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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1350 Reported in House (RH)]

                                                 Union Calendar No. 121

104th CONGRESS

  1st Session

                               H. R. 1350

                          [Report No. 104-229]

_______________________________________________________________________

                                 A BILL

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

_______________________________________________________________________

                             August 3, 1995

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed

                                                 Union Calendar No. 121
104th CONGRESS
  1st Session
                                H. R. 1350

                          [Report No. 104-229]

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

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             March 29, 1995

Mr. Spence (for himself, Mr. Dellums, and Mr. Bateman) (all by request) 
 introduced the following bill; which was referred to the Committee on 
                           National Security

                             August 3, 1995

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]
 [For text of introduced bill, see copy of bill as introduced on March 
                               29, 1995]

_______________________________________________________________________

                                 A BILL

 
To amend the Merchant Marine Act, 1936 to revitalize the United States-
             flag merchant marine, and for other purposes.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Maritime Security Act of 1995''.

SEC. 2. MARITIME SECURITY PROGRAM.

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

            ``Title VI--Vessel Operating Assistance Programs

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

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

             ``Subtitle B--Maritime Security Fleet Program

                        ``establishment of fleet

    ``Sec. 651. (a) In General.--The Secretary of Transportation shall 
establish a fleet of active, militarily useful, privately-owned vessels 
to meet national defense and other security requirements and maintain a 
United States presence in international commercial shipping. The Fleet 
shall consist of privately owned, United States-flag vessels for which 
there are in effect operating agreements under this subtitle, and shall 
be known as the Maritime Security Fleet.
    ``(b) Vessel Eligibility.--A vessel is eligible to be included in 
the Fleet if the vessel is self-propelled and--
            ``(1)(A) is operated by a person as an ocean common carrier 
        (as that term is used in the Shipping Act of 1984 (46 App. 
        U.S.C. 1701 et seq.));
            ``(B) whether in commercial service, on charter to the 
        Department of Defense, or in other employment, is either--
                    ``(i) a roll-on/roll-off vessel with a carrying 
                capacity of at least 80,000 square feet or 500 twenty-
                foot equivalent units; or
                    ``(ii) a lighter aboard ship vessel with a barge 
                capacity of at least 75 barges; or
            ``(C) any other type of vessel that is determined by the 
        Secretary to be suitable for use by the United States for 
        national defense or military purposes in time of war or 
        national emergency;
            ``(2)(A)(i) is a United States-documented vessel; and
            ``(ii) on the date an operating agreement covering the 
        vessel is entered into under this subtitle, is--
                    ``(I) a LASH vessel that is 25 years of age or 
                less; or
                    ``(II) any other type of vessel that is 15 years of 
                age or less;
        except that the Secretary of Transportation may waive the 
        application of clause (ii) if the Secretary, in consultation 
        with the Secretary of Defense, determines that the waiver is in 
        the national interest; or
            ``(B) it is not a United States-documented vessel, but the 
        owner of the vessel has demonstrated an intent to have the 
        vessel documented under chapter 121 of title 46, United States 
        Code, if it is included in the Fleet, and the vessel will be 
        less than 10 years of age on the date of that documentation;
            ``(3) the Secretary of Transportation determines that the 
        vessel is necessary to maintain a United States presence in 
        international commercial shipping or, after consultation with 
        the Secretary of Defense, determines that the vessel is 
        militarily useful for meeting the sealift needs of the United 
        States with respect to national emergencies; and
            ``(4) at the time an operating agreement for the vessel is 
        entered into under this subtitle, the vessel will be eligible 
        for documentation under chapter 121 of title 46, United States 
        Code.

