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

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;

(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

(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.

(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.

(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

(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.

(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.

(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;