I

104TH CONGRESS

1ST SESSION H. R. 1350

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

IN THE HOUSE OF REPRESENTATIVES

MARCH 29, 1995

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

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

A BILL

To amend the Merchant Marine Act, 1936 to revitalize the

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

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

3 SECTION 1. SHORT TITLE.

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

5 of 1995.’’

6 SEC. 2. AMENDMENTS TO THE MERCHANT MARINE ACT,

7 1936, AS AMENDED.

8 (a) Title VI of the Merchant Marine Act, 1936, as

9 amended (46 App. U.S.C. 1171 et seq.), is amended by

10 deleting the heading of title VI, ‘‘OPERATING-DIF-
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1 FERENTIAL SUBSIDY’’ and inserting a new heading

2 and subheading as follows:

3 ‘‘TITLE VI—OPERATING-DIFFERENTIAL

4 SUBSIDY AND MARITIME SECURITY PROGRAM

5 ‘‘Subpart A—Operating-Differential Subsidy’’.

6 (b) Section 605(b) (46 App. U.S.C. 1175(b)) is

7 amended to read as follows:

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

9 for the operation of a vessel that is more than twenty10 five years of age, unless the Secretary of Transportation

11 has determined, before the enactment of the Maritime Se12 curity Act of 1995, that it is in the public interest to grant

13 such financial aid for the operation of such vessel. After

14 the date of enactment of the Maritime Security Act of

15 1995, the Secretary of Transportation shall have no au16 thority to grant additional operating-differential subsidy

17 under this subsection.’’.

18 (c) Title VI of the Merchant Marine Act, 1936, as

19 amended (46 App. U.S.C. 1171 et seq.) is amended by

20 adding a new section 616 following section 615, to read

21 as follows:

22 ‘‘SEC. 616. (a)(1) The Secretary of Transportation

23 may authorize a contractor operating a liner vessel and

24 receiving an operating-differential subsidy under subpart

25 A of this title to construct, reconstruct, or acquire a liner
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1 vessel of over five thousand deadweight tons worldwide to

2 replace a vessel that would reach the end of its

3 subsidizable life prior to the expiration of the contractor’s

4 operating-differential subsidy contract. The replacement

5 vessel shall be documented under chapter 121 of subtitle

6 II of title 46, United States Code.

7 ‘‘(2) A replacement liner vessel shall not be eligible

8 for operating-differential subsidy pursuant to subpart A

9 of this title, and shall be limited to payments in the

10 amounts set forth in subpart B of this title until the exist11 ing contract pursuant to subpart A terminates according

12 to its terms.

13 ‘‘(b)(1) The Secretary of Transportation may author14 ize a contractor operating a bulk cargo vessel and receiv15 ing operating-differential subsidy under subpart A of this

16 title to construct, reconstruct, or acquire a bulk cargo ves17 sel of over five thousand deadweight tons worldwide to re18 place a vessel that would reach the end of its subsidizable

19 life prior to the expiration of the contractor’s operating20 differential subsidy contract. The replacement vessel shall

21 be documented under chapter 121 of subtitle II of title

22 46, United States Code.

23 ‘‘(2) A replacement bulk cargo vessel shall continue

24 to receive an operating-differential subsidy under an exist-
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1 ing contract pursuant to subpart A of this title until the

2 existing contract terminates according to its terms.

3 ‘‘(c) Liner vessels and bulk cargo vessels constructed

4 pursuant to subsections (a) and (b) of this section shall

5 be deemed to have been built in a domestic shipyard for

6 the purposes of section 610 of this Act: Provided, That

7 the provisions of section 607 of this Act shall not apply

8 to vessels constructed, reconstructed, or acquired pursuant

9 to subsections (a) and (b) of this section.

10 ‘‘(d) Any existing foreign-built liner vessel that is ac11 quired pursuant to subsection (a) of this section and docu12 mented under chapter 121 of subtitle II of title 46, United

13 States Code, shall be less than five years of age at the

14 time of such documentation.

15 ‘‘(e) Any existing foreign-built bulk cargo vessel that

16 is acquired pursuant to subsection (b) of this section and

17 documented under chapter 121 of subtitle II of title 46,

18 United States Code, shall be less than five years of age

19 at the time of such documentation.

20 ‘‘(f) No authority granted by the Secretary of Trans21 portation to construct, reconstruct, or acquire vessels pur22 suant to subsections (a) and (b) of this section may be

23 sold, assigned, conveyed, leased or otherwise transferred

24 to any other party, without the written consent of the Sec-
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1 retary of Transportation pursuant to section 608 of this

2 title.’’.

3 (d) Title VI of the Merchant Marine Act, 1936, as

4 amended (46 App. U.S.C. 1171 et seq.) is amended by

5 adding a new section 617 following the new section 616,

6 to read as follows:

7 ‘‘SEC. 617. (A) After the date of enactment of the

8 Maritime Security Act of 1995, the Secretary of Transpor9 tation shall not enter into any new contract for an operat10 ing-differential subsidy under subpart A of this title.

