve funds

(a) General Authority.— 
An eligible person under section 53303 of this title may establish a construction reserve fund for the construction, reconstruction, reconditioning, or acquisition of a new vessel or for other purposes authorized by this chapter.
(b) Application of Certain Laws and Regulations.— 
The fund shall be established, maintained, expended, and used as provided by this chapter and regulations prescribed jointly by the Secretary of Transportation and the Secretary of the Treasury.

46 USC 53303 - Persons eligible to establish funds

A construction reserve fund may be established by a citizen of the United States that
(1) is operating a vessel in the foreign or domestic commerce of the United States or in the fisheries;
(2) owns, in whole or in part, a vessel being operated in the foreign or domestic commerce of the United States or in the fisheries;
(3) was operating a vessel in the foreign or domestic commerce of the United States or in the fisheries when it was bought or requisitioned by the United States Government;
(4) owned, in whole or in part, a vessel being operated in the foreign or domestic commerce of the United States or in the fisheries when it was bought or requisitioned by the Government; or
(5) had acquired or was having constructed a vessel to operate in the foreign or domestic commerce of the United States or in the fisheries when it was bought or requisitioned by the Government.

46 USC 53304 - Vessel ownership

In this chapter, a vessel is deemed to be constructed or acquired by a taxpayer if constructed or acquired by a corporation when the taxpayer owns at least 95 percent of each class of stock of the corporation.

46 USC 53305 - Eligible fund deposits

A construction reserve fund may include deposits of
(1) the proceeds from the sale of a vessel;
(2) indemnities for the loss of a vessel;
(3) earnings from the operation of a documented vessel and from services incident to the operation; and
(4) interest or other amounts accrued on deposits in the fund.

46 USC 53306 - Recognition of gain for tax purposes

(a) Definitions.— 
In this section, the terms net proceeds and net indemnity mean the sum of
(1) the adjusted basis of the vessel; and
(2) the amount of gain the taxpayer would recognize without regard to this section.
(b) Recognition of Gain.— 
In computing net income under the income or excess profits tax laws of the United States, a taxpayer does not recognize a gain on the sale or the actual or constructive total loss of a vessel if the taxpayer
(1) deposits an amount equal to the net proceeds of the sale or the net indemnity for the loss in a construction reserve fund within 60 days after receiving the payment of proceeds or indemnity; and
(2) elects under this section not to recognize the gain.
(c) When Election Must Be Made.— 

(1) In general.— 
Except as provided in paragraph (2), the taxpayer must make the election referred to in subsection (b) in the taxpayers income tax return for the taxable year in which the gain was realized.
(2) Receipt after taxable year.— 
If the vessel is bought or requisitioned by the United States Government, or is lost, and the taxpayer receives payment for the vessel or indemnity for the loss from the Government after the end of the taxable year in which it was bought, requisitioned, or lost, the taxpayer must make the election referred to in subsection (b) within 60 days after receiving the payment or indemnity, on a form prescribed by the Secretary of the Treasury.
(d) Effect of Statute of Limitation.— 
If the taxpayer makes an election under subsection (c)(2), and computation or recomputation under this section is otherwise allowable but is prevented by a statute of limitation on the date the election is made or within 6 months thereafter, the computation or recomputation nevertheless shall be made notwithstanding the statute if the taxpayer files a claim for the computation or recomputation within 6 months after the date of making the election.

46 USC 53307 - Basis for determining gain or loss and for depreciating new vessels

Under the income or excess profits tax laws of the United States, the basis for determining a gain or loss and for depreciation of a new vessel constructed, reconstructed, reconditioned, or acquired by the taxpayer, or for which purchase-money indebtedness is liquidated as provided in section 53310 of this title, with amounts from a construction reserve fund, shall be reduced by that part of the deposits in the fund expended in the construction, reconstruction, reconditioning, acquisition, or liquidation of purchase-money indebtedness of the new vessel that represents a gain not recognized for tax purposes under section 53306 of this title.

46 USC 53308 - Order and proportions of deposits and withdrawals

In this chapter
(1) if the net proceeds of a sale or the net indemnity for a loss is deposited in more than one deposit, the amount consisting of the gain shall be deemed to be deposited first;
(2) amounts expended, obligated, or otherwise withdrawn shall be applied against the amounts deposited in the fund in the order of deposit; and
(3) if a deposit consists in part of a gain not recognized under section 53306 of this title, any expenditure, obligation, or withdrawal applied against that deposit shall be deemed to be a gain in the proportion that the part of the deposit consisting of a gain bears to the total amount of the deposit.

46 USC 53309 - Accumulation of deposits

For any taxable year, amounts on deposit in a construction reserve fund on the last day of the taxable year, for which the requirements of section 53310 of this title have been satisfied (to the extent they apply on the last day of the taxable year), are deemed to have been retained for the reasonable needs of the business within the meaning of section 537(a) of the Internal Revenue Code of 1986 (26 U.S.C. 537 (a)).

46 USC 53310 - Obligation of deposits and period for construction of certain vessels

(a) Application of Sections 53306 and 53309.— 
Sections 53306 and 53309 of this title apply to a deposit in a construction reserve fund only if, within 3 years after the date of the deposit (and any extension under subsection (c))
(1) 
(A) a contract is made for the construction or acquisition of a new vessel or, with the approval of the Secretary of Transportation, for a part interest in a new vessel or for the reconstruction or reconditioning of a new vessel;
(B) the deposit is expended or obligated for expenditure under that contract;
(C) at least 12.5 percent of the construction or contract price of the vessel is paid or irrevocably committed for payment; and
(D) the plans and specifications for the vessel are approved by the Secretary to the extent the Secretary considers necessary; or
(2) the deposit is expended or obligated for expenditure for the liquidation of existing or subsequently incurred purchase-money indebtedness to a person not a parent company of, or a company affiliated or associated with, the mortgagor on a new vessel.
(b) Additional Requirements for Certain Vessels.— 
In addition to the requirements of subsection (a)(1), for a vessel not constructed under a construction-differential subsidy contract or not bought from the Secretary of Transportation
(1) at least 5 percent of the construction (or, if the contract covers more than one vessel, at least 5 percent of the construction of the first vessel) must be completed within 6 months after the date of the construction contract (or within the period of an extension under subsection (c)), as estimated by the Secretary and certified by the Secretary to the Secretary of the Treasury; and
(2) construction under the contract must be completed with reasonable dispatch thereafter.
(c) Extensions.— 
The Secretary of Transportation may grant extensions of the period within which the deposits must be expended or obligated or within which the construction must have progressed to the extent of 5 percent completion under this section. However, the extensions may not be for a total of more than 2 years for the expenditure or obligation of deposits or one year for the progress of construction.

46 USC 53311 - Taxation of deposits on failure of conditions

A deposited gain, if otherwise taxable income under the law applicable to the taxable year in which the gain was realized, shall be included in gross income for that taxable year, except for purposes of the declared value excess profits tax and the capital stock tax, if
(1) the deposited gain is not expended or obligated within the appropriate period under section 53310 of this title;
(2) the deposited gain is withdrawn before the end of that period;
(3) the construction related to that deposited gain has not progressed to the extent of 5 percent of completion within the appropriate period under section 53310 of this title; or
(4) the Secretary of Transportation finds and certifies to the Secretary of the Treasury that, for causes within the control of the taxpayer, the entire construction related to that deposited gain is not completed with reasonable dispatch.

46 USC 53312 - Assessment and collection of deficiency tax

Notwithstanding any other provision of law, a deficiency in tax for a taxable year resulting from the inclusion of an amount in gross income as provided by section 53311 of this title, and the amount to be treated as a deficiency under section 53311 instead of as an adjustment for the declared value excess profits tax, may be assessed or a civil action may be brought to collect the deficiency without assessment, at any time. Interest on a deficiency or amount to be treated as a deficiency does not begin until the date the deposited gain or part of the deposited gain in question is required to be included in gross income under section 51111.

TITLE 46 - US CODE - CHAPTER 535 - CAPITAL CONSTRUCTION FUNDS

46 USC 53501 - Definitions

In this chapter:
(1) Agreement vessel.— 
The term agreement vessel means
(A) an eligible vessel or a qualified vessel that is subject to an agreement under this chapter; and
(B) a barge or container that is part of the complement of a vessel described in subparagraph (A) if provided for in the agreement.
(2) Eligible vessel.— 
The term eligible vessel means
(A) a vessel
(i) constructed in the United States (and, if reconstructed, reconstructed in the United States), constructed outside the United States but documented under the laws of the United States on April 15, 1970, or constructed outside the United States for use in the United States foreign trade pursuant to a contract made before April 15, 1970;
(ii) documented under the laws of the United States; and
(iii) operated in the foreign or domestic trade of the United States or in the fisheries of the United States; and
(B) a commercial fishing vessel
(i) constructed in the United States and, if reconstructed, reconstructed in the United States;
(ii) of at least 2 net tons but less than 5 net tons;
(iii) owned by a citizen of the United States;
(iv) having its home port in the United States; and
(v) operated in the commercial fisheries of the United States.
(3) Joint regulations.— 
The term joint regulations means regulations prescribed jointly by the Secretary and the Secretary of the Treasury under section 53502 (b) of this title.
(4) Noncontiguous trade.— 
The term noncontiguous trade means
(A) trade between
(i) one of the contiguous 48 States; and
(ii) Alaska, Hawaii, Puerto Rico, or an insular territory or possession of the United States; and
(B) trade between
(i) a place in Alaska, Hawaii, Puerto Rico, or an insular territory or possession of the United States; and
(ii) another place in Alaska, Hawaii, Puerto Rico, or an insular territory or possession of the United States.
(5) Qualified vessel.— 
The term qualified vessel means
(A) a vessel
(i) constructed in the United States (and, if reconstructed, reconstructed in the United States), constructed outside the United States but documented under the laws of the United States on April 15, 1970, or constructed outside the United States for use in the United States foreign trade pursuant to a contract made before April 15, 1970;
(ii) documented under the laws of the United States; and
(iii) agreed, between the Secretary and the person maintaining the capital construction fund established under section 53503 of this title, to be operated in the United States foreign, Great Lakes, noncontiguous domestic, or short sea transportation trade trade[1] or in the fisheries of the United States; and
(B) a commercial fishing vessel
(i) constructed in the United States and, if reconstructed, reconstructed in the United States;
(ii) of at least 2 net tons but less than 5 net tons;
(iii) owned by a citizen of the United States;
(iv) having its home port in the United States; and
(v) operated in the commercial fisheries of the United States.
(6) Secretary.— 
The term Secretary means
(A) the Secretary of Commerce with respect to an eligible vessel or a qualified vessel operated or to be operated in the fisheries of the United States; and
(B) the Secretary of Transportation with respect to other vessels.
(7) [2] Short sea transportation trade.The term short sea transportation trade means the carriage by vessel of cargo
(A) that is
(i) contained in intermodal cargo containers and loaded by crane on the vessel; or
(ii) loaded on the vessel by means of wheeled technology; and
(B) that is
(i) loaded at a port in the United States and unloaded either at another port in the United States or at a port in Canada located in the Great Lakes Saint Lawrence Seaway System; or
(ii) loaded at a port in Canada located in the Great Lakes Saint Lawrence Seaway System and unloaded at a port in the United States.
(7) [2] United states foreign trade.The term United States foreign trade includes those areas in domestic trade in which a vessel built with a construction-differential subsidy is allowed to operate under the first sentence of section 506 of the Merchant Marine Act, 1936.
(8) Vessel.— 
The term vessel includes
(A) cargo handling equipment that the Secretary determines is intended for use primarily on the vessel; and
(B) an ocean-going towing vessel, an ocean-going barge, or a comparable towing vessel or barge operated on the Great Lakes.
[1] So in original.
[2] So in original. Two pars. (7) have been enacted.

46 USC 53502 - Regulations

(a) In General.— 
Except as provided in subsection (b), the Secretary shall prescribe regulations to carry out this chapter.
(b) Tax Liability.— 
The Secretary and the Secretary of the Treasury shall prescribe joint regulations for the determination of tax liability under this chapter.

46 USC 53503 - Establishing a capital construction fund

(a) In General.— 
A citizen of the United States owning or leasing an eligible vessel may make an agreement with the Secretary under this chapter to establish a capital construction fund for the vessel.
(b) Allowable Purpose.— 
The purpose of the agreement shall be to provide replacement vessels, additional vessels, or reconstructed vessels, built in the United States and documented under the laws of the United States, for operation in the United States foreign, Great Lakes, noncontiguous domestic, or short sea transportation trade or in the fisheries of the United States.

46 USC 53504 - Deposits and withdrawals

(a) Required Deposits.— 
An agreement to establish a capital construction fund shall provide for the deposit in the fund of the amounts agreed to be appropriate to provide for qualified withdrawals under section 53509 of this title.
(b) Applicable Requirements.— 
Deposits in and withdrawals from the fund are subject to the requirements included in the agreement or prescribed by the Secretary by regulation. However, the Secretary may not require a person to deposit in the fund for a taxable year more than 50 percent of that portion of the persons taxable income for that year (as determined under section 53505 (a)(1) of this title) that is attributable to the operation of an agreement vessel.

46 USC 53505 - Ceiling on deposits

(a) Maximum Deposits.— 
The amount deposited in a capital construction fund for a taxable year may not exceed the sum of
(1) that portion of the taxable income of the owner or lessee for the taxable year (computed under chapter 1 of the Internal Revenue Code of 1986 (26 U.S.C. ch. 1) but without regard to the carryback of net operating loss or net capital loss or this chapter) that is attributable to the operation of agreement vessels in the foreign or domestic trade of the United States or in the fisheries of the United States;
(2) the amount allowable as a deduction under section 167 of such Code (26 U.S.C. 167) for the taxable year for agreement vessels;
(3) if the transaction is not taken into account for purposes of paragraph (1), the net proceeds (as defined in joint regulations) from the disposition of an agreement vessel or from insurance or indemnity attributable to an agreement vessel; and
(4) the receipts from the investment or reinvestment of amounts held in the fund.
(b) Reductions for Lessees.— 
For a lessee, the maximum amount that may be deposited for an agreement vessel under subsection (a)(2) for any period shall be reduced by any amount the owner is required or permitted, under the capital construction fund agreement, to deposit for that period for the vessel under subsection (a)(2).

46 USC 53506 - Investment and fiduciary requirements

(a) In General.— 
Amounts in a capital construction fund shall be kept in the depository specified in the agreement and shall be subject to trustee and other fiduciary requirements prescribed by the Secretary. Except as provided in subsection (b), amounts in the fund may be invested only in interest-bearing securities approved by the Secretary.
(b) Stock Investments.— 

(1) In general.— 
With the approval of the Secretary, an agreed percentage (but not more than 60 percent) of the assets of the fund may be invested in the stock of domestic corporations that
(A) is fully listed and registered on an exchange registered with the Securities and Exchange Commission as a national securities exchange; and
(B) would be acquired by a prudent investor seeking a reasonable income and the preservation of capital.
(2) Preferred stock.— 
The preferred stock of a corporation is deemed to satisfy the requirements of this subsection, even though it may not be registered and listed because it is nonvoting stock, if the common stock of the corporation satisfies the requirements and the preferred stock otherwise would satisfy the requirements.
(c) Maintaining Agreed Percentage.— 
If at any time the fair market value of the stock in the fund is more than the agreed percentage of the assets in the fund, any subsequent investment of amounts deposited in the fund, and any subsequent withdrawal from the fund, shall be made in a way that tends to restore the fair market value of the stock to not more than the agreed percentage.

46 USC 53507 - Nontaxation of deposits

(a) Tax Treatment.— 
Subject to subsection (b), under the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.)
(1) taxable income (determined without regard to this chapter and section 7518 of such Code (26 U.S.C. 7518)) for the taxable year shall be reduced by the amount deposited for the taxable year out of amounts referred to in section 53505 (a)(1) of this title;
(2) a gain from a transaction referred to in section 53505 (a)(3) of this title shall not be taken into account if an amount equal to the net proceeds (as defined in joint regulations) from the transaction is deposited in the fund;
(3) the earnings (including gains and losses) from the investment and reinvestment of amounts held in the fund shall not be taken into account;
(4) the earnings and profits of a corporation (within the meaning of section 316 of such Code (26 U.S.C. 316)) shall be determined without regard to this chapter and section 7518 of such Code (26 U.S.C. 7518); and
(5) in applying the tax imposed by section 531 of such Code (26 U.S.C. 531), amounts held in the fund shall not be taken into account.
(b) Condition.— 
This section applies to an amount only if the amount is deposited in the fund under the agreement within the time provided in joint regulations.

46 USC 53508 - Separate accounts within a fund

(a) In General.— 
A capital construction fund shall have three accounts:
(1) The capital account.
(2) The capital gain account.
(3) The ordinary income account.
(b) Capital Account.— 
The capital account shall consist of
(1) amounts referred to in section 53505 (a)(2) of this title;
(2) amounts referred to in section 53505 (a)(3) of this title, except that portion representing a gain not taken into account because of section 53507 (a)(2) of this title;
(3) the percentage applicable under section 243(a)(1) of the Internal Revenue Code of 1986 (26 U.S.C. 243 (a)(1)) of any dividend received by the fund for which the person maintaining the fund would be allowed (were it not for section 53507 (a)(3) of this title) a deduction under section 243 of such Code (26 U.S.C. 243); and
(4) interest income exempt from taxation under section 103 of such Code (26 U.S.C. 103).
(c) Capital Gain Account.— 
The capital gain account shall consist of
(1) amounts representing capital gains on assets held for more than 6 months and referred to in section 53505 (a)(3) or (4) of this title; minus
(2) amounts representing capital losses on assets held in the fund for more than 6 months.
(d) Ordinary Income Account.— 
The ordinary income account shall consist of
(1) amounts referred to in section 53505 (a)(1) of this title;
(2) 
(A) amounts representing capital gains on assets held for not more than 6 months and referred to in section 53505 (a)(3) or (4) of this title; minus
(B) amounts representing capital losses on assets held in the fund for not more than 6 months;
(3) interest (except tax-exempt interest referred to in subsection (b)(4)) and other ordinary income (except any dividend referred to in paragraph (5)) received on assets held in the fund;
(4) ordinary income from a transaction described in section 53505 (a)(3) of this title; and
(5) that portion of any dividend referred to in subsection (b)(3) not taken into account under subsection (b)(3).
(e) When Losses Allowed.— 
Except on termination of a fund, capital losses referred to in subsection (c) or (d)(2) shall be allowed only as an offset to gains referred to in subsection (c) or (d)(2), respectively.

46 USC 53509 - Qualified withdrawals

(a) In General.— 
Subject to subsection (b), a withdrawal from a capital construction fund is a qualified withdrawal if it is made under the terms of the agreement and is for
(1) the acquisition, construction, or reconstruction of a qualified vessel or a barge or container that is part of the complement of a qualified vessel; or
(2) the payment of the principal on indebtedness incurred in the acquisition, construction, or reconstruction of a qualified vessel or a barge or container that is part of the complement of a qualified vessel.
(b) Barges and Containers.— 
Except as provided in regulations prescribed by the Secretary, subsection (a) applies to a barge or container only if it is constructed in the United States.
(c) Treatment as Nonqualified Withdrawal.— 
Under joint regulations, if the Secretary determines that a substantial obligation under an agreement is not being fulfilled, the Secretary, after notice and opportunity for a hearing to the person maintaining the fund, may treat any amount in the fund as an amount withdrawn from the fund in a nonqualified withdrawal.

46 USC 53510 - Tax treatment of qualified withdrawals and basis of property

(a) Order of Withdrawals.— 
A qualified withdrawal from a capital construction fund shall be treated as made
(1) first from the capital account;
(2) second from the capital gain account; and
(3) third from the ordinary income account.
(b) Ordinary Income Account Withdrawals.— 
If a portion of a qualified withdrawal for a vessel, barge, or container is made from the ordinary income account, the basis of the vessel, barge, or container shall be reduced by an amount equal to that portion.
(c) Capital Gain Account Withdrawals.— 
If a portion of a qualified withdrawal for a vessel, barge, or container is made from the capital gain account, the basis of the vessel, barge, or container shall be reduced by an amount equal to that portion.
(d) Withdrawals To Pay Principal.— 
If a portion of a qualified withdrawal to pay the principal on indebtedness is made from the ordinary income account or the capital gain account, an amount equal to the total reduction that would be required by subsections (b) and (c) if the withdrawal were a qualified withdrawal for a purpose described in those subsections shall be applied, in the order provided in joint regulations, to reduce the basis of vessels, barges, and containers owned by the person maintaining the fund. The remaining amount of the withdrawal shall be treated as a nonqualified withdrawal.
(e) Gain on Property With Reduced Basis.— 
If property, the basis of which was reduced under subsection (b), (c), or (d), is disposed of, any gain realized on the disposition, to the extent it does not exceed the total reduction in the basis of the property under those subsections, shall be treated as an amount referred to in section 53511 (c)(1) of this title withdrawn on the date of disposition of the property. Subject to conditions prescribed in joint regulations, this subsection does not apply to a disposition if there is a redeposit, in an amount determined under joint regulations, that restores the fund as far as practicable to the position it was in before the withdrawal.

46 USC 53511 - Tax treatment of nonqualified withdrawals

(a) In General.— 
Except as provided in section 53513 of this title, a withdrawal from a fund that is not a qualified withdrawal shall be treated as a nonqualified withdrawal.
(b) Order of Withdrawals.— 
A nonqualified withdrawal shall be treated as made
(1) first from the ordinary income account;
(2) second from the capital gain account; and
(3) third from the capital account.
(c) Tax Treatment.— 
For purposes of the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.)
(1) a nonqualified withdrawal from the ordinary income account shall be included in income as an item of ordinary income for the taxable year in which the withdrawal is made;
(2) a nonqualified withdrawal from the capital gain account shall be included in income for the taxable year in which the withdrawal is made as an item of gain realized during that year from the disposition of an asset held for more than 6 months; and
(3) for the period through the last date prescribed for payment of tax for the taxable year in which the withdrawal is made
(A) no interest shall be payable under section 6601 of such Code (26 U.S.C. 6601) and no addition to the tax shall be payable under section 6651 of such Code (26 U.S.C. 6651);
(B) interest on the amount of the additional tax attributable to an amount treated as a nonqualified withdrawal from the ordinary income account or the capital gain account shall be paid at the rate determined under subsection (d) from the last date prescribed for payment of the tax for the taxable year for which the amount was deposited in the fund; and
(C) no interest shall be payable on amounts treated as withdrawn on a last-in-first-out basis under section 53512 of this title.
(d) Interest Rate.— 
The rate of interest under subsection (c)(3)(B) for a nonqualified withdrawal made in a taxable year beginning after 1971 shall be determined and published jointly by the Secretary and the Secretary of the Treasury. The rate shall be such that its relationship to 8 percent is comparable, as determined by the Secretaries under joint regulations, to the relationship between
(1) the money rates and investment yields for the calendar year immediately before the beginning of the taxable year; and
(2) the money rates and investment yields for the calendar year 1970.
(e) Nonqualified Withdrawals.— 

(1) In general.— 
The following applicable percentage of any amount that remains in a capital construction fund at the close of the following specified taxable year following the taxable year for which the amount was deposited shall be treated as a nonqualified withdrawal: If the amount remains in the fund at The applicable the close of the percentage is 26th taxable year20 percent 27th taxable year40 percent 28th taxable year60 percent 29th taxable year80 percent 30th taxable year100 percent.
(2) Earnings.— 
The earnings of a capital construction fund for any taxable year (except net gains) shall be treated under this subsection as an amount deposited for the taxable year.
(3) Contract for qualified withdrawal.— 
Under paragraph (1), an amount shall not be treated as remaining in a capital construction fund at the close of a taxable year to the extent there is a binding contract at the close of the taxable year for a qualified withdrawal of the amount for an identified item for which the withdrawal may be made.
(4) Excess earnings.— 
If the Secretary determines that the balance in a capital construction fund exceeds the amount appropriate to meet the vessel construction program objectives of the person that established the fund, the amount of the excess shall be treated as a nonqualified withdrawal under paragraph (1) unless the person develops appropriate program objectives within 3 years to dissipate the excess.
(5) Amounts in fund on january 1, 1987.— 
Under this subsection, amounts in a capital construction fund on January 1, 1987, shall be treated as having been deposited in that fund on that date.
(f) Tax Determinations.— 

(1) In general.— 
For a taxable year for which there is a nonqualified withdrawal (including an amount treated as a nonqualified withdrawal under subsection (e)), the tax imposed by chapter 1 of the Internal Revenue Code of 1986 (26 U.S.C. ch. 1) shall be determined by
(A) excluding the withdrawal from gross income; and
(B) increasing the tax imposed by chapter 1 of such Code by the product of the amount of the withdrawal and the highest tax rate specified in section 1 (or section 11 for a corporation) of such Code (26 U.S.C. 1, 11).
(2) Maximum tax rate.— 
For that portion of a nonqualified withdrawal made from the capital gain account during a taxable year to which section 1(h) or 1201(a) of such Code (26 U.S.C. 1 (h), 1201 (a)) applies, the tax rate used under paragraph (1)(B) may not exceed 15 percent (or 34 percent for a corporation).
(3) Tax benefit rule.— 
If any portion of a nonqualified withdrawal is properly attributable to deposits (except earnings on deposits) made by the taxpayer in a taxable year that did not reduce the taxpayers liability for tax under chapter 1 of such Code (26 U.S.C. ch. 1) for a taxable year before the taxable year in which the withdrawal occurs
(A) that portion shall not be taken into account under paragraph (1); and
(B) an amount equal to that portion shall be allowed as a deduction under section 172 of such Code (26 U.S.C. 172) for the taxable year in which the withdrawal occurs.
(4) Coordination with deduction for net operating losses.— 
A nonqualified withdrawal excluded from gross income under paragraph (1) shall be excluded in determining taxable income under section 172(b)(2) of such Code (26 U.S.C. 172 (b)(2)).

