TITLE 46 - US CODE - CHAPTER 27 - MERCHANT MARINE ACT, 1936

TITLE 46 - US CODE - SUBCHAPTER I - DECLARATION OF POLICY

46 USC Appendix 1101 - Fostering development and maintenance of merchant marine

It is necessary for the national defense and development of its foreign and domestic commerce that the United States shall have a merchant marine
(a)  sufficient to carry its domestic water-borne commerce and a substantial portion of the water-borne export and import foreign commerce of the United States and to provide shipping service essential for maintaining the flow of such domestic and foreign waterborne commerce at all times,
(b)  capable of serving as a naval and military auxiliary in time of war or national emergency,
(c)  owned and operated under the United States flag by citizens of the United States, insofar as may be practicable,
(d)  composed of the best-equipped, safest, and most suitable types of vessels, constructed in the United States and manned with a trained and efficient citizen personnel, and
(e)  supplemented by efficient facilities for shipbuilding and ship repair. It is declared to be the policy of the United States to foster the development and encourage the maintenance of such a merchant marine.

TITLE 46 - US CODE - SUBCHAPTER II - CREATION AND FUNCTIONS OF MARITIME AGENCIES

46 USC Appendix 1111 - Powers and duties of agencies

(a) Repealed. Pub. L. 97–31, § 12(58)(A), Aug. 6, 1981, 95 Stat. 158 
(b) Repealed. Pub. L. 101–225, title III, § 307(7), Dec. 12, 1989, 103 Stat. 1925 
(c) Records of meetings; seal; rules and regulations 
The Commission shall, through its secretary, keep a true record of all its meetings and the yea-and-nay votes taken therein, on every action, order, contract, or financial transaction approved or disapproved by the Commission. It shall have an official seal which shall be judicially noticed, and shall adopt rules and regulations in regard to its procedure and the conduct of its business.
(d) Expenditures 
The Commission and the Secretary of Transportation may make such expenditures as are necessary in the performance of their functions from funds made available to them by this chapter or appropriated after June 29, 1936, which further appropriations are authorized.
(e) Officers and employees 
The Commission and the Secretary of Transportation may appoint and prescribe the duties and fix the salaries of a secretary, a director for each of not to exceed five divisions, a general counsel, a clerk to each member of the Commission and not more than three assistants, a clerk to the general counsel, not more than a total of twenty naval architects or marine engineers, twenty special experts, twenty-two examiners, twelve attorneys, and two inspectors for each vessel at each shipyard at which vessels are being constructed by it or under its supervision. The Commission and the Secretary of Transportation may, subject to the provisions of the civil-service laws and chapter 51 and subchapter III of chapter 53 of title 5, appoint such other officers, engineers, inspectors, attorneys, examiners, and other employees as are necessary in the execution of their functions.
(f) Traveling and subsistence expenses; pay for military officer on assignment 
Each member, any employee of the Commission or the Secretary of Transportation, and any person detailed to it or the Secretary of Transportation from any other agency of the Government shall receive necessary traveling and subsistence expenses, or per diem allowance in lieu thereof, within the limitations prescribed by law, while away from his official station upon official business of the Commission or the Secretary of Transportation. Whenever any officer (not exceeding five in number at any time) of the Army, Navy, Marine Corps, or Coast Guard is detailed to the Commission or the Secretary of Transportation, he shall receive from the Commission or the Secretary of Transportation, for the period during which he is so detailed, such compensation as added to his pay and allowances as an officer in such service will make his aggregate compensation equal to the pay and allowances he would receive if he were the incumbent of an office or position in such service (or in the corresponding executive department), which, in the opinion of the Commission or the Secretary of Transportation, involves the performance of work similar in importance, difficulty, and responsibility to that performed by him while detailed to the Commission or the Secretary of Transportation. Expenditures by the Commission or the Secretary of Transportation shall be allowed and paid on the presentation of itemized vouchers therefor approved by the Commission or the Secretary of Transportation or a designated employee thereof.

46 USC Appendix 1111a - Administrative expenses; limitations

After June 30, 1939, the Federal Maritime Commission and the Secretary of Transportation shall not incur any obligations for administrative expenses except pursuant to an annual appropriation specifically therefor or to authority to use appropriations or other funds otherwise available therefor.

46 USC Appendix 1112 - Operation of property by Secretary

Notwithstanding any other provision of law, the Secretary of Transportation may, in accordance with good business methods and on such terms and conditions as he determines to effectuate the policy of this chapter, operate or lease any lands, docks, wharves, piers, or real property under his control, and all money received from such operation or lease shall be available for expenditure by the Secretary of Transportation as provided in this chapter. The Secretary of Transportation may, upon such terms and conditions as he may prescribe in accordance with sound business practice, make such extensions and accept such renewals of the notes and other evidences of indebtedness hereby transferred, and of the mortgages and other contracts securing the same, as he may deem necessary to carry out the objects of this chapter.

46 USC Appendix 1114 - Transfer of powers; rules and orders

(a) Transfer of functions, powers, and duties 
All the functions, powers, and duties vested in the former United States Shipping Board by the Shipping Act, 1916 [46 App. U.S.C. 801 et seq.], the Merchant Marine Act, 1920 [46 App. U.S.C. 861 et seq.], the Merchant Marine Act, 1928 [46 App. U.S.C. 891 et seq.], and amendments to those Acts, and now vested in the Department of Commerce pursuant to section 12 of the Presidents Executive Order [No. 6166] of June 10, 1933, are hereby transferred to the Federal Maritime Commission and the Secretary of Transportation: Provided, however, That after June 29, 1936, no further construction loans shall be made under the provisions of section 11 of the Merchant Marine Act, 1920, as amended.
(b) Rules and regulations 
The Commission and the Secretary of Transportation are authorized to adopt all necessary rules and regulations to carry out the powers, duties, and functions vested in them by this chapter.
(c) Enforcement of orders; penalties for violations 
The orders issued by the Federal Maritime Commission and the Secretary of Transportation in the exercise of the powers transferred to them by this subchapter shall be enforced in the same manner as heretofore provided by law for enforcement of the orders issued by the former United States Shipping Board, and violation of such orders shall subject the person or corporation guilty of such violation to the same penalties or punishment as heretofore provided for violation of the orders of said Board.

46 USC Appendix 1115 - Discrimination at ports by carriers by water against other carriers

Without limiting the power and authority otherwise vested in the Federal Maritime Commission and the Secretary of Transportation, it shall be unlawful for any common carrier by water, either directly or indirectly, through the medium of an agreement, conference, association, understanding, or otherwise, to prevent or attempt to prevent any other such carrier from serving any port designed for the accommodation of ocean-going vessels located on any improvement project authorized by the Congress or through it by any other agency of the Federal Government, lying within the continental limits of the United States, at the same rates which it charges at the nearest port already regularly served by it.

46 USC Appendix 1116 - Construction fund

All sums of money now in the construction loan fund created by section 111 of the Merchant Marine Act, 1920, as amended, together with the proceeds of all debts, accounts, choses in action, and the proceeds of all notes, mortgages, and other evidences of indebtedness, hereby transferred to the Department of Transportation, and all of the proceeds of sales of ships and surplus property heretofore or hereafter made, including proceeds of notes or other evidences of debt taken therefor and the interest thereon, and, notwithstanding any other provision of law, all money representing amounts of unclaimed wages, salvage awards and miscellaneous unclaimed items carried as liabilities on the books of the former United States Shipping Board Merchant Fleet Corporation and all money heretofore or hereafter received from the operation or leasing of lands, docks, wharves, piers, or real property shall be deposited in the Treasury of the United States and there maintained as a revolving fund, herein designated as the construction fund, and shall be available for expenditure by the Secretary of Transportation in carrying out the provisions of this chapter. All moneys received by the Department of Transportation under the provisions of this chapter shall be deposited in its construction fund, and all disbursements made by the Secretary of Transportation under authority of this chapter shall be paid out of said fund, and, notwithstanding any other provision of law, all disbursements applicable to the money referred to in this section may be made by the Secretary of Transportation out of said fund. Further appropriations by Congress to replenish said fund are authorized.
[1] See References in Text note below.

46 USC Appendix 1116a - Application to obligations against emergency ship construction fund

On and after March 22, 1947, the construction fund established by section 1116 of this Appendix shall be available for the payment of obligations previously incurred against the emergency ship construction fund.

46 USC Appendix 1117 - Power to contract; audit of accounts; reports of Comptroller General

The Federal Maritime Commission and the Secretary of Transportation may enter into such contracts, upon behalf of the United States, and may make such disbursements as may, in its or his discretion, be necessary to carry on the activities authorized by this chapter, or to protect, preserve, or improve the collateral held by the Commission or Secretary to secure indebtedness, in the same manner that a private corporation may contract within the scope of the authority conferred by its charter. All the Commissions and Secretarys financial transactions shall be audited in the Government Accountability Office according to approved commercial practice as provided in the Act of March 20, 1922 (42 Stat. 444): Provided, That it shall be recognized that, because of the business activities authorized by this chapter, the accounting officers shall allow credit for all expenditures shown to be necessary because of the nature of such authorized activities, notwithstanding any existing statutory provision to the contrary. The Comptroller General shall report annually or oftener to Congress any departure by the Commission or Secretary from the provisions of this chapter.

46 USC Appendix 1118 - Reports to Congress

The Federal Maritime Commission and the Secretary of Transportation shall, by April 1 each year, make a report to Congress, which shall include the results of its or his investigations, a summary of its or his transactions, its or his recommendations for legislation, a statement of all receipts under this chapter, and the purposes for which all expenditures were made.

46 USC Appendix 1119 - Authorization of appropriations

(a) Except as provided in subsection (b) of this section, there are authorized to be appropriated such sums as may be necessary to carry out the provisions of this chapter.
(b) Notwithstanding any other provision of this chapter or any other law, there are authorized to be appropriated after December 31, 1967, for the use of the Maritime Administration for
(1) acquisition, construction, or reconstruction of vessels;
(2) construction-differential subsidy incident to the construction, reconstruction, or reconditioning of ships;
(3) cost of national defense features;
(4) payment of obligations incurred for operating-differential subsidy;
(5) expenses necessary for research and development activities (including reimbursement of the Vessel Operations Revolving Fund for losses resulting from expenses of experimental ship operations);
(6) reserve fleet expenses;
(7) maritime training at the Merchant Marine Academy at Kings Point, New York;
(8) financial assistance to State maritime academies under section 1295c of this Appendix;
(9) the Vessel Operations Revolving Fund;
(10) [1] expenses necessary for additional training provided under section 1295d of this Appendix;
(10) [1] expenses necessary to carry out subchapter XIII of this chapter; and
(11) other operations and training expenses related to the development of waterborne transportation systems, the use of waterborne transportation systems, or general administration;

only such sums as the Congress may specifically authorize by law: Provided, however, That the Congress finds and declares that the national policy set forth in section 1101 of this Appendix requires that there should be authorized and appropriated for fiscal years 1971 through 1980 such sums as may be necessary to construct 300 ships of such sizes, types and designs as the Secretary of Transportation may consider best suited to carry out the purposes and policy of this chapter.

[1] See 1980 Amendment note below.

46 USC Appendix 1120 - Survey of existing merchant marine for creation of adequate American-owned fleet

It shall be the duty of the Secretary of Transportation to make a survey of the American merchant marine, as it now exists, to determine what additions and replacements are required to carry forward the national policy declared in section 1101 of this Appendix, and the Secretary of Transportation is directed to study, perfect, and adopt a long-range program for replacements and additions to the American merchant marine so that as soon as practicable the following objectives may be accomplished: First, the creation of an adequate and well-balanced merchant fleet, including vessels of all types, to provide shipping service essential for maintaining the flow of the foreign commerce of the United States, the vessels in such fleet to be so designed as to be readily and quickly convertible into transport and supply vessels in a time of national emergency. In planning the development of such a fleet the Secretary of Transportation is directed to cooperate closely with the Navy Department as to national-defense needs and the possible speedy adaptation of the merchant fleet to national-defense requirements. Second, the ownership and the operation of such a merchant fleet by citizens of the United States insofar as may be practicable. Third, the planning of vessels designed to afford the best and most complete protection for passengers and crew against fire and all marine perils. Fourth, the creation and maintenance of efficient shipbuilding and repair capacity in the United States with adequate numbers of skilled personnel to provide an adequate mobilization base.

46 USC Appendix 1121 - Investigations, studies, records, etc.

The Secretary of Transportation is authorized and directed to investigate, determine, and keep current records of
(a) Suitable ocean routes and lines to foreign ports; vessels and costs of operation 
The ocean services, routes, and lines from ports in the United States, or in a Territory, district, or possession thereof, to foreign markets, which are, or may be, determined by the Secretary of Transportation to be essential for the promotion, development, expansion, and maintenance of the foreign commerce of the United States, and in reaching his determination the Secretary of Transportation shall consider and give due weight to the cost of maintaining each of such steamship lines, the probability that any such line cannot be maintained except at a heavy loss disproportionate to the benefit accruing to foreign trade, the number of sailings and types of vessels that should be employed in such lines, and any other facts and conditions that a prudent business man would consider when dealing with his own business, with the added consideration, however, of the intangible benefit the maintenance of any such line may afford to the foreign commerce of the United States, to the national defense, and to other national requirements;
(b) Bulk cargo carrying services 
The bulk cargo carrying services that should, for the promotion, development, expansion, and maintenance of the foreign commerce of the United States and for the national defense or other national requirements be provided by United States-flag vessels whether or not operating on particular services, routes, or lines;
(c) Vessels required in proposed routes 
The type, size, speed, method of propulsion, and other requirements of the vessels, including express-liner or super-liner vessels, which should be employed in such services or on such routes or lines, and the frequency and regularity of the sailings of such vessels, with a view to furnishing adequate, regular, certain, and permanent service, or which should be employed to provide the bulk cargo carrying services necessary to the promotion, maintenance, and expansion of the foreign commerce of the United States and its national defense or other national requirements whether or not such vessels operate on a particular service, route, or line;
(d) Cost of construction in United States and abroad 
The relative cost of construction of comparable vessels in the United States and in foreign countries;
(e) Relative cost of operation under laws of United States and foreign countries 
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, rules, and regulations of the United States and under those of the foreign countries whose vessels are substantial competitors of any such American vessel;
(f) Foreign subsidies 
The extent and character of the governmental aid and subsidies granted by foreign governments to their merchant marine;
(g) Shipyards 
The number, location, and efficiency of the shipyards existing on June 29, 1936, or thereafter built in the United States;
(h) Laws applicable to aircraft 
To investigate and determine what provisions of this chapter and other Acts relating to shipping should be made applicable to aircraft engaged in foreign commerce in order to further the policy expressed in this chapter, and to recommend appropriate legislation to this end;
(i) Transportation to foreign ports of cotton, coal, lumber, and cement 
The advisability of enactment of suitable legislation authorizing the Secretary of Transportation in an economic or commercial emergency, to aid the farmers and cotton, coal, lumber, and cement producers 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 of Transportation, until such time as the Secretary of Transportation shall deem such special rate reduction and operation unnecessary for the benefit of the American farmers and such producers; and
(j) New designs of vessels; intercoastal and inland water transportation 
New designs, new methods of construction, and new types of equipment for vessels; the possibilities of promoting the carrying of American foreign trade in American vessels; and intercoastal and inland water transportation, including their relation to transportation by land and air.

46 USC Appendix 11211 - Priority loading for vessels engaged in coastwise transportation of coal; exception, report to Congress

Notwithstanding any other provisions of law, any 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 have the priority to load at any such ports ahead of any waiting vessels engaged in the export trade of coal produced in the United States: Provided, That, the Secretary of Transportation may, if he determines that it is in the national interest, eliminate priority loading, as provided herein, at any such port or ports, and to report such action to the Congress within 30 days.

46 USC Appendix 11212 - National Maritime Enhancement Institutes

(a) Designation by Secretary of Transportation 
The Secretary of Transportation may designate National Maritime Enhancement Institutes.
(b) Activities 
Activities undertaken by such an Institute may include
(1) conducting research concerning methods for improving 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) Submission of applications 
An institution seeking designation as a National Maritime Enhancement Institute shall submit an application under regulations prescribed by the Secretary.
(d) Designation criteria 
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 designee for carrying out the activities specified in subsection (b) of this section;
(2) the capability of the designee 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 designee encompassing research and training directed to enhancing maritime industries;
(4) the demonstrated ability of the designee 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; and
(5) the qualification of the designee as a nonprofit">nonprofit institution of higher learning.
(e) Awards 
The Secretary may make awards on an equal matching basis to an institute designated under subsection (a) of this section from amounts appropriated. The aggregate annual amount of the Federal share of the awards by the Secretary shall not exceed $500,000.
(f) University transportation research funds 

(1) In general 
The Secretary may make a grant under section 5505 of title 49 to an institute designated under subsection (a) of this section for maritime and maritime intermodal research under that section as if the institute were a university transportation center.
(2) Advice and consultation of MARAD 
In making a grant under the authority of paragraph (1), the Secretary, through the Research and Innovative Technology Administration, shall advise the Maritime Administration concerning the availability of funds for the grants, and consult with the Administration on the making of the grants.

46 USC Appendix 1122 - Maritime problems; cooperation with others; cargo carriage; recommendations

The Secretary of Transportation is authorized and directed
(a) Study of maritime problems 
To study all maritime problems arising in the carrying out of the policy set forth in subchapter I of this chapter;
(b) Inducing preferences for American vessels; construction of super-liners 
To study, and to cooperate with vessel owners in devising means by which
(1) the importers and exporters of the United States can be induced to give preference to vessels under United States registry; and
(2) there may be constructed by or with the aid of the United States express-liner or super-liner vessels comparable with those of other nations, especially with a view to their use in national emergency, and the use in connection with or in lieu of such vessels of transoceanic aircraft service;
(c) Collaboration with owners and builders 
To 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 accruing from standardized production where practicable and desirable; and
(d) Liaison with other agencies and trade organizations 
To establish and maintain liaison with such other boards, commissions, independent establishments, and departments 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 water-borne export and import foreign commerce of the United States, for the purpose of securing preference to vessels of United States registry in the shipment of such commodities.
(e) Repealed. Pub. L. 98–237, § 20(a), Mar. 20, 1984, 98 Stat. 88 
(f) Development and implementation of new methods of cargo carriage; preferences for cargo containers 
To study means and 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 to study the economic and technological aspects of the use of cargo containers as a method of carrying out the declaration of policy set forth in subchapter I of this chapter, and in carrying out the provisions of this subsection and such policy the United States shall not give preference as between carriers upon the basis of length, height, or width of cargo containers or length, height, or width of cargo container cells and this requirement shall be applicable to all existing container vessels and any container vessel to be constructed or rebuilt; and
(g) Recommendations for further legislation 
To make recommendations to Congress, from time to time, for such further legislation as he deems necessary better to effectuate the purpose and policy of this chapter.

46 USC Appendix 1122a - Vessel utilization and performance reports; filing; civil penalty; lien upon vessel; remission or mitigation of penalty

The operator of a vessel in waterborne foreign commerce of the United States shall file at such times and in such manner as the Secretary of Transportation may prescribe by regulations, such report, account, record, or memorandum relating to the utilization and performance of such vessel in commerce of the United States, as the Secretary may determine to be necessary or desirable in order to carry out the purposes and provisions of this chapter. Such report, account, record, or memorandum shall be signed and verified in accordance with regulations prescribed by the Secretary. An operator who does not file the report, account, record, or memorandum as required by this section and the regulations issued hereunder, shall be liable to the United States in a penalty of $50 for each day of such violation. The amount of any penalty imposed for any violation of this section upon the operator of any vessel shall constitute a lien upon the vessel involved in the violation, and such vessel may be libeled therefor in the district court of the United States for the district in which it may be found. The Secretary of Transportation may, in his discretion, remit or mitigate any penalty imposed under this section on such terms as he may deem proper.

46 USC Appendix 1122b - Mobile trade fairs

(a) Use of United States flag vessels and aircraft insofar as practicable 
The Secretary of Commerce shall encourage and promote the development and use of mobile trade fairs which are 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 operator or operators of the mobile trade fairs use insofar as practicable United States flag vessels and aircraft in the transportation of their exhibits.
(b) Technical and financial assistance; exceptions 
The Secretary of Commerce is authorized to provide to the operator or operators of such mobile trade fairs technical assistance and support as well as financial assistance for the purpose of defraying certain expenses incurred abroad (other than the cost of transportation on foreign-flag vessels and aircraft), when the Secretary determines that such operations provide an economical and effective means of promoting export sales.
(c) Use of foreign currencies 
In addition to any amounts appropriated to carry out trade promotion activities, the President may use foreign currencies owned by or owed to the United States to carry out this section.

46 USC Appendix 1123 - Obsolete tonnage; tramp service

The Secretary of Transportation shall make studies of and make reports to Congress on the following:
(1) The scrapping or removal from service of old or obsolete merchant tonnage owned by the United States or in use in the merchant marine.
(2) Tramp shipping service and the advisability of citizens of the United States participating in such service with vessels under United States registry.

46 USC Appendix 1124 - Witnesses

(a) Summoning; oaths; production of books and papers; fees 
For the purpose of any investigation which, in the opinion of the Secretary of Transportation, is necessary and proper in carrying out this chapter, the Secretary may subpoena witnesses, administer oaths and affirmations, take evidence, and require the production of books, papers, or other documents that are relevant to the matter under investigation. The attendance of witnesses and the production of books, papers, or other documents may be required from any place in the United States or any territory, district, or possession thereof at any designated place of hearing. Witnesses summoned before the Secretary shall be paid the same fees and mileage that are paid witnesses in the courts of the United States.
(b) Refusal to obey subpena; court orders; contempt 
Upon failure of any person to obey a subpoena issued by the Secretary, the Secretary may invoke the aid of any district court of the United States within the jurisdiction in which the person resides or carries on business in requiring the attendance and testimony of witnesses and the production of books, papers, or other documents. Any such court may issue an order requiring the person to appear before the Secretary, or an employee designated by the Secretary, there to produce books, papers, or other documents, if so ordered, or to give testimony relevant to the matter under investigation. A failure to obey an order of the court may be punished by the court as a contempt thereof. Process in such a case may be served in the judicial district in which the person resides or may be found.

46 USC Appendix 1125 - Acquisition of vessels

The Secretary of Transportation is authorized to acquire by purchase or otherwise such vessels constructed in the United States as he may deem necessary to establish, maintain, improve, or effect replacements upon any service, route, or line in the foreign commerce of the United States determined to be essential under section 1121 of this Appendix, and to pay for the same out of his construction fund: Provided, That the price paid therefor shall be based upon a fair and reasonable valuation, but it shall not exceed by more than 5 per centum the cost of such 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 thereon for reconditioning less depreciation based upon a twenty-five year life expectancy of the vessel. No such vessel shall be acquired by the Secretary of Transportation unless the Secretary of the Navy has certified to the Secretary of Transportation that such vessel is suitable for economical and speedy conversion into a naval or military auxiliary, or otherwise suitable for the use of the United States in time of war or national emergency. Every vessel acquired under authority of this section that is not documented under the laws of the United States at the time of its acquisition shall be so documented as soon as practicable.

46 USC Appendix 1125a - Construction, repair, etc., of vessels for Government agencies

The Secretary of Transportation is authorized to construct, reconstruct, repair, equip, and outfit, by contract or otherwise, vessels or parts thereof, for any other department or agency of the Government, to the extent that such other department or agency is authorized by law to do so for its own account, and any obligations heretofore or hereafter incurred by the Secretary for any of the aforesaid purposes shall not diminish or otherwise affect any contract authorization granted to the Secretary: Provided, The obligations incurred or the expenditures made are charged against and, to the amount of such obligation or expenditure, diminish the existing appropriation or contract authorization of such department or agency.

46 USC Appendix 11261 - Training of future naval officers under Naval Reserve Officer Training Corps programs at merchant marine academies for promotion of maximum integration of naval and merchant marine seapower of Nation

(a) It is the policy of the United States that the United States Navy and the Merchant Marine of the United States work closely together to promote the maximum integration of the total seapower forces of the Nation. In furtherance of this policy, it is necessary and desirable that special steps be taken to assure that Naval Reserve Officer Training Corps programs (for training future naval officers) be maintained at Federal and State merchant marine academies.
(b) It is the sense of the Congress that the Secretary of the Navy should work with the Maritime Administrator and the administrators of the several merchant marine academies to assure that the training available at these academies is consistent with Navy standards and needs.

TITLE 46 - US CODE - SUBCHAPTER III - AMERICAN SEAMEN

46 USC Appendix 1131 - Manning and wage scales; subsidy contracts

(a) Investigation of wages and working conditions; establishment of wage and manning scales; incorporation in subsidy contracts 
The Secretary of Transportation is authorized and directed to investigate the employment and wage conditions in ocean-going shipping and, after making such investigation and after appropriate hearings, to incorporate in the contracts authorized under subchapters VI and VII of this chapter minimum manning scales and minimum wage scales, and minimum working conditions for all officers and crews employed on all types of vessels receiving an operating-differential subsidy. After such minimum manning and wage scales, and working conditions shall have been adopted by the Secretary of Transportation, no change shall be made therein by the Secretary of Transportation except upon public notice of the hearing to be had, and a hearing by the Secretary of Transportation of all interested parties, under such rules as the Secretary of Transportation shall prescribe. The duly elected representatives of the organizations certified as the proper collective bargaining agencies shall have the right to represent the employees who are members of their organizations at any such hearings. Every contractor receiving an operating-differential subsidy shall post and keep posted in a conspicuous place on each such vessel operated by such contractor a printed copy of the minimum manning and wage scales, and working conditions prescribed by his contract and applicable to such vessel: Provided, however, That any increase in the operating expenses of the subsidized vessel occasioned by any change in the wage or manning scales or working conditions as provided in this section shall be added to the operating-differential subsidy previously authorized for the vessel.
(b) Subsidy contracts; provisions relative to officers and crew 
Every contract executed under authority of subchapters VI and VII of this chapter shall require
(1) Insofar as is practicable, officers living quarters shall be kept separate and apart from those furnished for members of the crew;
(2) Licensed officers and unlicensed members of the crew shall be entitled to make complaints or recommendations to the Secretary of Transportation providing they file such complaint or recommendation directly with the Secretary of Transportation, or with their immediate superior officer who shall be required to forward such complaint or recommendation with his remarks to the Secretary of Transportation, or with the authorized representatives of the respective collective bargaining agencies;
(3) Licensed officers who are members of the United States Navy Reserve shall wear on their uniforms such special distinguishing insignia as may be approved by the Secretary of the Navy; officers being those men serving under licenses issued by the Bureau of Marine Inspection and Navigation or the Coast Guard;
(4) The uniform stripes, decoration, or other insignia shall be of gold braid or woven gold or silver material, to be worn by officers, and no member of the ships crew other than licensed officers shall be allowed to wear any uniform with such officers identifying insignia;
(5) No discrimination shall be practiced against licensed officers, who are otherwise qualified, because of their failure to qualify as members of the United States Navy Reserve.

46 USC Appendix 1132 - Reemployment rights for certain merchant seamen

(a) In general 
An individual who is certified by the Secretary of Transportation under subsection (c) of this section 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) of this section to the Secretary of Transportation not later than 45 days after the date the individual completes a period of employment described in subsection (c)(1)(A) of this section with respect to which the application is submitted.
(c) Certification determination 
Not later than 20 days after the date the Secretary of Transportation receives from an individual an application for certification under this subsection, the Secretary shall
(1) determine whether or not the individual
(A) was employed in the activation or operation of a vessel
(i) in the National Defense Reserve Fleet maintained under section 1744 of Title 50, Appendix, in a period in which that vessel was in use or being activated for use under subsection (b) of that section;
(ii) that is requisitioned or purchased under section 1242 of this Appendix; or
(iii) that is owned, chartered, or controlled by the United States and used by the United States 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 chapter 73 (as applicable) of title 46; and
(2) if the Secretary makes affirmative determinations under paragraph (1)(A) and (B), 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) of this section shall be considered to be the equivalent of a certificate referred to in paragraph (1) of section 4301 (a) of title 38.[1]
[1] See References in Text note below.

TITLE 46 - US CODE - SUBCHAPTER V - CONSTRUCTION-DIFFERENTIAL SUBSIDY

46 USC Appendix 1151 - Subsidy authorized for vessels to be operated in foreign trade

(a) Application for subsidy for construction; conditions precedent to granting 
Any proposed ship purchaser who is a citizen of the United States or any shipyard of the United States may make application to the Secretary of Transportation for a construction-differential subsidy to aid in the construction of a new vessel to be used in the foreign commerce of the United States. No such application shall be approved by the Secretary of Transportation unless he determines that
(1)  the plans and specifications call for a new vessel which will meet the requirements of the foreign commerce of the United States, will aid in the promotion and development of such commerce, and be suitable for use by the United States for national defense or military purposes in time of war or national emergency;
(2)  if the applicant is the proposed ship purchaser, the applicant possesses the ability, experience, financial resources, and other qualifications necessary for the operation and maintenance of the proposed new vessel, and
(3)  the granting of the aid applied for is reasonably calculated to carry out effectively the purposes and policy of this chapter. The contract of sale, and the mortgage given to secure the payment of the unpaid balance of the purchase price shall not restrict the lawful or proper use or operation of the vessel except to the extent expressly required by law. The Secretary of Transportation may give preferred consideration to applications that will tend to reduce construction-differential subsidies and that propose the construction of ships of higher transport capability and productivity.
(b) Submission of plans to Navy Department; certification of approval 
The Secretary of Transportation shall submit the plans and specifications for the proposed vessel to the Navy Department for examination thereof and suggestions for such changes therein as may be deemed necessary or proper in order that such vessel shall be suitable for economical and speedy conversion into a naval or military auxiliary, or otherwise suitable for the use of the United States Government in time of war or national emergency. If the Secretary of the Navy approves such plans and specifications as submitted, or as modified, in accordance with the provisions of this subsection, he shall certify such approval to the Secretary of Transportation.
(c) Application for subsidy for reconstruction or reconditioning; conditions precedent to granting; contracts 
Any citizen of the United States or any shipyard of the United States may make application to the Secretary of Transportation for a construction-differential subsidy to aid in reconstructing or reconditioning any vessel that is to be used in the foreign commerce of the United States. If the Secretary of Transportation, in the exercise of his discretion, shall determine that the granting of the financial aid applied for is reasonably calculated to carry out effectively the purposes and policy of this chapter, the Secretary of Transportation may approve such application and enter into a contract or contracts with the applicant therefor providing for the payment by the United States of a construction-differential subsidy that is to be ascertained, determined, controlled, granted, and paid, subject to all the applicable conditions and limitations of this subchapter and under such further conditions and limitations as may be prescribed in the rules and regulations of the Secretary of Transportation has adopted as provided in section 1114 (b) of this Appendix; but the financial aid authorized by this subsection shall be extended to reconstruction or reconditioning only in exceptional cases and after a thorough study and a formal determination by the Secretary of Transportation that the proposed reconstruction or reconditioning is consistent with the purposes and policy of this chapter.

46 USC Appendix 1152 - Construction of vessels; bids; subsidies

(a) Approval of bids; contract with bidder; acceptance of negotiated price; shipyard records, availability; contract with applicant or qualified citizen for purchase of vessel 
If the Secretary of the Navy certifies his approval under section 1151 (b) of this Appendix, and the Secretary of Transportation approves the application, he may secure bids for the construction of the proposed vessel according to the approved plans and specifications. If the bid of the shipbuilder who is the lowest responsible bidder is determined by the Secretary of Transportation to be fair and reasonable, the Secretary of Transportation may approve such bid, and if such approved bid is accepted by the proposed ship purchaser, the Secretary of Transportation is authorized to enter into a contract with the successful bidder for the construction, outfitting, and equipment of the proposed vessel, and for the payment by the Secretary of Transportation to the shipbuilder, on terms to be agreed upon in the contract, of the contract price of the vessel, out of the construction fund hereinbefore referred to, or out of other available funds. Notwithstanding the provisions of the first sentence of section 1155 of this Appendix with respect to competitive bidding, the Secretary of Transportation is authorized to accept a price for the construction of the ship which has been negotiated between a shipyard and proposed ship purchaser if
(1)  the proposed ship purchaser and the shipyard submit backup cost details and evidence that the negotiated price is fair and reasonable;
(2)  the Secretary of Transportation finds that the negotiated price is fair and reasonable; and
(3)  the shipyard agrees that the Comptroller General of the United States or any of his duly authorized representatives shall, until the expiration of three years after final payment have access to and the right to examine any pertinent books, documents, papers, and records of the shipyard or any of its subcontractors related to the negotiation or performance of any contract or subcontract negotiated under this subsection and will include in its subcontracts a provision to that effect. Concurrently with entering into such contract with the shipbuilder, the Secretary of Transportation is authorized to enter into a contract for the sale of such vessel upon its completion, to the applicant if he is the proposed ship purchaser and if not to another citizen of the United States, if the Secretary of Transportation determines that such citizen possesses the ability, experience, financial resources, and other qualifications necessary for the operation and maintenance of the vessel at a price corresponding to the estimated cost, as determined by the Secretary of Transportation pursuant to the provisions of this chapter, of building such vessel in a foreign shipyard.
(b) Basis for fixing subsidy; cost of construction in foreign yards; annual recomputation and publication of foreign cost; limitation on construction differential; report on American shipbuilding industry 
The amount of reduction in selling price which is herein termed construction differential subsidy shall equal, but not exceed, the excess of the bid of the shipbuilder constructing the proposed vessel (excluding the cost of any features incorporated in the vessel for national defense uses, which shall be paid by the Secretary in addition to the subsidy), over the fair and reasonable estimate of cost, as determined by the Secretary, of the construction of that type vessel if it were constructed under similar plans and specifications (excluding national defense features as above provided) in a foreign shipbuilding center which is deemed by the Secretary to furnish a fair and representative example for the determination of the estimated foreign cost of construction of vessels of the type proposed to be constructed. The Secretary of Transportation shall recompute such estimated foreign cost annually unless, in the opinion of the Secretary, there has been a significant change in shipbuilding market conditions. The Secretary shall publish notice of his intention to compute or recompute such estimated foreign cost and shall give interested persons, including but not limited to shipyards and shipowners and associations thereof, an opportunity to file written statements. The Secretarys consideration shall include, but not be limited to, all relevant matter so filed, and his determination shall include or be accompanied by a concise explanation of the basis of his determination. The construction differential approved and paid by the Secretary shall not exceed 50 per centum of the cost of constructing, reconstructing, or reconditioning the vessel (excluding the cost of national defense features). If the Secretary finds that the construction differential exceeds, in any case, the foregoing percentage of such cost, the Secretary may negotiate with any bidder (whether or not such person is the lowest bidder) and may contract with such bidder (notwithstanding the first sentence of section 1155 of this Appendix) for the construction, reconstruction, or reconditioning of the vessel involved in a domestic shipyard at a cost which will reduce the construction differential to such percentage or less. In the event that the Secretary has reason to believe that the bidding in any instance is collusive, he shall report all of the evidence on which he acted
(1)  to the Attorney General of the United States, and
(2)  to the President of the Senate and to the Speaker of the House of Representatives if the Congress shall be in session or if the Congress shall not be in session, then to the Secretary of the Senate and Clerk of the House, respectively.
(c) Terms of sale of vessel to purchaser 
In such contract of sale between the purchaser and the Secretary of Transportation, the purchaser shall be required to make cash payments to the Secretary of Transportation of not less than 25 per centum of the price at which the vessel is sold to the purchaser. The cash payments shall be made at the time and in the same proportion as provided for the payments on account of the construction cost in the contract between the shipbuilder and the Secretary of Transportation. The purchaser shall pay, not less frequently than annually, interest on those portions of the Secretary of Transportations payments as made to the shipbuilder which are chargeable to the purchasers portion of the price of the vessel (after deduction of the purchasers cash payments) at a rate not less than
(i)  a rate determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities of such loans, adjusted to the nearest one-eighth of 1 per centum, plus
(ii)  an allowance adequate in the judgment of the Secretary of Transportation to cover administrative costs. The balance of such purchase price shall be paid by the purchaser, within twenty-five years after delivery of the vessel and in not to exceed twenty-five equal annual installments, the first of which shall be payable one year after the delivery of the vessel by the Secretary of Transportation to the purchaser. Interest at the rate per annum applicable to payments that are chargeable to the purchasers portion of the price of the vessel shall be paid on all such installments of the purchase price remaining unpaid.
(d) Repealed. Pub. L. 87–877, § 2(a), Oct. 24, 1962, 76 Stat. 1200 
(e) Construction in navy yards; sales to citizens; terms 
If no bids are received for the construction, outfitting, or equipping of such vessel, or if it appears to the Secretary of Transportation that the bids received from privately owned shipyards of the United States are collusive, excessive, or unreasonable, and if a citizen of the United States agrees to purchase said vessel as provided in this section, then, to provide employment for citizens of the United States, the Secretary of Transportation may have such vessel constructed, outfitted, or equipped at not in excess of the actual cost thereof in a navy yard of the United States under such regulations as may be promulgated by the Secretary of the Navy and the Secretary of Transportation. In such event the Secretary of Transportation is authorized to pay for any such vessel so constructed from his construction fund. The Secretary of Transportation is authorized to sell any vessel so constructed, outfitted, or equipped in a navy yard to a citizen of the United States for the fair and reasonable value thereof, but at not less than the cost thereof less the equivalent to the construction differential subsidy determined as provided by subsection (b) of this section, such sale to be in accordance with all the provisions of this subchapter.
(f) Survey of shipbuilding capability; correction of inadequacies; reimbursement of certain vessel construction and delivery expenses 
The Secretary of Transportation, with the advice of and in coordination with the Secretary of the Navy, shall at least once each year, as required for purposes of this chapter, survey the existing privately owned shipyards capable of merchant ship construction, or review available data on such shipyards if deemed adequate, to determine whether their capabilities for merchant ship construction, including facilities and skilled personnel, provide an adequate mobilization base at strategic points for purposes of national defense and national emergency. The Secretary of Transportation, in connection with ship construction, reconstruction, reconditioning, or remodeling under this subchapter and subchapter VII of this chapter, upon a basis of a finding that the award of the proposed construction, reconstruction, reconditioning, or remodeling work will remedy an existing or impending inadequacy in such mobilization base as to the capabilities and capacities of a shipyard or shipyards at a strategic point, and after taking into consideration the benefits accruing from standardized construction, the conditions of unemployment, and the needs and reasonable requirements of all shipyards, may allocate such construction, reconstruction, reconditioning, or remodeling to such yard or yards in such manner as he may determine to be fair, just, and reasonable to all sections of the country, subject to the provisions of this subsection. In the allocation of construction work to such yards as herein provided, the Secretary of Transportation may, after first obtaining competitive bids for such work in compliance with the provisions of this chapter, negotiate with the bidders and with other shipbuilders concerning the terms and conditions of any contract for such work, and is authorized to enter into such contract at a price deemed by the Secretary of Transportation to be fair and reasonable. Any contract entered into by the Secretary of Transportation under the provisions of this subsection shall be subject to all of the terms and conditions of this chapter, excepting those pertaining to the awarding of contracts to the lowest bidder which are inconsistent with the provisions of this subsection. In the event that a contract is made providing for a price in excess of the lowest responsible bid which otherwise would be accepted, such excess shall be paid by the Secretary of Transportation as a part of the cost of national defense, and shall not be considered as a part of the construction-differential subsidy. In the event that a contract is made providing for a price lower than the lowest responsible bid which otherwise would be accepted, the construction-differential subsidy shall be computed on the contract price in lieu of such bid. If, as a result of allocation under this subsection, the purchaser incurs expenses for inspection and supervision of the vessel during construction and for the delivery voyage of the vessel in excess of the estimated expenses for the same services that he would have incurred if the vessel had been constructed by the lowest responsible bidder the Secretary of Transportation (with respect to construction under this subchapter, except section 1159 of this Appendix) shall reimburse the purchaser for such excess, less one-half of any gross income the purchaser receives that is allocable to the delivery voyage minus one-half of the extra expenses incurred to produce such gross income, and such reimbursement shall not be considered part of the construction-differential subsidy: Provided, That no interest shall be paid on any refund authorized under this chapter. If the vessel is constructed under section 1159 of this Appendix the Secretary of Transportation shall reduce the price of the vessel by such excess, less one-half of any gross income (minus one-half of the extra expenses incurred to produce such gross income) the purchaser receives that is allocable to the delivery voyage. In the case of a vessel that is not to receive operating-differential subsidy, the delivery voyage shall be deemed terminated at the port where the vessel begins loading. In the case of a vessel that is to receive operating-differential subsidy, the delivery voyage shall be deemed terminated when the vessel begins loading at a United States port in an essential service. In either case, however, the vessel owner shall not be compensated for excess vessel delivery costs in an amount greater than the expenses that would have been incurred in delivering the vessel from the shipyard at which it was built to the shipyard of the lowest responsible bidder. If as a result of such allocation, the expenses the purchaser incurs with respect to such services are less than the expenses he would have incurred for such services if the vessel had been constructed by the lowest responsible bidder, the purchaser shall pay to the Secretary of Transportation an amount equal to such reduction and, if the vessel was built with the aid of construction-differential subsidy, such payment shall not be considered a reduction of the construction-differential subsidy.
(g) Sale of vessels acquired by Secretary 
Upon the application of any citizen of the United States to purchase any vessel acquired by the Secretary of Transportation under the provisions of section 1125 of this Appendix, the Secretary of Transportation is authorized to sell such vessel to the applicant for the fair and reasonable value thereof, but at not less than the cost thereof to the Secretary of Transportation less depreciation at the rate of 4 per centum per annum from the date of completion, excluding the cost of national-defense features added by the Secretary of Transportation, less the equivalent of any applicable construction-differential subsidy as provided by subsection (b) of this section, such sale to be in accordance with all the provisions of this subchapter. Such vessel shall thereupon be eligible for an operating-differential subsidy under subchapter VI of this chapter, notwithstanding the provisions of section 1171 (a)(1), and section 1180 (1) of this Appendix, or any other provision of law.
(h) Installation or removal of national defense features; title to such features 
The Secretary of Transportation is authorized to construct, purchase, lease, acquire, store, maintain, sell, or otherwise dispose of national defense features intended for installation on vessels. The Secretary of Transportation is authorized to install or remove such national defense features on any vessel
(1)  which is in the National Defense Reserve Fleet as defined by section 1744(a) of the Appendix to title 50,
(2)  which is requisitioned, purchased, or chartered under section 1242 of this Appendix,
(3)  which serves as security for the guarantee of an obligation by the Secretary of Transportation under subchapter XI of this chapter, or
(4)  which is the subject of an agreement between the owner of such vessel and the Secretary of Transportation to install or remove such national defense features. Title to such national defense features which the Secretary of Transportation determines are not to be permanently incorporated in a vessel shall not be affected by such installation or removal unless otherwise transferred in accordance with the provisions of this subchapter.
(i) Plans, specifications, and proposals for national defense features; certification of approval 
The Secretary of Transportation shall submit the plans and specifications for such national defense features and the proposals for their acquisition, storage, utilization, or disposition to the Navy Department for examination thereof and suggestion for such changes therein as may be deemed necessary or proper in order that such features shall be suitable for the use of the United States Government in time of war or national emergency. If the Secretary of the Navy approves such plans, specifications, or proposals as submitted, or as modified in accordance with the provisions of this subsection, he shall certify such approval to the Secretary of Transportation.