                         ``operating agreements

    ``Sec. 652. (a) In General.--The Secretary of Transportation shall 
require, as a condition of including any vessel in the Fleet, that the 
owner or operator of the vessel enter into an operating agreement with 
the Secretary under this section. Notwithstanding subsection (g), the 
Secretary may enter into an operating agreement for, among other 
vessels that are eligible to be included in the Fleet, any vessel which 
continues to operate under an operating-differential subsidy contract 
under subtitle A or which is under charter to the Department of 
Defense.
    ``(b) Requirements for Operation.--An operating agreement under 
this section shall require that, during the period a vessel is 
operating under the agreement--
            ``(1) the vessel--
                    ``(A) shall be operated exclusively in the foreign 
                trade or in mixed foreign and domestic trade allowed 
                under a registry endorsement issued under section 12105 
                of title 46, United States Code, and
                    ``(B) shall not otherwise be operated in the 
                coastwise trade; and
            ``(2) the vessel shall be documented under chapter 121 of 
        title 46, United States Code.
    ``(c) Certain Requirements Not To Apply.--A contractor of a vessel 
included in an operating agreement under this subtitle may operate the 
vessel in the foreign commerce of the United States without 
restriction, and shall not be subject to any requirement under section 
801, 808, 809, or 810.
    ``(d) Effectiveness and Annual Payment Requirements of Operating 
Agreements.--
            ``(1) Effectiveness.--The Secretary of Transportation may 
        enter into an operating agreement under this subtitle for 
        fiscal year 1996. The agreement shall be effective only for 1 
        fiscal year, but shall be renewable, subject to the 
        availability of appropriations, for each subsequent fiscal year 
        through the end of fiscal year 2005.
            ``(2) Annual payment.--An operating agreement under this 
        subtitle shall require, subject to the availability of 
        appropriations and the other provisions of this section, that 
        the Secretary of Transportation pay each fiscal year to the 
        contractor, for each vessel that is covered by the operating 
        agreement, an amount equal to $2,300,000 for fiscal year 1996 
        and $2,100,000 for each fiscal year thereafter in which the 
        agreement is in effect. The amount shall be paid in equal 
        monthly installments at the end of each month. The amount shall 
        not be reduced except as provided by this section.
    ``(e) Certification Required for Payment.--As a condition of 
receiving payment under this section for a fiscal year for a vessel, 
the owner or operator of the vessel shall certify, in accordance with 
regulations issued by the Secretary of Transportation, that the vessel 
has been and will be operated in accordance with subsection (b)(1) for
 at least 320 days in the fiscal year. Days during which the vessel is 
drydocked, surveyed, inspected, or repaired shall be considered days of 
operation for purposes of this subsection.
    ``(f) Operating Agreement is Obligation of United States 
Government.--An operating agreement under this subtitle constitutes a 
contractual obligation of the United States Government to pay the 
amounts provided for in the agreement to the extent of actual 
appropriations.
    ``(g) Limitations.--The Secretary of Transportation shall not make 
any payment under this subtitle for a vessel with respect to any days 
for which the vessel is--
            ``(1) subject to an operating-differential subsidy contract 
        under subtitle A or under a charter to the United States 
        Government, other than a charter pursuant to section 653;
            ``(2) not operated or maintained in accordance with an 
        operating agreement under this subtitle; or
            ``(3) more than 25 years of age, except that the Secretary 
        may make such payments for a LASH vessel for any day for which 
        the vessel is more than 25 years of age if that vessel--
                    ``(A) is modernized after January 1, 1994,
                    ``(B) is modernized before it is 25 years of age, 
                and
                    ``(C) is not more than 30 years of age.
    ``(h) Payments.--With respect to payments under this subtitle for a 
vessel covered by an operating agreement, the Secretary of 
Transportation--
            ``(1) except as provided in paragraph (2), shall not reduce 
        any payment for the operation of a vessel to carry military or 
        other preference cargoes under section 2631 of title 10, United 
        States Code, the Act of March 26, 1934 (46 App. U.S.C. 1241-1), 
        section 901(a), 901(b), or 901b of this Act, or any other cargo 
        preference law of the United States;
            ``(2) shall not make any payment for any day that a vessel 
        is engaged in transporting more than 7,500 tons of civilian 
        bulk preference cargoes pursuant to section 901(a), 901(b), or 
        901b that is bulk cargo (as that term is defined in section 3 
