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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1350 Enrolled Bill (ENR)]

        H.R.1350

                       One Hundred Fourth Congress

                                 of the

                        United States of America

                          AT THE SECOND SESSION

         Begun and held at the City of Washington on Wednesday,
   the third day of January, one thousand nine hundred and ninety-six

                                 An Act

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

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Maritime Security Act of 1996''.

SEC. 2. MARITIME SECURITY PROGRAM.

    Title VI of the Merchant Marine Act, 1936 (46 U.S.C. App. 1171 et 
seq.) is amended--
        (1) by striking the title heading and inserting the following:

            ``Title VI--Vessel Operating Assistance Programs

        ``Subtitle A--Operating-Differential Subsidy Program'';

    and
        (2) by adding at the end the following new subtitle:

             ``Subtitle B--Maritime Security Fleet Program

                         ``establishment of fleet

    ``Sec. 651. (a) In General.--The Secretary of Transportation shall 
establish a fleet of active, militarily useful, privately-owned vessels 
to meet national defense and other security requirements and maintain a 
United States presence in international commercial shipping. The Fleet 
shall consist of privately owned, United States-flag vessels for which 
there are in effect operating agreements under this subtitle, and shall 
be known as the Maritime Security Fleet.
    ``(b) Vessel Eligibility.--A vessel is eligible to be included in 
the Fleet if the vessel is self-propelled and--
        ``(1)(A) is operated by a person as an ocean common carrier;
        ``(B) whether in commercial service, on charter to the 
    Department of Defense, or in other employment, is either--
            ``(i) a roll-on/roll-off vessel with a carrying capacity of 
        at least 80,000 square feet or 500 twenty-foot equivalent 
        units; or
            ``(ii) a lighter aboard ship vessel with a barge capacity 
        of at least 75 barges; or
        ``(C) any other type of vessel that is determined by the 
    Secretary to be suitable for use by the United States for national 
    defense or military purposes in time of war or national emergency;
        ``(2)(A)(i) is a United States-documented vessel; and
        ``(ii) on the date an operating agreement covering the vessel 
    is entered into under this subtitle, is--
            ``(I) a LASH vessel that is 25 years of age or less; or
            ``(II) any other type of vessel that is 15 years of age or 
        less;
    except that the Secretary of Transportation may waive the 
    application of clause (ii) if the Secretary, in consultation with 
    the Secretary of Defense, determines that the waiver is in the 
    national interest; or
        ``(B) it is not a United States-documented vessel, but the 
    owner of the vessel has demonstrated an intent to have the vessel 
    documented under chapter 121 of title 46, United States Code, if it 
    is included in the Fleet, and the vessel will be less than 10 years 
    of age on the date of that documentation;
        ``(3) the Secretary of Transportation determines that the 
    vessel is necessary to maintain a United States presence in 
    international commercial shipping or, after consultation with the 
    Secretary of Defense, determines that the vessel is militarily 
    useful for meeting the sealift needs of the United States with 
    respect to national emergencies; and
        ``(4) at the time an operating agreement for the vessel is 
    entered into under this subtitle, the vessel will be eligible for 
    documentation under chapter 121 of title 46, United States Code.

                          ``operating agreements

    ``Sec. 652. (a) In General.--The Secretary of Transportation shall 
require, as a condition of including any vessel in the Fleet, that the 
owner or operator of the vessel enter into an operating agreement with 
the Secretary under this section. Notwithstanding subsection (g), the 
Secretary may enter into an operating agreement for, among other 
vessels that are eligible to be included in the Fleet, any vessel which 
continues to operate under an operating-differential subsidy contract 
under subtitle A or which is under charter to the Department of 
Defense.
    ``(b) Requirements for Operation.--An operating agreement under 
this section shall require that, during the period a vessel is 
operating under the agreement--
        ``(1) the vessel--
            ``(A) shall be operated exclusively in the foreign trade or 
        in mixed foreign and domestic trade allowed under a registry 
        endorsement issued under section 12105 of title 46, United 
        States Code, and
            ``(B) shall not otherwise be operated in the coastwise 
        trade; and
        ``(2) the vessel shall be documented under chapter 121 of title 
    46, United States Code.
    ``(c) Regulatory Relief.--A contractor of a vessel included in an 
operating agreement under this subtitle may operate the vessel in the 
foreign commerce of the United States without restriction, and shall 
not be subject to any requirement under section 801, 808, 809, or 810. 
Participation in the program established by this subtitle shall not 
subject a contractor to section 805 or to any provision of subtitle A.
    ``(d) Effectiveness and Annual Payment Requirements of Operating 
Agreements.--
        ``(1) Effectiveness.--The Secretary of Transportation may enter 
    into an operating agreement under this subtitle for fiscal year 
    1996. The agreement shall be effective only for 1 fiscal year, but 
    shall be renewable, subject to the availability of appropriations, 
    for each subsequent fiscal year through the end of fiscal year 
    2005.
        ``(2) Annual payment.--An operating agreement under this 
    subtitle shall require, subject to the availability of 
    appropriations and the other provisions of this section, that the 
    Secretary of Transportation pay each fiscal year to the contractor, 
    for each vessel that is covered by the operating agreement, an 
    amount equal to $2,300,000 for fiscal year 1996 and $2,100,000 for 
    each fiscal year thereafter in which the agreement is in effect. 
    The amount shall be paid in equal monthly installments at the end 
    of each month. The amount shall not be reduced except as provided 
    by this section.
    ``(e) Certification Required for Payment.--As a condition of 
receiving payment under this section for a fiscal year for a vessel, 
the contractor for the vessel shall certify, in accordance with 
regulations issued by the Secretary of Transportation, that the vessel 
has been and will be operated in accordance with subsection (b)(1) 
forat least 320 days in the fiscal year. Days during which the vessel 
is drydocked, surveyed, inspected, or repaired shall be considered days 
of operation for purposes of this subsection.
    ``(f) Operating Agreement is Obligation of United States 
Government.--An operating agreement under this subtitle constitutes a 
contractual obligation of the United States Government to pay the 
amounts provided for in the agreement to the extent of actual 
appropriations.
    ``(g) Limitations.--The Secretary of Transportation shall not make 
any payment under this subtitle for a vessel with respect to any days 
for which the vessel is--
        ``(1) subject to an operating-differential subsidy contract 
    under subtitle A or under a charter to the United States 
    Government, other than a charter pursuant to section 653;
        ``(2) not operated or maintained in accordance with an 
    operating agreement under this subtitle; or
        ``(3) more than 25 years of age, except that the Secretary may 
    make such payments for a LASH vessel for any day for which the 
    vessel is more than 25 years of age if that vessel--
            ``(A) is modernized after January 1, 1994,
            ``(B) is modernized before it is 25 years of age, and
            ``(C) is not more than 30 years of age.
    ``(h) Payments.--With respect to payments under this subtitle for a 
vessel covered by an operating agreement, the Secretary of 
Transportation--
        ``(1) except as provided in paragraph (2), shall not reduce any 
    payment for the operation of a vessel to carry military or other 
    preference cargoes under section 2631 of title 10, United States 
    Code, the Act of March 26, 1934 (46 U.S.C. App. 1241-1), section 
    901(a), 901(b), or 901b of this Act, or any other cargo preference 
    law of the United States;
        ``(2) shall not make any payment for any day that a vessel is 
    engaged in transporting more than 7,500 tons of civilian bulk 
    preference cargoes pursuant to section 901(a), 901(b), or 901b that 
    is bulk cargo; and
        ``(3) shall make a pro rata reduction in payment for each day 
    less than 320 in a fiscal year that a vessel covered by an 
    operating agreement is not operated in accordance with subsection 
    (b)(1), with days during which the vessel is drydocked or 
    undergoing survey, inspection, or repair considered to be days on 
    which the vessel is operated.
    ``(i) Priority for Awarding Agreements.--Subject to the 
availability of appropriations, the Secretary shall enter into 
operating agreements according to the following priority:
        ``(1) Vessels owned by citizens.--
            ``(A) Priority.--First, for any vessel that is--
                ``(i) owned and operated by persons who are citizens of 
            the United States under section 2 of the Shipping Act, 
            1916; or
                ``(ii) less than 10 years of age and owned and operated 
            by a corporation that is--

