Calendar No. 262

104TH CONGRESS

1ST SESSION H. R. 1350

AN ACT

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

DECEMBER 7, 1995

Received; read twice and placed on the calendar
II

Calendar No. 262

104TH CONGRESS

1ST SESSION H. R. 1350

IN THE SENATE OF THE UNITED STATES

DECEMBER 7, 1995

Received; read twice and placed on the calendar

AN ACT

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,

3 SECTION 1. SHORT TITLE.

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

5 of 1995’’.
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1 SEC. 2. MARITIME SECURITY PROGRAM.

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

3 U.S.C. 1171 et seq.) is amended—

4 (1) by striking the title heading and inserting

5 the following:

6 ‘‘TITLE VI—VESSEL OPERATING ASSISTANCE

7 PROGRAMS

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

9 and

10 (2) by adding at the end the following new sub11 title:

12 ‘‘Subtitle B—Maritime Security Fleet Program

13 ‘‘ESTABLISHMENT OF FLEET

14 ‘‘SEC. 651. (a) IN GENERAL.—The Secretary of

15 Transportation shall establish a fleet of active, militarily

16 useful, privately-owned vessels to meet national defense

17 and other security requirements and maintain a United

18 States presence in international commercial shipping. The

19 Fleet shall consist of privately owned, United States-flag

20 vessels for which there are in effect operating agreements

21 under this subtitle, and shall be known as the Maritime

22 Security Fleet.

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

24 included in the Fleet if the vessel is self-propelled and—

25 ‘‘(1)(A) is operated by a person as an ocean

26 common carrier;
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1 ‘‘(B) whether in commercial service, on charter

2 to the Department of Defense, or in other employ3 ment, is either—

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

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

6 twenty-foot equivalent units; or

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

8 barge capacity of at least 75 barges; or

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

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

11 States for national defense or military purposes in

12 time of war or national emergency;

13 ‘‘(2)(A)(i) is a United States-documented ves14 sel; and

15 ‘‘(ii) on the date an operating agreement cover16 ing the vessel is entered into under this subtitle, is—

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

18 or less; or

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

20 years of age or less;

21 except that the Secretary of Transportation may

22 waive the application of clause (ii) if the Secretary,

23 in consultation with the Secretary of Defense, deter24 mines that the waiver is in the national interest; or
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1 ‘‘(B) it is not a United States-documented ves2 sel, but the owner of the vessel has demonstrated an

3 intent to have the vessel documented under chapter

4 121 of title 46, United States Code, if it is included

5 in the Fleet, and the vessel will be less than 10

6 years of age on the date of that documentation;

7 ‘‘(3) the Secretary of Transportation deter8 mines that the vessel is necessary to maintain a

9 United States presence in international commercial

10 shipping or, after consultation with the Secretary of

11 Defense, determines that the vessel is militarily use12 ful for meeting the sealift needs of the United States

13 with respect to national emergencies; and

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

15 vessel is entered into under this subtitle, the vessel

16 will be eligible for documentation under chapter 121

17 of title 46, United States Code.

18 ‘‘OPERATING AGREEMENTS

19 ‘‘SEC. 652. (a) IN GENERAL.—The Secretary of

20 Transportation shall require, as a condition of including

21 any vessel in the Fleet, that the owner or operator of the

22 vessel enter into an operating agreement with the Sec23 retary under this section. Notwithstanding subsection (g),

24 the Secretary may enter into an operating agreement for,

25 among other vessels that are eligible to be included in the

26 Fleet, any vessel which continues to operate under an op-
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1 erating-differential subsidy contract under subtitle A or

2 which is under charter to the Department of Defense.

3 ‘‘(b) REQUIREMENTS FOR OPERATION.—An operat4 ing agreement under this section shall require that, during

5 the period a vessel is operating under the agreement—

6 ‘‘(1) the vessel—

7 ‘‘(A) shall be operated exclusively in the

8 foreign trade or in mixed foreign and domestic

9 trade allowed under a registry endorsement is10 sued under section 12105 of title 46, United

11 States Code, and

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

13 coastwise trade; and

14 ‘‘(2) the vessel shall be documented under chap15 ter 121 of title 46, United States Code.

16 ‘‘(c) REGULATORY RELIEF.—A contractor of a vessel

17 included in an operating agreement under this subtitle

18 may operate the vessel in the foreign commerce of the

19 United States without restriction, and shall not be subject

20 to any requirement under section 801, 808, 809, or 810.

21 Participation in the program established by this subtitle

22 shall not subject a contractor to section 805 or to any

23 provision of subtitle A.

24 ‘‘(d) EFFECTIVENESS AND ANNUAL PAYMENT RE25 QUIREMENTS OF OPERATING AGREEMENTS.—
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1 ‘‘(1) EFFECTIVENESS.—The Secretary of

2 Transportation may enter into an operating agree3 ment under this subtitle for fiscal year 1996. The

4 agreement shall be effective only for 1 fiscal year,

5 but shall be renewable, subject to the availability of

6 appropriations, for each subsequent fiscal year

7 through the end 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

13 each vessel that is covered by the operating agree14 ment, an amount equal to $2,300,000 for fiscal year

15 1996 and $2,100,000 for each fiscal year thereafter

16 in which the agreement is in effect. The amount

17 shall be paid in equal monthly installments at the

18 end of each month. The amount shall not be reduced

19 except as provided by this section.

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

21 a condition of receiving payment under this section for a

22 fiscal year for a vessel, the contractor for the vessel shall

23 certify, in accordance with regulations issued by the Sec24 retary of Transportation, that the vessel has been and will

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

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

3 be considered days of operation for purposes of this sub4 section.

5 ‘‘(f) OPERATING AGREEMENT IS OBLIGATION OF

6 UNITED STATES GOVERNMENT.—An operating agree7 ment under this subtitle constitutes a contractual obliga8 tion of the United States Government to pay the amounts

9 provided for in the agreement to the extent of actual ap10 propriations.

11 ‘‘(g) LIMITATIONS.—The Secretary of Transpor12 tation shall not make any payment under this subtitle for

13 a vessel with respect to any days for which the vessel is—

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

15 contract under subtitle A or under a charter to the

16 United States Government, other than a charter

17 pursuant to section 653;

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

19 with an operating agreement under this subtitle; or

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

21 Secretary may make such payments for a LASH

22 vessel for any day for which the vessel is more than

23 25 years of age if that vessel—

24 ‘‘(A) is modernized after January 1, 1994,
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1 ‘‘(B) is modernized before it is 25 years of

2 age, and

3 ‘‘(C) is not more than 30 years of age.

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

5 this subtitle for a vessel covered by an operating agree6 ment, the Secretary of Transportation—

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

8 not reduce any payment for the operation of a vessel

9 to carry military or other preference cargoes under

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

11 of March 26, 1934 (46 App. U.S.C. 1241–1), sec12 tion 901(a), 901(b), or 901b of this Act, or any

13 other cargo preference law of the United States;

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

15 that a vessel is engaged in transporting more than

16 7,500 tons of civilian bulk preference cargoes pursu17 ant to section 901(a), 901(b), or 901b that is cargo;

18 and

19 ‘‘(3) shall make a pro rata reduction in pay20 ment for each day less than 320 in a fiscal year that

21 a vessel covered by an operating agreement is not

22 operated in accordance with subsection (b)(1), with

23 days during which the vessel is drydocked or under24 going survey, inspection, or repair considered to be

25 days on which the vessel is operated.
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1 ‘‘(i) PRIORITY FOR AWARDING AGREEMENTS.—Sub2 ject to the availability of appropriations, the Secretary

3 shall enter into operating agreements according to the fol4 lowing 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

10 under section 2 of the Shipping Act, 1916;

11 or

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

13 owned and operated by a corporation that

14 is—

15 ‘‘(I) eligible to document a vessel

16 under chapter 121 of title 46, United

17 States Code; and

18 ‘‘(II) affiliated with a corporation

19 operating or managing for the Sec20 retary of Defense other vessels docu21 mented under that chapter, or char22 tering other vessels to the Secretary

23 of Defense.

