U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

49–010 

" ! SENATE 109TH CONGRESS

1st Session 

REPORT

2005

109–183 

Calendar No. 295 

MARITIME ADMINISTRATION 

ENHANCEMENT ACT OF 2005 

R E P O R T 

OF THE

COMMITTEE ON COMMERCE, SCIENCE, AND 

TRANSPORTATION 

ON

S. 2029 

NOVEMBER 17, 2005.—Ordered to be printed 


congress.#13
(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

TED STEVENS, Alaska, Chairman 

DANIEL K. INOUYE, Hawaii, Co-Chairman 

JOHN MCCAIN, Arizona 

CONRAD BURNS, Montana 

TRENT LOTT, Mississippi 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

GORDON H. SMITH, Oregon 

JOHN ENSIGN, Nevada 

GEORGE ALLEN, Virginia 

JOHN E. SUNUNU, New Hampshire 

JIM DEMINT, South Carolina 

DAVID VITTER, Louisiana 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

BYRON L. DORGAN, North Dakota 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

FRANK LAUTENBERG, New Jersey 

E. BENJAMIN NELSON, Nebraska 

MARK PRYOR, Arkansas 

LISA SUTHERLAND, Staff Director 

CHRISTINE DRAGER KURTH, Deputy Staff Director 

DAVID RUSSELL, Chief Counsel 

MARGARET CUMMISKY, Democratic Staff Director and Chief Counsel 

SAMUEL WHITEHORN, Democratic Deputy Staff Director and General Counsel 

Calendar No. 295 

109TH CONGRESS REPORT " ! SENATE 1st Session 109–183 

MARITIME ADMINISTRATION ENHANCEMENT ACT OF 2005 

NOVEMBER 17, 2005.—Ordered to be printed 

Mr. STEVENS, from the Committee on Commerce, Science, and 

Transportation, submitted the following 

R E P O R T 

[To accompany S. 2029] 

The Committee on Commerce, Science, and Transportation reports favorably an original bill (S. 2029) to amend and enhance certain maritime programs of the Department of Transportation, and 

for other purposes, and recommends that the bill do pass. 

PURPOSE OF THE BILL

The Maritime Administration Enhancement Act would streamline the process of covering the costs of vessel maintenance, repairs, and replacements; enhance the requirements for cadets entering the Merchant Marine Academy; authorize the Secretary of 

Transportation to permit training upon certain vessels; and grant 

the Maritime Administration (MARAD) greater flexibility in disposing of obsolete vessels from the National Defense Reserve Fleet 

(NDRF). 

In addition, the bill would grant MARAD the authority to retain 

certain deepwater port license application fees as well as funds collected through its Coastwise administrative waiver process. It 

would permit greater promotion of the merchant marine through 

the utilization of the U.S. Maritime Service at maritime-related 

functions beyond that of training and education, and authorize the 

Secretary to award, free of charge, medals for commendable 

achievements in the U.S. Merchant Marine. Furthermore, the bill 

would authorize duty-free treatment of emergency war materials 

imported for use by MARAD. 

The bill includes provisions designed to clarify Congressional reforms to the MARAD Title XI maritime loan guarantee program. 

The bill also designates MARAD as the lead Federal agency to adVerDate Aug 31 2005 01:30 Nov 23, 2005 Jkt 049010 PO 00000 Frm 00003 Fmt 6659 Sfmt 6601 E:\HR\OC\SR183.XXX SR183
2 

minister Federal funds for port and intermodal improvements in 

the State of Hawaii. Finally, the legislation would authorize a maritime training and shipyard capital grant program administered by 

MARAD. 

BACKGROUND AND NEEDS

The mission of MARAD is to promote the development and maintenance of an adequate, well-balanced United States merchant marine, sufficient to carry the Nation’s domestic waterborne commerce 

and a substantial portion of its waterborne foreign commerce, and 

capable of serving as a naval and military auxiliary in time of war 

or national emergency. MARAD also seeks to ensure that the 

United States enjoys adequate shipbuilding and repair service, efficient ports, effective intermodal water and land transportation systems, and reserve shipping capacity in times of national emergency. 

To meet its mission, MARAD administers various U.S. merchant 

marine support programs within the Department of Transportation 

(DOT). These programs include the Maritime Security Program 

(MSP), Title XI maritime loan guarantee program, various cargo 

preference programs, maintenance of the Ready Reserve Force 

(RRF), often used in domestic disaster relief efforts, and the National Defense Reserve Force (NDRF), and operation of the U.S. 

Merchant Marine Academy (USMMA) at Kings Point, NY. MARAD 

has approximately 825 employees, including RRF and USMMA 

staff. 

The MSP funds operating agreements to the privately owned, 

United States-flag, and United States-crewed liner fleet in international trade. This fleet also is available to support the Department of Defense (DOD) sustainment in a contingency. Currently, 

MSP is authorized through fiscal year 2015 and subject to a separate annual appropriation. 

The purpose of the Title XI ship loan guarantee program is to 

promote the growth and modernization of the U.S. merchant marine and U.S. shipyards. The program enables owners of eligible 

vessels and eligible shipyards to obtain long-term financing with 

attractive terms backed by the full faith and credit of the United 

States government to guarantee commercial loans. 

In November of 2003, Congress enacted reforms to the program 

under P.L.108–136, the National Defense Authorization Act of 

2003, which authorized the Secretary to require an independent 

analysis to be conducted by third party experts if the Secretary determines that risk factors associated with markets, technology, financial structures, or other factors need such analysis prior to 

making a determination on a loan guarantee application. The Secretary’s authority to conduct an independent risk analysis of 

projects was not intended to be used in routine cases nor where 

MARAD already has sufficient expertise to fully assess the risk of 

approving a loan guarantee application. The Committee is concerned the department is not administering the program consistent 

with P.L. 108–136 and is instead subjecting routine financial transactions to duplicative bureaucratic reviews by both MARAD and 

the newly established DOT Credit Council. In addition, the Committee is concerned with the proposed regulations issued June 8, 

3 

2005, Docket No. 2005–21380, as they appear to be contradictory 

to the sustainability of the program. 

The Committee is concerned the financial analysis and market 

assessment functions, key MARAD roles, are being taken away by 

DOT, thereby eroding MARAD’s fundamental expertise in the intricacies of shipbuilding and shipyard modernization. The Committee 

expects that the Title XI program remain exclusively within 

MARAD to streamline the application process and avoid the needless duplication of assessing, evaluating and determining the financial solvency and potential market performance of project applications. 

MARAD’s operations and training account funds the administration and staffing of MARAD programs (other than the Title XI 

guaranteed loan program and RRF costs), the USMMA, State maritime school costs associated with Federal training ships, training 

courses for merchant mariners, various operating programs, and 

research and development. The USMMA educates young men and 

women to become officers in the American merchant marine. 

The Global Maritime and Transportation School (GMATS) is a 

private, tuition-funded graduate school housed at the USMMA, 

which offers advanced mariner training and logistics and supply 

chain management courses. The primary mission of the USMMA 

GMATS is to offer leading edge education and training programs 

that will benefit maritime and transportation professionals from 

government agencies, the military, and private industry. Funds to 

operate GMATS are generated through tuition, meal, and lodging 

fees. It is not an appropriated instrumentality of the DOT. The current process through which some applicants are accepted is cumbersome and this legislation reduces that burden and clarifies 

GMATS’s role. 

SUMMARY OF PROVISIONS

The bill would allow MARAD to use a portion of the hire paid 

for the operation of the National Defense Reserve Fleet (NDRF) 

and proceeds recovered from vessel accident litigation and arbitration to be placed in a reserve fund to cover the costs of vessel maintenance, repairs, and replacements. The bill would authorize 

MARAD to retain fees from administrative waivers and deepwater 

port license applications up to a specific amount to pay for administrative costs. 

The legislation would require students entering the Merchant 

Marine Academy to meet the physical and mental standards required by the Department of Defense (DOD). MARAD has reported 

that some students fail to meet current standards set by MARAD, 

thereby avoiding certain commitments upon graduation, including 

entering Reserve units of the Armed Forces. In addition, the bill 

would allow the Armed Services to certify annually graduates’

mandatory military service commitment and permits Academy cadets to train on foreign flag vessels when in the interest of national 

security. Subject to appropriations, the bill increases the authorized payments for cadets enrolled in State Regional Maritime Academies to $500,000 dollars by fiscal year 2008 and increases the 

amount State Maritime Academies may receive for reimbursement 

of ship fuel costs. 

4 

This bill would grant MARAD the ability to purchase emergency 

war materials for RRF repairs without being subject to ad valorem 

duties while under operational authority DOD. MARAD is granted 

the flexibility to decide on the timing of ship and title transfers to 

U.S. territories and States. Finally, the bill would establish a grant 

program to assist small shipyard capital improvements and establish technical training programs for small communities largely 

served by the maritime industry. Payments for State and Regional 

Maritime Academies 

The measure also would clarify the roles of the Maritime Administrator and DOD in the loan guarantee process overseen by 

MARAD, and streamlines the cumbersome application review process. The bill would require an independent analysis of each loan 

guarantee be conducted by private sector maritime finance or operations experts. In addition, it requires adequate staffing and expertise to properly manage the program. 

