U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1

79–010

" ! SENATE 106TH CONGRESS

2d Session

REPORT

2000

106–345

Calendar No. 686

MARITIME ADMINISTRATION AUTHORIZATION ACT FOR FISCAL YEAR 2001

REPORT

OF THE

COMMITTEE ON COMMERCE, SCIENCE, AND

TRANSPORTATION

ON

S. 2487

JULY 17, 2000.—Ordered to be printed
(II)

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

JOHN MCCAIN, Arizona, Chairman

TED STEVENS, Alaska

CONRAD BURNS, Montana

SLADE GORTON, Washington

TRENT LOTT, Mississippi

KAY BAILEY HUTCHISON, Texas

OLYMPIA SNOWE, Maine

JOHN ASHCROFT, Missouri

BILL FRIST, Tennessee

SPENCER ABRAHAM, Michigan

SAM BROWNBACK, Kansas

ERNEST F. HOLLINGS, South Carolina

DANIEL K. INOUYE, Hawaii

JOHN D. ROCKEFELLER IV, West Virginia

JOHN F. KERRY, Massachusetts

JOHN B. BREAUX, Louisiana

RICHARD H. BRYAN, Nevada

BYRON L. DORGAN, North Dakota

RON WYDEN, Oregon

MAX CLELAND, Georgia

MARK BUSE, Staff Director

ANN H. CHOINIERE, General Counsel

KEVIN D. KAYES, Democratic Staff Director

MOSES BOYD, Democratic Chief Counsel

GREGG ELIAS, Democratic General Counsel
Calendar No. 686

106TH CONGRESS REPORT

2d Session " ! SENATE 106–345

MARITIME ADMINISTRATION AUTHORIZATION ACT FOR

FISCAL YEAR 2001

JULY 17, 2000.—Ordered to be printed

Mr. MCCAIN, from the Committee on Commerce, Science, and

Transportation, submitted the following

REPORT

[To accompany S. 2487]

The Committee on Commerce, Science, and Transportation, to

which was referred the bill (S. 2487) ‘‘A bill to authorize appropriations for Fiscal Year 2001 for certain maritime programs of the Department of Transportation’’, having considered the same, reports

favorably thereon with an amendment (in the nature of a substitute) and recommends that the bill (as amended) do pass.

PURPOSE OF THE BILL

The bill as reported by the Committee authorizes appropriations

for fiscal year (FY) 2001 for the Maritime Administration (MarAd);

amends Title IX of the Merchant Marine Act of 1936 to eliminate

the three-year period bulk or breakbulk vessels newly registered

under the U.S.-flag must wait in order to carry government-impelled cargo for a one year period; amends the Merchant Marine

Act of 1936 to allow the Secretary to scrap obsolete vessels in both

domestic and international markets; conveys ownership of the National Defense Reserve Fleet Vessel, Glacier, to the Glacier Society

for use as museum; requires the Maritime Administration to including the source and intended use of all funding in reports to

Congress; amends Public Law 101–115 to recognize National Maritime Enhancement Institutes as if they were University Transportation Centers for purposes of research awards; and requires the

Secretary of Transportation to review the funding of maritime research in relation to other modes of transportation.
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BACKGROUND AND NEEDS

MarAd administers various U.S. merchant marine support programs within the Department of Transportation (DOT). MarAd is

composed of approximately 970 employees—(including Ready Reserve Force (RRF) and U.S. Merchant Marine Academy (USMMA).

MarAd programs include Operating-Differential Subsidy (ODS),

Maritime Security Fleet Program (MSP), Title XI guaranteed loan

program, various cargo preference programs, maintenance of the

RRF and National Defense Reserve Fleet (NDRF), and operation of

the U.S. Merchant Marine Academy (USMMA) in Kings Point, NY.

The committee remains concerned about the appalling condition

of physical plant and infrastructure at USMMA. Further, the committee is troubled by the lack of action in completing a facilities

master plan that would prioritize repairs and improvements. Absent long term identification of facility needs it is difficult to assess

funding requirements. Additionally, the Committee urges MarAd to

carefully evaluate the needs of all state maritime school ships with

regard to repair and maintenance and make available, within applicable procedures and guidelines, funds to meet those needs.

MarAd’s annual discretionary appropriation does not include

ODS contract authority costs; permanent, indefinite appropriations

for cargo preference costs; RRF/NDRF maintenance funding; or

MSP funding. The Committee is concerned that these programs

have a large impact on the overall management and performance

of MarAd and is seeking to require the reporting of all funding for

these programs and any other programs administered by MarAd in

annual reporting and budget submissions.

During hearings on the bill, the Committee heard testimony regarding the default of a Title XI loan guarantee and the difficulties

faced by MarAd in trying to minimize the loss to the federal government. The Committee recommends that MarAd evaluate carefully all actions it may undertake with regards to Title XI loan

guarantee defaults and act to ensure that loss to the federal government is minimized.

Under current law, vessels built or reconstructed in a foreign

shipyard must be under U.S. registry for at least three years before

being eligible to carry cargo under the Cargo Preference Act of

1954. The same limitation does not apply to vessels that transport

military cargoes or Export-Import Bank cargoes reserved to U.S.-

flag vessels under the Cargo Preference Act of 1904 or Public Resolution 17, respectively.

The Merchant Marine Act of 1936 (46 U.S.C. App. 1101) mandates that the United States have sufficient vessels to carry a ‘‘substantial portion’’ of all preference cargo (75 percent of government

impelled food aid cargo). No dry-bulk vessels for our preference

trades have been built in a U.S. shipyard since the federal subsidy

for ship construction (CDS) effectively ended in 1981.