46 USC 53512 - FIFO and LIFO withdrawals

(a) FIFO.— 
Except as provided in subsection (b), an amount withdrawn from an account under this chapter shall be treated as withdrawn on a first-in-first-out basis.
(b) LIFO.— 
An amount withdrawn from an account under this chapter shall be treated as withdrawn on a last-in-first-out basis if it is
(1) a nonqualified withdrawal for research, development, and design expenses incident to new and advanced vessel design, machinery, and equipment; or
(2) an amount treated as a nonqualified withdrawal under section 53510 (d) of this title.

46 USC 53513 - Corporate reorganizations and partnership changes

Under joint regulations
(1) a transfer of a capital construction fund from one person to another person in a transaction to which section 381 of the Internal Revenue Code of 1986 (26 U.S.C. 381) applies may be treated as if the transaction is not a nonqualified withdrawal; and
(2) a similar rule shall be applied to a continuation of a partnership (within the meaning of subchapter K of chapter 1 of such Code (26 U.S.C. 701 et seq.)).

46 USC 53514 - Relationship of old fund to new fund

(a) Definition.— 
In this section, the term old fund means a capital construction fund maintained before October 21, 1970.
(b) Election To Maintain Old Fund.— 
A person maintaining an old fund may elect to continue the old fund, but may not
(1) hold amounts in the old fund beyond the expiration date provided in the agreement under which the old fund is maintained (determined without regard to an extension or renewal made after April 14, 1970); or
(2) maintain simultaneously the old fund and a new fund established under this chapter.
(c) Application of New Fund Agreement to Old Fund Amounts.— 
If a person makes an agreement under this chapter to establish a new fund, the person may agree to extend the agreement to some or all of the amounts in an old fund. Each item in the old fund to be transferred shall be transferred in a nontaxable transaction to the appropriate account in the new fund. For purposes of section 53511 (c)(3) of this title, the date of the deposit of an item so transferred shall be July 1, 1971, or the date of the deposit in the old fund, whichever is later.

46 USC 53515 - Records and reports

A person maintaining a fund under this chapter shall keep records and make reports as required by the Secretary or the Secretary of the Treasury.

46 USC 53516 - Termination of agreement after change in regulations

If, after an agreement has been made under this chapter, a change is made either in the joint regulations or in the regulations prescribed by the Secretary under this chapter that could have a substantial effect on the rights or duties of a person maintaining a fund under this chapter, that person may terminate the agreement.

46 USC 53517 - Reports

(a) In General.— 
Within 120 days after the close of each calendar year, the Secretary of Transportation and the Secretary of Commerce each shall provide the Secretary of the Treasury a written report on the capital construction funds under the particular Secretarys jurisdiction for the calendar year.
(b) Contents.— 
The report shall state the name and taxpayer identification number of each person
(1) establishing a capital construction fund during the calendar year;
(2) maintaining a capital construction fund on the last day of the calendar year;
(3) terminating a capital construction fund during the calendar year;
(4) making a deposit to or withdrawal from a capital construction fund during the calendar year, and the amount of the deposit or withdrawal; or
(5) having been determined during the calendar year to have failed to fulfill a substantial obligation under a capital construction fund agreement to which the person is a party.

TITLE 46 - US CODE - CHAPTER 537 - LOANS AND GUARANTEES

TITLE 46 - US CODE - SUBCHAPTER I - GENERAL

46 USC 53701 - Definitions

In this chapter:
(1) Actual cost.— 
The term actual cost means the sum of
(A) all amounts paid by or for the account of the obligor as of the date on which a determination is made under section 53715 (d)(1) of this title; and
(B) all amounts that the Secretary reasonably estimates the obligor will become obligated to pay from time to time thereafter, for the construction, reconstruction, or reconditioning of the vessel, including guarantee fees that will become payable under section 53714 of this title in connection with all obligations issued for construction, reconstruction, or reconditioning of the vessel or equipment to be delivered, and all obligations issued for the delivered vessel or equipment.
(2) Construction, reconstruction, and reconditioning.— 
The terms construction, reconstruction, and reconditioning include designing, inspecting, outfitting, and equipping.
(3) Depreciated actual cost.— 
The term depreciated actual cost of a vessel means
(A) if the vessel was not reconstructed or reconditioned, the actual cost of the vessel depreciated on a straight line basis over the useful life of the vessel as determined by the Secretary, not to exceed 25 years from the date of delivery by the builder; or
(B) if the vessel was reconstructed or reconditioned, the sum of
(i) the actual cost of the vessel depreciated on a straight line basis from the date of delivery by the builder to the date of the reconstruction or reconditioning, using the original useful life of the vessel, and from the date of the reconstruction or reconditioning, using a useful life of the vessel determined by the Secretary; and
(ii) any amount paid or obligated to be paid for the reconstruction or reconditioning, depreciated on a straight line basis using a useful life of the vessel determined by the Secretary.
(4) Eligible export vessel.— 
The term eligible export vessel means a vessel that
(A) is constructed, reconstructed, or reconditioned in the United States for use in world-wide trade; and
(B) will, on delivery or redelivery, become or remain documented under the laws of a country other than the United States.
(5) Fishery facility.— 

(A) In general.— 
Subject to subparagraph (B), the term fishery facility means
(i) for operations on land
(I) a structure or appurtenance thereto designed for the unloading and receiving from vessels, the processing, the holding pending processing, the distribution after processing, or the holding pending distribution, of fish from a fishery;
(II) the land necessary for the structure or appurtenance; and
(III) equipment that is for use with the structure or appurtenance and that is necessary for performing a function referred to in subclause (I);
(ii) for operations not on land, a vessel built in the United States and used for, equipped to be used for, or of a type normally used for, the processing of fish; or
(iii) for aquaculture, including operations on land or elsewhere
(I) a structure or appurtenance thereto designed for aquaculture;
(II) the land necessary for the structure or appurtenance;
(III) equipment that is for use with the structure or appurtenance and that is necessary for performing a function referred to in subclause (I); and
(IV) a vessel built in the United States and used for, equipped to be used for, or of a type normally used for, aquaculture.
(B) Required ownership.— 
Under subparagraph (A), the structure, appurtenance, land, equipment, or vessel must be owned by
(i) an individual who is a citizen of the United States; or
(ii) an entity that is a citizen of the United States under section 50501 of this title and that is at least 75 percent owned (as determined under that section) by citizens of the United States.
(6) Fishing vessel.— 
The term fishing vessel has the meaning given that term in section 3 of the Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 1802), and any reference in this chapter to a vessel designed principally for commercial use in the fishing trade or industry is deemed to be a reference to a fishing vessel.
(7) Mortgage.— 
The term mortgage includes
(A) a preferred mortgage as defined in section 31301 of this title; and
(B) a mortgage on a vessel that will become a preferred mortgage when filed or recorded under chapter 313 of this title.
(8) Obligation.— 
The term obligation means an instrument of indebtedness issued for a purpose described in section 53706 of this title, except
(A) an obligation issued by the Secretary under section 53723 of this title; and
(B) an obligation eligible for investment of funds under section 53715 (f) or 53717 of this title.
(9) Obligee.— 
The term obligee means the holder of an obligation.
(10) Obligor.— 
The term obligor means a party primarily liable for payment of the principal of or interest on an obligation.
(11) Ocean thermal energy conversion facility or plantship.— 
The term ocean thermal energy conversion facility or plantship means an at-sea facility or vessel, whether mobile, floating unmoored, moored, or standing on the seabed, that uses temperature differences in ocean water to produce electricity or another form of energy capable of being used directly to perform work, and includes
(A) equipment installed on the facility or vessel to use the electricity or other form of energy to produce, process, refine, or manufacture a product;
(B) a cable or pipeline used to deliver the electricity, freshwater, or product to shore; and
(C) other associated equipment and appurtenances of the facility or vessel to the extent they are located seaward of the high water mark.
(12) Secretary.— 
The term Secretary means
(A) the Secretary of Commerce with respect to fishing vessels and fishery facilities; and
(B) the Secretary of Transportation with respect to other vessels and general shipyard facilities (as defined in section 53733 (a) of this title).
(13) Vessel.— 
The term vessel means any type of vessel, whether in existence or under construction, including
(A) a cargo vessel;
(B) a passenger vessel;
(C) a combination cargo and passenger vessel;
(D) a tanker;
(E) a tug or towboat;
(F) a barge;
(G) a dredge;
(H) a floating drydock with a capacity of at least 35,000 lifting tons and a beam of at least 125 feet between the wing walls;
(I) an oceanographic research vessel;
(J) an instruction vessel;
(K) a pollution treatment, abatement, or control vessel;
(L) a fishing vessel whose ownership meets the citizenship requirements under section 50501 of this title for documenting vessels to operate in the coastwise trade; and
(M) an ocean thermal energy conversion facility or plantship that is or will be documented under the laws of the United States.

46 USC 53702 - General authority

(a) In General.— 
The Secretary, on terms the Secretary may prescribe, may guarantee or make a commitment to guarantee the payment of the principal of and interest on an obligation eligible to be guaranteed under this chapter. A guarantee or commitment to guarantee shall cover 100 percent of the principal and interest.
(b) Direct Loans for Fisheries.— 

(1) In general.— 
Notwithstanding any other provision of this chapter, any obligation involving a fishing vessel, fishery facility, aquaculture facility, individual fishing quota, or fishing capacity reduction program issued under this chapter after October 11, 1996, shall be a direct loan obligation for which the Secretary shall be the obligee, rather than an obligation issued to an obligee other than the Secretary and guaranteed by the Secretary. A direct loan obligation under this subsection shall be treated in the same manner and to the same extent as an obligation guaranteed under this chapter except with respect to provisions of this chapter that by their nature can only be applied to obligations guaranteed under this chapter.
(2) Interest rate.— 
Notwithstanding any other provision of this chapter, the annual rate of interest an obligor shall pay on a direct loan obligation under this subsection is 2 percent plus the additional percent the Secretary must pay as interest to borrow from the Treasury the funds to make the loan.

46 USC 53703 - Application procedures

(a) Time for Decision.— 

(1) In general.— 
The Secretary shall approve or deny an application for a loan guarantee under this chapter within 270 days after the date on which the signed application is received by the Secretary.
(2) Extension.— 
On request by an applicant, the Secretary may extend the 270-day period in paragraph (1) to a date not later than 2 years after the date on which the signed application was received by the Secretary.
(b) Certification of Review.— 
The Secretary may not guarantee or make a commitment to guarantee an obligation under this chapter unless the Secretary certifies that a full and fair consideration of all the regulatory requirements, including economic soundness and financial requirements applicable to the obligor and related parties, and a thorough assessment of the technical, economic, and financial aspects of the loan application, has been made.

46 USC 53704 - Funding limits

(a) General Limitations.— 
The total unpaid principal amount of obligations guaranteed under this chapter and outstanding at one time may not exceed $12,000,000,000. Of that amount
(1) $850,000,000 shall be limited to obligations related to fishing vessels and fishery facilities; and
(2) $3,000,000,000 shall be limited to obligations related to eligible export vessels.
(b) Additional Limitations.— 
Additional limitations may not be imposed on new commitments to guarantee loans for any fiscal year, except in amounts established in advance by annual authorization laws. A vessel eligible for a guarantee under this chapter may not be denied eligibility because of its type.
(c) Limits Based on Risk Factors.— 

(1) Definition.— 
In this subsection, the term cost has the meaning given that term in section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a).
(2) System of risk categories.— 
The Secretary shall
(A) establish, and update annually, a system of risk categories for obligations guaranteed under this chapter that categorizes the relative risk of guarantees based on the risk factors set forth in paragraph (4);
(B) determine annually for each risk category a subsidy rate equivalent to the cost of obligations in the category, expressed as a percentage of the amount guaranteed for obligations in the category; and
(C) ensure that each risk category is comprised of loans that are relatively homogeneous in cost and share characteristics predictive of defaults and other costs, given the facts known at the time of obligation or commitment, using a risk category system that is based on historical analysis of program data and statistical evidence concerning the likely costs of defaults or other costs that are expected to be associated with the loans in the category.
(3) Use of system.— 

(A) Placing obligation in category.— 
Before making a guarantee under this chapter for an obligation, and annually for projects subject to a guarantee, the Secretary shall apply the risk factors specified in paragraph (4) to place the obligation in a risk category established under paragraph (2).
(B) Reduction of available amount.— 
The Secretary shall consider the total amount available to the Secretary for making guarantees under this chapter to be reduced by the amount determined by multiplying
(i) the amount guaranteed under this chapter for an obligation; by
(ii) the subsidy rate for the category in which the obligation is placed under subparagraph (A).
(C) Estimated cost.— 
The estimated cost to the United States Government of a guarantee under this chapter for an obligation is deemed to be the amount determined under subparagraph (B) for the obligation.
(D) Restriction on further guarantees.— 
The Secretary may not guarantee obligations under this chapter after the total amount available to the Secretary under appropriations laws for the cost of loan guarantees is considered to be reduced to zero under subparagraph (B).
(4) Risk factors.— 
The risk factors referred to in this subsection are
(A) if applicable, the country risk for each eligible export vessel financed or to be financed by an obligation;
(B) the period for which an obligation is guaranteed or to be guaranteed;
(C) the amount of an obligation guaranteed or to be guaranteed in relation to the total cost of the project financed or to be financed by the obligation;
(D) the financial condition of an obligor or applicant for a guarantee;
(E) if applicable, other guarantees related to the project;
(F) if applicable, the projected employment of each vessel or equipment to be financed with an obligation;
(G) if applicable, the projected market that will be served by each vessel or equipment to be financed with an obligation;
(H) the collateral provided for a guarantee for an obligation;
(I) the management and operating experience of an obligor or applicant for a guarantee;
(J) whether a guarantee under this chapter is or will be in effect during the construction period of the project; and
(K) the concentration risk presented by an unduly large percentage of loans outstanding by any one borrower or group of affiliated borrowers.

46 USC 53705 - Pledge of United States Government

(a) Full Faith and Credit.— 
The full faith and credit of the United States Government is pledged to the payment of a guarantee made under this chapter, for both principal and interest, including interest (as may be provided for in the guarantee) accruing between the date of default under a guaranteed obligation and the date of payment in full of the guarantee.
(b) Incontestability.— 
A guarantee or commitment to guarantee made under this chapter is conclusive evidence of the eligibility of the obligation for the guarantee. The validity of a guarantee or commitment to guarantee made under this chapter is incontestable.

46 USC 53706 - Eligible purposes of obligations

(a) In General.— 
To be eligible for a guarantee under this chapter, an obligation must aid in any of the following:
(1) 
(A) Financing (including reimbursement of an obligor for expenditures previously made for) the construction, reconstruction, or reconditioning of a vessel (including an eligible export vessel) designed principally for research, or for commercial use
(i) in the coastwise or intercoastal trade;
(ii) on the Great Lakes, or on bays, sounds, rivers, harbors, or inland lakes of the United States;
(iii) in foreign trade as defined in section 109 (b) of this title;
(iv) as an ocean thermal energy conversion facility or plantship;
(v) as a floating drydock in the construction, reconstruction, reconditioning, or repair of vessels; or
(vi) as an eligible export vessel in worldwide trade.
(B) A guarantee under subparagraph (A) may not be made more than one year after delivery of the vessel (or redelivery if the vessel was reconstructed or reconditioned) unless the proceeds of the obligation are used to finance the construction, reconstruction, or reconditioning of a vessel or of facilities or equipment related to marine operations.
(2) Financing (including reimbursement of an obligor for expenditures previously made for) the construction, reconstruction, reconditioning, or purchase of a vessel owned by citizens of the United States and designed principally for research, or for commercial use in the fishing industry.
(3) Financing the purchase, reconstruction, or reconditioning of a vessel or fishery facility
(A) for which an obligation was guaranteed under this chapter; and
(B) that, under subchapter II of this chapter
(i) is a vessel or fishery facility for which an obligation was accelerated and paid;
(ii) was acquired by the Federal Ship Financing Fund or successor account under section 53717 of this title; or
(iii) was sold at foreclosure begun or intervened in by the Secretary.
(4) Financing any part of the repayment to the United States Government of any amount of a construction-differential subsidy paid for a vessel.
(5) Refinancing an existing obligation (regardless of whether guaranteed under this chapter) issued for a purpose described in paragraphs (1)(4), including a short-term obligation incurred to obtain temporary funds with the intention of refinancing.
(6) Financing or refinancing (including reimbursement of an obligor for expenditures previously made for) the construction, reconstruction, reconditioning, or purchase of a fishery facility.
(7) Financing or refinancing
(A) the purchase of individual fishing quotas in accordance with section 303(d)(4) of the Magnuson-Stevens Fishery Conservation and Management Act (including the reimbursement of obligors for expenditures previously made for such a purchase);
(B) activities that assist in the transition to reduced fishing capacity; or
(C) technologies or upgrades designed to improve collection and reporting of fishery-dependent data, to reduce bycatch, to improve selectivity or reduce adverse impacts of fishing gear, or to improve safety.
(b) Non-Vessels Treated as Vessels.— 
An obligation guaranteed under subsection (a)(6) or (7) shall be treated, for purposes of this chapter, in the same manner and to the same extent as an obligation that aids in financing the construction, reconstruction, reconditioning, or purchase of a vessel, except with respect to provisions that by their nature can only be applied to vessels.
(c) Priorities for Certain Vessels.— 
In guaranteeing or making a commitment to guarantee an obligation under this chapter, the Secretary shall give priority to
(1) a vessel that is otherwise eligible for a guarantee and is constructed with assistance under subtitle D of the Maritime Security Act of 2003 (46 U.S.C. 53101 note ); and
(2) after applying paragraph (1), a vessel that is otherwise eligible for a guarantee and that the Secretary of Defense determines
(A) is suitable for service as a naval auxiliary in time of war or national emergency; and
(B) meets a shortfall in sealift capacity or capability.

46 USC 53707 - Findings related to obligors and operators

(a) Responsible Obligor.— 
The Secretary may not guarantee or make a commitment to guarantee an obligation under this chapter unless the Secretary finds that the obligor is responsible and has the ability, experience, financial resources, and other qualifications necessary for the adequate operation and maintenance of each vessel that will serve as security for the guarantee.
(b) Operators of Liner Vessels.— 
The Secretary of Transportation may not guarantee or make a commitment to guarantee a loan for the construction, reconstruction, or reconditioning of a liner vessel under this chapter unless the Chairman of the Federal Maritime Commission certifies that the operator of the vessel has not been found by the Commission to have committed, within the previous 5 years
(1) a violation of part A of subtitle IV of this title that involves unjust or unfair discriminatory treatment or undue or unreasonable prejudice or disadvantage with respect to a United States shipper, ocean transportation intermediary, ocean common carrier, or port; or
(2) a violation of part B of subtitle IV of this title.
(c) Operators of Fishing Vessels.— 
The Secretary of Commerce may not guarantee or make a commitment to guarantee a loan for the construction, reconstruction, or reconditioning of a fishing vessel under this chapter if the operator of the vessel has been
(1) held liable, or the vessel has been held liable in rem, for a civil penalty under section 308 of the Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 1858) and the operator has not paid the penalty;
(2) found guilty of an offense under section 309 of the Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 1859) and not paid the assessed fine or served the assessed sentence;
(3) held liable for a civil or criminal penalty under section 105 of the Marine Mammal Protection Act of 1972 (16 U.S.C. 1375) and not paid the assessed fine or served the assessed sentence; or
(4) held liable for a civil penalty by the Coast Guard under this title or title 33 and not paid the assessed fine.
(d) Waivers Concerning Financial Condition.— 
The Secretary shall prescribe regulations concerning circumstances under which waivers of, or exceptions to, otherwise applicable regulatory requirements concerning financial condition can be made. The regulations shall require that
(1) the economic soundness requirements in section 53708 (a) of this title are met after the waiver of the financial condition requirement; and
(2) the waiver shall provide for the imposition of other requirements on the obligor designed to compensate for the increased risk associated with the obligors failure to meet regulatory requirements applicable to financial condition.

46 USC 53708 - Findings related to economic soundness

(a) By Secretary of Transportation.— 
The Secretary of Transportation may not guarantee or make a commitment to guarantee an obligation under this chapter unless the Secretary finds that the property or project for which the obligation will be executed will be economically sound. In making that finding, the Secretary shall consider
(1) the need in the particular segment of the maritime industry for new or additional capacity, including any impact on existing equipment for which a guarantee under this chapter is in effect;
(2) the market potential for employment of the vessel over the life of the guarantee;
(3) projected revenues and expenses associated with employment of the vessel;
(4) any charter, contract of affreightment, transportation agreement, or similar agreement or undertaking relevant to the employment of the vessel;
(5) other relevant criteria; and
(6) for inland waterways, the need for technical improvements, including increased fuel efficiency or improved safety.
(b) By Secretary of Commerce.— 
The Secretary of Commerce may not guarantee or make a commitment to guarantee an obligation under this chapter unless the Secretary finds, at or prior to the time the commitment is made or the guarantee becomes effective, that
(1) the property or project for which the obligation will be executed will be economically sound; and
(2) for a fishing vessel, the purpose of the financing or refinancing is consistent with
(A) the wise use of the fisheries resources and the development, advancement, management, conservation, and protection of the fisheries resources; or
(B) the need for technical improvements, including increased fuel efficiency or improved safety.
(c) Used Fishing Vessels and Facilities.— 
The Secretary of Commerce may not guarantee or make a commitment to guarantee an obligation under this chapter for the purchase of a used fishing vessel or used fishery facility unless the vessel or facility will be
(1) reconstructed or reconditioned in the United States and will contribute to the development of the United States fishing industry; or
(2) used
(A) in the harvesting of fish from an underused fishery; or
(B) for a purpose described in the definition of fishery facility in section 53701 of this title with respect to an underused fishery.
(d) Independent Analysis.— 
The Secretary may make a determination that aspects of an application under this chapter require independent analysis to be conducted by third party experts due to risk factors associated with markets, technology, financial structures, or other risk factors identified by the Secretary. Any independent analysis conducted under this subsection shall be performed by a party chosen by the Secretary.
(e) Additional Equity Because of Increased Risks.— 
Notwithstanding any other provision of this chapter, the Secretary may make a determination that an application under this title requires additional equity because of increased risk factors associated with markets, technology, financial structures, or other risk factors identified by the Secretary.