24 ‘‘(B) LIMITATION ON NUMBER OF OPERAT25 ING AGREEMENTS.—The total number of oper-
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1 ating agreements that may be entered into by

2 a person under the priority in subparagraph

3 (A)—

4 ‘‘(i) for vessels described in subpara5 graph (A)(i), may not exceed the sum of—

6 ‘‘(I) the number of United

7 States-documented vessels the person

8 operated in the foreign commerce of

9 the United States (except mixed

10 coastwise and foreign commerce) on

11 May 17, 1995; and

12 ‘‘(II) the number of United

13 States-documented vessels the person

14 chartered to the Secretary of Defense

15 on that date; and

16 ‘‘(ii) for vessels described in subpara17 graph (A)(ii), may not exceed 5 vessels.

18 ‘‘(C) TREATMENT OF RELATED PAR19 TIES.—For purposes of subparagraph (B), a re20 lated party with respect to a person shall be

21 treated as the person.

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

23 GOVERNMENT CONTRACTORS.—To the extent that

24 amounts are available after applying paragraph (1),
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1 any vessel that is owned and operated by a person

2 who is—

3 ‘‘(A) a citizen of the United States under

4 section 2 of the Shipping Act, 1916, that has

5 not been awarded an operating agreement

6 under the priority established under paragraph

7 (1); or

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

9 chapter 121 of title 46, United States Code;

10 and

11 ‘‘(ii) affiliated with a corporation operating

12 or managing other United States-documented

13 vessels for the Secretary of Defense or charter14 ing other vessels to the Secretary of Defense.

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

16 amounts are available after applying paragraphs (1)

17 and (2), any other eligible vessel.

18 ‘‘(j) TRANSFER OF OPERATING AGREEMENTS.—A

19 contractor under an operating agreement may transfer the

20 agreement (including all rights and obligations under the

21 agreement) to any person eligible to enter into that operat22 ing agreement under this subtitle after notification of the

23 Secretary in accordance with regulations prescribed by the

24 Secretary, unless the transfer is disapproved by the Sec25 retary within 90 days after the date of that notification.
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1 A person to whom an operating agreement is transferred

2 may receive payments from the Secretary under the agree3 ment only if each vessel to be covered by the agreement

4 after the transfer is an eligible vessel under section

5 651(b).

6 ‘‘(k) REVERSION OF UNUSED AUTHORITY.—The ob7 ligation of the Secretary to make payments under an oper8 ating agreement under this subtitle shall terminate with

9 respect to a vessel if the contractor fails to engage in oper10 ation of the vessel for which such payment is required—

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

12 the operating agreement, in the case of a vessel in

13 existence on the effective date of the agreement, or

14 ‘‘(2) within 30 months after the effective date

15 of the operating agreement, in the case of a vessel

16 to be constructed after that effective date.

17 ‘‘(l) PROCEDURE FOR CONSIDERING APPLICATION;

18 EFFECTIVE DATE FOR CERTAIN VESSELS.—

19 ‘‘(1) PROCEDURES.—No later than 30 days

20 after the date of the enactment of the Maritime Se21 curity Act of 1995, the Secretary shall accept appli22 cations for enrollment of vessels in the Fleet, and

23 within 90 days after receipt of an application for en24 rollment of a vessel in the Fleet, the Secretary shall

25 enter into an operating agreement with the applicant
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1 or provide in writing the reason for denial of that

2 application.

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

4 is requested by the applicant, the effective date for

5 an operating agreement with respect to a vessel

6 which is, on the date of entry into an operating

7 agreement, either subject to a contract under sub8 title A or on charter to the United States Govern9 ment, other than a charter under section 653, shall

10 be the expiration or termination date of the contract

11 under subtitle A or of the Government charter cover12 ing the vessel, respectively, or any earlier date the

13 vessel is withdrawn from that contract or charter.

14 ‘‘(m) EARLY TERMINATION.—An operating agree15 ment under this subtitle shall terminate on a date speci16 fied by the contractor if the contractor notifies the Sec17 retary, by not later than 60 days before the effective date

18 of the termination, that the contractor intends to termi19 nate the agreement. Vessels covered by an operating

20 agreement terminated under this subsection shall remain

21 documented under chapter 121 of title 46, United States

22 Code, until the date the operating agreement would have

23 terminated according to its terms. A contractor who termi24 nates an operating agreement pursuant to this subsection

25 shall continue to be bound by the provisions of section 653
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1 until the date the operating agreement would have termi2 nated according to its terms. All terms and conditions of

3 an Emergency Preparedness Agreement entered into

4 under section 653 shall remain in effect until the date the

5 operating agreement would have terminated according to

6 its terms, except that the terms of such Emergency Pre7 paredness Agreement may be modified by the mutual con8 sent of the contractor and the Secretary of Transportation

9 and the Secretary of Defense.

10 ‘‘(n) NONRENEWAL FOR LACK OF FUNDS.—If, by

11 the first day of a fiscal year, sufficient funds have not

12 been appropriated under the authority provided by section

13 655 for that fiscal year, the Secretary of Transportation

14 shall notify the Congress that operating agreements au15 thorized under this subtitle for which sufficient funds are

16 not available will not be renewed for that fiscal year if

17 sufficient funds are not appropriated by the 60th day of

18 that fiscal year. If funds are not appropriated under the

19 authority provided by section 655 for any fiscal year by

20 the 60th day of that fiscal year, then each vessel covered

21 by an operating agreement under this subtitle for which

22 funds are not available is thereby released from any fur23 ther obligation under the operating agreement, and the

24 vessel owner or operator may transfer and register such

25 vessel under a foreign registry deemed acceptable by the
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1 Secretary of Transportation, notwithstanding any other

2 provision of law. If section 902 is applicable to such vessel

3 after registration of the vessel under such a registry, the

4 vessel is available to be requisitioned by the Secretary of

5 Transportation pursuant to section 902.

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

7 ‘‘(1) IN GENERAL.—The Secretary of Transpor8 tation, subject to paragraph (4), shall award operat9 ing agreements within each priority under subsection

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

11 the Secretary.

12 ‘‘(2) NUMBER OF AGREEMENTS AWARDED.—

13 Regulations under paragraph (1) shall provide that

14 if appropriated amounts are not sufficient for oper15 ating agreements for all vessels within a priority

16 under subsection (i)(1), (2), or (3), the Secretary

17 shall award to each person submitting a request a

18 number of operating agreements that bears approxi19 mately the same ratio to the total number of vessels

20 in the priority, as the amount of appropriations

21 available for operating agreements for vessels in the

22 priority bears to the amount of appropriations nec23 essary for operating agreements for all vessels in the

24 priority.
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1 ‘‘(3) TREATMENT OF RELATED PARTIES.—For

2 purposes of paragraph (2), a related party with re3 spect to a person shall be treated as the person.

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

5 In awarding operating agreements for vessels within

6 a priority under subsection (i) (1), (2), or (3), the

7 Secretary shall give preference to a vessel that was

8 constructed in the United States, to the extent such

9 preference is consistent with establishment of a fleet

10 described in the first sentence of section 651(a)

11 (taking into account the age of the vessel, the nature

12 of service provided by the vessel, and the commercial

13 viability of the vessel).