The Committee remains concerned about the lack of bulk ship

construction in U.S. yards and the low charter rates in our nonpreference international dry bulk trades. The Committee believes

it is unrealistic to expect that sufficient U.S.-flag dry bulk vessels

to meet the demand of our preference trades will be constructed in

U.S. shipyards at any time in the foreseeable future.
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Further, the Committee believes that while not ideal, this oneyear relaxation of the three-year waiting requirement is the best

way to ensure that the U.S.-flag dry bulk fleet is of sufficient size/

number to carry a ‘‘substantial portion’’ of our preference cargo

without any long-term economic disadvantage to U.S. shipyards.

The Committee has diverse views on various Jones Act issues,

but all agree that this measure does not affect in any way the U.S.-

build requirement contained in the Jones Act. Under every major

merchant marine act, Congress has recognized that the foreign

trades, where the competition operates foreign-built and government subsidized vessels, should be distinguished from the domestic

trades, where the competition operates U.S.-built vessels. Moreover, neither the previous enactment of section 615 of the Merchant Marine Act of 1936, nor the 1997-enacted Maritime Security

Program, nor other foreign trade foreign-build permissions have

had any spill-over effect on the Jones Act because Jones Act issues

were not addressed in those instances. The Committee’s action in

reporting S. 2487, therefore, will have no precedential effect on the

Committee’s future consideration of Jones Act issues.

The Committee has again chosen to limit the waiver of the threeyear waiting period to one year in order to preserve building opportunities over the long term for U.S. shipyards, should the market

for construction of new U.S.-built dry bulk ships become competitive at some future time. In the meantime, the Committee has

carefully crafted section 3 to enhance job opportunities for U.S.

shipbuilders in the near term. The Committee’s bill explicitly provides that non-emergency shipyard repairs and other shipyard

work necessary to conform vessels to U.S.-flag standards must be

performed in a shipyard located in the United States. Such shipyard repairs and conforming shipyard work will create employment

opportunities in domestic yards that otherwise would not exist.

The Committee’s decision to relax temporarily the three year

waiting period for new foreign-built vessels to become eligible to

carry cargoes under the Cargo Preference Act of 1954 will create

additional seagoing billets for U.S. merchant mariners. The acquisition of new, modern dry bulk vessels will substantially improve

the efficiency of the U.S.-flag fleet dedicated to the food-aid trade,

and result in significant reductions in shipping costs and subsequent substantial savings to U.S. taxpayers. With major savings in

transportation costs, appropriations for food-aid programs will purchase more aid, more U.S. farm produce will be delivered, and increased food-aid relief will be possible for the same investment of

federal dollars.

LEGISLATIVE HISTORY

S. 2487 was introduced in the Senate on May 1, 2000 by Senator

McCain. The bill is cosponsored by Senators Hollings and Inouye.

A hearing was held on the MarAd authorization on May 16, 2000.

In open executive session on June 15, 2000, the Committee considered S. 2487, and ordered the legislation reported favorably without objection and with an amendment in the nature of a substitute

by Senators McCain and Hollings. The amendment in the nature

of a substitute conveys ownership of the National Defense Reserve

Fleet Vessel, Glacier, to the Glacier Society for use as a museum;

requires the Maritime Administration to include the source and in-
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tended use of all funding in reports to Congress; and requires the

Secretary of Transportation to review the funding of maritime research in relation to other modes of transportation. The Committee

also approved by voice vote an amendment offered by Senator Lott

to increase the authorization of funds for the Title XI loan guarantee program to $50 million. The House Department of Defense

Authorization bill (H.R. 4205) includes provisions similar or identical to S. 2487, as reported, which are within the jurisdiction of

the Committee. The Committee anticipates the Senate Armed Services Committee will endorse the provisions of S. 2487, as reported,

as the Senate position on the corresponding provisions in the

House and Senate Department of Defense Authorization legislation

during the conference with the House of Representatives on that

legislation, and looks forward to working with the Senate Armed

Services Committee to ensure the inclusion of S. 2487.

ESTIMATED COSTS

In accordance with paragraph 11(a) of rule XXVI of the Standing

Rules of the Senate and section 403 of the Congressional Budget

Act of 1974, the Committee provides the following cost estimate,

prepared by the Congressional Budget Office:

U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,

Washington, DC, June 28, 2000.

Hon. JOHN MCCAIN, Chairman, Committee on Commerce, Science, and Transportation,

U.S. Senate, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 2487, the Maritime Administration Authorization Act for Fiscal Year 2001.

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contact is Deborah Reis.

Sincerely,

BARRY B. ANDERSON

(For Dan L. Crippen, Director).

Enclosure.

S. 2487—Maritime Administration Authorization Act for Fiscal

Year 2001

Summary: Assuming appropriation of the amounts authorized by

S. 2487, CBO estimates that the federal government would spend

about $80 million, mostly over the next year, to carry out ongoing

maritime programs. The bill would not affect direct spending or receipts; therefore, pay-as-you-go procedures would not apply. S. 2487

contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) and would

impose no costs on state, local, or tribal governments.

S. 2487 would authorize the appropriation of $80 million for operation and training activities of the Maritime Administration

(MARAD) during fiscal year 2001. The bill also would authorize

$54 million for fiscal year 2000 loan guarantees and related administrative expenses, as already authorized under the Merchant Marine Act of 1936. Section 7 of the bill would direct MARAD to con-
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duct a study of maritime research and development. The study

would examine, among other funding issues, the relative amount of

federal funding historically provided to maritime programs as compared to those of other modes of transportation. For the purpose of

carrying out this study over the next nine months, the bill would

authorize the appropriation of $100,000. Other provisions of the

bill, most of which would require MARAD to complete various studies and reports, would have no significant effect on the federal

budget.