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

12 any operating-differential subsidy contract in effect under

13 title VI on the day before the date of enactment of the

14 Maritime Security and Trade Act of 1995—

15 ‘‘(1) shall continue in effect and terminate as

16 set forth in the contract, unless voluntarily termi17 nated at an earlier date by the persons (other than

18 the United States Government) that are parties to

19 the contract; and

20 ‘‘(2) may not be renewed or extended.

21 ‘‘(c) After the date of enactment of the Maritime Se22 curity Act of 1995, an owner or operator of a vessel cov23 ered by an operating-differential subsidy contract under

24 subpart A of this title may operate such vessel in the for-
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1 eign commerce of the United States without restriction,

2 notwithstanding any other provision of this Act.

3 ‘‘(d) With respect to a liner vessel—

4 ‘‘(1) whose operator receives operating-differen5 tial subsidy pursuant to a contract under this title,

6 which is in force on October 1, 1995, and if the Sec7 retary approves the replacement of such vessel with

8 a comparable vessel, or

9 ‘‘(2) covered by an operating agreement under

10 subpart B of this title, and if the Secretary approves

11 the replacement of such vessel with a comparable

12 vessel for inclusion in the fleet established under

13 subpart B of title VII—

14 such vessel may be transferred and registered under the

15 flag of an effective United States-controlled foreign flag,

16 notwithstanding any other provision of law: Provided,

17 That the vessel is available to be requisitioned by the Sec18 retary of Transportation pursuant to section 902 of this

19 Act (46 App. U.S.C. 1242).’’.

20 (e) Title VI of the Merchant Marine Act, 1936, as

21 amended (46 App. U.S.C. 1171 et seq.) is amended by

22 adding a new subpart B to read as follows:
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1 ‘‘Subpart B—Maritime Security Program

2 ‘‘ESTABLISHMENT OF FLEET

3 ‘‘SEC. 650. (a) The Secretary of Transportation shall

4 encourage the establishment of a fleet of active, militarily

5 useful, privately owned vessels to meet national defense

6 and other security requirements and maintain an Amer7 ican presence in international commercial shipping. The

8 fleet shall consist of privately owned, United States-flag

9 liner vessels for which there are in effect operating agree10 ments under this subpart.

11 ‘‘(b) A liner vessel may not be included in the fleet

12 unless:

13 ‘‘(1) It is operated by an ‘ocean common car14 rier’ as defined in section 3 of the Shipping Act of

15 1984 (46 App. U.S.C. 1702).

16 ‘‘(2) It is a vessel that is fifteen years of age

17 or less on the date an operating agreement is en18 tered into under section 651, unless the Secretary of

19 Transportation, in consultation with the Secretary of

20 Transportation, in consultation with the Secretary of

21 Defense, determines that it is in the national inter22 est to waive this requirement.

23 ‘‘(3) It is a vessel that is less than five years

24 of age at the time it is documented under chapter
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1 121 of subtitle II of title 46, United States Code, if

2 it is foreign-built.

3 ‘‘(4) The Secretary of Transportation, after

4 consultation with the Secretary of Defense, deter5 mines that the vessel is necessary to maintain a

6 United States presence in international commercial

7 shipping or determines that the vessel is militarily

8 useful for meeting the sealift needs of the United

9 States with respect to national emergencies.

10 ‘‘(5) The owner or operator of the vessel is a

11 citizen of the United States as set forth in section

12 651.

13 ‘‘OPERATING AGREEMENTS

14 ‘‘SEC. 651. (a) The Secretary of Transportation shall

15 require, as a condition of including any vessel in the fleet,

16 that the owner or operator of the vessel enter into an oper17 ating agreement with the Secretary of Transportation pur18 suant to this section.

19 ‘‘(b) An operating agreement pursuant to this section

20 shall require that, during the period of the agreement—

21 ‘‘(1) each vessel covered by the operating agree22 ment—

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

24 foreign trade, and
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1 ‘‘(B) shall not be operated in the coastwise

2 trade of the United States or in mixed domestic

3 and foreign trade; and

4 ‘‘(2) the owner or operator of a vessel covered

5 by the operating agreement shall have the vessel

6 documented under chapter 121 of subtitle II of title

7 46, United States Code, and shall maintain that

8 documentation.

9 ‘‘(c) An owner or operator of a vessel covered by an

10 operating agreement under this subpart may operate this

11 vessel in the foreign commerce of the United States with12 out restriction.

13 ‘‘(d)(1) The Secretary of Transportation is author14 ized to enter into multiyear operating agreements for the

15 period of fiscal year 1996 through fiscal year 2005, sub16 ject to the following conditions:

17 ‘‘(A) The total amount of all operating agree18 ments does not exceed $1,000,000,000 for fiscal

19 years 1996 through 2005.

20 ‘‘(B) Funds need only be appropriated for the

21 first year of the agreements and for termination

22 costs, pursuant to section 3 of the Maritime Security

23 Act of 1995, at the time the operating agreements

24 are executed.
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1 ‘‘(C) Funds for termination costs shall be held

2 in reserve, pursuant to section 3 of the Maritime Se3 curity Act of 1995.

4 ‘‘(D) Such operating agreements shall provide

5 that at no time will the Government’s total termi6 nation liability exceed amounts currently appro7 priated for the purpose of such agreements plus

8 amounts held in reserve for termination costs.