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

15 The Secretary shall include in any operating agreement

16 under this subtitle a requirement that the contractor

17 under the agreement shall, by not later than 30 days after

18 soliciting any bid or offer for the construction of any vessel

19 in a foreign shipyard and before entering into a contract

20 for construction of a vessel in a foreign shipyard, provide

21 notice of the intent of the contractor to enter into such

22 a contract to each shipyard in the United States that is

23 capable of constructing the vessel.

24 ‘‘NATIONAL SECURITY REQUIREMENTS

25 ‘‘SEC. 653. (a) EMERGENCY PREPAREDNESS AGREE26 MENT.—
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1 ‘‘(1) REQUIREMENT TO ENTER AGREEMENT.—

2 The Secretary of Transportation shall establish an

3 Emergency Preparedness Program under this sec4 tion that is approved by the Secretary of Defense.

5 Under the program, the Secretary of Transportation

6 shall include in each operating agreement under this

7 subtitle a requirement that the contractor enter into

8 an Emergency Preparedness Agreement under this

9 section with the Secretary. The Secretary shall nego10 tiate and enter into an Emergency Preparedness

11 Agreement with each contractor as promptly as

12 practicable after the contractor has entered into an

13 operating agreement under this subtitle.

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

15 Preparedness Agreement under this section shall re16 quire that upon a request by the Secretary of De17 fense during time of war or national emergency, or

18 whenever determined by the Secretary of Defense to

19 be necessary for national security (including any

20 natural disaster, international peace operation, or

21 contingency operation (as that term is defined in

22 section 101 of title 10, United States Code)), a con23 tractor for a vessel covered by an operating agree24 ment under this subtitle shall make available com25 mercial transportation resources (including services).
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1 The basic terms of the Emergency Preparedness

2 Agreements shall be established pursuant to con3 sultations among the Secretary, the Secretary of De4 fense, and Maritime Security Program contractors.

5 In any Emergency Preparedness Agreement, the

6 Secretary and a contractor may agree to additional

7 or modifying terms appropriate to the contractor’s

8 circumstances if those terms have been approved by

9 the Secretary of Defense.

10 ‘‘(3) PARTICIPATION AFTER EXPIRATION OF

11 OPERATING AGREEMENT.—Except as provided by

12 section 652(m), the Secretary may not require,

13 through an Emergency Preparedness Agreement or

14 operating agreement, that a contractor continue to

15 participate in an Emergency Preparedness Agree16 ment when the operating agreement with the con17 tractor has expired according to its terms or is oth18 erwise no longer in effect. After expiration of an

19 Emergency Preparedness Agreement, a contractor

20 may volunteer to continue to participate in such an

21 agreement.

22 ‘‘(b) RESOURCES MADE AVAILABLE.—The commer23 cial transportation resources to be made available under

24 an Emergency Preparedness Agreement shall include ves25 sels or capacity in vessels, intermodal systems and equip-
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1 ment, terminal facilities, intermodal and management

2 services, and other related services, or any agreed portion

3 of such nonvessel resources for activation as the Secretary

4 may determine to be necessary, seeking to minimize dis5 ruption of the contractor’s service to commercial shippers.

6 ‘‘(c) COMPENSATION.—

7 ‘‘(1) IN GENERAL.—The Secretary of Transpor8 tation shall provide in each Emergency Preparedness

9 Agreement for fair and reasonable compensation for

10 all commercial transportation resources provided

11 pursuant to this section.

12 ‘‘(2) SPECIFIC REQUIREMENTS.—Compensation

13 under this subsection—

14 ‘‘(A) shall not be less than the contractor’s

15 commercial market charges for like transpor16 tation resources;

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

18 associated with provision and use of the con19 tractor’s commercial resources to meet emer20 gency requirements;

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

22 vessel, shall be fair and reasonable;

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

24 in any way reflect amounts payable under sec25 tion 652; and
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1 ‘‘(E) shall be provided from the time that

2 a vessel or resource is diverted from commercial

3 service until the time that it reenters commer4 cial service.

5 ‘‘(3) APPROVAL OF AMOUNT BY SECRETARY OF

6 DEFENSE.—No compensation may be provided for a

7 vessel under this subsection unless the amount of

8 the compensation is approved by the Secretary of

9 Defense.

10 ‘‘(d) TEMPORARY REPLACEMENT VESSELS.—Not11 withstanding any other provision of this subtitle or of

12 other law to the contrary—

13 ‘‘(1) a contractor may operate or employ in for14 eign commerce a foreign-flag vessel or foreign-flag

15 vessel capacity, as a temporary replacement for a

16 United States-documented vessel or United States17 documented vessel capacity that is activated under

18 an Emergency Preparedness Agreement; and

19 ‘‘(2) such replacement vessel or vessel capacity

20 shall be eligible during the replacement period to

21 transport preference cargoes subject to section 2631

22 of title 10, United States Code, the Act of March

23 26, 1934 (46 App. U.S.C. 1241–1), and sections

24 901(a), 901(b), and 901b of this Act to the same ex-
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1 tent as the eligibility of the vessel or vessel capacity

2 replaced.

3 ‘‘(e) REDELIVERY AND LIABILITY OF U.S. FOR DAM4 AGES.—

5 ‘‘(1) IN GENERAL.—All commercial transpor6 tation resources activated under an Emergency Pre7 paredness Agreement shall, upon termination of the

8 period of activation, be redelivered to the contractor

9 in the same good order and condition as when re10 ceived, less ordinary wear and tear, or the Govern11 ment shall fully compensate the contractor for any

12 necessary repair or replacement.

13 ‘‘(2) LIMITATION ON LIABILITY OF U.S.—Ex14 cept as may be expressly agreed to in an Emergency

15 Preparedness Agreement, or as otherwise provided

16 by law, the Government shall not be liable for dis17 ruption of a contractor’s commercial business or

18 other consequential damages to a contractor arising

19 from activation of commercial transportation re20 sources under an Emergency Preparedness Agree21 ment.

22 ‘‘(3) LIMITATION ON APPLICATION OF OTHER

23 REQUIREMENTS.—Sections 902 and 909 of this Act

24 shall not apply to a vessel while it is covered by an

25 Emergency Preparedness Agreement under this sub-
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1 title. Any Emergency Preparedness Agreement en2 tered into by a contractor shall supersede any other

3 agreement between that contractor and the Govern4 ment for vessel availability in time of war or na5 tional emergency.

6 ‘‘DEFINITIONS

7 ‘‘SEC. 654. In this subtitle:

8 ‘‘(1) BULK CARGO.—The term ‘bulk cargo’

9 means cargo that is loaded and carried in bulk with10 out mark or count.

11 ‘‘(2) CONTRACTOR.—The term ‘contractor’

12 means an owner or operator of a vessel that enters

13 into an operating agreement for the vessel with the

14 Secretary of Transportation under section 652.

15 ‘‘(3) OCEAN COMMON CARRIER.—The term

16 ‘ocean common carrier’ means a person holding it17 self out to the general public to operate vessels to

18 provide transportation by water of passengers or

19 cargo between the United States and a foreign coun20 try for compensation, that—

21 ‘‘(A) assumes responsibility for the trans22 portation from the port or point of receipt to

23 the port or point of destination, and

24 ‘‘(B) utilizes, for all or part of that trans25 portation, a vessel operating on the high seas or

26 the Great Lakes between a port in the United
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1 States and a port in a foreign country, except

2 that the term does not include a common car3 rier engaged in ocean transportation by ferry

4 boat, ocean tramp, or chemical parcel-tanker.