                    ``(I) eligible to document a vessel under chapter 
                121 of title 46, United States Code; and
                    ``(II) affiliated with a corporation operating or 
                managing for the Secretary of Defense other vessels 
                documented under that chapter, or chartering other 
                vessels to the Secretary of Defense.

            ``(B) Limitation on number of operating agreements.--The 
        total number of operating agreements that may be entered into 
        by a person under the priority in subparagraph (A)--
                ``(i) for vessels described in subparagraph (A)(i), may 
            not exceed the sum of--

                    ``(I) the number of United States-documented 
                vessels the person operated in the foreign commerce of 
                the United States (except mixed coastwise and foreign 
                commerce) on May 17, 1995; and
                    ``(II) the number of United States-documented 
                vessels the person chartered to the Secretary of 
                Defense on that date; and

                ``(ii) for vessels described in subparagraph (A)(ii), 
            may not exceed 5 vessels.
            ``(C) Treatment of related parties.--For purposes of 
        subparagraph (B), a related party with respect to a person 
        shall be treated as the person.
        ``(2) Other vessels owned by citizens and government 
    contractors.--To the extent that amounts are available after 
    applying paragraph (1), any vessel that is owned and operated by a 
    person who is--
            ``(A) a citizen of the United States under section 2 of the 
        Shipping Act, 1916, that has not been awarded an operating 
        agreement under the priority established under paragraph (1); 
        or
            ``(B)(i) eligible to document a vessel under chapter 121 of 
        title 46, United States Code; and
            ``(ii) affiliated with a corporation operating or managing 
        other United States-documented vessels for the Secretary of 
        Defense or chartering other vessels to the Secretary of 
        Defense.
        ``(3) Other vessels.--To the extent that amounts are available 
    after applying paragraphs (1) and (2), any other eligible vessel.
    ``(j) Transfer of Operating Agreements.--A contractor under an 
operating agreement may transfer the agreement (including all rights 
and obligations under the agreement) to any person eligible to enter 
into that operating agreement under this subtitle after notification of 
the Secretary in accordance with regulations prescribed by the 
Secretary, unless the transfer is disapproved by the Secretary within 
90 days after the date of that notification. A person to whom an 
operating agreement is transferred may receive payments from the 
Secretary under the agreement only if each vessel to be covered by the 
agreement after the transfer is an eligible vessel under section 
651(b).
    ``(k) Reversion of Unused Authority.--The obligation of the 
Secretary to make payments under an operating agreement under this 
subtitle shall terminate with respect to a vessel if the contractor 
fails to engage in operation of the vessel for which such payment is 
required--
        ``(1) within one year after the effective date of the operating 
    agreement, in the case of a vessel in existence on the effective 
    date of the agreement, or
        ``(2) within 30 months after the effective date of the 
    operating agreement, in the case of a vessel to be constructed 
    after that effective date.
    ``(l) Procedure for Considering Application; Effective Date for 
Certain Vessels.--
        ``(1) Procedures.--No later than 30 days after the date of the 
    enactment of the Maritime Security Act of 1996, the Secretary shall 
    accept applications for enrollment of vessels in the Fleet, and 
    within 90 days after receipt of an application for enrollment of a 
    vessel in the Fleet, the Secretary shall enter into an operating 
    agreement with the applicant or provide in writing the reason for 
    denial of that application.
        ``(2) Effective date.--Unless an earlier date is requested by 
    the applicant, the effective date for an operating agreement with 
    respect to a vessel which is, on the date of entry into an 
    operating agreement, either subject to a contract under subtitle A 
    or on charter to the United States Government, other than a charter 
    under section 653, shall be the expiration or termination date of 
    the contract under subtitle A or of the Government charter covering 
    the vessel, respectively, or any earlier date the vessel is 
    withdrawn from that contract or charter.
    ``(m) Early Termination.--An operating agreement under this 
subtitle shall terminate on a date specified by the contractor if the 
contractor notifies the Secretary, by not later than 60 days before the 
effective date of the termination, that the contractor intends to 
terminate the agreement. Vessels covered by an operating agreement 
terminated under this subsection shall remain documented under chapter 
121 of title 46, United States Code, until the date the operating 
agreement would have terminated according to its terms. A contractor 
who terminates an operating agreement pursuant to this subsection shall 
continue to be bound by the provisions of section 653 until the date 
the operating agreement would have terminated according to its terms. 
All terms and conditions of an Emergency Preparedness Agreement entered 
into under section 653 shall remain in effect until the date the 
operating agreement would have terminated according to its terms, 
except that the terms of such Emergency Preparedness Agreement may be 
modified by the mutual consent of the contractor and the Secretary of 
Transportation and the Secretary of Defense.
    ``(n) Nonrenewal for Lack of Funds.--If, by the first day of a 
fiscal year, sufficient funds have not been appropriated under the 
authority provided by section 655 for that fiscal year, the Secretary 
of Transportation shall notify the Congress that operating agreements 
authorized under this subtitle for which sufficient funds are not 
available will not be renewed for that fiscal year if sufficient funds 
are not appropriated by the 60th day of that fiscal year. If funds are 
not appropriated under the authority provided by section 655 for any 
fiscal year by the 60th day of that fiscal year, then each vessel 
covered by an operating agreement under this subtitle for which funds 
are not available is thereby released from any further obligation under 
the operating agreement, and the vessel owner or operator may transfer 
and register such vessel under a foreign registry deemed acceptable by 
the Secretary of Transportation, notwithstanding any other provision of 
law. If section 902 is applicable to such vessel after registration of 
the vessel under such a registry, the vessel is available to be 
requisitioned by the Secretary of Transportation pursuant to section 
902.
    ``(o) Award of Operating Agreements.--
        ``(1) In general.--The Secretary of Transportation, subject to 
    paragraph (4), shall award operating agreements within each 
    priority under subsection (i) (1), (2), and (3) under regulations 
    prescribed by the Secretary.
        ``(2) Number of agreements awarded.--Regulations under 
    paragraph (1) shall provide that if appropriated amounts are not 
    sufficient for operating agreements for all vessels within a 
    priority under subsection (i) (1), (2), or (3), the Secretary shall 
    award to each person submitting a request a number of operating 
    agreements that bears approximately the same ratio to the total 
    number of vessels in the priority, as the amount of appropriations 
    available for operating agreements for vessels in the priority 
    bears to the amount of appropriations necessary for operating 
    agreements for all vessels in the priority.
        ``(3) Treatment of related parties.--For purposes of paragraph 
    (2), a related party with respect to a person shall be treated as 
    the person.
        ``(4) Preference for united states-built vessels.--In awarding 
    operating agreements for vessels within a priority under subsection 
    (i) (1), (2), or (3), the Secretary shall give preference to a 
    vessel that was constructed in the United States, to the extent 
    such preference is consistent with establishment of a fleet 
    described in the first sentence of section 651(a) (taking into 
    account the age of the vessel, the nature of service provided by 
    the vessel, and the commercial viability of the vessel).
    ``(p) Notice to United States Shipbuilders Required.--The Secretary 
shall include in any operating agreement under this subtitle a 
requirement that the contractor under the agreement shall, by not later 
than 30 days after soliciting any bid or offer for the construction of 
any vessel in a foreign shipyard and before entering into a contract 
for construction of a vessel in a foreign shipyard, provide notice of 
the intent of the contractor to enter into such a contract to each 
shipyard in the United States that is capable of constructing the 
vessel.