9 ‘‘(E) An operating agreement entered into pur10 suant to this section shall not be considered a pro11 curement contract for the purposes of Federal pro12 curement laws or regulations.

13 ‘‘(2) An operating agreement pursuant to this section

14 shall provide that the Secretary of Transportation pay to

15 the owner or operator of each liner vessel that is included

16 in the operating agreement, an amount per vessel per year

17 that does not exceed $2,500,000, for fiscal years 1996

18 through 1998, and does not exceed $2,000,000, for fiscal

19 years 1999 through 2005. The amount per year paid to

20 the owner or operator of a liner vessel under an operating

21 agreement pursuant to this section shall be paid at the

22 end of each month in equal installments.

23 ‘‘(e) In order to qualify for the annual payments

24 under this section, the owner or operator shall certify an25 nually, pursuant to regulations issued by the Secretary,
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1 that each vessel covered by an operating agreement was

2 operated in a trade required by section 651(b)(1) for at

3 least three hundred and twenty days in a fiscal year, in4 cluding days during which the liner vessel is drydocked,

5 surveyed, inspected, or repaired.

6 ‘‘(f) Without regard to an operating agreement in ef7 fect with an owner or operator of a liner vessel under this

8 section, the Secretary of Transportation shall not make

9 any payment under this section for a vessel with respect

10 to any period in which the vessel is—

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

12 contract under subpart A of title VI of this Act;

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

14 with an operating agreement under this subpart; or

15 ‘‘(3) more than twenty-five years of age.

16 ‘‘(g) With respect to payments under this section for

17 a vessel covered by an operating agreement, the Secretary

18 of Transportation—

19 ‘‘(1) shall not reduce any payment for the oper20 ation of a vessel to carry military or other preference

21 cargoes under—

22 ‘‘(A) section 2631 of title 10, United

23 States Code; or

24 ‘‘(B) section 1241–1 of title 46, Appendix,

25 United States Code;
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1 ‘‘(2) shall not make any payment for each day

2 that a vessel is engaged in transporting more than

3 five thousand tons of civilian bulk preference cargoes

4 pursuant to section 901(a), 901(b), or 901b of this

5 Act; and

6 ‘‘(3) shall reduce any payment for each day

7 that a vessel is engaged in transporting less than

8 five thousand tons of civilian bulk preference cargoes

9 pursuant to sections 901(a), 901(b), or 901b of this

10 Act, by an amount which bears the same ratio to the

11 amount otherwise payable as revenue for the car12 riage of preference cargo bears to the gross revenue

13 derived from the entire voyage.

14 ‘‘(h) The Secretary of Transportation shall enter into

15 operating agreements in the following order of priority—

16 ‘‘(1) liner vessel or vessels owned or operated by

17 a person that is a citizen of the United States under

18 section 2 of the Shipping Act, 1916; and then

19 ‘‘(2) liner vessel or vessels owned or operated by

20 a person that is eligible to document a vessel under

21 chapter 121 of subtitle II of title 46, United States

22 Code.

23 ‘‘(i) No authority granted by the Secretary of Trans24 portation to an owner or operator of a vessel covered by

25 an operating agreement under this subpart may be sold,
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1 assigned, conveyed, leased or otherwise transferred to any

2 other party, without the written consent of the Secretary

3 of Transportation pursuant to the provisions of section

4 608 of this title.

5 ‘‘(j) Any authority granted by the Secretary of Trans6 portation to an owner or operator of a vessel covered by

7 an operating agreement under this subpart shall be used

8 by the holder of the operating agreement within one year

9 from the date such authority is granted for existing vessels

10 and within two years from the date such authority is

11 granted for newly constructed vessels, or the authority

12 shall revert to the Secretary of Transportation for such

13 disposition as determined appropriate.

14 ‘‘(k) An operating agreement entered into by the Sec15 retary of Transportation under this subpart shall be effec16 tive for a period of not more than ten years, and, under

17 any condition, terminate not later than September 30,

18 2005.

19 ‘‘(l) An operating agreement entered into by the Sec20 retary of Transportation under this subpart shall require

21 the owner or operator of a vessel covered by an operating

22 agreement under this subpart to enroll in an Emergency

23 Preparedness Program, pursuant to the requirements of

24 section 652, under such terms and conditions as the Sec25 retary may prescribe.
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1 ‘‘NATIONAL SECURITY REQUIREMENTS

2 ‘‘SEC. 652. (a) On a request of the President during

3 time of war or national emergency or when decided by the

4 President to be necessary in the national interest, an

5 owner or operator of a vessel covered by an operating

6 agreement under this subpart shall make available com7 mercial transportation resources pursuant to an Emer8 gency Preparedness Program established by the Secretary

9 of Transportation and approved by the Secretary of De10 fense.

11 ‘‘(b) The commercial transportation resources to be

12 made available shall include vessels or capacity in vessels,

13 intermodal systems and equipment, terminal facilities, and

14 intermodal and management services, or any portion of

15 these resources, as the Secretary may determine to be nec16 essary.