46 USC Appendix 1153 - Documentation of completed vessel under laws of United States; delivery to purchaser; first mortgage to secure deferred payments

Upon completion of the construction of any vessel in respect to which a construction-differential subsidy is to be allowed under this subchapter and its delivery by the shipbuilder to the Secretary of Transportation, the vessel shall be documented under the laws of the United States, and concurrently therewith, or as soon thereafter as practicable, the vessel shall be delivered with a bill of sale to the purchaser with warranty against liens, pursuant to the contract of sale between the purchaser and the Secretary of Transportation. The vessel shall remain documented under the laws of the United States for not less than twenty-five years, or so long as there remains due the United States any principal or interest on account of the purchaser price, whichever is the longer period. At the time of delivery of the vessel the purchaser shall execute and deliver a first-preferred mortgage to the United States to secure payment of any sums due from the purchaser in respect to said vessel: Provided, That notwithstanding any other provisions of law, the payment of any sums due in respect to a passenger vessel purchased under section 1737(b)1 of the Appendix to title 50, reconverted or restored for normal operation in commercial services, or in respect to a passenger vessel purchased under subchapter V of this chapter, which is delivered subsequent to March 8, 1946, and which
(i)  is of not less than ten thousand gross tons,
(ii)  has a designed speed approved by the Secretary of Transportation but not less than eighteen knots,
(iii)  has accommodations for not less than two hundred passengers, and,
(iv)  is approved by the Secretary of Defense as being desirable for national defense purposes, may, with the approval of the Secretary of Transportation be secured only by a first-preferred mortgage on said vessel. With the approval of the Secretary of Transportation, such preferred mortgage may provide that the sole recourse against the purchaser of such a passenger vessel under such mortgage, and any of the notes secured thereby, shall be limited to repossession of the vessel by the United States and the assignment of insurance claims, if the purchaser shall have complied with all provisions of the mortgage other than those relating to the payment of principal and interest when due, and the obligation of the purchaser shall be satisfied and discharged by the surrender of the vessel, and all right, title, and interest therein to the United States. Such vessel upon surrender shall be
(i)  free and clear of all liens and encumbrances whatsoever, except the lien of the preferred mortgage,
(ii)  in class, and
(iii)  in as good order and condition, ordinary wear and tear excepted, as when acquired by the purchaser, except that any deficiencies with respect to freedom from encumbrances, condition, and class, may, to the extent covered by valid policies of insurance, be satisfied by the assignment to the United States of claims of the purchaser under such policies of insurance. The purchaser shall also comply with all the provisions of section 868 of this Appendix.
[1] See References in Text note below.

46 USC Appendix 1154 - Purchase of vessel constructed in accordance with application for subsidy; bid or negotiated price basis for subsidy and payments for cost of national defense features; documentation

If a qualified purchaser under the terms of this subchapter desires to purchase a vessel to be constructed in accordance with an application for construction-differential subsidy under this subchapter, the Secretary of Transportation may, in lieu of contracting to pay the entire cost of the vessel under section 1152 of this Appendix, contract to pay only construction-differential subsidy and the cost of national defense features to the shipyard constructing such vessel. The construction-differential subsidy and payments for the cost of national defense features shall be based upon the lowest responsible domestic bid unless the vessel is constructed at a negotiated price as provided by section 1152 (a) of this Appendix or under a contract negotiated by the Secretary of Transportation as provided in section 1152 (b) of this Appendix in which event the construction-differential subsidy and payments for the cost of national defense features shall be based upon such negotiated price. No construction-differential subsidy, as provided in this section, shall be paid unless the said contract or contracts or other arrangements contain such provisions as are provided in this subchapter to protect the interests of the United States as the Secretary of Transportation deems necessary. Such vessel shall be documented under the laws of the United States as provided in section 1153 of this Appendix. The contract of sale, and the mortgage given to secure the payment of the unpaid balance of the purchase price, shall not restrict the lawful or proper use or operation of the vessel, except to the extent expressly required by law.

46 USC Appendix 1155 - Eligible shipyards; materials; conditions of contracts; limitation to American shipyards; American materials, waiver; ability of bidders; filing bids and data

All construction in respect of which a construction-differential subsidy is allowed under this subchapter shall be performed in a shipyard of the United States as the result of competitive bidding, after due advertisement, with the right reserved in the Secretary of Transportation to disapprove, any or all bids. In all such construction the shipbuilder, subcontractors, materialmen, or suppliers shall use, so far as practicable, only articles, materials, and supplies of the growth, production, or manufacture of the United States as defined in paragraph K[1] of section 1401 of title 19; Provided, however, That with respect to other than major components of the hull, superstructure, and any material used in the construction thereof,
(1)  if the Secretary of Transportation determines that the requirements of this sentence will unreasonably delay completion of any vessel beyond its contract delivery date, and
(2)  if such determination includes or is accompanied by a concise explanation of the basis therefor, then the Secretary of Transportation may waive such requirements to the extent necessary to prevent such delay. No shipbuilder shall be deemed a responsible bidder unless he possesses the ability, experience, financial resources, equipment, and other qualifications necessary properly to perform the proposed contract. Each bid submitted to the Secretary of Transportation shall be accompanied by all detailed estimates upon which it is based. The Secretary of Transportation may require that the bids of any subcontractors, or other pertinent data, accompany such bid. All such bids and data relating thereto shall be kept on file until disposed of as provided by law. For the purposes of this subchapter V, the term shipyard of the United States means shipyards within any of the United States and the Commonwealth of Puerto Rico.
[1] See References in Text note below.

46 USC Appendix 1156 - Operation of subsidy constructed vessel limited to foreign trade; repayments to Secretary for deviations

Every owner of a vessel for which a construction-differential subsidy has been paid shall agree that the vessel shall be operated exclusively in foreign trade, or on a round-the-world voyage, or on a round voyage from the west coast of the United States to a European port or ports which includes intercoastal ports of the United States, or a round voyage from the Atlantic coast of the United States to the Orient which includes intercoastal ports of the United States, or on a voyage in foreign trade on which the vessel may stop at the State of Hawaii, or an island possession or island territory of the United States, and that if the vessel is operated in the domestic trade on any of the above-enumerated services, he will pay annually to the Secretary of Transportation that proportion of one-twenty-fifth of the construction-differential subsidy paid for such 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. The Secretary may consent in writing to the temporary transfer of such vessel to service other than the service covered by such agreement for periods not exceeding six months in any year, whenever the Secretary may determine that such transfer is necessary or appropriate to carry out the purposes of this chapter. Such consent shall be conditioned upon the agreement by the owner to pay to the Secretary, upon such terms and conditions as he may prescribe, an amount which bears the same proportion to the construction-differential subsidy paid by the Secretary as such temporary period bears to the entire economic life of the vessel. No operating-differential subsidy shall be paid for the operation of such vessel for such temporary period.

46 USC Appendix 1157 - Construction of new vessel to replace obsolete; purchase of old vessel by Secretary; bond of seller against liens

If a contract is made by the Secretary of Transportation under authority of this subchapter for the construction and sale of a new vessel to replace a vessel then operated in foreign trade or domestic trade, which in the judgment of the Secretary of Transportation should be replaced because it is obsolete or inadequate for successful operation in such trade, the Secretary of Transportation is authorized, in his discretion, to buy such replaced vessel from the owner at a fair and reasonable valuation, which valuation shall not exceed the cost to the owner or any former owner plus the actual cost previously expended thereon for reconditioning, and less a reasonable and proper depreciation, based upon not more than twenty-five-year life of the vessel, and apply the purchase price agreed upon to that portion of the construction cost of such new vessel which is to be borne by the purchaser thereof: Provided, That the owner of such replaced vessel shall execute a bond, with one or more approved sureties, conditioned upon indemnifying the United States from all loss resulting from any existing lien against such vessel: And provided further, That such vessel has been documented under the laws of the United States for a period of at least ten years prior to the date of its purchase by the United States.

46 USC Appendix 1158 - Disposition of vessels transferred to Maritime Administration of Department of Transportation

(a) Authority to scrap or sell obsolete vessels 
If the Secretary of Transportation shall determine that any vessel transferred to the Maritime Administration of the Department of Transportation by section 1112 of this Appendix, or hereafter acquired, is of insufficient value for commercial or military operation to warrant its further preservation, the Secretary of Transportation is authorized
(1)  to scrap said vessel, or
(2)  to sell such vessel for cash, after appraisement and due advertisement, and upon competitive sealed bids, either to citizens of the United States or to aliens: Provided, That the purchaser thereof shall enter into an undertaking with sureties approved by the Secretary of Transportation that such vessel shall not be operated in the foreign commerce of the United States at any time within the period of ten years after the date of the sale, in competition with any other vessel owned by a citizen or citizens of the United States and registered under the laws thereof.
(b) Authority to convey vessels 

(1) In general 
Notwithstanding section 1160 (j) of this Appendix, 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
(A) the recipient is a non-profit organization, a State, Commonwealth, or possession of the United States or any municipal corporation or political subdivision thereof, or the District of Columbia;
(B) the recipient agrees not to use, or allow others to use, the vessel for commercial transportation purposes;
(C) the recipient agrees to make the vessel available to the Government whenever the Secretary indicates that it is needed by the Government;
(D) the recipient 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;
(E) the recipient has a conveyance plan and a business plan that describes the intended use of the vessel, each of which have been submitted to and approved by the Secretary;
(F) the recipient 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
(G) the recipient agrees that when the recipient no longer requires the vessel for use as described in the business plan required under subparagraph (E)
(i) 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
(ii) 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 the provisions of section 501 (c)(3) of title 26, 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.
(2) Other equipment 
At the Secretarys discretion, additional equipment from other obsolete vessels of the National Defense Reserve Fleet may be conveyed to assist the recipient with maintenance, repairs, or modifications.
(3) Additional terms 
The Secretary may require any additional terms the Secretary considers appropriate.
(4) Delivery of vessel 
If conveyance is made under this subsection 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.
(5) Limitations 
If at any time prior to delivery of the vessel to the recipient, the Secretary determines that a different disposition of a 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.
(6) Reversion 
The Secretary shall include in any conveyance under this subsection terms under which all right, title, and interest conveyed by the Secretary shall revert to the United States if the Secretary determines the vessel has been used other than as described in the business plan required under paragraph (1)(E).

46 USC Appendix 1159 - Vessels to be operated in domestic trade; terms and conditions of construction aid and sale to purchaser

Any citizen of the United States may make application to the Secretary of Transportation for aid in the construction of a new vessel to be operated in the foreign or domestic trade (excepting vessels engaged solely in the transportation of property on inland rivers and canals exclusively). If such application is approved by the Secretary of Transportation, the vessel may be constructed under the terms and conditions of this subchapter, but no construction-differential subsidy shall be allowed. The Secretary of Transportation shall pay for the cost of national-defense features incorporated in such vessel. In case the vessel is designed to be of not less than three thousand five hundred gross tons and to be capable of sustained speed of not less than ten knots, or in the case of a passenger vessel operating solely on the inland rivers and waterways which is designed to be of not less than one thousand gross tons and to be capable of sustained speed of not less than eight knots, or in the case of a ferry operating solely in point-to-point transportation which is designed to be of not less than seventy-five gross tons and to be capable of a sustained speed of not less than eight knots, in the case of an oceangoing tug of more than two thousand five hundred horsepower or oceangoing barge of more than two thousand five hundred gross tons, or in the case of a vessel of more than two thousand five hundred horsepower designed to be capable of sustained speed of not less than forty knots, the purchaser shall be required to pay the Secretary of Transportation not less than 121/2 per centum of the cost of such vessel, and in the case of any other vessel the purchaser shall be required to pay the Secretary of Transportation not less than 25 per centum of the cost of such vessel (excluding from such cost, in either case, the cost of national defense features); and the balance of such purchase price shall be paid by the purchaser within twenty-five years in not to exceed twenty-five equal annual installments, with interest at a rate not less than
(i)  a rate determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities of such loans, adjusted to the nearest one-eighth of 1 per centum, plus
(ii)  an allowance adequate in the judgment of the Secretary of Transportation to cover administrative costs, the balance of such purchase price being secured by a preferred mortgage on the vessel sold and otherwise secured as the Secretary of Transportation may determine: Provided, That, notwithstanding any other provisions of law, the balance of the purchase price of a passenger vessel constructed under this section which is delivered subsequent to March 8, 1946, and which has the tonnage, speed, passenger accommodations, and other characteristics set forth in section 1153 of this Appendix, may, with the approval of the Secretary of Transportation, be secured as provided in such section, and the obligation of the purchaser of such a vessel shall be satisfied and discharged as provided in such section.

46 USC Appendix 1160 - Acquisition of obsolete vessels

(a) Definitions 
When used in this section
(1) The term obsolete vessel means a vessel or vessels, each of which
(A)  is of not less than one thousand three hundred and fifty gross tons,
(B)  in the judgment of the Secretary of Transportation, should, by reason of age, obsolescence, or otherwise, be replaced in the public interest and
(C)  has been owned by a citizen or citizens of the United States for at least three years immediately prior to the date of acquisition hereunder.
(2) The term new vessel means a vessel or vessels, each of which
(A)  is constructed under the provisions of this chapter, and is acquired within two years from the date of completion of such vessel, or is purchased under section 1204 of this Appendix, as amended, by the person turning in an obsolete vessel under this section, or
(B)  is hereafter constructed in a domestic shipyard on private account and not under the provisions of this chapter, and documented under the laws of the United States.
(b) Promotion of construction of new vessels; allowance on obsolete vessels 
In order 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 is authorized, subject to the provisions of this section, to acquire any obsolete vessel in exchange for an allowance of credit. The obsolete vessel shall be acquired by the Secretary of Transportation, if the owner so requests, either at the time the owner contracts for the construction or purchase of a new vessel or within five days of the actual date of delivery of the new vessel to the owner. The amount of the allowance shall be determined at the time of the acquisition of the obsolete vessel by the Secretary of Transportation. In the event the obsolete vessel is acquired by the Secretary of Transportation at the time the owner contracts for the construction or purchase of the new vessel, the allowance shall not be paid to the owner of the obsolete vessel, but shall be applied upon the purchase price of a new vessel. In the case of a new vessel constructed under the provisions of this chapter, such allowance may, under such terms and conditions as the Secretary of Transportation may prescribe, be applied upon the cash payments required under this chapter. In case the new vessel is not constructed under the provisions of this chapter, the allowance shall, upon acquisition of the obsolete vessel by the Secretary of Transportation, be paid, for the account of the owner, to the shipbuilder constructing such new vessel. In the event that title to the obsolete vessel is acquired by the Secretary of Transportation at the time of delivery of the new vessel, the allowance shall be deposited in the owners capital construction fund. This subsection shall apply to obsolete vessels exchanged for new vessels hereafter contracted to be built, or eligible for such exchange but not exchanged in connection with a contract for new vessels executed prior to October 1, 1960.
(c) Utility value of new vessel; gross tonnage 
The utility value of the new vessel for operation in the domestic or foreign commerce of the United States shall not be substantially less than that of the obsolete vessel. The gross tonnage of the obsolete vessel may exceed the gross tonnage of the new vessel in a ratio not in excess of three to one, if the Secretary of Transportation finds that the new vessel, although of lesser tonnage, will provide utility value equivalent to or greater than that of the obsolete vessel.
(d) Amount of allowance on obsolete vessel; determination of amount 
The allowance for an obsolete vessel shall be the fair and reasonable value of such vessel as determined by the Secretary of Transportation. In making such determination the Secretary of Transportation shall consider:
(1)  the scrap value of the obsolete vessel both in American and foreign markets,
(2)  the depreciated value based on a twenty or twenty-five year life, whichever is applicable to the obsolete vessel, and
(3)  the market value thereof for operation in the world trade or in the foreign or domestic trade of the United States. In the event the obsolete vessel is acquired by the Secretary of Transportation at the time the owner contracts for the construction of the new vessel, and the owner uses such vessel during the period of construction of the new vessel, the allowance shall be reduced by an amount representing the fair value of such use. The rate for the use of the obsolete vessel shall be fixed by the Secretary of Transportation for the entire period of such use at the time of execution of the contract for the construction of the new vessel.
(e) Recognition of gain for income tax purposes; basis for gain or loss 
No gain shall be recognized to the owner for the purpose of Federal income taxes in the case of a transfer of an obsolete vessel to the Secretary of Transportation under the provisions of this section. The basis for gain or loss upon a sale or exchange and for depreciation under the applicable Federal income-tax laws of a new vessel acquired as contemplated in this section shall be the same as the basis of the obsolete vessel or vessels exchanged for credit upon the acquisition of such new vessel, increased in the amount of the cost of such vessel (other than the cost represented by such obsolete vessel or vessels) and decreased in the amount of loss recognized upon such transfer.
(f) Report to Congress 
The Secretary of Transportation shall include in his annual report to Congress a detailed statement of all transactions consummated under the provisions of the preceding subsections during the period covered by such report.
(g) Use of vessels 25 years old or more 
An obsolete vessel acquired by the Secretary of Transportation under this section which is or becomes twenty-five years old or more, and vessels presently in the Secretarys laid-up fleet which are or become twenty-five years old or more, shall in no case be used for commercial operation, except that any such obsolete vessel, or any such vessel in the laid-up fleet may be used during any period in which vessels may be requisitioned under section 1242 of this Appendix, as amended, and except as otherwise provided in this chapter for the employment of the Secretarys vessels in steamship lines on trade routes exclusively serving the foreign trade of the United States.
(h) Repealed. Pub. L. 101–225, title III, § 307(7), Dec. 12, 1989, 103 Stat. 1925 
(i) Exchange of vessels; valuation; scrapping of traded out vessels 
The Secretary of Transportation is authorized to acquire suitable documented vessels, as defined in section 2101 of title 46, with funds in the Vessel Operations Revolving Fund derived from the sale of obsolete vessels in the National Defense Reserve Fleet. For purposes of this subsection, 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 National Defense Reserve Fleet; except that, in a transaction subject to this section, the value assigned to those vessels will be determined on the same basis, with consideration given to the fair value of the cost of positioning the traded-out vessel to the place of scrapping. All costs incident to the lay-up of the vessel acquired under this subsection may be paid from balances in the Fund. Notwithstanding the provisions of sections 808 and 835 of this Appendix, vessels sold from the National Defense Reserve Fleet under this subsection may be scrapped in approved foreign markets.
(j) Placement in national defense reserve fleet of acquired vessels 
Any vessel heretofore or hereafter acquired under this section, or otherwise acquired by the Maritime Administration of the Department of Transportation under any other authority shall be placed in the national defense reserve fleet established under authority of section 11 of the Merchant Ship Sales Act of 1946 [50 App. U.S.C. 1744] and shall not be traded out or sold from such reserve fleet, except as provided for in subsections (g) and (i) of this section. This limitation shall not affect the rights of the Secretary of Transportation to dispose of a vessel as provided in other sections of this subchapter or in subchapters VII or XI of this chapter.

46 USC Appendix 1161 - Reserve funds for construction or acquisition of vessels; taxation

(a) “New vessel” defined 
When used in this section the term new vessel means any vessel
(1)  documented or agreed with the Secretary of Transportation to be documented under the laws of the United States;
(2)  constructed in the United States after December 31, 1939, or the construction of which has been financed under subchapters V or VII of this chapter, or the construction of which has been aided by a mortgage insured under subchapter XI of this chapter; and
(3)  either
(A)  of such type, size, and speed as the Secretary of Transportation shall determine to be suitable for use on the high seas or Great Lakes in carrying out the purposes of this chapter, but not of less than two thousand gross tons or of less speed than twelve knots, unless the Secretary of Transportation shall determine and certify in each case that a vessel of a specified lesser tonnage or speed is desirable for use by the United States in case of war or national emergency, or
(B)  constructed to replace a vessel or vessels requisitioned or purchased by the United States.
(b) Establishment of construction reserve funds 
For the purposes of promoting the construction, reconstruction, reconditioning, or acquisition of vessels, or for other purposes authorized in this section, necessary to carrying out the policy set forth in section 1101 of this Appendix, any citizen of the United States who is operating a vessel or vessels in the foreign or domestic commerce of the United States or in the fisheries or owns in whole or in part a vessel or vessels being so operated, or who, at the time of purchase or requisition of the vessel by the Government, was operating a vessel or vessels so engaged or owned in whole or in part a vessel or vessels being so operated or had acquired or was having constructed a vessel or vessels for the purpose of operation in such commerce or in the fisheries, may establish a construction reserve fund, for the construction, reconstruction, reconditioning, or acquisition of new vessels, or for other purposes authorized in this section, to be composed of deposits of proceeds from sales of vessels, indemnities on account of losses of vessels, earnings from the operation of vessels documented under the laws of the United States and from services incident thereto, and receipts, in the form of interest or otherwise, with respect to amounts previously deposited. Such construction reserve fund shall be established, maintained, expended, and used in accordance with the provisions of this section and rules or regulations to be prescribed jointly by the Secretary of Transportation and the Secretary of the Treasury.
(c) Recognition of gain for taxation where proceeds of sale or indemnity for loss deposited in fund 
In the case of the sale or actual or constructive total loss of a vessel, if the taxpayer deposits an amount equal to the net proceeds of the sale or to the net indemnity with respect to the loss in a construction reserve fund established under subsection (b) of this section, then
(1) if the taxpayer so elects in his income-tax return for the taxable year in which the gain was realized, or
(2) in case a vessel is purchased or requisitioned by the United States, or is lost, in any taxable year beginning after December 31, 1939, and the taxpayer receives payment for the vessel so purchased or requisitioned, or receives from the United States indemnity on account of such loss, subsequent to the end of such taxable year, if the taxpayer so elects prior to the expiration of sixty days after the receipt of the payment or indemnity, and in accordance with a form of election to be prescribed by the Commissioner of Internal Revenue with the approval of the Secretary of the Treasury, no gain shall be recognized to the taxpayer in respect of such sale or indemnification in the computation of net income for the purposes of Federal income or excess-profits taxes. If an election is made under subdivision (2) of this subsection and if computation or recomputation in accordance with this subsection is otherwise allowable but is prevented, on the date of making such election or within six months thereafter, by any statute of limitation, such computation or recomputation nevertheless shall be made notwithstanding such statute if a claim therefor is filed within six months after the date of making such election. For the purposes of this subsection no amount shall be considered as deposited in a construction reserve fund unless it is deposited within sixty days after it is received by the taxpayer. As used in this subsection the term net proceeds and the term net indemnity mean the sum of
(1)  the adjusted basis of the vessel and
(2)  the amount of gain which would be recognized to the taxpayer without regard to this subsection.
(d) Basis for determining gain or loss and for depreciation of new vessels 
The basis for determining gain or loss and for depreciation, for the purposes of Federal income or excess profits taxes, of any new vessel constructed, reconstructed, reconditioned, or acquired by the taxpayer, or with respect to which purchase-money indebtedness is liquidated as provided in subsection (g) of this section, in whole or in part out of the construction reserve fund shall be reduced by that portion of the deposits in the fund expended in the construction, reconstruction, reconditioning, acquisition, or liquidation of purchase-money indebtedness of the new vessel which represents gain not recognized for tax purposes under subsection (c) of this section.
(e) Order, proportions, etc., of deposits and with­drawals 
For the purposes of this section,
(1)  if the net proceeds of a sale or the net indemnity in respect of a loss are deposited in more than one deposit, the amount consisting of the gain shall be considered as first deposited;
(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 any deposit consists in part of gain not recognized under subsection (c) of this section, any expenditure, obligation, or withdrawal applied against such deposit shall be considered to consist of gain in the proportion that the part of the deposit consisting of gain bears to the total amount of the deposit.
(f) Amounts in fund as accumulation of earnings or profits 
With respect to any taxable year, amounts on deposit on the last day of such year in a construction reserve fund in accordance with this section and with respect to which all the requirements of subsection (g) of this section have been satisfied, to the extent that such requirements are applicable as of the last day of said taxable year, shall not constitute an accumulation of earnings or profits within the meaning of section 102 of the Internal Revenue Code.
(g) Benefits of section conditioned upon manner and time of expenditure of deposits 
The provisions of subsections (c) and (f) of this section shall apply to any deposit in the construction reserve fund only to the extent that such deposit is expended or obligated for expenditure, in accordance with rules and regulations to be prescribed jointly by the Secretary of Transportation and the Secretary of the Treasury
(1) under a contract for the construction or acquisition of a new vessel or vessels (or in the discretion of the Secretary of Transportation, for a part interest therein), or, with the approval of the Secretary of Transportation, for the reconstruction or reconditioning of a new vessel or vessels, entered into within
(i)  two years from the date of deposit or the date of any extension thereof which may be granted by the Secretary of Transportation pursuant to the provisions of subsection (h) of this section, in the case of deposits made prior to the date on which these amendatory provisions become effective, or
(ii)  three years from the date of such deposit in the case of a deposit made after such effective date, only if under such rules and regulations
(A) within such period not less than 121/2 per centum of the construction or contract price of the vessel or vessels is paid or irrevocably committed on account thereof and the plans and specifications therefor are approved by the Secretary of Transportation to the extent by him deemed necessary; and
(B) in case of a vessel or vessels not constructed under the provisions of this subchapter or not purchased from the Secretary of Transportation,
(i)  said construction is completed, within six months from the date of the construction contract, to the extent of not less than 5 per centum thereof (or in case the contract covers more than one vessel, the construction of the first vessel so contracted for is so completed to the extent of not less than 5 per centum) as estimated by the Secretary of Transportation and certified by him to the Secretary of the Treasury, and
(ii)  all construction under such contract is completed with reasonable dispatch thereafter;
(2) for the liquidation of existing or subsequently incurred purchase-money indebtedness to persons other than a parent company of, or a company affiliated or associated with, the mortgagor on a new vessel or vessels within
(i)  two years from the date of deposit or the date of any extension thereof which may be granted by the Secretary of Transportation pursuant to the provisions of subsection (h) of this section, in the case of deposits made prior to the date on which these amendatory provisions become effective, or
(ii)  three years from the date of such deposit in the case of a deposit made after such effective date.
(h) Authorizations of extensions of time 
The Secretary of Transportation is authorized under rules and regulations to be prescribed jointly by the Secretary of the Treasury and the Secretary of Transportation to grant extensions of the period within which the deposits shall be expended or obligated or within which construction shall have progressed to the extent of 5 per centum of completion as provided herein, but such extension shall not be for an aggregate additional period in excess of two years with respect to the expenditure or obligation of such deposits or more than one year with respect to the progress of such construction: Provided, That until January 1, 1965, in addition to the extensions hereinbefore permitted, further extensions may be granted ending not later than December 31, 1965.
(i) Taxation of deposits upon failure of conditions 
Any such deposited gain or portion thereof which is not so expended or obligated within the period provided, or which is otherwise withdrawn before the expiration of such period, or with respect to which the construction has not progressed to the extent of 5 per centum of completion within the period provided, or with respect to which 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 is not completed with reasonable dispatch, if otherwise taxable income under the law applicable to the taxable year in which such gain was realized, shall be included in the gross income for such taxable year, except for the purpose of the declared value excess-profits tax and the capital stock tax. If any such deposited gain or portion thereof with respect to a deposit made in any taxable year ending on or before June 30, 1945 is so included in gross income for such taxable year, there shall (in addition to any other deficiency) be assessed, collected, and paid in the same manner as if it were a deficiency, an amount equal to 1.1 per centum of the amount of gain so included, such amount being in lieu of any adjustment with respect to the declared value excess-profits tax for such taxable year.
(j) Assessment and collection of deficiency tax 
Notwithstanding any other provision of law, any deficiency in tax for any taxable year resulting from the inclusion of any amount in gross income as provided by subsection (i) of this section, and the amount to be treated as a deficiency under such subsection in lieu of any adjustment with respect to the declared value excess-profits tax, may be assessed or a proceeding in court for the collection thereof may be begun without assessment, at any time: Provided, however, That interest on any such deficiency or amount to be treated as a deficiency shall not begin until the date the deposited gain or portion thereof in question is required under subsection (i) of this section to be included in gross income.
(k) Taxable years governed by section 
This section shall be applicable to a taxpayer only in respect of sales or indemnifications for losses occurring within a taxable year beginning after December 31, 1939, and only in respect of earnings derived during a taxable year beginning after December 31, 1939.
(l) Vessels deemed constructed or acquired by taxpayers owning stock in corporations constructing or acquiring vessels 
For the purposes of this section a vessel shall be considered as constructed or acquired by the taxpayer if constructed or acquired by a corporation at a time when the taxpayer owns at least 95 per centum of the total number of shares of each class of stock of the corporation.
(m) Definitions 
The terms used in this section shall have the same meaning as in chapter 1 of the Internal Revenue Code.
(n) “Contract for the construction” and “construction contract” defined 
The terms contract for the construction and construction contract, as used in this section, shall include, in the case of a taxpayer who constructs a new vessel in a shipyard owned by such taxpayer, an agreement between such taxpayer and the Secretary of Transportation with respect to such construction and containing provisions deemed necessary or advisable by the Secretary of Transportation to carry out the purposes and policy of this section.
(o) “Reconstruction and reconditioning” defined 
The terms reconstruction and reconditioning, as used in this section, shall include the reconstruction, reconditioning, or modernization of a vessel for exclusive use on the Great Lakes, including the Saint Lawrence River and Gulf, if the Secretary of Transportation determines that the objectives of this chapter will be promoted by such reconstruction, reconditioning, or modernization, and, notwithstanding any other provisions of law, such vessel shall be deemed to be a new vessel within the meaning of this section for such reconstruction, reconditioning, or modernization.

46 USC Appendix 1162 - Limitation on restrictions

(a) Except as provided in subsection (b) of this section, notwithstanding any other provision of law or contract, all restrictions and requirements under sections 1153, 1156, and 1212 of this Appendix applicable to a liner vessel constructed, reconstructed, or reconditioned with the aid of construction-differential subsidy shall terminate upon the expiration of the 25-year period beginning on the date of the original delivery of the vessel from the shipyard.
(b) 
(1) Except as provided in paragraph (2), the restrictions and requirements of section 1156 of this Appendix shall terminate upon the expiration of the 20-year period beginning on the date of the original delivery of the vessel from the shipyard for operation of a vessel in any domestic trade in which it has operated at any time since 1996.
(2) Paragraph (1) shall not affect any requirement to make payments under section 1156 of this Appendix.

TITLE 46 - US CODE - SUBCHAPTER VI - VESSEL OPERATING ASSISTANCE PROGRAMS

Part A - Operating-Differential Subsidy Program

46 USC Appendix 1171 - Subsidy authorized for operation of vessels in foreign trade or in off-season cruises

(a) Application for subsidy; conditions precedent to granting 
The Secretary of Transportation is authorized and directed to consider the application of any citizen of the United States for financial aid in the operation of a vessel or vessels, which are to be used in an essential service in the foreign commerce of the United States or in such service and in cruises authorized under section 1183 of this Appendix. In this subchapter VI the term essential service means the operation of a vessel on a service, route, or line described in section 1121 (a) of this Appendix or in bulk cargo carrying service described in section 1121 (b) of this Appendix. No such application shall be approved by the Secretary of Transportation unless he determines that
(1)  the operation of such vessel or vessels in an essential service is required to meet foreign-flag competition and to promote the foreign commerce of the United States except to the extent such vessels are to be operated on cruises authorized under section 1183 of this Appendix, and that such vessel or vessels were built in the United States, or have been documented under the laws of the United States not later than February 1, 1928, or actually ordered and under construction for the account of citizens of the United States prior to such date;
(2)  the applicant owns, or leases or can and will build or purchase, or lease, a vessel or vessels of the size, type, speed, and number, and with the proper equipment required to enable him to operate in an essential service, in such manner as may be necessary to meet competitive conditions, and to promote foreign commerce;
(3)  the applicant possesses the ability, experience, financial resources, and other qualifications necessary to enable him to conduct the proposed operations of the vessel or vessels as to meet competitive conditions and promote foreign commerce;
(4)  the granting of the aid applied for is necessary to place the proposed operations of the vessel or vessels on a parity with those of foreign competitors, and is reasonably calculated to carry out effectively the purposes and policy of this chapter. To the extent the application covers cruises, as authorized under section 1183 of this Appendix, the Secretary of Transportation may make the portion of this last determination relating to parity on the basis that any foreign flag cruise from the United States competes with any American flag cruise from the United States.
(b) Statements as to financial interests to accompany application; penalty for false statements 
Every application for an operating-differential subsidy under the provisions of this subchapter shall be accompanied by statements disclosing the names of all persons having any pecuniary interest, direct or indirect, in such application, or in the ownership or use of the vessel or vessels, routes, or lines covered thereby, and the nature and extent of any such interest, together with such financial and other statements as may be required by the Secretary of Transportation. All such statements shall be under oath or affirmation and in such form as the Secretary of Transportation shall prescribe. Any person who, in an application for financial aid under this subchapter or in any statement required to be filed therewith, willfully makes any untrue statement of a material fact, shall be guilty of a misdemeanor.

