Union Calendar No. 121

104TH CONGRESS

1ST SESSION H. R. 1350

[Report No. 104–229]

A BILL

To amend the Merchant Marine Act, 1936 to reviand for other purposes. talize the United States-flag merchant marine,

AUGUST 3, 1995

Reported with an amendment, committed to the Commitordered to be printed tee of the Whole House on the State of the Union, and
IB

Union Calendar No. 121

104TH CONGRESS

1ST SESSION H. R. 1350

[Report No. 104–229]

To amend the Merchant Marine Act, 1936 to revitalize the United Statesflag merchant marine, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 29, 1995

Mr. SPENCE (for himself, Mr. DELLUMS, and Mr. BATEMAN) (all by request)

introduced the following bill; which was referred to the Committee on National Security

AUGUST 3, 1995

Reported with an amendment, committed to the Committee of the Whole

House on the State of the Union, and ordered to be printed

[Strike out all after the enacting clause and insert the part printed in italic]

[For text of introduced bill, see copy of bill as introduced on March 29, 1995]

A BILL

To amend the Merchant Marine Act, 1936 to revitalize the

United States-flag merchant marine, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Maritime Security Act

3 of 1995’’.

4 SEC. 2. MARITIME SECURITY PROGRAM.

5 Title VI of the Merchant Marine Act, 1936 (46 App.

6 U.S.C. 1171 et seq.) is amended—

7 (1) by striking the title heading and inserting

8 the following:

9 ‘‘TITLE VI—VESSEL OPERATING ASSISTANCE PROGRAMS

10 ‘‘Subtitle A—Operating-Differential Subsidy Program’’;

11 and

12 (2) by adding at the end the following new sub13 title:

14 ‘‘Subtitle B—Maritime Security Fleet Program

15 ‘‘ESTABLISHMENT OF FLEET

16 ‘‘SEC. 651. (a) IN GENERAL.—The Secretary of Trans17 portation shall establish a fleet of active, militarily useful,

18 privately-owned vessels to meet national defense and other

19 security requirements and maintain a United States pres20 ence in international commercial shipping. The Fleet shall

21 consist of privately owned, United States-flag vessels for

22 which there are in effect operating agreements under this

23 subtitle, and shall be known as the Maritime Security Fleet.

24 ‘‘(b) VESSEL ELIGIBILITY.—A vessel is eligible to be

25 included in the Fleet if the vessel is self-propelled and—
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1 ‘‘(1)(A) is operated by a person as an ocean

2 common carrier (as that term is used in the Shipping

3 Act of 1984 (46 App. U.S.C. 1701 et seq.));

4 ‘‘(B) whether in commercial service, on charter

5 to the Department of Defense, or in other employ6 ment, is either—

7 ‘‘(i) a roll-on/roll-off vessel with a carrying

8 capacity of at least 80,000 square feet or 500

9 twenty-foot equivalent units; or

10 ‘‘(ii) a lighter aboard ship vessel with a

11 barge capacity of at least 75 barges; or

12 ‘‘(C) any other type of vessel that is determined

13 by the Secretary to be suitable for use by the United

14 States for national defense or military purposes in

15 time of war or national emergency;

16 ‘‘(2)(A)(i) is a United States-documented vessel;

17 and

18 ‘‘(ii) on the date an operating agreement cover19 ing the vessel is entered into under this subtitle, is—

20 ‘‘(I) a LASH vessel that is 25 years of age

21 or less; or

22 ‘‘(II) any other type of vessel that is 15

23 years of age or less;

24 except that the Secretary of Transportation may

25 waive the application of clause (ii) if the Secretary,
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1 in consultation with the Secretary of Defense, deter2 mines that the waiver is in the national interest; or

3 ‘‘(B) it is not a United States-documented vessel,

4 but the owner of the vessel has demonstrated an intent

5 to have the vessel documented under chapter 121 of

6 title 46, United States Code, if it is included in the

7 Fleet, and the vessel will be less than 10 years of age

8 on the date of that documentation;

9 ‘‘(3) the Secretary of Transportation determines

10 that the vessel is necessary to maintain a United

11 States presence in international commercial shipping

12 or, after consultation with the Secretary of Defense,

13 determines that the vessel is militarily useful for

14 meeting the sealift needs of the United States with re15 spect to national emergencies; and

16 ‘‘(4) at the time an operating agreement for the

17 vessel is entered into under this subtitle, the vessel

18 will be eligible for documentation under chapter 121

19 of title 46, United States Code.