17 ‘‘(c) The Secretary of Transportation shall not reduce

18 the amount of equal monthly installment payments under

19 section 651 to an owner or operator who makes commer20 cial transportation resources available pursuant to an

21 Emergency Preparedness Program under this section.

22 ‘‘(d) An owner or operator who makes a vessel avail23 able pursuant to this section shall be permitted to employ

24 a foreign-flag vessel in the foreign commerce of the United

25 States, without receiving additional compensation, as a re-
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1 placement for a vessel covered by an operating agreement,

2 until a vessel used is redelivered.

3 ‘‘DOMESTIC NONCONTIGUOUS TRADE RESTRICTIONS

4 ‘‘SEC. 653. (a) PROHIBITION.—

5 ‘‘(1) IN GENERAL.—Except as provided in this

6 section, an owner or operator may not receive any

7 payment under this subpart—

8 ‘‘(A) if the owner or operator or a related

9 party with respect to the owner or operator, di10 rectly or indirectly owns, charters, or operates

11 a vessel engaged in the transportation of cargo

12 in a noncontiguous trade other than in accord13 ance with a waiver under subsection (b), (c), or

14 (d); or

15 ‘‘(B) if the owner or operator is authorized

16 to operate a vessel in noncontiguous trade

17 under such a waiver, and there is a—

18 ‘‘(i) material change in the domestic

19 ports served by the owner or operator from

20 the ports permitted to be served under the

21 waiver;

22 ‘‘(ii) material increase in the annual

23 number or the frequency of sailings by the

24 owner or operator from the number or fre25 quency permitted under the waiver; or
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1 ‘‘(iii) material increase in the annual

2 volume of cargo carried or annual capacity

3 utilized by the owner or operator from the

4 annual volume of cargo or annual capacity

5 permitted under the waiver.

6 ‘‘(2) LIMITATIONS ON PROHIBITION.—Para7 graph (1) applies to an owner or operator only in

8 the years specified for payments under the operating

9 agreement entered into by the owner or operator.

10 ‘‘(b) GENERAL WAIVER AUTHORITY.—

11 ‘‘(1) IN GENERAL.—Except as provided in sub12 section (c), the Secretary may waive, in writing, the

13 application of subsection (a) to an owner or operator

14 pursuant to an application submitted in accordance

15 with this subsection, unless the Secretary finds

16 that—

17 ‘‘(A) the waiver would result in unfair

18 competition to any person that operates vessels

19 as a carrier of cargo in a service exclusively in

20 the noncontiguous trade for which the waiver is

21 applied;

22 ‘‘(B) subject to paragraph (6), existing

23 service in that noncontiguous trade is adequate;

24 or
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1 ‘‘(C) the waiver will result in prejudice to

2 the objects or policy of this title or Act.

3 ‘‘(2) TERMS OF WAIVER.—Any waiver granted

4 by the Secretary under this subsection shall state—

5 ‘‘(A) the domestic ports permitted to be

6 served,

7 ‘‘(B) the annual number or frequency of

8 sailings that may be provided; and

9 ‘‘(C)(i) the annual volume of cargo per10 mitted,

11 ‘‘(ii) for containerized or trailer service, the

12 annual forty-foot equivalent unit shipboard con13 tainer and trailer or vehicle or general cargo ca14 pacity permitted, or

15 ‘‘(iii) for tug and barge service, the annual

16 barge house cubic foot capacity and the annual

17 barge deck general cargo capacity, or forty-foot

18 equivalent unit container, trailer, or vehicle ca19 pacity, permitted.

20 ‘‘(3) APPLICATIONS FOR WAIVERS.—An appli21 cation for a waiver under this subsection may be

22 submitted by an owner or operator and shall de23 scribe, as applicable, the nature and scope of—

24 ‘‘(A) the service proposed to be conducted

25 in a noncontiguous trade under the waiver; or
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1 ‘‘(B) any proposed material change or in2 crease in a service in a noncontiguous trade

3 permitted under a previous waiver.

4 ‘‘(4) ACTION ON APPLICATION AND HEARING.—

5 ‘‘(A) NOTICE AND PROCEEDING.—Within

6 thirty days after receipt of an application for a

7 waiver under this subsection, the Secretary

8 shall—

9 ‘‘(i) publish a notice of the applica10 tion;

11 ‘‘(ii) begin a proceeding on the appli12 cation section 554 of title 5, United States

13 Code, to receive—

14 ‘‘(I) evidence of the nature,

15 quantity, and quality of the existing

16 service in the noncontiguous trade for

17 which the waiver is applied;

18 ‘‘(II) a description of the pro19 posed service or proposed material

20 change or increase in a previously per21 mitted service;

22 ‘‘(III) the projected effect of the

23 proposed service or proposed material

24 change or increase in existing service;

25 and
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1 ‘‘(IV) recommendations on condi2 tions that should be contained in any

3 waiver for the proposed service or ma4 terial change or increase.

5 ‘‘(B) INTERVENTION.—An applicant for a

6 waiver under this subsection, and any person

7 that operates cargo vessels in the noncontiguous

8 trade for which a waiver is applied and that has

9 any interest in the application, may intervene in

10 the proceedings on the application.

11 ‘‘(C) HEARING.—Before deciding whether

12 to grant a waiver under this subsection, the

13 Secretary shall hold a public hearing in an ex14 peditious manner, reasonable notice of which

15 shall be published.