46 USC 53709 - Amount of obligations

(a) In General.— 
The principal of an obligation may not be guaranteed in an amount greater than the amount determined by multiplying the percentage applicable under subsection (b) by
(1) the amount paid by or for the account of the obligor (as determined by the Secretary, which determination shall be conclusive) for the construction, reconstruction, or reconditioning of the vessel used as security for the guarantee; or
(2) if the obligor creates an escrow fund under section 53715 of this title, the actual cost of the vessel.
(b) Limitations on Amount Borrowed.— 

(1) In general.— 
Except as otherwise provided, the principal amount of an obligation guaranteed under this chapter may not exceed 75 percent of the actual cost or depreciated actual cost, as determined by the Secretary, of the vessel used as security for the guarantee.
(2) Certain approved vessels.— 
The principal amount may not exceed 87.5 percent of the actual cost or depreciated actual cost if
(A) the size and speed of the vessel are approved by the Secretary;
(B) the vessel is or would have been eligible for mortgage aid for construction under section 509 of the Merchant Marine Act, 1936, or would have been eligible except that the vessel was built with a construction-differential subsidy and the subsidy has been repaid; and
(C) the vessel is of a type described in that section for which the minimum down payment required by that section is 12.5 percent of the cost of the vessel.
(3) Barges.— 
For a barge constructed without a construction-differential subsidy or for which the subsidy has been repaid, the principal amount may not exceed 87.5 percent of the actual cost or depreciated actual cost.
(4) Fishing vessels and fishery facilities.— 
For a fishing vessel or fishery facility, the principal amount may not exceed 80 percent of the actual cost or depreciated actual cost. However, debt for the vessel or facility may not be placed through the Federal Financing Bank.
(5) OTEC.— 
For an ocean thermal energy conversion facility or plantship constructed without a construction-differential subsidy, the principal amount may not exceed 87.5 percent of the actual cost or depreciated actual cost of the facility or plantship.
(6) Eligible export vessels.— 
For an eligible export vessel, the principal amount may not exceed 87.5 percent of the actual cost or depreciated actual cost.
(c) Security Involving Multiple Vessels.— 
The principal amount of an obligation having more than one vessel as security for the guarantee may not exceed the sum of the principal amounts allowable for all the vessels.
(d) Prohibition on Uniform Percentage Limitations.— 
The Secretary may not establish a percentage under any provision of subsection (b) that is to be applied uniformly to all guarantees or commitments to guarantee made under that provision.
(e) Prohibition on Minimum Principal Amount.— 
The Secretary may not establish, as a condition of eligibility for a guarantee under this chapter, a minimum principal amount for an obligation covering the reconstruction or reconditioning of a fishing vessel or fishery facility. For purposes of this chapter, the reconstruction or reconditioning of a fishing vessel or fishery facility does not include the routine minor repair or maintenance of the vessel or facility.

46 USC 53710 - Contents of obligations

(a) In General.— 
An obligation guaranteed under this chapter must
(1) provide for payments by the obligor satisfactory to the Secretary;
(2) provide for interest (exclusive of guarantee fees and other fees) at a rate not more than the annual rate on the unpaid principal that the Secretary determines is reasonable, considering the range of interest rates prevailing in the private market for similar loans and the risks assumed by the Secretary;
(3) have a maturity date satisfactory to the Secretary, but
(A) not more than 25 years after the date of delivery of the vessel used as security for the guarantee; or
(B) if the vessel has been reconstructed or reconditioned, not more than the later of
(i) 25 years after the date of delivery of the vessel; or
(ii) the remaining years of useful life of the vessel as determined by the Secretary; and
(4) provide, or a related agreement must provide, that if the vessel used as security for the guarantee is a delivered vessel, the vessel shall be
(A) in class A1, American Bureau of Shipping, or meet other standards acceptable to the Secretary, with all required certificates, including marine inspection certificates of the Coast Guard or, in the case of an eligible export vessel, of the appropriate foreign authorities under a treaty, convention, or other international agreement to which the United States is a party, and with all outstanding requirements and recommendations necessary for class retention accomplished, unless the Secretary permits a deferment of repairs necessary to meet these requirements; and
(B) well equipped, in good repair, and in every respect seaworthy and fit for service.
(b) Provisions for Certain Passenger Vessels.— 

(1) In general.— 
With the Secretarys approval, if the vessel used as security for the guarantee is a passenger vessel having the tonnage, speed, passenger accommodations, and other characteristics described in section 503 of the Merchant Marine Act, 1936, an obligation guaranteed under this chapter or a related agreement may provide that
(A) the only recourse by the United States Government against the obligor for payments under the guarantee will be repossession of the vessel and assignment of insurance claims; and
(B) the obligors liability for payments under the guarantee will be satisfied and discharged by the surrender of the vessel and all interest in the vessel to the Government in the condition described in paragraph (2).
(2) Surrender of vessel.— 

(A) In general.— 
On surrender, the vessel must be
(i) free and clear of all liens and encumbrances except the security interest conveyed to the Secretary under this chapter;
(ii) in class; and
(iii) in as good order and condition (ordinary wear and tear excepted) as when acquired by the obligor.
(B) Covering deficiencies by insurance.— 
To the extent covered by insurance, a deficiency related to a requirement in subparagraph (A) may be satisfied by assignment of the obligors insurance claims to the Government.
(c) Other Provisions To Protect Security Interests.— 
An obligation guaranteed under this chapter and any related agreement must contain other provisions for the protection of the security interests of the Government (including acceleration, assumption, and subrogation provisions and the issuance of notes by the obligor to the Secretary), liens and releases of liens, payment of taxes, and other matters that the Secretary may prescribe.

46 USC 53711 - Security interest

(a) In General.— 
The Secretary may guarantee an obligation under this chapter only if the obligor conveys or agrees to convey to the Secretary a security interest the Secretary considers necessary to protect the interest of the United States Government.
(b) Multiple Vessels and Types of Security.— 
The security interest may relate to more than one vessel and may consist of more than one type of security. If the security interest relates to more than one vessel, the obligation may have the latest maturity date allowable under section 53710 (a)(3) of this title for any of the vessels used as security for the guarantee. However, the Secretary may require such payments of principal prior to maturity, with respect to all related obligations, as the Secretary considers necessary to maintain adequate security for the guarantee.

46 USC 53712 - Monitoring financial condition and operations of obligor

(a) In General.— 
The Secretary shall monitor the financial condition and operations of the obligor on a regular basis during the term of the guarantee. The Secretary shall document the results of the monitoring on an annual or quarterly basis depending on the condition of the obligor. If the Secretary determines that the financial condition of the obligor warrants additional protections to the Secretary, the Secretary shall take appropriate action under subsection (b). If the Secretary determines that the financial condition of the obligor jeopardizes its continued ability to perform its responsibilities in connection with the guarantee of an obligation by the Secretary, the Secretary shall make an immediate determination whether default should take place and whether further measures described in subsection (b) should be taken to protect the interests of the Secretary while ensuring that program objectives are met.
(b) Contract Provisions To Protect Secretary.— 
The Secretary shall include provisions in a loan agreement with an obligor that provides additional authority to the Secretary to take action to limit potential losses in connection with a defaulted loan or a loan that is in jeopardy due to the deteriorating financial condition of the obligor. These provisions include requirements for additional collateral or greater equity contributions that are effective upon the occurrence of verifiable conditions relating to the obligors financial condition or the status of the vessel or shipyard project.

46 USC 53713 - Administrative fees

(a) In General.— 
The Secretary shall charge and collect from the obligor fees the Secretary considers reasonable for
(1) investigating an application for a guarantee;
(2) appraising property offered as security for a guarantee;
(3) issuing a commitment;
(4) providing services related to an escrow fund under section 53715 of this title; and
(5) inspecting property during construction, reconstruction, or reconditioning.
(b) Total Fee Limitation.— 
The total fees under subsection (a) may not exceed 0.5 percent of the original principal amount of the obligations to be guaranteed.
(c) Fees for Independent Analysis.— 
The Secretary may charge and collect fees to cover the costs of independent analysis under section 53708 (d) of this title. Notwithstanding section 3302 of title 31, any fee collected under this subsection shall
(1) be credited as an offsetting collection to the account that finances the administration of the loan guarantee program;
(2) be available for expenditure only to pay the costs of activities and services for which the fee is imposed; and
(3) remain available until expended.

46 USC 53714 - Guarantee fees

(a) Regulations.— 
Subject to this section, the Secretary shall prescribe regulations to assess a fee for guaranteeing an obligation under this chapter.
(b) Computation of Fee.— 

(1) In general.— 
The amount of the fee for a guarantee under this chapter shall be equal to the sum of the amounts determined under paragraph (2) for the years in which the guarantee is in effect.
(2) Present value for each year.— 
The amount referred to in paragraph (1) for a year in which the guarantee is in effect is the present value of the amount calculated under paragraph (3). To determine the present value, the Secretary shall apply a discount rate determined by the Secretary of the Treasury, considering current market yields on outstanding obligations of the United States Government having periods to maturity comparable to the period to maturity for the guaranteed obligation.
(3) Calculation of amount.— 
The amount referred to in paragraph (2) shall be calculated by multiplying
(A) the estimated average unpaid principal amount of the obligation that will be outstanding during the year (excluding the average amount, other than interest, on deposit during the year in an escrow fund under section 53715 of this title); by
(B) the fee rate set under paragraph (4).
(4) Setting fee rates.— 
To set the fee rate referred to in paragraph (3)(B), the Secretary shall establish a formula that
(A) takes into account the security provided for the guaranteed obligation; and
(B) is a sliding scale based on the creditworthiness of the obligor, using
(i) the lowest allowable rate under paragraph (5) for the most creditworthy obligors; and
(ii) the highest allowable rate under paragraph (5) for the least creditworthy obligors.
(5) Permissible range of rates.— 
The fee rate set under paragraph (4) shall be
(A) for a delivered vessel or equipment, at least 0.5 percent and not more than 1 percent; and
(B) for a vessel to be constructed, reconstructed, or reconditioned or equipment to be delivered, at least 0.25 percent and not more than 0.5 percent.
(c) When Fee Collected.— 
A fee for the guarantee of an obligation under this chapter shall be collected not later than the date on which an amount is first paid on the obligation.
(d) Financing the Fee.— 
A fee paid under this section is eligible to be financed under this chapter and shall be included in the actual cost of the obligation guaranteed.
(e) Not Refundable.— 
A fee paid under this section is not refundable. However, an obligor shall receive credit for the amount paid for the remaining term of the obligation if the obligation is refinanced and guaranteed under this chapter after the refinancing.

46 USC 53715 - Escrow fund

(a) In General.— 
If the proceeds of an obligation guaranteed under this chapter are to be used to finance the construction, reconstruction, or reconditioning of a vessel that will serve as security for a guarantee under this chapter, the Secretary may accept and hold in escrow, under an escrow agreement with the obligor, a portion of the proceeds of all obligations guaranteed under this chapter whose proceeds are to be so used which is equal to
(1) the excess of
(A) the principal amount of all obligations whose proceeds are to be so used; over
(B) 75 percent or 87.5 percent, whichever is applicable under section 53709 (b) of this title, of the amount paid by or for the account of the obligor for the construction, reconstruction, or reconditioning of the vessel; plus
(2) any interest the Secretary may require on the amount described in paragraph (1).
(b) Security Involving Both Uncompleted and Delivered Vessels.— 
If the security for the guarantee of an obligation relates both to a vessel to be constructed, reconstructed, or reconditioned and to a delivered vessel, the principal amount of the obligation shall be prorated for purposes of subsection (a) under regulations prescribed by the Secretary.
(c) Disbursement Before Termination of Agreement.— 

(1) Purposes.— 
The Secretary shall disburse amounts in the escrow fund, as specified in the escrow agreement, to
(A) pay amounts the obligor is obligated to pay for
(i) the construction, reconstruction, or reconditioning of a vessel used as security for the guarantee; and
(ii) interest on the obligations;
(B) redeem the obligations under a refinancing guaranteed under this chapter; and
(C) pay any excess interest deposits to the obligor at times provided for in the escrow agreement.
(2) Manner of payment.— 
If a payment becomes due under the guarantee before the termination of the escrow agreement, the amount in the escrow fund at the time the payment becomes due, including realized income not yet paid to the obligor, shall be paid into the appropriate account under section 53717 of this title. The amount shall be credited against amounts due or to become due from the obligor to the Secretary on the guaranteed obligations or, to the extent not so required, be paid to the obligor.
(d) Payments Required Before Disbursement.— 

(1) In general.— 
No disbursement shall be made under subsection (c) to any person until the total amount paid by or for the account of the obligor from sources other than the proceeds of the obligation equals at least 25 percent or 12.5 percent, whichever is applicable under section 53709 (b) of this title, of the aggregate actual cost of the vessel, as previously approved by the Secretary. If the aggregate actual cost of the vessel has increased since the Secretarys initial approval or if it increases after the first disbursement is permitted under this subsection, then no further disbursements shall be made under subsection (c) until the total amount paid by or for the account of the obligor from sources other than the proceeds of the obligation equals at least 25 percent or 12.5 percent, as applicable, of the increase, as determined by the Secretary, in the aggregate actual cost of the vessel. This paragraph does not require the Secretary to consent to finance any increase in actual cost unless the Secretary determines that such an increase in the obligation meets all the terms and conditions of this chapter or other applicable law.
(2) Documented proof of progress requirement.— 
The Secretary shall, by regulation, establish a transparent, independent, and risk-based process for verifying and documenting the progress of projects under construction before disbursing guaranteed loan funds. At a minimum, the process shall require documented proof of progress in connection with the construction, reconstruction, or reconditioning of a vessel or vessels before disbursements are made from the escrow fund. The Secretary may require that the obligor provide a certificate from an independent party certifying that the requisite progress in construction, reconstruction, or reconditioning has taken place.
(e) Disbursement on Termination of Agreement.— 

(1) In general.— 
If a payment has not become due under the guarantee before the termination of the escrow agreement, the balance of the escrow fund at the time of termination shall be disbursed to
(A) prepay the excess of
(i) the principal amount of all obligations whose proceeds are to be used to finance the construction, reconstruction, or reconditioning of the vessel used or to be used as security for the guarantee; over
(ii) 75 percent or 87.5 percent, whichever is applicable under section 53709 (b) of this title, of the actual cost of the vessel to the extent paid; and
(B) pay interest on that prepaid amount of principal.
(2) Remaining balance.— 
Any remaining balance of the escrow fund shall be paid to the obligor.
(f) Investment.— 
The Secretary may invest and reinvest any part of an escrow fund in obligations of the United States Government with maturities such that the escrow fund will be available as required for purposes of the escrow agreement. Investment income shall be paid to the obligor when received.
(g) Terms To Protect Government.— 
The escrow agreement shall contain other terms the Secretary considers necessary to protect fully the interests of the Government.

46 USC 53716 - Deposit fund

(a) In General.— 
There is a deposit fund in the Treasury for purposes of this section. The Secretary, in accordance with an agreement under subsection (b), may deposit into and hold in the fund cash belonging to an obligor to serve as collateral for a guarantee made under this chapter with respect to the obligor.
(b) Agreement.— 
The Secretary and an obligor shall make a reserve fund or other collateral account agreement to govern the deposit, withdrawal, retention, use, and reinvestment of cash of the obligor held in the fund. The agreement shall contain
(1) terms and conditions required by this section;
(2) terms that grant to the United States Government a security interest in all amounts deposited into the fund; and
(3) any additional terms considered by the Secretary to be necessary to protect fully the interests of the Government.
(c) Investment.— 
The Secretary may invest and reinvest any part of the amounts in the fund in obligations of the Government with maturities such that amounts in the fund will be available as required for purposes of the agreement under subsection (b). Cash balances in the fund in excess of current requirements shall be maintained in a form of uninvested funds, and the Secretary of the Treasury shall pay interest on these funds.
(d) Withdrawals.— 

(1) In general.— 
Cash deposited into the fund may not be withdrawn without the consent of the Secretary.
(2) Use of income.— 
Subject to paragraph (3), the Secretary may pay any income earned on cash of an obligor deposited into the fund in accordance with the agreement with the obligor under subsection (b).
(3) Retention against default.— 
The Secretary may retain and offset any or all of the cash of an obligor in the fund, and any income realized thereon, as part of the Secretarys recovery against the obligor in case of a default by the obligor on an obligation.

46 USC 53717 - Management of funds in the Treasury

(a) Definition.— 
In this section, the term FCRA means the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.).
(b) Loan Guarantees by Secretary of Transportation.— 

(1) When not subject to fcra.— 
The Secretary of Transportation shall account for payments and disbursements involving obligations guaranteed under this chapter and not subject to FCRA in an account in the Treasury entitled the Federal Ship Financing Fund Liquidating Account (a liquidating account as defined in FCRA).
(2) When subject to fcra.— 
The Secretary of Transportation shall account for payments and disbursements involving obligations guaranteed under this chapter and subject to FCRA in a separate account in the Treasury entitled the Federal Ship Financing Guaranteed Loan Financing Account (a financing account as defined in FCRA).
(c) Loan Guarantees by Secretary of Commerce.— 

(1) When not subject to fcra.— 
The Secretary of Commerce shall account for payments and disbursements involving obligations guaranteed under this chapter and not subject to FCRA in a separate account in the Treasury established for this purpose.
(2) When subject to fcra.— 
The Secretary of Commerce shall account for payments and disbursements involving obligations guaranteed under this chapter and subject to FCRA in a separate account in the Treasury established for this purpose.
(d) Direct Loans by Secretary of Commerce.— 
The Secretary of Commerce shall account for payments and disbursements involving direct loans made under this chapter in a separate account in the Treasury established for this purpose.

46 USC 53718 - Annual report to Congress

The Secretary of Transportation shall report to Congress annually on the loan guarantee program under this chapter. Each report shall include
(1) the size, in dollars, of the portfolio of loans guaranteed;
(2) the size, in dollars, of projects in the portfolio facing financial difficulties;
(3) the number and type of projects covered;
(4) a profile of pending loan applications;
(5) the amount of appropriations available for new guarantees;
(6) a profile of each project approved since the last report; and
(7) a profile of any defaults since the last report.

TITLE 46 - US CODE - SUBCHAPTER II - DEFAULT PROVISIONS

46 USC 53721 - Rights of obligee

(a) Demands by Obligees.— 
Except as provided in subsection (c), if an obligor has continued in default for 30 days in the payment of principal or interest on an obligation guaranteed under this chapter, the obligee or the obligees agent may demand that the Secretary pay the unpaid principal amount of the obligation and the unpaid interest on the obligation to the date of payment. The demand must be made within the earlier of
(1) a period that may be specified in the guarantee or a related agreement; or
(2) 90 days from the date of the default.
(b) Payments by Secretary.— 

(1) In general.— 
If a demand is made under subsection (a), the Secretary shall pay to the obligee or the obligees agent the unpaid principal amount of the obligation and the unpaid interest on the obligation to the date of payment. Payment shall be made within the earlier of
(A) a period that may be specified in the guarantee or a related agreement; or
(B) 30 days from the date of the demand.
(2) If no existing default.— 
The Secretary is not required to make payment under this subsection if, within the appropriate period under paragraph (1), the Secretary finds that the obligor was not in default or that the default was remedied before the demand.
(c) Assumption of Rights and Obligations Before Demand.— 
An obligee or the obligees agent may not demand payment under this section if the Secretary, before the demand and on terms that may be provided in the obligation or a related agreement, has assumed the obligors rights and duties under the obligation and any related agreement and made any payment in default. However, the guarantee of the obligation remains in effect after the Secretarys assumption.

46 USC 53722 - Actions by Secretary

(a) General Authority.— 
On default under an obligation or related agreement between the Secretary and the obligor, the Secretary, on terms that may be provided in the obligation or agreement, may
(1) assume the obligors rights and duties under the obligation or agreement, make any payment in default, and notify the obligee or the obligees agent of the default and the Secretarys assumption; or
(2) notify the obligee or the obligees agent of the default.
(b) Demands by Obligees.— 

(1) Demand.— 
If the Secretary proceeds under subsection (a)(2), the obligee or the obligees agent may demand that the Secretary pay the unpaid principal amount of the obligation and the unpaid interest on the obligation. The demand must be made within the earlier of
(A) a period that may be specified in the guarantee or a related agreement; or
(B) 60 days from the date of the Secretarys notice.
(2) Payment.— 
If a demand is made under paragraph (1), the Secretary shall pay to the obligee or the obligees agent the unpaid principal amount of the obligation and the unpaid interest on the obligation to the date of payment. Payment shall be made within the earlier of
(A) a period that may be specified in the guarantee or a related agreement; or
(B) 30 days from the date of the demand.
(c) Continued Effect of Guarantee.— 
A guarantee of an obligation remains in effect after an assumption of the obligation by the Secretary.
(d) Additional Responses.— 
If there is a default on an obligation, the Secretary shall conduct operations under this chapter in a manner that
(1) maximizes the net present value return from the sale or disposition of assets associated with the obligation, including prompt referral to the Attorney General for collection as appropriate;
(2) minimizes the amount of any loss realized in the resolution of the guarantee;
(3) ensures adequate competition and fair and consistent treatment of offerors; and
(4) requires appraisal of assets by an independent appraiser.

46 USC 53723 - Payments by Secretary and issuance of obligations

(a) Cash Payment.— 
Amounts required to be paid by the Secretary under section 53721 or 53722 of this title shall be paid in cash.
(b) Issuance of Obligations.— 
If amounts in the appropriate account under section 53717 of this title are not sufficient to make a payment required under section 53721 or 53722 of this title, the Secretary may issue obligations to the Secretary of the Treasury. The Secretary, with the approval of the Secretary of the Treasury, shall prescribe the form, denomination, maturity, and other terms (except the interest rate) of the obligations. The Secretary of the Treasury shall set the interest rate for the obligations, considering the current average market yield on outstanding marketable obligations of the United States Government of comparable maturities during the month before the obligations are issued.
(c) Purchase of Obligations.— 
The Secretary of the Treasury shall purchase the obligations issued under this section. To purchase the obligations, the Secretary of the Treasury may use as a public debt transaction the proceeds from the sale of securities issued under chapter 31 of title 31. The purposes for which securities may be issued under that chapter are extended to include the purchase of obligations under this subsection. The Secretary of the Treasury may sell obligations purchased under this section. A redemption, purchase, or sale of the obligations by the Secretary of the Treasury is a public debt transaction of the Government.
(d) Deposits and Redemptions.— 
The Secretary shall deposit amounts borrowed under this section in the appropriate account under section 53717 of this title and make redemptions of the obligations from that account.

46 USC 53724 - Rights to secured property

(a) Acquisition of Security Rights.— 
When the Secretary makes a payment on, or assumes, an obligation under section 53721 or 53722 of this title, the Secretary acquires the rights under the security agreement with the obligor in the security held by the Secretary to guarantee the obligation.
(b) Use and Disposition of Secured Property.— 
Notwithstanding any other law relating to the acquisition, handling, or disposal of property by the United States Government, the Secretary has the right, in the Secretarys discretion, to complete, reconstruct, recondition, renovate, repair, maintain, operate, charter, or sell any property acquired under a security agreement with an obligor, or to place a vessel so acquired in the National Defense Reserve Fleet. The terms of a sale under this subsection shall be as approved by the Secretary.

46 USC 53725 - Actions against obligor

(a) In General.— 
For a default under a guaranteed obligation or related agreement, the Secretary may take any action against the obligor or another liable party that the Secretary considers necessary to protect the interests of the United States Government. A civil action may be brought in the name of the United States or the obligee. The obligee shall make available to the Government all records and evidence necessary to prosecute the action.
(b) Title, Possession, and Purchase.— 

(1) In general.— 
The Secretary may
(A) accept a conveyance of title to and possession of property from the obligor or another party liable to the Secretary; and
(B) purchase the property for an amount not greater than the unpaid principal amount of the obligation and interest thereon.
(2) Payment of excess.— 
If, through the sale of property, the Secretary receives an amount of cash greater than the unpaid principal amount of the obligation, the unpaid interest on the obligation, and the expenses of collecting those amounts, the Secretary shall pay the excess to the obligor.