46 USC Appendix 1172 - Determination of necessity of subsidy to meet competition

Except with respect to cruises authorized under section 1183 of this Appendix, no contract for an operating-differential subsidy shall be made by the Secretary of Transportation for the operation of a vessel or vessels to meet foreign competition, except direct foreign-flag competition, until and unless the Secretary of Transportation, after a full and complete investigation and hearing, shall determine that an operating-differential subsidy is necessary to meet competition of foreign-flag ships.

46 USC Appendix 1173 - Contracts for payment of subsidy

(a) Authorization of contracts 
If the Secretary of Transportation approves the application, he may enter into a contract with the applicant for the payment of an operating-differential subsidy determined in accordance with the provisions of subsection (b) of this section, for the operation of such vessel or vessels in an essential service and in cruises authorized under section 1183 of this Appendix for a period not exceeding twenty years, and subject to such reasonable terms and conditions, consistent with this chapter, as the Secretary of Transportation shall require to effectuate the purposes and policy of this chapter, including a performance bond with approved sureties, if such bond is required by the Secretary of Transportation.
(b) Amount of subsidy 
Such contract shall provide, except as the parties should agree upon a lesser amount, that the amount of the operating-differential subsidy for the operation of vessels in an essential service shall equal the excess of the subsidizable wage costs of the United States officers and crews, the fair and reasonable cost of insurance, subsistence of officers and crews on passenger vessels, as defined in section 1183 of this Appendix, maintenance, and repairs not compensated by insurance, incurred in the operation under United States registry of the vessel or vessels covered by the contract, over the estimated fair and reasonable cost of the same items of expense (after deducting therefrom any estimated increase in such items necessitated by features incorporated pursuant to the provisions of section 1151 (b) of this Appendix) if such vessel or vessels were operated under the registry of a foreign country whose vessels are substantial competitors of the vessel or vessels covered by the contract: Provided, however, That the Secretary of Transportation may, with respect to any vessel in an essential bulk cargo carrying service as described in section 1121 (b) of this Appendix, pay, in lieu of the operating-differential subsidy provided by this subsection (b), such sums as he shall determine to be necessary to make the cost of operating such vessel competitive with the cost of operating similar vessels under the registry of a foreign country. For any period during which a vessel cruises as authorized by section 1183 of this Appendix, operating-differential subsidy shall be computed as though the vessel were operating on the essential service to which the vessel is assigned: Provided, however, That if the cruise vessel calls at a port or ports outside of its assigned service, but which is served with passenger vessels (as defined in section 1183 of this Appendix) by another subsidized operator at an operating-differential subsidy rate for wages lower than the cruise vessel has on its assigned essential service, the operating-differential subsidy rates for each of the subsidizable items for each day (a fraction of a day to count as a day) that the vessel stops at such port shall be at the respective rates applicable to the subsidized operator regularly serving the area.
(c) “Collective bargaining costs”, “base period costs”, “base period”, and “subsidizable wage costs of United States officers and crews” defined; determination of collective bargaining costs and establishment of new base periods; wage change index 

(1) When used in this section
(A) The term collective bargaining costs means the annual cost, calculated on the basis of the per diem rate of expense as of any date, of all items of expense required of the applicant through collective bargaining or other agreement, covering the employ of United States officers and crew of a vessel, including payments required by law to assure old-age pensions, unemployment benefits, or similar benefits and taxes or other governmental assessments on crew payrolls, but excluding subsistence of officers and crews on vessels other than passenger vessels as defined in section 1183 of this Appendix and costs relating to:
(i) the officers or members of the crew that the Secretary of Transportation has found, prior to the award of a contract for the construction or reconstruction of a vessel, to be unnecessary for the efficient and economical operation of such vessel: Provided, That the Secretary of Transportation shall afford representatives of the collective-bargaining unit or units responsible for the manning of the vessel an opportunity to comment on such finding prior to the effective date of such finding: And provided further, That in determining whether officers or members of the crew are necessary for the efficient and economical operation of such vessel, the Secretary of Transportation shall give due consideration to, but shall not be bound by, wage and manning scales and working conditions required by a bona fide collective-bargaining agreement, or
(ii) those officers or members of the crew that the Secretary of Transportation has found, prior to ninety days following October 21, 1970, to be unnecessary for the efficient and economical operation of the vessel.
(B) The term base period costs means for the base period beginning July 1, 1970, and ending June 30, 1971, the collective-bargaining costs as of January 1, 1971, less all other items of cost that have been disallowed by the Secretary of Transportation prior to ninety days following October 21, 1970, and not already excluded from collective-bargaining costs under subparagraph (A)(i) or (A)(ii) of this subsection. In any subsequent base period the term base period costs means the average of the subsidizable wage cost of United States officers and crews for the preceding annual period ending June 30 (calculated without regard to the limitation of the last sentence of paragraph (D) of this subdivision but increased or decreased by the increase or decrease in the index described in subdivision (3) of this subsection from January 1 of such annual period to January 1 of the base period), and the collective-bargaining costs as of January 1 of the base period: Provided, That in no event shall the base period cost be such that the difference between the base period cost and the collective-bargaining costs as of January 1 of any base period subsequent to the first base period exceeds five-fourths of 1 per centum of the collective-bargaining costs as of such January 1 multiplied by the number of years that have elapsed since the most recent base period.
(C) The term base period means any annual period beginning July 1, and ending June 30 with respect to which a base period cost is established.
(D) The term subsidizable wage costs of United States officers and crews in any period other than a base period means the most recent base period costs increased or decreased by the increase or decrease from January 1 of such base period to January 1 of such period in the index described in subdivision (3) hereof, and with respect to a base period means the base period cost. The subsidizable wage costs of United States officers and crews in any period other than a base period shall not be less than 90 per centum of the collective-bargaining costs as of January 1 of such period nor greater than 110 per centum of such collective-bargaining costs.
(2) The Secretary of Transportation shall determine the collective-bargaining costs on ships in subsidized operation as of January 1, 1971, and as of each January 1 thereafter, and shall as of intervals of not less than two years nor more than four years, establish a new base period cost, except that the Secretary shall not establish a new base period unless he announces his intention to do so prior to the December 31 that would be included in the new base period.
(3) The Bureau of Labor Statistics shall compile the index referred to in subdivision (1). Such index shall consist of the average annual change in wages and benefits placed into effect for employees covered by collective-bargaining agreements with equal weight to be given to changes affecting employees in the transportation industry (excluding the offshore maritime industry) and to changes affecting employees in private nonagricultural industries other than transportation. Such index shall be based on the materials regularly used by the Bureau of Labor Statistics in compiling its regularly published statistical series on wage and benefit changes arrived at through collective bargaining. Such materials shall remain confidential and not be subject to disclosure.
(d) Foreign wage computation; foreign manning 
Each foreign wage cost computation shall be made after an opportunity is given to the contractor to submit in writing and in timely fashion all relevant data within his possession. In making the computation, the Secretary shall consider all relevant matter so presented and all foreign wage cost data collected at his request or on his behalf. Such foreign cost data shall be made available to an interested contractor, unless the Secretary shall find that disclosure of the data will prevent him from obtaining such data in the future. In determining foreign manning for purposes of this section, the foreign manning determined for any ship type with respect to any base period shall not be redetermined until the beginning of a new base period.
(e) Monthly payment of wage subsidy; procedures for calculation and payment of subsidy on certain expenses 
The wage subsidy shall be payable monthly for the voyages completed during the month, upon the contractors certification that the subsidized vessels were in authorized service during the month. The Secretary of Transportation shall prescribe procedures for the calculation and payment of subsidy on items of expense which are included in collective-bargaining costs but are not included in the daily rate because they are unpredictably timed.
(f) Monthly percentage payment of other than wage subsidy; security for refund of overpayments; payment of remainder after audit of voyage accounts 
Ninety percent of the amount of the insurance and maintenance and repair and subsistence of officers and crews subsidy shall be payable monthly for the voyages completed during the month on the basis of the subsidy estimated to have accrued with respect to such voyages. Any such payment shall be made only after there has been furnished to the Secretary of Transportation such security as he deems to be reasonable and necessary to assure refund of any overpayment. The contractor and the Secretary of Transportation shall audit the voyage accounts as soon as practicable after such payment. The remaining 10 percent of such subsidy shall be payable after such audit.

46 USC Appendix 1174 - Additional subsidy; when authorized

If in the case of any particular foreign-trade route the Secretary of Transportation shall find after consultation with the Secretary of State, that the subsidy provided for in this subchapter is in any respect inadequate to offset the effect of governmental aid paid to foreign competitors, he may grant such additional subsidy as he determines to be necessary for that purpose.

46 USC Appendix 1175 - Vessels excluded from subsidy

(a) Vessels engaged in coastwise or intercoastal trade; vessels on inland waterways 
No operating-differential subsidy shall be paid for the operation of any vessel on a voyage on which it engages in coastwise or intercoastal trade: Provided, however, That such subsidy may be paid on a round-the-world voyage or a round voyage from the west coast of the United States to a European port or ports or a round voyage from the Atlantic coast to the Orient which includes intercoastal ports of the United States or a voyage in foreign trade on which the vessel may stop at the State of Hawaii, or an island possession or island territory of the United States, and if the subsidized vessel earns any gross revenue on the carriage of mail, passengers, or cargo by reason of such coastal or intercoastal trade the subsidy payment for the entire voyage shall be reduced by an amount which bears the same ratio to the subsidy otherwise payable as such gross revenue bears to the gross revenue derived from the entire voyage. No vessel operating on the inland waterways of the United States shall be considered for the purposes of this chapter to be operating in foreign trade.
(b) Vessels more than 25 years old 
No operating-differential subsidy shall be paid for the operation of a vessel after the calendar year the vessel becomes 25 years of age, unless the Secretary of Transportation has determined, before October 8, 1996, that it is in the public interest to grant such financial aid for the operation of such vessel.
(c) Vessels to be operated in an essential service served by citizens of United States 
No contract shall be made under this subchapter with respect to a vessel to be operated in an essential service served by citizens of the United States which would be in addition to the existing service, or services, unless the Secretary of Transportation shall determine after proper hearing of all parties that the service already provided by vessels of United States registry is inadequate, and that in the accomplishment of the purposes and policy of this chapter additional vessels should be operated thereon; and no contract shall be made with respect to a vessel operated or to be operated in an essential service served by two or more citizens of the United States with vessels of United States registry, if the Secretary of Transportation shall determine the effect of such a contract would be to give undue advantage or be unduly prejudicial, as between citizens of the United States, in the operation of vessels in such essential service unless following public hearing, due notice of which shall be given to each operator serving such essential service, the Secretary of Transportation shall find that it is necessary to enter into such contract in order to provide adequate service by vessels of United States registry. The Secretary of Transportation in determining for the purposes of this section whether services are competitive, shall take into consideration the type, size, and speed of the vessels employed, whether passenger or cargo, or combination passenger and cargo, vessels, the ports or ranges between which they run, the character of cargo carried, and such other facts as he may deem proper.

46 USC Appendix 1176 - Readjustments; change in service; withdrawal from service; payment of excess profits; wages, etc.; American materials

Every contract for an operating-differential subsidy under this subchapter shall provide
(1)  that the amount of the future payments to the contractor shall be subject to review and readjustment from time to time, but not more frequently than once a year, at the instance of the Secretary of Transportation or of the contractor. If any such readjustment cannot be reached by mutual agreement, the Secretary of Transportation, on his own motion or on the application of the contractor, shall, after a proper hearing, determine the facts and make such readjustment in the amount of such future payments as he may determine to be fair and reasonable and in the public interest. The testimony in every such proceeding shall be reduced to writing and filed in the office of the Secretary of Transportation. His decision shall be based upon and governed by the changes which may have occurred since the date of the said contract, with respect to the items theretofore considered and on which such contract was based, and other conditions affecting shipping, and shall be promulgated in a formal order, which shall be accompanied by a report in writing in which the Secretary of Transportation shall state his findings of fact;
(2)  that the compensation to be paid under it shall be reduced, under such terms and in such amounts as the Secretary of Transportation shall determine, for any periods in which the vessel or vessels are laid up;
(3)  that if the Secretary of Transportation shall determine that a change in an essential service, which is receiving an operating-differential subsidy under this subchapter, is necessary in the accomplishment of the purposes of this chapter, it may make such change upon such readjustment of payments to the contractor as shall be arrived at by the method prescribed in clause (1) of these conditions;
(4)  that if at any time the contractor receiving an operating-differential subsidy claims that he cannot maintain and operate his vessels in such an essential service, with a reasonable profit upon his investment, and applies to the Secretary of Transportation for a modification or rescission of his contract to maintain such essential service, and the Secretary of Transportation determines that such claim is proved the Secretary of Transportation shall modify or rescind such contract and permit the contractor to withdraw such vessels from such essential service upon a date fixed by the Secretary of Transportation, and upon the date of such withdrawal the further payment of the operating differential subsidy shall cease and the contractor be discharged from any further obligation under such contract;
(5)  that the contractor shall conduct his operations with respect to essential services and any services authorized under section 1183 of this Appendix, covered by his contract in an economical and efficient manner, and
(6)  that whenever practicable, an operator who receives subsidy with respect to subsistence of officers and crews shall use as such subsistence items only articles, materials, and supplies of the growth, production, and manufacture of the United States, as defined in section 1155 of this Appendix, except when it is necessary to purchase supplies outside the United States to enable such vessel to continue and complete her voyage, and an operator who receives subsidy with respect to repairs shall perform such repairs within any of the United States or the Commonwealth of Puerto Rico, except in an emergency.

46 USC Appendix 1177 - Capital construction fund

(a) Agreement rules; persons eligible; replacement, additional, or reconstructed vessels for prescribed trade and fishery operations; amount of deposits, annual limitation; conditions and requirements for deposits and withdrawals 
Any citizen of the United States owning or leasing one or more eligible vessels (as defined in subsection (k)(1) of this section) may enter into an agreement with the Secretary under, and as provided in, this section to establish a capital construction fund (hereinafter in this section referred to as the fund) with respect to any or all of such vessels. Any agreement entered into under this section shall be for the purpose of providing 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, or noncontiguous domestic trade or in the fisheries of the United States and shall provide for the deposit in the fund of the amounts agreed upon as necessary or appropriate to provide for qualified withdrawals under subsection (f) of this section. The deposits in the fund, and all withdrawals from the fund, whether qualified or nonqualified, shall be subject to such conditions and requirements as the Secretary may by regulations prescribe or are set forth in such agreement; except that the Secretary may not require any person to deposit in the fund for any taxable year more than 50 percent of that portion of such persons taxable income for such year (computed in the manner provided in subsection (b)(1)(A) of this section) which is attributable to the operation of the agreement vessels.
(b) Ceiling on deposits; lessees; “agreement vessel” defined 

(1) The amount deposited under subsection (a) of this section in the fund for any taxable year shall not exceed the sum of:
(A) that portion of the taxable income of the owner or lessee for such year (computed as provided in chapter 1 of the Internal Revenue Code of 1986 [26 U.S.C. 1 et seq.] but without regard to the carryback of any net operating loss or net capital loss and without regard to this section) which is attributable to the operation of the agreement vessels in the foreign or domestic commerce of the United States or in the fisheries of the United States,
(B) the amount allowable as a deduction under section 167 of the Internal Revenue Code of 1986 [26 U.S.C. 167] for such year with respect to the agreement vessels,
(C) if the transaction is not taken into account for purposes of subparagraph (A), the net proceeds (as defined in joint regulations) from
(i)  the sale or other disposition of any agreement vessel, or
(ii)  insurance or indemnity attributable to any agreement vessel, and
(D) the receipts from the investment or reinvestment of amounts held in such fund.
(2) In the case of a lessee, the maximum amount which may be deposited with respect to an agreement vessel by reason of paragraph (1)(B) for any period shall be reduced by any amount which, under an agreement entered into under this section, the owner is required or permitted to deposit for such period with respect to such vessel by reason of paragraph (1)(B).
(3) For purposes of paragraph (1), the term agreement vessel includes barges and containers which are part of the complement of such vessel and which are provided for in the agreement.
(c) Investment requirements; depositories; fiduciary requirements; interest-bearing securities; stock: percentage for domestic issues, listing and registration, prudent acquisitions, value and percentage equilibrium, and treatment of preferred issues 
Amounts in any fund established under this section shall be kept in the depository or depositories specified in the agreement and shall be subject to such trustee and other fiduciary requirements as may be specified by the Secretary. They may be invested only in interest-bearing securities approved by the Secretary; except that, if the Secretary consents thereto, an agreed percentage (not in excess of 60 percent) of the assets of the fund may be invested in the stock of domestic corporations. Such stock must be currently fully listed and registered on an exchange registered with the Securities and Exchange Commission as a national securities exchange, and must be stock which would be acquired by prudent men of discretion and intelligence in such matters who are seeking a reasonable income and the preservation of their capital. 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 such a way as to tend to restore the fund to a situation in which the fair market value of the stock does not exceed such agreed percentage. For purposes of this subsection, if the common stock of a corporation meets the requirements of this subsection and if the preferred stock of such corporation would meet such requirements but for the fact that it cannot be listed and registered as required because it is nonvoting stock, such preferred stock shall be treated as meeting the requirements of this subsection.
(d) Nontaxability of deposits; eligible deposits 

(1) For purposes of the Internal Revenue Code of 1986
(A) taxable income (determined without regard to this section and section 7518 of such Code [26 U.S.C. 7518]) for the taxable year shall be reduced by an amount equal to the amount deposited for the taxable year out of amounts referred to in subsection (b)(1)(A) of this section,
(B) gain from a transaction referred to in subsection (b)(1)(C) of this section, shall not be taken into account if an amount equal to the net proceeds (as defined in joint regulations) from such transaction is deposited in the fund,
(C) the earnings (including gains and losses) from the investment and reinvestment of amounts held in the fund shall not be taken into account,
(D) the earnings and profits of any corporation (within the meaning of section 316 of such Code [26 U.S.C. 316]) shall be determined without regard to this section and section 7518 of such Code [26 U.S.C. 7518], and
(E) in applying the tax imposed by section 531 of such Code [26 U.S.C. 531] (relating to the accumulated earnings tax), amounts while held in the fund shall not be taken into account.
(2) Paragraph (1) shall apply with respect to any amount only if such amount is deposited in the fund pursuant to the agreement and not later than the time provided in joint regulations.
(e) Accounts within fund: capital account, capital gain account, and ordinary income account; limitation on capital losses 
For purposes of this section
(1) Within the fund established pursuant to this section three accounts shall be maintained:
(A) the capital account,
(B) the capital gain account, and
(C) the ordinary income account.
(2) The capital account shall consist of
(A) amounts referred to in subsection (b)(1)(B) of this section,
(B) amounts referred to in subsection (b)(1)(C) of this section other than that portion thereof which represents gain not taken into account by reason of subsection (d)(1)(B) of this section,
(C) 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 with respect to which the person maintaining the fund would (but for subsection (d)(1)(C) of this section) be allowed a deduction under section 243 of the Internal Revenue Code of 1986 [26 U.S.C. 243], and
(D) interest income exempt from taxation under section 103 of such Code [26 U.S.C. 103].
(3) The capital gain account shall consist of
(A) amounts representing capital gains on assets held for more than 6 months and referred to in subsection (b)(1)(C) or (b)(1)(D) of this section reduced by
(B) amounts representing capital losses on assets held in the fund for more than 6 months.
(4) The ordinary income account shall consist of
(A) amounts referred to in subsection (b)(1)(A) of this section,
(B) 
(i) amounts representing capital gains on assets held for 6 months or less and referred to in subsection (b)(1)(C) or (b)(1)(D) of this section, reduced by
(ii) amounts representing capital losses on assets held in the fund for 6 months or less,
(C) interest (not including any tax-exempt interest referred to in paragraph (2)(D)) and other ordinary income (not including any dividend referred to in subparagraph (E)) received on assets held in the fund,
(D) ordinary income from a transaction described in subsection (b)(1)(C) of this section, and
(E) the portion of any dividend referred to in paragraph (2)(C) not taken into account under such paragraph.
(5) Except on termination of a fund, capital losses referred to in paragraph (3)(B) or in paragraph (4)(B)(ii) shall be allowed only as an offset to gains referred to in paragraph (3)(A) or (4)(B)(i), respectively.
(f) Purposes of qualified withdrawals; nonqualified withdrawal treatment for nonfulfillment of substantial obligations 

(1) A qualified withdrawal from the fund is one made in accordance with the terms of the agreement but only if it is for:
(A) the acquisition, construction, or reconstruction of a qualified vessel,
(B) the acquisition, construction, or reconstruction of barges and containers which are part of the complement of a qualified vessel, or
(C) the payment of the principal on indebtedness incurred in connection with the acquisition, construction or reconstruction of a qualified vessel or a barge or container which is part of the complement of a qualified vessel.

Except to the extent provided in regulations prescribed by the Secretary, subparagraph (B), and so much of subparagraph (C) as relates only to barges and containers, shall apply only with respect to barges and containers constructed in the United States.

(2) Under joint regulations, if the Secretary determines that any substantial obligation under any agreement is not being fulfilled, he may, after notice and opportunity for hearing to the person maintaining the fund, treat the entire fund or any portion thereof as an amount withdrawn from the fund in a nonqualified withdrawal.
(g) Tax treatment of qualified withdrawals; basis: reduction 

(1) Any qualified withdrawal from a fund shall be treated
(A) first as made out of the capital account,
(B) second as made out of the capital gain account, and
(C) third as made out of the ordinary income account.
(2) If any portion of a qualified withdrawal for a vessel, barge, or container is made out of the ordinary income account, the basis of such vessel, barge, or container shall be reduced by an amount equal to such portion.
(3) If any portion of a qualified withdrawal for a vessel, barge, or container is made out of the capital gain account, the basis of such vessel, barge, or container shall be reduced by an amount equal to such portion.
(4) If any portion of a qualified withdrawal to pay the principal on any indebtedness is made out of the ordinary income account or the capital gain account, then an amount equal to the aggregate reduction which would be required by paragraphs (2) and (3) if this were a qualified withdrawal for a purpose described in such paragraphs 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. Any amount of a withdrawal remaining after the application of the preceding sentence shall be treated as a nonqualified withdrawal.
(5) If any property the basis of which was reduced under paragraph (2), (3), or (4) is disposed of, any gain realized on such disposition, to the extent it does not exceed the aggregate reduction in the basis of such property under such paragraphs, shall be treated as an amount referred to in subsection (h)(3)(A) of this section which was withdrawn on the date of such disposition. Subject to such conditions and requirements as may be provided in joint regulations, the preceding sentence shall not apply to a disposition where there is a redeposit in an amount determined under joint regulations which will, insofar as practicable, restore the fund to the position it was in before the withdrawal.
(h) Tax treatment of nonqualified withdrawals; FIFO and LIFO bases; interest rate; amounts not withdrawn after 25 years; highest marginal rate of tax 

(1) Except as provided in subsection (i) of this section, any withdrawal from a fund which is not a qualified withdrawal shall be treated as a nonqualified withdrawal.
(2) Any nonqualified withdrawal from a fund shall be treated
(A) first as made out of the ordinary income account,
(B) second as made out of the capital gain account, and
(C) third as made out of the capital account.

For purposes of this section, items withdrawn from any account shall be treated as withdrawn on a first-in-first-out basis; except that

(i)  any nonqualified withdrawal for research, development, and design expenses incident to new and advanced ship design, machinery and equipment, and
(ii)  any amount treated as a nonqualified withdrawal under the second sentence of subsection (g)(4) of this section, shall be treated as withdrawn on a last-in-first-out basis.
(3) For purposes of the Internal Revenue Code of 1986
(A) any amount referred to in paragraph (2)(A) shall be included in income as an item of ordinary income for the taxable year in which the withdrawal is made,
(B) any amount referred to in paragraph (2)(B) shall be included in income for the taxable year in which the withdrawal is made as an item of gain realized during such year from the disposition of an asset held for more than 6 months, and
(C) for the period on or before the last date prescribed for payment of tax for the taxable year in which this withdrawal is made
(i) 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],
(ii) interest on the amount of the additional tax attributable to any item referred to in subparagraph (A) or (B) shall be paid at the applicable rate (as defined in paragraph (4)) from the last date prescribed for payment of the tax for the taxable year for which such item was deposited in the fund, and
(iii) no interest shall be payable on amounts referred to in clauses (i) and (ii) of paragraph (2) or in the case of any nonqualified withdrawal arising from the application of the recapture provision of section 1176 (5) of this Appendix as in effect on December 31, 1969.
(4) For purposes of paragraph (3)(C)(ii), the applicable rate of interest for any nonqualified withdrawal
(A) made in a taxable year beginning in 1970 or 1971 is 8 percent, or
(B) made in a taxable year beginning after 1971, shall be determined and published jointly by the Secretary of the Treasury and the Secretary and shall bear a relationship to 8 percent which the Secretaries determine under joint regulations to be comparable to the relationship which the money rates and investment yields for the calendar year immediately preceding the beginning of the taxable year bear to the money rates and investment yields for the calendar year 1970.
(5) Amount not withdrawn from fund after 25 years from deposit taxed as nonqualified withdrawal.— 

(A) In general.— 
The applicable percentage of any amount which remains in a capital construction fund at the close of the 26th, 27th, 28th, 29th, or 30th taxable year following the taxable year for which such amount was deposited shall be treated as a nonqualified withdrawal in accordance with the following table: If the amount remains in the fund at the The applicable 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.
(B) Earnings treated as deposits.— 
The earnings of any capital construction fund for any taxable year (other than net gains) shall be treated for purposes of this paragraph as an amount deposited for such taxable year.
(C) Amounts committed treated as withdrawn.— 
For purposes of subparagraph (A), an amount shall not be treated as remaining in a capital construction fund at the close of any taxable year to the extent there is a binding contract at the close of such year for a qualified withdrawal of such amount with respect to an identified item for which such withdrawal may be made.
(D) Authority to treat excess funds as withdrawn.— 
If the Secretary determines that the balance in any capital construction fund exceeds the amount which is appropriate to meet the vessel construction program objectives of the person who established such fund, the amount of such excess shall be treated as a nonqualified withdrawal under subparagraph (A) unless such person develops appropriate program objectives within 3 years to dissipate such excess.
(E) Amounts in fund on january 1, 1987.— 
For purposes of this paragraph, all amounts in a capital construction fund on January 1, 1987, shall be treated as deposited in such fund on such date.
(6) Nonqualified withdrawals taxed at highest marginal rate.— 

(A) In general.— 
In the case of any taxable year for which there is a nonqualified withdrawal (including any amount so treated under paragraph (5)), the tax imposed by chapter 1 of the Internal Revenue Code of 1986 [26 U.S.C. 1 et seq.] shall be determined
(i) by excluding such withdrawal from gross income, and
(ii) by increasing the tax imposed by chapter 1 of such Code by the product of the amount of such withdrawal and the highest rate of tax specified in section 1 (section 11 in the case of a corporation) of such Code [26 U.S.C. 1, 11].

With respect to the portion of any nonqualified withdrawal made out of 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 rate of tax taken into account under the preceding sentence shall not exceed 15 percent (34 percent in the case of a corporation).

(B) Tax benefit rule.— 
If any portion of a nonqualified withdrawal is properly attributable to deposits (other than earnings on deposits) made by the taxpayer in any taxable year which did not reduce the taxpayers liability for tax under chapter 1 [26 U.S.C. 1 et seq.] for any taxable year preceding the taxable year in which such withdrawal occurs
(i) such portion shall not be taken into account under subparagraph (A), and
(ii) an amount equal to such portion shall be treated as allowed as a deduction under section 172 of such Code [26 U.S.C. 172] for the taxable year in which such withdrawal occurs.
(C) Coordination with deduction for net operating losses.— 
Any nonqualified withdrawal excluded from gross income under subparagraph (A) shall be excluded in determining taxable income under section 172(b)(2) of the Internal Revenue Code of 1986 [26 U.S.C. 172 (b)(2)].
(i) Corporate reorganizations and partnership changes 
Under joint regulations
(1) a transfer of a 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 such transaction did not constitute a nonqualified withdrawal, and
(2) a similar rule shall be applied in the case of a continuation of a partnership (within the meaning of subchapter K[1] of such Code [26 U.S.C. 701 et seq.]).
(j) Treatment of existing funds; relation of old to new fund 

(1) Any person who was maintaining a fund or funds (hereinafter in this subsection referred to as old fund) under this section (as in effect before the enactment of this subsection) may elect to continue such old fund but
(A) may not hold moneys in the old fund beyond the expiration date provided in the agreement under which such old fund is maintained (determined without regard to any extension or renewal entered into after April 14, 1970),
(B) may not simultaneously maintain such old fund and a new fund established under this section, and
(C) if he enters into an agreement under this section to establish a new fund, may agree to the extension of such agreement to some or all of the amounts in the old fund.
(2) In the case of any extension of an agreement pursuant to paragraph (1)(C), each item in the old fund to be transferred shall be transferred in a nontaxable transaction to the appropriate account in the new fund established under this section. For purposes of subsection (h)(3)(C) of this section, the date of the deposit of any item so transferred shall be July 1, 1971, or the date of the deposit in the old fund, whichever is the later.
(k) Definitions 
For purposes of this section
(1) The term eligible vessel means any vessel
(A) constructed in the United States and, if reconstructed, reconstructed in the United States,
(B) documented under the laws of the United States, and
(C) operated in the foreign or domestic commerce of the United States or in the fisheries of the United States.

Any vessel which

(i)  was constructed outside of the United States but documented under the laws of the United States on April 15, 1970, or
(ii)  constructed outside the United States for use in the United States foreign trade pursuant to a contract entered into before April 15, 1970, shall be treated as satisfying the requirements of subparagraph (A) of this paragraph and the requirements of subparagraph (A) of paragraph (2).
(2) The term qualified vessel means any vessel
(A) constructed in the United States and, if reconstructed, reconstructed in the United States,
(B) documented under the laws of the United States, and
(C) which the person maintaining the fund agrees with the Secretary will be operated in the United States foreign, Great Lakes, or noncontiguous domestic trade or in the fisheries of the United States.
(3) The term agreement vessel means any eligible vessel or qualified vessel which is subject to an agreement entered into under this section.
(4) The term United States, when used in a geographical sense, means the continental United States including Alaska, Hawaii, and Puerto Rico.
(5) The term United States foreign trade includes (but is not limited to) those areas in domestic trade in which a vessel built with construction-differential subsidy is permitted to operate under the first sentence of section 1156 of this Appendix.
(6) The term joint regulations means regulations prescribed under subsection (l) of this section.
(7) The term vessel includes cargo handling equipment which the Secretary determines is intended for use primarily on the vessel. The term vessel also includes an ocean-going towing vessel or an ocean-going barge or comparable towing vessel or barge operated on the Great Lakes.
(8) The term noncontiguous trade means
(i)  trade between the contiguous forty-eight States on the one hand and Alaska, Hawaii, Puerto Rico and the insular territories and possessions of the United States on the other hand, and
(ii)  trade from any point in Alaska, Hawaii, Puerto Rico, and such territories and possessions to any other point in Alaska, Hawaii, Puerto Rico, and such territories and possessions.
(9) The term Secretary means the Secretary of Commerce with respect to eligible or qualified vessels operated or to be operated in the fisheries of the United States, and the Secretary of Transportation with respect to all other vessels.
(l) Records; reports; rules and regulations; termination of agreement upon changes in regulations with substantial effect on rights or obligations 
Each person maintaining a fund under this section shall keep such records and shall make such reports as the Secretary or the Secretary of the Treasury shall require. The Secretary of the Treasury and the Secretary shall jointly prescribe all rules and regulations, not inconsistent with the foregoing provisions of this section, as may be necessary or appropriate to the determination of tax liability under this section. If, after an agreement has been entered into under this section, a change is made either in the joint regulations or in the regulations prescribed by the Secretary under this section which could have a substantial effect on the rights or obligations of any person maintaining a fund under this section, such person may terminate such agreement.
(m) Departmental reports and certification 

(1) In general 
For each calendar year, the Secretaries shall each provide the Secretary of the Treasury, within 120 days after the close of such calendar year, a written report with respect to those capital construction funds that are under their jurisdiction.
(2) Contents of reports 
Each report shall set forth the name and taxpayer identification number of each person
(A) establishing a capital construction fund during such calendar year;
(B) maintaining a capital construction fund as of the last day of such calendar year;
(C) terminating a capital construction fund during such calendar year;
(D) making any withdrawal from or deposit into (and the amounts thereof) a capital construction fund during such calendar year; or
(E) with respect to which a determination has been made during such calendar year that such person has failed to fulfill a substantial obligation under any capital construction fund agreement to which such person is a party.
[1] So in original. Probably should be followed by “of chapter 1”.

46 USC Appendix 11771 - Small fishing vessel construction reserves

In addition to any other vessel which may be deemed an eligible vessel and a qualified vessel under section 1177 of this Appendix, a commercial fishing vessel under five net tons but not under two net tons
(1) which is constructed in the United States and, if reconstructed, is reconstructed in the United States;
(2) which is owned by a citizen of the United States;
(3) which has a home port in the United States; and
(4) which is operated in the commercial fisheries of the United States,

shall be considered to be an eligible vessel and a qualified vessel for the purposes of such section 1177 of this Appendix.

46 USC Appendix 1177a - Deposits in special reserve fund; excusal; tax treatment

On and after June 13, 1957, to the extent that the operating-differential subsidy accrual (computed on the basis of parity) is represented on the operators books by a contingent accounts receivable item against the United States as a partial or complete offset to the recapture accrual, the operator
(1)  shall be excused from making deposits in the special reserve fund, and
(2)  as to the amount of such earnings the deposit of which is so excused shall be entitled to the same tax treatment as though it had been deposited in said special reserve fund. To the extent that any amount paid to the operator by the United States reduces the balance in the operators contingent receivable account against the United States, such amount shall forthwith be deposited in the special reserve fund of the operator.

46 USC Appendix 1178 - Sale or assignment of contract; consent of Secretary; purchaser subject to terms of contract; rescinding contract on transfer without consent

No contract executed under this subchapter or any interest therein shall be sold, assigned, or transferred, either directly or indirectly, or through any reorganization, merger, or consolidation, nor shall any agreement or arrangement be made by the holder whereby the maintenance, management, or operation of the service, route, line, vessel, or vessels is to be performed by any other person, without the written consent of the Secretary of Transportation. If he consents to such agreement or arrangement, the agreement or arrangement shall make provision whereby the person undertaking such maintenance, management, or operation agrees to be bound by all of the provisions of the contract and of this chapter applicable thereto, and the rules and regulations prescribed pursuant to this chapter. If the holder of any such contract shall voluntarily sell such contract or any interest therein, or make such assignment, transfer, agreement, or arrangement whereby the maintenance, management, or operation of the service, route, line, vessel, or vessels is to be performed by any other person, without the consent of the Secretary of Transportation, or if the operation of the service, route, line, or vessel, shall pass out of the direct control of the holder of such contract by reason of any voluntary or involuntary receivership or bankruptcy proceedings, the Secretary of Transportation shall have the right to modify or rescind such contract, without further liability thereon by the United States, and is vested with exclusive jurisdiction to determine the purposes for which any payments made by him under such contract shall be expended.

46 USC Appendix 1179 - Withholding payment to defaulting contractor

The Secretary of Transportation shall withhold the payment of operating-differential subsidy while any contractor therefor is in default in any payments due on account of construction-loan, ship-sales mortgage notes, or any other obligation due the United States, and shall apply the amount so withheld to the satisfaction of such debt.

46 USC Appendix 1180 - Vessels eligible to subsidy

An operating-differential subsidy shall not be paid under authority of this subchapter on account of the operation of any vessel which does not meet the following requirements:
(1)  The vessel shall be of steel or other acceptable metal, shall be propelled by steam or motor, shall be as nearly fireproof as practicable, shall be built in a domestic yard or shall have been documented under the laws of the United States not later than February 1, 1928, or actually ordered and under construction for the account of citizens of the United States prior to such date, and shall be documented under the laws of the United States, during the entire life of the subsidy contract; and
(2)  if the vessel shall be constructed after June 29, 1936 it shall be either a vessel constructed according to plans and specifications approved by the Secretary of Transportation and the Secretary of the Navy, with particular reference to economical conversion into an auxiliary naval vessel, or a vessel approved by the Secretary of Transportation and the Navy Department as otherwise useful to the United States in time of national emergency.

46 USC Appendix 1181 - Transfer of vessels to foreign registry on default of United States

(a) Application; hearing; grant or denial 
The contractor, upon compliance with the provisions of this section, may transfer to foreign registry the vessels covered by any operating-differential subsidy contract held by him, in the event that the United States defaults upon such contract or cancels it without just cause. Any contractor desiring to transfer any such vessel to foreign registry upon such default or cancelation shall file an application in writing with the Secretary of Transportation setting forth its contentions with respect to the lack of just cause or lawful grounds for such default or cancelation. The Secretary of Transportation shall afford the contractor an opportunity for a hearing within twenty days after such contractor files written application therefor, and after the testimony, if any, in such hearing has been reduced to writing and filed with the Secretary of Transportation, he shall, within a reasonable time, grant or deny the application by order.
(b) Appeal from denial of application 
If any such application is denied, the contractor may obtain a review of the order of denial in the United States Court of Appeals for the District of Columbia, by filing in such court, within twenty days after the entry of such order, a written petition praying that the order of the Secretary of Transportation be set aside. A copy of such petition shall be forthwith transmitted by the clerk of the court to the Secretary of Transportation or any officer designated by him for that purpose, and thereupon the Secretary of Transportation shall file in the court the record upon which the order complained of was entered, as provided in section 2112 of title 28. Upon the filing of such petition such court shall have exclusive jurisdiction to determine whether such cancelation or default was without just cause, and to affirm or set aside such order. The judgment and decree of the court affirming or setting aside any such order of the Secretary of Transportation shall be final.
(c) Effectiveness of transfer 
No transfer of vessels to foreign registry under this section shall become effective until any indebtedness to the Government or to any citizen of the United States, secured by such vessels, has been paid or discharged, and until after the expiration of ninety days from the date of final determination of the application or the appeal, if any. Within such ninety-day period the Secretary of Transportation may
(1)  with the consent of the contractor purchase the vessels at cost to the contractor plus cost of capital improvements thereon, less 4 per centum annual depreciation upon such vessel, and the actual depreciated costs of capital improvements thereon, or
(2)  reinstate the contract and adjust or settle the default found by the Secretary of Transportation or the court to exist.