16 ‘‘(5) DECISION.—The Secretary shall complete

17 all proceedings and hearings on an application under

18 this subsection and issue a decision on the record

19 within ninety days after receipt of the final briefs

20 submitted for the record.

21 ‘‘(6) LIMITATION ON CONSIDERATION OF CER22 TAIN EXISTING SERVICE.—

23 ‘‘(A) LIMITATION.—In determining wheth24 er to grant a waiver under this subsection for

25 noncontiguous trade with Hawaii, the Secretary
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1 shall not consider the criterion set forth in

2 paragraph (1)(B) if a qualified operator—

3 ‘‘(i) is a party to an operating agree4 ment under this subpart, and

5 ‘‘(ii) operates four or more vessels in

6 foreign commerce in competition with an7 other operator who is a party to an operat8 ing agreement under this subpart.

9 ‘‘(B) QUALFIEID OPERATOR.—In this

10 paragraph, the term ‘qualified operator’ means

11 a person that on July 1, 1992, offered service

12 as an operator of containerized vessels, trailer

13 vessels, or combination container and trailer

14 vessels in domestic trade with Hawaii and the

15 Johnston Islands (including a related party

16 with respect to the person).

17 ‘‘(c) WAIVERS FOR EXISTING NONCONTIGUOUS

18 TRADE OPERATORS.—

19 ‘‘(1) IN GENERAL.—The Secretary shall waive

20 the application of subsection (a) to an owner or op21 erator, who is a party to an operating agreement

22 under this subpart, pursuant to an application sub23 mitted in accordance with this subsection if the Sec24 retary finds that the owner or operator, or a related
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1 party or predecessor in interest with respect to the

2 owner or operator—

3 ‘‘(A) engaged in bona fide operation of a

4 vessel as a carrier of cargo by water—

5 ‘‘(i) in a noncontiguous trade on July

6 1, 1992; or

7 ‘‘(ii) in furnishing seasonal service in

8 a season ordinarily covered by its oper9 ation, during the 12 calendar months pre10 ceding July 1, 1992; and

11 ‘‘(B) has operated in that service since

12 that time, except for interruptions of service re13 sulting from military contingency or over which

14 the owner or operator (or related party or pred15 ecessor in interest) had no control.

16 ‘‘(2) TERMS OF WAIVER.—

17 ‘‘(A) IN GENERAL.—Except as otherwise

18 provided in this paragraph, the level of service

19 permitted under a waiver under this subsection

20 shall be the level of service provided by the ap21 plicant (or related party or predecessor in inter22 est) in the relevant noncontiguous trade during,

23 for year-round service, the six calendar months

24 preceding July 1, 1992, or for seasonal service,
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1 the twelve calendar months preceding July 1,

2 1992, determined by—

3 ‘‘(i) the domestic ports called;

4 ‘‘(ii) the number of sailings actually

5 made, except as to interruptions in the

6 service in the noncontiguous trade result7 ing from military contingency or over

8 which the applicant (or related party or

9 predecessor in interest) had no control;

10 and

11 ‘‘(iii) the volume of cargo carried or,

12 for containerized or trailer service, the

13 forty-foot equivalent unit shipboard con14 tainer, trailer, or vehicle or general cargo

15 capacity employed, or, for tug and barge

16 service, the barge house cubic foot capacity

17 and barge deck general cargo capacity or

18 forty-foot equivalent unit container, trailer,

19 or vehicle capacity, employed.

20 ‘‘(B) CERTAIN CONTAINERIZED VES21 SELS.—If an applicant under this subsection

22 was offering service as an operator of container23 ized vessels in noncontiguous trades with Ha24 waii, Puerto Rico, and Alaska on July 1, 1992,
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1 a waiver under this subsection for the applicant

2 shall permit a level of service consisting of—

3 ‘‘(i) one hundred and four sailings

4 each year from the West Coast of the

5 United States to Hawaii with an annual

6 capacity allocated to the service of 75 per

7 centum of the total capacity of the vessels

8 employed in the service on July 1, 1992;

9 ‘‘(ii) one hundred and fifty-six sailings

10 each year in each direction between the

11 East Coast or Gulf Coast of the United

12 States and Puerto Rico with an annual ca13 pacity allocated to the service of 75 per

14 centum of the total capacity of its vessels

15 employed in the service on the date of the

16 enactment of the Maritime Security Act of

17 1995; and

18 ‘‘(iii) one hundred and three sailings

19 each year in each direction between Wash20 ington and Alaska with an annual capacity

21 allocated to the service in each direction of

22 100 per centum of the total capacity of its

23 vessels employed in the service on July 1,

24 1992.
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1 ‘‘(C) CERTAIN TUGS AND BARGES.—If an

2 applicant under this subsection was offering

3 service as an operator of tugs and barges in

4 noncontiguous trades with Hawaii, Puerto Rico,

5 and Alaska on July 1, 1992, a waiver under

6 this subsection for the applicant shall permit a

7 level of service consisting of—

8 ‘‘(i) seventeen sailings each year in

9 each direction between ports in Washing10 ton, Oregon, and Northern California and