TITLE 46 - US CODE - SUBCHAPTER III - PARTICULAR PROJECTS

46 USC 53731 - Commercial demonstration ocean thermal energy conversion facilities and plantships

(a) In General.— 
Under subchapter I of this chapter, the Secretary may guarantee or make a commitment to guarantee the payment of the principal of and interest on an obligation that aids in financing (including reimbursement of an obligor for expenditures previously made for) the construction, reconstruction, or reconditioning of a commercial demonstration ocean thermal energy conversion facility or plantship. This section may be used to guarantee obligations for a total of not more than 5 separate facilities and plantships or a demonstrated 400 megawatt capacity, whichever comes first.
(b) Applicability of Other Provisions.— 
Except as otherwise provided in this section, a guarantee or commitment to guarantee under this section is subject to all the provisions applicable to a guarantee or commitment to guarantee under subchapter I of this chapter.
(c) Economic Soundness.— 
The required determination of economic soundness under section 53708 of this title applies to a guarantee or commitment to guarantee for that portion of a facility or plantship not to be supported with appropriated Federal funds.
(d) Reasonableness of Risk.— 
A guarantee or commitment to guarantee may not be made under this section unless the Secretary of Energy, in consultation with the Secretary, certifies to the Secretary that, for the facility or plantship for which the guarantee or commitment to guarantee is sought, there is sufficient guarantee of performance and payment to lower the risk to the United States Government to a reasonable level. In deciding whether to issue such a certification, the Secretary of Energy shall consider
(1) the successful demonstration of the technology to be used in the facility at a scale sufficient to establish the likelihood of technical and economic viability in the proposed market; and
(2) the need of the United States to develop new and renewable sources of energy and the benefits to be realized from the construction and successful operation of the facility or plantship.
(e) Amount of Obligation.— 
The total principal amount of an obligation guaranteed under this section may not exceed 87.5 percent of
(1) the actual cost or depreciated actual cost of the facility or plantship; or
(2) if the facility or plantship is supported with appropriated Federal funds, the total principal amount of that portion of the actual cost or depreciated actual cost for which the obligor is obligated to secure financing under the agreement between the obligor and the Department of Energy or other Federal agency.
(f) OTEC Demonstration Fund.— 

(1) In general.— 
There is a special subaccount, known as the OTEC Demonstration Fund, in the account established under section 53717 (b)(1) of this title.
(2) Use and operation.— 
The OTEC Demonstration Fund shall be used for obligation guarantees authorized under this section that do not qualify under subchapter I of this chapter. Except as otherwise provided in this section, the OTEC Demonstration Fund shall be operated in the same manner as the parent account. However
(A) amounts received by the Secretary under subchapter I of this chapter related to guarantees or commitments to guarantee made under this section shall be deposited only in the OTEC Demonstration Fund; and
(B) when obligations issued by the Secretary under section 53723 of this title related to the OTEC Demonstration Fund are outstanding, any amount received by the Secretary under subchapter I of this chapter related to ocean thermal energy conversion facilities or plantships shall be deposited in the OTEC Demonstration Fund.
(3) Transfers.— 
Assets in the OTEC Demonstration Fund may be transferred to the parent account when and to the extent the balance in the OTEC Demonstration Fund exceeds the total guarantees or commitments to guarantee made under this section then outstanding, plus obligations issued by the Secretary under section 53723 of this title related to the OTEC Demonstration Fund.
(4) Liability.— 
The parent account is not liable for a guarantee or commitment to guarantee made under this section.
(5) Maximum unpaid principal amount.— 
The total unpaid principal amount of the obligations guaranteed with the backing of the OTEC Demonstration Fund and outstanding at any one time may not exceed $1,650,000,000.
(g) Issuance and Payment of Obligations.— 
Section 53723 of this title applies to the OTEC Demonstration Fund. However, obligations issued by the Secretary under that section related to the OTEC Demonstration Fund shall be payable only from proceeds realized by the OTEC Demonstration Fund.
(h) Taxation of Interest.— 
Interest on an obligation guaranteed under this section shall be included in gross income under chapter 1 of the Internal Revenue Code of 1986 (26 U.S.C. ch. 1).

46 USC 53732 - Eligible export vessels

(a) Applicable Terms.— 
The Secretary may guarantee an obligation for an eligible export vessel in accordance with
(1) the terms applicable under this chapter for vessels documented under the laws of the United States; or
(2) other terms the Secretary determines are more favorable than those terms and compatible with export credit terms offered by foreign governments for the sale of vessels built in foreign shipyards.
(b) Interagency Council.— 

(1) Establishment.— 
There is an interagency council to carry out this section.
(2) Composition.— 
The council is composed of the following individuals or their designees:
(A) The Secretary of Transportation, who is the chairman of the council.
(B) The Secretary of the Treasury.
(C) The Secretary of State.
(D) The Assistant to the President for Economic Policy.
(E) The United States Trade Representative.
(F) The President and Chairman of the Export-Import Bank of the United States.
(3) Functions.— 
The council shall
(A) obtain information on shipbuilding loan guarantees, direct and indirect subsidies, and other favorable treatment of shipyards provided by foreign governments to shipyards in competition with United States shipyards;
(B) consult regularly with United States shipbuilders to obtain the essential information about international shipbuilding competition on which to set terms for loan guarantees under subsection (a)(2); and
(C) provide guidance to the Secretary in establishing terms for loan guarantees under subsection (a)(2).
(4) Annual report.— 
Not later than January 31 of each year, the Secretary shall submit to Congress a report on activities of the Secretary under this section during the preceding year. The report shall include
(A) documentation of sources of information about assistance by governments of other countries to shipyards in those countries; and
(B) a summary of recommendations made to the Secretary during the preceding year about applications submitted to the Secretary during that year for loan guarantees to construct eligible export vessels.
(c) Required Findings.— 

(1) Benefit to shipbuilding industry.— 
The Secretary may not guarantee or make a commitment to guarantee an obligation for an eligible export vessel unless the Secretary finds that the construction, reconstruction, or reconditioning of the vessel will aid in the transition of United States shipyards to commercial activities or will preserve shipbuilding assets that would be essential in time of war or national emergency.
(2) Priority of documented vessels.— 
The Secretary may not make a commitment to guarantee an obligation for an eligible export vessel unless the Secretary determines that making the commitment will not result in denial of an economically sound application for a commitment to guarantee an obligation for a vessel documented under the laws of the United States and operating in the domestic or foreign commerce of the United States. The Secretary has sole discretion in making the determination. In making the determination, the Secretary shall consider
(A) the status and economic soundness of pending applications for commitments to guarantee obligations for vessels documented under the laws of the United States that are operating or will be operating in the domestic or foreign commerce of the United States; and
(B) the amount of guarantee authority available.
(d) Restriction on Transfer of Vessel.— 
The Secretary may not guarantee or make a commitment to guarantee an obligation for an eligible export vessel unless the owner of the vessel agrees with the Secretary that the vessel will not be transferred to a country designated by the Secretary of Defense as a country whose interests are hostile to the interests of the United States.
(e) Review by Secretary of Defense.— 

(1) Notification.— 
The Secretary shall promptly notify the Secretary of Defense of the receipt of an application for a loan guarantee for an eligible export vessel.
(2) Disapproval.— 
The Secretary of Defense, within 30 days after receiving the notice, may disapprove the guarantee based on an assessment of the potential use of the vessel in a manner that may harm the national security interests of the United States. The Secretary may not disapprove a guarantee solely because of the type of vessel to be constructed.
(3) Delegation.— 
The authority of the Secretary of Defense to disapprove a guarantee under this subsection may be delegated only to a civilian officer of the Department of Defense appointed by the President by and with the advice and consent of the Senate.
(4) Prohibition.— 
The Secretary may not make a loan guarantee disapproved by the Secretary of Defense under this subsection.
(f) Expiration of Authority.— 
The Secretary may not issue a commitment to guarantee an obligation for an eligible export vessel under this chapter after the last date on which such a commitment may be issued under any treaty or convention entered into after November 30, 1993, that prohibits guarantee of such an obligation.

46 USC 53733 - Shipyard modernization and improvement

(a) Definitions.— 
In this section:
(1) Advanced shipbuilding technology.— 
The term advanced shipbuilding technology includes
(A) numerically controlled machine tools, robots, automated process control equipment, computerized flexible manufacturing systems, associated computer software, and other technology for improving shipbuilding and related industrial production that advance the state-of-the-art; and
(B) novel techniques and processes designed to improve shipbuilding quality, productivity, and practice, and to promote sustainable development, including engineering design, quality assurance, concurrent engineering, continuous process production technology, energy efficiency, waste minimization, design for recyclability or parts reuse, inventory management, upgraded worker skills, and communications with customers and suppliers.
(2) General shipyard facility.— 
The term general shipyard facility means
(A) for operations on land
(i) a structure or appurtenance thereto designed for the construction, reconstruction, repair, rehabilitation, or refurbishment of a vessel, including a graving dock, building way, ship lift, wharf, or pier crane;
(ii) the land necessary for the structure or appurtenance; and
(iii) equipment that is for use with the structure or appurtenance and that is necessary for performing a function referred to in clause (i); and
(B) for operations not on land, a vessel, floating drydock, or barge built in the United States and used for, equipped to be used for, or of a type normally used for, performing a function referred to in subparagraph (A)(i).
(3) Modern shipbuilding technology.— 
The term modern shipbuilding technology means the best available proven technology, techniques, and processes appropriate to enhancing the productivity of shipyards.
(b) General Authority.— 
Under subchapter I of this chapter, the Secretary may guarantee or make a commitment to guarantee the payment of the principal of and interest on an obligation for advanced shipbuilding technology and modern shipbuilding technology of a general shipyard facility in the United States. Only a private shipyard is eligible to receive a guarantee.
(c) Applicability of Other Provisions.— 
Except as otherwise provided in this section, a guarantee or commitment to guarantee under this section is subject to all the provisions applicable to a guarantee or commitment to guarantee under subchapter I of this chapter.
(d) Amount of Obligation.— 
The principal amount of an obligation guaranteed under this chapter may not exceed 87.5 percent of the actual cost of the advanced shipbuilding technology or modern shipbuilding technology.
(e) Transfer of Amounts.— 
The Secretary may accept the transfer of amounts from a department, agency, or instrumentality of the United States Government and may use those amounts to cover the cost (as defined in section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a)) of making guarantees or commitments to guarantee under this section.

46 USC 53734 - Replacement of vessels because of changes in operating standards

(a) General Authority.— 
Notwithstanding any other provision of this chapter, the Secretary, on terms the Secretary may prescribe, may guarantee or make a commitment to guarantee the payment of the principal of and interest on an obligation that aids in financing or refinancing (including reimbursement of an obligor for expenditures previously made for) a contract for the construction or reconstruction of a vessel if
(1) the vessel is designed and to be used for commercial use in coastwise, intercoastal, or foreign trade;
(2) the construction or reconstruction is necessary to replace a vessel that cannot continue to be operated because of a change required by law in the standards for the operation of vessels, and the applicant for the guarantee or commitment would not otherwise legally be able to continue operating vessels in the trades in which the applicant operated vessels before the change;
(3) the applicant is presently engaged in transporting cargoes in vessels of the type and class that will be constructed or reconstructed under this section and agrees to employ vessels constructed or reconstructed under this section as replacements only for vessels made obsolete by the change in operating standards;
(4) the capacity of the vessels to be constructed or reconstructed under this section will not increase the cargo carrying capacity of the vessels being replaced;
(5) the Secretary has not determined that the market demand for the vessel over its useful life will diminish so as to make granting the guarantee fiduciarily imprudent;
(6) the vessel, if to be reconstructed, will have a useful life of at least 15 years after the reconstruction; and
(7) the Secretary has considered the criteria specified in section 53708 (a)(3)(5) of this title.
(b) Term and Amount of Obligation.— 

(1) Term.— 
The term of an obligation guaranteed under this section may not exceed 25 years.
(2) Amount.— 
The amount of an obligation guaranteed under this section may not exceed 87.5 percent of the actual cost or depreciated actual cost to the applicant for the construction or reconstruction of the vessel. The Secretary may not establish a percentage under this paragraph that is to be applied uniformly to all guarantees or commitments to guarantee made under this section.
(c) Applicability of Other Provisions.— 
A guarantee or commitment to guarantee under this section is also subject to sections 53701, 53702 (a), 53704, 53705, 53707 (a), 53708 (d) and (e), 53709 (a), 53710 (a)(1), (2), and (4) and (c), 53711 (a), 53713, 53714, 53717, and 53721–53725 of this title.
(d) Security Against Default.— 
The Secretary shall require by regulation that an applicant under this section provide adequate security against default.
(e) Guarantee Fees.— 
The Secretary may establish a fee for the guarantee of an obligation under this section that is in addition to the fee established under section 53714 of this title. The fee may be
(1) an annual fee of not more than an additional 1 percent added to the fee established under section 53714 of this title; or
(2) a fee based on the amount of the obligation versus the percentage of the obligors fleet being replaced by vessels constructed or reconstructed under this section.

46 USC 53735 - Fisheries financing and capacity reduction

(a) Definition.— 
In this section, the term program means a fishing capacity reduction program established under section 312 of the Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 1861a).
(b) Guarantee Authority.— 
The Secretary may guarantee the repayment of debt obligations issued by entities under this section. Debt obligations to be guaranteed may be issued by any entity that has been approved by the Secretary and has agreed with the Secretary to conditions the Secretary considers necessary for this section to achieve the objective of the program and to protect the interest of the United States.
(c) Requirements of Obligations.— 
A debt obligation guaranteed under this section shall
(1) be treated in the same manner and to the same extent as other obligations guaranteed under this chapter, except with respect to provisions of this chapter that by their nature cannot be applied to obligations guaranteed under this section;
(2) have the fishing fees established under the program paid into a separate subaccount of the fishing capacity reduction fund established under this section;
(3) not exceed $100,000,000 in an unpaid principal amount outstanding at any one time for a program;
(4) have such maturity (not to exceed 20 years), take such form, and contain such conditions as the Secretary determines necessary for the program to which they relate;
(5) have as the exclusive source of repayment (subject to the second sentence of subsection (d)(2)) and as the exclusive payment security, the fishing fees established under the program; and
(6) at the discretion of the Secretary be issued in the public market or sold to the Federal Financing Bank.
(d) Fishing Capacity Reduction Fund.— 

(1) In general.— 
There is a separate account in the Treasury, known as the Fishing Capacity Reduction Fund. Within the Fund, at least one subaccount shall be established for each program into which shall be paid all fishing fees established under the program and other amounts authorized for the program.
(2) Availability of amounts.— 
Amounts in the Fund shall be available, without appropriation or fiscal year limitation, to the Secretary to pay the cost of the program, including payments to financial institutions to pay debt obligations incurred by entities under this section. Funds available for this purpose from other amounts available for the program may also be used to pay those debt obligations.
(3) Investment.— 
Amounts in the Fund that are not currently needed for the purpose of this section shall be kept on deposit or invested in obligations of the United States Government.
(e) Regulations.— 
The Secretary shall prescribe regulations the Secretary considers necessary to carry out this section.

TITLE 46 - US CODE - CHAPTER 539 - WAR RISK INSURANCE

46 USC 53901 - Definitions

In this chapter:
(1) American vessel.— 
The term American vessel includes
(A) a documented vessel with a registry or coastwise endorsement under chapter 121 of this title;
(B) an undocumented vessel owned or chartered by or made available to the United States Government; and
(C) a tug, barge, or other watercraft (whether or not documented) owned by a citizen of the United States and used in essential water transportation or in the fisheries, except only for sport fishing.
(2) Cargo.— 
The term cargo includes a loaded or empty container on a vessel.
(3) Transportation in the waterborne commerce of the united states.— 
The term transportation in the waterborne commerce of the United States includes the operation of a vessel in the fisheries, except only for sport fishing.
(4) War risks.— 
The term war risks includes, to the extent the Secretary of Transportation determines
(A) any part of a loss excluded from marine insurance coverage under a free of capture or seizure clause or analogous clause; and
(B) any other loss from a hostile act, including confiscation, expropriation, nationalization, or deprivation.

46 USC 53902 - Authority to provide insurance

(a) In General.— 
With the approval of the President, and after such consultation with interested agencies of United States Government as the President may require, the Secretary of Transportation may provide insurance and reinsurance against loss or damage from war risks as provided by this chapter whenever it appears to the Secretary that insurance adequate for the needs of the waterborne commerce of the United States cannot be obtained on reasonable terms and conditions from companies authorized to do insurance business in a State of the United States.
(b) Consideration of Risk.— 
Insurance or reinsurance under this chapter shall be based, insofar as practicable, on consideration of the risk involved.
(c) Availability of Vessel During War or National Emergency.— 
Insurance or reinsurance for a vessel may be provided under this chapter only on the condition that the vessel will be available to the Government in time of war or national emergency.

46 USC 53903 - Insurable interests

(a) In General.— 
The Secretary of Transportation may provide insurance and reinsurance under this chapter for
(1) an American vessel, including a vessel under construction;
(2) a foreign vessel
(A) owned by a citizen of the United States; or
(B) engaged in transportation in the waterborne commerce of the United States or in such other transportation by water or such other services as the Secretary considers to be in the interest of the national defense or national economy of the United States, when so engaged;
(3) cargo
(A) shipped or to be shipped on a vessel insurable under this section, including by express or registered mail;
(B) owned by a citizen or resident of the United States;
(C) imported to or exported from the United States, or sold or purchased by a citizen or resident of the United States, under a contract of sale or purchase the terms of which provide that the risk of loss by war risks or the obligation to provide insurance against war risks is on a citizen or resident of the United States; or
(D) shipped between ports in the United States;
(4) disbursements, including advances to masters and general average disbursements, and freight and passage money of a vessel insurable under this section;
(5) personal effects of an individual on a vessel insurable under this section;
(6) loss of life, injury, or detention by an enemy of the United States after capture, with respect to an individual on a vessel insurable under this section; and
(7) statutory or contractual obligations or other liabilities of a vessel insurable under this section or of the owner or charterer of such a vessel, of a nature customarily covered by insurance.
(b) Considerations for Foreign Vessels.— 
In determining whether to provide insurance or reinsurance for a foreign vessel, the Secretary shall consider the characteristics, employment, and general management of the vessel by the owner or charterer.
(c) Non-War Risks.— 
Insurance of a risk under subsection (a)(5)(7), insofar as it involves a liability related to an individual on the vessel, may include risks other than war risks to the extent the Secretary considers advisable.

46 USC 53904 - Liability insurance for persons involved in war or defense efforts

(a) In General.— 
The Secretary of Transportation may provide insurance under this chapter against legal liability that a person may incur in providing services or facilities for a vessel if, in the opinion of the Secretary, the insurance
(1) is required in prosecuting a war or for national defense; and
(2) cannot be obtained at reasonable rates or on reasonable terms and conditions from approved companies authorized to do insurance business in a State of the United States.
(b) Limitations.— 
Employer liability insurance and worker compensation insurance against legal liability to employees may not be provided under this section.

46 USC 53905 - Agency insurance

(a) In General.— 
With the approval of the President, an agency of the United States Government may obtain insurance provided for by this chapter from the Secretary of Transportation, except as provided in sections 17302 and 17303 of title 40.
(b) Premium Waivers.— 
With the approval of the President, the Secretary of Transportation may provide insurance under this chapter at the request of the Secretary of Defense and other agencies the President may prescribe, without payment of an insurance premium if the Secretary of Defense or agency agrees to indemnify the Secretary of Transportation against loss covered by the insurance. The Secretary of Defense and agencies may make such an indemnity agreement.
(c) Presidential Approval.— 
The signature of the President (or an official designated by the President) on the agreement shall be treated as the approval required by section 53902 (a) of this title.

46 USC 53906 - Hull insurance valuation

(a) Stated Valuation.— 
The valuation in a hull insurance policy for actual or constructive total loss of the insured vessel shall be a stated valuation determined by the Secretary of Transportation. The stated valuation
(1) shall exclude national defense features paid for by the United States Government; and
(2) may not exceed the amount that would be payable if the ownership of the vessel had been requisitioned under chapter 563 of this title at the time the insurance attached under the policy.
(b) Rejecting Stated Valuation.— 
Within 60 days after the insurance attaches under a policy referred to in subsection (a) or within 60 days after the Secretary determines the valuation, whichever is later, the insured may reject the valuation and pay, at the rate provided in the policy, premiums based on the asserted valuation the insured specifies at the time of rejection. However, the asserted valuation is not binding on the Government in any subsequent action on the policy.
(c) Amount of Claim.— 
If a vessel is actually or constructively totally lost and the insured under a policy referred to in subsection (a) has not rejected the stated valuation determined by the Secretary, the amount of a claim adjusted, compromised, settled, adjudged, or paid may not exceed the stated valuation. However, if the insured has rejected the valuation, the insured
(1) shall be paid, as a tentative advance only, 75 percent of the stated valuation; and
(2) may bring a civil action against the United States in a court having jurisdiction of the claim to recover a valuation equal to the just compensation the court determines would have been payable if the ownership of the vessel had been requisitioned under chapter 563 of this title at the time the insurance attached under the policy.
(d) Adjusting Premiums.— 
If a court makes a determination as provided under subsection (c)(2), premiums paid under the policy shall be adjusted based on the courts determination and the rates provided for in the policy.

46 USC 53907 - Reinsurance

(a) In General.— 
To the extent the Secretary of Transportation is authorized to provide insurance under this chapter, the Secretary may provide reinsurance to a company authorized to do insurance business in a State of the United States. The Secretary may obtain reinsurance from such a company for any insurance provided by the Secretary under this chapter.
(b) Rates.— 
The Secretary may not provide reinsurance at rates less than, nor obtain reinsurance at rates more than, the rates established by the Secretary on the same or similar risks or the rates charged by the insurance company for the insurance reinsured, whichever is more advantageous to the Secretary. However, the Secretary may provide an allowance to the insurance company for the costs of services and facilities the company provides, in an amount the Secretary considers reasonable according to good business practice. The allowance to the company may not include any amount for soliciting or stimulating insurance business.

46 USC 53908 - Additional insurance privately obtained

With the approval of the Secretary of Transportation, a person having an insurable interest in a vessel may obtain insurance on the vessel with other underwriting agents in addition to the insurance with the Secretary. The Secretary is not entitled to the benefit of the additional insurance.

46 USC 53909 - War risk insurance revolving fund

(a) In General.— 
There is a war risk insurance revolving fund in the Treasury.
(b) Deposits.— 
There shall be deposited in the fund amounts appropriated to carry out this chapter and amounts received in carrying out this chapter.
(c) Payments.— 
There shall be paid from the fund amounts for return premiums, losses, settlements, judgments, and all liabilities incurred by the United States Government under this chapter.
(d) Investment.— 
The Secretary of Transportation may request the Secretary of the Treasury to invest such portion of the fund as is not, in the judgment of the Secretary of Transportation, required to meet the current needs of the fund. These investments shall be made by the Secretary of the Treasury in public debt securities of the Government, with maturities suitable to the needs of the fund, and bearing interest rates determined by the Secretary of the Treasury, taking into consideration current market yields on outstanding marketable obligations of the Government of comparable maturity. Interest and benefits from the securities shall be deposited in the fund.