5 As used in this paragraph, ‘chemical parcel6 tanker’ means a vessel whose cargo-carrying ca7 pability consists of individual cargo tanks for

8 bulk chemicals that are a permanent part of the

9 vessel, that have segregation capability with

10 piping systems to permit simultaneous carriage

11 of several bulk chemical cargoes with minimum

12 risk of cross-contamination, and that has a

13 valid certificate of fitness under the Inter14 national Maritime Organization Code for the

15 Construction and Equipment of Ships Carrying

16 Dangerous Chemicals in Bulk.

17 ‘‘(4) FLEET.—The term ‘Fleet’ means the Mar18 itime Security Fleet established pursuant to section

19 651(a).

20 ‘‘(5) LASH VESSEL.—The term ‘LASH vessel’

21 means a lighter aboard ship vessel.

22 ‘‘(6) UNITED STATES-DOCUMENTED VESSEL.—

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

24 vessel documented under chapter 121 of title 46,

25 United States Code.
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1 ‘‘AUTHORIZATION OF APPROPRIATIONS

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

3 for operating agreements under this subtitle, to remain

4 available until expended, $100,000,000 for fiscal year

5 1996 and such sums as may be necessary, not to exceed

6 $100,000,000, for each fiscal year thereafter through fis7 cal year 2005.’’.

8 SEC. 3. TERMINATION OF OPERATING-DIFFERENTIAL SUB9 SIDY PROGRAM.

10 (a) LIMITATION ON PAYMENTS FOR OLDER VES11 SELS.—Section 605(b) of the Merchant Marine Act, 1936

12 (46 App. U.S.C. 1175(b)), is amended to read as follows:

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

14 for the operation of a vessel after the calendar year the

15 vessel becomes 25 years of age, unless the Secretary of

16 Transportation has determined, before the date of enact17 ment of the Maritime Security Act of 1995, that it is in

18 the public interest to grant such financial aid for the oper19 ation of such vessel.’’.

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

21 (46 App. U.S.C. 1171 et seq.), as designated by the

22 amendment made by section 2(1), is further amended by

23 adding at the end the following new section:

24 ‘‘SEC. 616. (a) After the date of enactment of the

25 Maritime Security Act of 1995, the Secretary of Transpor-
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1 tation shall not enter into any new contract for operating2 differential subsidy under this subtitle.

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

4 any operating-differential subsidy contract in effect under

5 this title on the day before the date of enactment of the

6 Maritime Security Act of 1995 shall continue in effect and

7 terminate as set forth in the contract, unless voluntarily

8 terminated at an earlier date by the parties (other than

9 the United States Government) to the contract.

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

11 601(a) and 603(b), and the provisions of sections 605(c)

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

13 subsidy program under this subtitle effective upon the ear14 lier of—

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

16 the Maritime Security Program established by sub17 title B to a contractor under that subtitle who is not

18 party to an operating-differential subsidy contract

19 under this subtitle, with the Secretary to cause no20 tice of the date of such payment to be published in

21 the Federal Register as soon as possible; or

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

23 under the operating-differential subsidy program,

24 the date that contractor enters into a contract with
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1 the Secretary under the Maritime Security Program

2 established by subtitle B.

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

4 a vessel may be transferred and registered under an effec5 tive United States-controlled foreign flag if—

6 ‘‘(A) the operator of the vessel receives an oper7 ating-differential subsidy pursuant to a contract

8 under this subtitle which is in force on October 1,

9 1994, and the Secretary approves the replacement

10 of such vessel with a comparable vessel, or

11 ‘‘(B) the vessel is covered by an operating

12 agreement under subtitle B, and the Secretary ap13 proves the replacement of such vessel with a com14 parable vessel for inclusion in the Maritime Security

15 Fleet established under subtitle B.

16 ‘‘(2) Any such vessel may be requisitioned by the Sec17 retary of Transportation pursuant to section 902.’’.

18 SEC. 4. DOMESTIC OPERATIONS.

19 (a) IN GENERAL.—Subtitle B of title VI of the Mer20 chant Marine Act, 1936, as amended by section 102 of

21 this title, is further amended by adding at the end the

22 following new section:

23 ‘‘NONCONTIGUOUS DOMESTIC TRADES

24 ‘‘SEC. 656. (a)(1) Except as otherwise provided in

25 this section, no contractor or related party shall receive

26 payments pursuant to this subtitle during a period when
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1 it participates in a noncontiguous domestic trade, except

2 upon written permission of the Secretary of Transpor3 tation. Such written permission shall also be required for

4 any material change in the number or frequency of

5 sailings, the capacity offered, or the domestic ports called

6 by a contractor or related party in a noncontiguous domes7 tic trade. The Secretary may grant such written permis8 sion pursuant to written application of such contractor or

9 related party unless the Secretary finds that—

10 ‘‘(A) existing service in that trade is adequate;

11 or

12 ‘‘(B) the service sought to be provided by the

13 contractor or related party—

14 ‘‘(i) would result in unfair competition to

15 any other person operating vessels in such non16 contiguous domestic trade, or

17 ‘‘(ii) would be contrary to the objects and

18 policy of this Act.

19 ‘‘(2) For purposes of this subsection, ‘‘written per20 mission of the Secretary’’ means permission which states

21 the capacity offered, the number and frequency of sailings,

22 and the domestic ports called, and which is granted follow23 ing—

24 ‘‘(A) written application containing the infor25 mation required by paragraph (e)(1) by a person
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1 seeking such written permission, notice of which ap2 plication shall be published in the Federal Register

3 within 15 days of filing of such application with the

4 Secretary;

5 ‘‘(B) holding of a hearing on the application

6 under section 554 of title 5, United States Code, in

7 which every person, firm or corporation having any

8 interest in the application shall be permitted to in9 tervene and be heard; and

10 ‘‘(C) final decision on the application by the

11 Secretary within 120 days following conclusion of

12 such hearing.

13 ‘‘(b) Subsection (a) shall not apply in any way to pro14 vision by a contractor of service within the level of service

15 provided by that contractor as of the date established by

16 subsection (c) or to provision of service permitted by sub17 section (d).

18 ‘‘(c) The date referred to in subsection (b) shall be

19 August 9, 1995: Provided, however, That with respect to

20 tug and barge service to Alaska the date referred to in

21 subsection (b) shall be July 1, 1992.

22 ‘‘(d) A contractor may provide service in a trade in

23 addition to the level of service provided as of the applicable

24 date established by subsection (c) in proportion to the an25 nual increase in real gross product of the noncontiguous
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1 State or Commonwealth served since the applicable date

2 established by subsection (c).

3 ‘‘(e)(1) A person applying for award of an agreement

4 under this subtitle shall include with the application a de5 scription of the level of service provided by that person

6 in each noncontiguous domestic trade served as of the date

7 applicable under subsection (c). The application also shall

8 include, for each such noncontiguous domestic trade: a list

9 of vessels operated by that person in such trade, their con10 tainer carrying capacity expressed in twenty-foot equiva11 lent units (TEUs) or other carrying capacity, the itinerary

12 for each such vessel, and such other information as the

13 Secretary may require by regulation. Such description and

14 information shall be made available to the public. Within

15 15 days of the date of an application for an agreement

16 by a person seeking to provide service pursuant to sub17 sections (b) and (c) of this section, the Secretary shall

18 cause to be published in the Federal Register notice of

19 such description, along with a request for public comment

20 thereon. Comments on such description shall be submitted

21 to the Secretary within 30 days of publication in the Fed22 eral Register. Within 15 days after receipt of comments,

23 the Secretary shall issue a determination in writing either

24 accepting, in whole or part, or rejecting use of the appli25 cant’s description to establish the level of service provided
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1 as of the date applicable under subsection (c): Provided,

2 That notwithstanding the provisions of this subsection,

3 processing of the application for an award of an agreement

4 shall not be suspended or delayed during the time in which

5 comments may be submitted with respect to the deter6 mination or during the time prior to issuance by the Sec7 retary of the required determination: Provided further,

8 That if the Secretary does not make the determination re9 quired by this paragraph within the time provided by this

10 paragraph, the description of the level of service provided

11 by the applicant shall be deemed to be the level of service

12 provided as of the applicable date until such time as the

13 Secretary makes the determination.

14 ‘‘(2) No contractor shall implement the authority

15 granted in subsection (d) of this section except as follows:

16 ‘‘(A) An application shall be filed with the Sec17 retary which shall state the increase in capacity

18 sought to be offered, a description of the means by

19 which such additional capacity would be provided,

20 the basis for applicant’s position that such increase

21 in capacity would be in proportion to or less than

22 the increase in real gross product of the relevant

23 noncontiguous State or Commonwealth since the ap24 plicable date established by subsection (c), and such

25 information as the Secretary may require so that the
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1 Secretary may accurately determine such increase in

2 real gross product of the relevant noncontiguous

3 State or Commonwealth.

4 ‘‘(B) Such increase in capacity sought by appli5 cant and such information shall be made available to

6 the public.