                     ``national security requirements

    ``Sec. 653. (a) Emergency Preparedness Agreement.--
        ``(1) Requirement to enter agreement.--The Secretary of 
    Transportation shall establish an Emergency Preparedness Program 
    under this section that is approved by the Secretary of Defense. 
    Under the program, the Secretary of Transportation shall include in 
    each operating agreement under this subtitle a requirement that the 
    contractor enter into an Emergency Preparedness Agreement under 
    this section with the Secretary. The Secretary shall negotiate and 
    enter into an Emergency Preparedness Agreement with each contractor 
    as promptly as practicable after the contractor has entered into an 
    operating agreement under this subtitle.
        ``(2) Terms of agreement.--An Emergency Preparedness Agreement 
    under this section shall require that upon a request by the 
    Secretary of Defense during time of war or national emergency, or 
    whenever determined by the Secretary of Defense to be necessary for 
    national security (including any natural disaster, international 
    peace operation, or contingency operation (as that term is defined 
    in section 101 of title 10, United States Code)), a contractor for 
    a vessel covered by an operating agreement under this subtitle 
    shall make available commercial transportation resources (including 
    services). The basic terms of the Emergency Preparedness Agreements 
    shall be established pursuant to consultations among the Secretary, 
    the Secretary of Defense, and Maritime Security Program 
    contractors. In any Emergency Preparedness Agreement, the Secretary 
    and a contractor may agree to additional or modifying terms 
    appropriate to the contractor's circumstances if those terms have 
    been approved by the Secretary of Defense.
        ``(3) Participation after expiration of operating agreement.--
    Except as provided by section 652(m), the Secretary may not 
    require, through an Emergency Preparedness Agreement or operating 
    agreement, that a contractor continue to participate in an 
    Emergency Preparedness Agreement when the operating agreement with 
    the contractor has expired according to its terms or is otherwise 
    no longer in effect. After expiration of an Emergency Preparedness 
    Agreement, a contractor may volunteer to continue to participate in 
    such an agreement.
    ``(b) Resources Made Available.--The commercial transportation 
resources to be made available under an Emergency Preparedness 
Agreement shall include vessels or capacity in vessels, intermodal 
systems and equipment, terminal facilities, intermodal and management 
services, and other related services, or any agreed portion of such 
nonvessel resources for activation as the Secretary may determine to be 
necessary, seeking to minimize disruption of the contractor's service 
to commercial shippers.
    ``(c) Compensation.--
        ``(1) In general.--The Secretary of Transportation shall 
    provide in each Emergency Preparedness Agreement for fair and 
    reasonable compensation for all commercial transportation resources 
    provided pursuant to this section.
        ``(2) Specific requirements.--Compensation under this 
    subsection--
            ``(A) shall not be less than the contractor's commercial 
        market charges for like transportation resources;
            ``(B) shall include all the contractor's costs associated 
        with provision and use of the contractor's commercial resources 
        to meet emergency requirements;
            ``(C) in the case of a charter of an entire vessel, shall 
        be fair and reasonable;
            ``(D) shall be in addition to and shall not in any way 
        reflect amounts payable under section 652; and
            ``(E) shall be provided from the time that a vessel or 
        resource is diverted from commercial service until the time 
        that it reenters commercial service.
        ``(3) Approval of amount by secretary of defense.--No 
    compensation may be provided for a vessel under this subsection 
    unless the amount of the compensation is approved by the Secretary 
    of Defense.
    ``(d) Temporary Replacement Vessels.--Notwithstanding any other 
provision of this subtitle or of other law to the contrary--
        ``(1) a contractor may operate or employ in foreign commerce a 
    foreign-flag vessel or foreign-flag vessel capacity, as a temporary 
    replacement for a United States-documented vessel or United States-
    documented vessel capacity that is activated under an Emergency 
    Preparedness Agreement; and
        ``(2) such replacement vessel or vessel capacity shall be 
    eligible during the replacement period to transport preference 
    cargoes subject to section 2631 of title 10, United States Code, 
    the Act of March 26, 1934 (46 U.S.C. App. 1241-1), and sections 
    901(a), 901(b), and 901b of this Act to the same extent as the 
    eligibility of the vessel or vessel capacity replaced.
    ``(e) Redelivery and Liability of United States for Damages.--
        ``(1) In general.--All commercial transportation resources 
    activated under an Emergency Preparedness Agreement shall, upon 
    termination of the period of activation, be redelivered to the 
    contractor in the same good order and condition as when received, 
    less ordinary wear and tear, or the Government shall fully 
    compensate the contractor for any necessary repair or replacement.
        ``(2) Limitation on liability of united states.--Except as may 
    be expressly agreed to in an Emergency Preparedness Agreement, or 
    as otherwise provided by law, the Government shall not be liable 
    for disruption of a contractor's commercial business or other 
    consequential damages to a contractor arising from activation of 
    commercial transportation resources under an Emergency Preparedness 
    Agreement.
        ``(3) Limitation on application of other requirements.--
    Sections 902 and 909 of this Act shall not apply to a vessel while 
    it is covered by an Emergency Preparedness Agreement under this 
    subtitle. Any Emergency Preparedness Agreement entered into by a 
    contractor shall supersede any other agreement between that 
    contractor and the Government for vessel availability in time of 
    war or national emergency.