46 USC 53910 - Administrative

(a) Accordance With Commercial Practice.— 
In carrying out this chapter, the Secretary of Transportation may act in accordance with commercial practice in the marine insurance business.
(b) Regulations.— 
The Secretary may prescribe regulations the Secretary considers appropriate to carry out this chapter.
(c) Policies, Rates, and Annual Fees.— 
The Secretary may prescribe and change forms and policies, and fix and change the amounts insured and rates of premium, under this chapter.
(d) Annual Fees.— 
The Secretary may charge and collect an annual fee in an amount calculated to cover the expenses of processing applications for insurance, employing underwriting agents, and appointing experts under this chapter.
(e) Payment of Claims and Judgments.— 
The Secretary may settle and pay claims, and pay judgments against the United States, related to insurance under this chapter.
(f) Underwriting Agents.— 

(1) In general.— 
The Secretary may, and when the Secretary finds it practical to do so shall, employ a domestic company or group of domestic companies, authorized to do marine insurance business in a State of the United States, to act as underwriting agent for the Secretary. The services of an underwriting agent may be used in adjusting claims, but a claim may not be paid until approved by the Secretary.
(2) Compensation.— 
The Secretary may allow the company or group of companies reasonable compensation for services as the underwriting agent. The compensation may include an allowance for expenses reasonably incurred by the agent, but may not include any amount for soliciting or stimulating business.
(g) Fees For Arranging Insurance.— 
Except as provided in subsection (f)(2), the Secretary may not pay an insurance broker or other person acting in a similar intermediary capacity a fee or other consideration for participating in arranging insurance when the Secretary directly insures any of the risk.
(h) Employment of Marine Insurance Experts.— 
The Secretary, without regard to the laws and regulations on the employment of Federal employees, may appoint and prescribe the duties of experts in marine insurance as the Secretary considers necessary to carry out this chapter.
(i) Services of Other Government Agencies.— 
With the consent of another agency of the United States Government, the Secretary may use information, services, facilities, officers, and employees of the agency in carrying out this chapter.
(j) Vessel Location Reporting.— 
The Secretary may prescribe by regulation vessel location reporting requirements for a vessel insured under this chapter.

46 USC 53911 - Civil actions for losses

(a) In General.— 
If there is a disagreement about a loss insured under this chapter, a civil action in admiralty may be brought against the United States in the district court of the United States for the district in which the plaintiff or the plaintiffs agent resides. If the plaintiff has no residence in the United States, the action may be brought in the United States District Court for the District of Columbia or in the district court for any district in which the Attorney General agrees to accept service. Any person who may have an interest in the insurance may be made a party, either initially or on the motion of either party.
(b) Exclusive Remedy.— 
A civil action against the United States under this section is exclusive of any other action by reason of the same subject matter against an officer, employee, or agent employed or retained by the Government under this chapter.
(c) Procedure.— 
A civil action under this section shall be heard and determined under chapter 309 of this title.
(d) Tolling of Limitations Period.— 
If a claim is filed with the Secretary of Transportation, the running of the limitations period for bringing a civil action is suspended until the Secretary denies the claim, and for 60 days thereafter. The Secretary is deemed to have denied the claim if the Secretary does not act on the claim within 6 months after the claim is filed, unless the Secretary for good cause shown agrees with the claimant on a different period for the Secretary to act on the claim.
(e) Interpleader.— 
If the Secretary acknowledges the indebtedness of the Government under the insurance and there is a dispute about the persons entitled to receive payment, the Government may bring a civil action interpleading those persons. The action shall be brought in the United States District Court for the District of Columbia or in the district court for the district in which any of those persons resides. A person not residing or found in the district may be made a party by service in any reasonable manner the court directs. If the court is satisfied that unknown persons might make a claim under the insurance, the court may direct service on those unknown persons by publication in the Federal Register. Judgment after service by publication in the Federal Register discharges the Government from further liability to all persons.

46 USC 53912 - Expiration date

The authority of the Secretary of Transportation to provide insurance and reinsurance under this chapter expires on December 31, 2010.

Part D - Promotional Programs

TITLE 46 - US CODE - CHAPTER 551 - COASTWISE TRADE

46 USC 55101 - Application of coastwise laws

(a) In General.— 
Except as provided in subsection (b), the coastwise laws apply to the United States, including the island territories and possessions of the United States.
(b) Exceptions.— 
The coastwise laws do not apply to
(1) American Samoa;
(2) the Northern Mariana Islands, except as provided in section 502(b) of the Covenant To Establish a Commonwealth of the Northern Mariana Islands in Political Union With the United States of America (48 U.S.C. 1801 note );
(3) Canton Island until the President declares by proclamation that the coastwise laws apply to Canton Island; or
(4) the Virgin Islands until the President declares by proclamation that the coastwise laws apply to the Virgin Islands.

46 USC 55102 - Transportation of merchandise

(a) Definition.— 
In this section, the term merchandise includes
(1) merchandise owned by the United States Government, a State, or a subdivision of a State; and
(2) valueless material.
(b) Requirements.— 
Except as otherwise provided in this chapter or chapter 121 of this title, a vessel may not provide any part of the transportation of merchandise by water, or by land and water, between points in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel
(1) is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade; and
(2) has been issued a certificate of documentation with a coastwise endorsement under chapter 121 or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement.
(c) Penalty.— 
Merchandise transported in violation of subsection (b) is liable to seizure by and forfeiture to the Government. Alternatively, an amount equal to the value of the merchandise (as determined by the Secretary of Homeland Security) or the actual cost of the transportation, whichever is greater, may be recovered from any person transporting the merchandise or causing the merchandise to be transported.

46 USC 55103 - Transportation of passengers

(a) In General.— 
Except as otherwise provided in this chapter or chapter 121 of this title, a vessel may not transport passengers between ports or places in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel
(1) is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade; and
(2) has been issued a certificate of documentation with a coastwise endorsement under chapter 121 or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement.
(b) Penalty.— 
The penalty for violating subsection (a) is $300 for each passenger transported and landed.

46 USC 55104 - Transportation of passengers between Puerto Rico and other ports in the United States

(a) Definitions.— 
In this section:
(1) Certificate.— 
The term certificate means a certificate of financial responsibility for indemnification of passengers for nonperformance of transportation issued by the Federal Maritime Commission under section 44102 of this title.
(2) Passenger vessel.— 
The term passenger vessel means a vessel of similar size, or offering similar service, as any other vessel transporting passengers under subsection (b).
(b) Exemption.— 
Except as otherwise provided in this section, a vessel not qualified to engage in the coastwise trade may transport passengers between a port in Puerto Rico and another port in the United States.
(c) Expiration of Exemption.— 

(1) When coastwise-qualified vessel offering service.— 
On a showing to the Secretary of the department in which the Coast Guard is operating, by the vessel owner or charterer, that a United States passenger vessel qualified to engage in the coastwise trade is offering or advertising passenger service between a port in Puerto Rico and another port in the United States pursuant to a certificate, the Secretary shall notify the owner or operator of each vessel transporting passengers under subsection (b) to terminate that transportation within 270 days after the Secretarys notification. Except as provided in subsection (d), the authority to transport passengers under subsection (b) expires at the end of that 270-day period.
(2) When non-coastwise-qualified vessel offering service.— 
On a showing to the Secretary, by the vessel owner or charterer, that a United States passenger vessel not qualified to engage in the coastwise trade is offering or advertising passenger service between a port in Puerto Rico and another port in the United States pursuant to a certificate, the Secretary shall notify the owner or operator of each foreign vessel transporting passengers under subsection (b) to terminate that transportation within 270 days after the Secretarys notification. Except as provided in subsection (d), the authority of a foreign vessel to transport passengers under subsection (b) expires at the end of that 270-day period.
(d) Delaying Expiration.— 
If the vessel offering or advertising the service described in subsection (c) has not begun that service within 270 days after the Secretarys notification, the expiration provided by subsection (c) is delayed until 90 days after the vessel offering or advertising the service begins that service.
(e) Reinstatement of Exemption.— 
If the Secretary finds that the service on which an expiration was based is no longer available, the expired authority to transport passengers is reinstated.

46 USC 55105 - Transportation of hazardous waste

(a) In General.— 
The transportation of hazardous waste, as defined in section 1004(5) of the Resource Conservation and Recovery Act of 1976 (42 U.S.C. 6903 (5)), from a point in the United States to sea for incineration is deemed to be transportation of merchandise under section 55102 of this title.
(b) Nonapplication to Certain Foreign Vessels.— 

(1) In general.— 
Subsection (a) does not apply to transportation performed by a foreign ocean incineration vessel owned by or under construction on May 1, 1982, for a corporation wholly owned by citizens of the United States under section 50501 (a)(c) of this title.
(2) Standards for incineration equipment.— 
Incineration equipment on a vessel described in paragraph (1) must meet standards of the Coast Guard and the Environmental Protection Agency.
(3) Inspection.— 
A vessel described in paragraph (1) shall be inspected by the Coast Guard, regardless of whether inspected by the nation in which it is registered. The inspection shall be the same as would be required of a vessel of the United States, including drydock inspection and internal examination of tanks and void spaces. The inspection may be made concurrently with an inspection by that nation or within one year after the initial issuance or next scheduled issuance of the Safety of Life at Sea Safety Construction Certificate. In making the inspection, the Coast Guard shall refer to the condition of the hull and superstructure established by the initial foreign certification as the basis for evaluating the current condition of the hull and superstructure. The Coast Guard shall allow the substitution of fittings, material, apparatus, equipment, and appliances different from those required for vessels of the United States if satisfied they are equivalent and at least as effective as those required for vessels of the United States. A satisfactory inspection under this paragraph shall be certified in writing by the Secretary of the department in which the Coast Guard is operating.
(c) Effective Date.— 
Subsection (a) is not effective until an appropriate vessel has been built and documented under chapter 121 of this title.

46 USC 55106 - Merchandise transferred between barges

(a) In General.— 
On terms and conditions the Secretary of Homeland Security may prescribe by regulation, the Secretary may suspend the application of section 55102 of this title to the transportation of merchandise that is transferred, when moving in the foreign trade of the United States, from a barge certified by the owner or operator as designed specifically for carriage on a vessel and carried regularly on a vessel in foreign trade, to another such barge owned or leased by the same owner or operator. However, this subsection does not apply to transportation between the continental United States and noncontiguous States, territories, or possessions to which the coastwise laws apply.
(b) Reciprocity Requirement for Foreign Vessels.— 
This section applies to a vessel of foreign registry only if the Secretary of Homeland Security finds, based on information from the Secretary of State, that the government of the nation of registry extends reciprocal privileges to vessels of the United States.

46 USC 55107 - Empty cargo containers and barges

(a) In General.— 
Subject to subsections (b) and (c), and on terms and conditions the Secretary of Homeland Security may prescribe by regulation, section 55102 of this title does not apply to the transportation of
(1) empty cargo vans, empty lift vans, or empty shipping tanks;
(2) equipment for use with cargo vans, lift vans, or shipping tanks;
(3) empty barges specifically designed for carriage aboard a vessel and equipment (except propulsion equipment) for use with those barges;
(4) empty instruments for international traffic exempted from the customs laws under section 322(a) of the Tariff Act of 1930 (19 U.S.C. 1322 (a)); or
(5) stevedoring equipment and material.
(b) Conditions.— 

(1) Paragraphs (1)(4).Paragraphs (1)(4) of subsection (a) apply only if the items named are owned or leased by the owner or operator of the vessel and transported for its use in handling its cargo in foreign trade.
(2) Paragraph (5).Paragraph (5) of subsection (a) applies only if the items named are
(A) owned or leased by the owner or operator of the vessel or by the stevedoring company having the contract for the loading or unloading of the vessel; and
(B) transported without charge for use in the handling of cargo in foreign trade.
(c) Reciprocity Requirement for Foreign Vessels.— 
This section applies to a vessel of foreign registry only if the Secretary of Homeland Security finds, based on information from the Secretary of State, that the government of the nation of registry extends reciprocal privileges to vessels of the United States.

46 USC 55108 - Platform jackets

(a) Definitions.— 
In this section:
(1) Coastwise qualified vessel.— 
The term coastwise qualified vessel means a vessel that has been issued a certificate of documentation with a coastwise endorsement under chapter 121 of this title.
(2) Platform jacket.— 
The term platform jacket refers to a single physical component and includes any type of offshore exploration, development, or production structure or component thereof, including
(A) platform jackets;
(B) tension leg or SPAR platform superstructures (including the deck, drilling rig and support utilities, and supporting structure);
(C) hull (including vertical legs and connecting pontoons or vertical cylinder);
(D) tower and base sections of a platform jacket;
(E) jacket structures; and
(F) deck modules (known as topsides).
(b) Authorized Transportation.— 
Section 55102 of this title does not apply to the transportation of a platform jacket in or on a non-coastwise qualified launch barge between two points in the United States, at one of which there is an installation or other device within the meaning of section 4(a) of the Outer Continental Shelf Lands Act (43 U.S.C. 1333 (a)), if
(1) the launch barge was built before December 31, 2000, and has a launch capacity of at least 12,000 long tons; and
(2) the Secretary of Transportation makes a determination, in accordance with procedures established under subsection (c), that a suitable coastwise qualified vessel is not available for use in the transportation and, if needed, launch or installation of a platform jacket.
(c) Procedures To Maximize Use of Coastwise Qualified Vessels.— 
The Secretary of Transportation shall adopt procedures implementing this section that are reasonably designed to provide timely information so as to maximize the use of coastwise qualified vessels. The procedures shall, among other things, establish that for purposes of this section, a coastwise qualified vessel shall be deemed to be not available only if
(1) on application by an owner or operator for the use of a non-coastwise qualified launch barge for transportation of a platform jacket under this section (which application shall include all relevant information, including engineering details and timing requirements), the Secretary promptly publishes a notice in the Federal Register
(A) describing the project and the platform jacket involved;
(B) advising that all relevant information reasonably needed to assess the transportation requirements for the platform jacket will be made available to interested parties on request; and
(C) requesting that information on the availability of coastwise qualified vessels be submitted within 30 days after publication of that notice; and
(2) 
(A) no information is submitted to the Secretary within that 30 day period; or
(B) the owner or operator of a coastwise qualified vessel submits information to the Secretary asserting that the owner or operator has a suitable coastwise qualified vessel available for the transportation, but the Secretary determines, within 90 days after the notice is first published, that the coastwise qualified vessel is not suitable or reasonably available for the transportation.

46 USC 55109 - Dredging

(a) In General.— 
Except as provided in subsection (b), a vessel may engage in dredging in the navigable waters of the United States only if
(1) the vessel is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade;
(2) the charterer, if any, is a citizen of the United States for purposes of engaging in the coastwise trade; and
(3) the vessel has been issued a certificate of documentation with a coastwise endorsement under chapter 121 of this title or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement.
(b) Dredging of Gold in Alaska.— 
A documented vessel with a registry endorsement may engage in the dredging of gold in Alaska.
(c) Penalty.— 
If a vessel is operated in knowing violation of this section, the vessel and its equipment are liable to seizure by and forfeiture to the United States Government.

46 USC 55110 - Transportation of dredged material

Section 55102 of this title applies to the transportation of valueless material or dredged material, regardless of whether it has commercial value, from a point in the United States or on the high seas within the exclusive economic zone, to another point in the United States or on the high seas within the exclusive economic zone.

46 USC 55111 - Towing

(a) In General.— 
Except when towing a vessel in distress, a vessel may not do any part of any towing described in subsection (b) unless the towing vessel
(1) is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade; and
(2) has been issued a certificate of documentation with a coastwise endorsement under chapter 121 of this title or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement.
(b) Applicable Towing.— 
Subsection (a) applies to the towing of
(1) a vessel between ports or places in the United States to which the coastwise laws apply, either directly or via a foreign port or place;
(2) a vessel from point to point within the harbors of ports or places to which the coastwise laws apply; or
(3) a vessel transporting valueless material or dredged material, regardless of whether it has commercial value, from a point in the United States or on the high seas within the exclusive economic zone, to another point in the United States or on the high seas within the exclusive economic zone.
(c) Penalties.— 

(1) Owner and master.— 
The owner and master of a vessel towing another vessel in violation of this section are each liable for a penalty of at least $350 but not more than $1,100. A penalty under this paragraph constitutes a lien on the vessel. The lien is enforceable in a district court of the United States for any district in which the vessel is found. Clearance may not be granted to the vessel until the penalties have been paid.
(2) Vessel.— 
In addition to the penalties under paragraph (1), the towing vessel is liable for a penalty of $60 per ton based on the tonnage of each towed vessel.

46 USC 55112 - Vessel escort operations and towing assistance

(a) In General.— 
Except in the case of a vessel in distress, only a vessel of the United States may perform the following escort vessel operations within the navigable waters of the United States:
(1) Operations that commence or terminate at a port or place in the United States.
(2) Operations required by United States law or regulation.
(3) Operations provided in whole or in part within or through navigation facilities owned, maintained, or operated by the United States Government or the approaches to those facilities, other than facilities operated by the St. Lawrence Seaway Development Corporation on the St. Lawrence River portion of the Seaway.
(b) Escort Vessels.— 
For purposes of this section, an escort vessel is
(1) any vessel that is assigned and dedicated to assist another vessel, whether or not tethered to that vessel, solely as a safety precaution to assist in controlling the speed or course of the assisted vessel in the event of a steering or propulsion equipment failure, or any other similar emergency circumstance, or in restricted waters where additional assistance in maneuvering the vessel is required to ensure its safe operation; and
(2) in the case of a vessel being towed under section 55111 of this title, any vessel that is assigned and dedicated to the vessel being towed in addition to any towing vessel required under that section.
(c) Relationship to Other Law.— 
This section does not affect section 55111 of this title.
(d) Penalty.— 
A person violating this section is liable to the Government for a civil penalty of not more than $10,000 for each day during which the violation occurs.

46 USC 55113 - Use of foreign documented oil spill response vessels

Notwithstanding any other provision of law, an oil spill response vessel documented under the laws of a foreign country may operate in waters of the United States on an emergency and temporary basis, for the purpose of recovering, transporting, and unloading in a United States port oil discharged as a result of an oil spill in or near those waters, if
(1) an adequate number and type of oil spill response vessels documented under the laws of the United States cannot be engaged to recover oil from an oil spill in or near those waters in a timely manner, as determined by the Federal On-Scene Coordinator for a discharge or threat of a discharge of oil; and
(2) the foreign country has by its laws accorded to vessels of the United States the same privileges accorded to vessels of the foreign country under this section.

46 USC 55114 - Unloading fish from foreign vessels

(a) Prohibitions.— 
Except as otherwise provided by this section or a treaty or convention to which the United States is a party, a foreign vessel may not unload, in a port of the United States
(1) its catch of fish taken on board on the high seas or fish products processed from that catch of fish; or
(2) fish or fish products taken on board that vessel on the high seas from a vessel engaged in fishing operations or the processing of fish or fish products.
(b) Regulations on Obtaining Information.— 
The Secretary of Commerce may prescribe regulations the Secretary considers necessary to obtain information on the transportation of fish products by vessels of the United States for foreign fish processing vessels to points in the United States.
(c) Virgin Islands.— 

(1) In general.— 
A foreign vessel of not more than 50 feet overall in length may unload its catch of fresh fish (whole or with the heads, viscera, or fins removed, but not frozen, otherwise processed, or further advanced) in a port of the Virgin Islands for immediate consumption in those islands. Fish unloaded under this paragraph may be sold or transferred only for immediate consumption. In the absence of satisfactory evidence that a sale or transfer to an agent, representative, or employee of a freezer or cannery is for immediate consumption, the sale or transfer is deemed not to be for immediate consumption. This paragraph does not prohibit the freezing, smoking, or other processing of fresh fish by the ultimate consumer of the fish.
(2) Seizure, forfeiture, and penalty.— 
Fish unloaded in the Virgin Islands that are retained, sold, or transferred, except as allowed by paragraph (1), are liable to seizure by and forfeiture to the United States Government. A person retaining, selling, transferring, buying, or receiving the fish is liable to the Government for a civil penalty of not more than $1,000 for each violation. A penalty or forfeiture under this paragraph may be compromised, modified, or remitted under section 2107 (b) of this title.
(d) Northern Mariana Islands.— 
Subsection (a) does not apply to the Northern Mariana Islands.

46 USC 55115 - Supplies on fish processing vessels

Section 55102 of this title does not apply to supplies aboard a United States documented fish processing vessel that are necessary and used for processing or assembling fishery products aboard such a vessel.

46 USC 55116 - Canadian rail lines

Section 55102 of this title does not apply to the transportation of merchandise between points in the continental United States, including Alaska, over through routes in part over Canadian rail lines and connecting water facilities if the routes are recognized by the Surface Transportation Board and rate tariffs for the routes have been filed with the Board.

46 USC 55117 - Great Lakes rail route

Section 55102 of this title does not apply to the transportation of merchandise loaded on a railroad car or to a motor vehicle with or without a trailer, and with its passengers or contents when accompanied by the operator, when the railroad car or motor vehicle is transported in a railroad car ferry operated between fixed terminals on the Great Lakes as part of a rail route, if
(1) the car ferry is owned by a common carrier by water and operated as part of a rail route with the approval of the Surface Transportation Board;
(2) the stock of the common carrier by water, or its predecessor, was owned or controlled by a common carrier by rail prior to June 5, 1920;
(3) the stock of the common carrier owning the car ferry is, with the approval of the Board, now owned or controlled by a common carrier by rail; and
(4) the car ferry is built in and documented under the laws of the United States.

46 USC 55118 - Foreign railroads whose road enters by ferry, tugboat, or towboat

A foreign railroad, whose road enters the United States by ferry, tugboat, or towboat, may own and operate a vessel not having a coastwise endorsement in connection with the water transportation of the passenger, freight, express, baggage, and mail cars used by that road, together with the passengers, freight, express matter, baggage, and mails transported in those cars. However, the foreign railroad is subject to the same restrictions imposed by law on a vessel of the United States entering a port of the United States from the same foreign country. Except as otherwise authorized by this chapter, the ferry, tugboat, or towboat may not, under penalty of forfeiture, be used in the transportation of merchandise between ports or places in the United States to which the coastwise laws apply.

46 USC 55119 - Yukon River

Section 55102 of this title does not apply to the transportation of merchandise on the Yukon River until the Alaska Railroad is completed and the Secretary of Transportation finds that proper facilities will be available for transportation by citizens of the United States to properly handle the traffic.

46 USC 55120 - Transshipment of imported merchandise intended for immediate exportation

The Secretary of Homeland Security may prescribe regulations for the transshipment and transportation of merchandise that is imported into the United States by sea for immediate exportation to a foreign port by sea, or by a river, the right to ascend or descend which for the purposes of commerce is secured by treaty to the citizens of the United States and the subjects of a foreign power.

46 USC 55121 - Transportation of merchandise and passengers on Canadian vessels

(a) Between Rochester and Alexandria Bay.— 
Until passenger service is established by vessels of the United States between the port of Rochester, New York, and the port of Alexandria Bay, New York, the Secretary of Homeland Security may issue annually permits to Canadian passenger vessels to transport passengers between those ports. Canadian vessels holding such a permit are not subject to section 55103 of this title.
(b) Within Alaska or Between Alaska and Other Points in the United States.— 
Until the Secretary of Transportation determines that service by vessels of the United States is available to provide the transportation described in paragraph (1) or (2), sections 55102 and 55103 of this title do not apply to the transportation on Canadian vessels of
(1) passengers between ports in southeastern Alaska; or
(2) passengers or merchandise between Hyder, Alaska, and other points in southeastern Alaska or in the United States outside Alaska.

TITLE 46 - US CODE - CHAPTER 553 - PASSENGER AND CARGO PREFERENCES

TITLE 46 - US CODE - SUBCHAPTER I - GENERAL

46 USC 55301 - Priority loading for coal

A vessel engaged in the coastwise transportation of coal produced in the United States, from a port in the United States to another port in the United States, shall be given priority in loading at any of those ports ahead of a waiting vessel engaged in the export transportation of coal produced in the United States. However, if the Secretary of Transportation finds that it is in the national interest, the Secretary may eliminate this priority loading at any port. The Secretary shall report to Congress within 30 days an action eliminating priority loading under this section.

46 USC 55302 - Transportation of United States Government personnel

(a) In General.— 
An officer or employee of the United States Government traveling by sea on official business overseas or to or from a territory or possession of the United States shall travel and transport personal effects on a vessel documented under the laws of the United Sates if such a vessel is available, unless the necessity of the mission requires the use of a foreign vessel.
(b) Regulations.— 
The Administrator of General Services shall prescribe regulations under which agencies may not pay for or reimburse an officer or employee for travel or transportation expenses incurred on a foreign vessel in the absence of satisfactory proof of the necessity of using the vessel.