LEGISLATIVE HISTORY

The original committee bill was ordered reported to the Senate 

by voice vote on July 21, 2005 in the presence of a quorum. 

ESTIMATED COSTS

In accordance with paragraph 11(a) of rule XXVI of the Standing 

Rules of the Senate and section 403 of the Congressional Budget 

Act of 1974, the Committee provides the following cost estimate, 

prepared by the Congressional Budget Office: 

NOVEMBER 15, 2005. 

Hon. TED STEVENS, 

Chairman, Committee on Commerce, Science, and Transportation, 

U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for the Maritime Administration 

Enhancement Act of 2005. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Deborah Reis. 

Sincerely, 

DOUGLAS HOLTZ-EAKIN, Director. 

Enclosure. 

Maritime Administration Enhancement Act of 2005 

Summary: The Maritime Administration Enhancement Act 

would amend various laws governing the activities of the Maritime 

Administration (MARAD), authorize appropriations for a new program to assist small shipyards and maritime communities, and increase support for state maritime academies. Assuming appropriation of the authorized or necessary amounts, implementing the bill 

would result in discretionary spending totaling $104 million over 

the 2006–2010 period, CBO estimates. 

In addition, several provisions of the bill would allow MARAD to 

spend, without further appropriation action, certain collections 

from regulatory fees and legal damages. CBO estimates that enacting these provisions would increase direct spending by about $5 

5 

million over the 2006–2010 period and by $10 million over the 

2006–2015 period. 

Finally, the bill would exempt MARAD from paying ad valorem 

taxes on certain materials and repairs for vessels operated as part 

of the National Defense Reserve Fleet (NDRF) under wartime conditions, thereby reducing federal revenues by an estimated $1 million over the 2006–2010 period and by $2 million over the 2006– 2015 period. (The costs of NDRF operations would be reduced by 

similar amounts, assuming a corresponding reduction in future appropriations.) 

The legislation contains no intergovernmental or private-sector 

mandates as defined in the Unfunded Mandates Reform Act 

(UMRA); any costs to state and local governments would be incurred voluntarily. 

Estimated cost to the Federal Government: The estimated budgetary effects of the legislation are summarized in the following 

table. The costs of this legislation fall within budget function 400 

(transportation). 

By fiscal year, in millions of dollars— 

2006 2007 2008 2009 2010 

CHANGES IN SPENDING SUBJECT TO APPROPRIATION 

Additional MARAD Spending for State Maritime Academies: 

Estimated Authorization Level ............................................................. 1 2 4 4 4 

Estimated Outlays ................................................................................ 1 2 4 4 4 

Small Shipyard and Maritime Community Grants: 

Authorization Level ............................................................................... 30 30 30 30 30 

Estimated Outlays ................................................................................ 3 12 20 25 30 

Reduced Spending for Ad Valorem Duties on Foreign Materials and Repairs: 

Estimated Authorization Level ............................................................. * * * * * 

Estimated Outlays ................................................................................ * * * * * 

Total Additional MARAD Spending: 

Estimated Authorization Level ............................................................. 31 32 34 34 34 

Estimated Outlays ................................................................................ 4 14 24 29 34 

CHANGES IN DIRECT SPENDING 

Estimated Budget Authority .......................................................................... 1 1 1 1 1 

Estimated Outlays ......................................................................................... 1 1 1 1 1 

CHANGES IN REVENUES 1

Estimated Revenues from Ad Valorem Duties .............................................. * * * * * 

1 Enacting the bill would also change the classification of about $1 million a year in revenues by directing that those collections be recorded in the budget as an offset to spending. Following scorekeeping rule 13, such reclassifications in legislation are not counted for purposes of Congressional scorekeeping. Note.—* = between –$500,000 and $500,000. 

Basis of estimate 

Spending subject to appropriation 

For this estimate, CBO assumes that the amounts authorized or 

estimated to be necessary will be appropriated for each year. Estimated outlays are based on historical spending patterns for existing or similar programs. 

Section 112 would expand financial assistance to state maritime 

academies, subject to the availability of appropriations. Specifically, 

this section would increase annual direct payments to the six academies from the existing statutory level of $200,000 each to 

$300,000 in 2006, $400,000 in 2007, and $500,000 for each year 

thereafter. This section also would direct MARAD to pay up to 

$100,000 in 2006, $200,000 in 2007, and $300,000 a year thereafter 

6 

for the costs of fuel to operate state training vessels. CBO estimates that providing the higher annual payments to state academies and reimbursing them for fuel costs would require additional 

appropriations that would grow to $4 million annually by 2008. 

(MARAD received $1.2 million for direct payments to state maritime academies in fiscal year 2005. No amounts were appropriated 

for that year for fuel reimbursements. MARAD’s full-year appropriation for 2006 has not yet been enacted.) Section 114 would authorize the appropriation of $30 million for 

each of fiscal years 2006–2010 for a new program to support small 

shipyards and maritime communities. Under this program, 

MARAD would pay state and local governments to make grants, 

loans, and loan guarantees to small shipyards for capital improvements and to establish maritime training programs in communities 

whose economies are linked to the maritime industry. Assuming 

appropriation of the authorized amounts, CBO estimates that implementing this program would cost MARAD about $3 million in 

2006 and $90 million over the 2006–2010 period. We estimate that the remaining $60 million authorized by the bill would be spent 

after 2010. 

Other provisions of the bill would have no significant effect on 

the federal budget. 

Direct spending 

The legislation would provide about $1 million of new budget authority for MARAD each year by allowing the agency to spend 

without further appropriation certain amounts that are currently 

deposited in the U.S. Treasury as revenues. Section 109 would 

allow MARAD to spend payments for damages received for accidents that involve vessels that it owns or manages. Based on recent judgments and settlements for damages collected as a result 

of such incidents, CBO estimates that this new authority would increase direct spending by an average of $500,000 a year. Also, sections 107 and 108 would authorize the agency to spend up to a 

total of $500,000 a year from certain administrative and regulatory 

fees, thereby increasing annual direct spending by a like amount. 

The bill also would change the budgetary classification of those 

administrative and regulatory fees. Such collections are currently 

considered revenues but under the legislation would become offsetting receipts (an offset to direct spending). The resulting decrease 

in revenues and corresponding decrease in outlays are not counted 

for purposes of Congressional consideration, however, pursuant to 

scorekeeping rule 13, which states that reclassifications are not 

counted for purposes of enforcing the budget resolution (see House 

Report 105–217, the conference report on the Balanced Budget Act 

of 1997, page 1011). 

Revenues 

Section 106 would exempt MARAD from paying ad valorem duties on certain materials imported from foreign countries and on repairs made in foreign ports for vessels operated as part of the 

NDRF during wartime. CBO estimates that this provision would 

reduce revenues by less than $500,000 in 2006, by $1 million over 

the 2006–2010 period, and by $2 million through 2015. This provision also would result in like reductions in discretionary spending, 

7 

assuming that MARAD’s annual appropriations would be adjusted 

to reflect the savings in NDRF operating costs. 

By changing the budgetary classification of certain administrative and regulatory fees from revenues to offsetting receipts, enacting the bill would reduce revenues by about $500,000 a year over 

the 2006–2015 period. But, as noted above, such reclassifications 

are not counted for Congressional scorekeeping purposes. 

Intergovernmental and private-sector impact: The legislation contains no intergovernmental or private-sector mandates as defined 

in UMRA. The bill would increase the authorization of appropriations for maritime academies in six states and establish a new 

grant program to assist state and local governments in supporting 

small shipyards and maritime communities within their states. 

Any costs to state and local governments for participating in those 

programs would be incurred voluntarily. 

Estimate prepared by: Federal Spending: Deborah Reis. Federal 

Revenue: Emily Schlect. Impact on State, Local, and Tribal Governments: Sarah Puro. Impact on the Private Sector: Craig 

Cammarata. 

Estimate approved by: Robert A. Sunshine, Assistant Director for 

Budget Analysis. 

REGULATORY IMPACT STATEMENT

In accordance with paragraph 11(b) of rule XXVI of the Standing 

Rules of the Senate, the Committee provides the following evaluation of the regulatory impact of the legislation, as reported: 

NUMBER OF PERSONS COVERED

This program would not affect the number of people subject to 

regulation. 

ECONOMIC IMPACT

The bill would authorize the establishment of a $25 million grant 

program designed to assist small shipyards with capital improvement needs, and a $5 million grant program to provide maritime 

training. The grants in the program are designed to have a positive 

economic impact on United States maritime industry by subsidizing the needed capital improvements in communities largely 

served by that industry and by provided much needed training. 

PRIVACY

This program would not impact privacy issues. 

PAPERWORK

This program would not create new mandatory paperwork or reporting requirements. 

SECTION-BY-SECTION ANALYSIS

Section 1. Short title 

Section 1 states the short title of the legislation, the ‘‘Maritime 

Administration Enhancement Act of 2005’’. 