                              ``definitions

    ``Sec. 654. In this subtitle:
        ``(1) Bulk cargo.--The term `bulk cargo' means cargo that is 
    loaded and carried in bulk without mark or count.
        ``(2) Contractor.--The term `contractor' means an owner or 
    operator of a vessel that enters into an operating agreement for 
    the vessel with the Secretary of Transportation under section 652.
        ``(3) Ocean common carrier.--The term `ocean common carrier' 
    means a person holding itself out to the general public to operate 
    vessels to provide transportation by water of passengers or cargo 
    between the United States and a foreign country for compensation, 
    that--
            ``(A) assumes responsibility for the transportation from 
        the port or point of receipt to the port or point of 
        destination, and
            ``(B) utilizes, for all or part of that transportation, a 
        vessel operating on the high seas or the Great Lakes between a 
        port in the United States and a port in a foreign country, 
        except that the term does not include a common carrier engaged 
        in ocean transportation by ferry boat, ocean tramp, or chemical 
        parcel-tanker. As used in this paragraph, `chemical parcel-
        tanker' means a vessel whose cargo-carrying capability consists 
        of individual cargo tanks for bulk chemicals that are a 
        permanent part of the vessel, that have segregation capability 
        with piping systems to permit simultaneous carriage of several 
        bulk chemical cargoes with minimum risk of cross-contamination, 
        and that has a valid certificate of fitness under the 
        International Maritime Organization Code for the Construction 
        and Equipment of Ships Carrying Dangerous Chemicals in Bulk.
        ``(4) Fleet.--The term `Fleet' means the Maritime Security 
    Fleet established pursuant to section 651(a).
        ``(5) LASH vessel.--The term `LASH vessel' means a lighter 
    aboard ship vessel.
        ``(6) United states-documented vessel.--The term `United 
    States-documented vessel' means a vessel documented under chapter 
    121 of title 46, United States Code.

                    ``authorization of appropriations

    ``Sec. 655. There are authorized to be appropriated for operating 
agreements under this subtitle, to remain available until expended, 
$100,000,000 for fiscal year 1996 and such sums as may be necessary, 
not to exceed $100,000,000, for each fiscal year thereafter through 
fiscal year 2005.''.

SEC. 3. TERMINATION OF OPERATING-DIFFERENTIAL SUBSIDY PROGRAM.

    (a) Limitation on Payments for Older Vessels.--Section 605(b) of 
the Merchant Marine Act, 1936 (46 U.S.C. App. 1175(b)), is amended to 
read as follows:
    ``(b) No operating-differential subsidy shall be paid for the 
operation of a vessel after the calendar year the vessel becomes 25 
years of age, unless the Secretary of Transportation has determined, 
before the date of enactment of the Maritime Security Act of 1996, that 
it is in the public interest to grant such financial aid for the 
operation of such vessel.''.
    (b) Wind-Up of Program.--Subtitle A of such Act (46 U.S.C. App. 
1171 et seq.), as designated by the amendment made by section 2(1), is 
further amended by adding at the end the following new section:
    ``Sec. 616. (a) After the date of enactment of the Maritime 
Security Act of 1996, the Secretary of Transportation shall not enter 
into any new contract for operating-differential subsidy under this 
subtitle.
    ``(b) Notwithstanding any other provision of this Act, any 
operating-differential subsidy contract in effect under this title on 
the day before the date of enactment of the Maritime Security Act of 
1996 shall continue in effect and terminate as set forth in the 
contract, unless voluntarily terminated at an earlier date by the 
parties (other than the United States Government) to the contract.
    ``(c) The essential service requirements of section 601(a) and 
603(b), and the provisions of sections 605(c) and 809(a), shall not 
apply to the operating-differential subsidy program under this subtitle 
effective upon the earlier of--
        ``(1) the date that a payment is made, under the Maritime 
    Security Program established by subtitle B to a contractor under 
    that subtitle who is not party to an operating-differential subsidy 
    contract under this subtitle, with the Secretary to cause notice of 
    the date of such payment to be published in the Federal Register as 
    soon as possible; or
        ``(2) with respect to a particular contractor under the 
    operating-differential subsidy program, the date that contractor 
    enters into a contract with the Secretary under the Maritime 
    Security Program established by subtitle B.
    ``(d)(1) Notwithstanding any other provision of law, a vessel may 
be transferred and registered under an effective United States-
controlled foreign flag if--
        ``(A) the operator of the vessel receives an operating- 
    differential subsidy pursuant to a contract under this subtitle 
    which is in force on October 1, 1994, andthe Secretary approves the 
replacement of such vessel with a comparable vessel, or
        ``(B) the vessel is covered by an operating agreement under 
    subtitle B, and the Secretary approves the replacement of such 
    vessel with a comparable vessel for inclusion in the Maritime 
    Security Fleet established under subtitle B.
    ``(2) Any such vessel may be requisitioned by the Secretary of 
Transportation pursuant to section 902.''.

SEC. 4. DOMESTIC OPERATIONS.

    (a) In General.--Subtitle B of title VI of the Merchant Marine Act, 
1936, as amended by section 102 of this title, is further amended by 
adding at the end the following new section:

                     ``noncontiguous domestic trades

    ``Sec. 656. (a)(1) Except as otherwise provided in this section, no 
contractor or related party shall receive payments pursuant to this 
subtitle during a period when it participates in a noncontiguous 
domestic trade, except upon written permission of the Secretary of 
Transportation. Such written permission shall also be required for any 
material change in the number or frequency of sailings, the capacity 
offered, or the domestic ports called by a contractor or related party 
in a noncontiguous domestic trade. The Secretary may grant such written 
permission pursuant to written application of such contractor or 
related party unless the Secretary finds that--
        ``(A) existing service in that trade is adequate; or
        ``(B) the service sought to be provided by the contractor or 
    related party--
            ``(i) would result in unfair competition to any other 
        person operating vessels in such noncontiguous domestic trade, 
        or
            ``(ii) would be contrary to the objects and policy of this 
        Act.
    ``(2) For purposes of this subsection, `written permission of the 
Secretary' means permission which states the capacity offered, the 
number and frequency of sailings, and the domestic ports called, and 
which is granted following--
        ``(A) written application containing the information required 
    by paragraph (e)(1) by a person seeking such written permission, 
    notice of which application shall be published in the Federal 
    Register within 15 days of filing of such application with the 
    Secretary;
        ``(B) holding of a hearing on the application under section 554 
    of title 5, United States Code, in which every person, firm or 
    corporation having any interest in the application shall be 
    permitted to intervene and be heard; and
        ``(C) final decision on the application by the Secretary within 
    120 days following conclusion of such hearing.
    ``(b) Subsection (a) shall not apply in any way to provision by a 
contractor of service within the level of service provided by that 
contractor as of the date established by subsection (c) or to provision 
of service permitted by subsection (d).
    ``(c) The date referred to in subsection (b) shall be August 9, 
1995: Provided however, That with respect to tug and barge service to 
Alaska the date referred to in subsection (b) shall be July 1, 1992.
    ``(d) A contractor may provide service in a trade in addition to 
the level of service provided as of the applicable date established by 
subsection (c) in proportion to the annual increase in real gross 
product of the noncontiguous State or Commonwealth served since the 
applicable date established by subsection (c).
    ``(e)(1) A person applying for award of an agreement under this 
subtitle shall include with the application a description of the level 
of service provided by that person in each noncontiguous domestic trade 
served as of the date applicable under subsection (c). The application 
also shall include, for each such noncontiguous domestic trade: a list 
of vessels operated by that person in such trade, their container 
carrying capacity expressed in twenty-foot equivalent units (TEUs) or 
other carrying capacity, the itinerary for each such vessel, and such 
other information as the Secretary may require by regulation. Such 
description and information shall be made available to the public. 
Within 15 days of the date of an application for an agreement by a 
person seeking to provide service pursuant to subsections (b) and (c) 
of this section, the Secretary shall cause to be published in the 
Federal Register notice of such description, along with a request for 
public comment thereon. Comments on such description shall be submitted 
to the Secretary within 30 days of publication in the Federal Register. 
Within 15 days after receipt of comments, the Secretary shall issue a 
determination in writing either accepting, in whole or part, or 
rejecting use of the applicant's description to establish the level of 
service provided as of the date applicable under subsection (c): 
Provided, That notwithstanding the provisions of this subsection, 
processing of the application for an award of an agreement shall not be 
suspended or delayed during the time in which comments may be submitted 
with respect to the determination or during the time prior to issuance 
by the Secretary of the required determination: Provided further, That 
if the Secretary does not make the determination required by this 
paragraph within the time provided by this paragraph, the description 
of the level of service provided by the applicant shall be deemed to be 
the level of service provided as of the applicable date until such time 
as the Secretary makes the determination.
    ``(2) No contractor shall implement the authority granted in 
subsection (d) of this section except as follows:
        ``(A) An application shall be filed with the Secretary which 
    shall state the increase in capacity sought to be offered, a 
    description of the means by which such additional capacity would be 
    provided, the basis for applicant's position that such increase in 
    capacity would be in proportion to or less than the increase in 
    real gross product of the relevant noncontiguous State or 
    Commonwealth since the applicable date established by subsection 
    (c), and such information as the Secretary may require so that the 
    Secretary may accurately determine such increase in real gross 
    product of the relevant noncontiguous State or Commonwealth.
        ``(B) Such increase in capacity sought by applicant and such 
    information shall be made available to the public.
        ``(C) Within 15 days of the date of an application pursuant to 
    this paragraph the Secretary shall cause to be published in the 
    Federal Register notice of such application, along with a request 
    for public comment thereon.
        ``(D) Comments on such application shall be submitted to the 
    Secretary within 30 days of publication in the Federal Register.
        ``(E) Within 15 days after receipt of comments, the Secretary 
    shall issue a determination in writing either accepting, in whole 
    or part, or rejecting, the increase in capacity sought by the 
    applicant as being in proportion to or less than the increase in 
    real gross product of the relevant noncontiguous State or 
    Commonwealth since the applicable date established by subsection 
    (c): Provided, That, notwithstanding the provisions of this 
    section, if the Secretary does not make the determination required 
    by this paragraph within the time provided by this paragraph, the 
    increase in capacity sought by applicant shall be permitted as 
    being in proportion to or less than such increase in real gross 
    product until such time as the Secretary makes the determination.
    ``(f) With respect to provision by a contractor of service in a 
noncontiguous domestic trade not authorized by this section, the 
Secretary shall deny payments under the operating agreement with 
respect to the period of provision of such service but shall deny 
payments only in part if the extent of provision of such unauthorized 
service was de minimis or not material.
    ``(g) Notwithstanding any other provision of this subtitle, the 
Secretary may issue temporary permission for any United States citizen, 
as that term is defined in section 2 of the Shipping Act, 1916, to 
provide service to a noncontiguous State or Commonwealth upon the 
request of the Governor of such noncontiguous State or Commonwealth, in 
circumstances where an Act of God, a declaration of war or national 
emergency, or any other condition occurs that prevents ocean 
transportation service to such noncontiguous State or Commonwealth from 
being provided by persons currently providing such service. Such 
temporary permission shall expire 90 days from date of grant, unless 
extended by the Secretary upon written request of the Governor of such 
State or Commonwealth.
    ``(h) As used in this section:
        ``(1) The term `level of service provided by a contractor' in a 
    trade as of a date means--
            ``(A) with respect to service other than service described 
        in (B), the total annual capacity provided by the contractor in 
        that trade for the 12 calendar months preceding that date: 
        Provided, That, with respect to unscheduled, contract carrier 
        tug and barge service between points in Alaska south of the 
        Arctic Circle and points in the contiguous 48 States, the level 
        of service provided by a contractor shall include 100 percent 
        of the capacity of the equipment dedicated to such service on 
        the date specified in subsection (c) and actually utilized in 
        that service in the two-year period preceding that date, 
        excluding service to points between Anchorage, Alaska and 
        Whittier, Alaska, served by common carrier service unless such 
        unscheduled service is only for carriage of oil or pursuant to 
        a contract with the United States military: Provided further, 
        That, with respect to scheduled barge service between the 
        contiguous 48 States and Puerto Rico, such total annual 
        capacity shall be deemed as such total annual capacity plus the 
        annual capacity of two additional barges, each capable of 
        carrying 185 trailers and 100 automobiles; and
            ``(B) with respect to service provided by container 
        vessels, the overall capacity equal to the sum of--
                ``(i) 100 percent of the capacity of vessels operated 
            by or for the contractor on that date, with the vessels' 
            configuration and frequency of sailing in effect on that 
            date, and which participate solely in that noncontiguous 
            domestic trade; and
                ``(ii) 75 percent of the capacity of vessels operated 
            by or for the contractor on that date, with the vessels' 
            configuration and frequency of sailing in effect on that 
            date, and which participate in that noncontiguous domestic 
            trade and in another trade, provided that the term does not 
            include any restriction on frequency, or number of 
            sailings, or on ports called within such overall capacity.
        ``(2) The level of service set forth in paragraph (1) shall be 
    described with the specificity required by subsection (e)(1) and 
    shall be the level of service in a trade with respect to the 
    applicable date established by subsection (c) only if the service 
    is not abandoned thereafter, except for interruptions due to 
    military contingency or other events beyond the contractor's 
    control.
        ``(3) The term `participates in a noncontiguous domestic trade' 
    means directly or indirectly owns, charters, or operates a vessel 
    engaged in transportation of cargo between a point in the 
    contiguous 48 states and a point in Alaska, Hawaii, or Puerto Rico, 
    other than a point in Alaska north of the Arctic Circle.
        ``(4) The term `related party' means--
            ``(A) a holding company, subsidiary, affiliate, or 
        associate of a contractor who is a party to an operating 
        agreement under this subtitle; and
            ``(B) an officer, director, agent, or other executive of a 
        contractor or of a person referred to in subparagraph (A).''.
    (b) Conforming Amendment.--Section 805 of the Merchant Marine Act, 
1936 (46 U.S.C. App. 1223) is amended--
        (1) by striking ``title VI of this Act'' each place it appears 
    and inserting ``subtitle A of title VI of this Act''; and
        (2) by striking ``under title VI'' each place it appears and 
    inserting ``under subtitle A of title VI''.

SEC. 5. USE OF FOREIGN-FLAG VESSELS.