46 USC Appendix 1183 - Off-season cruises by passenger vessels

(a) “Passenger vessel” defined 
In this section, passenger vessel means a vessel which
(1)  is of not less than ten thousand gross tons, and
(2)  has accommodations for not less than one hundred passengers.
(b) Authorization for payment of subsidy 
If the Secretary of Transportation finds that the operation of any passenger vessel with respect to which a contract for the payment of an operating-differential subsidy has been entered into under section 1173 of this Appendix effective before January 2, 1960, is not required for all of each year, in order to furnish adequate service on the service, route, or line covered by such contract, he may amend such contract to agree to pay an operating-differential subsidy for operation of the vessel
(1)  on such service, route, or line for some part or no part of each year, and
(2)  on cruises for all or part of each year if such specific cruise is approved by the Secretary of Transportation under subsection (e) of this section: Provided, however, That no such vessel may cruise for more than seven months of each year to ports which are regularly served by another United States-flag passenger vessel pursuant to an operating-differential subsidy contract.
(c) Authorization for payment of subsidy to passenger vessels providing domestic service 
The Secretary of Transportation may authorize passenger vessels under operating-differential subsidy contracts to provide domestic service between specified ports while the vessels are on voyages in an essential service in the foreign commerce of the United States without reduction of operating-differential subsidy and the partial payback of construction-differential subsidy for operating in the domestic trades, if he finds that such domestic service will not result in a substantial deviation from the service, route, or line for which operating-differential subsidy is paid and will not adversely affect service on such service, route, or line.
(d) Conditions for cruises or domestic service while on voyages in an essential service in foreign commerce 
When a vessel is being operated on cruises or has been authorized under this section to provide domestic passenger services while on voyages in an essential service in foreign commerce of the United States
(1) except as provided in subdivision (4) of this subsection, it shall carry no mail unless required by law, or cargo except passengers luggage, except between those ports between which it may carry mail and cargo on its regular service assigned by contract;
(2) it may not carry one-way passengers between those ports served by another United States carrier on its regular service assigned by contract, without the consent of such carrier, except between those ports between which it may carry one-way passengers on its own regular service assigned by contract;
(3) it shall stop at other domestic ports only for the same time and the same purpose as is permitted with respect to a foreign-flag vessel which is carrying passengers who embarked at a domestic port, except that a cruise may end at a different port or coast from that where it began and may embark or disembark passengers at other domestic ports, either when not involving transportation in the domestic offshore trade in competition with a United States-flag passenger vessel offering berth service therein, or, if involving such transportation, with the consent of such carrier: Provided, however, That nothing herein shall be construed to repeal or modify section 1223 (a) of this Appendix.
(4) Any other provisions of this chapter or of the Shipping Act, 1916 [46 App. U.S.C. 801 et seq.], to the contrary notwithstanding, with the approval of the Secretary of Transportation, it may carry cargo and mail between ports to the extent such carriage is not in direct competition with a carrier offering United States-flag berth service between those ports, or, if such carriage is in direct competition with one or more carriers offering United States-flag berth service between such ports, with the consent of the next scheduled United States-flag carrier, which consent shall not be unreasonably withheld in the judgment of the Maritime Administrator.

Section 1175 (c) of this Appendix shall not apply to cruises authorized under this section. Notwithstanding the applicable provisions of sections 1175 (a) and 1156 of this Appendix requiring the reduction of operating differential subsidy and the partial payback of construction differential subsidy for operating in the domestic trades, such reduction of operating subsidy and partial payback of construction subsidy under sections 1175 (a) and 1156, respectively, of this Appendix, shall not apply to cruises or domestic services authorized under this section.

(e) Application for approval of cruise; notice to other American flag operators 
Upon the application of any operator for approval of a specific cruise, the Secretary of Transportation, after notice to all other American flag operators who may be affected and after affording all such operators an opportunity to submit written data, views or arguments, with or without opportunity to present the same orally in any manner, and after consideration of all relevant matter presented, shall approve the proposed cruise, if he determines that the proposed cruise will not substantially adversely affect an existing operators service performed with passenger vessels of United States registry. Such approval shall not be given more than two years in advance of the beginning of the cruise.

46 USC Appendix 1183a - Off-season cruises additional to right of operator to make voyages on regular service, route, or line, including approved deviations

The cruises authorized by section 1183 of this Appendix shall be in addition to and not in derogation of the right of an operator to make voyages on his regular service, route or line, including approved deviations within the general area of his essential service. There shall be no adjustment of subsidy in the event of such deviations if they are without prejudice to the adequacy of service.

46 USC Appendix 1184 - Suspension of operating differential subsidy contracts by operator recipients

(a) Any operator receiving operating differential subsidy funds may elect, for all or a portion of its ships, to suspend its operating differential subsidy contract with all attendant statutory and contractual restrictions, except as to those pertaining to the domestic intercoastal or coastwise service, including any agreement providing for the replacement of vessels, if
(1) the vessel is less than ten years of age;
(2) the suspension period is not less than twelve months;
(3) the operators financial condition is maintained at a level acceptable to the Secretary of Commerce; and
(4) the owner agrees to pay to the Secretary, upon such terms and conditions as he may prescribe, an amount which bears the same proportion to the construction differential subsidy paid by the Secretary as the portion of the suspension period during which the vessel is operated in any preference trade from which a subsidized vessel would otherwise be excluded by law or contract bears to the entire economic life of the vessel.
(b) Any operator making an election under this section is entitled to full reinstatement of the suspended contract on request. The Secretary of Commerce may prescribe rules and regulations consistent with the purpose of this section.

46 USC Appendix 1185 - Construction, reconstruction, or acquisition of vessels over five thousand deadweight tons in foreign shipyards; preconditions

(a) The Secretary of Commerce may, until September 30, 1983, authorize an operator receiving or applying for operating differential subsidy under this subchapter to construct, reconstruct, or acquire its vessels of over five thousand deadweight tons in a foreign shipyard if the Secretary finds and certifies in writing that such operators application for construction differential subsidy cannot be approved due to the unavailability of funds in the construction differential subsidy account. Vessels constructed, reconstructed, or modified pursuant to this section shall be deemed to have been United States built for the purposes of this subchapter, section 1241 (b) of this Appendix, and sections 3704 to 3709 of title 46: Provided, That the provisions of section 1177 of this Appendix shall not apply to vessels constructed, reconstructed, modified, or acquired pursuant to this section.
(b) The provisions of this section shall be effective for fiscal year 1983 only if the President in his annual budget message for that year requests at least $100,000,000 in construction differential subsidy or proposes an alternate program that would create equivalent merchant shipbuilding activity in privately owned United States shipyards and the Secretary reports to Congress on the effect such action will have on the shipyard mobilization base at least thirty days prior to making the certification referred to in subsection (a) of this section.

46 USC Appendix 1185a - Wind-up of program

(a) In general 
After October 8, 1996, the Secretary of Transportation shall not enter into any new contract for operating-differential subsidy under this part.
(b) Existing subsidy contracts 
Notwithstanding any other provision of this chapter, any operating-differential subsidy contract in effect under this subchapter on the day before October 8, 1996, shall continue in effect and terminate as set forth in the contract, unless voluntarily terminated at an earlier date by the parties (other than the United States Government) to the contract.
(c) Essential service and port equity requirements 
The essential service requirements of section[1] 1171(a) and 1173(b) of this Appendix, and the provisions of sections 1175 (c) and 1213 (a) of this Appendix, shall not apply to the operating-differential subsidy program under this part effective upon the earlier of
(1) the date that a payment is made, under the Maritime Security Program established by part B of this subchapter to a contractor under that part who is not party to an operating-differential subsidy contract under this part, with the Secretary to cause notice of the date of such payment to be published in the Federal Register as soon as possible; or
(2) with respect to a particular contractor under the operating-differential subsidy program, the date that contractor enters into a contract with the Secretary under the Maritime Security Program established by part B of this subchapter.
(d) Transfer and registration of vessel 

(1) Notwithstanding any other provision of law, a vessel may be transferred and registered under an effective United States-controlled foreign flag if
(A) the operator of the vessel receives an operating-differential subsidy pursuant to a contract under this part which is in force on October 1, 1994, and the Secretary approves the replacement of such vessel with a comparable vessel, or
(B) the vessel is covered by an operating agreement under part B of this subchapter, and the Secretary approves the replacement of such vessel with a comparable vessel for inclusion in the Maritime Security Fleet established under part B of this subchapter.
(2) Any such vessel may be requisitioned by the Secretary of Transportation pursuant to section 1242 of this Appendix.
[1] So in original. Probably should be “sections”.

Part B - Maritime Security Fleet Program

1187 to 1187e. Repealed. Pub. L. 108136, div. C, title XXXV, 3534(a)(1), Nov. 24, 2003, 117 Stat. 1818

Section 1187, act June 29, 1936, ch. 858, title VI, 651, as added Pub. L. 104–239, § 2(2), Oct. 8, 1996, 110 Stat. 3118, related to establishment of fleet. Section 1187a, act June 29, 1936, ch. 858, title VI, 652, as added Pub. L. 104–239, § 2(2), Oct. 8, 1996, 110 Stat. 3119; amended Pub. L. 105–85, div. C, title XXXVI, 3603(b), Nov. 18, 1997, 111 Stat. 2075, related to operating agreements. Section 1187b, act June 29, 1936, ch. 858, title VI, 653, as added Pub. L. 104–239, § 2(2), Oct. 8, 1996, 110 Stat. 3124; amended Pub. L. 105–85, div. C, title XXXVI, 3604, Nov. 18, 1997, 111 Stat. 2076, related to national security requirements. Section 1187c, act June 29, 1936, ch. 858, title VI, 654, as added Pub. L. 104–239, § 2(2), Oct. 8, 1996, 110 Stat. 3126, set out definitions. Section 1187d, act June 29, 1936, ch. 858, title VI, 655, as added Pub. L. 104–239, § 2(2), Oct. 8, 1996, 110 Stat. 3126, authorized appropriations. Section 1187e, act June 29, 1936, ch. 858, title VI, 656, as added Pub. L. 104–239, § 4(a), Oct. 8, 1996, 110 Stat. 3127; amended Pub. L. 105–85, div. C, title XXXVI, 3603(a), Nov. 18, 1997, 111 Stat. 2075, related to noncontiguous domestic trades.

TITLE 46 - US CODE - SUBCHAPTER VII - PRIVATE CHARTER OPERATION

46 USC Appendix 1191 - Additional powers of Secretary for completion of program

Whenever the Secretary of Transportation shall find and determine, and such finding and determination shall be approved by the President of the United States, that the national policy declared in section 1101 of this Appendix, and the objectives set forth in section 1120 of this Appendix, cannot be fully realized within a reasonable time, in whole or in part, under the provisions of subchapters V and VI of this chapter, the Secretary of Transportation is authorized and directed to complete his long-range program previously adopted as provided in this subchapter.

46 USC Appendix 1192 - Construction or reconditioning of vessels by Secretary

The Secretary of Transportation is authorized to have constructed in shipyards in the continental United States such new vessels as he shall determine may be required to carry out the objects of this chapter, and to have old vessels reconditioned or remodeled in such yards: Provided, That if satisfactory contracts for such new construction or reconstruction, in accordance with the provisions of this chapter, cannot be obtained from private shipbuilders, the Secretary of Transportation is authorized to have such vessels constructed, reconditioned, or remodeled in United States navy yards. For the purposes of this section, the term continental United States includes the States of Alaska and Hawaii.

46 USC Appendix 1193 - Competitive bidding

(a) Construction, reconstruction, or reconditioning of vessels 
No contract for the building of a new vessel, or for the reconditioning or reconstruction of any other vessel, shall be made by the Secretary of Transportation with any private shipbuilder, except after due advertisement and upon sealed competitive bids.
(b) Requirements 
All contracts for the construction, reconditioning, or reconstruction of a vessel or vessels by a private shipbuilder under authority of this subchapter shall be subject to all the provisions and requirements prescribed in subchapter V of this chapter with respect to contracts with a private shipbuilder for the construction of vessels under authority of said subchapter.
(c) Opening of bids 
All bids required by the Secretary of Transportation for the construction, reconstruction, or reconditioning of vessels, and for the chartering of the Secretarys vessels hereinafter provided for, shall be opened at the time, hour, and place stated in the advertisement for bids, and all interested persons, including representatives of the press, shall be permitted to attend, and the results of such bidding shall be publicly announced.

46 USC Appendix 1194 - Charter or sale of vessels acquired by Department of Transportation

All vessels transferred to or otherwise acquired by the Department of Transportation in any manner may be chartered or sold by the Secretary of Transportation pursuant to the further provisions of this chapter.

46 USC Appendix 1195 - Employment of vessels on foreign trade routes; selection of routes; encouraging private operation by sale or charter; selling price

As soon as practicable after June 29, 1936, and continuing thereafter, 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 of Transportation shall determine are necessary and essential for the development and maintenance of the commerce of the United States and the national defense: Provided, That such needs 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. It shall be the policy of the Secretary of Transportation to encourage private operation of each essential steamship line now owned by the United States by selling such lines to citizens of the United States in the manner provided in section 7 of the Merchant Marine Act, 1920 [46 App. U.S.C. 866], and in strict accordance with the provisions of section 5 of said Act,[1] or by demising his vessels on bare-boat charter to citizens of the United States who shall agree to maintain such line or lines in the manner hereinafter provided. No vessel constructed under the provisions of this chapter, as amended, shall be sold by the Secretary of Transportation for operation in the foreign trade for a sum less than the estimated foreign construction cost exclusive of national defense features (determined as of the date the construction contract therefor is executed) less depreciation based on a twenty-five year life, nor shall any such vessel be sold by the Secretary of Transportation for operation in the domestic trade for a sum less than the cost of construction in the United States exclusive of national defense features less depreciation based on a twenty-five year life.
[1] See References in Text note below.

46 USC Appendix 1196 - Advertising for bids for charters; rejection of bids

(a) The Secretary of Transportation shall not charter the Department of Transportations vessels to private operators except upon competitive sealed bids submitted in strict compliance with all the terms and conditions of a public advertisement soliciting such bids. Each and every advertisement for bids to charter the Department of Transportations vessels shall state the number, type, and tonnage of the vessels the Secretary of Transportation is offering for bare-boat charter for operation as a steamship line on a designated trade route, the minimum number of sailings that will be required, the length of time for which the charter will be given, and all other information the Secretary of Transportation shall deem necessary for the information of prospective bidders.
(b) The Secretary of Transportation shall have authority to, and shall announce in his advertisements for bids that the Secretary of Transportation reserves the right to, reject any and all bids submitted. The Secretary of Transportation shall reject any bid for the charter (under sections 1191 to 1203 of this Appendix) of any vessel constructed under the provisions of this chapter, as amended, if the charter hire offered by the bidder is lower than the minimum charter hire for such vessel would be if chartered under the provisions of section 1204 of this Appendix.

46 USC Appendix 1197 - Awarding charter on bids

(a) Highest bid 
The Secretary of Transportation shall award the charter to the bidder proposing to pay the highest monthly charter hire unless the Secretary of Transportation shall reject such bid for the reasons set forth in subsection (b) of this section.
(b) Rejection of highest bid 
The Secretary of Transportation may reject the highest or most advantageous or any other bid, if, in the Secretarys discretion, the charter hire offered is deemed too low, or the Secretary of Transportation determines that the bidder lacks sufficient capital, credit, or experience to operate successfully the line; but the reason or reasons for rejection of any bid, upon request of the bidder, shall be stated to such bidder in writing.
(c) Next highest bid; rejection of all bids and re­advertisement 
If the highest bid is rejected, the Secretary of Transportation may award the charter to the next highest bidder, or may reject all bids and readvertise the line: Provided, however, That the Secretary of Transportation may operate the line until conditions appear to be more favorable for a reoffering of the line for private charter.

46 USC Appendix 1198 - Payment of subsidies to charterers

The Secretary of Transportation may, if in his discretion financial aid is deemed necessary, enter into a contract with any charterer of his vessels for payment to such charterer of an operating-differential subsidy upon the same terms and conditions and subject to the same limitations and restrictions, where applicable, as are elsewhere provided in this chapter with respect to payments of such subsidies to operators of privately owned vessels.

46 USC Appendix 1199 - Excess profit; payment to Secretary; formula for determining profit

(a) Every charter made by the Secretary of Transportation pursuant to the provisions of this subchapter shall provide that whenever, at the end of any calendar year subsequent to the execution of such charter, the cumulative net voyage profits (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 vessels) shall exceed 10 per centum per annum on the charterers capital necessarily employed in the business of such chartered vessels, the charterer shall pay over to the Secretary of Transportation, as additional charter hire, one-half of such cumulative net voyage profit in excess of 10 per centum per annum: Provided, That the cumulative net profit so accounted for shall not be included in any calculation of cumulative net profit in subsequent years.
(b) Every charter shall contain a definition of the terms net voyage profit and fair and reasonable overhead expenses, and capital necessarily employed, as said terms are used in subsection (a) of this section, setting forth the formula for determining such profit and overhead expense and capital necessarily employed, which definitions shall have been previously approved by the Secretary of Transportation and published in the advertisement for bids for such charter.

46 USC Appendix 1200 - Undertaking required of charterer

Every charterer of the Secretary of Transportations vessels shall be required to deposit with the Secretary of Transportation an undertaking with approved sureties as security for the faithful performance of all of the conditions of the charter, including indemnity against liens on the chartered vessels, in such amount as the Secretary of Transportation shall require.

46 USC Appendix 1201 - Terms and conditions of charters

The charters to be made by the Secretary of Transportation pursuant to the provisions of this subchapter shall demise the vessels to the charterer subject to all usual conditions contained in bareboat charters, and until January 1, 1940, shall be for terms of three years or less as the Secretary of Transportation may decide: Provided, That after January 1, 1940, charters may be executed by the Secretary of Transportation for such terms as the experience gained by the Secretary of Transportation shall indicate are to the best interests of the United States and the merchant marine.

46 USC Appendix 1202 - Insurance requirements; repairs; inspection by Secretary; termination of charter in national emergency

Every charter shall provide
(a) That the charterer shall carry on the chartered vessels, at his own expense, policies of insurance covering all marine and port risks, protection and indemnity risks, and all other hazards and liabilities, in such amounts, in such form, and in such insurance companies as the Secretary of Transportation shall require and approve, adequate to cover all damages claimed against and losses sustained by the chartered vessels arising during the life of the charter: Provided, That in accordance with existing law, some or all of such insurance risks may be underwritten by the Secretary of Transportation himself as in his discretion he may determine.
(b) That the charterer shall at its own expense keep the chartered vessel in good state of repair and in efficient operating condition and shall at its own expense make any and all repairs as may be required by the Secretary of Transportation.
(c) That the Secretary of Transportation shall have the right to inspect the vessel at any and all times to ascertain its condition.
(d) That whenever the President shall proclaim that the security of the national defense makes it advisable, or during any national emergency declared by proclamation of the President, the Secretary of Transportation may terminate the charter without cost to the United States, upon such notice to the charterers as the President shall determine.

46 USC Appendix 1203 - Financial resources and other factors considered in awarding charters

In the awarding of charters, the Secretary of Transportation shall take in consideration the charterers financial resources and credit standing, practical experience in the operation of vessels, and any other factors that would be considered by a prudent businessman in entering into a transaction involving a large investment of his capital; and the Secretary of Transportation is directed to refrain from chartering the Department of Transportations vessels to any person appearing to lack sufficient capital, credit, and experience to operate successfully the vessel over the period covered by the charter.

46 USC Appendix 1204 - Construction and chartering of vessels for unsuccessful routes; purchase of vessel by charterer; purchase price; operation of vessel in foreign trade

If the Secretary of Transportation shall find that any trade route (determined by the Secretary of Transportation to be an essential trade route as provided in section 1121 of this Appendix) cannot be successfully developed and maintained and the Secretary of Transportations replacement program cannot be achieved under private operation of such trade route by a citizen of the United States with vessels registered under the laws thereof, without further Government aid in addition to the financial aids authorized under subchapters V and VI of this chapter, the Secretary of Transportation is authorized to have constructed, in private shipyards or in navy yards, the vessel or vessels of the types deemed necessary for such trade route, and to demise such new vessel or vessels, or bare-boat charter to the American-flag operator established on such trade route, without advertisement or competition, upon an annual charter hire of not less than 4 per centum of the price (herein referred to as the foreign cost) at which such vessel or vessels would be sold if constructed under subchapter V of this chapter plus an amount equal to (i) the sum of a percentage of the depreciated foreign cost computed annually upon the basis of a twenty-five year life of the vessel determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the term of the charter, adjusted to the nearest one-eighth of 1 per centum, plus (ii) an allowance adequate in the judgment of the Secretary of Transportation to cover administrative costs. Such charter may contain an option to the charterer to purchase such vessel or vessels from the Secretary of Transportation within five years after delivery thereof under the charter, upon the same terms and conditions as are provided in subchapter V of this chapter for the purchase of new vessels from the Secretary of Transportation, except that (a) the purchase price shall be the foreign cost less depreciation to the date of purchase based upon a twenty-five year life; (b) the required cash payment payable at the time of such purchase shall be 25 per centum of the purchase price as so determined; (c) the charter may provide that all or 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 such purchase; (d) the balance of the purchase price shall be paid within the years remaining of the twenty-five years after the date of delivery of the vessel under the charter and in approximately equal annual installments, except that the first of said installments, which shall be payable upon the next ensuing anniversary date of such delivery under the charter, shall be a proportionate part of the annual installment, interest to be payable upon the unpaid balances from the date of purchase, at a rate not less than (i) a rate determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities of such loans, adjusted to the nearest one-eighth of 1 per centum, plus (ii) an allowance adequate in the judgment of the Secretary of Transportation to cover administrative costs. Such charter shall provide for operation of the vessel exclusively in foreign trade, or on a round-the-world voyage, or on a round voyage from the west coast of the United States to a European port or ports which includes intercoastal ports of the United States, or a round voyage from the Atlantic coast of the United States to the Orient which includes intercoastal ports of the United States, or on a voyage in foreign trade on which the vessel may stop at the State of Hawaii, or an island possession or island Territory of the United States, and if the vessel is operated in the domestic trade on any of the above-enumerated services the charterer will pay annually to the Secretary of Transportation that proportion of one-twenty-fifth of the difference between the domestic and foreign cost of such 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 Appendix 1205 - Experimental operation and testing of United States vessels; number; bareboat charters; review of charters and agency agreements; provisions applicable to charters and agreements

The Secretary of Transportation, for the purpose of practical development, trial, and testing, is authorized without regard to other provisions of this subchapter or other laws relating to chartering and general agency operations, to operate, under general agency agreements, or bareboat charter, vessels owned by the United States (including any national defense reserve vessel) which have been constructed, reconditioned, or remodeled for experimental or testing purposes, in the foreign or domestic trade of the United States or for use for the account of any agency or department of the United States, under such reasonable terms or conditions as the Secretary of Transportation determines to be necessary to carry out the objects of this chapter: Provided, however, That not in excess of ten such vessels shall be operated and tested under the authority of this section in any one year. Bareboat charters entered into under this section shall be made at reasonable rates of charter and shall include such restrictions and conditions as the Secretary of Transportation determines to be necessary or appropriate to protect the public interest, including provisions for recapture of profits as provided for in section 1199 of this Appendix. Charters and general agency agreements entered into under this section shall be reviewed annually for the purpose of determining whether conditions exist which would justify continuance of the charter or agreement. Those provisions of law prescribed or incorporated under section 1241a of this Appendix, which relate to vessel operating activities of the Secretary of Transportation and to employment of seamen through general agents, shall be applicable in connection with charters and agreements entered into under this section.

TITLE 46 - US CODE - SUBCHAPTER VIII - CONTRACT PROVISIONS

46 USC Appendix 1211 - Provision for books and records; filing balance sheets; inspection and auditing by Secretary; rescission of contract on failure to comply with provisions

Every contract executed by the Secretary of Transportation under the provisions of subchapters VI or VII of this chapter shall contain provisions requiring
(1)  that, the contractor and every affiliate, domestic agent, subsidiary, or holding company connected with, or directly or indirectly controlling or controlled by, the contractor, to keep its books, records, and accounts, relating to the maintenance, operation, and servicing of the vessels, services, routes, and lines covered by the contract, in such form and under such regulations as may be prescribed by the Secretary of Transportation: Provided, That the provisions of this paragraph shall not require the duplication of books, records, and accounts required to be kept in some other form by the Interstate Commerce Commission;
(2)  that the contractor and every affiliate, domestic agent, subsidiary, or holding company connected with, or directly or indirectly controlling or controlled by, the contractor, to file, upon notice from the Secretary of Transportation, balance sheets, profit and loss statements, and such other statements of financial operations, special report, memoranda of any facts and transactions, which in the opinion of the Secretary of Transportation affect the financial results in, the performance of, or transactions or operations under, such contract;
(3)  that the Secretary of Transportation shall be authorized to examine and audit the books, records, and accounts of all persons referred to in this section whenever he may deem it necessary or desirable; and
(4)  that upon the willful failure or refusal of any person described in this section to comply with the contract provisions required by this section, the Secretary of Transportation shall have the right to rescind the contract, and upon such rescission, the United States shall be relieved of all further liability on such contract.

46 USC Appendix 1212 - Purchase or requisition of vessels by United States; amount of payment

Every contract executed by the Secretary of Transportation under authority of subchapter V of this chapter shall provide that In the event the United States shall, through purchase or requisition, acquire ownership of the vessel or vessels on which a construction-differential subsidy was paid, the owner shall be paid therefor the value thereof, but in no event shall such payment exceed the actual depreciated construction cost thereof (together with the actual depreciated cost of capital improvements thereon, but excluding the cost of national-defense features) less the depreciated amount of construction-differential subsidy theretofore paid incident to the construction or reconditioning of such vessel or vessels, or the fair and reasonable scrap value of such vessel as determined by the Secretary of Transportation, whichever is the greater. Such determination shall be final. In computing the depreciated value of such vessel, depreciation shall be computed on each vessel on the schedule adopted by the Internal Revenue Service for income-tax purposes. The foregoing provision respecting the requisition or the acquisition of ownership by the United States shall run with the title to such vessel or vessels and be binding on all owners thereof.

46 USC Appendix 1213 - Contracts designed equitably for all ports; minimum allocation of funds; report to Congress; preference to citizens of United States; regional offices for Maritime Administration

(a) Contracts under this chapter shall be entered into so as to equitably serve, insofar as possible, the foreign-trade requirements of the Atlantic, Gulf, Great Lakes, and Pacific ports of the United States. In order to assure equitable treatment for each range of ports referred to in the preceding sentence, not less than 10 percent of the funds appropriated for construction-differential subsidy and operating-differential subsidy pursuant to this chapter or any law authorizing funds for the purposes of this chapter shall be allocated to each such port range: Provided, however, That such allocation shall apply to the extent that subsidy contracts are approved by the Secretary of Transportation. For the purposes of this section and section 1121 (a) of this Appendix, the Secretary shall establish trade routes, services, or lines that take into account the seasonal closure of the Saint Lawrence Seaway and provide for alternate routing of ships via a different range of ports during that closure so as to maintain continuity of service on a year-round basis. For the purposes of section 1175 (c) of this Appendix, such an alternate routing via a different range of ports shall be deemed to be service from Great Lakes ports, provided such alternative routing is based upon receipt or delivery of cargo at Great Lakes-Saint Lawrence Seaway ports under through intermodal bills of lading. The Secretary shall include in the annual report pursuant to section 1118 of this Appendix a detailed report
(1)  describing the actions that have been taken pursuant to this chapter to assure insofar as possible that direct and adequate service is provided by United States-flag commercial vessels to each range of ports referred to in this section; and
(2)  including any recommendations for additional legislation that may be necessary to achieve the purpose of this section. In awarding contracts under this chapter, preference shall be given to persons who are citizens of the United States and who have the support, financial and otherwise, of the domestic communities primarily interested.
(b) There shall be established and maintained within the Maritime Administration such regional offices as may be necessary, including, but not limited to, one such office for each of the four port ranges specified in subsection (a) of this section. The Secretary of Transportation shall appoint a qualified individual to be the Director of each such regional office and shall carry out appropriate functions, activities, and programs of the Maritime Administration through such regional offices.

TITLE 46 - US CODE - SUBCHAPTER VIIIA - OFFENSES AND PENALTIES

46 USC Appendix 1222 - Repealed. Pub. L. 108136, div. C, title XXXV, 3534(a)(2), Nov. 24, 2003, 117 Stat. 1818

Section, acts June 29, 1936, ch. 858, title VIII, 804, 49 Stat. 2012; June 23, 1938, ch. 600, 35, 52 Stat. 963; Pub. L. 91–469, § 24, Oct. 21, 1970, 84 Stat. 1033; Pub. L. 96–470, title II, § 201(b), Oct. 19, 1980, 94 Stat. 2241; Pub. L. 97–31, § 12(121), Aug. 6, 1981, 95 Stat. 164; Pub. L. 101–225, title III, § 307(7), Dec. 12, 1989, 103 Stat. 1925; Pub. L. 104–239, § 5(a), Oct. 8, 1996, 110 Stat. 3131, prohibited the operation of a competing foreign-flag vessel.

46 USC Appendix 1223 - Forbidden practices relating to coastwise service, salaries, officers, and employees

(a) Foreign trade subsidy contractor engaging in coastwise or intercoastal trade 
It shall be unlawful to award or pay any subsidy to any contractor under authority of part A of subchapter VI of this chapter, or to charter any vessel to any person under subchapter VII of this chapter if said contractor or charterer, or any holding company, subsidiary, affiliate, or associate of such contractor or charterer, or any officer, director, agent, or executive thereof, directly or indirectly, shall own, operate, or charter any vessel or vessels engaged in the domestic intercoastal or coastwise service, or own any pecuniary interest, directly or indirectly, in any person or concern that owns, charters, or operates any vessel or vessels in the domestic intercoastal or coastwise service, without the written permission of the Secretary of Transportation. Every person, firm, or corporation having any interest in such application shall be permitted to intervene and the Secretary of Transportation shall give a hearing to the applicant and the intervenors. The Secretary of Transportation shall not grant any such application if the Secretary of Transportation finds it will result in unfair competition to any person, firm, or corporation operating exclusively in the coastwise or intercoastal service or that it would be prejudicial to the objects and policy of this chapter: Provided, That if such contractor or other person above-described 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 routes or in the trade or trades for which 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, the Secretary of Transportation shall grant such permission without requiring further proof that public interest and convenience will be served by such operation, and without further proceedings as to the competition in such route or trade. If such application be allowed, it shall be unlawful for any of the persons mentioned in this section to divert, directly or indirectly, any moneys, property, or other thing of value, used in foreign-trade operations, for which a subsidy is paid by the United States, into any such coastwise or intercoastal operations; and whosoever shall violate this provision shall be guilty of a misdemeanor.
(b) Contractor in default paying more than specified salary 
Whenever any contractor under part A of subchapter VI of this chapter or subchapter VII of this chapter receiving an operating-differential subsidy is in default with respect to any mortgage, note, purchase contract, or other obligation to the Secretary of Transportation, or has not maintained, in a manner satisfactory to the Secretary of Transportation, all of the reserves provided for in this chapter, the Secretary of Transportation shall have the right to supervise the number and compensation of all officers and employees of the contractor.
(c) Repealed. Pub. L. 91–469, § 25, Oct. 21, 1970, 84 Stat. 1034 
(d) Employing other persons or concerns as managing or operating agent 
It shall be unlawful, without express written consent of the Secretary of Transportation, for any contractor holding a contract authorized under part A of subchapter VI or[1] VII of this chapter to employ any other person or concern as the managing or operating agent of such operator, or to charter any vessel, on which an operating-differential subsidy is to be paid, for operation by another person or concern, and if such charter is made, the person or concern operating the chartered vessel or vessels shall be subject to all the terms and provisions of this chapter, including limitations of profits and salaries.
(e) Repealed. Pub. L. 101–225, title III, § 307(7), Dec. 12, 1989, 103 Stat. 1925 
(f) Penalty 
Any willful violation of any provision of this section shall constitute a breach of the contract or charter in force under this chapter, and upon determining that such a violation has occurred the Secretary of Transportation may forthwith declare such contract or charter rescinded and any person willfully violating the provisions of this section shall be guilty of a misdemeanor.
[1] So in original. Probably should be followed by “subchapter”.

46 USC Appendix 1226 - Discrimination in respect to cargo

It shall be unlawful for any contractor receiving an operating-differential subsidy under subchapter VI of this chapter or for any charterer under subchapter VII of this chapter unjustly to discriminate in any manner so as to give preference directly or indirectly in respect to cargo in which such contractor or charterer has a direct or indirect ownership, or purchase or vending interest; and whosoever shall violate this provision shall be guilty of a misdemeanor.

46 USC Appendix 1227 - Agreements with other carriers forbidden; withholding subsidies; actions by injured persons for damages

It shall be unlawful for any contractor receiving an operating-differential subsidy under subchapter VI of this chapter or for any charterer of vessels under subchapter VII of this chapter to continue as a party to or to conform to any agreement with another carrier or carriers by water, or to engage in any practice in concert with another carrier or carriers by water, which is unjustly discriminatory or unfair to any other citizen of the United States who operates a common carrier by water exclusively employing vessels registered under the laws of the United States on any established trade route from and to a United States port or ports. No payment or subsidy of any kind shall be paid directly or indirectly out of funds of the United States or any agency of the United States to any contractor or charterer who shall violate this section. Any person who shall be injured in his business or property by reason of anything forbidden by this section may sue therefor in any district court of the United States in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorneys fee.

46 USC Appendix 1228 - Fines and penalties; conviction as rendering persons ineligible to receive benefits of law

Whenever any natural person is found guilty in any district court of the United States of any act or acts declared in this chapter to constitute a misdemeanor, he shall be punished by a fine of not more than $10,000, or by imprisonment for not less than one year or more than five years, or by both fine and imprisonment. Whenever any corporation is found guilty of any act or acts declared in this chapter to be unlawful, such corporation shall be punished by a fine of not more than $25,000. In addition to the punishment prescribed in section 12241 of this Appendix, any person or corporation convicted of a misdemeanor under the provisions of this chapter shall be ineligible, at the discretion of the Commission or the Secretary of Transportation, to receive any benefits under subchapters V and VI of this chapter, or to receive a charter under subchapter VII of this chapter for a period of five years after conviction. Whoever knowingly and willfully violates any order, rule, or regulation of the Federal Maritime Commission or the Secretary of Transportation made or issued in the exercise of the powers, duties, or functions transferred to it or him or vested in it or him by this chapter, as amended, for which no penalty is otherwise expressly provided, shall upon conviction thereof be subject to a fine of not more than $500. If such violation is a continuing one, each day of such violation shall constitute a separate offense.
[1] See References in Text note below.

TITLE 46 - US CODE - SUBCHAPTER IX - MISCELLANEOUS PROVISIONS

46 USC Appendix 1241 - Transportation in American vessels of Government personnel and certain cargoes

(a) Requirement that officers and employees travel on American ships 
Any officer or employee of the United States traveling on official business overseas or to or from any of the possessions of the United States shall travel and transport his personal effects on ships registered under the laws of the United States where such ships are available unless the necessity of his mission requires the use of a ship under a foreign flag. The Administrator of General Services shall prescribe regulations under which agencies shall not pay for or reimburse officers or employees for travel or shipping expenses incurred on a foreign ship in the absence of satisfactory proof of the necessity therefor.
(b) Cargoes procured, furnished or financed by United States; waiver in emergencies; exceptions; definition 

(1) Whenever the United States shall procure, contract for, or otherwise obtain for its own account, or shall furnish to or for the account of any foreign nation without provision for reimbursement, any equipment, materials, or commodities, within or without the United States, or shall advance funds or credits or guarantee the convertibility of foreign currencies in connection with the furnishing of such equipment, materials, or commodities, the appropriate agency or agencies shall take such steps as may be necessary and practicable to assure that at least 50 per centum of the gross tonnage of such equipment, materials or commodities (computed separately for dry bulk carriers, dry cargo liners, and tankers), which may be transported on ocean vessels shall be transported on privately owned United States-flag commercial vessels, to the extent such vessels are available at fair and reasonable rates for United States-flag commercial vessels, in such manner as will insure a fair and reasonable participation of United States-flag commercial vessels in such cargoes by geographic areas: Provided, That the provisions of this subsection may be waived whenever the Congress by concurrent resolution or otherwise, or the President of the United States or the Secretary of Defense declares that an emergency exists justifying a temporary waiver of the provisions of this paragraph and so notifies the appropriate agency or agencies: And provided further, That the provisions of this subsection shall not apply to cargoes carried in the vessels of the Panama Canal Company. Nothing herein shall repeal or otherwise modify the provisions of section 1241–1 of this Appendix. For purposes of this section, the term privately owned United States-flag commercial vessels shall not be deemed to include any vessel which, subsequent to September 21, 1961, shall have been either (a) built outside the United States, (b) rebuilt outside the United States, or (c) documented under any foreign registry, until such vessel shall have been documented under the laws of the United States for a period of three years: Provided, however, That the provisions of this amendment shall not apply where, (1) prior to September 21, 1961, the owner of a vessel, or contractor for the purchase of a vessel, originally constructed in the United States and rebuilt abroad or contracted to be rebuilt abroad, has notified the Maritime Administration in writing of its intent to document such vessel under United States registry, and such vessel is so documented on its first arrival at a United States port not later than one year subsequent to September 21, 1961, or (2) where prior to September 21, 1961, the owner of a vessel under United States registry has made a contract for the rebuilding abroad of such vessel and has notified the Maritime Administration of such contract, and such rebuilding is completed and such vessel is thereafter documented under United States registry on its first arrival at a United States port not later than one year subsequent to September 21, 1961.
(2) Every department or agency having responsibility under this subsection shall administer its programs with respect to this subsection under regulations issued by the Secretary of Transportation. The Secretary of Transportation shall review such administration and shall annually report to the Congress with respect thereto.
(c) Motor vehicle owned by Government personnel 
Notwithstanding any other provision of law, privately owned American shipping services may be utilized for the transportation of motor vehicles owned by Government personnel whenever transportation of such vehicles at Government expense is otherwise authorized by law.