7 ‘‘(C) Within 15 days of the date of an applica8 tion pursuant to this paragraph the Secretary shall

9 cause to be published in the Federal Register notice

10 of such application, along with a request for public

11 comment thereon.

12 ‘‘(D) Comments on such application shall be

13 submitted to the Secretary within 30 days of publi14 cation in the Federal Register.

15 ‘‘(E) Within 15 days after receipt of comments,

16 the Secretary shall issue a determination in writing

17 either accepting, in whole or part, or rejecting, the

18 increase in capacity sought by the applicant as being

19 in proportion to or less than the increase in real

20 gross product of the relevant noncontiguous State or

21 Commonwealth since the applicable date established

22 by subsection (c): Provided That, notwithstanding

23 the provisions of this section, if the Secretary does

24 not make the determination required by this para25 graph within the time provided by this paragraph,
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1 the increase in capacity sought by applicant shall be

2 permitted as being in proportion to or less than such

3 increase in real gross product until such time as the

4 Secretary makes the determination.

5 ‘‘(f) With respect to provision by a contractor of serv6 ice in a noncontiguous domestic trade not authorized by

7 this section, the Secretary shall deny payments under the

8 operating agreement with respect to the period of provi9 sion of such service but shall deny payments only in part

10 if the extent of provision of such unauthorized service was

11 de minimis or not material.

12 ‘‘(g) Notwithstanding any other provision of this sub13 title, the Secretary may issue temporary permission for

14 any United States citizen, as that term is defined in sec15 tion 2 of the Shipping Act, 1916, to provide service to

16 a noncontiguous State or Commonwealth upon the request

17 of the Governor of such noncontiguous State or Common18 wealth, in circumstances where an Act of God, a declara19 tion of war or national emergency, or any other condition

20 occurs that prevents ocean transportation service to such

21 noncontiguous State or Commonwealth from being pro22 vided by persons currently providing such service. Such

23 temporary permission shall expire 90 days from date of

24 grant, unless extended by the Secretary upon written re25 quest of the Governor of such State or Commonwealth.
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1 ‘‘(h) As used in this section:

2 ‘‘(1) The term ‘level of service provided by a

3 contractor’ in a trade as of a date means—

4 ‘‘(A) with respect to service other than

5 service described in (B), the total annual capac6 ity provided by the contractor in that trade for

7 the 12 calendar months preceding that date:

8 Provided, That, with respect to unscheduled,

9 contract carrier tug and barge service between

10 points in Alaska south of the Arctic Circle and

11 points in the contiguous 48 States, the level of

12 service provided by a contractor shall include

13 100 percent of the capacity of the equipment

14 dedicated to such service on the date specified

15 in subsection (c) and actually utilized in that

16 service in the two-year period preceding that

17 date, excluding service to points between An18 chorage, Alaska and Whittier, Alaska, served by

19 common carrier service unless such unscheduled

20 service is only for carriage of oil or pursuant to

21 a contract with the United States military: Pro22 vided further, That, with respect to scheduled

23 barge service between the contiguous 48 States

24 and Puerto Rico, such total annual capacity

25 shall be deemed as such total annual capacity
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1 plus the annual capacity of two additional

2 barges, each capable of carrying 185 trailers

3 and 100 automobiles; and

4 ‘‘(B) with respect to service provided by

5 container vessels, the overall capacity equal to

6 the sum of—

7 ‘‘(i) 100 percent of the capacity of

8 vessels operated by or for the contractor on

9 that date, with the vessels’ configuration

10 and frequency of sailing in effect on that

11 date, and which participate solely in that

12 noncontiguous domestic trade; and

13 ‘‘(ii) 75 percent of the capacity of ves14 sels operated by or for the contractor on

15 that date, with the vessels’ configuration

16 and frequency of sailing in effect on that

17 date, and which participate in that non18 contiguous domestic trade and in another

19 trade, provided that the term does not in20 clude any restriction on frequency, or num21 ber of sailings, or on ports called within

22 such overall capacity.

23 ‘‘(2) The level of service set forth in paragraph

24 (1) shall be described with the specificity required by

25 subsection (e)(1) and shall be the level of service in
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1 a trade with respect to the applicable date estab2 lished by subsection (c) only if the service is not

3 abandoned thereafter, except for interruptions due

4 to military contingency or other events beyond the

5 contractor’s control.

6 ‘‘(3) The term ‘participates in a noncontiguous

7 domestic trade’ means directly or indirectly owns,

8 charters, or operates a vessel engaged in transpor9 tation of cargo between a point in the contiguous 48

10 states and a point in Alaska, Hawaii, or Puerto

11 Rico, other than a point in Alaska north of the Arc12 tic Circle.

13 ‘‘(4) The term ‘related party’ means—

14 ‘‘(A) a holding company, subsidiary, affili15 ate, or associate of a contractor who is a party

16 to an operating agreement under this subtitle;

17 and

18 ‘‘(B) an officer, director, agent, or other

19 executive of a contractor or of a person referred

20 to in subparagraph (A).’’.

21 (b) CONFORMING AMENDMENT.—Section 805 of the

22 Merchant Marine Act, 1936 (46 App. U.S.C. 1223) is

23 amended—
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1 (1) by striking ‘‘title VI of this Act’’ each place

2 it appears and inserting ‘‘subtitle A of title VI of

3 this Act’’; and

4 (2) by striking ‘‘under title VI’’ each place it

5 appears and inserting ‘‘under subtitle A of title VI’’.

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

7 (a) IN GENERAL.—Section 804 of the Merchant Ma8 rine Act, 1936 (46 App. U.S.C. 1222) is amended by add9 ing at the end the following new subsection:

10 ‘‘(f) The provisions of subsection (a) shall not pre11 clude a contractor receiving assistance under subtitle A

12 or B of title VI, or any holding company, subsidiary, or

13 affiliate of the contractor, or any officer, director, agent,

14 or executive thereof, from—

15 ‘‘(1) owning, chartering, or operating any for16 eign-flag vessel on a voyage or a segment of a voy17 age that does not call at a port in the United States;

18 ‘‘(2) owning, chartering, or operating any for19 eign-flag vessel in line haul service between the Unit20 ed States and foreign ports if—

21 ‘‘(A) the foreign-flag vessel was owned,

22 chartered, or operated by, or is a replacement

23 for a foreign-flag vessel owned, chartered, or

24 operated by, such owner or operator, or any

25 holding company, subsidiary, affiliate, or associ-
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1 ate of such owner or operator, on the date of

2 enactment of the Maritime Security Act of

3 1995;