11 ports in Hawaii with an annual barge

12 house cubic foot capacity and annual barge

13 deck forty-foot equivalent unit container

14 capacity in each direction of 100 per cen15 tum of the total of the capacity of its ves16 sels employed in the service during the six

17 calendar months preceding July 1, 1992,

18 annualized;

19 ‘‘(ii) two hundred and fifty-three

20 sailings each year in each direction be21 tween the East Coast or Gulf Coast of the

22 United States and Puerto Rico with an an23 nual forty-foot equivalent unit container or

24 trailer capacity equal to 100 per centum of

25 the capacity of its barges employed in the
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1 service on the date of the enactment of the

2 Maritime Security Act of 1995;

3 ‘‘(iii) thirty-seven regularly scheduled

4 tandem tow rail barge sailings and ten ad5 ditional single tow rail barge sailings each

6 year in each direction between Washington

7 and the Alaskan port range between and

8 including Anchorage and Whittier with an

9 annual capacity allocated to the service in

10 each direction of 100 per centum of the

11 total rail car capacity of its vessels em12 ployed in the service on July 1, 1992;

13 ‘‘(iv) eight regularly scheduled single

14 tow sailings each year in each direction be15 tween Washington and points in Alaska

16 (not including the port range between and

17 including Anchorage and Whittier, except

18 occasional deviations to discharge inciden19 tal quantities of cargo) with an annual ca20 pacity allocated to the service in each di21 rection of 100 per centum of the total ca22 pacity of its vessels employed in the service

23 on July 1, 1992; and

24 ‘‘(v) unscheduled, contract carrier tug

25 and barge service between points in Alaska
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1 south of the Arctic Circle not served by the

2 common carrier service permitted under

3 clause (iii) and points in the contiguous

4 forty-eight States, with an annual capacity

5 allocated to that service not exceeding 100

6 per centum of the total capacity of the

7 equipment that was dedicated to service

8 south of the Arctic Circle on July 1, 1992,

9 and actually utilized in that service in the

10 two-year period preceding that date.

11 ‘‘(D) ANNUALIZATION.—Capacity other12 wise required by this paragraph to be permitted

13 under a waiver under this subsection shall be

14 annualized if not a seasonal service.

15 ‘‘(E) ADJUSTMENTS.—

16 ‘‘(i) Each written waiver granted by

17 the Secretary under this subsection shall

18 contain a statement that the annual capac19 ity permitted under this waiver in any di20 rection shall increase for a calendar year

21 by the percentage of increase during the

22 preceding calendar year in the real gross

23 product of the State or territory to which

24 goods are transported in the noncontiguous

25 trade covered by the waiver, or its equiva-
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1 lent economic measure as determined by

2 the Secretary if the real gross produce is

3 not available, and that the increase shall

4 not be considered to be a material change

5 or increase for purposes of subsection

6 (a)(1)(B).

7 ‘‘(ii) The increase in permitted capac8 ity under clause (i) in the noncontiguous

9 trade with Alaska shall be allowed only to

10 the extent the operator actually uses that

11 increased capacity to carry cargo in the

12 permitted service in the calendar year im13 mediately following the preceding increase

14 in gross product. However, if an operator

15 operating exclusively containerized vessels

16 in trade on July 1, 1992, carries an aver17 age load factor of at least 90 per centum

18 of permitted capacity (including the capac19 ity, if any, both authorized and used under

20 the previous sentence) during nine months

21 of any one calendar year, then in the next

22 following calendar year and thereafter, the

23 requirement that additional capacity must

24 be used in the immediately following year

25 does not apply.
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1 ‘‘(F) SERVICE LEVELS NOT INCREASED BY

2 TERMINATION OF AGREEMENT.—The termi3 nation of an operating agreement under subpart

4 B of this title shall not be considered to in5 crease a level of service specified in subpara6 graph (A), (B), or (C) if the contractor under

7 the agreement enters into another operating

8 agreement after that termination.

9 ‘‘(3) APPLICATIONS FOR WAIVERS.—For a

10 waiver under this subsection a contractor shall sub11 mit to the Secretary an application certifying the

12 facts required to be found under paragraph (1) (A)

13 or (B), as applicable.

14 ‘‘(4) ACTION ON APPLICATION.—

15 ‘‘(A) NOTICE.—The Secretary shall pub16 lish a notice of receipt of an application for a

17 waiver under this subsection within thirty days

18 after receiving the application.

19 ‘‘(B) HEARING PROHIBITED.—The Sec20 retary may not conduct a hearing on an appli21 cation for a waiver under this subsection.

22 ‘‘(C) SUBMISSION OF COMMENTS.—The

23 Secretary shall give every person operating a

24 cargo vessel in a noncontiguous domestic trade

25 for which a waiver is applied for under this sub-
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1 section and who has any interest in the applica2 tion a reasonable opportunity to submit com3 ments on the application and on the description

4 of the service that would be permitted by any

5 waiver that is granted by the Secretary under

6 the application.