46 USC 55303 - Motor vehicles owned by United States Government personnel

Notwithstanding any other law, privately-owned American shipping services may be used to transport motor vehicles owned by personnel of the United States Government whenever transportation of those vehicles at Government expense is otherwise authorized by law.

46 USC 55304 - Exports financed by the United States Government

It is the sense of Congress that any loans made by an instrumentality of the United States Government to foster the exporting of agricultural or other products shall provide that the products may be transported only on vessels of the United States unless, as to any or all of those products, the Secretary of Transportation, after investigation, certifies to the instrumentality that vessels of the United States are not available in sufficient number, in sufficient tonnage capacity, on necessary schedules, or at reasonable rates.

46 USC 55305 - Cargoes procured, furnished, or financed by the United States Government

(a) Definition.— 
In this section, the term privately-owned commercial vessel of the United States does not include a vessel that, after September 21, 1961, was built or rebuilt outside the United States or documented under the laws of a foreign country, until the vessel has been documented under the laws of the United States for at least 3 years.
(b) Minimum Tonnage.— 
When the United States Government procures, contracts for, or otherwise obtains for its own account, or furnishes to or for the account of a foreign country without provision for reimbursement, any equipment, materials, or commodities, within or without the United States, or advances funds or credits, or guarantees the convertibility of foreign currencies in connection with the furnishing of the equipment, materials, or commodities, the appropriate agencies shall take steps necessary and practicable to ensure that at least 50 percent of the gross tonnage of the equipment, materials, or commodities (computed separately for dry bulk carriers, dry cargo liners, and tankers) which may be transported on ocean vessels is transported on privately-owned commercial vessels of the United States, to the extent those vessels are available at fair and reasonable rates for commercial vessels of the United States, in a manner that will ensure a fair and reasonable participation of commercial vessels of the United States in those cargoes by geographic areas.
(c) Waivers.— 
The President, the Secretary of Defense, or Congress (by concurrent resolution or otherwise) may waive this section temporarily by
(1) declaring the existence of an emergency justifying a waiver; and
(2) notifying the appropriate agencies of the waiver.
(d) Programs of Other Agencies.— 
An agency having responsibility under this section shall administer its programs with respect to this section under regulations prescribed by the Secretary of Transportation. The Secretary shall review the administration of those programs and report annually to Congress on their administration.

TITLE 46 - US CODE - SUBCHAPTER II - EXPORT TRANSPORTATION OF AGRICULTURAL COMMODITIES

46 USC 55311 - Findings and purposes

(a) Findings.— 
Congress finds that
(1) a productive and healthy agricultural industry and a strong and active United States maritime industry are vitally important to the economic well-being and security of the United States;
(2) both industries must compete in international markets increasingly dominated by foreign trade barriers and the subsidization practices of foreign governments; and
(3) increased agricultural exports and the use of merchant vessels of the United States contribute positively to the United States balance of trade and generate employment opportunities in the United States.
(b) Purposes.— 
The purposes of this subchapter are to
(1) enable the Secretary of Agriculture to plan export programs effectively, by clarifying the ocean transportation requirements applicable to those programs;
(2) take immediate and positive steps to promote the growth of the cargo-carrying capacity of the United States merchant marine;
(3) expand international trade in United States agricultural commodities and products and develop, maintain, and expand markets for United States agricultural exports;
(4) improve the efficiency of administration of both the commodity purchasing and selling activities and the ocean transportation activities associated with export programs sponsored by the Secretary;
(5) stimulate and promote the agricultural and maritime industries of the United States and encourage cooperative efforts by both industries to address their common problems; and
(6) provide for the appropriate disposition of these findings and purposes.

46 USC 55312 - Determining prevailing world market price

(a) Agricultural Commodities and Products.— 
The prevailing world market price for agricultural commodities or their products shall be determined under this subchapter under procedures prescribed by the Secretary of Agriculture. The Secretary shall prescribe the procedures by regulation, with notice and opportunity for public comment under section 553 of title 5.
(b) Services and Non-Agricultural Commodities and Products.— 
If a determination of the prevailing world market price of any other type of materials, goods, equipment, or service is required to determine whether a barter or exchange transaction is subject to section 55314 (b)(6) or (7) of this title, the determination shall be made by the Secretary of Agriculture in consultation with the heads of other appropriate agencies.

46 USC 55313 - Exemption of certain agricultural exports from cargo preference provisions

Sections 55304 and 55305 of this title do not apply to export activities of the Secretary of Agriculture or the Commodity Credit Corporation under which
(1) agricultural commodities or their products acquired by the Corporation are made available to United States exporters, users, processors, or foreign purchasers for the purpose of developing, maintaining, or expanding export markets for United States agricultural commodities or their products at prevailing world market prices;
(2) payments are made available to United States exporters, users, or processors or, except as provided in section 55314 of this title, cash grants are made available to foreign purchasers, for the purpose described in paragraph (1);
(3) commercial credit guarantees are blended with direct credits from the Corporation to reduce the effective rate of interest on export sales of United States agricultural commodities or their products;
(4) credit or credit guarantees for not more than 3 years are extended by the Corporation to finance or guarantee export sales of United States agricultural commodities or their products; or
(5) agricultural commodities or their products owned or controlled by or under loan from the Corporation are exchanged or bartered for materials, goods, equipment, or services at least equal in value to the agricultural commodities or their products for which they are exchanged or bartered (determined on the basis of prevailing world market prices at the time of the exchange or barter), but this paragraph does not exempt from the cargo preference provisions referred to in section 55314 (b) of this title any requirement otherwise applicable to the materials, goods, equipment, or services imported under the transaction.

46 USC 55314 - Transportation requirements for certain exports sponsored by the Secretary of Agriculture

(a) Minimum Tonnage.— 

(1) In general.— 
In addition to the requirement under section 55305 of this title for the transportation of a percentage of gross tonnage on commercial vessels of the United States, 25 percent of the gross tonnage of agricultural commodities or their products specified in subsection (b) shall be transported each calendar year on commercial vessels of the United States that
(A) are necessary for national security; and
(B) if more than 25 years old, were rebuilt within the last 5 years and certified by the Secretary of Transportation as having a useful life of at least 5 years after that rebuilding.
(2) Calendar year.— 
To provide for effective and equitable administration of the cargo preference laws, the calendar year for the purpose of compliance with minimum percentage requirements is the 12-month period beginning October 1 of each year.
(b) Applicable Export Activity.— 
This section applies to export activity (except inspection or weighing activities, other activities carried out for health or safety, or technical assistance provided in the handling of commercial transactions) of the Secretary of Agriculture or the Commodity Credit Corporation
(1) carried out under the Agricultural Trade Development and Assistance Act of 1954 (7 U.S.C. 1691 et seq.);
(2) carried out under section 416 of the Agricultural Act of 1949 (7 U.S.C. 1431);
(3) carried out under the Bill Emerson Humanitarian Trust Act (7 U.S.C. 1736f–1);
(4) under which agricultural commodities or their products are
(A) donated through foreign governments or private or public agencies, including intergovernmental organizations; or
(B) sold for foreign currencies or for dollars on credit terms of more than 10 years;
(5) under which agricultural commodities or their products are made available for emergency food relief at less than prevailing world market prices;
(6) under which a cash grant is made directly or through an intermediary to a foreign purchaser to enable the purchaser to obtain United States agricultural commodities or their products in an amount greater than the difference between the prevailing world market price and the United States market price, free along side vessel at a United States port; or
(7) under which agricultural commodities owned or controlled by or under loan from the Corporation are exchanged or bartered for materials, goods, equipment, or services produced in foreign countries, except export activities described in section 55313 (5) of this title.
(c) Additional Requirements.— 

(1) Application of section 55305.— 
The requirement for transportation on vessels of the United States under subsection (a) is subject to the same terms and conditions as provided in section 55305 of this title.
(2) Allocation of commodities.— 
Subject to paragraph (3), in carrying out this section and section 55305 of this title, the Corporation shall take steps necessary and practicable, and consistent with this section and section 55305, without detriment to any port range to allocate, on the principle of lowest landed cost without regard to the country of registry of the vessel, 25 percent of the bagged, processed, or fortified commodities provided under title II of the Agricultural Trade Development and Assistance Act of 1954 (7 U.S.C. 1721 et seq.).
(3) Calculations.— 
In carrying out paragraph (2), first there shall be calculated the allocation of 100 percent of the quantity to be procured on an overall lowest landed cost basis without regard to the country of registry of the vessel, and then there shall be allocated to the Great Lakes port range any cargoes for which it has the lowest landed cost under that calculation. The requirements for transportation on vessels of the United States under this section and section 55305 of this title do not apply to commodities allocated to the Great Lakes port range under paragraph (2). Commodities allocated to the Great Lakes port range under paragraph (2) may not be reallocated or diverted to another port range to meet those requirements to the extent that the total tonnage of commodities to which paragraph (2) applies that is furnished and transported from the Great Lakes port range is less than 25 percent of the total annual tonnage of the commodities furnished.
(4) Awarding contracts.— 
In awarding a contract for the transportation by vessel of commodities from the Great Lakes port range pursuant to an export activity referred to in subsection (b), an agency
(A) shall consider expressions of freight interest for any vessel from a vessel operator who meets reasonable requirements for financial and operational integrity; and
(B) may not deny award of the contract to a person based on the type of vessel on which the transportation would be provided (including on the basis that the transportation would not be provided on a liner vessel, as that term is used in the Shipping Act of 1984, as in effect on November 14, 1995), if the person otherwise satisfies reasonable requirements for financial and operational integrity.
(5) Nonavailability of vessels.— 
A determination of nonavailability of vessels of the United States resulting from the application of this subsection may not reduce the gross tonnage of commodities required by this section and section 55305 of this title to be transported on vessels of the United States.

46 USC 55315 - Minimum tonnage

(a) Definition.— 
In this section, the term base period means the 5-year period running from the sixth through the second prior fiscal years.
(b) Requirement.— 
For each fiscal year, the minimum quantity of agricultural commodities to be exported under programs subject to section 55314 of this title is the average of the tonnage exported under those programs during the base period, discarding the high and low years.
(c) Waivers.— 
The President may waive the minimum quantity for a fiscal year under this section if the President determines and reports to Congress, together with reasons, that the quantity cannot be used effectively for the purposes of those programs or, based on a certification by the Secretary of Agriculture, that the commodities are not available for reasons that include the unavailability of funds.

46 USC 55316 - Financing the transportation of agricultural commodities

(a) Financing of Increased Charges.— 
The Secretary of Transportation shall finance any increased ocean freight charges incurred in any fiscal year that result from the application of section 55314 of this title.
(b) Reimbursement of Increased Charges.— 

(1) In general.— 
The Secretary of Transportation shall reimburse the Secretary of Agriculture and the Commodity Credit Corporation for the amount by which, in any fiscal year
(A) the total cost of ocean freight and ocean freight differential for which obligations are incurred by the Secretary of Agriculture and the Corporation on exports of agricultural commodities and their products under the agricultural export programs specified in section 55314 (b) of this title; exceeds
(B) 20 percent of the value of the commodities and their products and the cost of the ocean freight and ocean freight differential on which obligations are incurred by the Secretary of Agriculture and the Corporation during that fiscal year.
(2) Commodities shipped from inventory.— 
For purposes of this subsection, commodities shipped from the inventory of the Corporation shall be valued as provided in section 412(d) of the Agricultural Trade Development and Assistance Act of 1954 (7 U.S.C. 1736f (d)).
(c) Issuance and Purchase of Obligations.— 

(1) Issuance.— 
To meet the expenses required to be assumed under subsections (a) and (b), the Secretary of Transportation shall issue obligations to the Secretary of the Treasury. The Secretary of Transportation, with the approval of the Secretary of the Treasury, shall prescribe the form, denomination, maturity, and other terms (except the interest rate) of the obligations. The Secretary of the Treasury shall set the interest rate for the obligations, considering the average market yield on outstanding marketable obligations of the United States Government of comparable maturities during the month before the obligations are issued.
(2) Purchase.— 
The Secretary of the Treasury shall purchase the obligations issued under this subsection. To purchase the obligations, the Secretary of the Treasury may use as a public debt transaction the proceeds from the sale of securities issued under chapter 31 of title 31. The purposes for which securities may be issued under that chapter are extended to include the purchase of obligations under this subsection. A redemption or purchase of the obligations by the Secretary of the Treasury is a public debt transaction of the Government.
(d) Source of Funds for Reimbursement.— 
Reimbursement of the Secretary of Transportation for costs incurred under this section shall be made with appropriated funds rather than through cancellation of notes.
(e) Appropriations.— 

(1) Authorization.— 
Each fiscal year, there is authorized to be appropriated an amount sufficient to reimburse the Secretary of Transportation for the costs incurred under this section, including administrative expenses and the principal and interest due on obligations issued to the Secretary of the Treasury.
(2) Appropriation for administrative expenses.— 
Each fiscal year, such amounts as may be necessary are hereby appropriated to pay interest and to liquidate debt on obligations issued to the Secretary of the Treasury under this section.
(f) Notification to Congress of Insufficiency.— 
If the Secretary of Transportation is unable to obtain the funds necessary to finance the increased ocean freight charges resulting from the requirements of subsections (a) and (b) and section 55314 (a) of this title, the Secretary shall notify Congress within 10 working days of the discovery of the insufficiency.

46 USC 55317 - Termination of subchapter

This subchapter terminates 90 days after the date on which a notification is made under section 55316 (f) of this title, except for shipments of agricultural commodities and their products subject to contracts made before the end of that 90-day period, unless within that 90-day period the Secretary of Transportation proclaims that funds are available to finance increased freight charges resulting from the requirements of sections 55314 (a) and 55316 (a) and (b) of this title. On the termination of this subchapter under this section
(1) this subchapter does not exempt export activities from, or subject export activities to, the cargo preference laws; and
(2) the 50-percent requirement in section 55305 of this title remains in effect.

46 USC 55318 - Effect on other law

This subchapter does not affect chapter 5 of title 5.

TITLE 46 - US CODE - SUBCHAPTER III - AMERICAN GREAT LAKES VESSELS

46 USC 55331 - Definitions

In this subchapter:
(1) American great lakes vessel.— 
The term American Great Lakes vessel means a vessel so designated under section 55332 of this title, but only during the period the designation is in effect.
(2) Great lakes.— 
The term Great Lakes means Lake Superior, Lake Michigan, Lake Huron, Lake Erie, Lake Ontario, the Saint Lawrence River west of Saint Regis, New York, and their connecting and tributary waters.
(3) Great lakes shipping season.— 
The term Great Lakes shipping season means the period each year during which the Saint Lawrence Seaway is open for navigation by vessels, as declared by the Saint Lawrence Seaway Development Corporation.

46 USC 55332 - Designating American Great Lakes vessels

(a) Designations.— 
The Secretary of Transportation shall designate a vessel as an American Great Lakes vessel if
(1) an application for designation is submitted to the Secretary under regulations prescribed by the Secretary;
(2) the vessel is documented under the laws of the United States;
(3) the vessel, on the effective date of the designation, is
(A) at least 1, but not more than 6, years old; or
(B) at least 1, but not more than 11, years old if the Secretary finds that suitable vessels are not available to provide the type of service for which the vessel will be used after the designation;
(4) the vessel has not previously been designated as an American Great Lakes vessel; and
(5) the owner makes an agreement as provided under subsection (b).
(b) Agreements.— 
A vessel may be designated as an American Great Lakes vessel only if the person that will be the owner of the vessel at the time of the designation makes an agreement with the Secretary providing that if the Secretary determines that the vessel is necessary to the defense of the United States, the United States Government will have an exclusive right, during the 120-day period following the date of a revocation of the designation under section 55335 of this title, to purchase the vessel for a price equal to the greater of
(1) the approximate world market value of the vessel; or
(2) the cost of the vessel to the owner less a reasonable amount for depreciation.
(c) Certain Foreign Documentation and Sale Not Prohibited.— 
Notwithstanding any other law, if the Government does not exercise its right of purchase under an agreement under subsection (b), the owner of the vessel is not prohibited from
(1) documenting the vessel under the laws of a foreign country; or
(2) selling the vessel to a person not a citizen of the United States.
(d) Regulations.— 
The Secretary shall prescribe regulations establishing requirements for submitting applications under this section.

46 USC 55333 - Exemption from restriction on transporting certain cargo

The 3-year documentation requirement of section 55305 (a) of this title does not apply to a vessel designated as an American Great Lakes vessel during the period of its designation.

46 USC 55334 - Restrictions on operations

(a) Prohibitions.— 
Except as provided in subsection (b), an American Great Lakes vessel may not be used to
(1) engage in trade
(A) from a port in the United States that is not located on the Great Lakes; or
(B) between ports in the United States;
(2) transport bulk cargo (as defined in section 40102 of this title) that is subject to section 55305 or 55314 of this title or section 2631 of title 10; or
(3) provide a service (except ocean freight service) as
(A) a contract carrier; or
(B) a common carrier on a fixed advertised schedule offering frequent sailings at regular intervals in the foreign trade of the United States.
(b) Off-Season Exception.— 
An American Great Lakes vessel may be used for not more than 90 days during any 12-month period to engage in trade prohibited by subsection (a)(1)(A), except during the Great Lakes shipping season.

46 USC 55335 - Revocations and terminations of designations

(a) Revocations.— 
After notice and an opportunity for a hearing, the Secretary of Transportation may revoke a designation of a vessel as an American Great Lakes vessel if the Secretary finds that
(1) the vessel does not meet a requirement for the designation;
(2) the vessel has been operated in violation of this subchapter; or
(3) the owner or operator of the vessel has violated an agreement made under section 55332 (b) of this title.
(b) Terminations.— 
On petition and a showing of good cause by the owner of a vessel, the Secretary may terminate the designation of a vessel as an American Great Lakes vessel. The Secretary may impose conditions in a termination order to prevent significant adverse effects on other operators of vessels of the United States.

46 USC 55336 - Civil penalty

After notice and an opportunity for a hearing, the Secretary of Transportation may impose a civil penalty of not more than $1,000,000 on the owner of an American Great Lakes vessel for any act for which the designation may be revoked under section 55335 of this title.

TITLE 46 - US CODE - CHAPTER 555 - MISCELLANEOUS

46 USC 55501 - Mobile trade fairs

(a) In General.— 
The Secretary of Commerce shall encourage and promote the development and use of mobile trade fairs designed to show and sell the products of United States business and agriculture at foreign ports and at other commercial centers throughout the world where the operators of the fairs use, insofar as practicable, vessels and aircraft of the United States in transporting their exhibits.
(b) Technical and Financial Assistance.— 
When the Secretary determines that a mobile trade fair provides an economical and effective means of promoting export sales, the Secretary may provide to the operator of the fair
(1) technical assistance and support; and
(2) financial assistance to defray certain expenses incurred outside the United States, except the cost of transportation on foreign vessels and aircraft.
(c) Use of Foreign Currencies.— 
To carry out this section, the President may use, in addition to amounts appropriated to carry out trade promotion activities, foreign currencies owned by or owed to the United States Government.

TITLE 46 - US CODE - CHAPTER 556 - SHORT SEA TRANSPORTATION

46 USC 55601 - Short sea transportation program

(a) Establishment.— 
The Secretary of Transportation shall establish a short sea transportation program and designate short sea transportation projects to be conducted under the program to mitigate landside congestion.
(b) Program Elements.— 
The program shall encourage the use of short sea transportation through the development and expansion of
(1) documented vessels;
(2) shipper utilization;
(3) port and landside infrastructure; and
(4) marine transportation strategies by State and local governments.
(c) Short Sea Transportation Routes.— 
The Secretary shall designate short sea transportation routes as extensions of the surface transportation system to focus public and private efforts to use the waterways to relieve landside congestion along coastal corridors. The Secretary may collect and disseminate data for the designation and delineation of short sea transportation routes.
(d) Project Designation.— 
The Secretary may designate a project to be a short sea transportation project if the Secretary determines that the project may
(1) offer a waterborne alternative to available landside transportation services using documented vessels; and
(2) provide transportation services for passengers or freight (or both) that may reduce congestion on landside infrastructure using documented vessels.
(e) Elements of Program.— 
For a short sea transportation project designated under this section, the Secretary may
(1) promote the development of short sea transportation services;
(2) coordinate, with ports, State departments of transportation, localities, other public agencies, and the private sector and on the development of landside facilities and infrastructure to support short sea transportation services; and
(3) develop performance measures for the short sea transportation program.
(f) Multistate, State and Regional Transportation Planning.— 
The Secretary, in consultation with Federal entities and State and local governments, shall develop strategies to encourage the use of short sea transportation for transportation of passengers and cargo. The Secretary shall
(1) assess the extent to which States and local governments include short sea transportation and other marine transportation solutions in their transportation planning;
(2) encourage State departments of transportation to develop strategies, where appropriate, to incorporate short sea transportation, ferries, and other marine transportation solutions for regional and interstate transport of freight and passengers in their transportation planning; and
(3) encourage groups of States and multi-State transportation entities to determine how short sea transportation can address congestion, bottlenecks, and other interstate transportation challenges.

46 USC 55602 - Cargo and shippers

(a) Memorandums of Agreement.— 
The Secretary of Transportation shall enter into memorandums of understanding with the heads of other Federal entities to transport federally owned or generated cargo using a short sea transportation project designated under section 55601 when practical or available.
(b) Short-Term Incentives.— 
The Secretary shall consult shippers and other participants in transportation logistics and develop proposals for short-term incentives to encourage the use of short sea transportation.

46 USC 55603 - Interagency coordination

The Secretary of Transportation shall establish a board to identify and seek solutions to impediments hindering effective use of short sea transportation. The board shall include representatives of the Environmental Protection Agency and other Federal, State, and local governmental entities and private sector entities.

46 USC 55604 - Research on short sea transportation

The Secretary of Transportation, in consultation with the Administrator of the Environmental Protection Agency, may conduct research on short sea transportation, regarding
(1) the environmental and transportation benefits to be derived from short sea transportation alternatives for other forms of transportation;
(2) technology, vessel design, and other improvements that would reduce emissions, increase fuel economy, and lower costs of short sea transportation and increase the efficiency of intermodal transfers; and
(3) solutions to impediments to short sea transportation projects designated under section 55601.

46 USC 55605 - Short sea transportation defined

In this chapter, the term short sea transportation means the carriage by vessel of cargo
(1) that is
(A) contained in intermodal cargo containers and loaded by crane on the vessel; or
(B) loaded on the vessel by means of wheeled technology; and
(2) that is
(A) loaded at a port in the United States and unloaded either at another port in the United States or at a port in Canada located in the Great Lakes Saint Lawrence Seaway System; or
(B) loaded at a port in Canada located in the Great Lakes Saint Lawrence Seaway System and unloaded at a port in the United States.

Part E - Control of Merchant Marine Capabilities

TITLE 46 - US CODE - CHAPTER 561 - RESTRICTIONS ON TRANSFERS

46 USC 56101 - Approval required to transfer vessel to noncitizen

(a) Restrictions.— 

(1) In General.— 
Except as otherwise provided in this section, section 12119 of this title, or section 611 of the Merchant Marine Act, 1936, a person may not, without the approval of the Secretary of Transportation
(A) sell, lease, charter, deliver, or in any other manner transfer, or agree to sell, lease, charter, deliver, or in any other manner transfer, to a person not a citizen of the United States, an interest in or control of
(i) a documented vessel owned by a citizen of the United States; or
(ii) a vessel last documented under the laws of the United States; or
(B) place under foreign registry, or operate under the authority of a foreign country, a documented vessel or a vessel last documented under the laws of the United States.
(2) Exceptions.— 
Paragraph (1)(A) does not apply to a vessel that has been operated only for pleasure or only as a fishing vessel, fish processing vessel, or fish tender vessel (as defined in section 2101 of this title).
(b) Approval Before Documentation.— 
To promote financing with respect to a vessel to be documented under chapter 121 of this title, the Secretary may grant approval under subsection (a) before the vessel is documented.
(c) Exceptions.— 
Notwithstanding any other provision of this subtitle, the Merchant Marine Act, 1936, or any contract with the Secretary made under this subtitle or that Act, a person may place a vessel under foreign registry without the approval of the Secretary if
(1) 
(A) the Secretary, in conjunction with the Secretary of Defense, determines that at least one replacement vessel of equal or greater military capability and of a capacity that is equivalent or greater, as measured by deadweight tons, gross tons, or container equivalent units, as appropriate, is documented under chapter 121 of this title by the owner of the vessel placed under foreign registry; and
(B) the replacement vessel is not more than 10 years old on the date of that documentation; or
(2) an operating agreement covering the vessel under chapter 531 of this title has expired.
(d) Status of Prohibited Transaction.— 
A charter, sale, or transfer of a vessel, or of an interest in or control of a vessel, in violation of this section is void.
(e) Penalties.— 

(1) Criminal penalty.— 
A person that knowingly sells, charters, or transfers a vessel, or an interest in or control of a vessel, in violation of this section shall be fined under title 18, imprisoned for not more than 5 years, or both.
(2) Civil penalty.— 
A person that sells, charters, or transfers a vessel, or an interest in or control of a vessel, in violation of this section is liable to the United States Government for a civil penalty of not more than $10,000 for each violation.
(3) Forfeiture.— 
A documented vessel may be seized by and forfeited to the Government if, in violation of this section, a person
(A) knowingly sells, charters, or transfers the vessel or an interest in or control of the vessel; or
(B) places the vessel under foreign registry or operates the vessel under the authority of a foreign country.