        of the Shipping Act of 1984 (46 App. U.S.C. 1702)); and
            ``(3) shall make a pro rata reduction in payment for each 
        day less than 320 in a fiscal year that a vessel covered by an 
        operating agreement is not operated in accordance with 
        subsection (b)(1), with days during which the vessel is 
        drydocked or undergoing survey, inspection, or repair 
        considered to be days on which the vessel is operated.
    ``(i) Priority for Awarding Agreements.--Subject to the 
availability of appropriations, the Secretary shall enter into 
operating agreements according to the following priority:
            ``(1) Vessels owned by citizens.--
                    ``(A) Priority.--First, for any vessel that is--
                            ``(i) owned and operated by persons who are 
                        citizens of the United States under section 2 
                        of the Shipping Act, 1916; or
                            ``(ii) less than 10 years of age and owned 
                        and operated by a corporation that is--
                                    ``(I) eligible to document a vessel 
                                under chapter 121 of title 46, United 
                                States Code; and
                                    ``(II) affiliated with a 
                                corporation operating or managing for 
                                the Secretary of Defense other vessels 
                                documented under that chapter, or 
                                chartering other vessels to the 
                                Secretary of Defense.
                    ``(B) Limitation on number of operating 
                agreements.--The total number of operating agreements 
                that may be entered into by a person under the priority 
                in subparagraph (A)--
                            ``(i) for vessels described in subparagraph 
                        (A)(i), may not exceed the sum of--
                                    ``(I) the number of United States-
                                documented vessels the person operated 
                                in the foreign commerce of the United 
                                States (except mixed coastwise and 
                                foreign commerce) on May 17, 1995; and
                                    ``(II) the number of United States-
                                documented vessels the person chartered 
                                to the Secretary of Defense on that 
                                date; and
                            ``(ii) for vessels described in 
                        subparagraph (A)(ii), may not exceed 5 vessels.
                    ``(C) Treatment of related parties.--For purposes 
                of subparagraph (B), a related party with respect to a 
                person shall be treated as the person.
            ``(2) Other vessels owned by citizens and government 
        contractors.--To the extent that amounts are available after 
        applying paragraph (1), any vessel that is owned and operated 
        by a person who is--
                    ``(A) a citizen of the United States under section 
                2 of the Shipping Act, 1916, that has not been awarded 
                an operating agreement under the priority established 
                under paragraph (1); or
                    ``(B)(i) eligible to document a vessel under 
                chapter 121 of title 46, United States Code; and
                    ``(ii) affiliated with a corporation operating or 
                managing other United States-documented vessels for the 
                Secretary of Defense or chartering other vessels to the 
                Secretary of Defense.
            ``(3) Other vessels.--To the extent that amounts are 
        available after applying paragraphs (1) and (2), any other 
        eligible vessel.
    ``(j) Transfer of Operating Agreements.--A contractor under an 
operating agreement may transfer the agreement (including all rights 
and obligations under the agreement) to any person eligible to enter 
into that operating agreement under this subtitle after notification of 
the Secretary in accordance with regulations prescribed by the 
Secretary, unless the transfer is disapproved by the Secretary within 
90 days after the date of that notification. A person to whom an 
operating agreement is transferred may receive payments from the 
Secretary under the agreement only if each vessel to be covered by the 
agreement after the transfer is an eligible vessel under section 
651(b).
    ``(k) Reversion of Unused Authority.--The obligation of the 
Secretary to make payments under an operating agreement under this 
subtitle shall terminate with respect to a vessel if the contractor 
fails to engage in operation of the vessel for which such payment is 
required--
            ``(1) within one year after the effective date of the 
        operating agreement, in the case of a vessel in existence on 
        the effective date of the agreement, or
            ``(2) within 30 months after the effective date of the 