Estimated cost to the Federal Government: The estimated budgetary impact of the bill is shown in the following table. The costs

of this legislation fall within budget function 400 (transportation).

For this estimate, CBO assumes that the entire amount authorized

for MARAD operation and training activities for fiscal year 2001

will be appropriated for that year. The estimate of outlays is based

on historical spending patterns for MARAD. Because appropriations for maritime loan guarantees and related administrative costs

are already authorized under existing law, the budgetary effects of

S. 2487 would be limited to the $80 million of authorized expenditures for MARAD operations and training programs and the

$100,000 for a new study.

By fiscal year, in millions of dollars—

2000 2001 2002 2003 2004 2005

SPENDING SUBJECT TO APPROPRIATION

MARAD Spending Under Current Law:

Budget Authority 1 ............................................................... 73 0 0 0 0 0

Estimated Outlays ............................................................... 82 11 4 0 0 0

Proposed Changes:

Authorization Level 2 ............................................................ 0 80 0 0 0 0

Estimated Outlays ............................................................... 0 68 8 4 0 0

MARAD Spending Under S. 2487:

Authorization Level 1 ............................................................ 73 80 0 0 0 0

Estimated Outlays ............................................................... 82 79 12 4 0 0

1 The 2000 level is the amount appropriated for that year.

2 No amounts are included as proposed changes for loan guarantee subsidies or administrative costs because those amounts are already authorized under current law.

Pay-as-you-go considerations: None.

Intergovernmental and private-sector impact: The bill contains

no intergovernmental or private-sector mandates as defined in

UMRA and would impose no costs on state, local, or tribal governments.

Estimate prepared by: Federal Cost: Deborah Reis. Impact on

State, Local, and Tribal Governments: Victoria Heid Hall. Impact

on the Private Sector: Natalie Tawil.

Estimate approved by: Peter H. Fontaine, Deputy Assistant Director for Budget Analysis.

REGULATORY IMPACT STATEMENT

In accordance with paragraph 11(b) of rule XXVI of the Standing

Rules of the Senate, the Committee provides the following evaluation of the regulatory impact of the legislation, as reported:

Because S. 2487 does not create any new programs, the legislation will have no additional regulatory impact, and will result in

no additional reporting requirements. While S. 2487 does not create any new programs, the legislation will require MarAd to report
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on the source and intended use of all funding under its administration. The legislation will have no further effect on the number or

types of individuals and businesses regulated, the economic impact

of such regulation, the personal privacy of affected individuals, or

the paperwork required from such individuals and businesses.

SUMMARY OF MAJOR PROVISIONS

The bill authorizes appropriations for the Maritime Administration for fiscal year 2000 and covers two appropriated accounts: (1)

operations and training; and (2) the shipbuilding loan guarantee

program authorized by Title XI of the Merchant Marine Act of

1936.

The bill provides $80.24 million for operations and training programs including $37.236 million, an increase of $3.292 million, for

deferred capital maintenance at the U.S. Merchant Marine Academy. The Committee is concerned that the physical condition of the

Academy poses a health and safety risk to students and faculty,

and recommends that MarAd move expeditiously to address the deterioration of the property. In addition, $50 million is for the costs,

as defined in section 502 of the Federal Credit Reform Act of 1990,

of loan guarantees authorized by Title XI of the Merchant Marine

Act, 1936 (46 U.S.C. App. 1271 et seq.), and $4.179 million is for

administrative expenses related to these loan guarantee commitments. Finally, the bill authorizes $100,000 for MarAd to prepare

a report to Congress on the status of research and technology development, and to make recommendations on how MarAd intends

to provide and oversee the necessary research to consider the needs

of the Maritime Transportation System (MTS). The Committee recognizes the rapidly changing nature of our maritime and intermodal transportation needs, and would encourage long term plans

on how to address the changing environment.

The bill also amends current law to provide a one year waiver

of the three year period bulk and breakbulk vessels newly registered under the U.S. flag must wait in order to carry Government-impelled cargo. The waiver would be in effect only for one

year beginning on the date of enactment. It is essential to provide

a window through which some newer vessels may be able to enter

the market to transport some of the increased food aid.

Finally, the bill would amend the National Maritime Heritage

Act of 1994 and allow the Secretary to scrap obsolete vessels in

both domestic and international markets; convey ownership of the

National Defense Reserve Fleet Vessel, Glacier, to the Glacier Society for use as a museum; requires the Maritime Administration to

including the source and intended use of all funding in reports to

Congress; amends Public Law 101–115 to recognize National Maritime Enhancement Institutes as if they were University Transportation Centers for purposes of the award of research funds for maritime and intermodal research; and require the Secretary of Transportation to review the funding of maritime research in relation to

other modes of transportation.
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SECTION-BY-SECTION ANALYSIS

Section 1. Short title

Section 1 states the short title of the proposal, the ‘‘Maritime Administration Authorization Act for Fiscal Year 2001’’.

Section 2. Authorization of appropriations for fiscal year 2001

Section 2 authorizes $80,240,000 for MarAd operations and train- ing activities, of which $33,520,000 is authorized for MarAd operations. Operations and training activities include the costs incurred

by headquarters and region staff in the administration and direction of the various MarAd programs such as:

(1) Emergency planning and operations, including administration of the Maritime Security Program agreements.

