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).