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.