(2) Negotiation of agreements, understandings and arrangements to reduce barriers that restrict American access to foreign ports and markets.

(3) Port, intermodal, and environmental activities.

(4) Labor, training, and safety activities.

(5) Administration of the Capital Construction Fund/Construction Reserve Fund.

(6) Monitoring compliance with cargo reservation statutes.

(7) Administration of the Operating-Differential Subsidy

agreements.

Operations and training funds also include funds for the operation of the United States Merchant Marine Academy (USMMA) at

Kings Point, New York, and continuing assistance to the six state

maritime academies. Expenses for maritime training at the

USMMA include $37,236,000, an increase of $3 million, for capital

maintenance and expenses, and $9,484,000 for financial assistance

to the state maritime academies.

The USMMA offers a four-year undergraduate, full scholarship

program that leads to a Bachelor of Science degree and to a merchant marine license as Third Mate or Third Assistant Engineer or

both. In addition, the students are enrolled as midshipmen and are

commissioned upon graduation as ensigns in the U.S. Naval Reserve and required to serve for no fewer than six years. Additionally, USMMA graduates are required to maintain licenses as U.S.

merchant marine officers for six years, and work as employees on

board a U.S. flag vessel or in a maritime related industry or serve

five years on active duty with the U.S. armed services.

The state maritime academies program assists states in the

training of individuals for service as officers in the U.S. merchant

marine. Assistance is provided to participating states (California,

Maine, Massachusetts, Michigan, New York, and Texas) in the

form of direct payments to the academies, incentive payments to

cadets currently enrolled in the Student Incentive Payment (SIP)

Program, and funding for the cost of maintenance and repair for

MarAd ships provided on loan to the schools for use as training

ships.

The Omnibus Appropriations Act for Fiscal Year 1999, P.L. 105–

277, established the American Fisheries Act. The American Fisheries Act tasks MarAd with new duties and responsibilities in determining the citizenship of certain fishing vessels. Among other

things, the measure designates MarAd as the primary agency re-
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sponsible for ensuring that the proper citizenship requirements are

adhered to for ownership of vessels 100 feet or greater that have,

or are seeking, a fisheries endorsement to their documentation. In

enforcing citizenship standards, MarAd will be required to rigorously scrutinize transfers of ownership or control with particular

attention to leases, charters, mortgages, and financing arrangements for fishing vessels. Further, MarAd will need to approve

qualified trustees to hold mortgages where vessel financing is procured through foreign lenders.

Operations and training funds will also be used to administer the

processing of waivers to the U.S.-build requirement of the Jones

Act for certain small passenger vessels, enacted in P.L. 105–383,

the Coast Guard Authorization Act of 1998.

The section also contains the authorization for the maritime

guaranteed loan program that is administered by MarAd under

Title XI of the Merchant Marine Act of 1936 (46 U.S.C. App. 1271

et seq.). Title XI authorizes the Secretary of Transportation (authority delegated to the Maritime Administrator) to enter into commitments to guarantee private sector debt financing for the construction or reconstruction of U.S.-flag vessels and export vessels in

U.S. shipyards, and for U.S. shipyard modernization and improvement projects. Title XI loan guarantees enable ship owners and

shipyards to borrow private sector funds on more favorable terms

than might otherwise be available. Government funds are expended only in the event of a default, because the private sector

provides total project funding.

Federal accounting procedures enacted in the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.) require that estimated costs

of potential defaults and administrative costs be appropriated before a loan guarantee commitment may be entered into by the Government. An authorization of $50,000,000 for the estimated costs of

loan guarantee commitments, with an estimated carryover of

$42,000,000, would enable MarAd to provide loan guarantees of

$1,840,000,000 based on a 5 percent loan subsidy rate. The Federal

Credit Reform Act of 1990 requires, and MarAd requests, a separate authorization of $4,179,000 for administrative expenses for the

entire Title XI program, to manage both the existing portfolio of

loan guarantees and new guarantees.

Section 3. Amendments to Title IX of the Merchant Marine Act of

1936

The section would amend Title IX of the Merchant Marine Act

of 1936, as amended, to create a new section 910 eliminating the

three-year period bulk or breakbulk vessels (including heavylift

vessels) newly registered under the U.S. flag must wait in order to

carry government-impelled cargo. This new section would remain

in effect for one year from the date of enactment, or until enactment of the Organization for Economic Cooperation and Development (OECD) Agreement on Shipbuilding Subsidies (which would

permit new vessels built in OECD countries to immediately carry

preference cargoes). Present law requires a vessel that is registered

under a foreign flag, or is foreign built or reconstructed in a foreign

shipyard to be under U.S. registry for at least three years before

the vessel is able to carry cargo reserved to U.S.-flag vessels under

the Cargo Preference Act of 1954. This requirement does not apply
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to liner vessels that receive operating payments under the Maritime Security Program. Bulk vessels do not qualify for operating

payments under the Maritime Security Program and are subject to

the three-year wait period.

It is unlikely that a foreign-flag vessel newly transferred to U.S.

registry can support itself in U.S. foreign commercial trades during

the three-year waiting period due to presently low international

charter rates. Thus, there is a barrier to replacement and modernization of the U.S.-flag bulk fleet, which is required by statute

to transport 75 percent of agricultural products exported under certain food aid programs. The youngest U.S.-flag self-propelled bulk

vessel in foreign trade is 13 years old and shippers of cargo subject

to cargo preference sometimes have a difficult time obtaining a

U.S.-flag vessel. This proposed amendment provides a limited opportunity for modern foreign vessels to transfer to U.S. registry

and to be immediately eligible to carry preference cargoes. In return, the vessels must perform non-emergency shipyard repairs,

and other shipyard work necessary to conform the vessel to U.S.-

flag standards, in a shipyard of the United States, and such vessels

shall not be granted preapproval to leave U.S. registry under section 9(e) of the Shipping Act, 1916, as amended on October 19,

1996.