    (a) In General.--Section 804 of the Merchant Marine Act, 1936 (46 
U.S.C. App. 1222) is amended by adding at the end the following new 
subsection:
    ``(f) The provisions of subsection (a) shall not preclude a 
contractor receiving assistance under subtitle A or B of title VI, or 
any holding company, subsidiary, or affiliate of the contractor, or any 
officer, director, agent, or executive thereof, from--
        ``(1) owning, chartering, or operating any foreign-flag vessel 
    on a voyage or a segment of a voyage that does not call at a port 
    in the United States;
        ``(2) owning, chartering, or operating any foreign-flag vessel 
    in line haul service between the United States and foreign ports 
    if--
            ``(A) the foreign-flag vessel was owned, chartered, or 
        operated by, or is a replacement for a foreign-flag vessel 
        owned, chartered, or operated by, such owner or operator, or 
        any holding company, subsidiary, affiliate, or associate of 
        such owner or operator, on the date of enactment of the 
        Maritime Security Act of 1996;
            ``(B) the owner or operator, with respect to each 
        additional foreign-flag vessel, other than a time chartered 
        vessel, has first applied to have that vessel covered by an 
        operating agreement under subtitle B of title VI, and the 
        Secretary has not awarded an operating agreement with respect 
        to that vessel within 90 days after the filing of the 
        application; or
            ``(C) the vessel has been placed under foreign 
        documentation pursuant to section 9 of the Shipping Act, 1916 
        (46 U.S.C. App. 808), except that any foreign-flag vessel, 
        other than a time chartered vessel, a replacement vessel under 
        section 653(d), or a vessel operated by the owner or operator 
        on the date of enactment of the Maritime Security Act of 1996, 
        in line haul service between the United States and foreign 
        ports is registered under the flag of an effective United 
        States-controlled foreign flag, and available to be 
        requisitioned by the Secretary of Transportation pursuant to 
        section 902 of this Act;
        ``(3) owning, chartering, or operating foreign-flag bulk cargo 
    vessels that are operated in foreign-to-foreign service or the 
    foreign commerce of the United States;
        ``(4) chartering or operating foreign-flag vessels that are 
    operated solely as replacement vessels for United States-flag 
    vessels or vessel capacity that are made available to the Secretary 
    of Defense pursuant to section 653 of this Act; or
        ``(5) entering into time or space charter or other cooperative 
    agreements with respect to foreign-flag vessels or acting as agent 
    or broker for a foreign-flag vessel or vessels.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to a contractor under subtitle B of title VI of the Merchant 
Marine Act, 1936, as amended by this Act, upon enactment of this Act, 
and shall apply to a contractor under subtitle A of title VI of that 
Act, upon the earlier of--
        (1) the date that a payment is made, under the Maritime 
    Security Program under subtitle B of that title to a contractor 
    under subtitle B of that title who is not party to an operating-
    differential subsidy contract under subtitle A of that title, with 
    the Secretary of Transportation to cause notice of the date of such 
    payment to be published in the Federal Register as soon as 
    possible; or
        (2) with respect to a particular contractor under the 
    operating-differential subsidy program under subtitle A of that 
    title, the date that contractor enters into a contract with the 
    Secretary under the Maritime Security Program established by 
    subtitle B of that title.

SEC. 6. AMENDMENT TO SHIPPING ACT, 1916.

    Section 9 of the Shipping Act, 1916 (46 U.S.C. App. 808) is amended 
by adding at the end the following:
    ``(e) Notwithstanding subsection (c)(2), the Merchant Marine Act, 
1936, or any contract entered into with the Secretary of Transportation 
under that Act, a vessel may be placed under a foreign registry, 
without approval of the Secretary, if--
        ``(1)(A) the Secretary determines that at least one replacement 
    vessel of a capacity that is equivalent or greater, as measured by 
    deadweight tons, gross tons, or container equivalent units, as 
    appropriate, is documented under chapter 121 of title 46, United 
    States Code, by the owner of the vessel placed under the foreign 
    registry; and
        ``(B) the replacement vessel is not more than 10 years of age 
    on the date of that documentation;
        ``(2)(A) an application for an operating agreement under 
    subtitle B of title VI of the Merchant Marine Act, 1936 has been 
    filed with respect to a vessel which is eligible to be included in 
    the Maritime Security Fleet under section 651(b)(1) of that Act; 
    and
        ``(B) the Secretary has not awarded an operating agreement with 
    respect to that vessel within 90 days after the date of that 
    application;
        ``(3) a contract covering the vessel under subtitle A of title 
    VI of the Merchant Marine Act, 1936 has expired, and that vessel is 
    more than 15 years of age on the date the contract expires; or
        ``(4) an operating agreement covering the vessel under subtitle 
    B of title VI of the Merchant Marine Act, 1936 has expired.''.

SEC. 7. CONSTRUCTION DIFFERENTIAL SUBSIDY RESTRICTIONS.

    Title V of the Merchant Marine Act, 1936 (46 U.S.C. App. 1151 et 
seq.) is amended by adding at the end the following new section:

``SEC. 512. LIMITATION ON RESTRICTIONS.

    ``Notwithstanding any other provision of law or contract, all 
restrictions and requirements under sections 503, 506, and 802 
applicable to a liner vessel constructed, reconstructed, or 
reconditioned with the aid of construction-differential subsidy shall 
terminate upon the expiration of the 25-year period beginning on the 
date of the original delivery of the vessel from the shipyard.''.

SEC. 8. REGULATIONS.

    (a) In General.--The Secretary of Transportation may prescribe 
rules as necessary to carry out this Act and the amendments made by 
this Act.
    (b) Interim Rules.--The Secretary of Transportation may prescribe 
interim rules necessary to carry out this Act and the amendments made 
by this Act. For this purpose, the Secretary of Transportation is 
excepted from compliance with the notice and comment requirements of 
section 553 of title 5, United States Code. All rules prescribed under 
the authority of this subsection that are not earlier superseded by 
final rules shall expire no later than 270 days after the date of 
enactment of this Act.

SEC. 9. MERCHANT SHIP SALES ACT OF 1946 AMENDMENT.

    Section 11 of the Merchant Ship Sales Act of 1946 (50 U.S.C. App. 
1744) is amended as follows:
        (1) In subsection (b)(2) by striking ``Secretary of the Navy,'' 
    and inserting ``Secretary of Defense,''.
        (2) By striking subsection (c) and redesignating subsection (d) 
    as subsection (c).

SEC. 10. REEMPLOYMENT RIGHTS FOR CERTAIN MERCHANT SEAMEN.