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

5 each additional foreign-flag vessel, other than a

6 time chartered vessel, has first applied to have

7 that vessel covered by an operating agreement

8 under subtitle B of title VI, and the Secretary

9 has not awarded an operating agreement with

10 respect to that vessel within 90 days after the

11 filing of the application; or

12 ‘‘(C) the vessel has been placed under for13 eign documentation pursuant to section 9 of the

14 Shipping Act, 1916 (46 App. U.S.C. 808), ex15 cept that any foreign-flag vessel, other than a

16 time chartered vessel, a replacement vessel

17 under section 653(d), or a vessel operated by

18 the owner or operator on the date of enactment

19 of the Maritime Security Act of 1995, in line

20 haul service between the United States and for21 eign ports is registered under the flag of an ef22 fective United States-controlled foreign flag,

23 and available to be requisitioned by the Sec24 retary of Transportation pursuant to section

25 902 of this Act;
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1 ‘‘(3) owning, chartering, or operating foreign2 flag bulk cargo vessels that are operated in foreign3 to-foreign service or the foreign commerce of the

4 United States;

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

6 that are operated solely as replacement vessels for

7 United States-flag vessels or vessel capacity that are

8 made available to the Secretary of Defense pursuant

9 to section 653 of this Act; or

10 ‘‘(5) entering into time or space charter or

11 other cooperative agreements with respect to foreign12 flag vessels or acting as agent or broker for a for13 eign-flag vessel or vessels.’’.

14 (b) EFFECTIVE DATE.—The amendment made by

15 subsection (a) shall apply to a contractor under subtitle

16 B of title VI of the Merchant Marine Act, 1936, as amend17 ed by this Act, upon enactment of this Act, and shall apply

18 to a contractor under subtitle A of title VI of that Act,

19 upon the earlier of—

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

21 Maritime Security Program under subtitle B of that

22 title to a contractor under subtitle B of that title

23 who is not party to an operating-differential subsidy

24 contract under subtitle A of that title, with the Sec25 retary of Transportation to cause notice of the date
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1 of such payment to be published in the Federal Reg2 ister as soon as possible; or

3 (2) with respect to a particular contractor

4 under the operating-differential subsidy program

5 under subtitle A of that title, the date that contrac6 tor enters into a contract with the Secretary under

7 the Maritime Security Program established by sub8 title B of that title.

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

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

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

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

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

14 Secretary of Transportation under that Act, a vessel may

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

16 Secretary, if—

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

18 one replacement vessel of a capacity that is equiva19 lent or greater, as measured by deadweight tons,

20 gross tons, or container equivalent units, as appro21 priate, is documented under chapter 121 of title 46,

22 United States Code, by the owner of the vessel

23 placed under the foreign registry; and

24 ‘‘(B) the replacement vessel is not more than

25 10 years of age on the date of that documentation;
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1 ‘‘(2)(A) an application for an operating agree2 ment under subtitle B of title VI of the Merchant

3 Marine Act, 1936 has been filed with respect to a

4 vessel which is eligible to be included in the Mari5 time Security Fleet under section 651(b)(1) of that

6 Act; and

7 ‘‘(B) the Secretary has not awarded an operat8 ing agreement with respect to that vessel within 90

9 days after the date of that application;

10 ‘‘(3) a contract covering the vessel under sub11 title A of title VI of the Merchant Marine Act, 1936

12 has expired, and that vessel is more than 15 years

13 of age on the date the contract expires; or

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

15 under subtitle B of title VI of the Merchant Marine

16 Act, 1936 has expired.’’.

17 SEC. 7. CONSTRUCTION DIFFERENTIAL SUBSIDY RESTRIC18 TIONS.

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

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

21 the following new section:

22 ‘‘SEC. 512. LIMITATION ON RESTRICTIONS.

23 ‘‘Notwithstanding any other provision of law or con24 tract, all restrictions and requirements under sections

25 503, 506, and 802 applicable to a liner vessel constructed,
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1 reconstructed, or reconditioned with the aid of construc2 tion-differential subsidy shall terminate upon the expira3 tion of the 25-year period beginning on the date of the

4 original delivery of the vessel from the shipyard.’’.

5 SEC. 8. REGULATIONS.

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

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

8 the amendments made by this Act.

9 (b) INTERIM RULES.—The Secretary of Transpor10 tation may prescribe interim rules necessary to carry out

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

12 purpose, the Secretary of Transportation is excepted from

13 compliance with the notice and comment requirements of

14 section 553 of title 5, United States Code. All rules pre15 scribed under the authority of this subsection that are not

16 earlier superseded by final rules shall expire no later than

17 270 day after the date of enactment of this Act.

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

19 Section 11 of the Merchant Ship Sales Act of 1946

20 (50 App. U.S.C. 1744) is amended as follows:

21 (1) In subsection (b)(2) by striking ‘‘Secretary

22 of the Navy,’’ and inserting ‘‘Secretary of Defense,’’.

23 (2) By striking subsection (c) and redesignating

24 subsection (d) as subsection (c).
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1 SEC. 10. REEMPLOYMENT RIGHTS FOR CERTAIN MER2 CHANT SEAMEN.

3 (a) IN GENERAL.—Title III of the Merchant Marine

4 Act, 1936 (46 App. U.S.C. 1131) is amended by inserting

5 after section 301 the following new section:

6 ‘‘SEC. 302. (a) An individual who is certified by the

7 Secretary of Transportation under subsection (c) shall be

8 entitled to reemployment rights and other benefits sub9 stantially equivalent to the rights and benefits provided

10 for by chapter 43 of title 38, United States Code, for any

11 member of a Reserve component of the Armed Forces of

12 the United States who is ordered to active duty.

13 ‘‘(b) An individual may submit an application for cer14 tification under subsection (c) to the Secretary of Trans15 portation not later than 45 days after the date the individ16 ual completes a period of employment described in sub17 section (c)(1)(A) with respect to which the application is

18 submitted.

19 ‘‘(c) Not later than 20 days after the date the Sec20 retary of Transportation receives from an individual an

21 application for certification under this subsection, the Sec22 retary shall—

23 ‘‘(1) determine whether or not the individual—

24 ‘‘(A) was employed in the activation or op25 eration of a vessel—
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1 ‘‘(i) in the National Defense Reserve

2 Fleet maintained under section 11 of the

3 Merchant Ship Sales Act of 1946, in a pe4 riod in which that vessel was in use or

5 being activated for use under subsection

6 (b) of that section;

7 ‘‘(ii) that is requisitioned or pur8 chased under section 902 of this Act; or

9 ‘‘(iii) that is owned, chartered, or con10 trolled by the United States and used by

11 the United States for a war, armed con12 flict, national emergency, or maritime mo13 bilization need (including for training pur14 poses or testing for readiness and suit15 ability for mission performance); and

16 ‘‘(B) during the period of that employ17 ment, possessed a valid license, certificate of

18 registry, or merchant mariner’s document is19 sued under chapter 71 or chapter 73 (as appli20 cable) of title 46, United States Code; and

21 ‘‘(2) if the Secretary makes affirmative deter22 minations under paragraph (1)(A) and (B), certify

23 that individual under this subsection.

24 ‘‘(d) For purposes of reemployment rights and bene25 fits provided by this section, a certification under sub-
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1 section (c) shall be considered to be the equivalent of a

2 certificate referred to in paragraph (1) of section 4301(a)

3 of title 38, United States Code.’’.

4 (b) APPLICATION.—The amendment made by sub5 section (a) shall apply to employment described in section

6 302(c)(1)(A) of the Merchant Marine Act, 1936, as

7 amended by subsection (a), occurring after the date of en8 actment of this Act.

9 (c) REGULATION.—Not later than 120 days after the

10 date of the enactment of this Act, the Secretary of Trans11 portation shall issue regulations implementing this section.