        operating agreement, in the case of a vessel to be constructed 
        after that effective date.
    ``(l) Procedure for Considering Application; Effective Date for 
Certain Vessels.--
            ``(1) Procedures.--Within 90 days after receipt of an 
        application for enrollment of a vessel in the Fleet, the 
        Secretary shall enter into an operating agreement with the 
        applicant or provide in writing the reason for denial of that 
        application.
            ``(2) Effective date.--Unless an earlier date is requested 
        by the applicant, the effective date for an operating agreement 
        with respect to a vessel which is, on the date of entry into an 
        operating agreement, either subject to a contract under 
        subtitle A or on charter to the United States Government, other 
        than a charter under section 653, shall be the expiration or 
        termination date of the contract under subtitle A or of the 
        Government charter covering the vessel, respectively, or any 
        earlier date the vessel is withdrawn from that contract or 
        charter.
    ``(m) Early Termination.--An operating agreement under this 
subtitle shall terminate on a date specified by the contractor if the 
contractor notifies the Secretary, by not later than 60 days before the 
effective date of the termination, that the contractor intends to 
terminate the agreement. Vessels covered by an operating agreement 
terminated under to this subsection shall remain documented under 
chapter 121 of title 46, United States Code, until the date the 
operating agreement would have terminated according to its terms. A 
contractor who terminates an operating agreement pursuant to this 
subsection shall continue to be bound by the provisions of section 653 
until the date the operating agreement would have terminated according 
to its terms. All terms and conditions of an Emergency Preparedness 
Agreement entered into under to section 653 shall remain in effect 
until the date the operating agreement would have terminated according 
to its terms, except that the terms of such Emergency Preparedness 
Agreement may be modified by the mutual consent of the contractor and 
the Secretary of Transportation.
    ``(n) Termination for Lack of Funds.--If funds are not appropriated 
under the authority provided by section 655 for any fiscal year, then 
each vessel covered by an operating agreement under this subtitle is 
thereby released from any further obligation under the operating 
agreement, the operating agreement shall terminate, and the vessel 
owner or operator may transfer and register such vessel under an 
effective United States-controlled foreign flag, notwithstanding any 
other provision of law. If section 902 is applicable to such vessel 
after registry under an effective United States-controlled foreign 
flag, the vessel is available to be requisitioned by the Secretary of 
Transportation pursuant to section 902.
    ``(o) Award of Operating Agreements.--
            ``(1) In general.--The Secretary of Transportation, subject 
        to paragraph (4), shall award operating agreements within each 
        priority under subsection (i)(1), (2), and (3) under 
        regulations prescribed by the Secretary.
            ``(2) Number of agreements awarded.--Regulations under 
        paragraph (1) shall provide that if appropriated amounts are 
        not sufficient for operating agreements for all vessels within 
        a priority under subsection (i)(1), (2), or (3), the Secretary 
        shall award to each person submitting a request a number of 
        operating agreements that bears approximately the same ratio to 
        the total number of vessels in the priority, as the amount of 
        appropriations available for operating agreements for vessels 
        in the priority bears to the amount of appropriations necessary 
        for operating agreements for all vessels in the priority.
            ``(3) Treatment of related parties.--For purposes of 
        paragraph (2), a related party with respect to a person shall 
        be treated as the person.
            ``(4) Preference for u.s.-built vessels.--In awarding 
        operating agreements for vessels within a priority under 
        subsection (i) (1), (2), or (3), the Secretary shall give 
        preference to a vessel that was constructed in the United 
        States, to the extent such preference is consistent with 
        establishment of a fleet described in the first sentence of 
        section 651(a) (taking into account the age of the vessel, the 
        nature of service provided by the vessel, and the commercial 
        viability of the vessel).
    ``(p) Notice to U.S. Shipbuilders Required.--The Secretary shall 
include in any operating agreement under this subtitle a requirement 
that the contractor under the agreement shall, by not later than 30 
days after soliciting any bid or offer for the construction of any 
vessel in a foreign shipyard and before entering into a contract for 
construction of a vessel in a foreign shipyard, provide notice of the 
intent of the contractor to enter into such a contract to each shipyard 
in the United States that is capable of constructing the vessel.