It is anticipated that this provision will improve the vessel profile of the US.-flag dry bulk fleet, add jobs for U.S. merchant mariners, and increase the percentage of U.S. foreign commerce carded

in U.S.-flag vessels. These additional modern vessels will increase

the competition for carriage of government-impelled cargoes, which

could result in substantial cost savings to the U.S. Government.

This section also would amend Section 901(b)(c)(2) of the Merchant Marine Act of 1936, to make the cargo preference year for

determining compliance coincide with the Federal Government Fiscal Year. This would simplify record keeping and management of

the program without impact to any involved agencies or shippers.

Section 4. Scrapping of certain vessels

Section 4 would require the Secretary of Transportation to focus

efforts to scrap obsolete vessels in the National Defense Reserve

Fleet on vessels identified as posing the greatest risk to the environment and navigation of our nation’s waterways. Further, it

would require the Secretary of Transportation along with the Secretary of the Navy, the Administrator of the Environmental Protection Agency (EPA), the Director of the Occupational Health and

Safety Administration, and the Secretary of State, after reviewing

all alternatives, to develop a long term plan for disposal of obsolete

vessels within nine months of enactment.

The section directs the Secretary of Transportation along with

the Secretary of the Navy, the Administrator of the Environmental

Protection Agency (EPA), the Occupational Safety and Health Administration, and the Secretary of State, to consider all alternatives

and available information in developing a disposal plan, including

alternative scrapping sites, vessel donations, sinking of vessels in

deep water, sinking vessels for development of artificial reefs, the

sale of vessels before they become obsolete, the results of the Navy

Pilot Scrapping Program (Section 8124, P.L. 105–262), and the
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Interagency Ship Scrapping Review Panel report on ship scrapping

issued in April of 1998.

The section would also allow for the scrapping of vessels in both

the domestic and international market as long as scrapping facilities are able to scrap vessels economically, safely, with minimal impact on the environment, while showing respect for worker safety.

Additionally, Section 4 would amend the National Maritime Heritage Act of 1994 by extending the deadline for disposal of all obsolete vessels by five years. This is the second extension of the deadline, but is one that is required due to the inaction of MarAd, the

EPA, and the Department of State in addressing the problems associated with scrapping since enactment of the Heritage Act in

1994. The additional time is also needed to allow the domestic shipbuilding industry to adjust its activities to meet the need to scrap

in the domestic market.

The section would further amend the Heritage Act by removing

the requirement that obsolete vessels be scrapped at a profit to the

federal government and replacing it with a requirement that vessels be scrapped in the most cost effective manner to the United

States taking into account the need for disposal, the environment,

and safety concerns.

Finally, Section 4 would allow the Secretary of Transportation to

use funds made available for the care and maintenance of the National Defense Reserve Fleet for the scrapping of obsolete vessels

and require a report to Congress biannually on the progress of disposal of obsolete vessels.

Section 5. Reporting of administered and oversight funds

Section 5 would require MarAd to include in its annual estimated budget and its annual report to Congress the amount,

source, intended use, and nature of any funding for programs

under MarAd’s jurisdiction or administered by MarAd (other than

funds appropriated to the Administration or to the Secretary of

Transportation) for use by MarAd.

MarAd does not currently include in its annual budget submission information relating to programs such as management of the

Ready Reserve Fleet that are funded through the Department of

Defense. While these activities are vital to our nation’s defense

transportations needs, MarAd is not currently required to provide

any information on past activities or justification for future needs

in relation to other programs under its jurisdiction.

Section 6. Maritime intermodal research

Section 6 would allow the Secretary of Transportation to make

grants for maritime and maritime intermodal research to National

Maritime Enhancement Institutes. This section also requires the

Secretary to advise the Maritime Administration concerning the

funds available for grants through the Research and Special Programs Administration and to consult with MarAd on the making

of the grants.

Under current law (Section 5505 of Public Law 105–178), the

Secretary of Transportation, through delegation to the Research

and Special Programs Agency, cannot make grants to National

Maritime Enhancement Institutes. This provision would authorize

the Secretary to award research grants to National Maritime En-
11

hancement Institutes, as if they were University Transportation

Centers.

Section 7. Maritime research and technology development

Section 7 authorizes $100,000 for the Secretary of Transportation

to prepare a report to Congress on the status of research and technology development in the five different modes of transportation.

MarAd will be required to report on federal funds spent on research for each mode of transportation and provide a description of

current and future research proposals for our nation’s Maritime

Transportation System.

Section 8. Authority to convey National Defense Reserve Fleet vessel,

Glacier

Section 8 would authorize the Secretary of Transportation to convey the National Defense Reserve Fleet vessel, U.S.S. Glacier

(United States official number AGB–4), to the Glacier Society, Inc.,

for use as a museum. This provision also specifies the same terms

of conveyance and required conditions typically required by the

Committee for Government vessel conveyance authorizations.