    (a) In General.--Title III of the Merchant Marine Act, 1936 (46 
U.S.C. App. 1131) is amended by inserting after section 301 the 
following new section:
    ``Sec. 302. (a) An individual who is certified by the Secretary of 
Transportation under subsection (c) shall be entitled to reemployment 
rights and other benefits substantially equivalent to the rights and 
benefits provided for by chapter 43 of title 38, United States Code, 
for any member of a Reserve component of the Armed Forces of the United 
States who is ordered to active duty.
    ``(b) An individual may submit an application for certification 
under subsection (c) to the Secretary of Transportation not later than 
45 days after the date the individual completes a period of employment 
described in subsection (c)(1)(A) with respect to which the application 
is submitted.
    ``(c) Not later than 20 days after the date the Secretary of 
Transportation receives from an individual an application for 
certification under this subsection, the Secretary shall--
        ``(1) determine whether or not the individual--
            ``(A) was employed in the activation or operation of a 
        vessel--
                ``(i) in the National Defense Reserve Fleet maintained 
            under section 11 of the Merchant Ship Sales Act of 1946, in 
            a period in which that vessel was in use or being activated 
            for use under subsection (b) of that section;
                ``(ii) that is requisitioned or purchased under section 
            902 of this Act; or
                ``(iii) that is owned, chartered, or controlled by the 
            United States and used by the United States for a war, 
            armed conflict, national emergency, or maritime 
            mobilization need (including for training purposes or 
            testing for readiness and suitability for mission 
            performance); and
            ``(B) during the period of that employment, possessed a 
        valid license, certificate of registry, or merchant mariner's 
        document issued under chapter 71 or chapter 73 (as applicable) 
        of title 46, United States Code; and
        ``(2) if the Secretary makes affirmative determinations under 
    paragraph (1) (A) and (B), certify that individual under this 
    subsection.
    ``(d) For purposes of reemployment rights and benefits provided by 
this section, a certification under subsection (c) shall be considered 
to be the equivalent of a certificate referred to in paragraph (1) of 
section 4301(a) of title 38, United States Code.''.
    (b) Application.--The amendment made by subsection (a) shall apply 
to employment described in section 302(c)(1)(A) of the Merchant Marine 
Act, 1936, as amended by subsection (a), occurring after the date of 
enactment of this Act.
    (c) Regulation.--Not later than 120 days after the date of the 
enactment of this Act, the Secretary of Transportation shall issue 
regulations implementing this section.

SEC. 11. TITLE XI LOAN GUARANTEES.

    Title XI of the Merchant Marine Act, 1936 (46 U.S.C. App. 1271 et 
seq.) is amended--
        (1) in section 1101(b), by striking ``owned by citizens of the 
    United States'';
        (2) in section 1104B(a), in the material preceding paragraph 
    (1), by striking ``owned by citizens of the United States''; and
        (3) in section 1110(a), by striking ``owned by citizens of the 
    United States''.

SEC. 12. EXTENSION OF WAR RISK INSURANCE AUTHORITY.

    Section 1214 of the Merchant Marine Act, 1936 (46 U.S.C. App. 1294) 
is amended by striking ``June 30, 1995'' and inserting ``June 30, 
2000''.

SEC. 13. VESSEL LOAN GUARANTEE PROGRAM.

    (a) Risk Factor Determinations.--Section 1103 of the Merchant 
Marine Act, 1936 (46 U.S.C. App. 1273) is amended by adding at the end 
the following new subsection:
    ``(h)(1) The Secretary shall--
        ``(A) establish in accordance with this subsection a system of 
    risk categories for obligations guaranteed under this title, that 
    categorizes the relative risk of guarantees made under this title 
    with respect to the risk factors set forth in paragraph (3); and
        ``(B) determine for each of the risk categories a subsidy rate 
    equivalent to the cost of obligations in the category, expressed as 
    a percentage of the amount guaranteed under this title for 
    obligations in the category.
    ``(2)(A) Before making a guarantee under this section for an 
obligation, the Secretary shall apply the risk factors set forth in 
paragraph (3) to place the obligation in a risk category established 
under paragraph (1)(A).
    ``(B) The Secretary shall consider the aggregate amount available 
to the Secretary for making guarantees under this title to be reduced 
by the amount determined by multiplying--
        ``(i) the amount guaranteed under this title for an obligation, 
    by
        ``(ii) the subsidy rate for the category in which the 
    obligation is placed under subparagraph (A) of this paragraph.
    ``(C) The estimated cost to the Government of a guarantee made by 
the Secretary under this title for an obligation is deemed to be the 
amount determined under subparagraph (B) for the obligation.
    ``(D) The Secretary may not guarantee obligations under this title 
after the aggregate amount available to the Secretary under 
appropriations Acts for the cost of loan guarantees is required by 
subparagraph (B) to be considered reduced to zero.
    ``(3) The risk factors referred to in paragraphs (1) and (2) are 
the following:
        ``(A) If applicable, the country risk for each eligible export 
    vessel financed or to be financed by an obligation.
        ``(B) The period for which an obligation is guaranteed or to be 
    guaranteed.
        ``(C) The amount of an obligation, which is guaranteed or to be 
    guaranteed, in relation to the total cost of the project financed 
    or to be financed by the obligation.
        ``(D) The financial condition of an obligor or applicant for a 
    guarantee.
        ``(E) If applicable, any guarantee related to the project, 
    other than the guarantee under this title for which the risk factor 
    is applied.
        ``(F) If applicable, the projected employment of each vessel or 
    equipment to be financed with an obligation.
        ``(G) If applicable, the projected market that will be served 
    by each vessel or equipment to be financed with an obligation.
        ``(H) The collateral provided for a guarantee for an 
    obligation.
        ``(I) The management and operating experience of an obligor or 
    applicant for a guarantee.
        ``(J) Whether a guarantee under this title is or will be in 
    effect during the construction period of the project.
    ``(4) In this subsection, the term `cost' has the meaning given 
that term in section 502 of the Federal Credit Reform Act of 1990 (2 
U.S.C. 661a).''.
    (b) Application.--Subsection (h)(2) of section 1103 of the Merchant 
Marine Act, 1936 (46 U.S.C. App. 1273), as amended by subsection (a) of 
this section, shall apply to guarantees that the Secretary of 
Transportation makes or commits to make with any amounts that are 
unobligated on or after the date of enactment of this Act.
    (c) Guarantee Fees.--Section 1104A(e) of title XI of the Merchant 
Marine Act, 1936 (46 U.S.C. App. 1274(e)) is amended to read as 
follows:
    ``(e)(1) Except as otherwise provided in this subsection, the 
Secretary shall prescribe regulations to assess in accordance with this 
subsection a fee for the guarantee of an obligation under this title.
    ``(2)(A) The amount of a fee under this subsection for a guarantee 
is equal to the sum determined by adding the amounts determined under 
subparagraph (B) for the years in which the guarantee is in effect.
    ``(B) The amount referred to in subparagraph (A) for a year is the 
present value (determined by applying the discount rate determined 
under subparagraph (F)) of the amount determined by multiplying--
        ``(i) the estimated average unpaid principal amount of the 
    obligation that will be outstanding during the year (determined in 
    accordance with subparagraph (E)), by
        ``(ii) the fee rate established under subparagraph (C) for the 
    obligation for each year.
    ``(C) The fee rate referred to in subparagraph (B)(ii) for an 
obligation shall be--
        ``(i) in the case of an obligation for a delivered vessel or 
    equipment, not less than one-half of 1 percent and not more than 1 
    percent, determined by the Secretary for the obligation under the 
    formula established under subparagraph (D); or
        ``(ii) in the case of an obligation for a vessel to be 
    constructed, reconstructed, or reconditioned, or of equipment to be 
    delivered, not less than one-quarter of 1 percent and not more than 
    one-half of 1 percent, determined by the Secretary for the 
    obligation under the formula established under subparagraph (D).
    ``(D) The Secretary shall establish a formula for determining the 
fee rate for an obligation for purposes of subparagraph (C), that--
        ``(i) is a sliding scale based on the creditworthiness of the 
    obligor;
        ``(ii) takes into account the security provided for a guarantee 
    under this title for the obligation; and
        ``(iii) uses--
            ``(I) in the case of the most creditworthy obligors, the 
        lowest rate authorized under subparagraph (C) (i) or (ii), as 
        applicable; and
            ``(II) in the case of the least creditworthy obligors, the 
        highest rate authorized under subparagraph (C) (i) or (ii), as 
        applicable.
    ``(E) For purposes of subparagraph (B)(i), the estimated average 
unpaid principal amount does not include the average amount (except 
interest) on deposit in a year in the escrow fund under section 1108.
    ``(F) For purposes of determining present value under subparagraph 
(B) for an obligation, the Secretary shall apply a discount rate 
determined by the Secretary of the Treasury taking into consideration 
current market yields on outstanding obligations of the United States 
having periods to maturity comparable to the period to maturity for the 
obligation with respect to which the determination of present value is 
made.
    ``(3) A fee under this subsection shall be assessed and collected 
not later than the date on which amounts are first paid under an 
obligation with respect to which the fee is assessed.
    ``(4) A fee paid under this subsection is not refundable. However, 
an obligor shall receive credit for the amount paid for the remaining 
term of the guaranteed obligation if the obligation is refinanced and 
guaranteed under this title after such refinancing.
    ``(5) A fee paid under subsection (e) shall be included in the 
amount of the actual cost of the obligation guaranteed under this title 
and is eligible to be financed under this title.''.