7 ‘‘(5) DECISION ON APPLICATION.—Subject to

8 the time required for publication of notice and for

9 receipt and evaluation of comments by the Sec10 retary, an application for a waiver under this sub11 section submitted at the same time the applicant ap12 plies for inclusion of a vessel in the fleet established

13 under this subpart shall be granted in accordance

14 with the level of service determined by the Secretary

15 under this subsection by not later than the date on

16 which the Secretary offers to the applicant an oper17 ating agreement with respect to that vessel.

18 ‘‘(6) CHANGE OF INCREASE IN SERVICE.—Any

19 material change or increase in a service that is sub20 ject to a waiver under this subsection is not author21 ized except to the extent the change or increase is

22 permitted by a waiver under subsection (b).

23 ‘‘(d) EMERGENCY WAIVER.—Notwithstanding any

24 other provision of this section, the Secretary may, without

25 hearing, temporarily waive the application of subsection
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1 (a)(1)(B) if the Secretary finds that a material change or

2 increase is essential in order to respond adequately to—

3 ‘‘(1) an environmental or natural disaster or

4 emergency, or

5 ‘‘(2) another emergency declared by the Presi6 dent.

7 Any waiver shall be for a period of not to exceed forty8 five days, except that a waiver may be renewed for thirty9 day periods if the Secretary finds that adequate capacity

10 continues to be otherwise unavailable.

11 ‘‘(e) ANNUAL REPORT ON WAIVERS.—Each waiver

12 under this section shall require the person who is granted

13 the waiver to submit to the Secretary each year an annual

14 report setting forth for the service authorized by the waiv15 er—

16 ‘‘(1) the ports served during the year;

17 ‘‘(2) the number or frequency of sailings per18 formed during the year; and

19 ‘‘(3) the volume of cargo carried or, for contain20 erized or trailer service, the annual forty-foot equiva21 lent unit shipboard container, trailer, or vehicle ca22 pacity utilized during the year, or for tug and barge

23 service, the annual barge house and barge deck ca24 pacity utilized during the year.

25 ‘‘(f) DEFINITIONS.—In this section—
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1 ‘‘(1) the term ‘noncontiguous trade’ means

2 trade between—

3 ‘‘(A) a point in the contiguous forty-eight

4 States; and

5 ‘‘(B) a point in Alaska, Hawaii, or Puerto

6 Rico, other than a point in Alaska north of the

7 Arctic Circle; and

8 ‘‘(2) the term ‘related party’ means—

9 ‘‘(A) a holding company, subsidiary, affili10 ate, or associate of a owner or operator who is

11 a party to an operating agreement under this

12 subpart; and

13 ‘‘(B) an officer, director, agency, or other

14 executive of a contractor or of a person referred

15 to in subparagraph (A).

16 ‘‘DEFINITIONS

17 ‘‘SEC. 654. For the purposes of subpart B of this

18 title:

19 ‘‘(1) The term ‘citizen of the United States’

20 means a person that is a citizen of the United States

21 under section 651 of this subpart.

22 ‘‘(2) The term ‘operating agreement’ means an

23 operating agreement that takes effect under section

24 651 of this subpart and covers one or more ves25 sels.’’.
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1 (f) EFFECTIVE DATE.—The amendments made by

2 subsections (a) through (e) of this section shall be effective

3 beginning on the date which is one hundred twenty days

4 after the date of enactment of the Maritime Security Act

5 of 1995.

6 SEC. 3. AUTHORIZATION OF APPROPRIATIONS.

7 (a) Funds are authorized to be appropriated for oper8 ating agreements that are entered into under the Maritime

9 Security Program in subpart B of title VI of the Merchant

10 Marine Act, 1936, as amended, as follows:

11 ‘‘(1) not to exceed $175,000,000, to remain

12 available until expended, for fiscal year 1996, of

13 which $75,000,000 shall be held in reserve for con14 tract termination costs, and

15 ‘‘(2) not to exceed $100,000,000, to remain

16 available until expended, for each of fiscal years

17 1997 through 2005.’’.

18 (b) For any fiscal year after fiscal year 1996, con19 tract termination costs are deemed termination costs that

20 satisfy the total obligation of the Federal Government to

21 an owner or operator of a vessel covered by an operating

22 agreement under the Maritime Security Program and the

23 operating agreement is thereby terminated, if funds are

24 not authorized and appropriated for payments pursuant

25 to operating agreements that are entered into under the
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1 Maritime Security Program, and the $75,000,000 held in

2 reserve for contract termination costs is paid on a pro rata

3 basis for vessels covered by operating agreements in the

4 year of the default. Each vessel covered by an operating

5 agreement is thereby released from any further obligation

6 under the operating agreement and the vessel owner or

7 operator may transfer and register such vessel imme8 diately under an effective United States-controlled foreign

9 flag, notwithstanding any other provision of law: Provided,

10 that, if section 902 of the Merchant Marine Act, 1936,

11 as amended (46 App. U.S.C. 1242) is applicable to such

12 vessel after registry under the flag of an effective United

13 States-controlled foreign flag, the vessel is available to be

14 requisitioned by the Secretary of Transportation pursuant

15 to section 902 of the Merchant Marine Act, 1936, as

16 amended.