20 ‘‘OPERATING AGREEMENTS

21 ‘‘SEC. 652. (a) IN GENERAL.—The Secretary of Trans22 portation shall require, as a condition of including any ves23 sel in the Fleet, that the owner or operator of the vessel enter

24 into an operating agreement with the Secretary under this

25 section. Notwithstanding subsection (g), the Secretary may

26 enter into an operating agreement for, among other vessels
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1 that are eligible to be included in the Fleet, any vessel which

2 continues to operate under an operating-differential subsidy

3 contract under subtitle A or which is under charter to the

4 Department of Defense.

5 ‘‘(b) REQUIREMENTS FOR OPERATION.—An operating

6 agreement under this section shall require that, during the

7 period a vessel is operating under the agreement—

8 ‘‘(1) the vessel—

9 ‘‘(A) shall be operated exclusively in the for10 eign trade or in mixed foreign and domestic

11 trade allowed under a registry endorsement is12 sued under section 12105 of title 46, United

13 States Code, and

14 ‘‘(B) shall not otherwise be operated in the

15 coastwise trade; and

16 ‘‘(2) the vessel shall be documented under chapter

17 121 of title 46, United States Code.

18 ‘‘(c) CERTAIN REQUIREMENTS NOT TO APPLY.—A

19 contractor of a vessel included in an operating agreement

20 under this subtitle may operate the vessel in the foreign

21 commerce of the United States without restriction, and shall

22 not be subject to any requirement under section 801, 808,

23 809, or 810.

24 ‘‘(d) EFFECTIVENESS AND ANNUAL PAYMENT RE25 QUIREMENTS OF OPERATING AGREEMENTS.—
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1 ‘‘(1) EFFECTIVENESS.—The Secretary of Trans2 portation may enter into an operating agreement

3 under this subtitle for fiscal year 1996. The agreement

4 shall be effective only for 1 fiscal year, but shall be

5 renewable, subject to the availability of appropria6 tions, for each subsequent fiscal year through the end

7 of fiscal year 2005.

8 ‘‘(2) ANNUAL PAYMENT.—An operating agree9 ment under this subtitle shall require, subject to the

10 availability of appropriations and the other provi11 sions of this section, that the Secretary of Transpor12 tation pay each fiscal year to the contractor, for each

13 vessel that is covered by the operating agreement, an

14 amount equal to $2,300,000 for fiscal year 1996 and

15 $2,100,000 for each fiscal year thereafter in which the

16 agreement is in effect. The amount shall be paid in

17 equal monthly installments at the end of each month.

18 The amount shall not be reduced except as provided

19 by this section.

20 ‘‘(e) CERTIFICATION REQUIRED FOR PAYMENT.—As a

21 condition of receiving payment under this section for a fis22 cal year for a vessel, the owner or operator of the vessel

23 shall certify, in accordance with regulations issued by the

24 Secretary of Transportation, that the vessel has been and

25 will be operated in accordance with subsection (b)(1) for
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1 at least 320 days in the fiscal year. Days during which

2 the vessel is drydocked, surveyed, inspected, or repaired

3 shall be considered days of operation for purposes of this

4 subsection.

5 ‘‘(f) OPERATING AGREEMENT IS OBLIGATION OF UNIT6 ED STATES GOVERNMENT.—An operating agreement under

7 this subtitle constitutes a contractual obligation of the Unit8 ed States Government to pay the amounts provided for in

9 the agreement to the extent of actual appropriations.

10 ‘‘(g) LIMITATIONS.—The Secretary of Transportation

11 shall not make any payment under this subtitle for a vessel

12 with respect to any days for which the vessel is—

13 ‘‘(1) subject to an operating-differential subsidy

14 contract under subtitle A or under a charter to the

15 United States Government, other than a charter pur16 suant to section 653;

17 ‘‘(2) not operated or maintained in accordance

18 with an operating agreement under this subtitle; or

19 ‘‘(3) more than 25 years of age, except that the

20 Secretary may make such payments for a LASH ves21 sel for any day for which the vessel is more than 25

22 years of age if that vessel—

23 ‘‘(A) is modernized after January 1, 1994,

24 ‘‘(B) is modernized before it is 25 years of

25 age, and
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1 ‘‘(C) is not more than 30 years of age.