46 USC Appendix 12411 - Shipment of exports financed by Government in United States vessels

It is the sense of Congress that in any loans made by any instrumentality of the Government to foster the exporting of agricultural or other products, provision shall be made that such products shall be carried exclusively in vessels of the United States, unless, as to any or all of such products, the Secretary of Transportation, after investigation, shall certify to the instrumentality of the Government that vessels of the United States are not available in sufficient numbers, or in sufficient tonnage capacity, or on necessary sailing schedule, or at reasonable rates.

46 USC Appendix 1241a - Vessel operations revolving fund; establishment; uses; limitation

There is established a working capital of $20,000,000 to remain available until expended, for the Vessel Operations Revolving Fund, which is created for the purpose of carrying out vessel operating functions of the Secretary of Transportation, including charter, operation, maintenance, repair, reconditioning, and betterment of merchant vessels under the jurisdiction of the Secretary of Transportation. Notwithstanding any other provision of law, rates for shipping services rendered under said Fund shall be prescribed by the Secretary of Transportation and the Fund shall be credited with all receipts from vessel operating activities conducted thereunder: Provided, That the provisions of sections 1291 (a), (c), 1293 (c), and 1294 of Appendix to title 50 shall be applicable in connection with such operations and to seamen employed through general agents as employees of the United States, who may be employed in accordance with customary commercial practices in the maritime industry, notwithstanding the provisions of any law applicable in terms to the employment of persons by the United States: Provided further, That such sums as may be determined to be necessary by the Secretary of Transportation, with the approval of the Office of Management and Budget, but not exceeding 2 per centum of vessel operating expenses, may be advanced from this Fund to the appropriation Salaries and expenses for the purposes of that appropriation in connection with vessel operating functions, but without regard to the limitations on amounts as stated therein: Provided further, That notwithstanding any other provisions of law, the unexpended balances of any working funds or of allocation accounts established, subsequent to January 1, 1951, for the activities provided for under this appropriation, together with receipts heretofore and hereafter received from such activities, may be transferred to and consolidated with this Fund, which shall be available for the purposes of such working funds or allocation accounts. No money made available to the Department of Transportation, for Maritime Activities, by this section or any other Act shall be used in payment for a vessel the title to which is acquired by the Government either by requisition or purchase, or the use of which is taken either by requisition or agreement, or which is insured by the Government and lost while so insured, unless the price or hire to be paid therefor, (except in cases where section 1212 of this Appendix is applicable) is computed in accordance with subsection (a) of section 1242 of this Appendix, as that subsection is interpreted by the Government Accountability Office.

46 USC Appendix 1241b - Availability of vessel operations revolving fund; vessels involved in mortgage-foreclosure or forfeiture proceedings; redelivery and layup of chartered ships; custody and husbanding of Government-owned ships

On and after June 20, 1956, the vessel operations revolving fund shall be available for necessary expenses incurred, in connection with protection, preservation, maintenance, acquisition, or use of vessels involved in mortgage-foreclosure or forfeiture proceedings instituted by the United States, including payment of prior claims and liens, expenses of sale, or other charges incident thereto; for necessary expenses incident to the redelivery and lay-up, in the United States, of ships now chartered under agreements which do not call for their return to the United States; for activation, repair and deactivation of merchant ships chartered for limited emergency purposes during the fiscal year 1957 under the jurisdiction of the Secretary of Transportation; and for payment of expenses of custody and husbanding of Government-owned ships other than those within reserve fleets.

46 USC Appendix 1241c - Expenses for activation, repair and deactivation of merchant ships; receipts

The vessel operations revolving fund created by section 1241a of this Appendix, shall, beginning July 1, 1956, be available for expenses incurred in connection with the activation, repair, and deactivation of merchant ships chartered under the jurisdiction of the Secretary of Transportation. There shall be credited to such fund all receipts on account of operations after July 1, 1956, under charters of Government-owned ships under the jurisdiction of the Secretary of Transportation.

46 USC Appendix 1241d - Findings and declarations with respect to export transportation of agricultural commodities

(a) The Congress finds and declares
(1) that a productive and healthy agricultural industry and a strong and active United States maritime industry are vitally important to the economic well-being and national security objectives of our Nation;
(2) that both industries must compete in international markets increasingly dominated by foreign trade barriers and the subsidization practices of foreign governments; and
(3) that increased agricultural exports and the utilization of United States merchant vessels contribute positively to the United States balance of trade and generate employment opportunities in the United States.
(b) It is therefore declared to be the purpose and policy of the Congress in sections 1241d to 1241p of this Appendix
(1) to enable the Department of Agriculture to plan its export programs effectively, by clarifying the ocean transportation requirements applicable to such programs;
(2) to take immediate and positive steps to promote the growth of the cargo carrying capacity of the United States merchant marine;
(3) to expand international trade in United States agricultural commodities and products and to develop, maintain, and expand markets for United States agricultural exports;
(4) to improve the efficiency of administration of both the commodity purchasing and selling and the ocean transportation activities associated with export programs sponsored by the Department of Agriculture;
(5) to stimulate and promote both the agricultural and maritime industries of the United States and encourage cooperative efforts by both industries to address their common problems; and
(6) to provide in this chapter for the appropriate disposition of these findings and purposes.

46 USC Appendix 1241e - Exemption of certain agricultural exports from requirements of cargo preference laws

The requirements of sections 1241 (b)(1) and 1241–1 of this Appendix, shall not apply to any export activities of the Secretary of Agriculture or the Commodity Credit Corporation
(1) under which agricultural commodities or the products thereof acquired by the Commodity Credit 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 the products thereof at prevailing world market prices;
(2) under which payments are made available to United States exporters, users, or processors or, except as provided in section 1241f of this Appendix, cash grants are made available to foreign purchasers, for the purpose described in paragraph (1);
(3) under which commercial credit guarantees are blended with direct credits from the Commodity Credit Corporation to reduce the effective rate of interest on export sales of United States agricultural commodities or the products thereof;
(4) under which credit or credit guarantees for not to exceed 3 years are extended by the Commodity Credit Corporation to finance or guarantee export sales of United States agricultural commodities or the products thereof; or
(5) under which agricultural commodities or the products thereof owned or controlled by or under loan from the Commodity Credit Corporation are exchanged or bartered for materials, goods, equipment, or services, but only if such materials, goods, equipment, or services are of a value at least equivalent to the value of the agricultural commodities or products exchanged or bartered therefor (determined on the basis of prevailing world market prices at the time of the exchange or barter), but nothing in this subsection shall be construed to exempt from the cargo preference provisions referred to in section 1241f of this Appendix any requirement otherwise applicable to the materials, goods, equipment, or services imported under any such transaction.

46 USC Appendix 1241f - Shipment requirements for certain exports sponsored by Department of Agriculture

(a) Minimum requirement respecting gross tonnage transported in United States-flag commercial vessels; implementation 

(1) In addition to the requirement for United States-flag carriage of a percentage of gross tonnage imposed by section 1241 (b)(1) of this Appendix, 25 percent of the gross tonnage of agricultural commodities or the products thereof specified in subsection (b) of this section shall be transported on United States-flag commercial vessels.
(2) In order to achieve an orderly and efficient implementation of the requirement of paragraph (1)
(A) an additional quantity equal to 10 percent of the gross tonnage referred to in paragraph (1) shall be transported in United States-flag vessels in calendar year 1986;
(B) an additional quantity equal to 20 percent of the gross tonnage shall be transported in such vessels in calendar year 1987; and
(C) an additional quantity equal to 25 percent of the gross tonnage shall be transported in such vessels in calendar year 1988 and in each calendar year thereafter.
(b) Covered export activity 
This section shall apply to any export activity of the Commodity Credit Corporation or the Secretary of Agriculture
(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 the products thereof are
(A) donated through foreign governments or agencies, private or public, including intergovernmental organizations; or
(B) sold for foreign currencies or for dollars on credit terms of more than ten years;
(5) under which agricultural commodities or the products thereof 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 for the purpose of enabling the purchaser to obtain United States agricultural commodities or the products thereof in an amount greater than the difference between the prevailing world market price and the United States market price, free along side vessel at United States port; or
(7) under which agricultural commodities owned or controlled by or under loan from the Commodity Credit Corporation are exchanged or bartered for materials, goods, equipment, or services produced in foreign countries, other than export activities described in section 1241e (5) of this Appendix.
(c) Terms and conditions 

(1) The requirement for United States-flag transportation imposed by subsection (a) of this section shall be subject to the same terms and conditions as provided in section 1241 (b) of this Appendix.
(2) In order to provide for effective and equitable administration of the cargo preference laws the calendar year for the purpose of compliance with minimum percentage requirements shall be for 12 month periods commencing April 1, 1986, the 18-month period beginning April 1, 2002, and the 12-month period beginning October 1, 2003, and each year thereafter.
(3) 
(A) Subject to subparagraph (B), in administering sections 1241 (b) and 1241f of this Appendix, and, subject to subparagraph (B) of this paragraph, consistent with those sections, the Commodity Credit Corporation shall take such steps as may be necessary and practicable without detriment to any port range to allocate, on the principle of lowest landed cost without regard to the country of documentation of the vessel, 25 percent of the bagged, processed, or fortified commodities furnished pursuant to title II of the Agricultural Trade Development and Assistance Act of 1954 [7 U.S.C. 1721 et seq.].
(B) In carrying out this paragraph, there shall first 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 documentation of the vessel and 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 United States-flag transportation under section 1241 (b) of this Appendix and this section shall not apply to commodities allocated under subparagraph (A) to the Great Lakes port range, and commodities allocated under subparagraph (A) to that port range 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 subparagraph (A) applies that is furnished and transported from the Great Lakes port range is less than 25 percent of the total annual tonnage of such commodities furnished.
(C) In awarding any contract for the transportation by vessel of commodities from the Great Lakes port range pursuant to an export activity referred to in subsection (b) of this section, each agency or instrumentality
(i) shall consider expressions of freight interest for any vessel from a vessel operator who meets reasonable requirements for financial and operational integrity; and
(ii) 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 [46 App. U.S.C. 1701 et seq.], as in effect on November 14, 1995)), if the person otherwise satisfies reasonable requirements for financial and operational integrity.
(4) Any determination of nonavailability of United States-flag vessels resulting from the application of this subsection shall not reduce the gross tonnage of commodities required by sections 1241 (b) and 1241f of this Appendix to be transported on United States-flag vessels.
(d) “Export activity” defined 
As used in subsection (b) of this section, the term export activity does not include inspection or weighing activities, other activities carried out for health or safety purposes, or technical assistance provided in the handling of commercial transactions.
(e) Prevailing world market price 

(1) The prevailing world market price as to agricultural commodities or the products thereof shall be determined under sections 1241e through 1241h of this Appendix in accordance with procedures established by the Secretary of Agriculture. The Secretary shall prescribe such procedures by regulation, with notice and opportunity for public comment, pursuant to section 553 of title 5.
(2) In the event that a determination of the prevailing world market price of any other type of materials, goods, equipment, or service is required in order to determine whether a barter or exchange transaction is subject to subsection (b)(6) or (b)(7) of this section, such determination shall be made by the Secretary of Agriculture in consultation with the heads of other appropriate Federal agencies.

46 USC Appendix 1241g - Minimum tonnage

(a) 
(1) For fiscal year 1986 and each fiscal year thereafter, the minimum quantity of agricultural commodities to be exported under programs subject to section 1241f of this Appendix shall be the average of the tonnage exported under such programs during the base period defined in subsection (b) of this section, discarding the high and low years.
(2) The President may waive the minimum quantity for any fiscal year required under paragraph (1) if he determines and reports to the Congress, together with his reasons, that such quantity cannot be effectively used for the purposes of such programs or, based on a certification by the Secretary of Agriculture, that the commodities are not available for reasons which include the unavailability of funds.
(b) The base period utilized for computing the minimum tonnage quantity referred to in subsection (a) of this section for any fiscal year shall be the five fiscal years beginning with the sixth fiscal year preceding such fiscal year and ending with the second fiscal year preceding such fiscal year.

46 USC Appendix 1241h - Financing of shipment of agricultural commodities in United States-flag vessels

(a) Financing by Secretary of Transportation of increased ocean freight charges 
The Secretary of Transportation shall finance any increased ocean freight charges incurred in any fiscal year which result from the application of section 1241f of this Appendix.
(b) Reimbursement of Secretary of Agriculture and Commodity Credit Corporation; computations 
If in any fiscal year the total cost of ocean freight and ocean freight differential for which obligations are incurred by the Department of Agriculture and the Commodity Credit Corporation on exports of agricultural commodities and products thereof under the agricultural export programs specified in section 1241f (b) of this Appendix exceeds 20 percent of the value of such commodities and products and the cost of such ocean freight and ocean freight differential on which obligations are incurred by such Department and Corporation during such year, the Secretary of Transportation shall reimburse the Department of Agriculture and the Commodity Credit Corporation for the amount of such excess. For the purpose of this subsection, commodities shipped from the inventory of the Commodity Credit Corporation shall be valued as provided in section 1733 (b)1 of title 7.
(c) Issuance, etc., of obligations for financing 
For the purpose of meeting those expenses required to be assumed under subsections (a) and (b) of this section, the Secretary of Transportation shall issue to the Secretary of the Treasury such obligations in such forms and denominations, bearing such maturities and subject to such terms and conditions, as may be prescribed by the Secretary of Transportation with the approval of the Secretary of the Treasury. Such obligations shall be at a rate of interest as determined by the Secretary of the Treasury, taking into consideration the average market yield on outstanding marketable obligations of the United States with remaining periods of maturity comparable to the average maturities of such obligations during the month preceding the issuance of such obligations of the Secretary of Transportation. The Secretary of the Treasury shall purchase any obligations of the Secretary of Transportation issued under this subsection and, for the purpose of purchasing such obligations, the Secretary of the Treasury may use as a public debt transaction the proceeds from the sale of any securities issued under chapter 31 of title 31 after December 23, 1985, and the purposes for which securities may be issued under such chapter are extended to include any purchases of the obligations of the Secretary of Transportation under this subsection. All redemptions and purchases by the Secretary of the Treasury of the obligations of the Secretary of Transportation shall be treated as public-debt transactions of the United States.
(d) Authorization of appropriations 
There is authorized to be appropriated annually for each fiscal year, commencing with the fiscal year beginning October 1, 1986, an amount sufficient to reimburse the Secretary of Transportation for the costs, including administrative expenses and the principal and interest due on the obligations to the Secretary of the Treasury incurred under this section. Reimbursement of any such costs shall be made with appropriated funds, as provided in this section, rather than through cancellation of notes.
(e) Notification of Congress respecting failure to obtain funds necessary for financing 
Notwithstanding the provisions of this section, in the event that 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) of this section and section 1241f (a) of this Appendix, the Secretary of Transportation shall so notify the Congress within 10 working days of the discovery of such insufficiency.
[1] See References in Text note below.

46 USC Appendix 1241i - Authorization of appropriations

There are authorized to be appropriated such sums as may be necessary to carry out the provisions of sections 1241e through 1241o of this Appendix.

46 USC Appendix 1241j - Termination of sections 1241e through 1241o of this Appendix

The operation of sections 1241e through 1241o of this Appendix shall terminate 90 days after the date on which a notification is made pursuant to section 1241h (e) of this Appendix, except with respect to shipments of agricultural commodities and products subject to contracts entered into before the expiration of such 90-day period, unless within such 90-day period the Secretary of Transportation proclaims that funds are available to finance increased freight charges resulting from the requirements of sections 1241f (a) and 1241h (a) and (b) of this Appendix. In the event of termination under this section, nothing in sections 1241e through 1241h of this Appendix shall be construed as exempting export activities from or subjecting export activities to the cargo preference laws except to the extent those activities are exempt under section 1707a (b)1 of title 7. In the event of termination under this section, the 50 percent requirement in section 1241 (b) of this Appendix shall be in full effect.
[1] See References in Text note below.

46 USC Appendix 1241k - National Advisory Commission on Agricultural Export Transportation Policy

(a) Establishment 
There is hereby established an advisory commission to be known as the National Advisory Commission on Agricultural Export Transportation Policy (hereafter in this section through section 1241n of this Appendix referred to as the Commission).
(b) Membership; composition, appointment, etc. 

(1) The Commission shall be composed of 16 members.
(2) Eight members of the Commission shall be appointed by the President.
(3) The chairman and ranking minority members of the Senate Committee on Agriculture, Nutrition, and Forestry, of the Subcommittee on Merchant Marine of the Senate Committee on Commerce, Science, and Transportation, of the House Committee on Agriculture, and of the House Committee on Transportation and Infrastructure shall serve as members of the Commission.
(4) 
(A) Four of the members appointed by the President shall be representatives of agricultural producers, cooperatives, merchandisers, and processors of agricultural commodities.
(B) The remaining four members appointed by the President shall be representatives of the United States-flag maritime industry, two of whom shall represent labor and two of whom shall represent management.
(c) Chairman; vacancy 

(1) The members of the Commission shall elect a Chairman from among its members.
(2) Any vacancy in the Commission does not affect its powers but shall be filled in the same manner in which the original appointment was made.

46 USC Appendix 1241l - Duties of Commission

(a) Study and review of ocean transportation of agricultural exports subject to cargo preference laws; recommendations, scope, etc. 
It shall be the duty of the Commission to conduct a comprehensive study and review of the ocean transportation of agricultural exports subject to the cargo preference laws referred to in section 1241f of this Appendix and to make recommendations to the President and the Congress for improving the efficiency of such transportation on United States-flag vessels in order to reduce the costs incurred by the United States in connection with such transportation. In carrying out such study and review, the Commission shall consider the extent to which any unfair or discriminatory practices of foreign governments increase the cost to the United States of transporting agricultural commodities subject to such cargo preference laws.
(b) Reporting requirements; termination of Commission 

(1) The Commission shall submit an interim report to the President and the Congress not later than one year after December 23, 1985, and such other interim reports as the Commission considers advisable.
(2) The Commission shall submit a final report containing its findings and recommendations to the President and the Congress not later than two years after December 23, 1985. The report shall include recommendations for any changes in the provisions of paragraph (1) that would help assure that the cost of ocean freight and ocean freight differential incurred by the Department of Agriculture and the Commodity Credit Corporation on the agricultural export programs specified in section 1241f of this Appendix, is not increased above historical levels as a result of the extra demand for United States-flag vessels caused by section 1241f of this Appendix.
(3) Sixty days after the submission of the final report, the Commission shall cease to exist.
(c) Contents of reports 
The Commission shall include in its reports submitted pursuant to subsection (b) of this section recommendations concerning the feasibility and desirability of achieving the following goals with respect to the ocean transportation of agricultural commodities subject to the cargo preference laws referred to in section 1241f of this Appendix:
(1) Ensuring that the timing of commodity purchase agreements entered into by the United States in connection with the export of such commodities, and the methods of implementing such agreements, will minimize cost to the United States.
(2) Ensuring that shipments of such commodities are made on the most modern and efficient United States-flag vessels available.
(3) Ensuring that shipments of such commodities are made under the most advantageous terms available, including
(A) charters for full shiploads;
(B) charters for intermediate or long term;
(C) charters for consecutive voyages and contracts of affreightment; and
(D) adjustment of rates in the event that vessels used for shipments of such commodities also carry cargoes on return voyages.
(4) Reduction and elimination of impediments, including delays in port, to the efficient loading and operation of the vessels employed for shipment of such commodities.
(5) Utilization of open and competitive bidding for the ocean transportation of such commodities.

46 USC Appendix 1241m - Information and assistance to be furnished to Commission

(a) Each department, agency, and instrumentality of the United States, including independent agencies, shall furnish to the Commission, upon request made by the Chairman, such statistical data, reports, and other information as the Commission considers necessary to carry out its functions.
(b) The Secretary of Agriculture and the Secretary of Transportation shall make available to the Commission such staff, personnel, and administrative services as may reasonably be required to carry out the Commissions duties.

46 USC Appendix 1241n - Compensation and travel and subsistence expenses of Commission members

Members of the Commission shall serve without compensation in addition to compensation they may otherwise be entitled to receive as employees of the United States or as Members of Congress, but shall be reimbursed for travel, subsistence, and other necessary expenses incurred in the performance of duties vested in the Commission.

46 USC Appendix 1241o - Definition of United States-flag vessel eligible to carry cargoes under sections 1241f through 1241h of this Appendix

A United States flag[1] vessel eligible to carry cargoes under sections 1241f through 1241h of this Appendix means a vessel, as defined in section 3 of title 1, that is necessary for national security purposes and, if more than 25 years old, is within five years of having been substantially rebuilt and certified by the Secretary of Transportation as having a useful life of at least five years after that rebuilding.
[1] So in original. Probably should be “United States-flag”.

46 USC Appendix 1241p - Effect on other laws

Sections 1241d to 1241p of this Appendix shall not be construed as modifying in any manner the provisions of section 1707a (b)(8)1 of title 7 or chapter 5 of title 5.
[1] See References in Text note below.

46 USC Appendix 1241q - Exemption of American Great Lakes vessels from restriction on carriage of preference cargoes

(a) Exemption from restriction 
The restriction described in subsection (b) of this section shall not apply to an American Great Lakes vessel while it is so designated.
(b) Restriction described 
The restriction referred to in subsection (a) of this section is the restriction in section 1241 (b)(1) of this Appendix, that a vessel that is
(1) built outside the United States;
(2) rebuilt outside the United States; or
(3) documented under any foreign registry;

shall not be a privately owned United States-flag commercial vessel under that section until the vessel is documented under the laws of the United States for a period of 3 years.

(c) Subsequent application of restriction 
Upon the revocation or termination of a designation of a vessel as an American Great Lakes vessel, the restriction described in subsection (b) of this section shall apply as if the vessel had never been a vessel documented under the laws of the United States.

46 USC Appendix 1241r - Designation of American Great Lakes vessels

(a) In general 
The Secretary shall designate a vessel as an American Great Lakes vessel for purposes of sections 1241q to 1241v of this Appendix if
(1) the vessel is documented under the laws of the United States;
(2) the Secretary receives an application for such designation submitted in accordance with regulations issued by the Secretary under subsection (d) of this section;
(3) the owner of the vessel enters into an agreement in accordance with subsection (b) of this section;
(4) 
(A) the vessel is not more than 6 years old, and not less than 1 year old, on the effective date of the designation; or
(B) the vessel is not more than 11 years old, and not less than 1 year old on the effective date of the designation, and the Secretary determines that suitable vessels are not available for providing the type of service for which the vessel will be used after designation; and
(5) the vessel has not been previously designated as an American Great Lakes vessel.
(b) Construction and purchase agreement 
As a condition of designating a vessel as an American Great Lakes vessel under this section, the Secretary shall require the person who will be the owner of the vessel at the time of that designation to enter into an agreement with the Secretary which provides that if the Secretary determines that the vessel is necessary to the defense of the United States, the United States Government shall have, during the 120-day period following the date of any revocation of such designation under section 1241t of this Appendix, an exclusive right to purchase the vessel for a price equal to
(1) the approximate world market value of the vessel; or
(2) the cost of the vessel to the owner less an amount representing reasonable depreciation of the vessel;

whichever is greater.

(c) Certain foreign registry and sale not prohibited 
Notwithstanding any other provision of law, if the United States does not purchase a vessel in accordance with its right of purchase under a construction and purchase agreement under subsection (b) of this section, the owner of the vessel shall not be prohibited from
(1) transferring the vessel to a foreign registry; or
(2) selling the vessel to a person who is not a citizen of the United States.
(d) Issuance of regulations 
Not later than 60 days after November 28, 1990, the Secretary shall issue regulations establishing requirements for submission of applications for designation of vessels as American Great Lakes vessels under this section.

46 USC Appendix 1241s - Restrictions on operations of American Great Lakes vessels

(a) In general 
Subject to subsection (b) of this section, an American Great Lakes vessel shall not be used
(1) to 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) to carry bulk cargo (as that term is defined in section 1702 of this Appendix[1] which is subject to section 1241 (b) or 1241f of this Appendix, or section 2631 of title 10; or
(3) to provide any service other than ocean freight service
(A) as a contract carrier; or
(B) as a common carrier on a fixed advertised schedule offering frequent sailings at regular intervals in the foreign commerce of the United States.
(b) Off-season carriage exception 

(1) In general 
Subject to paragraph (2), an American Great Lakes vessel may be used to engage in trade otherwise prohibited by subsection (a)(1)(A) of this section for not more than 90 days during any 12-month period.
(2) Limitation 
An American Great Lakes vessel shall not be used during the Great Lakes shipping season to engage in trade referred to in paragraph (1).
[1] So in original. Probably should be followed by a closing ­parenthesis.

46 USC Appendix 1241t - Revocation and termination of designation

(a) Revocation 
The Secretary, after notice and an opportunity for a hearing, may revoke the designation of a vessel under section 1241r of this Appendix as an American Great Lakes vessel if the Secretary determines that
(1) the vessel does not meet a requirement for such designation;
(2) the vessel has been operated in violation of sections 1241q to 1241v of this Appendix; or
(3) the owner or operator of the vessel has violated a construction and purchase agreement under section 1241r (b) of this Appendix.
(b) Civil penalty 
The Secretary, after notice and an opportunity for a hearing, may assess a civil penalty of not more than $1,000,000 against the owner of an American Great Lakes vessel, for any act for which the designation of that vessel as an American Great Lakes vessel may be revoked under subsection (a) of this section.
(c) Termination of designation 
The Secretary may terminate the designation of a vessel as an American Great Lakes vessel under sections 1241q to 1241v of this Appendix upon petition and a showing of good cause for that termination by the owner of the vessel. The Secretary may impose conditions or restrictions in a termination order to prevent significant adverse effects on other United States-flag vessel operators.

46 USC Appendix 1241u - Study and report

(a) Study 
The Secretary, in consultation with the Secretary of Agriculture, shall conduct a study on the implementation of sections 1241q to 1241v of this Appendix. The study shall include analysis of
(1) the effects of that implementation on diversions of cargo to and from the Great Lakes port range and any resulting effects on the cost of transporting commodities furnished pursuant to title II of the Agricultural Trade Development and Assistance Act of 1954 [7 U.S.C. 1721 et seq.]; and
(2) whether the authority to designate vessels as American Great Lakes vessels has increased United States-flag vessel service to Great Lakes ports.
(b) Report 
Not later than December 31, 1994, the Secretary shall submit a report to the Congress on the findings of the study under subsection (a) of this section.

46 USC Appendix 1241v - Definitions

As used in sections 1241q to 1241v of this Appendix
(1) American Great Lakes vessel 
The term American Great Lakes vessel means a vessel which is so designated by the Secretary in accordance with section 1241r of this Appendix.
(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 of each year during which the Saint Lawrence Seaway is open for navigation by vessels, as declared by the Saint Lawrence Seaway Development Corporation created by the Act of May 13, 1954 (33 U.S.C. 981 et seq.).
(4) Secretary 
The term Secretary means the Secretary of Transportation.

46 USC Appendix 1242 - Requisition or purchase of vessels in time of emergency

(a) Compensation; restoration; consequential damages 
Whenever the President shall proclaim that the security of the national defense makes it advisable or during any national emergency declared by proclamation of the President, it shall be lawful for the Secretary of Transportation to requisition or purchase any vessel or other watercraft owned by citizens of the United States, a documented vessel, or a vessel under construction within the United States, or for any period during such emergency, to requisition or charter the use of any such property. The termination of any emergency so declared shall be announced by a further proclamation by the President. When any such property or the use thereof is so requisitioned, the owner thereof shall be paid just compensation for the property taken or for the use of such property, but in no case shall the value of the property taken or used be deemed enhanced by the causes necessitating the taking or use. If any property is taken and used under authority of this section, but the ownership thereof is not required by the United States, such property shall be restored to the owner in a condition at least as good as when taken, less ordinary wear and tear, or the owner shall be paid an amount for reconditioning sufficient to place the property in such condition. The owner shall not be paid for any consequential damages arising from a taking or use of property under authority of this section.
(b) Determination of value of vessel 
When any vessel is taken or used under authority of this section, upon which vessel a construction-differential subsidy has been allowed and paid, the value of the vessel at the time of its taking shall be determined as provided in section 1212 of this Appendix, and in determining the value of any vessel taken or used, on which a construction-differential subsidy has not been paid, the value of any national defense features previously paid for by the United States shall be excluded.
(c) Charter of vessels; compensation; reimbursement for loss or damage 
If any property is taken and used under authority of this section, but the ownership thereof is not required by the United States, the Secretary of Transportation, at the time of the taking or as soon thereafter as the exigencies of the situation may permit, shall transmit to the person entitled to the possession of such property a charter setting forth the terms which, in the Secretarys judgment, should govern the relationships between the United States and such person and a statement of the rate of hire which, in the Secretarys judgment, will be just compensation for the use of such property and for the services required under the terms of such charter. If such person does not execute and deliver such charter and accept such rate of hire, the Secretary of Transportation shall pay to such person as a tentative advance only, on account of such just compensation a sum equal to 75 per centum of such rate of hire as the same may from time to time be due under the terms of the charter so tendered, and such person shall be entitled to sue the United States in a court having jurisdiction of such claims to recover such amounts as would be equal to just compensation for the use of the property and for the services required in connection with such use: Provided, however, That in the event of an election by such person to reject the rate of hire fixed by the Secretary of Transportation and to sue in the courts, the excess of any amounts advanced on account of just compensation over the amount of the court judgment will be required to be refunded. In the event of loss or damage to such property, due to operation of a risk assumed by the United States under the terms of a charter prescribed in this subsection, but no valuation of such vessel or other property or mode of compensation has been agreed to, the United States shall pay just compensation for such loss or damage, to the extent the person entitled thereto is not reimbursed therefor through policies of insurance against such loss or damage.
(d) Determination of amount of compensation 
In all cases, the just compensation authorized by this section shall be determined and paid by the Secretary of Transportation as soon as practicable, but if the amount of just compensation determined by the Secretary is unsatisfactory to the person entitled thereto; such person shall be paid, as a tentative advance only, 75 per centum of the amount so determined and shall be entitled to sue the United States to recover such amount as would equal just compensation therefor, in the manner provided for by sections 1346 and 1491 of title 28: Provided, however, That in that event of an election to reject the amount determined by the Secretary of Transportation and to sue in the courts, the excess of any amounts advanced on account of just compensation over the amount of the court judgment will be required to be refunded. The existence of any valid claim by way of mortgage or maritime claim or attachment lien upon such vessel shall not prevent the taking thereof pursuant to this section: Provided, however, That in the event any such claim exists the Secretary of Transportation may in his discretion deposit such portion of the compensation hereunder, or advances on account thereof, as may equal but not exceed the amount of such claims in respect of the vessel, with the Treasurer of the United States, and the fund so deposited shall be available for the payment of such compensation, and shall be subject to be applied to the payment of the amount of any valid claim by way of mortgage or maritime lien or attachment lien upon such vessel, or of any stipulation therefor in a court of the United States, or of any State, subsisting at the time of such requisition or taking of title or possession; the holder of any such claim may commence prior to June 30, 1943, or within six months after the first such deposit with the Treasurer and publication of notice thereof in the Federal Register, whichever date is later, and maintain in the United States district court from whose custody such vessel has been or may be taken or in whose territorial jurisdiction the vessel was lying at the time of requisitioning or taking of title or possession, a suit in admiralty according to the principles of libels in rem against the fund, which shall proceed and be heard and determined according to the principles of law and to the rules of practice obtaining in like cases between private parties, and any decree in said suit shall be paid out of the first and all subsequent deposits of compensation; and such suit shall be commenced in the manner provided by section 742 of this Appendix and service of process shall be made in the manner therein provided by service upon the United States attorney and by mailing by registered mail to the Attorney General and the Secretary of Transportation and due notice shall under order of the court be given to all interested persons, and any decree shall be subject to appeal and revision as now provided in other cases of admiralty and maritime jurisdiction.
(e) Use of vessels by Secretary; transfer to other departments or agencies; reimbursement of Secretary 
The Secretary of Transportation is authorized to repair, recondition, reconstruct, and operate, or charter for operation, any property acquired under authority of this section. The Secretary of Transportation is further authorized to transfer the possession or control of any such property to any department or agency of the Government of the United States upon such terms and conditions as may be approved by the President. In case of any such transfer the department or agency to which the transfer is made shall promptly reimburse the Secretary of Transportation for the Department of Transportations expenditures on account of just compensation, purchase price, repairs, reconditioning, reconstruction, or charter hire for the property transferred. Such reimbursements shall be deposited in the construction fund established by section 1116 of this Appendix.

46 USC Appendix 1242a - Maintenance of and adjustment of obligations with respect to essential vessels affected by Neutrality Act

(a) “Essential vessel” defined 
When used in this section the term essential vessel means any vessel
(1)  which is
(A)  security for any mortgage indebtedness to the United States or
(B)  constructed under this chapter, or required by the terms of a contract under this chapter to be operated on a certain essential foreign trade route, and
(2)  which it is necessary in the interests of commerce and national defense to maintain in condition for prompt use.
(b) Adjustment of obligations and arrangements for maintenance of essential vessels 
For the purposes of preserving in the national interest the full availability and usefulness of essential vessels, which, under the provisions of the Neutrality Act of 1939 [22 U.S.C. 441 et seq.] (or any proclamation issued thereunder), or compatibly with the national interest, cannot be operated in the service, route, or line to which such vessels are assigned pursuant to this chapter, or in which they would otherwise be operated, the Secretary of Transportation is authorized to make adjustments of obligations in respect to such vessels and to make arrangements for the maintenance of such vessels, subject to the provisions of this section and to such rules and regulations as the Secretary of Transportation shall prescribe as necessary or appropriate for carrying out the purposes and provisions of this section. If the Secretary of Transportation, upon written application in respect of any essential vessel, determines after such examination, investigation, and proceedings as he deems desirable, that
(1)  the operation of such vessel in the service, route, or line to which such vessel is assigned pursuant to this chapter, or in which it would otherwise be operated, is either
(A)  not lawful under the Neutrality Act of 1939 (or any proclamation issued thereunder), or
(B)  not compatible with the maintenance of availability of such vessel for purposes of national defense and commerce,
(2)  it is not feasible under existing law to employ such vessel in any other service or operation in either the foreign or domestic trades (except temporary or emergency operation under subsection (c)(5) hereof), and
(3)  the applicant, by reason of the restrictions of the Neutrality Act of 1939, or the withdrawal of vessels for national-defense purposes under clause (1) hereof, is not earning or will not earn a fair and reasonable return on the capital necessarily employed in its business, the Secretary of Transportation may make adjustments and arrangements with the applicant as provided in subsection (c) of this section, which shall continue in effect only during the circumstances above described.
(c) Provisions included within adjustments and arrangements 
Such adjustments and arrangements shall include suspension of the requirement to operate such vessel in foreign trade under the applicable operating-differential or construction-differential subsidy contract or mortgage or other agreement, and of the right to operating-differential subsidy in respect of such vessel, and may include any one or more of the following provisions, in whole or in part, as, and to the extent that, the Secretary of Transportation may deem to be necessary or appropriate to carry out the purposes of this chapter, or the purposes and provisions of this section:
(1) Lay-up of the vessel by the owner or, at the option of the Secretary of Transportation, in the custody of the Secretary of Transportation, with payment or reimbursement by the Secretary of Transportation of necessary and proper expenses thereof (including reasonable overhead and insurance), or in lieu of such payment or reimbursement, a fixed periodic allowance therefor;
(2) Postponement, for a period not in excess of the period or periods of lay-up, of the maturity date of each installment on account of the principal of obligations to the United States in respect of the vessel (whether or not such maturity date shall fall within such period or periods), or rearrangement of such maturities;
(3) Postponement or cancellation of interest accruing on such obligations during such period or periods of lay-up;
(4) Extension for a period not in excess of the period or periods of lay-up, of the twenty-year life limitation in respect of the vessel, and of the period or periods of other limitations and provisions of this chapter, insofar as they are based upon a twenty-year life;
(5) Provisions for such temporary or emergency employment of the vessel in lieu of lay-up as may be practicable, with such arrangements for management of the vessel, payment of expenses, and application of the proceeds of such employment, as the Secretary of Transportation may approve, the period or periods of such operation being included as part of the period or periods of lay-up;
(6) The payment to the Secretary of Transportation, upon termination of the arrangements with the applicant hereunder, out of the applicants net profits, earned while such arrangements were in effect, in excess of 10 per centum per annum on the capital necessarily employed in the applicants business, in reimbursement, to the extent that the Secretary of Transportation shall deem it necessary to carry out the purposes of this section, on account of obligations postponed or canceled and expenses incurred or paid by the Secretary of Transportation under this subsection. For the purposes of this paragraph capital of the applicant represented by vessels of the applicant laid up or operated under this section shall not be excluded from capital necessarily employed in the applicants business. The Secretary of Transportation may require that the vessels so laid up or operated be security for reimbursement hereunder.
(d) Readjustment or modification of adjustments and arrangements 
The adjustments and arrangements made under subsection (c) of this section in respect of any vessel shall be subject to such readjustment or modification from time to time as may be deemed necessary by the Secretary of Transportation to carry out the purposes and provisions of this section.
(e) Expenses incurred in adjustments and arrangements 
Moneys in the construction fund of the Secretary of Transportation shall be available for expenses of the Secretary of Transportation incurred in adjustments or arrangements made under this section.