8 

Section 101. United States Maritime Service 

This section would permit the Commandant of the United States 

Maritime Service (USMS) or the Maritime Administrator to utilize 

the USMS for maritime related functions beyond that of training 

and education that are determined to be necessary for the promotion of the U.S. merchant marine. For instance, the amendment 

would permit the use of members of the USMS to further the visibility and understanding of the U.S. merchant marine, and allow 

members of the USMS to serve as liaisons within the DOT and to 

the public. 

Section 102. War risk insurance 

This is a technical correction to section 3502(b) of P.L. 108–375, 

the National Defense Authorization Act for Fiscal Year 2005. 

Section 103. Maritime education and training 

This section would require students entering the Merchant Marine Academy to meet the same physical and mental standards required by the DOD. Any cadet not meeting such standards could 

be expelled. This change is necessary to ensure that students admitted to the Academy are capable of fulfilling the requirements of 

their commitment agreements upon graduation. If students do not 

meet these DOD standards, they are not eligible to obtain a Merchant Marine license or to accept an appointment in a reserve unit 

of the armed forces of the United States, two key commitment 

agreement service requirements. 

Current law requires Academy graduates to become commissioned officers on active duty in an armed force of the United 

States or to become commissioned officers in the reserves of the 

armed forces for at least 6 years following graduation. The Privacy 

Act currently prevents MARAD from readily verifying with the 

DOD that graduates are serving their commitment to the armed 

forces. This section would require the DOD, the U.S. Coast Guard, 

and the National Oceanic and Atmospheric Administration (NOAA) 

to certify annually to MARAD that Academy graduates have remained on active duty or in ready reserve status, thus confirming 

the fulfillment of a graduates service commitment agreement. This 

provision would provide a mechanism for MARAD to recover tuition from graduates who fail to perform their duties and that are 

found in noncompliance with their commitment agreement and enable MARAD 

In addition, this section would authorize Academy cadets to train 

on foreign flag vessels if it is in the interest of national security. 

For example, cadets would be permitted to train on vessels involved in unique trades that involve sensitive security interests of 

the United States such as Liquefied Natural Gas (LNG) vessels 

that are not documented in the United States. This is not intended 

to authorize the training of cadets on foreign flag vessels that do 

not pose a significant security interest to the nation. 

Further, this section would clarify the role of the Global Maritime and Transportation School (GMATS) located on the campus of 

Kings Point as a non-appropriated fund instrumentality (NAFI) operating under the jurisdiction of the Department of Transportation. 

9 

Section 104. Authority to dispose of obsolete government vessels 

Public Law 108–136 authorized the Secretary to convey to U.S. 

territories and foreign governments obsolete vessels for use as artificial reefs; however, it did not provide MARAD with the discretion 

to decide when to transfer the ship and title(s) fleetside at the 

NDRF. This section would provide MARAD the flexibility to make 

vessel and title transfer decisions that not only encourage States 

to request the ships for use as reefs, but also that are in the best 

interests of the government. 

Section 105. Awards and medals 

This section would provide the Administrator the discretion to 

award medals at no cost to the recipient. Currently, MARAD may 

only provide such medals and decorations at cost, or authorize for 

the manufacture and sale at reasonable prices by private persons. 

Section 106. Elimination of tariffs on certain national defense activities 

This measure would grant MARAD the ability to purchase emergency war materials for RRF repairs without being subject to ad 

valorem duties while under operational authority of the Department of Defense in a war zone. MARAD provides support for the 

deployment of military forces worldwide using the NDRF and RRF, 

which is part of the NDRF, and is a key element of the Navy’s 

Strategic Sealift Program. Currently, there are 59 RRF vessels in 

a high state of readiness, and the availability of these ships is essential to the deployment of DOD forces and equipment, as part of 

the Navy’s Military Sealift Command (MSC). The RRF fleet has 

been activated to support the current efforts in Afghanistan and 

the Persian Gulf. 

Currently, 24 of the vessels are foreign constructed and another 

35, while not foreign built, are equipped with foreign-made items. 

To maintain the vessels in a constant state of readiness, MARAD 

must regularly import foreign-made spare parts, repair parts, 

equipment and supplies. The imports necessary to maintain the 

fleet incur customs duties. Since MARAD vessels are maintained 

for the operational control of MSC, and are required for rapid deployment during national emergencies, the supplies and equipment 

needed to maintain the vessels should be accorded the same type 

of duty-free exemption for emergency war materials that is extended to DOD. 

These vessels are U.S.-documented, thus any repairs or repair 

parts received abroad are subject to an ad valorem tax of 50 percent of the cost of the repairs received abroad. Although the ad valorem tax is intended to serve as an incentive for vessel operators 

to repair their vessels in United States shipyards, unintended consequences arise when applied to government owned vessels that 

are deployed overseas for extended periods of time and are engaged 

in national security functions. Therefore, streamlining this process 

in this instance is appropriate and necessary, providing DOD maximum flexibility for vessels under its control operating in a war 

zone to obtain ship repairs. 

10 

Section 107. Availability of funds from application fees for deepwater ports 

This section would allow MARAD to retain fees assessed pursuant to applications for licenses for ownership, construction, and operation of deepwater ports, up to $450,000 per fiscal year. 

Section 108. Availability of funds from administrative waivers of 

coastwise trade laws for eligible vessels 

This section would authorize MARAD to retain funds routinely 

collected through the agency’s program for the Administrative Waiver of Coastwise Trade Laws for Eligible Vessels, up to $50,000 

per fiscal year. 

Section 109. Amendments to the Vessel Operations Revolving Fund 

(VORF) 

The VORF was created in 1951 to carry out vessel operating 

functions under the jurisdiction of Secretary of Transportation, including the charter, operation, maintenance, repair, reconditioning 

and betterment of merchant vessels. At present, such functions 

come at the expense of the operating repairs and maintenance 

budgeted for other NDRF vessels. In addition, all recoveries from 

litigation are deposited into the Treasury after payment to the Department of Justice for the costs of litigation. This section would 

allow MARAD to use a portion of the hire paid for the operation 

of the NDRF vessels and proceeds recovered from vessel accident 

litigation and arbitration. Funds would be placed in a reserve fund 

to cover the costs of vessel maintenance, repairs, and replacements. 

Section 110. Right to use Maritime Administration decoration 

This section would authorize the Secretary to sanction the use, 

manufacture, sale, possession, or display of a decoration or medal, 

such as the merchant marine seal. Currently no such authority exists, thus the use of the merchant seal is severely limited. This provision would permit the Secretary, through the Maritime Administrator, to authorize the use of maritime emblems for purposes and 

events he deems meritorious, such as commemorative ceremonies 

or events. 

Section 111. Hawaii port infrastructure expansion program 

This section would designate MARAD as the lead Federal agency 

to administer Federal funds for port and intermodal improvements 

in Hawaii. 

Section 112. Payments for State and regional maritime academies 

This section would increase the amount of assistance provided to 

the 6 State maritime academies which are located in Maine, Massachusetts, New York, Michigan, Texas, and California. These 6 

schools currently receive limited Federal support, yet a substantial 

number of their graduates hold Federal licenses and support our 

increasing mariner requirements in both the commercial and military sectors. Current law provides for a payment from MARAD of 

$200,000 dollars annually for cadet training and facilities support. 

That amount has not been raised since 1989. This section would increase the authorization level of Federal support to $300,000 dollars for fiscal year 2006, $400,000 dollars in fiscal year 2007, and 

11 

$500,000 in fiscal year 2008, and for each fiscal year thereafter, 

subject to the availability of appropriations. This section would also 

require MARAD to provide modest payments to the aforementioned 

State maritime academies for the increasing cost of fuel used for 

the operation of the academies’ training ships. 

Section 113. Reduction of report burden 

This section would eliminate a report required every 6 months 

pertaining to the progress of ship scrapping. 

Section 114. Assistance for small shipyards and maritime communities 

This provision would establish a grant program to assist small 

shipyards to make capital improvements and improve maritime 

training programs for small communities largely served by the 

maritime industry. 

Section 201. Redesignation of duplicate numbered sections 

This is a technical correction designed to correct duplicative section numbers. 

Section 202. Transfer of authority to MARAD 

This section would clarify the roles of the Maritime Administrator and the Department of Defense in the loan guarantee process overseen by MARAD and streamline the cumbersome application process. It would require independent analyses of the loan 

guarantees be conducted by private sector maritime finance or operations experts based on the determination of the Maritime Administrator that a particular set of circumstances relating to risk 

exists. Further, the provision would require MARAD to maintain 

adequate staffing and expertise in the agency to properly manage 

the program. 

CHANGES IN EXISTING LAW

In compliance with paragraph 12 of rule XXVI of the Standing 

Rules of the Senate, changes in existing law made by the bill, as 

reported, are shown as follows (existing law proposed to be omitted 

is enclosed in black brackets, new material is printed in italic, existing law in which no change is proposed is shown in roman): 

FLOYD D. SPENCE NATIONAL DEFENSE AUTHORIZATION 

ACT OF FISCAL YEAR 2001 

SEC. 3502. SCRAPPING OF NATIONAL DEFENSE RESERVE FLEET VESSELS. 