2 ‘‘(h) PAYMENTS.—With respect to payments under this

3 subtitle for a vessel covered by an operating agreement, the

4 Secretary of Transportation—

5 ‘‘(1) except as provided in paragraph (2), shall

6 not reduce any payment for the operation of a vessel

7 to carry military or other preference cargoes under

8 section 2631 of title 10, United States Code, the Act

9 of March 26, 1934 (46 App. U.S.C. 1241–1), section

10 901(a), 901(b), or 901b of this Act, or any other cargo

11 preference law of the United States;

12 ‘‘(2) shall not make any payment for any day

13 that a vessel is engaged in transporting more than

14 7,500 tons of civilian bulk preference cargoes pursu15 ant to section 901(a), 901(b), or 901b that is bulk

16 cargo (as that term is defined in section 3 of the

17 Shipping Act of 1984 (46 App. U.S.C. 1702)); and

18 ‘‘(3) shall make a pro rata reduction in payment

19 for each day less than 320 in a fiscal year that a ves20 sel covered by an operating agreement is not operated

21 in accordance with subsection (b)(1), with days dur22 ing which the vessel is drydocked or undergoing sur23 vey, inspection, or repair considered to be days on

24 which the vessel is operated.
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1 ‘‘(i) PRIORITY FOR AWARDING AGREEMENTS.—Subject

2 to the availability of appropriations, the Secretary shall

3 enter into operating agreements according to the following

4 priority:

5 ‘‘(1) VESSELS OWNED BY CITIZENS.—

6 ‘‘(A) PRIORITY.—First, for any vessel that

7 is—

8 ‘‘(i) owned and operated by persons

9 who are citizens of the United States under

10 section 2 of the Shipping Act, 1916; or

11 ‘‘(ii) less than 10 years of age and

12 owned and operated by a corporation that

13 is—

14 ‘‘(I) eligible to document a vessel

15 under chapter 121 of title 46, United

16 States Code; and

17 ‘‘(II) affiliated with a corporation

18 operating or managing for the Sec19 retary of Defense other vessels docu20 mented under that chapter, or charter21 ing other vessels to the Secretary of De22 fense.

23 ‘‘(B) LIMITATION ON NUMBER OF OPERAT24 ING AGREEMENTS.—The total number of operat25 ing agreements that may be entered into by a
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1 person under the priority in subparagraph

2 (A)—

3 ‘‘(i) for vessels described in subpara4 graph (A)(i), may not exceed the sum of—

5 ‘‘(I) the number of United States6 documented vessels the person operated

7 in the foreign commerce of the United

8 States (except mixed coastwise and for9 eign commerce) on May 17, 1995; and

10 ‘‘(II) the number of United

11 States-documented vessels the person

12 chartered to the Secretary of Defense

13 on that date; and

14 ‘‘(ii) for vessels described in subpara15 graph (A)(ii), may not exceed 5 vessels.

16 ‘‘(C) TREATMENT OF RELATED PARTIES.—

17 For purposes of subparagraph (B), a related

18 party with respect to a person shall be treated as

19 the person.

20 ‘‘(2) OTHER VESSELS OWNED BY CITIZENS AND

21 GOVERNMENT CONTRACTORS.—To the extent that

22 amounts are available after applying paragraph (1),

23 any vessel that is owned and operated by a person

24 who is—
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1 ‘‘(A) a citizen of the United States under

2 section 2 of the Shipping Act, 1916, that has not

3 been awarded an operating agreement under the

4 priority established under paragraph (1); or

5 ‘‘(B)(i) eligible to document a vessel under

6 chapter 121 of title 46, United States Code; and

7 ‘‘(ii) affiliated with a corporation operating

8 or managing other United States-documented

9 vessels for the Secretary of Defense or chartering

10 other vessels to the Secretary of Defense.

11 ‘‘(3) OTHER VESSELS.—To the extent that

12 amounts are available after applying paragraphs (1)

13 and (2), any other eligible vessel.