12 SEC. 11. TITLE XI LOAN GUARANTEES.

13 Title XI of the Merchant Marine Act, 1936 (46 App.

14 U.S.C. 1271 et seq.) is amended—

15 (1) in section 1101(b), by striking ‘‘owned by

16 citizens of the United States’’;

17 (2) in section 1104B(a), in the material preced18 ing paragraph (1), by striking ‘‘owned by citizens of

19 the United States’’; and

20 (3) in section 1110(a), by striking ‘‘owned by

21 citizens of the United States’’.

22 SEC. 12. EXTENSION OF WAR RISK INSURANCE AUTHORITY.

23 Section 1214 of the Merchant Marine Act, 1936 (46

24 App. U.S.C. 1294) is amended by striking ‘‘June 30,

25 1995’’ and inserting ‘‘June 30, 2000’’.
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1 SEC. 13. VESSEL LOAN GUARANTEE PROGRAM.

2 (a) RISK FACTOR DETERMINATIONS.—Section 1103

3 of the Merchant Marine Act, 1936 (46 App. U.S.C. 1273)

4 is amended by adding at the end the following new sub5 section:

6 ‘‘(h)(1) The Secretary shall—

7 ‘‘(A) establish in accordance with this sub8 section a system of risk categories for obligations

9 guaranteed under this title, that categorizes the rel10 ative risk of guarantees made under this title with

11 respect to the risk factors set forth in paragraph

12 (3); and

13 ‘‘(B) determine for each of the risk categories

14 a subsidy rate equivalent to the cost of obligations

15 in the category, expressed as a percentage of the

16 amount guaranteed under this title for obligations in

17 the category.

18 ‘‘(2)(A) Before making a guarantee under this sec19 tion for an obligation, the Secretary shall apply the risk

20 factors set forth in paragraph (3) to place the obligation

21 in a risk category established under paragraph (1)(A).

22 ‘‘(B) The Secretary shall consider the aggregate

23 amount available to the Secretary for making guarantees

24 under this title to be reduced by the amount determined

25 by multiplying—
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1 ‘‘(i) the amount guaranteed under this title for

2 an obligation, by

3 ‘‘(ii) the subsidy rate for the category in which

4 the obligation is placed under subparagraph (A) of

5 this paragraph.

6 ‘‘(C) The estimated cost to the Government of a

7 guarantee made by the Secretary under this title for an

8 obligation is deemed to be the amount determined under

9 subparagraph (B) for the obligation.

10 ‘‘(D) The Secretary may not guarantee obligations

11 under this title after the aggregate amount available to

12 the Secretary under appropriations Acts for the cost of

13 loan guarantees is required by subparagraph (B) to be

14 considered reduced to zero.

15 ‘‘(3) The risk factors referred to in paragraphs (1)

16 and (2) are the following:

17 ‘‘(A) If applicable, the country risk for each eli18 gible export vessel financed or to be financed by an

19 obligation.

20 ‘‘(B) The period for which an obligation is

21 guaranteed or to be guaranteed.

22 ‘‘(C) The amount of an obligation, which is

23 guaranteed or to be guaranteed, in relation to the

24 total cost of the project financed or to be financed

25 by the obligation.
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1 ‘‘(D) The financial condition of an obligor or

2 applicant for a guarantee.

3 ‘‘(E) If applicable, any guarantee related to the

4 project, other than the guarantee under this title for

5 which the risk factor is applied.

6 ‘‘(F) If applicable, the projected employment of

7 each vessel or equipment to be financed with an obli8 gation.

9 ‘‘(G) If applicable, the projected market that

10 will be served by each vessel or equipment to be fi11 nanced with an obligation.

12 ‘‘(H) The collateral provided for a guarantee

13 for an obligation.

14 ‘‘(I) The management and operating experience

15 of an obligor or applicant for a guarantee.

16 ‘‘(J) Whether a guarantee under this title is or

17 will be in effect during the construction period of the

18 project.

19 ‘‘(4) In this subsection, the term ‘cost’ has the mean20 ing given that term in section 502 of the Federal Credit

21 Reform Act of 1990 (2 U.S.C. 661a).’’.

22 (b) APPLICATION.—Subsection (h)(2) of section 1103

23 of the Merchant Marine Act, 1936 (46 App. U.S.C. 1273),

24 as amended by subsection (a) of this section, shall apply

25 to guarantees that the Secretary of Transportation makes
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1 or commits to make with any amounts that are unobli2 gated on or after the date of enactment of this Act.

3 (c) GUARANTEE FEES.—Section 1104A(e) of title XI

4 of the Merchant Marine Act, 1936 (46 App. U.S.C.

5 1274(e)) is amended to read as follows:

6 ‘‘(e)(1) Except as otherwise provided in this sub7 section, the Secretary shall prescribe regulations to assess

8 in accordance with this subsection a fee for the guarantee

9 of an obligation under this title.

10 ‘‘(2)(A) The amount of a fee under this subsection

11 for a guarantee is equal to the sum determined by adding

12 the amounts determined under subparagraph (B) for the

13 years in which the guarantee is in effect.

14 ‘‘(B) The amount referred to in subparagraph (A) for

15 a year is the present value (determined by applying the

16 discount rate determined under subparagraph (F)) of the

17 amount determined by multiplying—

18 ‘‘(i) the estimated average unpaid principal

19 amount of the obligation that will be outstanding

20 during the year (determined in accordance with sub21 paragraph (E)), by

22 ‘‘(ii) the fee rate established under subpara23 graph (C) for the obligation for each year.

24 ‘‘(C) The fee rate referred to in subparagraph (B)(ii)

25 for an obligation shall be—
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1 ‘‘(i) in the case of an obligation for a delivered

2 vessel or equipment, not less than one-half of 1 per3 cent and not more than 1 percent, determined by

4 the Secretary for the obligation under the formula

5 established under subparagraph (D); or

6 ‘‘(ii) in the case of an obligation for a vessel to

7 be constructed, reconstructed, or reconditioned, or of

8 equipment to be delivered, not less than one-quarter

9 of 1 percent and not more than one-half of 1 per10 cent, determined by the Secretary for the obligation

11 under the formula established under subparagraph

12 (D).

13 ‘‘(D) The Secretary shall establish a formula for de14 termining the fee rate for an obligation for purposes of

15 subparagraph (C), that—

16 ‘‘(i) is a sliding scale based on the creditworthi17 ness of the obligor;

18 ‘‘(ii) takes into account the security provided

19 for a guarantee under this title for the obligation;

20 and

21 ‘‘(iii) uses—

22 ‘‘(I) in the case of the most creditworthy

23 obligors, the lowest rate authorized under sub24 paragraph (C)(i) or (ii), as applicable; and
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1 ‘‘(II) in the case of the least creditworthy

2 obligors, the highest rate authorized under sub3 paragraph (C)(i) or (ii), as applicable.

4 ‘‘(E) For purposes of subparagraph (B)(i), the esti5 mated average unpaid principal amount does not include

6 the average amount (except interest) on deposit in a year

7 in the escrow fund under section 1108.

8 ‘‘(F) For purposes of determining present value

9 under subparagraph (B) for an obligation, the Secretary

10 shall apply a discount rate determined by the Secretary

11 of the Treasury taking into consideration current market

12 yields on outstanding obligations of the United States hav13 ing periods to maturity comparable to the period to matu14 rity for the obligation with respect to which the determina15 tion of present value is made.

16 ‘‘(3) A fee under this subsection shall be assessed and

17 collected not later than the date on which amounts are

18 first paid under an obligation with respect to which the

19 fee is assessed.