CHANGES IN EXISTING LAW

In compliance with paragraph 12 of rule XXVI of the Standing

Rules of the Senate, changes in existing law made by the bill, as

reported, are shown as follows (existing law proposed to be omitted

is enclosed in black brackets, new material is printed in italic, existing law in which no change is proposed is shown in roman):

TITLE 10. ARMED FORCES

SUBTITLE A. GENERAL MILITARY LAW

PART IV. SERVICE, SUPPLY, AND PROCUREMENT

CHAPTER 131. PLANNING AND COORDINATION

§ 2218. National Defense Sealift Fund

(a) ESTABLISHMENT.—There is established in the Treasury of the

United States a fund to be known as the ‘‘National Defense Sealift

Fund’’.

(b) ADMINISTRATION OF FUND.—The Secretary of Defense shall

administer the Fund consistent with the provisions of this section.

(c) FUND PURPOSES.—

(1) Funds in the National Defense Sealift Fund shall be

available for obligation and expenditure only for the following

purposes:

(A) Construction (including design of vessels), purchase,

alteration, and conversion of Department of Defense sealift

vessels.

(B) Operation, maintenance, and lease or charter of Department of Defense vessels for national defense purposes.

(C) Installation and maintenance of defense features for

national defense purposes on privately owned and operated

vessels that are constructed in the United States and documented under the laws of the United States.
12

(D) Research and development relating to national defense sealift.

(E) Expenses for maintaining and scrapping the vessels

of the National Defense Reserve Fleet under section 11 of

the Merchant Ship Sales Act of 1946 (50 U.S.C. App.

1744), and for the costs of acquisition of vessels for, and

alteration and conversion of vessels in (or to be placed in),

the fleet, but only for vessels built in United States shipyards.

(2) Funds in the National Defense Sealift Fund may be obligated or expended only in amounts authorized by law.

(3) Funds obligated and expended for a purpose set forth in

subparagraph (B) or (D) of paragraph (1) may be derived only

from funds deposited in the National Defense Sealift Fund pursuant to subsection (d)(1).

(d) DEPOSITS.—There shall be deposited in the Fund the following:

(1) All funds appropriated to the Department of Defense for

fiscal years after fiscal year 1993 for—

(A) construction (including design of vessels), purchase,

alteration, and conversion of national defense sealift vessels;

(B) operations, maintenance, and lease or charter of national defense sealift vessels;

(C) installation and maintenance of defense features for

national defense purposes on privately owned and operated

vessels; and

(D) research and development relating to national defense sealift.

(2) All receipts from the disposition of national defense sealift vessels, excluding receipts from the sale, exchange, or

scrapping of National Defense Reserve Fleet vessels under sections 508 and 510 of the Merchant Marine Act of 1936 (46

U.S.C. App. 1158, 1160), shall be deposited in the Fund.

(3) All receipts from the charter of vessels under section

1424(c) of the National Defense Authorization Act for Fiscal

Year 1991 (10 U.S.C. 7291 note).

(e) ACCEPTANCE OF SUPPORT.—

(1) The Secretary of Defense may accept from any person,

foreign government, or international organization any contribution of money, personal property (excluding vessels), or assistance in kind for support of the sealift functions of the Department of Defense.

(2) Any contribution of property accepted under paragraph

(1) may be retained and used by the Department of Defense or

disposed of in accordance with procedures prescribed by the

Secretary of Defense.

(3) The Secretary of Defense shall deposit in the Fund money

and receipts from the disposition of any property accepted

under paragraph (1).

(f) LIMITATIONS.—

(1) Not more than a total of five vessels built in foreign ship

yards may be purchased with funds in the National Defense

Sealift Fund pursuant to subsection (c)(1).
13

(2) Construction, alteration, or conversion of vessels with

funds in the National Defense Sealift Fund pursuant to subsection (c)(1) shall be conducted in United States ship yards

and shall be subject to section 1424(b) of Public Law 101–510

(104 Stat. 1683).

(g) EXPIRATION OF FUNDS AFTER 5 YEARS.—No part of an appropriation that is deposited in the National Defense Sealift Fund pursuant to subsection (d)(1) shall remain available for obligation more

than five years after the end of fiscal year for which appropriated

except to the extent specifically provided by law.

(h) BUDGET REQUESTS.—Budget requests submitted to Congress

for the National Defense Sealift Fund shall separately identify—

(1) the amount requested for programs, projects, and activities for construction (including design of vessels), purchase, alteration, and conversion of national defense sealift vessels;

(2) the amount requested for programs, projects, and activities for operation, maintenance, and lease or charter of national defense sealift vessels;

(3) the amount requested for programs, projects, and activities for installation and maintenance of defense features for

national defense purposes on privately owned and operated

vessels that are constructed in the United States and documented under the laws of the United States; and

(4) the amount requested for programs, projects, and activities for research and development relating to national defense

sealift.

(i) TITLE OR MANAGEMENT OF VESSELS.—Nothing in this section

(other than subsection (c)(1)(E)) shall be construed to affect or modify title to, management of, or funding responsibilities for, any vessel of the National Defense Reserve Fleet, or assigned to the Ready

Reserve Force component of the National Defense Reserve Fleet, as

established by section 11 of the Merchant Ship Sales Act of 1946

(50 U.S.C. App. 1744).

(j) AUTHORITY FOR CERTAIN USE OF FUNDS.—Upon a determination by the Secretary of Defense that such action serves the national defense interest and after consultation with the congressional defense committees, the Secretary may use funds available

for obligation or expenditure for a purpose specified under subsection (c)(1) (A), (B), (C), and (D) for any purpose under subsection

(c)(1).