14 ‘‘(j) TRANSFER OF OPERATING AGREEMENTS.—A con15 tractor under an operating agreement may transfer the

16 agreement (including all rights and obligations under the

17 agreement) to any person eligible to enter into that operat18 ing agreement under this subtitle after notification of the

19 Secretary in accordance with regulations prescribed by the

20 Secretary, unless the transfer is disapproved by the Sec21 retary within 90 days after the date of that notification.

22 A person to whom an operating agreement is transferred

23 may receive payments from the Secretary under the agree24 ment only if each vessel to be covered by the agreement after

25 the transfer is an eligible vessel under section 651(b).
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1 ‘‘(k) REVERSION OF UNUSED AUTHORITY.—The obli2 gation of the Secretary to make payments under an operat3 ing agreement under this subtitle shall terminate with re4 spect to a vessel if the contractor fails to engage in operation

5 of the vessel for which such payment is required—

6 ‘‘(1) within one year after the effective date of

7 the operating agreement, in the case of a vessel in ex8 istence on the effective date of the agreement, or

9 ‘‘(2) within 30 months after the effective date of

10 the operating agreement, in the case of a vessel to be

11 constructed after that effective date.

12 ‘‘(l) PROCEDURE FOR CONSIDERING APPLICATION; EF13 FECTIVE DATE FOR CERTAIN VESSELS.—

14 ‘‘(1) PROCEDURES.—Within 90 days after re15 ceipt of an application for enrollment of a vessel in

16 the Fleet, the Secretary shall enter into an operating

17 agreement with the applicant or provide in writing

18 the reason for denial of that application.

19 ‘‘(2) EFFECTIVE DATE.—Unless an earlier date

20 is requested by the applicant, the effective date for an

21 operating agreement with respect to a vessel which is,

22 on the date of entry into an operating agreement, ei23 ther subject to a contract under subtitle A or on char24 ter to the United States Government, other than a

25 charter under section 653, shall be the expiration or
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1 termination date of the contract under subtitle A or

2 of the Government charter covering the vessel, respec3 tively, or any earlier date the vessel is withdrawn

4 from that contract or charter.

5 ‘‘(m) EARLY TERMINATION.—An operating agreement

6 under this subtitle shall terminate on a date specified by

7 the contractor if the contractor notifies the Secretary, by

8 not later than 60 days before the effective date of the termi9 nation, that the contractor intends to terminate the agree10 ment. Vessels covered by an operating agreement terminated

11 under to this subsection shall remain documented under

12 chapter 121 of title 46, United States Code, until the date

13 the operating agreement would have terminated according

14 to its terms. A contractor who terminates an operating

15 agreement pursuant to this subsection shall continue to be

16 bound by the provisions of section 653 until the date the

17 operating agreement would have terminated according to

18 its terms. All terms and conditions of an Emergency Pre19 paredness Agreement entered into under to section 653 shall

20 remain in effect until the date the operating agreement

21 would have terminated according to its terms, except that

22 the terms of such Emergency Preparedness Agreement may

23 be modified by the mutual consent of the contractor and

24 the Secretary of Transportation.
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1 ‘‘(n) TERMINATION FOR LACK OF FUNDS.—If funds

2 are not appropriated under the authority provided by sec3 tion 655 for any fiscal year, then each vessel covered by

4 an operating agreement under this subtitle is thereby re5 leased from any further obligation under the operating

6 agreement, the operating agreement shall terminate, and the

7 vessel owner or operator may transfer and register such ves8 sel under an effective United States-controlled foreign flag,

9 notwithstanding any other provision of law. If section 902

10 is applicable to such vessel after registry under an effective

11 United States-controlled foreign flag, the vessel is available

12 to be requisitioned by the Secretary of Transportation pur13 suant to section 902.

14 ‘‘(o) AWARD OF OPERATING AGREEMENTS.—

15 ‘‘(1) IN GENERAL.—The Secretary of Transpor16 tation, subject to paragraph (4), shall award operat17 ing agreements within each priority under subsection

18 (i)(1), (2), and (3) under regulations prescribed by

19 the Secretary.

20 ‘‘(2) NUMBER OF AGREEMENTS AWARDED.—Reg21 ulations under paragraph (1) shall provide that if

22 appropriated amounts are not sufficient for operating

23 agreements for all vessels within a priority under sub24 section (i)(1), (2), or (3), the Secretary shall award

25 to each person submitting a request a number of oper-
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1 ating agreements that bears approximately the same

2 ratio to the total number of vessels in the priority, as

3 the amount of appropriations available for operating

4 agreements for vessels in the priority bears to the

5 amount of appropriations necessary for operating

6 agreements for all vessels in the priority.