SEC. 14. MARITIME POLICY REPORT.

    (a) Report.--The Secretary of Transportation shall transmit to the 
Congress a report setting forth the Department of Transportation's 
policies for the 5-year period beginning October 1, 1995, with respect 
to--
        (1) fostering and maintaining a United States merchant marine 
    capable of meeting economic and national security requirements;
        (2) improving the vitality and competitiveness of the United 
    States merchant marine and the maritime industrial base, including 
    ship repairers, shipbuilders, ship manning, ship operators, and 
    ship suppliers;
        (3) reversing the precipitous decrease in the number of ships 
    in the United States-flag fleet and the Nation's shipyard and 
    repair capability;
        (4) stabilizing and eventually increasing the number of 
    mariners available to crew United States merchant vessels;
        (5) achieving adequate manning of merchant vessels for national 
    security needs during a mobilization;
        (6) ensuring that sufficient civil maritime resources will be 
    available to meet defense deployment and essential economic 
    requirements in support of our national security strategy;
        (7) ensuring that the United States maintains the capability to 
    respond unilaterally to security threats in geographic areas not 
    covered by alliance commitments and otherwise meets sealift 
    requirements in the event of crisis or war;
        (8) ensuring that international agreements and practices do not 
    place United States maritime industries at an unfair competitive 
    disadvantage in world markets;
        (9) ensuring that Federal agencies promote, through efficient 
    application of laws and regulations, the readiness of the United 
    States merchant marine and supporting industries; and
        (10) any other relevant maritime policies.
    (b) Date of Transmittal.--The report required under subsection (a) 
shall be transmitted along with the President's budget submission, 
under section 1105 of title 31, United States Code, for fiscal year 
1997.

SEC. 15. RELIEF FROM UNITED STATES DOCUMENTATION REQUIREMENT FOR 3 
              VESSELS.

    (a) In General.--Notwithstanding any other law or any agreement 
with the United States Government, a vessel described in subsection (b) 
may be sold to a person that is not a citizen of the United States and 
transferred to or placed under a foreign registry.
    (b) Vessels Described.--The vessels referred to in subsection (a) 
are the following:
        (1) RAINBOW HOPE (United States official number 622178).
        (2) IOWA TRADER (United States official number 642934).
        (3) KANSAS TRADER (United States official number 634621).

SEC. 16. VESSEL REPAIR AND MAINTENANCE PILOT PROGRAM.

    (a) In General.--The Secretary of Transportation shall conduct a 
pilot program to evaluate the feasibility of using renewable contracts 
for the maintenance and repair of outported vessels in the Ready 
Reserve Force to enhance the readiness of those vessels. Under the 
pilot program, the Secretary, subject to the availability of 
appropriations and within 6 months after the date of the enactment of 
this Act, shall award 9 contracts for this purpose.
    (b) Use of Various Contracting Arrangements.--In conducting a pilot 
program under this section, the Secretary of Transportation shall use 
contracting arrangements similar to those used by the Department of 
Defense for procuring maintenance and repair of its vessels.
    (c) Contract Requirements.--Each contract with a shipyard under 
this section shall--
        (1) subject to subsection (d), provide for the procurement from 
    the shipyard of all repair and maintenance (including activation, 
    deactivation, and drydocking) for 1 vessel in the Ready Reserve 
    Force that is outported in the geographical vicinity of the 
    shipyard;
        (2) be effective for 1 fiscal year; and
        (3) be renewable, subject to the availability of 
    appropriations, for each subsequent fiscal year through fiscal year 
    1998.
    (d) Limitation of Work Under Contracts.--A contract under this 
section may not provide for the procurement of operation or manning for 
a vessel that may be procured under another contract for the vessel to 
which section 11(d)(2) of the Merchant Ship Sales Act of 1946 (50 
U.S.C. App. 1774(d)(2)) applies.
    (e) Geographic Distribution.--The Secretary shall seek to 
distribute contract awards under this section to shipyards located 
throughout the United States.
    (f) Reports.--The Secretary shall submit to the Congress--
        (1) an interim report on the effectiveness of each contract 
    under this section in providing for economic and efficient repair 
    and maintenance of the vessel included in the contract, no later 
    than 20 months after the date of the enactment of this Act; and
        (2) a final report on that effectiveness no later than 6 months 
    after the termination of all contracts awarded pursuant to this 
    section.

SEC. 17. STREAMLINING OF CARGO ALLOCATION PROCEDURES.

    (a) Amendments.--Section 901b(c)(3) of the Merchant Marine Act, 
1936 (46 U.S.C. App. 1241f(c)(3)) is amended--
        (1) in subparagraph (A)--
            (A) by striking ``and consistent with those sections,'' and 
        inserting ``and, subject to subparagraph (B) of this paragraph, 
        consistent with those sections,''; and
            (B) by striking ``50 percent'' and inserting ``25 
        percent''; and
        (2) by striking subparagraph (B) and inserting the following 
    new subparagraphs:
    ``(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.''.
    (b) Conforming Amendments.--(1) Paragraph (4) of section 901b(c) of 
that Act is repealed.
    (2) Paragraph (5) of that section is redesignated as paragraph (4).

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.
```