46 USC Appendix 1244 - Definitions

When used in this chapter
(a) The words foreign commerce or foreign trade mean commerce or trade between the United States, its Territories or possessions, or the District of Columbia, and a foreign country, except that in the context of section 1177 of this Appendix concerning capital construction funds and in the context of subchapter V of this chapter concerning construction-differential subsidy, the said words foreign commerce or foreign trade shall also include, 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 U.S.-flag bulk 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 section 1114 (b) of this Appendix.
(b) 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.
(c) The words citizen of the United States include a corporation, partnership, or association only if it is a citizen of the United States within the meaning of sections 802 and 803 of this Appendix, and with respect to a corporation under subchapter VI of this chapter, all directors of the corporation are citizens of the United States and, in the case of a corporation, partnership, or association operating a vessel on the Great Lakes, or on bays, sounds, rivers, harbors, or inland lakes of the United States the amount of interest required to be owned by a citizen of the United States shall be not less than 75 per centum.
(d) The word construction includes outfitting and equipping.
(e) Repealed. Pub. L. 97–31, § 12(133)(B), Aug. 6, 1981, 95 Stat. 165.
(f) The terms Representative and Member of the Congress include Delegates to the House of Representatives from the District of Columbia, Guam, and the Virgin Islands, and the Resident Commissioner to the House of Representatives from the Commonwealth of Puerto Rico.
(g) The term United States includes the District of Columbia, the Commonwealth of Puerto Rico, the Northern Mariana Islands, Guam, American Samoa, the Virgin Islands, and the areas and installations in the Republic of Panama made available to the United States pursuant to 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.

46 USC Appendix 1245 - Separability; short title of chapter

If any provisions of this chapter, or the application thereof to any person or circumstance, is held invalid, the remainder of the chapter, and the application of such provisions to other persons or circumstances, shall not be affected thereby. This chapter may be cited as the Merchant Marine Act, 1936.

46 USC Appendix 1247 - Appointment of Secretary as trustee or receiver; operation of vessels under court orders; payment of operating costs; claims against corporation

(a) Notwithstanding any other provision of law, in any proceeding in a bankruptcy, equity, or admiralty court of the United States in which a receiver or trustee may be appointed for any corporation engaged in the operation of one or more vessels of United States registry between the United States and any foreign country, upon which the United States holds mortgages, the court, upon finding that it will inure to the advantage of the estate and the parties in interest and that it will tend to further the purposes of this chapter, may constitute and appoint the Secretary of Transportation as sole trustee or receiver, subject to the directions and orders of the court, and in any such proceeding the appointment of any person other than the Secretary as trustee or receiver shall become effective upon the ratification thereof by the Secretary without a hearing, unless the Secretary shall deem a hearing necessary. In no such proceeding shall the Secretary be constituted as trustee or receiver without the Secretarys express consent.
(b) If the court, in any such proceeding, is unwilling to permit the trustee or receiver to operate such vessels in such service pending the termination of such proceeding, without financial aid from the Government, and the Secretary certifies to the court that the continued operation of such vessel is, in the opinion of the Secretary, essential to the foreign commerce of the United States and is reasonably calculated to carry out the purposes and policy of this chapter, the court may permit the Secretary to operate the vessels subject to the orders of the court and upon terms decreed by the court sufficient to protect all the parties in interest, for the account of the trustee or receiver, directly or through a managing agent or operator employed by the Secretary, if the Secretary undertakes to pay all operating losses resulting from such operation, and comply with the terms imposed by the court, and such vessel shall be considered to be a vessel of the United States within the meaning of the Suits in Admiralty Act [46 App. U.S.C. 741 et seq.]. The Secretary shall have no claim against the corporation, its estate, or its assets for the amount of such payments, but the Secretary may pay such sums for depreciation as it deems reasonable and such other sums as the court may deem just. The payment of such sums, and compliance with other terms duly imposed by the court, together with the payment of the operating losses, shall be in satisfaction of all claims against the Secretary on account of the operation of such vessels.

46 USC Appendix 1248 - Enrollment in a sealift readiness program

No vessel may receive construction differential subsidy or operating differential subsidy if it is not offered for enrollment in a sealift readiness program approved by the Secretary of Defense.

46 USC Appendix 1249 - Assistance for small shipyards and maritime communities

(a) Establishment of program 
Subject to the availability of appropriations, the Administrator of the Maritime Administration shall establish a program to provide assistance to State and local governments
(1) to provide assistance in the form of grants, loans, and loan guarantees to small shipyards for capital improvements; and
(2) for maritime training programs in communities whose economies are substantially related to the maritime industry.
(b) Awards 
In providing assistance under the program, the Administrator shall
(1) take into account
(A) the economic circumstances and conditions of maritime communities; and
(B) the local, State, and regional economy in which the communities are located; and
(2) strongly encourage State, local, and regional efforts to promote economic development and training that will enhance the economic viability of and quality of life in maritime communities.
(c) Use of funds 
Assistance provided under this section may be used
(1) to make capital and related improvements in small shipyards located in or near maritime communities;
(2) to encourage, assist in, or provide training for residents of maritime communities that will enhance the economic viability of those communities; and
(3) for such other purposes as the Administrator determines to be consistent with and supplemental to such activities.
(d) Prohibited uses 
Grants awarded under this section may not be used to construct buildings or other physical facilities or to acquire land unless such use is specifically approved by the Administrator in support of subsection (c)(3) of this section.
(e) Matching requirements 

(1) Federal funding 
Except as provided in paragraph (2), Federal funds for any eligible project under this section shall not exceed 75 percent of the total cost of such project.
(2) Exceptions 

(A) Small projects 
Paragraph (1) shall not apply to grants under this section for stand alone projects costing not more than $25,000. The amount under this subparagraph shall be indexed to the consumer price index and modified each fiscal year after the annual publication of the consumer price index.
(B) Reduction in matching requirement 
If the Administrator determines that a proposed project merits support and cannot be undertaken without a higher percentage of Federal financial assistance, the Administrator may award a grant for such project with a lesser matching requirement than is described in paragraph (1).
(f) Application 

(1) In general 
The Administrator shall determine who, as an eligible applicant, may submit an application, at such time, in such form, and containing such information and assurances as the Administrator may require.
(2) Minimum standards for payment or reimbursement 
Each application submitted under paragraph (1) shall include
(A) a comprehensive description of
(i) the need for the project;
(ii) the methodology for implementing the project; and
(iii) any existing programs or arrangements that can be used to supplement or leverage assistance under the program.
(3) Procedural safeguards 
The Administrator, in consultation with the Office of the Inspector General, shall issue guidelines to establish appropriate accounting, reporting, and review procedures to ensure that
(A) grant funds are used for the purposes for which they were made available;
(B) grantees have properly accounted for all expenditures of grant funds; and
(C) grant funds not used for such purposes and amounts not obligated or expended are returned.
(4) Project approval required 
The Administrator may not award a grant under this section unless the Administrator determines that
(A) sufficient funding is available to meet the matching requirements of subsection (e) of this section;
(B) the project will be completed without unreasonable delay; and
(C) the recipient has authority to carry out the proposed project.
(g) Audits and examinations 
All grantees under this section shall maintain such records as the Administrator may require and make such records available for review and audit by the Administrator.
(h) Small shipyard defined 
In this section, the term small shipyard means a shipyard that
(1) is a small business concern (within the meaning of section 632 of title 15); and
(2) does not have more than 600 employees.
(i) Authorization of appropriations 
There are authorized to be appropriated to the Administrator of the Maritime Administration for each of fiscal years 2006 through 2010 to carry out this section
(1) $5,000,000 for training grants; and
(2) $25,000,000 for capital and related improvement grants.

TITLE 46 - US CODE - SUBCHAPTER XI - FEDERAL SHIP MORTGAGE INSURANCE

46 USC Appendix 1271 - Definitions

As used in this subchapter
(a) The term mortgage includes
(1) a preferred mortgage as defined in section 31301 of title 46; and
(2) a mortgage on a vessel that will become a preferred mortgage when filed or recorded under chapter 313 of title 46.[1]
(b) The term vessel includes all types, whether in existence or under construction, of passenger cargo and combination passenger-cargo carrying vessels, tankers, tugs, towboats, barges, dredges and ocean thermal energy conversion facilities or plantships which are or will be documented under the laws of the United States, fishing vessels whose ownership will meet the citizenship requirements for documenting vessels in the coastwise trade within the meaning of sections 802 and 803 of this Appendix, floating drydocks which have a capacity of thirty-five thousand or more lifting tons and a beam of one hundred and twenty-five feet or more between the wing walls and oceanographic research or instruction or pollution treatment, abatement or control vessels;
(c) The term obligation shall mean any note, bond, debenture, or other evidence of indebtedness (exclusive of notes or other obligations issued by the Secretary or Administrator pursuant to section 1275 (d) of this Appendix and obligations eligible for investment of funds under sections 1272 and 1279a (d) of this Appendix), issued for one of the purposes specified in section 1274 (a)2 of this Appendix;
(d) The term obligor shall mean any party primarily liable for payment of the principal of or interest on any obligation;
(e) The term obligee shall mean the holder of an obligation;
(f) Actual Cost Defined.— 
The term actual cost means the sum of
(1) all amounts paid by or for the account of the obligor as of the date on which a determination is made under section 1279a (g)(1) of this Appendix; and
(2) all amounts that the Secretary or Administrator reasonably estimates that 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 1274 (e) of this Appendix 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.[1]
(g) The term depreciated actual cost of a vessel means the actual cost of the vessel depreciated on a straightline basis over the useful life of the vessel as determined by the Secretary or Administrator, not to exceed twenty-five years from the date the vessel was delivered by the shipbuilder, or, if the vessel has been reconstructed or reconditioned, the actual cost of the vessel depreciated on a straightline basis from the date the vessel was delivered by the shipbuilder to the date of such reconstruction or reconditioning on the basis of the original useful life of the vessel and from the date of such reconstruction or reconditioning on a straightline basis and on the basis of a useful life of the vessel determined by the Secretary or Administrator, plus all amounts paid or obligated to be paid for the reconstruction or reconditioning depreciated on a straightline basis and on the basis of a useful life of the vessel determined by the Secretary or Administrator.[1]
(h) The terms construction, reconstruction, or reconditioning shall include, but shall not be limited to, designing, inspecting, outfitting, and equipping;
(i) The term ocean thermal energy conversion facility or plantship means any at-sea facility or vessel, whether mobile, floating unmoored, moored, or standing on the seabed, which uses temperature differences in ocean water to produce electricity or another form of energy capable of being used directly to perform work, and includes any equipment installed on such facility or vessel to use such electricity or other form of energy to produce, process, refine, or manufacture a product, and any cable or pipeline used to deliver such electricity, freshwater, or product to shore, and all other associated equipment and appurtenances of such facility or vessel, to the extent they are located seaward of the highwater mark;
(j) The term citizen of the Northern Mariana Islands means
(1) an individual who qualifies as such under section 8 of the Schedule on Transitional Matters attached to the Constitution of the Northern Mariana Islands; or
(2) a corporation, partnership, association, or other entity formed under the laws of the Northern Mariana Islands, not less than 75 percent of the interest in which is owned by individuals referred to in paragraph (1) or citizens or nationals of the United States, in cases in which owned is used in the same sense as in sections 802 and 803 of this Appendix;
(k) The term fishery facility means
(1) for operations on land
(A) any 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 one or more fisheries,
(B) the land necessary for any such structure or appurtenance described in subparagraph (A), and
(C) equipment which is for use in connection with any such structure or appurtenance and which is necessary for the performance of any function referred to in subparagraph (A);
(2) for operations other than on land, any vessel built in the United States used for, equipped to be used for, or of a type which is normally used for, the processing of fish; or
(3) for aquaculture, including operations on land or elsewhere
(A) any structure or appurtenance thereto designed for aquaculture;
(B) the land necessary for any such structure or appurtenance described in subparagraph (A);
(C) equipment which is for use in connection with any such structure or appurtenance and which is necessary for the performance of any function referred to in subparagraph (A); and
(D) any vessel built in the United States used for, equipped to be used for, or of a type which is normally used for aquaculture; but only if such structure, appurtenance, land, equipment, or vessel is owned by an individual who is a citizen or national of the United States or a citizen of the Northern Mariana Islands or by a corporation, partnership, association, or other entity that is a citizen of the United States within the meaning of sections 802 and 803 of this Appendix, and for purposes of applying such sections 802 and 803 of this Appendix with respect to this section
(i) the term State as used therein includes any State, the District of Columbia, the Commonwealth of Puerto Rico, American Samoa, the Virgin Islands of the United States, Guam, the Northern Mariana Islands, or any other Commonwealth, territory, or possession of the United States; and
(ii) citizens of the United States must own not less than 75 percent of the interest in the entity and nationals of the United States or citizens of the Northern Mariana Islands shall be treated as citizens of the United States in meeting such ownership requirement;
(l) The term fishing vessel has the meaning given such term by section 1802 (11)3 of title 16; and any reference in this subchapter to a vessel designed principally for commercial use in the fishing trade or industry shall be treated as a reference to a fishing vessel;
(m) The term United States when used in a geographical context with respect to fishing vessels or fishery facilities includes all States referred to in subsection (k)(i) of this section.[1]
(n) The term Secretary means the Secretary of Commerce with respect to fishing vessels and fishing facilities as provided by this subchapter.[1]
(o) The term eligible export vessel means a vessel constructed, reconstructed, or reconditioned in the United States for use in world-wide trade which will, upon delivery or redelivery, be placed under or continued to be documented under the laws of a country other than the United States.
(p) The term Administrator means the Administrator of the Maritime Administration.
[1] So in original. The period probably should be a semicolon.
[2] See References in Text note below.
[3] See References in Text note below.

46 USC Appendix 1272 - Federal Ship Financing Fund

There is created a Federal Ship Financing Fund (hereinafter referred to as the Fund) which shall be used by the Secretary or Administrator as a revolving fund for the purpose of carrying out the provisions of this subchapter, and there shall be allocated to such fund the sum of $1,000,000 out of funds made available to the Secretary or Administrator under the appropriation authorized by section 12791 of this Appendix. Moneys in the Fund shall be deposited in the Treasury of the United States to the credit of the Fund or invested in bonds or other obligations of, or guaranteed as to principal and interest by, the United States.
[1] See References in Text note below.

46 USC Appendix 1273 - Authorization of Secretary or Administrator to guarantee obligations

(a) Principal and interest 
The Secretary or Administrator is authorized to guarantee, and to enter into commitments to guarantee, the payment of the interest on, and the unpaid balance of the principal of, any obligation which is eligible to be guaranteed under this subchapter. A guarantee, or commitment to guarantee, made by the Secretary or Administrator under this subchapter shall cover 100 percent of the amount of the principal and interest of the obligation.
(b) Security interest 
No obligation shall be guaranteed under this subchapter unless the obligor conveys or agrees to convey to the Secretary or Administrator such security interest, which may include a mortgage or mortgages on a vessel or vessels, as the Secretary or Administrator may reasonably require to protect the interest of the United States.
(c) Amount of guarantee; percentage limitation; determination of actual cost of vessel 
The Secretary or Administrator shall not guarantee the principal of obligations in an amount in excess of 75 per centum, or 871/2 per centum, whichever is applicable under section 12741 of this Appendix, of the amount, as determined by the Secretary or Administrator which determination shall be conclusive, paid by or for the account of the obligor for the construction, reconstruction, or reconditioning of a vessel or vessels with respect to which a security interest has been conveyed to the Secretary or Administrator, unless the obligor creates an escrow fund as authorized by section 1279a of this Appendix, in which case the Secretary or Administrator may guarantee 75 per centum or 871/2 per centum, whichever is applicable under section 1274 of this Appendix, of the actual cost of such vessel or vessels.
(d) Pledge of United States 
The full faith and credit of the United States is pledged to the payment of all guarantees made under this subchapter with respect to 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 payment in full of the guarantee.
(e) Proof of obligations 
Any guarantee, or commitment to guarantee, made by the Secretary or Administrator under this subchapter shall be conclusive evidence of the eligibility of the obligations for such guarantee, and the validity of any guarantee, or commitment to guarantee, so made shall be incontestable. Notwithstanding an assumption of an obligation by the Secretary or Administrator under section 1275 (a) or (b) of this Appendix, the validity of the guarantee of an obligation made by the Secretary or Administrator under this subchapter is unaffected and the guarantee remains in full force and effect.
(f) Limitation on outstanding amount 
The aggregate unpaid principal amount of the obligations guaranteed under this section and outstanding at any one time shall not exceed $12,000,000,000, of which
(1)  $850,000,000 shall be limited to obligations pertaining to guarantees of obligations for fishing vessels and fishery facilities made under this subchapter, and
(2)  $3,000,000,000 shall be limited to obligations pertaining to guarantees of obligations for eligible export vessels. No additional limitations may be imposed on new commitments to guarantee loans for any fiscal year, except in such amounts as established in advance in annual authorization Acts. No vessel eligible for guarantees under this subchapter shall be denied eligibility because of its type.
(g) Restrictions on commitments to guarantee obligations on eligible export vessels 

(1) The Secretary or Administrator may not issue a commitment to guarantee obligations for an eligible export vessel unless, after considering
(A) the status of pending applications for commitments to guarantee obligations for vessels documented under the laws of the United States and operating or to be operated in the domestic or foreign commerce of the United States,
(B) the economic soundness of the applications referred to in subparagraph (A), and
(C) the amount of guarantee authority available,

the Secretary or Administrator determines, in the sole discretion of the Secretary or Administrator, that the issuance of a commitment to guarantee obligations for an eligible export vessel will not result in the denial of an economically sound application to issue a commitment to guarantee obligations for vessels documented under the laws of the United States operating in the domestic or foreign commerce of the United States.

(2) The Secretary or Administrator may not issue commitments to guarantee obligations for eligible export vessels under this section after the later of
(A) the 5th anniversary of the date on which the Secretary or Administrator publishes final regulations setting forth the application procedures for the issuance of commitments to guarantee obligations for eligible export vessels,
(B) the last day of any 5-year period in which funding and guarantee authority for obligations for eligible export vessels have been continuously available, or
(C) the last date on which those commitments may be issued under any treaty or convention entered into after November 30, 1993, that prohibits guarantee of those obligations.
(h) Risk categories 

(1) The Secretary or Administrator shall
(A) establish in accordance with this subsection, and update annually, a system of risk categories for obligations guaranteed under this subchapter, that categorizes the relative risk of guarantees made under this subchapter with respect to the risk factors set forth in paragraph (3);
(B) annually determine for each of the risk categories a subsidy rate equivalent to the cost of obligations in the category, expressed as a percentage of the amount guaranteed under this subchapter 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 expected to be associated with the loans in the category.
(2) 
(A) Before making a guarantee under this section for an obligation, and annually for projects subject to a guarantee, the Secretary or Administrator shall apply the risk factors set forth in paragraph (3) to place the obligation in a risk category established under paragraph (1)(A).
(B) The Secretary or Administrator shall consider the aggregate amount available to the Secretary or Administrator for making guarantees under this subchapter to be reduced by the amount determined by multiplying
(i) the amount guaranteed under this subchapter for an obligation, by
(ii) the subsidy rate for the category in which the obligation is placed under subparagraph (A) of this paragraph.
(C) The estimated cost to the Government of a guarantee made by the Secretary or Administrator under this subchapter for an obligation is deemed to be the amount determined under subparagraph (B) for the obligation.
(D) The Secretary or Administrator may not guarantee obligations under this subchapter after the aggregate amount available to the Secretary or Administrator under appropriations Acts for the cost of loan guarantees is required by subparagraph (B) to be considered reduced to zero.
(3) The risk factors referred to in paragraphs (1) and (2) are the following:
(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, which is 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, any guarantee related to the project, other than the guarantee under this subchapter for which the risk factor is applied.
(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 subchapter is or will be in effect during the construction period of the project.
(K) A risk factor for concentration risk reflecting the risk presented by an unduly large percentage of loans outstanding by any 1 borrower or group of affiliated borrowers.
(4) In this subsection, the term cost has the meaning given that term in section 661a of title 2.
(i) Priority for national defense tank vessels 
In guaranteeing and entering commitments to guarantee under this section, the Administrator shall give priority to guarantees and commitments for vessels that are otherwise eligible for a guarantee under this section and that are constructed with assistance under subtitle D of the Maritime Security Act of 2003.
(j) Priority for other vessels suitable for service as a naval auxiliary 
In guaranteeing and entering commitments to guarantee under this section, the Administrator shall, after applying subsection (i) of this section, give priority to a guarantee or commitment for a vessel that is otherwise eligible for a guarantee under this section and that the Secretary of Defense determines
(1) is suitable for service as a naval auxiliary in time of war or national emergency; and
(2) meets a shortfall in sealift capacity or capability.

The Secretary of Defense shall determine whether a vessel satisfies paragraphs (1) and (2) by not later than 30 days after receipt of a request from the Administrator for such a determination.

[1] See References in Text note below.

46 USC Appendix 1273a - Certain loan guarantees and commitments

(a) The Administrator of the Maritime Administration may not issue a guarantee or commitment to guarantee a loan for the construction, reconstruction, or reconditioning of a liner vessel under the authority of title XI of the Merchant Marine Act, 1936 (46 App. U.S.C. 1271 et seq.) after October 14, 1998, unless the Chairman of the Federal Maritime Commission certifies that the operator of such vessel
(1) has not been found by the Commission to have violated section 19 of the Merchant Marine Act, 1920 (46 App. U.S.C. 876), or the Foreign Shipping Practices Act of 1988 [46 App. U.S.C. 1710a], within the previous 5 years; and
(2) has not been found by the Commission to have committed a violation of the Shipping Act of 1984 (46 App. U.S.C. 1701 et seq.), which 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 within the previous 5 years.
(b) The Secretary of Commerce may not issue a guarantee or a commitment to guarantee a loan for the construction, reconstruction, or reconditioning of a fishing vessel under the authority of title XI of the Merchant Marine Act, 1936 (46 App. U.S.C. 1271 et seq.) if the fishing vessel operator has been
(1) held liable or liable in rem for a civil penalty pursuant to section 1858 of title 16 and not paid the penalty;
(2) found guilty of an offense pursuant to section 1859 of title 16 and not paid the assessed fine or served the assessed sentence;
(3) held liable for a civil or criminal penalty pursuant to section 1375 of title 16 and not paid the assessed fine or served the assessed sentence; or
(4) held liable for a civil penalty by the Coast Guard pursuant to title 33 or 46 and not paid the assessed fine.

46 USC Appendix 1274 - Eligibility for guarantee

(a) Purpose of obligations 
Pursuant to the authority granted under section 1273 (a) of this Appendix, the Secretary or Administrator, upon such terms as he shall prescribe, may guarantee or make a commitment to guarantee, payment of the principal of and interest on an obligation which aids in
(1) financing, including reimbursement of an obligor for expenditures previously made for, construction, reconstruction, or reconditioning of a vessel (including an eligible export vessel), which is designed principally for research, or for commercial use
(A)  in the coastwise or intercoastal trade;
(B)  on the Great Lakes, or on bays, sounds, rivers, harbors, or inland lakes of the United States;
(C)  in foreign trade as defined in section 1244 of this Appendix for purposes of subchapter V of this chapter; or
(D)  as an ocean thermal energy conversion facility or plantship;
(E)  with respect to floating drydocks in the construction, reconstruction, reconditioning, or repair of vessels; or
(F)  with respect to an eligible export vessel, in world-wide trade;[1] Provided, however, That no guarantee shall be entered into pursuant to this paragraph (a)(1) later than one year after delivery, or redelivery in the case of reconstruction or reconditioning of any such vessel unless the proceeds of the obligation are used to finance the construction, reconstruction, or reconditioning of a vessel or vessels, or facilities or equipment pertaining to marine operations;
(2) financing, including reimbursement of an obligor for expenditures previously made for, construction, reconstruction, reconditioning, or purchase of a vessel or vessels owned by citizens or nationals of the United States or citizens of the Northern Mariana Islands which are designed principally for research, or for commercial use in the fishing trade or industry;
(3) financing the purchase, reconstruction, or reconditioning of vessels or fishery facilities for which obligations were guaranteed under this subchapter that, under the provisions of section 1275 of this Appendix:
(A) are vessels or fishery facilities for which obligations were accelerated and paid;
(B) were acquired by the Fund; or
(C) were sold at foreclosure instituted by the Secretary or Administrator;
(4) financing, in whole or in part, the repayment to the United States of any amount of construction-differential subsidy paid with respect to a vessel pursuant to subchapter V of this chapter;
(5) refinancing existing obligations issued for one of the purposes specified in (1), (2), (3), or (4) whether or not guaranteed under this subchapter, including, but not limited to, short-term obligations incurred for the purpose of obtaining temporary funds with the view to refinancing from time to time;
(6) financing or refinancing, including, but not limited to, the reimbursement of obligors for expenditures previously made for, the construction, reconstruction, reconditioning, or purchase of fishery facilities; or
(7) financing or refinancing, including, but not limited to, the reimbursement of obligors for expenditures previously made, for the purchase of individual fishing quotas in accordance with section 1853 (d)(4) of title 16.

Any obligation guaranteed under paragraphs (6) and (7) shall be treated, for purposes of this subchapter in the same manner and to the same extent as an obligation guaranteed under this subchapter which aids in the construction, reconstruction, reconditioning, or purchase of a vessel; except with respect to provisions of this subchapter that by their nature can only be applied to vessels.

(b) Contents of obligations 
Obligations guaranteed under this subchapter
(1) shall have an obligor approved by the Secretary or Administrator as responsible and possessing the ability, experience, financial resources, and other qualifications necessary to the adequate operation and maintenance of the vessel or vessels which serve as security for the guarantee of the Secretary or Administrator;
(2) subject to the provisions of subsection (c)(1) of this section and subsection (i) of this section, shall be in an aggregate principal amount which does not exceed 75 per centum of the actual cost or depreciated actual cost, as determined by the Secretary or Administrator, of the vessel which is used as security for the guarantee of the Secretary or Administrator: Provided, however, That in the case of a vessel, the size and speed of which are approved by the Secretary or Administrator; and which is or would have been eligible for mortgage aid for construction under section 1159 of this Appendix (or would have been eligible for mortgage aid under section 1159 of this Appendix except that the vessel was built with the aid of construction-differential subsidy and said subsidy has been repaid) and in respect of which the minimum downpayment by the mortgagor required by that section would be or would have been 121/2 per centum of the cost of such vessel, such obligations may be in an amount which does not exceed 871/2 per centum of such actual cost or depreciated actual cost: Provided, further, That the obligations which relate to a barge which is constructed without the aid of construction-differential subsidy, or, if so subsidized, on which said subsidy has been repaid, may be in an aggregate principal amount which does not exceed 871/2 per centum of the actual cost or depreciated actual cost thereof: Provided further, That in the case of a fishing vessel or fishery facility, the obligation shall be in an aggregate principal amount not to exceed 80 percent of the actual cost or depreciated actual cost of the fishing vessel or fishery facility, except that no debt may be placed under this proviso through the Federal Financing Bank: Provided further, That in the case of an ocean thermal energy conversion facility or plantship which is constructed without the aid of construction-differential subsidy, such obligations may be in an aggregate principal amount which does not exceed 871/2 percent of the actual cost or depreciated actual cost of the facility or plantship: Provided further, That in the case of an eligible export vessel, such obligations may be in an aggregate principal amount which does not exceed 871/2 of the actual cost or depreciated actual cost of the eligible export vessel;
(3) shall have maturity dates satisfactory to the Secretary or Administrator but, subject to the provisions of paragraph (2) of subsection (c) of this section, not to exceed twenty-five years from the date of the delivery of the vessel which serves as security for the guarantee of the Secretary or Administrator or, if the vessel has been reconstructed or reconditioned, not to exceed the later of
(i)  twenty-five years from the date of delivery of the vessel and
(ii)  the remaining years of the useful life of the vessel as determined by the Secretary or Administrator;
(4) shall provide for payments by the obligor satisfactory to the Secretary or Administrator;
(5) shall bear interest (exclusive of charges for the guarantee and service charges, if any) at rates not to exceed such per centum per annum on the unpaid principal as the Secretary or Administrator determines to be reasonable, taking into account the range of interest rates prevailing in the private market for similar loans and the risks assumed by the Secretary or Administrator;
(6) shall provide, or a related agreement shall provide, that if the vessel used as security for the guarantee of the Secretary or Administrator is a delivered vessel, the vessel shall be in class A1, American Bureau of Shipping, or shall meet such other standards as may be acceptable to the Secretary or Administrator, with all required certificates, including but not limited to, marine inspection certificates of the United States Coast Guard or, in the case of an eligible export vessel, of the appropriate national flag authorities under a treaty, convention, or other international agreement to which the United States is a party, with all outstanding requirements and recommendations necessary for retention of class accomplished, unless the Secretary or Administrator permits a deferment of such repairs, and shall be tight, stanch, strong, and well and sufficiently tackled, appareled, furnished, and equipped, and in every respect seaworthy and in good running condition and repair, and in all respects fit for service; and
(7) may provide, or a related agreement may provide, if the vessel used as security for the guarantee of the Administrator is a passenger vessel having the tonnage, speed, passenger accommodations and other characteristics set forth in subchapter V of this chapter, and if the Administrator approves, that the sole recourse against the obligor by the United States for any payments under the guarantee shall be limited to repossession of the vessel and the assignment of insurance claims and that the liability of the obligor for any payments of principal and interest under the guarantee shall be satisfied and discharged by the surrender of the vessel and all right, title, and interest therein to the United States: Provided, That the vessel upon surrender shall be
(i)  free and clear of all liens and encumbrances whatsoever except the security interest conveyed to the Administrator under this subchapter,
(ii)  in class, and
(iii)  in as good order and condition, ordinary wear and tear excepted, as when acquired by the obligor, except that any deficiencies with respect to freedom from encumbrances, condition and class may, to the extent covered by valid policies of insurance, be satisfied by the assignment to the Administrator of claims of the obligor under such policies.

The Secretary may not establish, as a condition of eligibility for guarantee under this subchapter, a minimum principal amount for an obligation covering the reconstruction or reconditioning of a fishing vessel or fishery facility. For purposes of this subchapter, the reconstruction or reconditioning of a fishing vessel or fishery facility does not include the routine minor repair of maintenance of the vessel or facility.

(c) Security 

(1) The security for the guarantee of an obligation by the Secretary or Administrator under this subchapter may relate to more than one vessel and may consist of any combination of types of security. The aggregate principal amount of obligations which have more than one vessel as security for the guarantee of the Secretary or Administrator under this subchapter may equal, but not exceed, the sum of the principal amount of obligations permissible with respect to each vessel.
(2) If the security for the guarantee of an obligation by the Secretary or Administrator under this subchapter relates to more than one vessel, such obligation may have the latest maturity date permissible under subsection (b) of this section with respect to any of such vessels: Provided, That the Secretary or Administrator may require such payments of principal, prior to maturity, with respect to all related obligations as he deems necessary in order to maintain adequate security for his guarantee.
(d) Restrictions 

(1) 
(A) No commitment to guarantee, or guarantee of, an obligation shall be made by the Administrator unless the Administrator finds that the property or project with respect to which the obligation will be executed will be economically sound. In making that determination, the Administrator shall consider
(i) 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 subchapter is in effect;
(ii) the market potential for the employment of the vessel over the life of the guarantee;
(iii) projected revenues and expenses associated with employment of the vessel;
(iv) any charters, contracts of affreightment, transportation agreements, or similar agreements or undertakings relevant to the employment of the vessel;
(v) other relevant criteria; and
(vi) for inland waterways, the need for technical improvements, including but not limited to increased fuel efficiency, or improved safety.
(B) No commitment to guarantee, or guarantee of, an obligation shall be made by the Secretary of Commerce unless the Secretary finds, at or prior to the time such commitment is made or guarantee becomes effective, that the property or project with respect to which the obligation will be executed will be, in the Secretarys opinion, economically sound and in the case of fishing vessels, that the purpose of the financing or refinancing is consistent with the wise use of the fisheries resources and with the development, advancement, management, conservation, and protection of the fisheries resources, or with the need for technical improvements including but not limited to increased fuel efficiency or improved safety.
(2) No commitment to guarantee, or guarantee of an obligation may be made by the Secretary under this subchapter for the purchase of a used fishing vessel or used fishery facility unless
(A) the vessel or facility will be reconstructed or reconditioned in the United States and will contribute to the development of the United States fishing industry; or
(B) the vessel or facility will be used in the harvesting of fish from, or for a purpose described in section 1271 (k) of this Appendix with respect to, an underutilized fishery.
(3) No commitment to guarantee, or guarantee of an obligation may be made by the Administrator or Administrator[2] under this subchapter for the construction, reconstruction, or reconditioning of an eligible export vessel unless
(A) the Administrator or Administrator[2] finds that the construction, reconstruction, or reconditioning of that 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, and
(B) the owner of the vessel agrees with the Administrator that the vessel shall not be transferred to any country designated by the Secretary of Defense as a country whose interests are hostile to the interests of the United States.
(4) The Secretary shall promulgate 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
(A) the economic soundness requirements set forth in paragraph (1)(A) of this subsection are met after the waiver of the financial condition requirement; and
(B) if deemed necessary by the Secretary or Administrator, the waiver shall provide for the imposition of other requirements on the obligor designed to compensate for any significant increase in risk associated with the obligors failure to meet regulatory requirements applicable to financial condition.
(e) Guarantee fees 

(1) Except as otherwise provided in this subsection, the Secretary or Administrator shall prescribe regulations to assess in accordance with this subsection a fee for the guarantee of an obligation under this subchapter.
(2) 
(A) The amount of a fee under this subsection for a guarantee is equal to the sum determined by adding the amounts determined under subparagraph (B) for the years in which the guarantee is in effect.
(B) The amount referred to in subparagraph (A) for a year is the present value (determined by applying the discount rate determined under subparagraph (F)) of the amount determined by multiplying
(i) the estimated average unpaid principal amount of the obligation that will be outstanding during the year (determined in accordance with subparagraph (E)), by
(ii) the fee rate established under subparagraph (C) for the obligation for each year.
(C) The fee rate referred to in subparagraph (B)(ii) for an obligation shall be
(i) in the case of an obligation for a delivered vessel or equipment, not less than one-half of 1 percent and not more than 1 percent, determined by the Secretary or Administrator for the obligation under the formula established under subparagraph (D); or
(ii) in the case of an obligation for a vessel to be constructed, reconstructed, or reconditioned, or of equipment to be delivered, not less than one-quarter of 1 percent and not more than one-half of 1 percent, determined by the Secretary or Administrator for the obligation under the formula established under subparagraph (D).
(D) The Secretary or Administrator shall establish a formula for determining the fee rate for an obligation for purposes of subparagraph (C), that
(i) is a sliding scale based on the creditworthiness of the obligor;
(ii) takes into account the security provided for a guarantee under this subchapter for the obligation; and
(iii) uses
(I) in the case of the most creditworthy obligors, the lowest rate authorized under subparagraph (C)(i) or (ii), as applicable; and
(II) in the case of the least creditworthy obligors, the highest rate authorized under subparagraph (C)(i) or (ii), as applicable.
(E) For purposes of subparagraph (B)(i), the estimated average unpaid principal amount does not include the average amount (except interest) on deposit in a year in the escrow fund under section 1279a of this Appendix.
(F) For purposes of determining present value under subparagraph (B) for an obligation, the Secretary or Administrator shall apply a discount rate determined by the Secretary of the Treasury taking into consideration current market yields on outstanding obligations of the United States having periods to maturity comparable to the period to maturity for the obligation with respect to which the determination of present value is made.
(3) A fee under this subsection shall be assessed and collected not later than the date on which amounts are first paid under an obligation with respect to which the fee is assessed.
(4) A fee paid under this subsection is not refundable. However, an obligor shall receive credit for the amount paid for the remaining term of the guaranteed obligation if the obligation is refinanced and guaranteed under this subchapter after such refinancing.
(5) A fee paid under subsection (e) of this section shall be included in the amount of the actual cost of the obligation guaranteed under this subchapter and is eligible to be financed under this subchapter.
(f) Investigation of applications 

(1) The Secretary or Administrator shall charge and collect from the obligor such amounts as he may deem reasonable for the investigation of applications for a guarantee, for the appraisal of properties offered as security for a guarantee, for the issuance of commitments, for services in connection with the escrow fund authorized by section 1279a of this Appendix and for the inspection of such properties during construction, reconstruction, or reconditioning: Provided, That such charges shall not aggregate more than one-half of 1 per centum of the original principal amount of the obligations to be guaranteed.
(2) The Secretary or Administrator may make a determination that aspects of an application under this subchapter require independent analysis to be conducted by third party experts due to risk factors associated with markets, technology, or financial structures. Any independent analysis conducted pursuant to this provision shall be performed by a party chosen by the Secretary or Administrator.
(3) Notwithstanding any other provision of this subchapter, the Secretary or Administrator may make a determination that an application under this subchapter requires additional equity because of increased risk factors associated with markets, technology, or financial structures.
(4) The Secretary or Administrator may charge and collect fees to cover the costs of independent analysis under paragraph (2). Notwithstanding section 3302 of title 31, any fee collected under this paragraph shall
(A) be credit as an offsetting collection to the account that finances the administration of the loan guarantee program;
(B) shall[3] be available for expenditure only to pay the costs of activities and services for which the fee is imposed; and
(C) shall[3] remain available until expended.
(5) A third party independent analysis conducted under paragraph (2) shall be performed by a private sector expert in assessing such risk factors who is selected by the Administrator.
(g) Disposition of moneys 
All moneys received by the Secretary or Administrator under the provisions of sections 1271 to 1276 and 12794 of this Appendix shall be deposited in the Fund.
(h) Additional requirements 
Obligations guaranteed under this subchapter and agreements relating thereto shall contain such other provisions with respect to the protection of the security interests of the United States (including acceleration, assumption, and subrogation provisions and the issuance of notes by the obligor to the Secretary or Administrator), liens and releases of liens, payments of taxes, and such other matters as the Secretary or Administrator may, in his discretion, prescribe.
(i) Limitation on authority to establish uniform percentage limitations 
The Secretary or Administrator may not, with respect to
(1) the general 75 percent or less limitation in subsection (b)(2) of this section;
(2) the 871/2 percent or less limitation in the 1st, 2nd, 4th, or 5th proviso to subsection (b)(2) of this section or section 1279e (b) of this Appendix; or
(3) the 80 percent or less limitation in the 3rd proviso to such subsection;

establish by rule, regulation, or procedure any percentage within any such limitation that is, or is intended to be, applied uniformly to all guarantees or commitments to guarantee made under this section that are subject to the limitation.