7 ‘‘(3) TREATMENT OF RELATED PARTIES.—For

8 purposes of paragraph (2), a related party with re9 spect to a person shall be treated as the person.

10 ‘‘(4) PREFERENCE FOR U.S.-BUILT VESSELS.—In

11 awarding operating agreements for vessels within a

12 priority under subsection (i) (1), (2), or (3), the Sec13 retary shall give preference to a vessel that was con14 structed in the United States, to the extent such pref15 erence is consistent with establishment of a fleet de16 scribed in the first sentence of section 651(a) (taking

17 into account the age of the vessel, the nature of service

18 provided by the vessel, and the commercial viability

19 of the vessel).

20 ‘‘(p) NOTICE TO U.S. SHIPBUILDERS REQUIRED.—

21 The Secretary shall include in any operating agreement

22 under this subtitle a requirement that the contractor under

23 the agreement shall, by not later than 30 days after solicit24 ing any bid or offer for the construction of any vessel in

25 a foreign shipyard and before entering into a contract for
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1 construction of a vessel in a foreign shipyard, provide notice

2 of the intent of the contractor to enter into such a contract

3 to each shipyard in the United States that is capable of

4 constructing the vessel.

5 ‘‘NATIONAL SECURITY REQUIREMENTS

6 ‘‘SEC. 653. (a) EMERGENCY PREPAREDNESS AGREE7 MENT.—

8 ‘‘(1) REQUIREMENT TO ENTER AGREEMENT.—

9 The Secretary of Transportation shall establish an

10 Emergency Preparedness Program under this section

11 that is approved by the Secretary of Defense. Under

12 the program, the Secretary of Transportation shall

13 include in each operating agreement under this sub14 title a requirement that the contractor enter into an

15 Emergency Preparedness Agreement under this sec16 tion with the Secretary. The Secretary shall negotiate

17 and enter into an Emergency Preparedness Agree18 ment with each contractor as promptly as practicable

19 after the contractor has entered into an operating

20 agreement under this subtitle.

21 ‘‘(2) TERMS OF AGREEMENT.—An Emergency

22 Preparedness Agreement under this section shall re23 quire that upon a request by the Secretary of Defense

24 during time of war or national emergency, an owner

25 or operator of a vessel covered by an operating agree26 ment under this subtitle shall make available commer-
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1 cial transportation resources (including services). The

2 basic terms of the Emergency Preparedness Agreement

3 shall be established pursuant to consultations among

4 the Secretary, the Secretary of Defense, and Maritime

5 Security Program contractors. In any Emergency

6 Preparedness Agreement, the Secretary and a contrac7 tor may agree to additional or modifying terms ap8 propriate to the contractor’s circumstances.

9 ‘‘(b) RESOURCES MADE AVAILABLE.—The commercial

10 transportation resources to be made available under an

11 Emergency Preparedness Agreement shall include vessels or

12 capacity in vessels, intermodal systems and equipment, ter13 minal facilities, intermodal and management services, and

14 other related services, or any agreed portion of such

15 nonvessel resources for activation as the Secretary may de16 termine to be necessary, seeking to minimize disruption of

17 the contractor’s service to commercial shippers.

18 ‘‘(c) COMPENSATION.—

19 ‘‘(1) IN GENERAL.—The Secretary of Transpor20 tation shall provide in each Emergency Preparedness

21 Agreement for reasonable compensation for all com22 mercial transportation resources provided pursuant to

23 this section.

24 ‘‘(2) SPECIFIC REQUIREMENTS.—Compensation

25 under this subsection—
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1 ‘‘(A) shall not be less than the contractor’s

2 commercial market charges for like transpor3 tation resources;

4 ‘‘(B) shall include all the contractor’s costs

5 associated with provision and use of the contrac6 tor’s commercial resources to meet emergency re7 quirements;

8 ‘‘(C) in the case of a charter of an entire

9 vessel, shall be fair and reasonable;

10 ‘‘(D) shall be in addition to and shall not

11 in any way reflect amounts payable under sec12 tion 652; and

13 ‘‘(E) shall be provided from the time that a

14 vessel or resource is diverted from commercial

15 service until the time that reenters commercial

16 service.