[Pub. L. 106–398 App.; 114 Stat. 1654A-492] 

(a) EXTENSION OF SCRAPPING AUTHORITY UNDER NATIONAL MARITIME HERITAGE ACT OF 1994.—Section 6(c)(1) of the National Maritime Heritage Act of 1994 (16 U.S.C. 5405(c)(1)) is amended—

(1) in subparagraph (A) by striking ‘‘2001’’ and inserting 

‘‘2006’’; and 

(2) by striking subparagraph (B) and inserting the following: 

‘‘(B) in the manner that provides the best value to the 

Government, except in any case in which obtaining the 

12 

best value would require towing a vessel and such towing 

poses a serious threat to the environment; and’’. (b) SELECTION OF SCRAPPING FACILITIES.—The Secretary of 

Transportation may scrap obsolete vessels pursuant to section 

6(c)(1) of the National Maritime Heritage Act of 1994 (16 U.S.C. 

5405(c)(1)) through qualified scrapping facilities, using the most expeditious scrapping methodology and location practicable. Scrapping facilities shall be selected under that section on a best value 

basis consistent with the Federal Acquisition Regulation, as in effect on the date of the enactment of this Act, without any predisposition toward foreign or domestic facilities taking into consideration, among other things, the ability of facilities to scrap vessels— (1) at least cost to the Government; 

(2) in a timely manner; 

(3) giving consideration to worker safety and the environment; and 

(4) in a manner that minimizes the geographic distance that 

a vessel must be towed when towing a vessel poses a serious 

threat to the environment. 

ø(c) LIMITATION ON SCRAPPING BEFORE PROGRAM.— ø(1) IN GENERAL.—Until the report required by subsection 

(d)(1) is transmitted to the congressional committees referred 

to in that subsection, the Secretary may not proceed with the 

scrapping of any vessel in the National Defense Reserve Fleet 

except the following: 

ø(A) DONNER. 

ø(B) EXPORT COMMERCE. 

ø(C) BUILDER. 

ø(D) ALBERT E. WATTS. 

ø(E) WAYNE VICTORY. 

ø(F) MORMACDAWN. 

ø(G) MORMACMOON. 

ø(H) SANTA ELENA. 

ø(I) SANTA ISABEL. 

ø(J) SANTA CRUZ. 

ø(K) PROTECTOR. 

ø(L) LAUDERDALE. 

ø(N) PVT. FRED C. MURPHY. 

ø(M) BEAUJOLAIS. 

ø(O) MEACHAM. 

ø(P) NEACO. 

ø(Q) WABASH. 

ø(R) NEMASKET. 

ø(S) MIRFAK. 

ø(T) GEN. ALEX M. PATCH. 

ø(U) ARTHUR M. HUDDELL. 

ø(V) WASHINGTON. 

ø(W) SUFFOLK COUNTY. 

ø(X) CRANDALL. 

ø(Y) CRILLEY. 

ø(Z) RIGEL. 

ø(AA) VEGA. 

ø(BB) COMPASS ISLAND. 

ø(CC) EXPORT CHALLENGER. 

13 

ø(DD) PRESERVER. 

ø(EE) MARINE FIDDLER. 

ø(FF) WOOD COUNTY. 

ø(GG) CATAWBA VICTORY. 

ø(HH) GEN. NELSON M. WALKER. 

ø(II) LORAIN COUNTY. 

ø(JJ) LYNCH. 

ø(KK) MISSION SANTA YNEZ. 

ø(LL) CALOOSAHATCHEE. 

ø(MM) CANISTEO. 

ø(2) PRIORITIZATION.—The Secretary shall exercise discretion 

to prioritize for scrapping those vessels identified in paragraph 

(1) that pose the most immediate threat to the environment. 

ø(d)¿ (c) SCRAPPING PROGRAM FOR OBSOLETE NATIONAL DEFENSE

RESERVE FLEET VESSELS.—

(1) DEVELOPMENT OF PROGRAM; REPORT.—The Secretary of 

Transportation, in consultation with the Secretary of the Navy 

and the Administrator of the Environmental Protection Agency, shall within 6 months after the date of the enactment of 

this Act—

(A) develop a program for the scrapping of obsolete National Defense Reserve Fleet vessels; and 

(B) submit a report on the program to the Committee on 

Transportation and Infrastructure and the Committee on 

Resources of the House of Representatives, the Committee 

on Commerce, Science, and Transportation of the Senate, 

and the Committees on Armed Services of the House of 

Representatives and the Senate. 

(2) CONTENTS OF REPORT.—The report shall include information concerning the initial determination of scrapping capacity, 

both domestically and abroad, appropriate proposed regulations to implement the program, funding and staffing requirements, milestone dates for the disposal of each obsolete vessel, 

and longterm cost estimates for the program. 

(3) ALTERNATIVES.—In developing the program, the Secretary of Transportation, in consultation with the Secretary of 

the Navy and the Administrator of the Environmental Protection Agency, shall consider all alternatives and available information, including— (A) alternative scrapping sites; 

(B) vessel donations; 

(C) sinking of vessels in deep water; 

(D) sinking vessels for development of artificial reefs; 

(E) sales of vessels before they become obsolete; 

(F) results from the Navy Ship Disposal Program under 

section 8124 of the Department of Defense Appropriations 

Act, 1999; and 

(G) the Report of the Department of Defense’s Interagency Panel on Ship Scrapping issued in April 1998. 

ø(e) REPORT.—Not later than 1 year after the date of the enactment of this Act, and every 6 months thereafter, the Secretary of 

Transportation, in coordination with the Secretary of the Navy, 

shall report to the Committee on Transportation and Infrastructure 

and the Committee on Resources of the House of Representatives, 

the Committee on Commerce, Science, and Transportation of the 

14 

Senate, and the Committees on Armed Services of the House of 

Representatives and the Senate on the progress of the vessel scrapping program developed under subsection (d)(1) and on the 

progress of any other scrapping of obsolete Government-owned vessels.¿ 

ø(f)¿ (d) PRESIDENTIAL RECOMMENDATION.—The President shall 

transmit with the report required by øsubsection (d)(1)¿ subsection 

(c)(1) a recommendation on—

(1) whether it is necessary to amend the Toxic Substances 

Control Act (15 U.S.C. 2601 et seq.) or any other environmental statute or regulatory requirements relevant to the disposal of vessels described in section 6(c)(2) of the National 

Maritime Heritage Act of 1994 (16 U.S.C. 5405(c)(2)) by September 30, 2006; and 

(2) any proposed changes to those requirements to carry out 

such disposals. 

PUBLIC LAW 92–402 

SEC. 4. TRANSFER OF TITLE; TERMS AND CONDITIONS. 

[16 U.S.C. 1220a] 

If, after consideration of such comments and views as are received pursuant to section 3(c), the Secretary finds that the use of 

obsolete ships proposed by a State will not violate any Federal law, 

contribute to degradation of the marine environment, create undue 

interference with commercial fishing or navigation, and is not frivolous, he may transfer without consideration to the State all right, 

title, and interest of the United States in and to any obsolete ships 

which are available for transfer under this Act if—

(1) the State gives to the Secretary such assurances as he 

deems necessary that such ships will be utilized and maintained only for the purposes stated in the application and, 

when sunk, will be charted and marked as a hazard to navigation; 

(2) the State agrees to secure any licenses or permits which 

may be required under the provisions of any other applicable 

Federal law; 

(3) the State agrees to such other terms and conditions as 

the Secretary shall require in order to protect the marine environment and other interests of the United States; and 

ø(4) the transfer would be at no cost to the Government (except for any financial assistance provided under section 7) with 

the State taking delivery of such obsolete ships at fleetside of 

the National Defense Reserve Fleet in an ‘‘as is—where is’’ condition.¿ 

(4) the transfer would be at no cost to the government (except 

for any financial assistance provided under section 1220(c)(1) of 

this title) with the State taking delivery of such obsolete ships 

and titles in an ‘‘as-is—where-is’’ condition at such place and 

time designated as may be determined by the Secretary of 

Transportation. 

15 

TARIFF ACT OF 1930 

SEC. 466. EQUIPMENT AND REPAIRS OF VESSELS. 

[19 U.S.C. 1466] 

(a) VESSELS SUBJECT TO DUTY; PENALTIES.—The equipments, or 

any part thereof, including boats, purchased for, or the repair parts 

or materials to be used, or the expenses of repairs made in a foreign country upon a vessel documented under the laws of the 

United States to engage in the foreign or coasting trade, or a vessel 

intended to be employed in such trade, shall, on the first arrival 

of such vessel in any port of the United States, be liable to entry 

and the payment of an ad valorem duty of 50 per centum on the 

cost thereof in such foreign country. If the owner or master willfully or knowingly neglects or fails to report, make entry, and pay 

duties as herein required, or if he makes any false statement in respect of such purchases or repairs without reasonable cause to believe the truth of such statements, or aids or procures the making 

of any false statement as to any matter material thereto without 

reasonable cause to believe the truth of such statement, such vessel, or a monetary amount up to the value thereof as determined 

by the Secretary, to be recovered from the owner, shall be subject 

to seizure and forfeiture[.] For the purposes of this section, compensation paid to members of the regular crew of such vessel in 

connection with the installation of any such equipments or any 

part thereof, or the making of repairs, in a foreign country, shall 

not be included in the cost of such equipment or part thereof, or 

of such repairs. 