17 SEC. 4. USE OF FOREIGN-FLAG VESSELS.

18 Section 804 of title VIII of the Merchant Marine Act,

19 1936, as amended (46 App. U.S.C. 1222), is amended by

20 adding a new subsection (f) as follows:

21 ‘‘(f) The provisions of subsection (a) of this section

22 shall not preclude an owner or operator receiving operat23 ing assistance under subpart A or subpart B of title VI,

24 or any holding company, subsidiary, affiliate or associate
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1 of such owner or operator, or any officer, director, agency,

2 or executive thereof from—

3 ‘‘(1) owning, chartering, or operating any for4 eign-flag vessel that is operated as a feeder vessel

5 for a United States-flag service under an operating

6 agreement pursuant to subpart B of title VI;

7 ‘‘(2) owning, chartering, or operating any for8 eign-flag vessel in line haul service between the Unit9 ed States and foreign ports; Provided, That the for10 eign-flag vessel was operated by that owner or oper11 ator on the date of enactment of this Act; or that

12 the owner or operator, with respect to each addi13 tional foreign-flag vessel, has first applied to have

14 that vessel added to the existing operating agree15 ment, and the Secretary has denied the application;

16 And provided further, That any foreign-flag vessel in

17 line haul service between the United States and for18 eign ports is—

19 (A) registered under the flag of an effec20 tive United States-controlled foreign flag, and

21 (B) available to be requisitioned by the

22 Secretary of Transportation pursuant to section

23 902 of this Act;

24 ‘‘(3) owning, chartering, or operating foreign25 flag liner vessels that are operated exclusively in for-
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1 eign-to-foreign service and not in the foreign com2 merce of the United States;

3 ‘‘(4) owning, chartering, or operating foreign4 flag bulk cargo vessels that are operated in both for5 eign-to-foreign service and the foreign commerce of

6 the United States;

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

8 that are operated solely as replacement vessels for

9 United States-flag vessels that are made available to

10 the Secretary of Defense pursuant to section 652 of

11 subpart B of title VI; or

12 ‘‘(6) entering into space charter agreements

13 with foreign-flag carriers or acting as agent or

14 broker for a foreign-flag vessel or vessels.’’.

15 SEC. 5. DEFINITION OF PRIVATELY OWNED UNITED

16 STATES-FLAG COMMERCIAL VESSELS.

17 The third sentence of section 901(b)(1) of title IX

18 of the Merchant Marine Act, 1936, as amended (46 App.

19 U.S.C. 1241(b)(1)) is deleted in its entirety and the fol20 lowing is inserted in lieu thereof: ‘‘For purposes of this

21 section, the term ‘privately owned United States-flag com22 mercial vessels’ shall be deemed to include—

23 (A) any privately owned United States flag

24 commercial vessel constructed in the United

25 States,
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1 (B) any privately owned liner vessel con2 structed, reconstructed, or acquired outside the

3 United States that is documented pursuant to

4 chapter 121 of title 46, United States Code and

5 is less than five years of age on the date of

6 such documentation, and

7 (C) any bulk cargo vessel constructed in or

8 delivered by a shipyard outside the United

9 States after January 1, 1993.

10 The term ‘privately owned United States-flag com11 mercial vessels’ shall also be deemed to include any

12 liner or bulk cargo vessel that so qualified pursuant

13 to section 615 of title VI or Section 901(b)(1) of

14 title IX of this Act, prior to enactment of the Mari15 time Security Act of 1995. The term ‘privately

16 owned United States-flag commercial vessels’ shall

17 not be deemed to include any liquid bulk cargo ves18 sel that does not meet the requirements of section

19 3703a of title 46, United States Code.’’.

20 SEC. 6. USE OF FOREIGN-FLAG FEEDER VESSELS IN CAR21 RIAGE OF PREFERENCE CARGOES.

22 The provisions of law set forth in 46 App. U.S.C.

23 1241(b)(1), 1241–1, and 1241f, requiring use of United

24 States-flag vessels shall, with respect to liner vessels, be

25 deemed fulfilled, as to the total of any shipment other than
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1 that of the Department of Defense covered by 10 U.S.C.

2 2631, if the actual ocean transportation of each shipment

3 for which the United States-flag carrier has issued its own

4 through bill-of-lading between the original port of lading

5 and the port of final discharge, consists of transportation

6 of the cargo by a combination of United States- and for7 eign-flag vessels; Provided, That, measured by distance,

8 the United States-flag line haul portion of each voyage is

9 greater than the foreign-flag feeder portion of each voyage

10 pursuant to regulations issued by the Secretary of Trans11 portation.

12 SEC. 7. LIMITATION ON RESTRICTIONS.

13 Notwithstanding any other provision of law or con14 tract, all restrictions and requirements set forth in 46

15 App. U.S.C. 1153, 1156, and 1212, applicable to a vessel

16 constructed, reconstructed or reconditioned with the aid

17 of construction-differential subsidy shall terminate—

18 (1) for a liner or dry bulk cargo vessel, upon

19 the expiration of the twenty-five-year period begin20 ning on the date of original delivery of the vessel

21 from the shipyard, and

22 (2) for a liquid bulk cargo vessel, upon the expi23 ration of the twenty-year period beginning on the
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1 date of original delivery of the vessel from the ship2 yard.

Æ

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