17 ‘‘(d) TEMPORARY REPLACEMENT VESSELS.—Notwith18 standing any other provision of this subtitle or of other law

19 to the contrary—

20 ‘‘(1) a contractor may operate or employ in for21 eign commerce a foreign-flag vessel or foreign-flag ves22 sel capacity, as a temporary replacement for a United

23 States-documented vessel or United States-documented

24 vessel capacity that is activated under an Emergency

25 Preparedness Agreement; and
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1 ‘‘(2) such replacement vessel or vessel capacity

2 shall be eligible during the replacement period to

3 transport preference cargoes subject to section 2631 of

4 title 10, United States Code, the Act of March 26,

5 1934 (46 App. U.S.C. 1241–1), and sections 901(a),

6 901(b), and 901b of this Act to the same extent as the

7 eligibility of the vessel or vessel capacity replaced.

8 ‘‘(e) REDELIVERY AND LIABILITY OF U.S. FOR DAM9 AGES.—

10 ‘‘(1) IN GENERAL.—All commercial transpor11 tation resources activated under an Emergency Pre12 paredness Agreement shall, upon termination of the

13 period of activation, be redelivered to the contractor

14 in the same good order and condition as when re15 ceived, less ordinary wear and tear, or the Govern16 ment shall fully compensate the contractor for any

17 necessary repair or replacement.

18 ‘‘(2) LIMITATION ON LIABILITY OF U.S.—Except

19 as may be expressly agreed to in an Emergency Pre20 paredness Agreement, or as otherwise provided by

21 law, the Government shall not be liable for disruption

22 of a contractor’s commercial business or other con23 sequential damages to a contractor arising from acti24 vation of commercial transportation resources under

25 an Emergency Preparedness Agreement.
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1 ‘‘(3) LIMITATION ON APPLICATION OF OTHER RE2 QUIREMENTS.—Sections 902 and 909 of this Act shall

3 not apply to a vessel while it is covered by an Emer4 gency Preparedness Agreement under this subtitle.

5 Any Emergency Preparedness Agreement entered into

6 by a contractor shall supersede any other agreement

7 between that contractor and the Government for vessel

8 availability in time of war or national emergency.

9 ‘‘DEFINITIONS

10 ‘‘SEC. 654. In this subtitle:

11 ‘‘(1) FLEET.—The term ‘Fleet’ means the Mari12 time Security Fleet established pursuant to section

13 651(a).

14 ‘‘(2) LASH VESSEL.—The term ‘LASH vessel’

15 means a lighter aboard ship vessel.

16 ‘‘(3) UNITED STATES-DOCUMENTED VESSEL.—

17 The term ‘United States-documented vessel’ means a

18 vessel documented under chapter 121 of title 46, Unit19 ed States Code.

20 ‘‘AUTHORIZATION OF APPROPRIATIONS

21 ‘‘SEC. 655. There are authorized to be appropriated

22 for operating agreements under this subtitle, to remain

23 available until expended, $100,000,000 for fiscal year 1996

24 and such sums as may be necessary, not to exceed

25 $100,000,000, for each fiscal year thereafter through fiscal

26 year 2005.’’.
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1 SEC. 3. TERMINATION OF OPERATING-DIFFERENTIAL SUB2 SIDY PROGRAM.

3 (a) LIMITATION ON PAYMENTS FOR OLDER VES4 SELS.—Section 605(b) of the Merchant Marine Act, 1936

5 (46 App. U.S.C. 1175(b)), is amended to read as follows:

6 ‘‘(b) No operating-differential subsidy shall be paid for

7 the operation of a vessel after the calendar year the vessel

8 becomes 25 years of age, unless the Secretary of Transpor9 tation has determined, before the date of enactment of the

10 Maritime Security Act of 1995, that it is in the public in11 terest to grant such financial aid for the operation of such

12 vessel.’’.

13 (b) WIND-UP OF PROGRAM.—Subtitle A of such Act

14 (46 App. U.S.C. 1171 et seq.), as designated by the amend15 ment made by section 2(1), is further amended by adding

16 at the end the following new section:

17 ‘‘SEC. 616. (a) After the date of enactment of the Mari18 time Security Act of 1995, the Secretary of Transportation

19 shall not enter into any new contract for operating-differen20 tial subsidy under this subtitle.

21 ‘‘(b) Notwithstanding any other provision of this Act,

22 any operating-differential subsidy contract in effect under

23 this title on the day before the date of enactment of the Mar24 itime Security Act of 1995 shall continue in effect and ter25 minate as set forth in the contract, unless voluntarily termi-
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1 nated at an earlier date by the parties (other than the Unit2 ed States Government) to the contract.