(b) NOTICE.—If the appropriate customs officer has reasonable 

cause to believe a violation has occurred and determines that further proceedings are warranted, he shall issue to the person concerned a written notice of his intention to issue a penalty claim. 

Such notice shall—

(1) describe the circumstances of the alleged violation; 

(2) specify all laws and regulations allegedly violated; 

(3) disclose all the material facts which establish the alleged 

violation; 

(4) state the estimated loss of lawful duties, if any, and taking into account all of the circumstances, the amount of the 

proposed penalty; and 

(5) inform such person that he shall have a reasonable opportunity to make representations, both oral and written, as to 

why such penalty claim should not be issued. 

(c) VIOLATION.—After considering representations, if any, made 

by the person concerned pursuant to the notice issued under subsection (b), the appropriate customs officer shall determine whether 

any violation of subsection (a), as alleged in the notice, has occurred. If such officer determines that there was no violation, he 

shall promptly notify, in writing, the person to whom the notice 

was sent. If such officer determines that there was a violation, he 

shall issue a written penalty claim to such person. The written 

penalty claim shall specify all changes in the information provided 

under paragraphs (1) through (4) of subsection (b). 

(d) REMISSION FOR NECESSARY REPAIRS.—If the owner or master 

of such vessel furnishes good and sufficient evidence that—

16 

(1) such vessel, while in the regular course of her voyage, 

was compelled, by stress of weather or other casualty, to put 

into such foreign port and purchase such equipments, or make 

such repairs, to secure the safety and seaworthiness of the vessel to enable her to reach her port of destination; 

(2) such equipments or parts thereof or repair parts or materials, were manufactured or produced in the United States, 

and the labor necessary to install such equipments or to make 

such repairs was performed by residents of the United States, 

or by members of the regular crew of such vessel; or 

(3) such equipments, or parts thereof, or materials, or labor, 

were used as dunnage for cargo, or for the packing or shoring 

thereof, or in the erection of temporary bulkheads or other 

similar devices for the control of bulk cargo, or in the preparation (without permanent repair or alteration) of tanks for the 

carriage of liquid cargo; then the Secretary of the Treasury is 

authorized to remit or refund such duties, and such vessel 

shall not be liable to forfeiture, and no license or enrollment 

and license, or renewal of either, shall hereafter be issued to 

any such vessel until the collector to whom application is made 

for the same shall be satisfied, from the oath of the owner or 

master, that all such equipments or parts thereof or materials 

and repairs made within the year immediately preceding such 

application have been duly accounted for under the provisions 

of this section, and the duties accruing thereon duly paid; and 

if such owner or master shall refuse to take such oath, or take 

it falsely, the vessel shall be seized and forfeited. 

(e) VESSELS USED PRIMARILY FOR PURPOSES OTHER THAN TRANSPORTING PASSENGERS OR PROPERTY.—

(1) In the case of any vessel referred to in subsection (a) that 

arrives in a port of the United States two years or more after 

its last departure from a port in the United States, the duties 

imposed by this section shall apply only with respect to— (A) fish nets and netting, and 

(B) other equipments and parts thereof, repair parts and 

materials purchased, or repairs made, during the first six 

months after the last departure of such vessel from a port 

of the United States. 

(2) If such vessel is designed and used primarily for transporting passengers or property, paragraph (1) shall not apply 

if the vessel departed from the United States for the sole purpose of obtaining such equipments, parts, materials, or repairs. 

(f) CIVIL AIRCRAFT EXCEPTION.—The duty imposed under subsection (a) shall not apply to the cost of equipments, or any part 

thereof, purchased, of repair parts or materials used, or of repairs 

made in a foreign country with respect to a United States civil aircraft, within the meaning of general note 3(c)(iv) of the Harmonized 

Tariff Schedule of the United States. 

(g) NATIONAL DEFENSE RESERVE FLEET EXCEPTION.— (1) IN GENERAL.—The duty imposed under subsection (a) 

shall not apply to the cost of equipment, or any part thereof 

purchased, of repair parts or materials used, or expenses of repairs made in a foreign country for any vessel operated as part 

of the National Defense Reserve Fleet when the vessel is under 

the jurisdictional control of the Department of Defense if equivVerDate Aug 31 2005 01:30 Nov 23, 2005 Jkt 049010 PO 00000 Frm 00018 Fmt 6659 Sfmt 6603 E:\HR\OC\SR183.XXX SR183
17 

alent equipment, parts, repair parts, or materials made in the 

United States, or repairs made in the United States were determined by the Secretary of Transportation not to be reasonably 

available. 

(2) REPORT ON DETERMINATIONS.—The Secretary of Transportation shall transmit a report to the Senate Committee on Commerce, Science, and Transportation and the House of Representatives Committee on Armed Services setting forth the circumstances under which any such determination was made by 

the Secretary. 

ø(g)¿ (h) FISH NET AND NETTING PURCHASES AND REPAIRS.—The 

duty imposed by subsection (a) shall not apply to entries on and 

after October 1, 1979, and before January 1, 1982, of— (1) tuna purse seine nets and netting which are equipments 

or parts thereof, 

(2) repair parts for such nets and netting, or materials used 

in repairing such nets and netting, or 

(3) the expenses of repairs of such nets and netting, for any 

United States documented tuna purse seine vessel of greater 

than 500 tons carrying capacity or any United States tuna 

purse seine vessel required to carry a certificate of inclusion 

under the general permit issued to the American Tunaboat Association pursuant to section 104 of the Marine Mammal Protection Act of 1972. 

ø(h)¿ (i) FOREIGN REPAIR OF VESSELS.—The duty imposed by 

subsection (a) of this section shall not apply to— (1) the cost of any equipment, or any part of equipment, purchased for, or the repair parts or materials to be used, or the 

expense of repairs made in a foreign country with respect to, 

LASH (Lighter Aboard Ship) barges documented under the 

laws of the United States and utilized as cargo containers; 

(2) the cost of spare repair parts or materials (other than 

nets or nettings) which the owner or master of the vessel certifies are intended for use aboard a cargo vessel, documented 

under the laws of the United States and engaged in the foreign 

or coasting trade, for installation or use on such vessel, as 

needed, in the United States, at sea, or in a foreign country, 

but only if duty is paid under appropriate commodity classifications of the Harmonized Tariff Schedule of the United States 

upon first entry into the United States of each such spare part 

purchased in, or imported from, a foreign country; 

(3) the cost of spare parts necessarily installed before the 

first entry into the United States, but only if duty is paid 

under appropriate commodity classifications of the Harmonized 

Tariff Schedule of the United States upon first entry into the 

United States of each such spare part purchased in, or imported from, a foreign country; or 

(4) the cost of equipment, repair parts, and materials that 

are installed on a vessel documented under the laws of the 

United States and engaged in the foreign or coasting trade, if 

the installation is done by members of the regular crew of such 

vessel while the vessel is on the high seas. Declaration and 

entry shall not be required with respect to the installation, 

equipment, parts, and materials described in paragraph (4). 

* * * * * * * 

18 

[Insert A, attached as page ——A] 

MERCHANT MARINE ACT, 1936 

TITLE XI—FEDERAL SHIP FINANCING GUARANTEE PROGRAM

SEC. 1101. DEFINITIONS. 

[46 U.S.C. App. 1271] 

As used in this title—

(a) The term ‘‘mortgage’’ includes—

(1) a preferred mortgage as defined in section 31301 of title 

46, United States Code; and 

(2) a mortgage on a vessel that will become a preferred mortgage when filed or recorded under chapter 313 of title 46, 

United States Code. 

(b) The term ‘‘vessel’’ includes all types, whether in existence or 

under construction, of passenger cargo and combination passenger 

cargo carrying vessels, tankers, tugs, towboats, barges, dredges and 

ocean thermal energy conversion facilities or plantships which are 

or will be documented under the laws of the United States, fishing 

vessels whose ownership will meet the citizenship requirements for 

documenting vessels in the coastwise trade within the meaning of 

section 2 of the Shipping Act, 1916, as amended, floating drydocks 

which have a capacity of thirty-five thousand or more lifting tons 

and a beam of one hundred and twenty-five feet or more between 

the wing walls and oceanographic research or instruction or pollution treatment, abatement or control vessels; 

(c) The term ‘‘obligation’’ shall mean any note, bond, debenture, 

or other evidence of indebtedness (exclusive of notes or other obligations issued by the øSecretary¿ Secretary or Administrator pursuant to subsection (d) of section 1105 of this title and obligations 

eligible for investment of funds under section 1102 and subsection 

(d) of section 1108 of this title), issued for one of the purposes specified in subsection (a) of section 1104 of this title; 

(d) The term ‘‘obligor’’ shall mean any party primarily liable for 

payment of the principal of or interest on any obligation; 

(e) The term ‘‘obligee’’ shall mean the holder of an obligation; 

(f) ACTUAL COST DEFINED.—The term ‘‘actual cost’’ means the 

sum of—

(1) all amounts paid by or for the account of the obligor as 

of the date on which a determination is made under section 

1108(g)(1); and 

(2) all amounts that the øSecretary¿ Secretary or Administrator reasonably estimates that the obligor will become obligated to pay from time to time thereafter, for the construction, 

reconstruction, or reconditioning of the vessel, including guarantee fees that will become payable under section 1104A(e) in 

connection with all obligations issued for construction, reconstruction, or reconditioning of the vessel or equipment to be delivered, and all obligations issued for the delivered vessel or 

equipment. 