(k) CONTRACTS FOR INCORPORATION OF DEFENSE FEATURES IN

COMMERCIAL VESSELS.—

(1) The head of an agency may enter into a contract with a

company submitting an offer for that company to install and

maintain defense features for national defense purposes in one

or more commercial vessels owned or controlled by that company in accordance with the purpose for which funds in the

National Defense Sealift Fund are available under subsection

(c)(1)(C). The head of the agency may enter into such a contract only after the head of the agency makes a determination

of the economic soundness of the offer.

(2) The head of an agency may make advance payments to

the contractor under a contract under paragraph (1) in a lump

sum, in annual payments, or in a combination thereof for costs
14

associated with the installation and maintenance of the defense features on a vessel covered by the contract, as follows:

(A) The costs to build, procure, and install a defense feature in the vessel.

(B) The costs to periodically maintain and test any defense feature on the vessel.

(C) Any increased costs of operation or any loss of revenue attributable to the installation or maintenance of any

defense feature on the vessel.

(D) Any additional costs associated with the terms and

conditions of the contract.

(3) For any contract under paragraph (1) under which the

United States makes advance payments under paragraph (2)

for the costs associated with installation or maintenance of any

defense feature on a commercial vessel, the contractor shall

provide to the United States such security interests in the vessel, by way of a preferred mortgage under section 31322 of title

46 or otherwise, as the head of the agency may prescribe in

order to adequately protect the United States against loss for

the total amount of those costs.

(4) Each contract entered into under this subsection shall—

(A) set forth terms and conditions under which, so long

as a vessel covered by the contract is owned or controlled

by the contractor, the contractor is to operate the vessel for

the Department of Defense notwithstanding any other contract or commitment of that contractor; and

(B) provide that the contractor operating the vessel for

the Department of Defense shall be paid for that operation

at fair and reasonable rates.

(5) The head of an agency may not delegate authority under

this subsection to any officer or employee in a position below

the level of head of a procuring activity.

(l) DEFINITIONS.—In this section:

(1) The term ‘‘Fund’’ means the National Defense Sealift

Fund established by subsection (a).

(2) The term ‘‘Department of Defense sealift vessel’’ means

any ship owned, operated, controlled, or chartered by the Department of Defense that is any of the following:

(A) A fast sealift ship, including any vessel in the Fast

Sealift Program established under section 1424 of Public

Law 101–510 (104 Stat. 1683) [10 USCS § 7291 note].

(B) A maritime prepositioning ship.

(C) An afloat prepositioning ship.

(D) An aviation maintenance support ship.

(E) A hospital ship.

(F) A strategic sealift ship.

(G) A combat logistics force ship.

(H) A maritime prepositioned ship.

(I) Any other auxiliary support vessel.

(3) The term ‘‘national defense sealift vessel’’ means—

(A) a Department of Defense sealift vessel; and

(B) a national defense reserve fleet vessel, including a

vessel in the Ready Reserve Force maintained under section 11 of the Merchant Ship Sales Act of 1946 (50 U.S.C.

App. 1744).
15

(4) The term ‘‘congressional defense committees’’ means—

(A) the Committee on Armed Services and the Committee on Appropriations of the Senate; and

(B) the Committee on Armed Services and the Committee on Appropriations of the House of Representatives.

(5) The term ‘‘head of an agency’’ has the meaning given that

term in section 2302(1) of this title.

NATIONAL MARITIME HERITAGE ACT OF 1994

SEC. 6. FUNDING.

[16 U.S.C. 5405]

(a) AVAILABILITY OF FUNDS FROM SALE AND SCRAPPING OF OBSOLETE VESSELS.—

(1) IN GENERAL.—Notwithstanding any other provision of

law, the amount of funds credited in a fiscal year to the Vessel

Operations Revolving Fund established by the Act of June 2,

1951 (46 App. U.S.C. 1241a), that is attributable to the sale of

obsolete vessels in the National Defense Reserve Fleet that are

scrapped or sold under section 508 or 510(i) of the Merchant

Marine Act, 1936 (46 App. U.S.C. 1158 or 1160(i)) shall be

available until expended as follows:

(A) 50 percent shall be available to the Administrator of

the Maritime Administration for such acquisition, maintenance, repair, reconditioning, or improvement of vessels in

the National Defense Reserve Fleet as is authorized under

other Federal law.

(B) 25 percent shall be available to the Administrator of

the Maritime Administration for the payment or reimbursement of expenses incurred by or on behalf of State

maritime academies or the United States Merchant Marine Academy for facility and training ship maintenance,

repair, and modernization, and for the purchase of simulators and fuel.

(C) The remainder shall be available to the Secretary to

carry out the Program, as provided in subsection (b).

(2) APPLICATION.—Paragraph (1) does not apply to amounts

credited to the Vessel Operations Revolving Fund before July

1, 1994.

(b) USE OF AMOUNTS FOR PROGRAM.—

(1) IN GENERAL.—Except as provided in paragraph (2), of

amounts available each fiscal year for the Program under subsection (a)(1)(C)—

(A) 1⁄2 shall be used for grants under section 4(b); and

(B) 1⁄2 shall be used for grants under section 4(c).

(2) USE FOR INTERIM PROJECTS.—Amounts available for the

Program under subsection (a)(1)(C) that are the proceeds of

any of the first 8 obsolete vessels in the National Defense Reserve Fleet that are sold or scrapped after July 1, 1994, under

section 508 or 510(i) of the Merchant Marine Act, 1936 (46

U.S.C. [App.] 1158 or 1160(i)) are available to the Secretary for

grants for interim projects approved under section 4(j) of this

Act.

(3) ADMINISTRATIVE EXPENSES.—
16

(A) IN GENERAL.—Not more than 15 percent or $500,000,

whichever is less, of the amount available for the Program

under subsection (a)(1)(C) for a fiscal year may be used for

expenses of administering the Program.