                    ``national security requirements

    ``Sec. 653. (a) Emergency Preparedness Agreement.--
            ``(1) Requirement to enter agreement.--The Secretary of 
        Transportation shall establish an Emergency Preparedness 
        Program under this section that is approved by the Secretary of 
        Defense. Under the program, the Secretary of Transportation 
        shall include in each operating agreement under this subtitle a 
        requirement that the contractor enter into an Emergency 
        Preparedness Agreement under this section with the Secretary. 
        The Secretary shall negotiate and enter into an Emergency 
        Preparedness Agreement with each contractor as promptly as 
        practicable after the contractor has entered into an operating 
        agreement under this subtitle.
            ``(2) Terms of agreement.--An Emergency Preparedness 
        Agreement under this section shall require that upon a request 
        by the Secretary of Defense during time of war or national 
        emergency, an owner or operator of a vessel covered by an 
        operating agreement under this subtitle shall make available 
        commercial transportation resources (including services). The 
        basic terms of the Emergency Preparedness Agreement shall be 
        established pursuant to consultations among the Secretary, the 
        Secretary of Defense, and Maritime Security Program 
        contractors. In any Emergency Preparedness Agreement, the 
        Secretary and a contractor may agree to additional or modifying 
        terms appropriate to the contractor's circumstances.
    ``(b) Resources Made Available.--The commercial transportation 
resources to be made available under an Emergency Preparedness 
Agreement shall include vessels or capacity in vessels, intermodal 
systems and equipment, terminal facilities, intermodal and management 
services, and other related services, or any agreed portion of such 
nonvessel resources for activation as the Secretary may determine to be 
necessary, seeking to minimize disruption of the contractor's service 
to commercial shippers.
    ``(c) Compensation.--
            ``(1) In general.--The Secretary of Transportation shall 
        provide in each Emergency Preparedness Agreement for reasonable 
        compensation for all commercial transportation resources 
        provided pursuant to this section.
            ``(2) Specific requirements.--Compensation under this 
        subsection--
                    ``(A) shall not be less than the contractor's 
                commercial market charges for like transportation 
                resources;
                    ``(B) shall include all the contractor's costs 
                associated with provision and use of the contractor's 
                commercial resources to meet emergency requirements;
                    ``(C) in the case of a charter of an entire vessel, 
                shall be fair and reasonable;
                    ``(D) shall be in addition to and shall not in any 
                way reflect amounts payable under section 652; and
                    ``(E) shall be provided from the time that a vessel 
                or resource is diverted from commercial service until 
                the time that reenters commercial service.
    ``(d) Temporary Replacement Vessels.--Notwithstanding any other 
provision of this subtitle or of other law to the contrary--
            ``(1) a contractor may operate or employ in foreign 
        commerce a foreign-flag vessel or foreign-flag vessel capacity, 
        as a temporary replacement for a United States-documented 
        vessel or United States-documented vessel capacity that is 
        activated under an Emergency Preparedness Agreement; and
            ``(2) such replacement vessel or vessel capacity shall be 
        eligible during the replacement period to transport preference 
        cargoes subject to section 2631 of title 10, United States 
        Code, the Act of March 26, 1934 (46 App. U.S.C. 1241-1), and 
        sections 901(a), 901(b), and 901b of this Act to the same 
        extent as the eligibility of the vessel or vessel capacity 
        replaced.
    ``(e) Redelivery and Liability of U.S. for Damages.--
            ``(1) In general.--All commercial transportation resources 
        activated under an Emergency Preparedness Agreement shall, upon 
        termination of the period of activation, be redelivered to the 
        contractor in the same good order and condition as when 
        received, less ordinary wear and tear, or the Government shall 
        fully compensate the contractor for any necessary repair or 
        replacement.
            ``(2) Limitation on liability of u.s.--Except as may be 
        expressly agreed to in an Emergency Preparedness Agreement, or 
        as otherwise provided by law, the Government shall not be 
        liable for disruption of a contractor's commercial business or 
        other consequential damages to a contractor arising from 
        activation of commercial transportation resources under an 
        Emergency Preparedness Agreement.
            ``(3) Limitation on application of other requirements.--
        Sections 902 and 909 of this Act shall not apply to a vessel 
        while it is covered by an Emergency Preparedness Agreement 
        under this subtitle. Any Emergency Preparedness Agreement 
        entered into by a contractor shall supersede any other 
        agreement between that contractor and the Government for vessel 
        availability in time of war or national emergency.
                             ``definitions