(g) The term ‘‘depreciated actual cost’’ of a vessel means the actual cost of the vessel depreciated on a straightline basis over the 

useful life of the vessel as determined by the øSecretary¿ Secretary 

or Administrator, not to exceed twenty-five years from the date the 

19 

vessel was delivered by the shipbuilder, or, if the vessel has been 

reconstructed or reconditioned, the actual cost of the vessel depreciated on a straightline basis from the date the vessel was delivered by the shipbuilder to the date of such reconstruction or reconditioning on the basis of the original useful life of the vessel and 

from the date of such reconstruction or reconditioning on a 

straightline basis and on the basis of a useful life of the vessel determined by the øSecretary¿ Secretary or Administrator, plus all 

amounts paid or obligated to be paid for the reconstruction or reconditioning depreciated on a straightline basis on the basis of a 

useful life of the vessel determined by the øSecretary¿ Secretary or 

Administrator; 

(h) The terms ‘‘construction’’, ‘‘reconstruction’’, or ‘‘reconditioning’’

shall include, but shall not be limited to, designing, inspecting, outfitting, and equipping; 

(i) The term ‘‘ocean thermal energy conversion facility or 

plantship’’ means any at-sea facility or vessel, whether mobile, 

floating unmoored, moored, or standing on the seabed, which uses 

temperature differences in ocean water to produce electricity or another form of energy capable of being used directly to perform 

work, and includes any equipment installed on such facility or vessel to use such electricity or other form of energy to produce, process, refine, or manufacture a product, and any cable or pipeline 

used to deliver such electricity, freshwater, or product to shore, and 

all other associated equipment and appurtenances of such facility 

or vessel, to the extent they are located seaward of the highwater 

mark; 

(j) The term ‘‘citizen of the Northern Mariana Islands’’ means—

(1) an individual who qualifies as such under section 8 of the 

Schedule on Transitional Matters attached to the Constitution 

of the Northern Mariana Islands; or 

(2) a corporation, partnership, association, or other entity 

formed under the laws of the Northern Mariana Islands, not 

less than 75 percent of the interest in which is owned by individuals referred to in paragraph (1) or citizens or nationals of 

the United States, in cases in which ‘‘owned’’ is used in the 

same sense as in section 2 of the Shipping Act, 1916 (46 U.S.C. 

802); 

(k) The term ‘‘fishery facility’’ means—

(1) for operations on land—

(A) any structure or appurtenance thereto designed for 

the unloading and receiving from vessels, the processing, 

the holding pending processing, the distribution after processing, or the holding pending distribution, of fish from 

one or more fisheries, 

(B) the land necessary for any such structure or appurtenance described in subparagraph (A), and 

(C) equipment which is for use in connection with any 

such structure or appurtenance and which is necessary for 

the performance of any function referred to in subparagraph (A); 

(2) for operations other than on land, any vessel built in the 

United States used for, equipped to be used for, or of a type 

which is normally used for, the processing of fish; or 

20 

(3) for aquaculture, including operations on land or elsewhere—

(A) any structure or appurtenance thereto designed for 

aquaculture; 

(B) the land necessary for any such structure or appurtenance described in subparagraph (A); 

(C) equipment which is for use in connection with any 

such structure or appurtenance and which is necessary for 

the performance of any function referred to in subparagraph (A); and 

(D) any vessel built in the United States used for, 

equipped to be used for, or of a type which is normally 

used for aquaculture; but only if such structure, appurtenance, land, equipment, or vessel is owned by an individual who is a citizen or national of the United States or 

a citizen of the Northern Mariana Islands or by a corporation, partnership, association, or other entity that is a citizen of the United States within the meaning of section 2 

of the Shipping Act, 1916 (46 U.S.C. 802), and for purposes 

of applying such section 2 with respect to this section—

(i) the term ‘‘State’’ as used therein includes any 

State, the District of Columbia, the Commonwealth of 

Puerto Rico, American Samoa, the Virgin Islands of 

the United States, Guam, the Northern Mariana Islands, or any other Commonwealth, territory, or possession of the United States; and 

(ii) citizens of the United States must own not less 

than 75 percent of the interest in the entity and nationals of the United States or citizens of the Northern 

Mariana Islands shall be treated as citizens of the 

United States in meeting such ownership requirement; 

(l) The term ‘‘fishing vessel’’ has the meaning given such term by 

section 3(11) of the Magnuson-Stevens Fishery Conservation and 

Management Act of 1976 (16 U.S.C. 1802(11)); and any reference 

in this title to a vessel designed principally for commercial use in 

the fishing trade or industry shall be treated as a reference to a 

fishing vessel; 

(m) The term ‘‘United States’’ when used in a geographical context with respect to fishing vessels or fishery facilities includes all 

States referred to in subsection (k)(i). 

(n) The term ‘‘Secretary’’ means the Secretary of Commerce with 

respect to fishing vessels and fishing facilities as provided by this 

øtitle, and the Secretary of Transportation with respect to all other 

vessels and general shipyard facilities (as defined in section 

1112(d)(3)).¿ title. 

(o) The term ‘‘eligible export vessel’’ means a vessel constructed, 

reconstructed, or reconditioned in the United States for use in 

world-wide trade which will, upon delivery or redelivery, be placed 

under or continued to be documented under the laws of a country 

other than the United States. 

(p) The term ‘‘Administrator’’ means the Administrator of the 

Maritime Administration. 

21 

SEC. 1102. FEDERAL SHIP FINANCING FUND. 

[46 U.S.C. App. 1272] 

There is hereby created a Federal Ship Financing Fund (hereinafter referred to as the Fund) which shall be used by the øSecretary¿ Secretary or Administrator as a revolving fund for the purpose of carrying out the provisions of this title, and there shall be 

allocated to such Fund the sum of $1,000,000 out of funds made 

available to the øSecretary¿ Secretary or Administrator under the 

appropriation authorized by Section 1107 (46 U.S.C.). Moneys in 

the Fund shall be deposited in the Treasury of the United States 

to the credit of the Fund or invested in bonds or other obligations 

of, or guaranteed as to principal and interest by, the United States. 

SEC. 1103. AUTHORIZATION OF SECRETARY TO GUARANTEE OBLIGATIONS. 

[46 U.S.C. App. 1273]. 

(a) PRINCIPAL AND INTEREST.—The øSecretary¿ Secretary or Administrator is authorized to guarantee, and to enter into commitments to guarantee, the payment of the interest on, and the unpaid 

balance of the principal of, any obligation which is eligible to be 

guaranteed under this title. A guarantee, or commitment to guarantee, made by the øSecretary¿ Secretary or Administrator under 

this title shall cover 100 percent of the amount of the principal and 

interest of the obligation. 

(b) SECURITY INTEREST.—No obligation shall be guaranteed 

under this title unless the obligor conveys or agrees to convey to 

the øSecretary¿ Secretary or Administrator such security interest, 

which may include a mortgage or mortgages on a vessel or vessels, 

as the øSecretary¿ Secretary or Administrator may reasonably require to protect the interests of the United States. 

(c) AMOUNT OF GUARANTEE; PERCENTAGE LIMITATION; DETER- MINATION OF ACTUAL COST OF VESSEL.—The øSecretary¿ Secretary 

or Administrator shall not guarantee the principal of obligations in 

an amount in excess of 75 per centum, or 87 1⁄2 per centum, whichever is applicable under section 1104 of this title, of the amount, 

as determined by the øSecretary¿ Secretary or Administrator which 

determination shall be conclusive, paid by or for the account of the 

obligor for the construction, reconstruction, or reconditioning of a 

vessel or vessels with respect to which a security interest has been 

conveyed to the øSecretary¿ Secretary or Administrator, unless the 

obligor creates an escrow fund as authorized by section 1108 of this 

title, in which case the øSecretary¿ Secretary or Administrator may 

guarantee 75 per centum or 871⁄2 per centum, whichever is applicable under section 1104 of this title, of the actual cost of such vessel 

or vessels. 

(d) PLEDGE OF UNITED STATES.—The full faith and credit of the 

United States is pledged to the payment of all guarantees made 

under this title with respect to both principal and interest, including interest, as may be provided for in the guarantee, accruing between the date of default under a guaranteed obligation and the 

payment in full of the guarantee. 