20 ‘‘(4) A fee paid under this subsection is not refund21 able. However, an obligor shall receive credit for the

22 amount paid for the remaining term of the guaranteed ob23 ligation if the obligation is refinanced and guaranteed

24 under this title after such refinancing.
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1 ‘‘(5) A fee paid under subsection (e) shall be included

2 in the amount of the actual cost of the obligation guaran3 teed under this title and is eligible to be financed under

4 this title.’’.

5 SEC. 14. MARITIME POLICY REPORT.

6 (a) REPORT.—The Secretary of Transportation shall

7 transmit to the Congress a report setting forth the De8 partment of Transportation’s policies for the 5-year period

9 beginning October 1, 1995, with respect to—

10 (1) fostering and maintaining a United States

11 merchant marine capable of meeting economic and

12 national security requirements;

13 (2) improving the vitality and competitiveness

14 of the United States merchant marine and the mari15 time industrial base, including ship repairers, ship16 builders, ship manning, ship operators, and ship

17 suppliers;

18 (3) reversing the precipitous decrease in the

19 number of ships in the United States-flag fleet and

20 the Nation’s shipyard and repair capability;

21 (4) stabilizing and eventually increasing the

22 number of mariners available to crew United States

23 merchant vessels;
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1 (5) achieving adequate manning of merchant

2 vessels for national security needs during a mobiliza3 tion;

4 (6) ensuring that sufficient civil maritime re5 sources will be available to meet defense deployment

6 and essential economic requirements in support of

7 our national security strategy;

8 (7) ensuring that the United States maintains

9 the capability to respond unilaterally to security

10 threats in geographic areas not covered by alliance

11 commitments and otherwise meets sealift require12 ments in the event of crisis or war;

13 (8) ensuring that international agreements and

14 practices do not place United States maritime indus15 tries at an unfair competitive disadvantage in world

16 markets;

17 (9) ensuring that Federal agencies promote,

18 through efficient application of laws and regulations,

19 the readiness of the United States merchant marine

20 and supporting industries; and

21 (10) any other relevant maritime policies.

22 (b) DATE OF TRANSMITTAL.—The report required

23 under subsection (a) shall be transmitted along with the

24 President’s budget submission, under section 1105 of title

25 31, United States Code, for fiscal year 1997.
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1 SEC. 15. RELIEF FROM U.S. DOCUMENTATION REQUIRE2 MENT FOR 3 VESSELS.

3 (a) IN GENERAL.—Notwithstanding any other law or

4 any agreement with the United States Government, a ves5 sel described in subsection (b) may be sold to a person

6 that is not a citizen of the United States and transferred

7 to or placed under a foreign registry.

8 (b) VESSELS DESCRIBED.—The vessels referred to in

9 subsection (a) are the following:

10 (1) RAINBOW HOPE (United States official

11 number 622178).

12 (2) IOWA TRADER (United States official

13 number 642934).

14 (3) KANSAS TRADER (United States official

15 number 634621).

16 SEC. 16. VESSEL REPAIR AND MAINTENANCE PILOT PRO17 GRAM.

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

19 shall conduct a pilot program to evaluate the feasibility

20 of using renewable contracts for the maintenance and re21 pair of outported vessels in the Ready Reserve Force to

22 enhance the readiness of those vessels. Under the pilot

23 program, the Secretary, subject to the availability of ap24 propriations and with 6 months after the date of the en25 actment of this Act, shall award 9 contracts for this pur26 pose.
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1 (b) USE OF VARIOUS CONTRACTING ARRANGE2 MENTS.—In conducting a pilot program under this sec3 tion, the Secretary of Transportation shall use contracting

4 arrangements similar to those used by the Department of

5 Defense for procuring maintenance and repair of its ves6 sels.

7 (c) CONTRACT REQUIREMENTS.—Each contract with

8 a shipyard under this section shall—

9 (1) subject to subsection (d), provide for the

10 procurement from the shipyard of all repair and

11 maintenance (including activation, deactivation, and

12 drydocking) for 1 vessel in the Ready Reserve Force

13 that is outported in the geographical vicinity of the

14 shipyard;

15 (2) be effective for 1 fiscal year; and

16 (3) be renewable, subject to the availability of

17 appropriations, for each subsequent fiscal year

18 through fiscal year 1998.

19 (d) LIMITATION OF WORK UNDER CONTRACTS.—A

20 contract under this section may not provide for the pro21 curement of operation or manning for a vessel that may

22 be procured under another contract for the vessel to which

23 section 11(d)(2) of the Merchant Ship Sales Act of 1946

24 (50 U.S.C. App. 1774(d)(2)) applies.
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1 (e) GEOGRAPHIC DISTRIBUTION.—The Secretary

2 shall seek to distribute contract awards under this section

3 to shipyards located throughout the United States.

4 (f) REPORTS.—The Secretary shall submit to the

5 Congress—

6 (1) an interim report on the effectiveness of

7 each contract under this section in providing for eco8 nomic and efficient repair and maintenance of the

9 vessel included in the contract, no later than 20

10 months after the date of the enactment of this Act;

11 and

12 (2) a final report on that effectiveness no later

13 than 6 months after the termination of all contracts

14 awarded pursuant to this section.

15 SEC. 17. STREAMLINING OF CARGO ALLOCATION PROCE16 DURES.

17 (a) AMENDMENTS.—Section 901b(c)(3) of the Mer18 chant Marine Act, 1936 (46 App. U.S.C. 1241f(c)(3)) is

19 amended—

20 (1) in subparagraph (A)—

21 (A) by striking ‘‘and consistent with those

22 sections,’’ and inserting ‘‘and, subject to sub23 paragraph (B) of this paragraph, consistent

24 with those sections,’’; and
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1 (B) by striking ‘‘50 percent’’ and inserting

2 ‘‘25 percent’’; and

3 (2) by striking subparagraph (B) and inserting

4 the following new subparagraphs:

5 ‘‘(B) In carrying out this paragraph, there shall first

6 be calculated the allocation of 100 percent of the quantity

7 to be procured on an overall lowest landed cost basis with8 out regard to the country of documentation of the vessel

9 and there shall be allocated to the Great Lakes port range

10 any cargoes for which it has the lowest landed cost under

11 that calculation. The requirements for United States-flag

12 transportation under section 901(b) and this section shall

13 not apply to commodities allocated under subparagraph

14 (A) to the Great Lakes port range, and commodities allo15 cated under subparagraph (A) to that port range may not

16 be reallocated or diverted to another port range to meet

17 those requirements to the extent that the total tonnage

18 of commodities to which subparagraph (A) applies that is

19 furnished and transported from the Great Lakes port

20 range is less than 25 percent of the total annual tonnage

21 of such commodities furnished.

22 ‘‘(C) In awarding any contract for the transportation

23 by vessel of commodities from the Great Lakes port range

24 pursuant to an export activity referred to in subsection

25 (b), each agency or instrumentality—
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1 ‘‘(i) shall consider expressions of freight inter2 est for any vessel from a vessel operator who meets

3 reasonable requirements for financial and oper4 ational integrity; and

5 ‘‘(ii) may not deny award of the contract to a

6 person based on the type of vessel on which the

7 transportation would be provided (including on the

8 basis that the transportation would not be provided

9 on a liner vessel (as that term is used in the Ship10 ping Act of 1984, as in effect on November 14,

11 1995)), if the person otherwise satisfies reasonable

12 requirements for financial and operational integ13 rity.’’.

14 (b) CONFORMING AMENDMENTS.—(1) Paragraph (4)

15 of section 901b(c) of that Act is repealed.

16 (2) Paragraph (5) of that section is redesignated as

17 paragraph (4).

Passed the House of Representatives December 6,

1995.

Attest: ROBIN H. CARLE,

Clerk.

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