(B) ALLOCATION.—Of the amount available under subparagraph (A) for a fiscal year—

(i) 1⁄2 shall be allocated to the National Trust for expenses incurred in administering grants under section

4(b); and

(ii) 1⁄2 shall be allocated as appropriate by the Secretary to the National Park Service and participating

State Historic Preservation Officers.

(c) DISPOSALS OF VESSELS.—

(1) REQUIREMENT.—The Secretary of Transportation shall

dispose of all vessels described in paragraph (2)—

(A) by September 30, ø2001;¿ 2006;

ø(B) in a manner that maximizes the return on the vessels to the United States; and¿

(B) in the most cost effective manner to the United States

taking into account the need for disposal, the environment,

and safety concerns; and

(C) in accordance with the plan of the Department of

Transportation for disposal of those vessels and requirements under sections 508 and 510(i) of the Merchant Marine Act, 1936 (46 App. U.S.C. 1158, 1160(i)).

(2) VESSELS DESCRIBED.—The vessels referred to in paragraph (1) are the vessels in the National Defense Reserve Fleet

after July 1, 1994, that—

(A) are not assigned to the Ready Reserve Force component of that fleet; and

(B) are not specifically authorized or required by statute

to be used for a particular purpose.

(d) TREATMENT OF AMOUNTS AVAILABLE.—Amounts available

under this section shall not be considered in any determination of

the amounts available to the Department of the Interior.

PUBLIC LAW 101–115

[46 U.S.C. APP. 1121–2]

NATIONAL MARITIME ENHANCEMENT INSTITUTES

SEC. 8. (a) The Secretary of Transportation may designate National Maritime Enhancement Institutes.

(b) 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;
17

(8) fostering innovations in maritime transportation pricing;

and

(9) improving maritime economics and finance.

(c) An institution seeking designation as a National Maritime

Enhancement Institute shall submit an application under regulations prescribed by the Secretary.

(d) 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);

(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 institution

of higher learning.

(e) The Secretary may make awards on an equal matching basis

to an institute designated under subsection (a) from amounts appropriated. The aggregate annual amount of the Federal share of

the awards by the Secretary 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, United States Code, to an institute designated under subsection (a) for maritime and maritime intermodal research under that section as if the institute were a university transportation center.

(2) ADVICE AND CONSULTATION OF MARAD.—In making a

grant under the authority of paragraph (1), the Secretary,

through the Research and Special Programs 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.

TITLE 46. MERCHANT MARINE ACT, 1936

SHIPMENT REQUIREMENTS FOR CERTAIN EXPORTS SPONSORED BY

DEPARTMENT OF AGRICULTURE

[46 U.S.C. APP. 1241F]

SEC. 901b. (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

901(b)(1) of this Act, 25 percent of the gross tonnage of agricultural commodities or the products thereof specified in sub-
18

section (b) 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 et seq.);

(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 901a(5).

(c) TERMS AND CONDITIONS.—

(1) The requirement for United States-flag transportation

imposed by subsection (a) shall be subject to the same terms

and conditions as provided in section 901(b) of this Act.

(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, ø1986.¿

1986, the 18-month period commencing April 1, 2000, and the

12-month period beginning on the first day of October in the

year 2001 and each year thereafter.
19

(3)(A) Subject to subparagraph (B), in administering sections

901(b) and 901b (46 U.S.C. App. 1241(b) and 1241f), 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. 1751

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

901(b) 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), 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, 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 Statesflag vessels resulting from the application of this subsection

shall not reduce the gross tonnage of commodities required by

sections 901(b) and 901b to be transported on United Statesflag vessels.

(d) EXPORT ACTIVITY DEFINED.—As used in subsection (b), 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 sec-
20

tions 901a through 901d 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,

United States Code.

(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),

such determination shall be made by the Secretary of Agriculture in consultation with the heads of other appropriate

Federal agencies.

SEC. 910. DOCUMENTATION OF CERTAIN DRY CARGO VESSELS.

(a) IN GENERAL.—The restrictions of section 901(b)(1) of this Act

concerning a vessel built in a foreign country shall not apply to a

newly constructed drybulk or breakbulk vessel over 7,500 deadweight tons that has been delivered from a foreign shipyard or contracted for construction in a foreign shipyard before the earlier of—

(1) the date that is 1 year after the date of enactment of the

Maritime Administration Authorization Act for Fiscal Year

2001; or

(2) the effective date of the OECD Shipbuilding Trade Agreement Act.

(b) COMPLIANCE WITH CERTAIN U.S.-BUILD REQUIREMENTS.—A

vessel timely contracted for or delivered pursuant to this section and

documented under the laws of the United States shall be deemed to

have been United-States built for purposes of sections 901(b) and

901b of this Act if—

(1) following delivery by a foreign shipyard, the vessel has

any additional shipyard work necessary to receive its initial

Coast Guard certificate of inspection performed in a United

States shipyard;

(2) the vessel is not documented in another country before

being documented under the laws of the United States;

(3) the vessel complies with the same inspection standards set

forth for ocean common carriers in section 1137 of the Coast

Guard Authorization Act of 1996 (46 U.S.C. App. 1187 note);

and

(4) actual delivery of a vessel contracted for construction

takes place on or before the 3-year anniversary of the date of the

contract to construct the vessel.

(c) SECTION 12106(e) OF TITLE 46.—Section 12106(e) of title 46,

United States Code, shall not apply to a vessel built pursuant to

this section.

Æ