(j) Guarantees for eligible export vessels 

(1) Upon receiving an application for a loan guarantee for an eligible export vessel, the Administrator shall promptly provide to the Secretary of Defense notice of the receipt of the application. During the 30-day period beginning on the date on which the Secretary of Defense receives such notice, the Secretary of Defense may disapprove the loan guarantee based on the assessment of the Administrator of the potential use of the vessel in a manner that may cause harm to United States national security interests. The Secretary of Defense may not disapprove a loan guarantee under this section solely on the basis of the type of vessel to be constructed with the loan guarantee. The authority of the Administrator to disapprove a loan guarantee under this section may not be delegated to any official other than a civilian officer of the Department of Defense appointed by the President, by and with the advice and consent of the Senate.
(2) The Administrator may not make a loan guarantee disapproved by the Secretary of Defense under paragraph (1).
(k) Monitoring 
The Secretary or Administrator shall monitor the financial conditions and operations of the obligor on a regular basis during the term of the guarantee. The Secretary or Administrator shall document the results of the monitoring on an annual or quarterly basis depending upon the condition of the obligor. If the Secretary or Administrator determines that the financial condition of the obligor warrants additional protections to the Secretary or Administrator, then the Secretary or Administrator shall take appropriate action under subsection (m) of this section. If the Secretary or Administrator determines that the financial condition of the obligor jeopardizes its continued ability to perform its responsibilities in connection with the guarantee of obligations by the Secretary or Administrator, the Secretary or Administrator shall make an immediate determination whether default should take place and whether further measures described in subsection (m) of this section should be taken to protect the interests of the Secretary or Administrator while insuring that program objectives are met.
(l) Review of applications 
No commitment to guarantee, or guarantee of, an obligation shall be made by the Secretary or Administrator unless the Secretary or Administrator certifies that a full and fair consideration of all the regulatory requirements, including economic soundness and financial requirements applicable to obligors and related parties, and a thorough assessment of the technical, economic, and financial aspects of the loan application has been made.
(m) Agreement with obligor 
The Secretary or Administrator shall include provisions in loan agreements with obligors that provide additional authority to the Secretary or Administrator to take action to limit potential losses in connection with defaulted loans or loans that are in jeopardy due to the deteriorating financial condition of obligors. If the Secretary or Administrator has waived a requirement under subsection (d) of this section, the loan agreement shall include requirements for additional payments, collateral, or equity contributions to meet such waived requirement upon the occurrence of verifiable conditions indicating that the obligors financial condition enables the obligor to meet the waived requirement.
(n) Decision period 

(1) In general 
The Administrator shall approve or deny an application for a loan guarantee under this subchapter within 270 days after the date on which the signed application is received by the Administrator or Administrator.[2]
(2) Extension 
Upon request by an applicant, the Administrator or Administrator[2] 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 for the loan guarantee was received by the Administrator or Administrator.[2]
[1] So in original. The semicolon probably should be a colon.
[2] So in original. See 2006 Amendment notes.
[3] So in original. The word “shall” probably should not appear.
[4] See References in Text note below.

46 USC Appendix 1274a - Authorization of Secretary or Administrator to guarantee obligations arising from statutorily mandated change in standards for operation of vessels

(a) Purpose of obligations; principal and interest 
Notwithstanding the provisions of this subchapter, except as provided in subsection (d) of this section, the Secretary or Administrator, upon the terms the Secretary or Administrator may prescribe, may guarantee or make a commitment to guarantee, payment of the principal of and interest on an obligation which aids in financing and refinancing, including reimbursement to an obligor for expenditures previously made, of a contract for construction or reconstruction of a vessel or vessels which are designed and to be employed for commercial use in the coastwise or intercoastal trade or in foreign trade as defined in section 1244 of this Appendix if
(1) the construction or reconstruction by an applicant is made necessary to replace vessels the continued operation of which is denied by virtue of the imposition of a statutorily mandated change in standards for the operation of vessels, and where, as a matter of law, the applicant would otherwise be denied the right to continue operating vessels in the trades in which the applicant operated prior to the taking effect of the statutory or regulatory change;
(2) 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 changes in operating standards imposed by statute;
(3) the capacity of the vessels to be constructed or reconstructed under this subchapter will not increase the cargo carrying capacity of the vessels being replaced;
(4) the Secretary or Administrator has not made a determination that the market demand for the vessel over its useful life will diminish so as to make the granting of the guarantee fiduciarily imprudent; and
(5) the Secretary or Administrator has considered the provisions of section 1274 (d)(1)(A)(iii), (iv), and (v) of this Appendix.
(b) Limitations on length and amount of guaranteed obligations; useful life of vessel 
For the purposes of this section
(1) the maximum term for obligations guaranteed under this program may not exceed 25 years;
(2) obligations guaranteed may not exceed 871/2 percent of the actual cost or depreciated actual cost to the applicant for the construction or reconstruction of the vessel; and
(3) reconstruction cost obligations may not be guaranteed unless the vessel after reconstruction will have a useful life of at least 15 years.

The Secretary or Administrator may not by rule, regulation, or procedure establish any percentage within the 871/2 percent or less limitation in paragraph (2) that is, or is intended to be, applied uniformly to all guarantees or commitments to guarantee made under this section.

(c) Security against default; fees; Vessel Replacement Guarantee Fund 

(1) The Secretary or Administrator shall by rule require that the applicant provide adequate security against default. The Secretary or Administrator may, in addition to any fees assessed under section 1274 (e) of this Appendix, establish a Vessel Replacement Guarantee Fund into which shall be paid by obligors under this section
(A) annual fees which may be an additional amount on the loan guarantee fee in section 1274 (e) of this Appendix not to exceed an additional 1 percent; or
(B) fees based on the amount of the obligation versus the percentage of the obligors fleet being replaced by vessels constructed or reconstructed under this section.
(2) The Vessel Replacement Guarantee Fund shall be a subaccount in the Federal Ship Financing Fund, and shall
(A) be the depository for all moneys received by the Secretary or Administrator under sections 1271 through 1276 and 12791 of this Appendix with respect to guarantee or commitments to guarantee made under this section;
(B) not include investigation fees payable under section 1274 (f) of this Appendix which shall be paid to the Federal Ship Financing Fund; and
(C) be the depository, whenever there shall be outstanding any notes or obligations issued by the Secretary or Administrator under section 1275 (d) of this Appendix with respect to the Vessel Replacement Guarantee Fund, for all moneys received by the Secretary or Administrator under sections 1271 through 1276 and 12791 of this Appendix from applicants under this section.
(d) Additional requirements 
The program created by this section shall, in addition to the requirements of this section, be subject to the provisions of sections 1271 through 1273; 1274(b)(1), (4), (5), (6); 1274(e); 1274(f); 1274(h); and 1275, 1276, and 1279[1] of this Appendix; except that the Federal Ship Financing Fund is not liable for any guarantees or commitments to guarantee issued under this section.
[1] See References in Text note below.

46 USC Appendix 1275 - Defaults

(a) Rights of obligee 
In the event of a default, which has continued for thirty days, in any payment by the obligor of principal or interest due under an obligation guaranteed under this subchapter, the obligee or his agent shall have the right to demand (unless the Secretary or Administrator shall, upon such terms as may be provided in the obligation or related agreements, prior to that demand, have assumed the obligors rights and duties under the obligation and agreements and shall have made any payments in default), at or before the expiration of such period as may be specified in the guarantee or related agreements, but not later than ninety days from the date of such default, payment by the Secretary or Administrator of the unpaid principal amount of said obligation and of the unpaid interest thereon to the date of payment. Within such period as may be specified in the guarantee or related agreements, but not later than thirty days from the date of such demand, the Secretary or Administrator shall promptly pay to the obligee or his agent the unpaid principal amount of said obligation and unpaid interest thereon to the date of payment: Provided, That the Secretary or Administrator shall not be required to make such payment if prior to the expiration of said period he shall find that there was no default by the obligor in the payment of principal or interest or that such default has been remedied prior to any such demand.
(b) Notice of default 
In the event of a default under a mortgage, loan agreement, or other security agreement between the obligor and the Secretary or Administrator, the Secretary or Administrator may upon such terms as may be provided in the obligation or related agreement, either:
(1) assume the obligors rights and duties under the agreement, make any payment in default, and notify the obligee or the obligees agent of the default and the assumption by the Secretary or Administrator; or
(2) notify the obligee or the obligees agent of the default, and the obligee or the obligees agent shall have the right to demand at or before the expiration of such period as may be specified in the guarantee or related agreements, but not later than 60 days from the date of such notice, payment by the Secretary or Administrator of the unpaid principal amount of said obligation and of the unpaid interest thereon. Within such period as may be specified in the guarantee or related agreements, but not later than 30 days from the date of such demand, the Secretary or Administrator shall promptly pay to the obligee or the obligees agent the unpaid principal amount of said obligation and unpaid interest thereon to the date of payment.
(c) Secretary or Administrator to complete, sell or operate property 
In the event of any payment or assumption by the Secretary or Administrator under subsection (a) or (b) of this section, the Secretary or Administrator shall have all rights in any security held by him relating to his guarantee of such obligations as are conferred upon him under any security agreement with the obligor. Notwithstanding any other provision of law relating to the acquisition, handling, or disposal of property by the United States, the Secretary or Administrator shall have the right, in his discretion, to complete, recondition, reconstruct, renovate, repair, maintain, operate, charter, or sell any property acquired by him pursuant to a security agreement with the obligor or may place a vessel in the national defense reserve. The terms of the sale shall be as approved by the Secretary or Administrator.
(d) Cash payments; issuance of notes or obligations 
Any amount required to be paid by the Secretary or Administrator pursuant to subsection (a) or (b) of this section, shall be paid in cash. If at any time the moneys in the Fund authorized by section 1272 of this Appendix are not sufficient to pay any amount the Secretary or Administrator is required to pay by subsection (a) or (b) of this section, the Secretary or Administrator is authorized to issue to the Secretary of the Treasury notes or other obligations in such forms and denominations, bearing such maturities, and subject to such terms and conditions as may be prescribed by the Secretary or Administrator, with the approval of the Secretary of the Treasury. Such notes or other obligations shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the United States of comparable maturities during the month preceding the issuance of such notes or other obligations. The Secretary of the Treasury is authorized and directed to purchase any notes and other obligations to be issued hereunder and for such purpose he is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under chapter 31 of title 31, and the purposes for which securities may be issued under such chapter, are extended to include any purchases of such notes and obligations. The Secretary of the Treasury may at any time sell any of the notes or other obligations acquired by him under this section. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes or other obligations shall be treated as public debt transactions of the United States. Funds borrowed under this section shall be deposited in the Fund and redemptions of such notes and obligations shall be made by the Secretary or Administrator from such Fund.
(e) Actions against obligor 
In the event of a default under any guaranteed obligation or any related agreement, the Secretary or Administrator shall take such action against the obligor or any other parties liable thereunder that, in his discretion, may be required to protect the interests of the United States. Any suit may be brought in the name of the United States or in the name of the obligee and the obligee shall make available to the United States all records and evidence necessary to prosecute any such suit. The Secretary or Administrator shall have the right, in his discretion, to accept a conveyance of title to and possession of property from the obligor or other parties liable to the Secretary or Administrator, and may purchase the property for an amount not greater than the unpaid principal amount of such obligation and interest thereon. In the event that the Secretary or Administrator shall receive through the sale of property an amount of cash in excess of the unpaid principal amount of the obligation and unpaid interest on the obligation and the expenses of collection of those amounts, the Secretary or Administrator shall pay the excess to the obligor.
(f) Default response 
In the event of default on an obligation, the Secretary shall conduct operations under this subchapter in a manner which
(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 Appendix 1279a - Escrow fund

(a) Creation 
If the proceeds of an obligation guaranteed under this subchapter are to be used to finance the construction, reconstruction, or reconditioning of a vessel or vessels which will serve as security for the guarantee of the Secretary or Administrator, the Secretary or Administrator is authorized to accept and hold, in escrow under an escrow agreement with the obligor, a portion of the proceeds of all obligations guaranteed under this subchapter whose proceeds are to be so used which is equal to:
(i)  the excess of the principal amount of all obligations whose proceeds are to be so used over 75 per centum, or 871/2 per centum, whichever is applicable under section 12741 of this Appendix, of the amount paid by or for the account of the obligor for the construction, reconstruction, or reconditioning of the vessel or vessels;
(ii)  with such interest thereon, if any, as the Secretary or Administrator may require: Provided, That in the event the security for the guarantee of an obligation by the Secretary or Administrator relates both to a vessel or vessels to be constructed, reconstructed or reconditioned and to a delivered vessel or vessels, the principal amount of such obligation shall be prorated for purposes of this subsection (a) under regulations prescribed by the Secretary or Administrator.
(b) Disbursement prior to termination of escrow agreement 
The Secretary or Administrator shall, as specified in the escrow agreement, disburse the escrow fund to pay amounts the obligor is obligated to pay as interest on such obligations or for the construction, reconstruction, or reconditioning of the vessel or vessels used as security for the guarantee of the Secretary or Administrator under this subchapter, to redeem such obligations in connection with a refinancing under paragraph (4)[1] of section 1274 (a) of this Appendix or to pay to the obligor at such times as may be provided for in the escrow agreement any excess interest deposits, except that if payments become due under the guarantee prior to the termination of the escrow agreement, all amounts in the escrow fund at the time such payments become due (including realized income which has not yet been paid to the obligor) shall be paid into the Fund and (i), be credited against any amounts due or to become due to the Secretary or Administrator from the obligor with respect to the guaranteed obligations and (ii) to the extent not so required, be paid to the obligor.
(c) Disbursement upon termination of escrow agreement 
If payments under the guarantee have not become due prior to the termination of the escrow agreement, any balance of the escrow fund at the time of such termination shall be disbursed to prepay the excess of the principal of all obligations whose proceeds are to be used to finance the construction, reconstruction, or reconditioning of the vessel or vessels which serve or will serve as security for such guarantee over 75 per centum or 871/2 per centum, whichever is applicable under section 12741 of this Appendix, of the actual cost of such vessel or vessels to the extent paid, and to pay interest on such prepaid amount of principal, and the remainder of such balance of the escrow fund shall be paid to the obligor.
(d) Investment of fund 
The Secretary or Administrator may invest and reinvest all or any part of the escrow fund in obligations of the United States with such maturities that the escrow fund will be available as required for purposes of the escrow agreement.
(e) Payment of income 
Any income realized on the escrow fund shall, upon receipt, be paid to the obligor.
(f) Terms of escrow agreement 
The escrow agreement shall contain such other terms as the Secretary or Administrator may consider necessary to protect fully the interests of the United States.
(g) Payments required before disbursement 

(1) In general 
No disbursement shall be made under subsection (b) of this section 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 121/2 percent, whichever is applicable under section 1274 of this Appendix, of the aggregate actual cost of the vessel, as previously approved by the Secretary or Administrator. If the aggregate actual cost of the vessel has increased since the Secretarys or Administrators initial approval or if it increases after the first disbursement is permitted under this subsection, then no further disbursements shall be made under subsection (b) of this section 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 121/2 percent, as applicable, of the increase, as determined by the Secretary or Administrator, in the aggregate actual cost of the vessel. Nothing in this paragraph shall require the Secretary or Administrator to consent to finance any increase in actual cost unless the Secretary or Administrator determines that such an increase in the obligation meets all the terms and conditions of this subchapter or other applicable law.
(2) Documented proof of progress requirement 
The Secretary or Administrator 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 or Administrator 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.
[1] See References in Text note below.

46 USC Appendix 1279b - Deposit fund

(a) Establishment of deposit fund 
There is established in the Treasury a deposit fund for purposes of this section. The Secretary or Administrator may, in accordance with an agreement under subsection (b) of this section, deposit into and hold in the deposit fund cash belonging to an obligor to serve as collateral for a guarantee under this subchapter made with respect to the obligor.
(b) Agreement 

(1) In general 
The Secretary or Administrator and an obligor shall enter into 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 deposit fund established by subsection (a) of this section.
(2) Terms 
The agreement shall contain such terms and conditions as are required under this section and such additional terms as are considered by the Secretary or Administrator to be necessary to protect fully the interests of the United States.
(3) Security interest of United States 
The agreement shall include terms that grant to the United States a security interest in all amounts deposited into the deposit fund.
(c) Investment 
The Secretary or Administrator may invest and reinvest any part of the amounts in the deposit fund established by subsection (a) of this section in obligations of the United States with such maturities as ensure that amounts in the deposit fund will be available as required for purposes of agreements under subsection (b) of this section. Cash balances of the deposit 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 
The cash deposited into the deposit fund established by subsection (a) of this section may not be withdrawn without the consent of the Secretary or Administrator.
(2) Use of income 
Subject to paragraph (3), the Secretary or Administrator may pay any income earned on cash of an obligor deposited into the deposit fund in accordance with the terms of the agreement with the obligor under subsection (b) of this section.
(3) Retention against default 
The Secretary or Administrator may retain and offset any or all of the cash of an obligor in the deposit fund, and any income realized thereon, as part of the Secretarys or Administrators recovery against the obligor in case of a default by the obligor on an obligation.

46 USC Appendix 1279c - Ocean thermal energy conversion demonstration facilities and plantships

(a) Financing of construction, reconstruction, or reconditioning 
Pursuant to the authority granted under section 1273 (a) of this Appendix, the Administrator, upon such terms as he shall prescribe, may guarantee or make a commitment to guarantee, payment of the principal of and interest on an obligation which aids in financing, including reimbursement of an obligor for expenditures previously made for, construction, reconstruction, or reconditioning of a commercial demonstration ocean thermal energy conversion facility or plantship. Guarantees or commitments to guarantee under this subsection shall be subject to all the provisos, requirements, regulations, and procedures which apply to guarantees or commitments to guarantee made pursuant to section 1274 (a)(1)1 of this Appendix, except that
(1) no guarantees or commitments to guarantee may be made by the Administrator under this subsection before October 1, 1981;
(2) the provisions of subsection (d) of section 1274[1] of this Appendix shall apply to guarantees or commitments to guarantee for that portion of a commercial demonstration ocean thermal energy conversion facility or plantship not to be supported with appropriated Federal funds;
(3) guarantees or commitments to guarantee made pursuant to this section may be in an aggregate principal amount which does not exceed 871/2 percent of the actual cost or depreciated actual cost of the commercial demonstration ocean thermal energy conversion facility or plantship: Provided, That, if the commercial demonstration ocean thermal energy conversion facility or plantship is supported with appropriated Federal funds, such guarantees or commitments to guarantee may not exceed 871/2 percent of the aggregate principal amount of that portion of the actual cost or depreciated actual cost for which the obligor has an obligation to secure financing in accordance with the terms of the agreement between the obligor and the Department of Energy or other Federal agency; and
(4) the provisions of this section may be used to guarantee obligations for a total of not more than 5 separate commercial demonstration ocean thermal energy conversion facilities and plantships or a demonstrated 400 megawatt capacity, whichever comes first.
(b) Certification of reasonableness of risk 
A guarantee or commitment to guarantee shall not be made under this section unless the Secretary of Energy, in consultation with the Administrator, certifies to the Administrator that, for the ocean thermal energy conversion 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 Federal Government to a level which is reasonable. The Secretary of Energy must base his considerations on the following:
(1)  the successful demonstration of the technology to be used in such 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 such facility or plantship.
(c) OTEC Demonstration Fund 
A special subaccount in the Federal Ship Financing Fund, to be known as the OTEC Demonstration Fund, shall be established on October 1, 1981. The OTEC Demonstration Fund shall be used for obligation guarantees authorized under this section which do not qualify under other sections of this subchapter. Except as specified otherwise in this section, the operation of the OTEC Demonstration Fund shall be identical with that of the parent Federal Ship Financing Fund: except that, notwithstanding the provisions of section 1274 (g)1 of this Appendix,
(1)  all moneys received by the Administrator pursuant to sections 1271 through 1276 and 12791 of this Appendix with respect to guarantees or commitments to guarantee made pursuant to this section shall be deposited only in the OTEC Demonstration Fund, and
(2)  whenever there shall be outstanding any notes or other obligations issued by the Administrator pursuant to section 1275 (d) of this Appendix with respect to the OTEC Demonstration Fund, all moneys received by the Administrator pursuant to sections 1271 through 1276 and 12791 of this Appendix with respect to ocean thermal energy conversional facilities or plantships shall be deposited in the OTEC Demonstration Fund. Assets in the OTEC Demonstration Fund may at any time be transferred to the parent fund whenever and to the extent that the balance thereof exceeds the total guarantees or commitments to guarantee made pursuant to this section then outstanding, plus any notes or other obligations issued by the Administrator pursuant to section 1275 (d) of this Appendix with respect to the OTEC Demonstration Fund. The Federal Ship Financing Fund shall not be liable for any guarantees or commitments to guarantee issued pursuant to this section. The aggregate unpaid principal amount of the obligations guaranteed with the backing of the OTEC Demonstration Fund and outstanding at any one time shall not exceed $1,650,000,000.
(d) Notes and obligations 
The provisions of section 1275 (d) of this Appendix shall apply specifically to the OTEC Demonstration Fund as well as to the Fund: Provided, however, That any notes or obligations issued by the Administrator pursuant to section 1275 (d) of this Appendix with respect to the OTEC Demonstration Fund shall be payable solely from proceeds realized by the OTEC Demonstration Fund.
(e) Taxability of interest 
The interest on any obligation guaranteed under this section shall be included in gross income for purposes of chapter 1 of the Internal Revenue Code of 1986 [26 U.S.C. 1 et seq.].
[1] See References in Text note below.

46 USC Appendix 1279d - Loan guarantees for eligible export vessels

(a) Authority to guarantee obligations for eligible export vessels 
The Administrator may guarantee obligations for eligible export vessels
(1) in accordance with the terms and conditions of this subchapter applicable to loan guarantees in the case of vessels documented under the laws of the United States; or
(2) in accordance with such other terms as the Administrator determines to be more favorable than the terms otherwise provided in this subchapter and to be compatible with export credit terms offered by foreign governments for the sale of vessels built in foreign shipyards.
(b) Interagency council 

(1) Establishment; composition 
There is hereby established an interagency council for the purposes of this section. The council shall be composed of the Administrator, who shall be chairman of the Council,[1] the Secretary of the Treasury, the Secretary of State, the Assistant to the President for Economic Policy, the United States Trade Representative, and the President and Chairman of the United States Export-Import Bank, or their designees.
(2) Purpose of the council 
The council shall
(A) obtain information on shipbuilding loan guarantees, on direct and indirect subsidies, and on other favorable treatment of shipyards provided by foreign governments to shipyards in competition with United States shipyards; and
(B) provide guidance to the Administrator in establishing terms for loan guarantees for eligible export vessels under subsection (a)(2) of this section.
(3) Consultation with U.S. shipbuilders 
The council shall consult regularly with United States shipbuilders to obtain the essential information concerning international shipbuilding competition on which to set terms and conditions for loan guarantees under subsection (a)(2) of this section.
(4) Annual report 
Not later than January 31 of each year (beginning in 1995), the Administrator shall submit to Congress a report on the activities of the Administrator under this section during the preceding year. Each report shall include documentation of sources of information on assistance provided by the governments of other nations to shipyards in those nations and a summary of recommendations made to the Administrator during the preceding year regarding applications submitted to the Administrator during that year for loan guarantees under this subchapter for construction of eligible export vessels.
[1] So in original. Probably should not be capitalized.

46 USC Appendix 1279e - Loan guarantees for shipyard modernization and improvement

(a) General authority 
The Administrator, under section 1273 (a) of this Appendix and subject to the terms the Administrator shall prescribe, may guarantee or make a commitment to guarantee the payment of the principal of, and the interest on, an obligation for advanced shipbuilding technology and modern shipbuilding technology of a general shipyard facility located in the United States.
(b) Applicable laws, requirements, regulations, and procedures 
Guarantees or commitments to guarantee under this section are subject to the extent applicable to all the laws, requirements, regulations, and procedures that apply to guarantees or commitments to guarantee made under this subchapter, except that guarantees or commitments to guarantee made under this section may be in the aggregate principal amount that does not exceed 871/2 percent of the actual cost of the advanced shipbuilding technology or modern shipbuilding technology.
(c) Transfer of funds 
The Administrator may accept the transfer of funds from any other department, agency, or instrumentality of the United States Government and may use those funds to cover the cost (as defined in section 661a of title 2) of making guarantees or commitments to guarantee loans entered into under this section.
(d) Definitions 
For purposes of this section:
(1) 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 which 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) The term modern shipbuilding technology means the best available proven technology, techniques, and processes appropriate to enhancing the productivity of shipyards.
(3) The term general shipyard facility means
(A) for operations on land
(i) any structure or appurtenance thereto designed for the construction, repair, rehabilitation, refurbishment or rebuilding of any vessel (as defined in title 1) and including graving docks, building ways, ship lifts, wharves, and pier cranes;
(ii) the land necessary for any structure or appurtenance described in clause (i); and
(iii) equipment that is for the use in connection with any structure or appurtenance and that is necessary for the performance of any function referred to in subparagraph (A);
(B) for operations other than on land, any vessel, floating drydock or barge built in the United States and used for, equipped to be used for, or of a type that is normally used for activities referred to in subparagraph (A)(i) of this paragraph.

46 USC Appendix 1279f - Fisheries financing and capacity reduction

(a) Authorization for guarantees; issuance of obligations 
The Secretary or Administrator is authorized to 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 or Administrator and has agreed with the Secretary or Administrator to such conditions as the Secretary or Administrator deems necessary for this section to achieve the objective of the program and to protect the interest of the United States.
(b) Requirements for guaranteed obligations 
Any 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 subchapter, except with respect to provisions of this subchapter 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 or Administrator determines necessary for the program to which they relate;
(5) have as the exclusive source of repayment (subject to the proviso in subsection (c)(2) of this section) and as the exclusive payment security, the fishing fees established under the program; and
(6) at the discretion of the Secretary or Administrator be issued in the public market or sold to the Federal Financing Bank.
(c) Fishing capacity reduction fund; establishment; availability of amounts; deposit or investment 

(1) There is established in the Treasury of the United States a separate account which shall be known as the fishing capacity reduction fund (referred to in this section as the 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) Amounts in the fund shall be available, without appropriation or fiscal year limitation, to the Secretary or Administrator to pay the cost of the program, including payments to financial institutions to pay debt obligations incurred by entities under this section: Provided, That funds available for this purpose from other amounts available for the program may also be used to pay such debt obligations.
(3) Sums 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.
(d) Issuance of regulations 
The Secretary or Administrator is authorized and directed to issue such regulations as the Secretary or Administrator deems necessary to carry out this section.
(e) “Program” defined 
For the purposes of this section, the term program means a fishing capacity reduction program established under section 1861a of title 16.

46 USC Appendix 1279g - Direct loan obligations for fisheries financing and capacity reduction

(a) Notwithstanding any other provision of this subchapter, all obligations involving any fishing vessel, fishery facility, aquaculture facility, individual fishing quota, or fishing capacity reduction program issued under this subchapter after October 11, 1996, shall be direct loan obligations, for which the Secretary shall be the obligee, rather than obligations issued to obligees other than the Secretary and guaranteed by the Secretary. All direct loan obligations under this section shall be treated in the same manner and to the same extent as obligations guaranteed under this subchapter except with respect to provisions of this subchapter which by their nature can only be applied to obligations guaranteed under this subchapter.
(b) Notwithstanding any other provisions of this subchapter, the annual rate of interest which obligors shall pay on direct loan obligations under this section shall be fixed at two percent of the principal amount of such obligations outstanding plus such additional percent as the Secretary shall be obligated to pay as the interest cost of borrowing from the United States Treasury the funds with which to make such direct loans.

46 USC Appendix 1280 - Advances to fund

The Secretary or the Administrator of the Maritime Administration is authorized to advance to the Federal Ship Financing Fund from the Vessel operations revolving fund (46 U.S.C. 1241a),[1] such amounts as may be required for the payment, pursuant to section 1275 of this Appendix, of unpaid principal amounts of defaulted mortgages and loans and of unpaid interest thereon: Provided, That such advances shall be repaid to the Vessel operations revolving fund as soon as practicable consistent with the status of the Federal Ship Financing Fund: Provided further, That the total advances outstanding at any one time shall not exceed $10,000,000.
[1] Now 46 App. U.S.C. 1241a.

46 USC Appendix 1280a - Eligible shipyards

To be eligible to receive loan guarantee assistance under title XI of the Merchant Marine Act, 1936 [46 App. U.S.C. 1271 et seq.], a shipyard must be a private shipyard located in the United States.

46 USC Appendix 1280b - Annual report on program

The Administrator of the Maritime Administration shall report to Congress annually on the loan guarantee program under title XI of the Merchant Marine Act, 1936 (46 App. U.S.C. 1271 et seq.). The reports 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 XII - WAR RISK INSURANCE

46 USC Appendix 1281 - Definitions

As used in this subchapter
(a) The term American vessels includes any vessel registered, enrolled, or licensed under the laws of the United States and any undocumented vessel owned or chartered by or made available to the United States or any department or agency thereof and any tug or barge or other watercraft (documented or undocumented) owned by a citizen of the United States used in essential water transportation or in the fishing trade or industry, except watercraft used exclusively in or for sport fishing.
(b) The term transportation in the water-borne commerce of the United States includes the operation of vessels in the fishing trade or industry, except watercraft used exclusively in or for sport fishing.
(c) The term war risks includes to such extent as the Secretary may determine
(1) all or any part of any loss that is excluded from marine insurance coverage under a free of capture or seizure clause, or under analogous clauses; and
(2) other losses from hostile acts, including confiscation, expropriation, nationalization, or deprivation.
(d) The term citizen of the United States includes corporations, partnerships, and associations existing, authorized, or organized under the laws of the United States or any State, district, Territory, or possession thereof.
(e) The term Secretary shall mean the Secretary of Transportation.

46 USC Appendix 1282 - Authority to provide insurance; consideration of risk

(a) Authorization, approval, and consultation; criteria 
The Secretary, with the approval of the President, and after such consultation with interested agencies of the Government as the President may require, may provide insurance and reinsurance against loss or damage by war risks in the manner and to the extent provided in this subchapter, whenever it appears to the Secretary that such insurance adequate for the needs of the water-borne commerce of the United States cannot be obtained on reasonable terms and conditions from companies authorized to do an insurance business in a State of the United States.
(b) Consideration of risk 
Any insurance or reinsurance issued under any of the provisions of this subchapter shall be based, insofar as practicable, upon consideration of the risk involved.
(c) Condition of availability in time of war or national emergency 
Insurance and reinsurance for vessels may be provided by the Secretary under this subchapter only on the condition that such vessels be available for the United States in time of war or national emergency.

46 USC Appendix 1283 - Persons, property, and interests insurable

The Secretary may provide the insurance and reinsurance authorized by section 1282 of this Appendix with respect to the following persons, property, or interest:
(a) American vessels, including vessels under construction, foreign-flag vessels owned by citizens of the United States or engaged in transportation in the water-borne commerce of the United States or in such other transportation by water or such other services as may be deemed by the Secretary to be in the interest of the national defense or the national economy of the United States, when so engaged. In determining whether to grant such insurance or reinsurance to foreign-flag vessels, the Secretary shall further consider the characteristics, the employment, and the general management of the vessel by the owner or charterer. American- and foreign-flag vessels so insured or reinsured shall be subject to such vessel location reporting requirements as the Secretary may establish by regulation.
(b) Cargoes shipped or to be shipped on any such vessels, including shipments by express or registered mail; cargoes owned by citizens or residents of the United States, its Territories or possessions; cargoes imported to, or exported from, the United States, its Territories or possessions, and cargoes sold or purchased by citizens or residents of the United States, its Territories or possessions, under contracts of sale or purchase by the terms of which the risk of loss by war risks or the obligation to provide insurance against such risks is assumed by or falls upon a citizen or resident of the United States, its Territories or possessions; cargoes shipped between ports in the United States, or between ports in the United States and its Territories and possessions, or between ports in such Territories or possessions. For the purposes of this subchapter, the term cargo shall include loaded or empty containers located aboard such vessels.
(c) The disbursements, including advances to masters and general average disbursements, and freight and passage moneys of such vessels.
(d) The personal effects of the masters, officers, and crews of such vessels, and of other persons transported on such vessels.
(e) Masters, officers, members of the crews of such vessels and other persons employed or transported thereon against loss of life, injury, detention by an enemy of the United States following capture.
(f) Statutory or contractual obligations or other liabilities of such vessels or of the owner or charterer of such vessels of the nature customarily covered by insurance.

46 USC Appendix 1284 - Risks other than war risks

Whenever the Secretary shall insure any risk included under subsections (d), (e), or (f) of section 1283 of this Appendix, insofar as it concerns liabilities relating to the masters, officers, and crews of such vessels or to other persons transported thereon, the insurance on such risks may include risks other than war risks to the extent that the Secretary determines to be necessary or advisable.

46 USC Appendix 1285 - Insurance of property of Government departments and agencies

(a) Any department or agency of the United States may, with the approval of the President, procure from the Secretary any of the insurance as provided for in this subchapter, except as provided in sections 17302 and 17303 (a) and (b) of title 40.
(b) The Secretary is authorized with such approval to provide such insurance at the request of the Secretary of Defense, and such other agencies as the President may prescribe, without premium in consideration of the agreement of the Secretary of Defense or such agency to indemnify the Secretary against all losses covered by such insurance, and the Secretary of Defense and such other agencies are authorized to execute such indemnity agreement with the Secretary. The signature of the President (or of an official designated by the President) on the agreement shall be treated as an expression of the approval required under section 1282 (a) of this Appendix to provide the insurance.

46 USC Appendix 1286 - Liability insurance for persons performing services or providing facilities for vessels

The Secretary is authorized to provide insurance for any person who performs services or provides facilities for or with respect to any American- or foreign-flag vessel, public or private, against legal liabilities that may be incurred by such person in connection with the performance of such services or the providing of such facilities. Such insurance shall not be issued against liability to employees in respect of employers liability or workmens compensation. No such insurance shall be provided unless, in the opinion of the Secretary, such insurance is required in the prosecution of the war effort or in connection with national defense and cannot be obtained at reasonable rates or upon reasonable conditions from approved companies authorized to do insurance business in any State of the United States.

46 USC Appendix 1287 - Reinsurance; rates; allowances to insurance carriers

(a) To the extent that he is authorized by this subchapter to provide marine, war risk, and liability insurance, the Secretary may reinsure, in whole or in part, any company authorized to do an insurance business in any State of the United States. The Secretary may reinsure with, or cede or retrocede to, any such company any insurance or reinsurance provided by the Secretary in accordance with the provisions of this subchapter.
(b) Reinsurance shall not be provided by the Secretary at rates less than nor obtained by the Secretary at rates more than the rates established by the Secretary on the same or similar risks or the rates charged by the insurance carrier for the insurance so reinsured whichever is most advantageous to the Secretary, except that the Secretary may make to the insurance carrier such allowances for expenses on account of the cost of services rendered or facilities furnished as he deems reasonably to accord with good business practice, but such allowance to the carrier shall not provide for any payment by the carrier on account of solicitation for or stimulation of insurance business.

46 USC Appendix 1288 - Insurance fund; investments; appropriations

(a) The Secretary shall create an insurance fund in the Treasury to enable him to carry out the provisions of this subchapter. Moneys appropriated by Congress to carry out the provisions of this subchapter and all moneys received from premiums, salvage, or other recoveries and all receipts in connection with this subchapter shall be deposited in the Treasury to the credit of such fund. 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. Such investments shall be made by the Secretary of the Treasury in public debt securities of the United States, 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 United States of comparable maturity. Upon the request of the Secretary of Transportation, the Secretary of the Treasury may invest or reinvest all or any part of the fund in securities of the United States or in securities guaranteed as to principal and interest by the United States. The interest and benefits accruing from such securities shall be deposited to the credit of the fund.
(b) Such sums as shall be necessary to carry out the provisions of this subchapter are authorized to be appropriated to such fund.

46 USC Appendix 1288a - Transfer of funds from Vessel Operations Revolving Fund

For the war-risk insurance revolving fund, authorized by this subchapter, the Secretary of Transportation is authorized to transfer to said fund, at such times as it may become necessary in order to place into effect the insurance coverage authorized by this subchapter, and in such amounts as he may determine, not to exceed a total of $10,000,000 from the Vessel Operations Revolving Fund.