3 ‘‘(c) The essential service requirements of section

4 601(a) and 603(b), and the provisions of sections 605(c)

5 and 809(a), shall not apply to the operating-differential

6 subsidy program under this subtitle effective upon the ear7 lier of—

8 ‘‘(1) the date that a payment is made, under the

9 Maritime Security Program established by subtitle B

10 to a contractor under that subtitle who is not party

11 to an operating-differential subsidy contract under

12 this subtitle, with the Secretary to cause notice of the

13 date of such payment to be published in the Federal

14 Register as soon as possible; or

15 ‘‘(2) with respect to a particular contractor

16 under the operating-differential subsidy program, the

17 date that contractor enters into a contract with the

18 Secretary under the Maritime Security Program es19 tablished by subtitle B.

20 ‘‘(d)(1) Notwithstanding any other provision of law,

21 a vessel may be transferred and registered under an effective

22 United States-controlled foreign flag if—

23 ‘‘(A) the operator of the vessel receives an operat24 ing-differential subsidy pursuant to a contract under

25 this subtitle which is in force on October 1, 1994, and
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1 the Secretary approves the replacement of such vessel

2 with a comparable vessel, or

3 ‘‘(B) the vessel is covered by an operating agree4 ment under subtitle B, and the Secretary approves the

5 replacement of such vessel with a comparable vessel

6 for inclusion in the Maritime Security Fleet estab7 lished under subtitle B.

8 ‘‘(2) Any such vessel may be requisitioned by the Sec9 retary of Transportation pursuant to section 902.’’.

10 SEC. 4. DOMESTIC OPERATIONS.

11 Section 805(a) of the Merchant Marine Act, 1936 (46

12 App. U.S.C. 1223(a)) is amended by striking ‘‘1935’’ each

13 place it appears and inserting ‘‘1995’’.

14 SEC. 5. USE OF FOREIGN-FLAG VESSELS.

15 (a) IN GENERAL.—Section 804 of the Merchant Ma16 rine Act, 1936 (46 App. U.S.C. 1222) is amended by adding

17 at the end the following new subsection:

18 ‘‘(f) The provisions of subsection (a) shall not preclude

19 a contractor receiving assistance under subtitle A or B of

20 title VI, or any holding company, subsidiary, or affiliate

21 of the contractor, or any officer, director, agent, or executive

22 thereof, from—

23 ‘‘(1) owning, chartering, or operating any for24 eign-flag vessel on a voyage or a segment of a voyage

25 that does not call at a port in the United States;
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1 ‘‘(2) owning, chartering, or operating any for2 eign-flag vessel in line haul service between the Unit3 ed States and foreign ports if—

4 ‘‘(A) the foreign-flag vessel was operated by,

5 or is a replacement for a foreign-flag vessel oper6 ated by, such owner or operator, or any holding

7 company, subsidiary, affiliate, or associate of

8 such owner or operator, on the date of enactment

9 of the Maritime Security Act of 1995;

10 ‘‘(B) the owner or operator, with respect to

11 each additional foreign-flag vessel, other than a

12 time chartered vessel, has first applied to have

13 that vessel covered by an operating agreement

14 under subtitle B of title VI, and the Secretary

15 has not awarded an operating agreement with

16 respect to that vessel within 90 days after the fil17 ing of the application; or

18 ‘‘(C) the vessel has been placed under for19 eign documentation pursuant to section 9 of the

20 Shipping Act, 1916 (46 App. U.S.C. 808), except

21 that any foreign-flag vessel, other than a time

22 chartered vessel, a replacement vessel under sec23 tion 653(d), or a vessel operated by the owner or

24 operator on the date of enactment of the Mari25 time Security Act of 1995, in line haul service
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1 between the United States and foreign ports is

2 registered under the flag of an effective United

3 States-controlled foreign flag, and available to be

4 requisitioned by the Secretary of Transportation

5 pursuant to section 902 of this Act;

6 ‘‘(3) owning, chartering, or operating foreign7 flag bulk cargo vessels that are operated in foreign-to8 foreign service or the foreign commerce of the United

9 States;

10 ‘‘(4) chartering or operating foreign-flag vessels

11 that are operated solely as replacement vessels for

12 United States-flag vessels or vessel capacity that are

13 made available to the Secretary of Defense pursuant

14 to section 653 of this Act; or

15 ‘‘(5) entering into time or space charter or other

16 cooperative agreements with respect to foreign-flag

17 vessels or acting as agent or broker for a foreign-flag

18 vessel or vessels.’’.