46 USC 56102 - Additional controls during war or national emergency

(a) In General.— 
During war, or a national emergency declared by Presidential proclamation, a person may not, without the approval of the Secretary of Transportation
(1) place under foreign registry a vessel owned in whole or in part by a citizen of the United States or a corporation incorporated under the laws of the United States or of a State;
(2) sell, mortgage, lease, charter, deliver, or in any other manner transfer, or agree to sell, mortgage, lease, charter, deliver, or in any other manner transfer, to a person not a citizen of the United States
(A) a vessel owned as described in paragraph (1), or an interest therein;
(B) a vessel documented under the laws of the United States, or an interest therein; or
(C) a facility for building or repairing vessels, or an interest therein;
(3) issue, assign, or transfer to a person not a citizen of the United States an instrument of indebtedness secured by a mortgage of a vessel to a trustee, by an assignment of an owners interest in a vessel under construction to a trustee, or by a mortgage of a facility for building or repairing vessels to a trustee, unless the trustee or a substitute trustee is approved by the Secretary under subsection (b);
(4) enter into an agreement or understanding to construct a vessel in the United States for, or to be delivered to, a person not a citizen of the United States without expressly stipulating that construction will not begin until after the war or national emergency has ended;
(5) enter into an agreement or understanding whereby there is vested in, or for the benefit of, a person not a citizen of the United States the controlling interest in a corporation that is incorporated under the laws of the United States or a State and that owns a vessel or facility for building or repairing vessels; or
(6) cause or procure a vessel, constructed in whole or in part in the United States and never cleared for a foreign port, to depart from a port of the United States before it has been documented under the laws of the United States.
(b) Trustees.— 

(1) Approval.— 
The Secretary shall approve a trustee or substitute trustee under subsection (a)(3) if and only if the trustee is a bank or trust company that
(A) is organized as a corporation, and is doing business, under the laws of the United States or a State;
(B) is authorized under those laws to exercise corporate trust powers;
(C) is a citizen of the United States;
(D) is subject to supervision or examination by Federal or State authority; and
(E) has a combined capital and surplus (as set forth in its most recent published report of condition) of at least $3,000,000.
(2) Disapproval.— 
If a trustee or substitute trustee ceases to meet the conditions in paragraph (1), the Secretary shall disapprove the trustee or substitute trustee. After the disapproval, the restrictions on transfer or assignment without the Secretarys approval in subsection (a)(3) apply.
(3) Operation of vessel.— 
During a period when subsection (a) applies, a trustee referred to in subsection (a)(3), even though approved as a trustee by the Secretary, may not operate the vessel under the mortgage or assignment without the Secretarys approval.
(c) Status of Prohibited Transaction.— 
A transaction in violation of this section is void.
(d) Recovery of Consideration.— 

(1) In general.— 
A person that deposited or paid consideration in connection with a transaction prohibited by this section may recover the consideration after tender of the vessel, facility, stock, or other security, or interest therein, to the person entitled to it, or the forfeiture thereof to the United States Government.
(2) Exception.— 
Paragraph (1) does not apply if the person in whose interest the consideration was deposited, or to whom it was paid, entered into the transaction in the belief that the person depositing or paying the consideration was a citizen of the United States.
(e) Penalties.— 

(1) Criminal penalty.— 
A person that violates, or attempts or conspires to violate, this section shall be fined under title 18, imprisoned for not more than 5 years, or both.
(2) Forfeiture.— 
The following shall be forfeited to the Government:
(A) A vessel, a facility for building or repairing vessels, or an interest in a vessel or such a facility, that is sold, mortgaged, leased, chartered, delivered, transferred, or documented, or agreed to be sold, mortgaged, leased, chartered, delivered, transferred, or documented, in violation of this section.
(B) Stock and other securities sold or transferred, or agreed to be sold or transferred, in violation of this section.
(C) A vessel departing in violation of subsection (a)(6).

46 USC 56103 - Conditional approvals

(a) In General.— 
In approving an act or transaction under section 56101 or 56102 of this title, the Secretary of Transportation may do so absolutely or upon conditions the Secretary considers advisable. The Secretary shall state the conditions in the notice of approval.
(b) Violations.— 
A violation of a condition of approval is subject to the same penalties as a violation resulting from an act done without the required approval. The violation occurs at the time the condition is violated.

46 USC 56104 - Penalty for false statements

A person that knowingly makes a false statement of a material fact to the Secretary of Transportation or another officer, employee, or agent of the Department of Transportation, to obtain the Secretarys approval under section 56101 or 56102 of this title, shall be fined under title 18, imprisoned for not more than 5 years, or both.

46 USC 56105 - Forfeiture procedure

(a) In General.— 
A forfeiture under this chapter may be enforced in the same way as a forfeiture under the laws on the collection of duties. However, such a forfeiture may be remitted without seizure of the vessel.
(b) Prior Convictions.— 
In a proceeding under this chapter to enforce a forfeiture, a prior criminal conviction of a person for a violation of this chapter with respect to the subject matter of the forfeiture is prima facie evidence of the violation against the person convicted.

TITLE 46 - US CODE - CHAPTER 563 - EMERGENCY ACQUISITION OF VESSELS

46 USC 56301 - General authority

During a national emergency declared by Presidential proclamation, or a period for which the President has proclaimed that the security of the national defense makes it advisable, the Secretary of Transportation may requisition or purchase, or requisition or charter the use of, a vessel owned by citizens of the United States, a documented vessel, or a vessel under construction in the United States.

46 USC 56302 - Charter terms

(a) In General.— 
If a vessel is requisitioned for use but not ownership under this chapter, the Secretary of Transportation, at the time of requisition or as soon thereafter as the situation allows, shall offer the person entitled to possession of the vessel a charter containing
(1) the terms the Secretary believes should govern the relationship between the United States Government and the person; and
(2) the rate of hire the Secretary considers just compensation for the use of the vessel and the services required under the charter.
(b) Refusal To Accept.— 
If the person does not accept the charter and rate of hire, the parties shall proceed as provided in section 56304 of this title.

46 USC 56303 - Compensation

(a) In General.— 
As soon as practicable, the Secretary of Transportation shall determine and pay just compensation for a vessel requisitioned under this chapter.
(b) Factors Not Affecting Value.— 
The value of a vessel may not be considered enhanced by the circumstances requiring its requisition. Consequential damages arising from the requisition may not be paid.
(c) Effect of Construction-Differential Subsidy.— 

(1) If paid.— 
If a construction-differential subsidy has been paid for the vessel, the value of the vessel at the time of requisition shall be determined under section 802 of the Merchant Marine Act, 1936.
(2) If not paid.— 
If a construction-differential subsidy has not been paid for the vessel, the value of any national defense features previously paid for by the United States Government shall be excluded.
(d) Loss or Damage During Charter.— 
If a vessel is lost or damaged by a risk assumed by the Government under the charter, but a valuation for the vessel or a means of compensation has not been agreed to, the Secretary shall pay just compensation for the loss or damage, to the extent the person is not reimbursed through insurance.

46 USC 56304 - Disputed compensation

If the person entitled to compensation disputes the amount of just compensation determined by the Secretary of Transportation under this chapter, the Secretary shall pay the person, as a tentative advance, 75 percent of the amount determined. The person may bring a civil action against the United States to recover just compensation. If the tentative advance paid under this section is greater than the amount of the courts judgment, the person shall refund the difference.

46 USC 56305 - Vessel encumbrances

(a) In General.— 
The existence of an encumbrance on a vessel does not prevent the requisition of the vessel under this chapter.
(b) Deposit in Treasury.— 

(1) In general.— 
If an encumbrance exists, the Secretary of Transportation may deposit part of the compensation or advance of compensation to be paid under this chapter (but not more than the total amount of all encumbrances) in a fund in the Treasury. The Secretary shall publish notice of the creation of the fund in the Federal Register.
(2) Availability of amounts deposited.— 
Amounts deposited in the fund shall be available to pay the compensation or any of the encumbrances (including encumbrances stipulated to in a court of the United States or a State) existing at the time the vessel was requisitioned.
(c) Civil Action.— 

(1) In general.— 
Within 6 months after publication of notice under subsection (b), the holder of an encumbrance may bring a civil action in admiralty, according to the principles of libels in rem, against the fund.
(2) Venue.— 
The action must be brought in the district court of the United States
(A) from whose custody the vessel was or may be requisitioned; or
(B) in whose district the vessel was located when it was requisitioned.
(3) Service of process.— 
Service of process shall be made on the appropriate United States Attorney, the Attorney General, and the Secretary, in the manner provided by the Federal Rules of Civil Procedure (28 App. U.S.C.). Notice of the action shall be given to all interested persons as ordered by the court.
(4) As between private parties.— 
The action shall proceed and be determined according to the principles of law and the rules of practice applicable in like cases between private parties.

46 USC 56306 - Use and transfer of vessels

(a) In General.— 
The Secretary of Transportation may repair, recondition, reconstruct, operate, or charter for operation, a vessel acquired under this chapter.
(b) Transfer to Other Agencies.— 
The Secretary may transfer the possession or control of a vessel acquired under this chapter to another department or agency of the United States Government on terms and conditions approved by the President. The department or agency shall promptly reimburse the Secretary for expenditures for just compensation, purchase price, charter hire, repairs, reconditioning, or reconstruction.

46 USC 56307 - Return of vessels

When a vessel requisitioned for use but not ownership is returned to the owner, the Secretary of Transportation shall
(1) return the vessel in a condition at least as good as when taken, less ordinary wear and tear; or
(2) pay the owner an amount sufficient to recondition the vessel to that condition, less ordinary wear and tear.

TITLE 46 - US CODE - CHAPTER 565 - ESSENTIAL VESSELS AFFECTED BY NEUTRALITY ACT

46 USC 56501 - Definition

In this chapter, the term essential vessel means a vessel that is
(1) 
(A) security for a mortgage indebtedness to the United States Government; or
(B) constructed under this subtitle or required by a contract under this subtitle to be operated on a certain essential foreign trade route; and
(2) necessary in the interests of commerce and national defense to be maintained in condition for prompt use.

46 USC 56502 - Adjusting obligations and arranging maintenance

(a) General Authority.— 
On written application, the Secretary of Transportation may adjust obligations and arrange for maintenance of an essential vessel as provided in this chapter if the Secretary determines, after any investigation or proceeding the Secretary considers desirable, that
(1) the operation of the vessel in the service, route, or line to which it is assigned under this subtitle, or in which it otherwise would be operated, is not
(A) lawful under the Neutrality Act of 1939 (22 U.S.C. 441 et seq.) or a proclamation issued under that Act; or
(B) compatible with maintaining the availability of the vessel for national defense and commerce;
(2) it is not feasible under existing law to employ the vessel in any other service or operation in foreign or domestic trade (except temporary or emergency operation under section 56503 (b)(5) of this title); and
(3) the applicant, because of the restrictions of the Neutrality Act of 1939 (22 U.S.C. 441 et seq.) or the withdrawal of vessels for national defense under paragraph (1), is not earning or will not earn a reasonable return on the capital necessarily employed in its business.
(b) Effective Period.— 
Adjustments and arrangements under subsection (a) shall continue in effect only as long as the circumstances described in subsection (a) continue to exist.

46 USC 56503 - Types of adjustments and arrangements

(a) Suspension Requirements.— 
An adjustment or arrangement under this chapter shall include suspension of
(1) the requirement to operate the vessel in foreign trade under the applicable operating-differential or construction-differential subsidy contract or mortgage or other agreement; and
(2) the right to operating-differential subsidy for the vessel.
(b) Discretionary Adjustments and Arrangements.— 
To the extent the Secretary of Transportation considers appropriate to carry out the purposes of this subtitle, an adjustment or arrangement under this chapter may include any of the following:
(1) Lay-up of the vessel by the owner or in the custody of the Secretary, with payment or reimbursement by the Secretary of necessary and proper expenses (including reasonable overhead and insurance) or a fixed periodic allowance instead of payment or reimbursement.
(2) Postponement, for not more than the total period of the lay-up, of the maturity date of each installment of the principal of obligations to the United States Government for the vessel (regardless of whether the maturity date is during a lay-up period), or rearrangement of those maturities.
(3) Postponement or cancellation of interest accruing on the obligations during a lay-up period.
(4) Extension, for not more than the total period of the lay-up, of the 20-year life limitation for the vessel and other limitations and provisions of this subtitle based on a 20-year life.
(5) Provision for temporary or emergency employment of the vessel (instead of lay-up) as may be practicable, with such arrangements for management of the vessel, payment of expenses, and application of the proceeds of the employment, as the Secretary may approve, with any period of operation being included as part of the lay-up period.
(6) Payment to the Secretary, on termination of the arrangements with the applicant, of the applicants net profits (earned while the arrangements were in effect) in excess of 10 percent a year on the capital necessarily employed in the applicants business, as reimbursement for obligations postponed or canceled and expenses incurred or paid by the Secretary under this section.
(c) Laid-Up Vessels.— 
Under subsection (b)(6), capital of the applicant represented by a vessel of the applicant laid-up or operated under this section shall be included in capital necessarily employed in the applicants business. The Secretary may require a vessel laid-up or operated under this section to be security for reimbursement.

46 USC 56504 - Changes in adjustments and arrangements

The Secretary of Transportation may change an adjustment or arrangement made under this chapter as the Secretary considers necessary to carry out this chapter.

Part F - Government-Owned Merchant Vessels

TITLE 46 - US CODE - CHAPTER 571 - GENERAL AUTHORITY

46 USC 57101 - Placement of vessels in National Defense Reserve Fleet

(a) In General.— 
Any vessel acquired by the Maritime Administration shall be placed in the National Defense Reserve Fleet maintained under section 11 of the Merchant Ship Sales Act of 1946 (50 App. U.S.C. 1744).
(b) Removal From Fleet.— 
A vessel placed in the Fleet under subsection (a) may not be traded out or sold from the Fleet, except as provided in section 57102, 57103, or 57104 or chapter 533section 57102, 57103, or 57104 or chapter 533, 537, 573, or 575 of this title.

46 USC 57102 - Disposition of vessels not worth preserving

(a) In General.— 
If the Secretary of Transportation determines that a vessel owned by the Maritime Administration is of insufficient value for commercial or military operation to warrant its further preservation, the Secretary may scrap the vessel or sell the vessel for cash.
(b) Selling Procedure.— 
The sale of a vessel under subsection (a) shall be made on the basis of competitive sealed bids, after an appraisal and due advertisement. The purchaser does not have to be a citizen of the United States. The purchaser shall provide a surety bond, with a surety approved by the Secretary, to ensure that the vessel will not be operated in the foreign trade of the United States at any time within 10 years after the sale, in competition with a vessel owned by a citizen of the United States and documented under the laws of the United States.

46 USC 57103 - Sale of obsolete vessels in National Defense Reserve Fleet

(a) In General.— 
The Secretary of Transportation may convey the right, title, and interest of the United States Government in any vessel of the National Defense Reserve Fleet that has been identified by the Secretary as an obsolete vessel of insufficient value to warrant its further preservation, if the recipient
(1) is a non-profit organization, a State, or a municipal corporation or political subdivision of a State;
(2) agrees not to use, or allow others to use, the vessel for commercial transportation purposes;
(3) agrees to make the vessel available to the Government whenever the Secretary indicates that it is needed by the Government;
(4) agrees to hold the Government harmless for any claims arising from exposure to asbestos, polychlorinated biphenyls, lead paint, or other hazardous substances after conveyance of the vessel, except for claims arising from use of the vessel by the Government;
(5) has a conveyance plan and a business plan that describes the intended use of the vessel, each of which has been submitted to and approved by the Secretary;
(6) has provided proof, as determined by the Secretary, of resources sufficient to accomplish the transfer, necessary repairs and modifications, and initiation of the intended use of the vessel; and
(7) agrees that when the recipient no longer requires the vessel for use as described in the business plan required under paragraph (5)
(A) the recipient will, at the discretion of the Secretary, reconvey the vessel to the Government in good condition except for ordinary wear and tear; or
(B) if the Board of Trustees of the recipient has decided to dissolve the recipient according to the laws of the State in which the recipient is incorporated, then
(i) the recipient shall distribute the vessel, as an asset of the recipient, to a person that has been determined exempt from taxation under section 501(c)(3) of the Internal Revenue Code of 1986 (26 U.S.C. 501 (c)(3)), or to the Federal Government or a State or local government for a public purpose; and
(ii) the vessel shall be disposed of by a court of competent jurisdiction of the county in which the principal office of the recipient is located, for such purposes as the court shall determine, or to such organizations as the court shall determine are organized exclusively for public purposes.
(b) Other Equipment.— 
At the Secretarys discretion, additional equipment from other obsolete vessels of the Fleet may be conveyed to assist the recipient with maintenance, repairs, or modifications.
(c) Additional Terms.— 
The Secretary may require any additional terms the Secretary considers appropriate.
(d) Delivery of Vessel.— 
If conveyance is made under this section, the vessel shall be delivered to the recipient at a time and place to be determined by the Secretary. The vessel shall be conveyed in an as is condition.
(e) Limitations.— 
If at any time prior to delivery of the vessel to the recipient, the Secretary determines that a different disposition of the vessel would better serve the interests of the Government, the Secretary shall pursue the more favorable disposition of the obsolete vessel and shall not be liable for any damages that may result from an intended recipients reliance upon a proposed transfer.
(f) Reversion.— 
The Secretary shall include in any conveyance under this section terms under which all right, title, and interest conveyed by the Secretary shall revert to the Government if the Secretary determines the vessel has been used other than as described in the business plan required under subsection (a)(5).

46 USC 57104 - Acquisition of vessels from sale of obsolete vessels

(a) In General.— 
The Secretary of Transportation may acquire suitable documented vessels with amounts in the Vessel Operations Revolving Fund derived from the sale of obsolete vessels in the National Defense Reserve Fleet.
(b) Valuation.— 
The acquired and obsolete vessels shall be valued at their scrap value in domestic or foreign markets as of the date of the acquisition for or sale from the Fleet. However, the value assigned to those vessels shall be determined on the same basis, with consideration given to the fair value of the cost of moving the vessel sold from the Fleet to the place of scrapping.
(c) Costs Incident to Lay-Up.— 
Costs incident to the lay-up of the vessel acquired under this section may be paid from amounts in the Fund.
(d) Transfers to Non-Citizens.— 
A vessel sold from the Fleet under this section may be scrapped in an approved foreign market without obtaining additional separate approval from the Secretary to transfer the vessel to a person not a citizen of the United States.

46 USC 57105 - Acquisition of vessels for essential services, routes, or lines

(a) In General.— 
The Secretary of Transportation may acquire a vessel, by purchase or otherwise, if
(1) the Secretary considers the vessel necessary to establish, maintain, improve, or serve as a replacement on an essential service, route, or line in the foreign commerce of the United States, as determined under section 50103 of this title;
(2) the vessel was constructed in the United States; and
(3) the Secretary of the Navy has certified to the Secretary of Transportation that the vessel is suitable for economical and speedy conversion into a naval or military auxiliary or otherwise suitable for use by the United States Government in time of war or national emergency.
(b) Price.— 
The price paid for the vessel shall be based on a fair and reasonable valuation. However, the price may not exceed by more than 5 percent the cost of the vessel to the owner (excluding any construction-differential subsidy and the cost of national defense features paid by the Secretary of Transportation) plus the actual cost previously expended for reconditioning, less depreciation based on a 25-year life for a dry-cargo or passenger vessel and a 20-year life for a tanker or other liquid bulk carrier vessel.
(c) Documentation.— 
A vessel acquired under this section that is not documented under the laws of the United States at the time of acquisition shall be so documented as soon as practicable.

46 USC 57106 - Maintenance, improvement, and operation of vessels

(a) In General.— 
The Secretary of Transportation may maintain, repair, recondition, remodel, and improve vessels owned by the United States Government and in the possession or under the control of the Secretary, to equip them adequately for competition in the foreign trade of the United States. The Secretary may operate such a vessel or charter the vessel on terms and conditions the Secretary considers appropriate to carry out the purposes of this subtitle.
(b) Documentation and Restrictions on Operation.— 
A vessel reconditioned, remodeled, or improved under subsection (a) shall be documented under the laws of the United States and remain so documented for at least 5 years after completion of the reconditioning, remodeling, or improvement. During that period, it shall be operated on voyages that are not exclusively coastwise.

46 USC 57107 - Vessels for other agencies

(a) In General.— 
The Secretary of Transportation may construct, reconstruct, repair, equip, and outfit, by contract or otherwise, vessels or parts thereof, for any other department or agency of the United States Government to the extent the other department or agency is authorized by law to do so for its own account.
(b) Effect on Contract Authorization.— 
An obligation incurred or expenditure made by the Secretary under this section does not affect any contract authorization of the Secretary, but instead shall be charged against the existing appropriation or contract authorization of the department or agency.

46 USC 57108 - Consideration of ballast and equipment in determining selling price

The Maritime Administration may not sell a vessel until its ballast and equipment have been inventoried and their value considered in determining the selling price of the vessel.

46 USC 57109 - Operation of vessels purchased, chartered, or leased from Secretary of Transportation

Unless otherwise authorized by the Secretary of Transportation, a vessel purchased, chartered, or leased from the Secretary may be operated only under a certificate of documentation with a registry or coastwise endorsement. Such a vessel, while employed solely as a merchant vessel, is subject to the laws, regulations, and liabilities governing merchant vessels, whether the United States Government has an interest in the vessel as an owner or holds a mortgage, lien, or other interest.

TITLE 46 - US CODE - CHAPTER 573 - VESSEL TRADE-IN PROGRAM

46 USC 57301 - Definitions

In this chapter:
(1) New vessel.— 
The term new vessel means a vessel
(A) constructed under this subtitle and acquired within 2 years after the date of completion; or
(B) constructed in a domestic shipyard on private account and not under this subtitle, and documented under the laws of the United States.
(2) Obsolete vessel.— 
The term obsolete vessel means a vessel that
(A) is of at least 1,350 gross tons;
(B) the Secretary of Transportation believes should, because of its age, obsolescence, or other reasons, be replaced in the public interest; and
(C) has been owned by a citizen of the United States for at least 3 years immediately before its acquisition under this chapter.

46 USC 57302 - Authority to acquire vessels

To promote the construction of new, safe, and efficient vessels to carry the domestic and foreign waterborne commerce of the United States, the Secretary of Transportation may acquire an obsolete vessel in exchange for an allowance of credit toward the cost of construction or purchase of a new vessel as provided in this chapter.