(e) PROOF OF OBLIGATIONS.—Any guarantee, or commitment to 

guarantee, made by the øSecretary¿ Secretary or Administrator 

under this title shall be conclusive evidence of the eligibility of the 

obligations for such guarantee, and the validity of any guarantee, 

or commitment to guarantee, so made shall be incontestable. NotVerDate Aug 31 2005 01:30 Nov 23, 2005 Jkt 049010 PO 00000 Frm 00023 Fmt 6659 Sfmt 6601 E:\HR\OC\SR183.XXX SR183
22 

withstanding an assumption of an obligation by the øSecretary¿ 

Secretary or Administrator under section 1105(a) or (b) of this Act, 

the validity of the guarantee of an obligation made by the øSecretary¿ Secretary or Administrator under this title is unaffected 

and the guarantee remains in full force and effect. 

(f) LIMITATION ON OUTSTANDING AMOUNT.—The aggregate unpaid principal amount of the obligations guaranteed under this section and outstanding at any one time shall not exceed 

$12,000,000,000, of which (1) $850,000,000 shall be limited to obligations pertaining to guarantees of obligations for fishing vessels 

and fishery facilities made under this title, and (2) $3,000,000,000 

shall be limited to obligations pertaining to guarantees of obligations for eligible export vessels. No additional limitations may be 

imposed on new commitments to guarantee loans for any fiscal 

year, except in such amounts as established in advance in annual 

authorization Acts. No vessel eligible for guarantees under this 

title shall be denied eligibility because of its type. 

(g) LOAN GUARANTEES FOR EXPORT VESSELS; FINDING REQUIRED; 

TERMINATION OF AUTHORITY.—

(1) The øSecretary¿ Secretary or Administrator may not 

issue a commitment to guarantee obligations for an eligible export vessel unless, after considering—

(A) the status of pending applications for commitments 

to guarantee obligations for vessels documented under the 

laws of the United States and operating or to be operated 

in the domestic or foreign commerce of the United States, 

(B) the economic soundness of the applications referred 

to in subparagraph (A), and 

(C) the amount of guarantee authority available, the 

øSecretary¿ Secretary or Administrator determines, in the 

sole discretion of the øSecretary¿ Secretary or Administrator, that the issuance of a commitment to guarantee obligations for an eligible export vessel will not result in the 

denial of an economically sound application to issue a commitment to guarantee obligations for vessels documented 

under the laws of the United States operating in the domestic or foreign commerce of the United States. 

(2) The øSecretary¿ Secretary or Administrator may not 

issue commitments to guarantee obligations for eligible export 

vessels under this section after the later of—

(A) the 5th anniversary of the date on which the øSecretary¿ Secretary or Administrator publishes final regulations setting forth the application procedures for the 

issuance of commitments to guarantee obligations for eligible export vessels, 

(B) the last day of any 5-year period in which funding 

and guarantee authority for obligations for eligible export 

vessels have been continuously available, or 

(C) the last date on which those commitments may be 

issued under any treaty or convention entered into after 

the date of the enactment of the National Shipbuilding and 

Shipyard Conversion Act of 1993 that prohibits guarantee 

of those obligations. 

(h)(1) The øSecretary¿ Secretary or Administrator shall—

23 

(A) establish in accordance with this subsection, and update 

annually, a system of risk categories for obligations guaranteed 

under this title, that categorizes the relative risk of guarantees 

made under this title with respect to the risk factors set forth 

in paragraph (3); 

(B) annually determine for each of the risk categories a subsidy rate equivalent to the cost of obligations in the category, 

expressed as a percentage of the amount guaranteed under 

this title for obligations in the category; and 

(C) ensure that each risk category is comprised of loans that 

are relatively homogeneous in cost and share characteristics 

predictive of defaults and other costs, given the facts known at 

the time of obligation or commitment, using a risk category 

system that is based on historical analysis of program data and 

statistical evidence concerning the likely costs of defaults or 

other costs that expected to be associated with the loans in the 

category. 

(2)(A) Before making a guarantee under this section for an obligation, and annually for projects subject to a guarantee, the øSecretary¿ Secretary or Administrator shall apply the risk factors set 

forth in paragraph (3) to place the obligation in a risk category established under paragraph (1)(A). 

(B) The øSecretary¿ Secretary or Administrator shall consider 

the aggregate amount available to the øSecretary¿ Secretary or Administrator for making guarantees under this title to be reduced by 

the amount determined by multiplying— (i) the amount guaranteed under this title for an obligation, 

by 

(ii) the subsidy rate for the category in which the obligation 

is placed under subparagraph (A) of this paragraph. 

(C) The estimated cost to the Government of a guarantee made 

by the øSecretary¿ Secretary or Administrator under this title for 

an obligation is deemed to be the amount determined under subparagraph (B) for the obligation. 

(D) The øSecretary¿ Secretary or Administrator may not guarantee obligations under this title after the aggregate amount available to the øSecretary¿ Secretary or Administrator under appropriations Acts for the cost of loan guarantees is required by subparagraph (B) to be considered reduced to zero. 

(3) The risk factors referred to in paragraphs (1) and (2) are the 

following: 

(A) If applicable, the country risk for each eligible export vessel financed or to be financed by an obligation. 

(B) The period for which an obligation is guaranteed or to be 

guaranteed. 

(C) The amount of an obligation, which is guaranteed or to 

be guaranteed, in relation to the total cost of the project financed or to be financed by the obligation. 

(D) The financial condition of an obligor or applicant for a 

guarantee. 

(E) If applicable, any guarantee related to the project, other 

than the guarantee under this title for which the risk factor is 

applied. 

(F) If applicable, the projected employment of each vessel or 

equipment to be financed with an obligation. 

24 

(G) If applicable, the projected market that will be served by 

each vessel or equipment to be financed with an obligation. 

(H) The collateral provided for a guarantee for an obligation. 

(I) The management and operating experience of an obligor 

or applicant for a guarantee. 

(J) Whether a guarantee under this title is or will be in effect during the construction period of the project. 

(K) A risk factor for concentration risk reflecting the risk 

presented by an unduly large percentage of loans outstanding 

by any 1 borrower or group of affiliated borrowers. 

(4) In this subsection, the term ‘‘cost’’ has the meaning given that 

term in section 502 of the Federal Credit Reform Act of 1990 (2 

U.S.C. 661a). 

(i) PRIORITY FOR NATIONAL DEFENSE TANK VESSELS.—In guaranteeing and entering commitments to guarantee under this section, 

the øSecretary¿ Administrator shall give priority to guarantees and 

commitments for vessels that are otherwise eligible for a guarantee 

under this section and that are constructed with assistance under 

subtitle D of the Maritime Security Act of 2003. 

(j) PRIORITY FOR OTHER VESSELS SUITABLE FOR SERVICE AS A

NAVAL AUXILIARY.—øIn guaranteeing and entering commitments to 

guarantee under this section,¿ If the Secretary or Administrator 

seeks a priority for a commitment to guarantee under this section, 

the øSecretary¿ Administrator shall, after applying subsection (i), 

give priority to a guarantee or commitment for a vessel that is otherwise eligible for a guarantee under this section and that the Secretary of Defense determines—

(1) is suitable for service as a naval auxiliary in time of war 

or national emergency; and 

(2) meets a shortfall in sealift capacity or capability. 

SEC. 1104A. ELIGIBILITY FOR GUARANTEE. 

[46 U.S.C. App. 1274] 

(a) PURPOSE OF OBLIGATIONS.—Pursuant to the authority granted under section 1103(a), the øSecretary¿ Secretary or Administrator upon such terms as he shall prescribe, may guarantee or 

make a commitment to guarantee, payment of the principal of and 

interest on an obligation which aids in—

(1) financing, including reimbursement of an obligor for expenditures previously made for, construction, reconstruction, or 

reconditioning of a vessel (including an eligible export vessel), 

which is designed principally for research, or for commercial 

use (A) in the coastwise or intercoastal trade; (B) on the Great 

Lakes, or on bays, sounds, rivers, harbors, or inland lakes of 

the United States; (C) in foreign trade as defined in section 905 

of this Act for purposes of title V of this Act; or (D) as an ocean 

thermal energy conversion facility or plantship; (E) with respect to floating drydocks in the construction, reconstruction, 

reconditioning, or repair of vessels; or (F) with respect to an eligible export vessel, in world-wide trade; Provided, however, 

That no guarantee shall be entered into pursuant to this paragraph (a)(1) later than one year after delivery, or redelivery in 

the case of reconstruction or reconditioning of any such vessel 

unless the proceeds of the obligation are used to finance the 

construction, reconstruction, or reconditioning of a vessel or 

25 

vessels, or facilities or equipment pertaining to marine operations; 

(2) financing, including reimbursement of an obligor for expenditures previously made for, construction, reconstruction, 

reconditioning, or purchase of a vessel or vessels owned by citizens or nationals of the United States or citizens of the Northern Mariana Islands which are designed principally for research, or for commercial use in the fishing trade or industry; 

(3) financing the purchase, reconstruction, or reconditioning 

of vessels or fishery facilities for which obligations were guaranteed under this title that, under the provisions of section 

1105: 

(A) are vessels or fishery facilities for which obligations 

were accelerated and paid; 

(B) were acquired by the Fund; or 

(C) were sold at foreclosure instituted by the øSecretary¿ 

Secretary or Administrator; 

(4) financing, in whole or in part, the repayment to the 

United States of any amount of construction-differential subsidy paid with respect to a vessel pursuant to title V of this 

Act, as amended; 

(5) refinancing existing obligations issued for one of the purposes specified in (1), (2), (3), or (4) whether or not guaranteed 

under this title, including, but not limited to, short-term obligations incurred for the purpose of obtaining temporary funds 

with the view to refinancing from time to time; 

(6) financing or refinancing, including, but not limited to, the 

reimbursement of obligors for expenditures previously made 

for, the construction, reconstruction, reconditioning, or purchase of fishery facilities; or 

(7) financing or refinancing, including, but not limited to, the 

reimbursement of obligors for expenditures previously made, 

for the purchase of individual fishing quotas in accordance 

with section 303(d)(4) of the Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 1853(d)(4)). 