19 (b) EFFECTIVE DATE.—The amendment made by sub20 section (a) shall apply to a contractor under subtitle B of

21 title VI of the Merchant Marine Act, 1936, as amended by

22 this Act, upon enactment of this Act, and shall apply to

23 a contractor under subtitle A of title VI of that Act, upon

24 the earlier of—
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1 (1) the date that a payment is made, under the

2 Maritime Security Program under subtitle B of that

3 title to a contractor under subtitle B of that title who

4 is not party to an operating-differential subsidy con5 tract under subtitle A of that title, with the Secretary

6 of Transportation to cause notice of the date of such

7 payment to be published in the Federal Register as

8 soon as possible; or

9 (2) with respect to a particular contractor under

10 the operating-differential subsidy program under sub11 title A of that title, the date that contractor enters

12 into a contract with the Secretary under the Mari13 time Security Program established by subtitle B of

14 that title.

15 SEC. 6. AMENDMENT TO SHIPPING ACT, 1916.

16 Section 9 of the Shipping Act, 1916 (46 App. U.S.C.

17 808) is amended by adding at the end the following:

18 ‘‘(e) Notwithstanding subsection (c)(2), the Merchant

19 Marine Act, 1936, or any contract entered into with the

20 Secretary of Transportation under that Act, a vessel may

21 be placed under a foreign registry, without approval of the

22 Secretary, if—

23 ‘‘(1)(A) the Secretary determines that at least

24 one replacement vessel of a capacity that is equivalent

25 or greater, as measured by deadweight tons, gross
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1 tons, or container equivalent units, as appropriate, is

2 documented under chapter 121 of title 46, United

3 States Code, by the owner of the vessel placed under

4 the foreign registry; and

5 ‘‘(B) the replacement vessel is not more than 10

6 years of age on the date of that documentation;

7 ‘‘(2)(A) an application for an operating agree8 ment under subtitle B of title VI of the Merchant Ma9 rine Act, 1936 has been filed with respect to a vessel

10 which is eligible to be included in the Maritime Secu11 rity Fleet under section 651(b)(1) of that Act; and

12 ‘‘(B) the Secretary has not awarded an operat13 ing agreement with respect to that vessel within 90

14 days after the date of that application;

15 ‘‘(3) a contract covering the vessel under subtitle

16 A of title VI of the Merchant Marine Act, 1936 has

17 expired, and that vessel is more than 15 years of age

18 on the date the contract expires; or

19 ‘‘(4) an operating agreement covering the vessel

20 under subpart B of title VI of the Merchant Marine

21 Act, 1936 has expired.’’.
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1 SEC. 7. CONSTRUCTION DIFFERENTIAL SUBSIDY RESTRIC2 TIONS.

3 Title V of the Merchant Marine Act, 1936 (46 App.

4 U.S.C. 1151 et seq.) is amended by adding at the end the

5 following new section:

6 ‘‘SEC. 512. LIMITATION ON RESTRICTIONS.

7 ‘‘Notwithstanding any other provision of law or con8 tract, all restrictions and requirements under sections 503,

9 506, and 802 applicable to a liner vessel constructed, recon10 structed, or reconditioned with the aid of construction-dif11 ferential subsidy shall terminate upon the expiration of the

12 25-year period beginning on the date of the original deliv13 ery of the vessel from the shipyard.’’.

14 SEC. 8. REGULATIONS.

15 (a) IN GENERAL.—The Secretary of Transportation

16 may prescribe rules as necessary to carry out this Act and

17 the amendments made by this Act.

18 (b) INTERIM RULES.—The Secretary of Transpor19 tation may prescribe interim rules necessary to carry out

20 this Act and the amendments made by this Act. For this

21 purpose, the Secretary of Transportation is excepted from

22 compliance with the notice and comment requirements of

23 section 553 of title 5, United States Code. All rules pre24 scribed under the authority of this subsection that are not

25 earlier superseded by final rules shall expire no later than

26 270 day after the date of enactment of this Act.
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