46 USC 57303 - Utility value and tonnage requirements

(a) Utility Value.— 
The utility value of a new vessel to be acquired under this chapter for operation in the domestic or foreign commerce of the United States may not be substantially less than that of the obsolete vessel acquired in exchange under this chapter.
(b) Tonnage.— 
If the Secretary of Transportation finds that the new vessel will have a utility value at least equal to that of the obsolete vessel, the new vessel may be of lesser gross tonnage than the obsolete vessel. However, the gross tonnage of the new vessel must be at least one-third the gross tonnage of the obsolete vessel.

46 USC 57304 - Eligible acquisition dates

At the option of the owner, the acquisition of an obsolete vessel under this chapter shall occur
(1) when the owner contracts for the construction or purchase of a new vessel; or
(2) within 5 days of the actual date of delivery of the new vessel to the owner.

46 USC 57305 - Determination of trade-in allowance

(a) In General.— 
The Secretary of Transportation shall determine the trade-in allowance for an obsolete vessel at the time of acquisition of the vessel. The allowance shall be the fair value of the vessel. In determining the value, the Secretary shall consider
(1) the scrap value of the obsolete vessel in American and foreign markets;
(2) the depreciated value based on a 20-year or 25-year life, whichever applies to the obsolete vessel; and
(3) the market value of the obsolete vessel for operation in world commerce or in the domestic or foreign commerce of the United States.
(b) Use of Obsolete Vessels.— 
If acquisition of the obsolete vessel occurs when the owner contracts for the construction of the new vessel, and the owner uses the obsolete vessel during the period of construction of the new vessel, the Secretary shall reduce the trade-in allowance by an amount representing the fair value of that use. The Secretary shall establish the rate for use of the obsolete vessel when the contract for construction of the new vessel is made.

46 USC 57306 - Payment of trade-in allowance

(a) Acquisition at Time of Contract.— 
If acquisition of an obsolete vessel under this chapter occurs when the owner contracts for the construction or purchase of the new vessel, the Secretary of Transportation shall apply the trade-in allowance to the purchase price of the new vessel rather than paying it to the owner. If the new vessel is constructed under this subtitle, the Secretary may apply the trade-in allowance to the required cash payments on terms and conditions the Secretary may prescribe. If the new vessel is not constructed under this subtitle, the Secretary shall pay the trade-in allowance to the builder of the vessel for the account of the owner when the Secretary acquires the obsolete vessel.
(b) Acquisition at Time of Delivery.— 
If acquisition of the obsolete vessel occurs when the new vessel is delivered to the owner, the Secretary shall deposit the trade-in allowance in the owners capital construction fund.

46 USC 57307 - Recognition of gain for tax purposes

The owner of an obsolete vessel does not recognize a gain under the Federal income tax laws when the vessel is transferred to the Secretary of Transportation in exchange for a trade-in allowance under this chapter. The basis of the new vessel acquired with the allowance is the same as the basis of the obsolete vessel
(1) increased by the difference between the cost of the new vessel and the trade-in allowance of the obsolete vessel; and
(2) decreased by the amount of loss recognized on the transfer.

46 USC 57308 - Use of vessels at least 25 years old

An obsolete vessel acquired under this chapter that is or becomes at least 25 years old may not be used for commercial operation. However, the vessel may be used
(1) during a period in which vessels may be requisitioned under chapter 563 of this title; or
(2) except as otherwise provided in this subtitle, on trade routes serving only the foreign trade of the United States.

TITLE 46 - US CODE - CHAPTER 575 - CONSTRUCTION, CHARTER, AND SALE OF VESSELS

TITLE 46 - US CODE - SUBCHAPTER I - GENERAL

46 USC 57501 - Completion of long-range program

Whenever the Secretary of Transportation determines that the objectives and policies declared in sections 50101 and 50102 of this title cannot be fully realized within a reasonable time under titles V and VI of the Merchant Marine Act, 1936, and the President approves the determination, the Secretary, in accordance with this chapter, shall complete the long-range program described in section 50102 of this title.

46 USC 57502 - Construction, reconditioning, and remodeling of vessels

(a) In General.— 
The Secretary of Transportation may have new vessels constructed, and have old vessels reconditioned or remodeled, as the Secretary determines necessary to carry out the objectives of this subtitle.
(b) Place of Work.— 
Construction, reconditioning, and remodeling of vessels under subsection (a) shall take place in shipyards in the continental United States (including Alaska and Hawaii). However, if satisfactory contracts cannot be obtained from private shipbuilders, the Secretary may have the work done in navy yards.
(c) Applicability of Construction-Differential Subsidy Provisions.— 
Contracts for the construction, reconstruction, or reconditioning of a vessel by a private shipbuilder under this chapter are subject to the provisions of title V of the Merchant Marine Act, 1936, applicable to a contract with a private shipbuilder for the construction of a vessel under title V of that Act.

46 USC 57503 - Competitive bidding

(a) Advertisement and Bidding.— 
The Secretary of Transportation may make a contract with a private shipbuilder for the construction of a new vessel, or for the reconstruction or reconditioning of an existing vessel, only after due advertisement and upon sealed competitive bids.
(b) Opening of Bids.— 
Bids required under this section shall be opened at the time and place stated in the advertisement for bids. All interested persons, including representatives of the press, shall be permitted to attend. The results of the bidding shall be publicly announced.

46 USC 57504 - Charter or sale of vessels acquired by Department of Transportation

Vessels transferred to or otherwise acquired by the Department of Transportation in any manner may be chartered or sold by the Secretary of Transportation as provided in this chapter.

46 USC 57505 - Employment of vessels on foreign trade routes

(a) In General.— 
The Secretary of Transportation shall arrange for the employment of the Department of Transportations vessels in steamship lines on such trade routes, exclusively serving the foreign trade of the United States, as the Secretary determines are essential for the development and maintenance of the commerce of the United States and the national defense. However, the Secretary shall first determine that those routes are not being adequately served by existing steamship lines privately owned and operated by citizens of the United States and documented under the laws of the United States.
(b) Policy To Encourage Private Operation.— 
The Secretary shall have a policy of encouraging private operation of each essential steamship line now owned by the United States Government by
(1) selling the line to a citizen of the United States; or
(2) demising the Secretarys vessels on bareboat charter to citizens of the United States who agree to maintain the line in the manner provided in this chapter.

46 USC 57506 - Minimum selling price of vessels

(a) In General.— 
A vessel constructed under this subtitle or the Merchant Marine Act, 1936, may not be sold by the Secretary of Transportation for less than the price specified in this section.
(b) Operation in Foreign Trade.— 
If the vessel is to be operated in foreign trade, the minimum price is the estimated foreign construction cost (exclusive of national defense features) determined as of the date the construction contract is executed, less depreciation under subsection (d).
(c) Operation in Domestic Trade.— 
If the vessel is to be operated in domestic trade, the minimum price is the cost of construction in the United States (exclusive of national defense features), less depreciation under subsection (d).
(d) Depreciation.— 
Depreciation under subsections (b) and (c) shall be based on
(1) a 25-year life for dry-cargo and passenger vessels; and
(2) a 20-year life for tankers and other bulk liquid carrier vessels.

TITLE 46 - US CODE - SUBCHAPTER II - CHARTERS

46 USC 57511 - Demise charters

A charter by the Secretary of Transportation under this chapter shall demise the vessel to the charterer subject to all usual conditions contained in a bareboat charter. The charter shall be for a term the Secretary considers to be in the best interest of the United States Government and the merchant marine.

46 USC 57512 - Competitive bidding

(a) In General.— 
The Secretary of Transportation may charter a vessel of the Department of Transportation to a private operator only on the basis of competitive sealed bidding. The bids must be submitted in strict compliance with the terms and conditions of a public advertisement soliciting the bids.
(b) Advertisement for Bids.— 
An advertisement for bids shall state
(1) the number, type, and tonnage of the vessels being offered for bareboat charter for operation as a steamship line on a designated trade route;
(2) the minimum number of sailings required;
(3) the length of time of the charter;
(4) the right of the Secretary to reject all bids; and
(5) other information the Secretary considers necessary for the information of prospective bidders.
(c) Opening of Bids.— 
Bids required under this section shall be opened at the time and place stated in the advertisement for bids. All interested persons, including representatives of the press, shall be permitted to attend. The results of the bidding shall be publicly announced.

46 USC 57513 - Minimum bid

The Secretary of Transportation shall reject any bid for the charter under this subchapter of a vessel constructed under this subtitle or the Merchant Marine Act, 1936, if the charter hire offered is lower than the minimum charter hire would be if the vessel were chartered under section 57531 of this title.

46 USC 57514 - Qualifications of bidders

(a) Considerations.— 
In deciding whether to award a charter to a bidder, the Secretary of Transportation shall consider
(1) the bidders financial resources, credit standing, and practical experience in operating vessels; and
(2) other factors a prudent business person would consider in entering into a transaction involving a large capital investment.
(b) Disqualifications.— 
The Secretary may not charter a vessel to a person appearing to lack sufficient capital, credit, and experience to operate the vessel successfully over the period covered by the charter.

46 USC 57515 - Awarding of charters

(a) In General.— 
The Secretary of Transportation shall award the charter to the bidder proposing to pay the highest monthly charter hire. However, the Secretary may reject the highest or most advantageous or any other bid if the Secretary considers the charter hire offered too low or determines that the bidder lacks the qualifications required by section 57514 of this title.
(b) Highest Bid Rejected.— 
If the Secretary rejects the highest bid, the Secretary may
(1) award the charter to the next highest bidder; or
(2) reject all bids and either readvertise the line or operate the line until conditions appear more favorable to reoffer the line for private charter.
(c) Reason for Rejection.— 
On request of a bidder, the reason for rejection shall be stated in writing to the bidder.

46 USC 57516 - Operating-differential subsidies

If the Secretary of Transportation considers it necessary, the Secretary may make a contract with a charterer of a vessel owned by the Secretary for payment of an operating-differential subsidy, on the same terms and conditions, and subject to the same limitations and restrictions, as otherwise provided with respect to payment of operating-differential subsidies to operators of privately-owned vessels.

46 USC 57517 - Recovery of excess profits

(a) In General.— 
A charter under this chapter shall provide that if, at the end of a calendar year subsequent to the execution of the charter, the cumulative net voyage profit (after payment of the charter hire reserved in the charter and payment of the charterers fair and reasonable overhead expenses applicable to operation of the chartered vessel) exceeds 10 percent a year of the charterers capital necessarily employed in the business of the chartered vessel, the charterer shall pay to the Secretary of Transportation, as additional charter hire, half the cumulative net voyage profit in excess of 10 percent a year. However, any cumulative net voyage profit accounted for under this subsection is not to be included in the calculation of cumulative net voyage profit in any subsequent year.
(b) Terms To Be Defined and Used.— 
The Secretary shall define the terms net voyage profit, fair and reasonable overhead expenses, and capital necessarily employed for this section. Each advertisement for bids and each charter shall contain these definitions, stating the formula for determining each of these three amounts.

46 USC 57518 - Performance bond

The Secretary of Transportation shall require a charterer of a vessel of the Secretary to deposit with the Secretary an undertaking, with approved sureties, in such amount as the Secretary may require as security for the faithful performance of the terms of the charter, including indemnity against liens on the chartered vessel.

46 USC 57519 - Insurance

A charter under this chapter shall require the charterer to carry, at the charterers expense, insurance on the chartered vessel covering all marine and port risks, protection and indemnity risks, and all other hazards and liabilities, adequate to cover damages claimed against and losses sustained by the chartered vessel arising during the term of the charter. The insurance shall be in such form, in such amount, and with such companies as the Secretary of Transportation may require. In accordance with law, any of the insurance risks may be underwritten by the Secretary.

46 USC 57520 - Vessel maintenance

(a) In General.— 
A charter under this chapter shall require the charterer, at the charterers expense, to
(1) keep the chartered vessel in good repair and efficient operating condition; and
(2) make any repairs required by the Secretary of Transportation.
(b) Inspection.— 
The charter shall provide that the Secretary has the right to inspect the vessel at any time to ascertain its condition.

46 USC 57521 - Termination of charter during national emergency

A charter under this chapter shall provide that during a national emergency proclaimed by the President or a period for which the President has proclaimed that the security of the national defense makes it advisable, the Secretary of Transportation may terminate the charter without cost to the United States Government on such notice to the charterer as the President determines.

TITLE 46 - US CODE - SUBCHAPTER III - MISCELLANEOUS

46 USC 57531 - Construction and charter of vessels for unsuccessful routes

(a) In General.— 
If the Secretary of Transportation finds that a trade route determined to be essential under section 50103 of this title cannot be successfully developed and maintained and the Secretarys replacement program cannot be achieved under private operation of the trade route by a citizen of the United States with vessels documented under chapter 121 of this title, without further aid by the United States Government in addition to the financial aid authorized under titles V and VI of the Merchant Marine Act, 1936, the Secretary, without advertisement or competition, may
(1) have constructed, in private shipyards or in navy yards, vessels of the types necessary for the trade route; and
(2) demise charter those new vessels to the operator of vessels of the United States established on the trade route.
(b) Amount of Charter Hire.— 

(1) In general.— 
The annual charter hire under subsection (a) shall be at least 4 percent of the price (referred to in this section as the foreign cost) at which the vessel would be sold if constructed under title V of the Merchant Marine Act, 1936, plus
(A) a percentage of the depreciated foreign cost computed annually determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the Government with remaining periods to maturity comparable to the term of the charter, adjusted to the nearest one-eighth percent; and
(B) an allowance adequate in the judgment of the Secretary of Transportation to cover administrative costs.
(2) Depreciation.— 
Depreciation under paragraph (1)(A) shall be based on
(A) a 25-year life for dry-cargo and passenger vessels; and
(B) a 20-year life for tankers and other bulk liquid carrier vessels.
(c) Option To Purchase.— 
The charter may contain an option to the charterer to purchase the vessels from the Secretary of Transportation within 5 years after delivery under the charter, on the same terms and conditions as provided in title V of the Merchant Marine Act, 1936, for the purchase of new vessels from the Secretary. However
(1) the purchase price shall be the foreign cost less depreciation to the date of purchase based on the useful life specified in subsection (b)(2);
(2) the required cash payment payable at the time of the purchase shall be 25 percent of the purchase price;
(3) the charter may provide that any part of the charter hire paid in excess of the minimum charter hire provided for in this section may be credited against the cash payment payable at the time of the purchase;
(4) the balance of the purchase price shall be paid within the remaining years of useful life (as specified in subsection (b)(2)) after the date of delivery of the vessel under the charter and in approximately equal annual installments, except that the first installment, which shall be payable on the next ensuing anniversary date of the delivery under the charter, shall be a proportionate part of the annual installment; and
(5) interest shall be payable on the unpaid balances from the date of purchase, at a rate not less than
(A) a rate determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the Government with remaining periods to maturity comparable to the average maturities of the loans, adjusted to the nearest one-eighth percent; plus
(B) an allowance adequate in the judgment of the Secretary of Transportation to cover administrative costs.
(d) Operation of Vessel.— 

(1) Permissible voyages.— 
The charter shall provide for operation of the vessel exclusively
(A) in foreign trade;
(B) on a round-the-world voyage;
(C) on a round voyage from the west coast of the United States to a European port that includes an intercoastal port of the United States;
(D) on a round voyage from the Atlantic coast of the United States to the Orient that includes an intercoastal port of the United States; or
(E) on a voyage in foreign trade on which the vessel may stop at Hawaii or an island territory or possession of the United States.
(2) Domestic trade.— 
The charter shall provide if the vessel is operated in domestic trade on any of the services specified in paragraph (1), the charterer will pay annually to the Secretary of Transportation that proportion of 1/25 of the difference between the domestic and foreign cost of the vessel as the gross revenue derived from the domestic trade bears to the gross revenue derived from the entire voyages completed during the preceding year.

46 USC 57532 - Operation of experimental vessels

(a) Definition.— 
In this section, the term experimental vessel means a vessel owned by the United States Government (including a vessel in the National Defense Reserve Fleet) that has been constructed, reconditioned, or remodeled for experimental or testing purposes.
(b) Authority To Operate.— 
The Secretary of Transportation, for the purpose of practical development, trial, and testing, may operate an experimental vessel under a bareboat charter or general agency agreement in the foreign or domestic trade of the United States or for use for the account of a department or agency of the Government, without regard to other provisions of this subtitle and other laws related to chartering and general agency operations. Not more than 10 vessels may be operated and tested under this section in any one year.
(c) Terms of Operation.— 
Operation of a vessel under this section shall be on terms the Secretary considers appropriate to carry out the purposes of this subtitle. A bareboat charter under this section shall be at reasonable rates and include restrictions the Secretary considers appropriate to protect the public interest, including provisions for recapture of profits under section 57517 of this title. A charter or general agency agreement under this section shall be reviewed annually to determine whether conditions exist to justify continuance of the charter or agreement.
(d) Rights of Seamen.— 
A seaman engaged in vessel operations of the Secretary under this section and employed through a general agent in connection with a charter or agreement under this section is entitled to all the rights and remedies provided in sections 1(a) and (c), 3(c), and 4 of the Act of March 24, 1943 (50 App. U.S.C. 1291 (a), (c), 1293 (c), 1294).

Part G - Restrictions and Penalties

TITLE 46 - US CODE - CHAPTER 581 - RESTRICTIONS AND PENALTIES

46 USC 58101 - Operating in domestic intercoastal or coastwise service

(a) Prohibition.— 
A subsidy may not be awarded or paid to a contractor under the operating-differential subsidy program, and a vessel may not be chartered to a person under chapter 575 of this title, if the contractor or charterer, or a holding company, subsidiary, affiliate, or associate of the contractor or charterer, or an officer, director, agent, or executive thereof, directly or indirectly
(1) owns, charters, or operates a vessel engaged in the domestic intercoastal or coastwise service; or
(2) owns a pecuniary interest in a person that owns, charters, or operates a vessel in the domestic intercoastal or coastwise service.
(b) Waiver.— 
A person may apply to the Secretary of Transportation for a waiver of subsection (a). Before deciding on the waiver, the Secretary shall give the applicant and other interested persons an opportunity for a hearing. The Secretary may not grant the waiver if the Secretary finds it would
(1) result in unfair competition to a person operating exclusively in the domestic intercoastal or coastwise service; or
(2) be prejudicial to the objectives and policy of this subtitle.
(c) Continuous Operation Since 1935.— 
The Secretary shall grant an application under subsection (b) without requiring further proof that the public interest and convenience will be served and without further proceedings as to the competition in the route or trade, if the contractor or other person, or a predecessor in interest, was in bona-fide operation as a common carrier by water in the domestic intercoastal or coastwise trade in 1935 over the route or in the trade for which the application is made and has so operated since that time or, if engaged in furnishing seasonal service only, was in bona-fide operation in 1935 during the season ordinarily covered by its operation, except in either event as to interruptions of service over which the applicant or its predecessor in interest had no control.
(d) Diversion Into Intercoastal or Coastwise Operations.— 
If an application under subsection (b) is approved, a person referred to in this section may not divert, directly or indirectly, money, property, or any other thing of value, used in a foreign-trade operation for which a subsidy is paid by the United States Government, into intercoastal or coastwise operations.

46 USC 58102 - Default on payment or maintenance of reserves

The Secretary of Transportation may supervise the number and compensation of all officers and employees of a contractor under the operating-differential subsidy program or a charterer under chapter 575 of this title, receiving an operating-differential subsidy, if the contractor or charterer
(1) is in default on a mortgage, note, purchase contract, or other obligation to the Secretary; or
(2) has not maintained, in a manner satisfactory to the Secretary, all of the reserves provided for in this subtitle.

46 USC 58103 - Employing another person as managing or operating agent

(a) Prohibition.— 
Except with the written consent of the Secretary of Transportation, a contractor holding a contract under the operating-differential subsidy program or under chapter 575 of this title may not
(1) employ another person as the managing or operating agent of the operator; or
(2) charter a vessel, on which an operating-differential subsidy is to be paid, for operation by another person.
(b) Applicability of Provisions to Charterer.— 
If a charter prohibited by this section is made, the person operating the chartered vessel is subject to all the provisions of this subtitle and the operating-differential subsidy program, including limitations of profits and salaries.

46 USC 58104 - Willful violation constitutes breach of contract or charter

A willful violation of any provision of sections 58101–58103 of this title constitutes a breach of the contract or charter. On determining that a violation has occurred, the Secretary of Transportation may declare the contract or charter rescinded.

46 USC 58105 - Preferences for cargo in which charterer has interest

A contractor receiving an operating-differential subsidy, or a charterer under chapter 575 of this title, may not unjustly discriminate in any manner so as to give preference, directly or indirectly, to cargo in which the contractor or charterer has a direct or indirect ownership, purchase, or vending interest.

46 USC 58106 - Concerted discriminatory activities

(a) Prohibition.— 
A contractor receiving an operating-differential subsidy, or a charterer under chapter 575 of this title, may not continue as a party to or conform to an agreement with another carrier by water, or engage in a practice in concert with another carrier by water, that is unjustly discriminatory or unfair to any other citizen of the United States operating a common carrier by water employing only vessels documented under the laws of the United States on an established trade route from and to a United States port.
(b) Government Payment Prohibited.— 
No payment or subsidy of any kind may be paid, directly or indirectly, out of funds of the United States Government to a contractor or charterer that has violated subsection (a).
(c) Civil Action.— 
A person whose business or property is injured by a violation of subsection (a) may bring a civil action in the district court of the United States for the district in which the defendant resides, is found, or has an agent. If the person prevails, the person shall be awarded
(1) 3 times the damages; and
(2) costs, including reasonable attorney fees.

46 USC 58107 - Discrimination at ports by water common carriers

(a) Prohibition.— 
A common carrier by water may not, directly or indirectly, through an agreement, conference, association, understanding, or otherwise, prevent or attempt to prevent any other common carrier by water from serving any port described in subsection (b) at the same rates the first carrier charges at the nearest port already regularly served by it.
(b) Ports.— 
A port referred to in subsection (a) is one that is
(1) designed for the accommodation of ocean-going vessels;
(2) located on an improvement project authorized by law or by a Federal agency; and
(3) located within the continental limits of the United States.
(c) Other Authority Not Limited.— 
This section does not limit the authority otherwise vested in the Secretary of Transportation and the Federal Maritime Commission.

46 USC 58108 - Charges for transportation subject to subtitle IV of title 49

(a) Prohibition.— 
A carrier may not charge, collect, or receive for transportation subject to subtitle IV of title 49 of persons or property, under any joint rate, fare, or charge, or under any export, import, or other proportional rate, fare, or charge, that is based in whole or in part on the fact that the persons or property affected are to be transported to, or have been transported from, a port in a territory or possession of the United States or in a foreign country, by a carrier by water in foreign commerce, any lower rate, fare, or charge than the carrier charges, collects, or receives for the transportation of persons or similar property for the same distance, in the same direction, and over the same route, in commerce wholly within the United States, unless the vessel used for the transportation is or was at the time of the transportation documented under the laws of the United States.
(b) Suspension of Prohibition.— 
Whenever the Secretary of Transportation believes that adequate shipping facilities to or from any port in a territory or possession of the United States or a foreign country are not being provided by vessels documented under the laws of the United States, the Secretary shall certify this fact to the Surface Transportation Board. On receiving the certification, the Board may by order suspend the operation of subsection (a) with respect to the rates, fares, and charges for the transportation by rail of persons and property transported from or to be transported to those ports, for such time and under such terms and conditions as the Secretary may specify in the order or in any supplemental order.
(c) Termination of Suspension.— 
Whenever the Secretary believes that adequate shipping facilities are being provided to those ports by vessels documented under the laws of the United States, and certifies that fact to the Board, the Board may order the termination of the suspension.

46 USC 58109 - Penalties

(a) Individuals.— 
An individual convicted of violating section 58101 (d), 58103, or 58105 of this title shall be fined under title 18, imprisoned for at least one year but not more than 5 years, or both.
(b) Organizations.— 
An organization convicted of committing an act prohibited by this subtitle shall be fined under title 18.
(c) Ineligibility To Receive Benefits.— 
An individual or organization convicted of violating a section referred to in subsection (a) is ineligible, at the discretion of the Secretary of Transportation, to receive any benefit under the construction-differential subsidy or operating-differential subsidy programs, or a charter under chapter 575 of this title, for 5 years after the conviction.