    ``Sec. 654. In this subtitle:
            ``(1) Fleet.--The term `Fleet' means the Maritime Security 
        Fleet established pursuant to section 651(a).
            ``(2) LASH vessel.--The term `LASH vessel' means a lighter 
        aboard ship vessel.
            ``(3) United states-documented vessel.--The term `United 
        States-documented vessel' means a vessel documented under 
        chapter 121 of title 46, United States Code.

                   ``authorization of appropriations

    ``Sec. 655. There are authorized to be appropriated for operating 
agreements under this subtitle, to remain available until expended, 
$100,000,000 for fiscal year 1996 and such sums as may be necessary, 
not to exceed $100,000,000, for each fiscal year thereafter through 
fiscal year 2005.''.
SEC. 3. TERMINATION OF OPERATING-DIFFERENTIAL SUBSIDY PROGRAM.

    (a) Limitation on Payments for Older Vessels.--Section 605(b) of 
the Merchant Marine Act, 1936 (46 App. U.S.C. 1175(b)), is amended to 
read as follows:
    ``(b) No operating-differential subsidy shall be paid for the 
operation of a vessel after the calendar year the vessel becomes 25 
years of age, unless the Secretary of Transportation has determined, 
before the date of enactment of the Maritime Security Act of 1995, that 
it is in the public interest to grant such financial aid for the 
operation of such vessel.''.
    (b) Wind-Up of Program.--Subtitle A of such Act (46 App. U.S.C. 
1171 et seq.), as designated by the amendment made by section 2(1), is 
further amended by adding at the end the following new section:
    ``Sec. 616. (a) After the date of enactment of the Maritime 
Security Act of 1995, the Secretary of Transportation shall not enter 
into any new contract for operating-differential subsidy under this 
subtitle.
    ``(b) Notwithstanding any other provision of this Act, any 
operating-differential subsidy contract in effect under this title on 
the day before the date of enactment of the Maritime Security Act of 
1995 shall continue in effect and terminate as set forth in the 
contract, unless voluntarily terminated at an earlier date by the 
parties (other than the United States Government) to the contract.
    ``(c) The essential service requirements of section 601(a) and 
603(b), and the provisions of sections 605(c) and 809(a), shall not 
apply to the operating-differential subsidy program under this subtitle 
effective upon the earlier of--
            ``(1) the date that a payment is made, under the Maritime 
        Security Program established by subtitle B to a contractor 
        under that subtitle who is not party to an operating-
        differential subsidy contract under this subtitle, with the 
        Secretary to cause notice of the date of such payment to be 
        published in the Federal Register as soon as possible; or
            ``(2) with respect to a particular contractor under the 
        operating-differential subsidy program, the date that 
        contractor enters into a contract with the Secretary under the 
        Maritime Security Program established by subtitle B.
    ``(d)(1) Notwithstanding any other provision of law, a vessel may 
be transferred and registered under an effective United States-
controlled foreign flag if--
            ``(A) the operator of the vessel receives an operating-
        differential subsidy pursuant to a contract under this subtitle 
        which is in force on October 1, 1994, and
         the Secretary approves the replacement of such vessel with a 
comparable vessel, or
            ``(B) the vessel is covered by an operating agreement under 
        subtitle B, and the Secretary approves the replacement of such 
        vessel with a comparable vessel for inclusion in the Maritime 
        Security Fleet established under subtitle B.
    ``(2) Any such vessel may be requisitioned by the Secretary of 
Transportation pursuant to section 902.''.