46 USC Appendix 1289 - Administrative provisions

(a) Issuance of policies, rules, and regulations; settlement of claims; valuation; rejection and review of valuation 

(1) The Secretary, in the administration of this subchapter, may issue such policies, rules, and regulations as he deems proper and may adjust and pay losses, compromise and settle claims, whether in favor of or against the United States and pay the amount of any judgment rendered against the United States in any suit, or the amount of any settlement agreed upon, in respect of any claim under insurance authorized by this subchapter.
(2) In respect of hull insurance, the valuation in the policy for actual or constructive total loss of the vessel insured shall be a stated valuation (exclusive of National Defense features paid for by the Government) determined by the Secretary which shall not exceed the amount that would be payable if the vessel had been requisitioned for title under section 1242 (a) of this Appendix at the time of the attachment of the insurance under said policy: Provided, That the insured shall have the right within sixty days after the attachment of the insurance under said policy, or within sixty days after determination of such valuation by the Secretary, whichever is later, to reject such valuation, and shall pay, at the rate provided for in said policy, premiums upon such asserted valuation as the insured shall specify at the time of rejection, but such asserted valuation shall not operate to the prejudice of the Government in any subsequent action on the policy. In the event of the actual or constructive total loss of the vessel, if the insured has not rejected such valuation the amount of any claim therefor which is adjusted, compromised, settled, adjudged, or paid shall not exceed such stated amount, but if the insured has so rejected such valuation, the insured shall be paid as a tentative advance only, 75 per centum of such valuation so determined by the Secretary and shall be entitled to sue the United States in a court having jurisdiction of such claims to recover such valuation as would be equal to the just compensation which such court determines would have been payable if the vessel had been requisitioned for title under section 1242 (a) of this Appendix at the time of the attachment of the insurance under said policy: Provided, That in the event of an election by the insured to reject the stated valuation fixed by the Secretary and to sue in the courts, the amount of the judgment will be payable without regard to the limitations contained in section 1242–11 of this Appendix, although the excess of any amounts advanced on account of just compensation over the amount of the court judgment will be required to be refunded. In the event of such court determination, premiums under the policy shall be adjusted on the basis of the valuation as finally determined and of the rate provided for in said policy.
(b) Forms and policies; rates; fees 
The Secretary may prescribe and change forms and policies, and fix, adjust, and change the amounts insured and rates of premium provided for in this subchapter. The Secretary may charge and collect an annual fee in an amount calculated to cover the expenses of processing applications for insurance, the employment of underwriting agents, and the appointment of experts.
(c) Commercial practice controlling; limitation on fees 
The Secretary, in administering this subchapter, may exercise his powers, perform his duties and functions, and make his expenditures, in accordance with commercial practice in the marine insurance business. Except as authorized in subsection (d) of this section, no insurance broker or other person acting in a similar intermediary capacity shall be paid any fee or other consideration by the Secretary by virtue of his participation in arranging any insurance wherein the Secretary directly insures any of the risk thereof.
(d) Underwriting agents 
The Secretary may, and whenever he finds it practical to do so shall, employ domestic companies or groups of domestic companies authorized to do a marine insurance business in any State of the United States, to act as his underwriting agent. The Secretary may allow such companies or groups of companies fair and reasonable compensation for servicing insurance written by such companies or groups of companies as underwriting agent for the Secretary. The services of such underwriting agents may be utilized in the adjustment of claims under insurance provided by this subchapter, but no claim shall be paid unless and until it has been approved by the Secretary. Such compensation may include an allowance for expenses reasonably incurred by such agent, but such allowance shall not include any payment by such agent on account of solicitation for or stimulation of insurance business.
(e) Employment of marine insurance experts 
The Secretary without regard to the laws, rules, or regulations relating to the employment of employees of the United States may appoint and prescribe the duties of such number of experts in marine insurance as he deems necessary under this subchapter.
(f) Utilization of services of other Government agencies 
The Secretary with the consent of any executive department, independent establishment, or other agency of the Government, including any field service thereof, may avail himself of the use of information, services, facilities, officers, and employees thereof in carrying out the provisions of this subchapter.
[1] See References in Text note below.

46 USC Appendix 1290 - Seamens rights unaffected

This subchapter shall not affect rights of seamen under existing law.

46 USC Appendix 1291 - Reports to Congress

The Secretary shall include in his annual report to Congress a detailed statement of all activities and of all expenditures and receipts under this subchapter for the period covered by such report.

46 USC Appendix 1292 - Actions on claims for losses; jurisdiction of courts; limitation of actions

Upon disagreement as to a loss insured under this subchapter, suit may be maintained against the United States in admiralty in the district in which the claimant or his agent resides, and this remedy shall be exclusive of any other action by reason of the same subject matter against any agent or employee of the United States employed or retained under this subchapter. If the claimant has no residence in the United States, suit may be brought in the district court of the District of Columbia or in such other district court in which the Attorney General of the United States agrees to accept service. Such suits shall be heard and determined under the provisions of the Act of March 9, 1920, as amended (known as the Suits in Admiralty Act) [46 App. U.S.C. 741 et seq.]. All persons having or claiming or who might have an interest in such insurance, may be made parties either initially or upon the motion of either party. In any case where the Secretary acknowledges the indebtedness of the United States on account of such insurance, and there is a dispute as to the persons entitled to receive payment, the United States may bring an action in the nature of a bill of interpleader against such parties, in the District Court for the District of Columbia, or in the district court of the district in which any such person resides. In such actions any party, if not a resident of or found within the district, may be brought in by order of court served in such reasonable manner as the court directs. If the court is satisfied that persons unknown might assert a claim on account of such insurance, it may direct service upon such persons unknown by publication in the Federal Register. Judgment in any such suit shall discharge the United States from further liability to any parties to such action, and to all persons when service by publication upon persons unknown is directed by the court. The period within which suits may be commenced contained in said Suits in Admiralty Act shall, if claim be filed therefor within such period, be suspended from such time of filing until the claim shall have been administratively denied by the Secretary and for sixty days thereafter: Provided, however, That such claim shall be deemed to have been administratively denied if not acted upon within six months after the time of filing, unless the Secretary for good cause shown shall have otherwise agreed with the claimant.

46 USC Appendix 1293 - Additional insurance with other underwriters

A person having an insurable interest in a vessel may, with the approval of the Secretary, insure with other underwriters in an amount in excess of the amount insured with the Secretary of Transportation, and in that event the Secretary of Transportation shall not be entitled to the benefit of such insurance.

46 USC Appendix 1294 - Expiration of authority to provide insurance

The authority of the Secretary to provide insurance and reinsurance under this subchapter shall expire December 31, 2010.

TITLE 46 - US CODE - SUBCHAPTER XIII - MARITIME EDUCATION AND TRAINING

46 USC Appendix 1295 - Congressional declaration of 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. In furtherance of this policy
(1) the Secretary of Transportation is authorized to take the steps necessary to provide for the education and training of citizens of the United States who are capable of providing for the safe and efficient operation of the merchant marine of the United States at all times and as a naval and military auxiliary in time of war or national emergency; and
(2) the Secretary of Navy, in cooperation with the Maritime Administrator and the head of each State maritime academy, shall assure that the training of future merchant marine officers at the United States Merchant Marine Academy and at the State maritime academies includes programs for naval science training in the operation of merchant marine vessels as a naval and military auxiliary and that naval officer training programs for the training of future officers, insofar as possible, be maintained at designated maritime academies consistent with United States Navy standards and needs.

46 USC Appendix 1295a - Definitions

For purposes of this subchapter
(1) the term Secretary means the Secretary of Transportation;
(2) the term Academy means the United States Merchant Marine Academy located at Kings Point, New York which is maintained under section 1295b of this Appendix;
(3) the term State maritime academy means any maritime academy or college which is assisted under section 1295c of this Appendix and which is sponsored by any State or territory of the United States or, in the case of a regional maritime academy or college, sponsored by any group of States or territories of the United States, or both;
(4) the term merchant marine officer means any person who holds a license issued by the United States Coast Guard which authorizes service
(A) as a master, mate, or pilot on board any vessel of 1,000 gross tons or more as measured under section 14502 of title 46, or an alternate tonnage measured under section 14302 of that title as prescribed by the Secretary under section 14104 of that title which is documented under the laws of the United States and which operates on the oceans or on the Great Lakes; or
(B) as an engineer officer on board any vessel propelled by machinery of 4,000 horsepower or more which is documented under the laws of the United States; and
(5) the term cost of education provided means the financial costs incurred by the Federal Government for providing training or financial assistance to students at the United States Merchant Marine Academy and the State maritime academies, including direct financial assistance, room, board, classroom academics, and other training activities.

46 USC Appendix 1295b - Maintenance of Academy

(a) Duty of Secretary 
The Secretary shall maintain the Academy for providing instruction to individuals to prepare them for service in the merchant marine of the United States.
(b) Nomination and appointment of cadets; designation and licensing of individuals from Trust Territory of Pacific Islands, Western Hemisphere nations and nations other than United States 

(1) Each Senator and Member of the House of Representatives, the Panama Canal Commission, the Governor of the Northern Mariana Islands, and the Delegate from American Samoa may nominate for appointment as a cadet at the Academy any individual who is
(A) a citizen of the United States or a national of the United States; and
(B) a resident of the State represented by such Senator if the individual is nominated by a Senator, a resident of the State in which the congressional district represented by such Member of the House of Representatives is located if the individual is nominated by a Member of the House of Representatives (or a resident of Guam, the Virgin Islands, the District of Columbia, the Commonwealth of Puerto Rico, or American Samoa if the individual is nominated by a Member of the House of Representatives representing such area), a resident of the area or installation described in paragraph (3)(A)(ii), or a son or daughter of the personnel described in such paragraph, if the individual is nominated by the Panama Canal Commission, or a resident of the Northern Mariana Islands if the individual is nominated by the Governor of the Northern Mariana Islands.
(2) 
(A) The Secretary shall establish minimum requirements for the individuals nominated pursuant to paragraph (1) and shall establish a system of competition for the selection of individuals qualified for appointment as cadets at the Academy.
(B) Such system of competition shall determine the relative merit of appointing each such individual to the Academy through the use of competitive examinations, an assessment of the academic background of the individual, and such other factors as are considered effective indicators of motivation and the probability of successful completion of training at the Academy.
(3) 
(A) Qualified individuals nominated pursuant to paragraph (1) shall be selected each year for appointment as cadets at the Academy to fill positions allocated as follows:
(i) Positions shall be allocated each year for individuals who are residents of each State and are nominated by the Members of the Congress from such State in proportion to the representation in Congress from that State.
(ii) Two positions shall be allocated each year for individuals nominated by the Panama Canal Commission who are sons or daughters of residents of any area or installation located in the Republic of Panama which is made available to the United States pursuant to 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 sons or daughters of personnel of the United States Government and the Panama Canal Commission residing in the Republic of Panama, nominated by the Panama Canal Commission.
(iii) One position shall be allocated each year for an individual who is a resident of Guam and is nominated by the Delegate to the House of Representatives from Guam.
(iv) One position shall be allocated each year for an individual who is a resident of the Virgin Islands and is nominated by the Delegate to the House of Representatives from the Virgin Islands.
(v) One position shall be allocated each year for an individual who is a resident of the Northern Mariana Islands and is nominated by the Governor of the Northern Mariana Islands.
(vi) One position shall be allocated each year for an individual who is a resident of American Samoa and is nominated by the Delegate to the House of Representatives from American Samoa.
(vii) Four positions shall be allocated each year for individuals who are residents of the District of Columbia and are nominated by the Delegate to the House of Representatives from the District of Columbia.
(viii) One position shall be allocated each year for an individual who is a resident of the Commonwealth of Puerto Rico and is nominated by the Resident Commissioner to the United States from Puerto Rico.
(B) The Secretary shall make appointments of qualified individuals to fill the positions allocated pursuant to subparagraph (A) (from among the individuals nominated pursuant to paragraph (1)) in the order of merit determined pursuant to paragraph (2)(B) among residents of each State, Guam, the Virgin Islands, the Northern Mariana Islands, American Samoa, the District of Columbia, and the Commonwealth of Puerto Rico and among individuals nominated by the Panama Canal Commission.
(C) If positions are not filled after the appointments are made pursuant to subparagraph (B), the Secretary shall make appointments of qualified individuals to fill such positions from among all individuals nominated pursuant to paragraph (1) in the order of merit determined pursuant to paragraph (2)(B) among all such individuals.
(D) In addition, the Secretary may each year appoint without competition as cadets at the Academy not more than 40 qualified individuals possessing qualities deemed to be of special value to the Academy. In making such appointments the Secretary shall attempt to achieve a national demographic balance at the Academy.
(E) No preference shall be granted in selecting individuals for appointment as cadets at the Academy because one or more members of the immediate family of any such individual are alumni of the Academy.
(F) Any citizen of the United States selected for appointment pursuant to this paragraph must agree to apply for midshipman status in the United States Navy Reserve (including the Merchant Marine Reserve, United States Navy Reserve) before being appointed as a cadet at the Academy.
(G) For purposes of this paragraph, the term State means the several States.
(4) 
(A) In addition to paragraph (3), the Secretary may permit, upon designation by the Secretary of the Interior, individuals from the Trust Territory of the Pacific Islands to receive instruction at the Academy.
(B) Not more than 4 individuals may receive instruction under this paragraph at any one time.
(C) Any individual receiving instruction under the authority of this paragraph shall receive the same allowances and shall be subject to the same rules and regulations governing admission, attendance, discipline, resignation, discharge, dismissal, and graduation as cadets at the Academy appointed from the United States, subject to such exceptions as shall be jointly agreed upon by the Secretary and the Secretary of the Interior.
(5) 
(A) In addition to paragraphs (3) and (4), the President may designate individuals from nations located in the Western Hemisphere other than the United States to receive instruction at the Academy.
(B) Not more than 12 individuals may receive instruction under this paragraph at any one time, and not more than 2 individuals receiving instruction under this paragraph at any one time may be from the same nation.
(C) Any individual receiving instruction under this subparagraph is entitled to the same allowances and shall be subject to the same rules and regulations governing admission, attendance, discipline, resignation, discharge, dismissal, and graduation as cadets at the Academy appointed from the United States.
(6) 
(A) In addition to paragraphs (3), (4), and (5), the Secretary may permit, upon approval of the Secretary of State, individuals from nations other than the United States to receive instruction at the Academy.
(B) Not more than 30 individuals may receive instruction under this paragraph at any one time.
(C) The Secretary shall insure that each nation from which an individual comes to receive instruction under this paragraph shall reimburse the Secretary for the cost of such instructions (including the same allowances as received by cadets at the Academy appointed from the United States), as determined by the Secretary.
(D) Any individual receiving instruction at the Academy under this paragraph shall be subject to the same rules and regulations governing admission, attendance, discipline, resignation, discharge, dismissal, and graduation as cadets at the Academy appointed from the United States.
(7) 
(A) The Secretary may permit, upon approval of the Secretary of State, additional individuals from the Republic of Panama to receive instruction at the Academy, in addition to those individuals appointed under paragraphs (3), (4), (5), and (6) of this subsection.
(B) The Secretary shall be reimbursed for the cost of that instruction (including the same allowances as received by cadets at the Academy appointed from the United States) as determined by the Secretary.
(C) An individual receiving instructions at the Academy under this paragraph shall be subject to the same rules and regulations governing admission, attendance, discipline, resignation, discharge, dismissal, and graduation as cadets at the Academy appointed from the United States.
(8) An individual appointed as a cadet under paragraph (3), or receiving instruction under paragraph (4), (5), (6), or (7) of this subsection is not entitled to hold a license authorizing service on a merchant marine vessel of the United States solely by reason of graduation from the Academy.
(c) Appointment of cadet as midshipman in United States Navy Reserve; rights and privileges 

(1) Any citizen of the United States who is appointed as a cadet at the Academy shall be appointed by the Secretary of the Navy as a midshipman in the United States Navy Reserve (including the Merchant Marine Reserve, United States Navy Reserve).
(2) The Secretary of the Navy shall provide for cadets of the Academy who are midshipmen in the United States Navy Reserve to be issued an identification card (referred to as a military ID card) and to be 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) The Secretary of the Navy shall carry out paragraphs (1) and (2) in coordination with the Secretary.
(d) Uniforms, textbooks, and transportation allowances 
The Secretary shall provide to any cadet at the Academy all required uniforms and textbooks and allowances for transportation (including reimbursement of traveling expenses) while traveling under orders as a cadet of the Academy.
(e) Commitment agreements 

(1) Each individual appointed as a cadet at the Academy after the date occurring 6 months after October 1, 1981, who is a citizen of the United States, shall as a condition of appointment to the Academy sign an agreement committing such individual
(A) to complete the course of instruction at the Academy;
(B) to fulfill the requirements for a license as an officer in the merchant marine of the United States on or before the date of graduation from the Academy of such individual;
(C) to maintain a valid license as an officer in the merchant marine of the United States for at least 6 years following the date of graduation from the Academy of such individual, accompanied by the appropriate national and international endorsements and certification as required by the United States Coast Guard for service aboard vessels on domestic and international voyages;
(D) to apply for an appointment as, to accept if tendered an appointment as, and to serve as a commissioned officer in the United States Navy Reserve (including the Merchant Marine Reserve, United States Navy Reserve), the United States Coast Guard Reserve, or any other Reserve unit of an armed force of the United States, for at least 6 years following the date of graduation from the Academy of such individual;
(E) to serve the foreign and domestic commerce and the national defense of the United States for at least 5 years following the date of graduation from the Academy
(i) as a merchant marine officer serving on vessels documented under the laws of the United States or on vessels owned and operated by the United States or by any State or territory of the United States;
(ii) 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 clause (i) is not available to such individual;
(iii) 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 other maritime-related employment with the Federal Government which serves the national security interests of the United States, as determined by the Secretary; or
(iv) by combining the services specified in clauses (i), (ii), and (iii); and
(F) to report to the Secretary on the compliance by the individual to this paragraph.
(2) 
(A) If the Secretary determines that any individual who has attended the Academy for not less than 2 years has failed to fulfill the part of the agreement required by paragraph (1)(A), such individual may be ordered by the Secretary of Defense to active duty in one of the armed forces of the United States to serve for a period of time not to exceed 2 years. In cases of hardship as determined by the Secretary, the Secretary may waive this provision in whole or in part.
(B) If the Secretary of Defense is unable or unwilling to order an individual to active duty under subparagraph (A), 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 may recover from the individual the cost of education provided by the Federal Government.
(3) 
(A) If the Secretary determines that an individual has failed to fulfill any part of the agreement required by paragraph (1), as described in paragraph (1)(B), (C), (D), (E), or (F), such individual may be ordered to active duty to serve a period of time not less than 3 years and not more than the unexpired portion, as determined by the Secretary, of the service required by paragraph (1)(E). The Secretary, in consultation with the Secretary of Defense, shall determine in which service the individual shall be ordered to active duty to serve such period of time. In cases of hardship, as determined by the Secretary, the Secretary may waive this provision in whole or in part.
(B) If the Secretary of Defense is unable or unwilling to order an individual to active duty under subparagraph (A), 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 may recover from the individual the cost of education provided and may reduce the amount to be recovered from such individual to reflect partial performance of service obligations and such other factors as the Secretary determines merit such a reduction.
(4) To aid in the recovery of the cost of education provided by the Federal Government pursuant to a commitment agreement under this section, the Secretary may request the Attorney General to begin court proceedings, and the Secretary may make use of the Federal debt collection procedures in chapter 176 of title 28 or other applicable administrative remedies.
(5) The Secretary may defer the service commitment of any individual pursuant to subparagraph (E) of paragraph (1) (as specified in the agreement required by such paragraph) for a period of not more than 2 years if such individual is engaged in a graduate course of study approved by the Secretary, except that any deferment of service as a commissioned officer pursuant to paragraph (1)(E) must be approved by the Secretary of the military department (including the Secretary of Commerce with respect to the National Oceanic and Atmospheric Administration) which has jurisdiction over such service.
(f) Places of training 
The Secretary may provide for the training of cadets at the Academy
(1) on vessels owned or subsidized by the United States;
(2) on other vessels documented under the laws of the United States if the owner of any such vessel cooperates in such use; and
(3) in shipyards or plants and with any industrial or educational organizations.
(g) Degrees awarded 

(1) Bachelor’s degree 
The Superintendent of the Academy may confer the degree of bachelor of science upon any individual who has met the conditions prescribed by the Secretary and who, if a citizen of the United States, has passed the examination for a merchant marine officers license. No individual may be denied a degree under this subsection because the individual is not permitted to take such examination solely because of physical disqualification.
(2) Master’s degree 
The Superintendent of the Academy may confer a masters degree upon any individual who has met the conditions prescribed by the Secretary. Any masters degree program may be funded through non-appropriated funds. In order to maintain the appropriate academic standards, the program shall be accredited by the appropriate accreditation body. The Secretary may make regulations necessary to administer such a program.
(h) Board of Visitors 

(1) A Board of Visitors to the Academy shall be established, for a term of two years commencing at the beginning of each Congress, to visit the Academy annually on a date determined by the Secretary and to make recommendations on the operation of the Academy.
(2) The Board shall be composed of
(A) 2 Senators appointed by the chairman of the Commerce, Science, and Transportation Committee of the Senate;
(B) 3 Members of the House of Representatives appointed by the chairman of the Merchant Marine and Fisheries Committee 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 chairman of the Commerce, Science, and Transportation Committee of the Senate and the chairman of the Merchant Marine and Fisheries Committee of the House of Representatives, as ex officio members.
(3) Whenever a member of the Board is unable to attend the annual meeting provided in paragraph (1), another individual may be appointed in the manner provided by paragraph (2) as a substitute for such member.
(4) The chairmen of the Commerce, Science, and Transportation Committee of the Senate and the Merchant Marine and Fisheries Committee of the House of Representatives may designate staff members of such committees to serve without reimbursement as staff for the Board.
(5) While away from their homes or regular places of business in the performance of services for the Board, members of the Board and any staff members designated under paragraph (4) shall be allowed travel expenses, including per diem in lieu of subsistence, in the same manner as persons employed intermittently in the Government service are allowed expenses under section 5703 of title 5.
(i) Advisory Board 

(1) An Advisory Board to the 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.
(2) The Advisory Board shall be composed of not more than 7 persons of distinction in education and other fields relating to the Academy who shall be appointed by the Secretary for terms not to exceed 3 years and may be reappointed.
(3) The Secretary shall appoint a chairman from among the members of the Advisory Board.
(4) While away from their homes or regular places of business in the performance of service for the Advisory Board, members of the Advisory Board shall be allowed travel expenses, including per diem in lieu of subsistence, in the same manner as persons employed intermittently in the Government service are allowed expenses under section 5703 of title 5.
(5) The Federal Advisory Committee Act (5 App. U.S.C. 1 et seq.) shall not apply to the Advisory Board established pursuant to this subsection.
(j) Limitation on charges and fees for attendance 

(1) Except as provided in paragraph (2), no charge or fee for tuition, room, or board for attendance at the Academy may be imposed unless the charge or fee is specifically authorized by a law enacted after October 5, 1994.
(2) The prohibition specified in paragraph (1) 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 paragraph.

46 USC Appendix 1295c - State maritime academies

(a) Cooperation and assistance 
The Secretary shall cooperate with and assist any State maritime academy in providing instruction to individuals to prepare them for service in the merchant marine of the United States.
(b) Regional maritime academies 
The Governors of all States or territories of the United States, or both, cooperating to sponsor a regional maritime academy shall designate in writing one State or territory of the United States, from among the sponsoring States or territories, or both, to conduct the affairs of such regional maritime academy. Any regional maritime academy shall be eligible for assistance from the Federal Government on the same basis as any State maritime academy sponsored by a single State or territory of the United States.
(c) Training vessels 

(1) 
(A) The Secretary may furnish for training purposes any suitable vessel under the control of the Secretary or provided under subparagraph (B), or construct and furnish a suitable vessel if such a vessel is not available, to any State maritime academy meeting the requirements of subsection (f)(1) of this section. Any such vessel
(i) shall be repaired, reconditioned, and equipped (including supplying all apparel, charts, books, and instruments of navigation) as necessary for use as a training ship;
(ii) shall be furnished to such State maritime academy only after application for such vessel is made in writing by the Governor of the State or territory sponsoring such State maritime academy or, with respect to a regional maritime academy the Governor of the State or territory designated pursuant to subsection (b) of this section;
(iii) shall be furnished to such State maritime academy only if a suitable port for the safe mooring of such vessel is available while it is being used by such academy;
(iv) shall be maintained in good repair by the Secretary; and
(v) shall remain the property of the United States.
(B) Any department or agency of the United States may provide to the Secretary to be furnished to any State maritime academy any vessel (including equipment) which is suitable for the purposes of this paragraph and which can be provided without detriment to the service to which such vessel is assigned.
(2) 
(A) The Secretary shall, subject to the availability of appropriations, pay to each State maritime academy the amount of the costs of all fuel consumed by any vessel furnished under paragraph (1) while such vessel is being used for training purposes by such academy.
(B) The amount of the payment to a State maritime academy under this paragraph shall not exceed
(i) $100,000 for fiscal year 2006;
(ii) $200,000 for fiscal year 2007; and
(iii) $300,000 for fiscal year 2008 and each fiscal year thereafter.
(3) 
(A) The Secretary may provide for the training of individuals attending a State maritime academy
(i) on vessels owned or subsidized by the United States;
(ii) on other vessels documented under the laws of the United States if the owner of any such vessel cooperates in such use; and
(iii) in shipyards or plants and with any industrial or educational organizations.
(B) While traveling under orders for purposes of receiving training under this paragraph, any individual who is attending a State maritime academy shall receive from the Secretary allowances for transportation (including reimbursement of traveling expenses) in accordance with any regulations promulgated by the Secretary.
(d) Annual payments 

(1) 
(A) The Secretary may enter into an agreement, which shall be effective for not more than 4 years, with one State maritime academy (not including regional maritime academies) located in each State or territory of the United States which meets the requirements of subsection (f)(1) of this section, and with each regional maritime academy which meets the requirements of subsection (f)(1) of this section, to make annual payments to each such academy for the maintenance and support of such academy.
(B) Subject to subparagraph (C), the annual payment to such State maritime academy 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, and to such regional maritime academy shall be at least equal to the amount given the academy by all States and territories cooperating to sponsor the academy.
(C) The amount under subparagraph (B) may not be more than $25,000, except that the amount shall be
(i) $100,000 to such State maritime academy if the academy meets the condition set forth in subsection (f)(2) of this section; or
(ii) $300,000 for fiscal year 2006, $400,000 for fiscal year 2007, and $500,000 for fiscal year 2008 and each fiscal year thereafter to such regional maritime academy if the academy meets the condition set forth in subsection (f)(2) of this section.
(2) 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.
(e) Detailing of personnel 
Upon the request of the Governor of any State or territory, the President may detail, without reimbursement, any of the personnel of the United States Navy, the United States Coast Guard, or the United States Maritime Service to any State maritime academy to serve as superintendents, professors, lecturers, or instructors at such academy.
(f) Conditions to receiving payments or use of vessels 

(1) As a condition to receiving any payment or the use of any vessel under this section, any State maritime academy shall
(A) 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;
(B) agree in writing to conform to such standards for courses, training facilities, admissions, and instruction as are established by the Secretary after consultation with the superintendents of the State maritime academies; and
(C) 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 shall pass the examination administered by the Coast Guard required for issuance of a license under section 7101 of title 46.
(2) As a condition to receiving an annual payment of any amount in excess of $25,000 under subsection (d) of this section, a State maritime academy shall agree to admit to such academy each year a number of individuals who meet the admission requirements of such academy and who are citizens of the United States residing in States and territories of the United States other than the States or territories, or both, supporting such academy. The Secretary shall determine the number of individuals under this paragraph for each State maritime academy so that such number does not exceed one-third of the total number of individuals attending such academy at any time.
(g) Student incentive payment agreements 

(1) The Secretary may enter into an agreement, which shall be effective for not more than 4 academic years, with any individual, who is a citizen of the United States and is attending a State maritime academy which entered into an agreement with the Secretary under subsection (d)(1) of this section, to make student incentive payments to such individual, which payments shall be in amounts equaling $4,000 for each academic year and which payments shall be
(A) allocated among the various State maritime academies in a fair and equitable manner;
(B) used to assist the individual in paying the cost of uniforms, books, and subsistence; and
(C) paid by the Secretary as the Secretary shall prescribe while the individual is attending the academy.
(2) Each agreement entered into under paragraph (1) shall require the individual to accept midshipman and enlisted reserve status in the United States Navy Reserve (including the Merchant Marine Reserve, United States Navy Reserve) before receiving any student incentive payments under this subsection.
(3) Each agreement entered into under paragraph (1) shall obligate the individual receiving student incentive payments under the agreement
(A) to complete the course of instruction at the State maritime academy which the individual is attending;
(B) to take the examination for a license as an officer in the merchant marine of the United States on or before the date of graduation from such State maritime academy of such individual and to fulfill the requirements for such license not later than 3 months after such graduation date;
(C) to maintain a valid license as an officer in the merchant marine of the United States for at least 6 years following the date of graduation from such State maritime academy of such individual, accompanied by the appropriate national and international endorsements and certification as required by the United States Coast Guard for service aboard vessels on domestic and international voyages;
(D) to accept if tendered an appointment as, and to serve as a commissioned officer in the United States Navy Reserve (including the Merchant Marine Reserve, United States Navy Reserve), the United States Coast Guard Reserve, or any other reserve unit of an armed force of the United States, for at least 6 years following the date of graduation from such State maritime academy of such individual;
(E) to serve the foreign and domestic commerce and the national defense of the United States for at least 3 years following the date of graduation from the Academy
(i) as a merchant marine officer serving on vessels documented under the laws of the United States or on vessels owned and operated by the United States or by any State or territory of the United States;
(ii) 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 clause (i) is not available to such individual;
(iii) 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 employment with the Federal Government which serves the national security interests of the United States, as determined by the Secretary; or
(iv) by combining the services specified in clauses (i), (ii), and (iii); and
(F) to report to the Secretary on the compliance by the individual to this paragraph.
(4) 
(A) If the Secretary determines that an individual who has accepted the payment described in paragraph (1) for a minimum of 2 academic years has failed to fulfill the part of the agreement required by paragraph (1) and described in paragraph (3)(A), such individual may be ordered by the Secretary of Defense to active duty in the Armed Forces of the United States to serve for a period of time not to exceed 2 years. In cases of hardship, as determined by the Secretary, the Secretary may waive this provision in whole or in part.
(B) If the Secretary of Defense is unable or unwilling to order an individual to active duty under subparagraph (A), 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
(i) subject to clause (ii), may recover from the individual the amount of student incentive payments, plus interest and attorneys fees; and
(ii) may reduce the amount to be recovered from such individual to reflect partial performance of service obligations and such other factors as the Secretary determines merit such reduction.
(5) 
(A) If the Secretary determines that an individual has failed to fulfill any part of the agreement required by paragraph (1), as described in paragraph (3)(B), (C), (D), (E), or (F), such individual may be ordered to active duty to serve a period of time not less than 2 years and not more than the unexpired portion, as determined by the Secretary, of the service required by paragraph (3)(E). The Secretary, in consultation with the Secretary of Defense, shall determine in which service the individual shall be ordered to active duty to serve such period of time. In cases of hardship, as determined by the Secretary, the Secretary may waive this provision in whole or in part.
(B) If the Secretary of Defense is unable or unwilling to order an individual to active duty under subparagraph (A), 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
(i) subject to clause (ii), may recover from the individual the amount of student incentive payments, plus interest and attorneys fees; and
(ii) may reduce the amount to be recovered from such individual to reflect partial performance of service obligations and such other factors as the Secretary determines merit such reduction.
(6) To aid in the recovery of student incentive payments plus interest and attorneys fees the Secretary may request the Attorney General to begin court proceedings, and the Secretary may make use of the Federal debt collection procedures in chapter 176 of title 28 and other applicable administrative remedies.
(7) The Secretary may defer the service commitment of any individual pursuant to subparagraph (E) of paragraph (3) (as specified in the agreement required by such paragraph) for a period of not more than 2 years if such individual is engaged in a graduate course of study approved by the Secretary, except that any deferment of service as a commissioned officer pursuant to subparagraph (E) of such paragraph must be approved by the Secretary of the military department (including the Secretary of Commerce with respect to the National Oceanic and Atmospheric Administration) which has jurisdiction over such service.
(8) This subsection shall apply only to individuals first entering a State maritime academy after the date occurring 6 months after October 1, 1981.
(h) Appointment of cadet as midshipman in United States Navy Reserve 
Any citizen of the United States attending a State maritime academy may be appointed by the Secretary of the Navy as a midshipman in the United States Navy Reserve (including the Merchant Marine Reserve, United States Navy Reserve).

46 USC Appendix 1295c1 - Plan for sharing training vessels

On and after December 22, 1987, no funds shall be appropriated for the purchase or construction of training vessels for State maritime academies unless a plan for sharing training vessels between State maritime academies has been approved by the Maritime Administration.

46 USC Appendix 1295d - Additional training

(a) In general 
The Secretary may provide additional training on maritime subjects, as the Secretary deems necessary, to supplement other training opportunities and may make any such training available to the personnel of the merchant marine of the United States and to individuals preparing for a career in the merchant marine of the United States.
(b) Equipment or supplies required for training 
The Secretary may prepare or purchase any equipment or supplies required for any training provided under subsection (a) of this section and may contract with any person, partnership, firm, association, or corporation (without regard to section 5 of title 41) for the performance of any services deemed necessary by the Secretary in the preparation of any such equipment or supplies and in the supervision and administration of any such training.
(c) Oil pollution prevention, response, and clean-up program 

(1) The Secretary shall assist maritime training institutions approved by the Secretary in establishing a maritime oil pollution prevention, response, and clean-up training program.
(2) Under the program established under paragraph (1)
(A) the Secretary may provide, to maritime training institutions approved by the Secretary, vessels described in paragraph (4), with title free of all liens, subject to the requirements specified under paragraph (3); and
(B) in return for receipt of such vessels, such institutions shall
(i) employ the vessels for the training of students and appropriate maritime industry personnel in oil spill prevention, response, clean-up, and related skills; and
(ii) make the vessels and qualified students available to appropriate Federal, State, and local oil spill response authorities in the event of a maritime oil spill.
(3) The requirements referred to in paragraph (2)(A) are as follows:
(i) any vessel provided under paragraph (2)(A) shall be tendered to the approved maritime training institution at a location determined by the Secretary;
(ii) no such vessel may be sold, traded, chartered, donated, scrapped, or in any way altered or disposed of without the prior approval of the Secretary;
(iii) no such vessel may be used in competition with any privately-owned vessel documented under the laws of the United States or any State, unless necessary to carry out the purposes of this subsection;
(iv) any approved maritime training institution in possession of such a vessel which can no longer utilize the vessel for training purposes shall return the vessel to the Secretary, who shall take possession of the vessel at the training institution and thereafter may dispose of the vessel, or provide the vessel to another approved maritime training institution, as the Secretary determines appropriate; and
(v) such other requirements or conditions as the Secretary determines appropriate.
(4) The vessels referred to in paragraph (2)(A) are United States-built offshore supply vessels and United States-built tug/supply vessels in the possession of the Maritime Administration as a result of defaults on loans guaranteed under subchapter XI of this chapter.

46 USC Appendix 1295e - United States Maritime Service

(a) Establishment and maintenance 
The Secretary may establish and maintain a voluntary organization for the training of citizens of the United States to serve on merchant marine vessels of the United States and to perform functions to assist the United States merchant marine, as determined necessary by the Secretary, to be known as the United States Maritime Service.
(b) Enrollment; compensation; course of study and periods of training; uniforms 
The Secretary may determine the number of individuals to be enrolled for training and reserve purposes in such service, to fix the rates of pay and allowances of such individuals without regard to the provisions of chapter 51 and subchapter III of chapter 53 of title 5 (relating to classification and General Schedule pay rates), to prescribe the course of study and the periods of training in such service, and to prescribe the uniform of such service and the rules governing the wearing and furnishing of such uniform.
(c) Ranks, grades, and ratings same as for United States Coast Guard 
The ranks, grades, and ratings for personnel of the United States Maritime Service shall be the same as are then prescribed for the personnel of the United States Coast Guard.
(d) Awards and medals 
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 United States Maritime Service.

46 USC Appendix 1295f - Civilian nautical school

(a) “Civilian nautical school” defined 
As used in this section, the term civilian nautical school means any school operated and conducted in the United States (except the Academy maintained under section 1295b of this Appendix, any State maritime academy assisted under section 1295c of this Appendix, and any other school operated by the United States or any agency of the United States) which offers instruction to individuals quartered on board any vessel for the primary purpose of training them for service in the merchant marine.
(b) Examination and inspection of school; rating and certification 
Each civilian nautical school shall be subject to examination and inspection by the Secretary, and the Secretary may (under such rules and regulations as the Secretary may prescribe) provide for the rating and certification of such schools as to the adequacy of the course of instruction, the competency of the instructors, and the suitability of the equipment used by, or in connection with, such school.
(c) Repealed. Pub. L. 98–89, § 4(b), Aug. 26, 1983, 97 Stat. 603 
(d) Fines and penalties 
Whoever
(1) violates this section or any regulations promulgated to implement this section;
(2) , (3) Repealed. Pub. L. 98–89, § 4(b), Aug. 26, 1983, 97 Stat. 603.

shall be fined not more than $10,000 or imprisoned for not more than one year, or both, for each offense.

46 USC Appendix 1295g - Powers and duties of Secretary

(a) Rules and regulations 
The Secretary shall establish such rules and regulations as may be necessary to carry out this subchapter.
(b) Excess vessels and equipment 
The Secretary may cooperate with and assist the Academy, any State maritime academy, and any nonprofit">nonprofit training institution which has been jointly approved by the Secretary and the Secretary of the department in which the United States Coast Guard is operating as offering training courses which meet Federal regulations for maritime training, by making vessels, shipboard equipment, and other marine equipment, owned by the United States which have been determined to be excess or surplus, available by gift, loan, sale, lease, or charter to such institution for instructional purposes on such terms as the Secretary deems appropriate.
(c) Securing of information, facilities, or equipment; detailing of personnel 

(1) The Secretary may secure directly from any department or agency of the United States any information, facilities, or equipment, on a reimbursable basis, necessary to carry out this subchapter.
(2) Upon the request of the Secretary, the head of any department or agency of the United States (including any military department of the United States) may detail, on a reimbursable basis, any of the personnel of such department or agency to the Secretary to assist in carrying out this subchapter.
(d) Employment of personnel 
To carry out this subchapter, the Secretary may employ at the Academy any individual as a professor, lecturer, or instructor, without regard to the provisions of title 5 (governing appointments in the competitive service), and may pay such individual without regard to the provisions of chapter 51 and subchapter III of chapter 53 of such title (relating to classification and General Schedule pay rates).