SEC. 4. DOMESTIC OPERATIONS.

    Section 805(a) of the Merchant Marine Act, 1936 (46 App. U.S.C. 
1223(a)) is amended by striking ``1935'' each place it appears and 
inserting ``1995''.

SEC. 5. USE OF FOREIGN-FLAG VESSELS.

    (a) In General.--Section 804 of the Merchant Marine Act, 1936 (46 
App. U.S.C. 1222) is amended by adding at the end the following new 
subsection:
    ``(f) The provisions of subsection (a) shall not preclude a 
contractor receiving assistance under subtitle A or B of title VI, or 
any holding company, subsidiary, or affiliate of the contractor, or any 
officer, director, agent, or executive thereof, from--
            ``(1) owning, chartering, or operating any foreign-flag 
        vessel on a voyage or a segment of a voyage that does not call 
        at a port in the United States;
            ``(2) owning, chartering, or operating any foreign-flag 
        vessel in line haul service between the United States and 
        foreign ports if--
                    ``(A) the foreign-flag vessel was operated by, or 
                is a replacement for a foreign-flag vessel operated by, 
                such owner or operator, or any holding company, 
                subsidiary, affiliate, or associate of such owner or 
                operator, on the date of enactment of the Maritime 
                Security Act of 1995;
                    ``(B) the owner or operator, with respect to each 
                additional foreign-flag vessel, other than a time 
                chartered vessel, has first applied to have that vessel 
                covered by an operating agreement under subtitle B of 
                title VI, and the Secretary has not awarded an 
                operating agreement with respect to that vessel within 
                90 days after the filing of the application; or
                    ``(C) the vessel has been placed under foreign 
                documentation pursuant to section 9 of the Shipping 
                Act, 1916 (46 App. U.S.C. 808), except that any 
                foreign-flag vessel, other than a time chartered 
                vessel, a replacement vessel under section 653(d), or a 
                vessel operated by the owner or operator on the date of 
                enactment of the Maritime Security Act of 1995, in line 
                haul service between the United States and foreign 
                ports is registered under the flag of an effective 
                United States-controlled foreign flag, and available to 
                be requisitioned by the Secretary of Transportation 
                pursuant to section 902 of this Act;
            ``(3) owning, chartering, or operating foreign-flag bulk 
        cargo vessels that are operated in foreign-to-foreign service 
        or the foreign commerce of the United States;
            ``(4) chartering or operating foreign-flag vessels that are 
        operated solely as replacement vessels for United States-flag 
        vessels or vessel capacity that are made available to the 
        Secretary of Defense pursuant to section 653 of this Act; or
            ``(5) entering into time or space charter or other 
        cooperative agreements with respect to foreign-flag vessels or 
        acting as agent or broker for a foreign-flag vessel or 
        vessels.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to a contractor under subtitle B of title VI of the Merchant 
Marine Act, 1936, as amended by this Act, upon enactment of this Act, 
and shall apply to a contractor under subtitle A of title VI of that 
Act, upon the earlier of--
            (1) the date that a payment is made, under the Maritime 
        Security Program under subtitle B of that title to a contractor 
        under subtitle B of that title who is not party to an 
        operating-differential subsidy contract under subtitle A of 
        that title, with the Secretary of Transportation to cause 
        notice of the date of such payment to be published in the 
        Federal Register as soon as possible; or
            (2) with respect to a particular contractor under the 
        operating-differential subsidy program under subtitle A of that 
        title, the date that contractor enters into a contract with the 
        Secretary under the Maritime Security Program established by 
        subtitle B of that title.

SEC. 6. AMENDMENT TO SHIPPING ACT, 1916.

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

SEC. 7. CONSTRUCTION DIFFERENTIAL SUBSIDY RESTRICTIONS.

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

``SEC. 512. LIMITATION ON RESTRICTIONS.

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

SEC. 8. REGULATIONS.

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