Any obligation guaranteed under paragraphs (6) and (7) shall be 

treated, for purposes of this title, in the same manner and to the 

same extent as an obligation guaranteed under this title which aids 

in the construction, reconstruction, reconditioning, or purchase of a 

vessel; except with respect to provisions of this title that by their 

nature can only be applied to vessels. 

(b) CONTENTS OF OBLIGATIONS.—Obligations guaranteed under 

this title—

(1) shall have an obligor approved by the øSecretary¿ Secretary or Administrator as responsible and possessing the ability, experience, financial resources, and other qualifications 

necessary to the adequate operation and maintenance of the 

vessel or vessels which serve as security for the guarantee of 

the øSecretary¿ Secretary or Administrator; 

(2) subject to the provisions of subsection (c)(1) and subsection (i), shall be in an aggregate principal amount which 

does not exceed 75 per centum of the actual cost or depreciated 

actual cost, as determined by the øSecretary¿ Secretary or Administrator, of the vessel which is used as security for the 

guarantee of the øSecretary¿ Secretary or Administrator: ProVerDate Aug 31 2005 01:30 Nov 23, 2005 Jkt 049010 PO 00000 Frm 00027 Fmt 6659 Sfmt 6601 E:\HR\OC\SR183.XXX SR183
26 

vided, however, That in the case of a vessel, the size and speed 

of which are approved by the øSecretary¿ Secretary or Administrator, and which is or would have been eligible for mortgage 

aid for construction under section 509 of this Act (or would 

have been eligible for mortgage aid under section 509 of this 

Act except that the vessel was built with the aid of construction-differential subsidy and said subsidy has been repaid) and 

in respect of which the minimum downpayment by the mortgagor required by that section would be or would have been 

121⁄2 per centum of the cost of such vessel, such obligations 

may be in an amount which does not exceed 871⁄2 per centum 

of such actual cost or depreciated actual cost: Provided, further, That the obligations which relate to a barge which is constructed without the aid of construction-differential subsidy, or, 

if so subsidized, on which said subsidy has been repaid, may 

be in an aggregate principal amount which does not exceed 

871⁄2 per centum of the actual cost or depreciated actual cost 

thereof: Provided further, That in the case of a fishing vessel 

or fishery facility, the obligation shall be in an aggregate principal amount not to exceed 80 percent of the actual cost or depreciated actual cost of the fishing vessel or fishery facility, except that no debt may be placed under this proviso through the 

Federal Financing Bank: Provided further, That in the case of 

an ocean thermal energy conversion facility or plantship which 

is constructed without the aid of construction-differential subsidy, such obligations may be in an aggregate principal amount 

which does not exceed 871⁄2 percent of the actual cost or depreciated actual cost of the facility or plantship: Provided further, 

That in the case of an eligible export vessel, such obligations 

may be in an aggregate principal amount which does not exceed 871⁄2 of the actual cost or depreciated actual cost of the 

eligible export vessel; 

(3) shall have maturity dates satisfactory to the øSecretary¿ 

Secretary or Administrator but, subject to the provisions of 

paragraph (2) of subsection (c) of this section, not to exceed 

twenty-five years from the date of the delivery of the vessel 

which serves as security for the guarantee of the øSecretary¿ 

Secretary or Administrator or, if the vessel has been reconstructed or reconditioned, not to exceed the later of (i) twentyfive years from the date of delivery of the vessel and (ii) the 

remaining years of the useful life of the vessel as determined 

by the øSecretary¿ Secretary or Administrator; 

(4) shall provide for payments by the obligor satisfactory to 

the øSecretary¿ Secretary or Administrator; 

(5) shall bear interest (exclusive of charges for the guarantee 

and service charges, if any) at rates not to exceed such per centum per annum on the unpaid principal as the øSecretary¿ 

Secretary or Administrator determines to be reasonable, taking 

into account the range of interest rates prevailing in the private market for similar loans and the risks assumed by the 

øSecretary¿ Secretary or Administrator; 

(6) shall provide, or a related agreement shall provide, that 

if the vessel used as security for the guarantee of the øSecretary¿ Secretary or Administrator is a delivered vessel, the 

vessel shall be in class A–1, American Bureau of Shipping, or 

27 

shall meet such other standards as may be acceptable to the 

øSecretary¿ Secretary or Administrator, with all required certificates, including but not limited to, marine inspection certificates of the United States Coast Guard or, in the case of an 

eligible export vessel, of the appropriate national flag authorities under a treaty, convention, or other international agreement to which the United States is a party, with all outstanding requirements and recommendations necessary for retention of class accomplished, unless the øSecretary¿ Secretary 

or Administrator permits a deferment of such repairs, and 

shall be tight, stanch, strong, and well and sufficiently tackled, 

appareled, furnished, and equipped, and in every respect seaworthy and in good running condition and repair, and in all respects fit for service; and 

(7) may provide, or a related agreement may provide, if the 

vessel used as security for the guarantee of the øSecretary¿ 

Administrator is a passenger vessel having the tonnage, speed, 

passenger accommodations and other characteristics set forth 

in title V of this Act, as amended, and if the Secretary approves, that the sole recourse against the obligor by the United 

States for any payments under the guarantee shall be limited 

to repossession of the vessel and the assignment of insurance 

claims and that the liability of the obligor for any payments of 

principal and interest under the guarantee shall be satisfied 

and discharged by the surrender of the vessel and all right, 

title, and interest therein to the United States: Provided, That 

the vessel upon surrender shall be (i) free and clear of all liens 

and encumbrances whatsoever except the security interest conveyed to the øSecretary¿ Administrator under this title, (ii) in 

class, and (iii) in as good order and condition, ordinary wear 

and tear excepted, as when acquired by the obligor, except that 

any deficiencies with respect to freedom from encumbrances, 

condition and class may, to the extent covered by valid policies 

of insurance, be satisfied by the assignment to the øSecretary¿ 

Administrator of claims of the obligor under such policies. 

The Secretary may not establish, as a condition of eligibility for 

guarantee under this title, a minimum principal amount for an obligation covering the reconstruction or reconditioning of a fishing 

vessel or fishery facility. For purposes of this title, the reconstruction or reconditioning of a fishing vessel or fishery facility does not 

include the routine minor repair or maintenance of the vessel or facility. 

(c) SECURITY.—(1) The security for the guarantee of an obligation 

by the øSecretary¿ Secretary or Administrator under this title may 

relate to more than one vessel and may consist of any combination 

of types of security. The aggregate principal amount of obligations 

which have more than one vessel as security for the guarantee of 

the øSecretary¿ Secretary or Administrator under this title may 

equal, but not exceed, the sum of the principal amount of obligations permissible with respect to each vessel. 

(2) If the security for the guarantee of an obligation by the øSecretary¿ Secretary or Administrator under this title relates to more 

than one vessel, such obligation may have the latest maturity date 

permissible under subsection (b) of this section with respect to any 

of such vessels: Provided, That the øSecretary¿ Secretary or AdVerDate Aug 31 2005 01:30 Nov 23, 2005 Jkt 049010 PO 00000 Frm 00029 Fmt 6659 Sfmt 6601 E:\HR\OC\SR183.XXX SR183
28 

ministrator may require such payments of principal, prior to maturity, with respect to all related obligations as he deems necessary 

in order to maintain adequate security for his guarantee. 

(d) RESTRICTIONS.—(1)(A) No commitment to guarantee, or guarantee of, an obligation shall be made by the øSecretary of Transportation¿ Administrator unless the øSecretary¿ Administrator 

finds that the property or project with respect to which the obligation will be executed will be economically sound. In making that 

determination, the øSecretary¿ Administrator shall consider—

(i) the need in the particular segment of the maritime industry for new or additional capacity, including any impact on existing equipment for which a guarantee under this title is in 

effect; 

(ii) the market potential for the employment of the vessel 

over the life of the guarantee; 

(iii) projected revenues and expenses associated with employment of the vessel; 

(iv) any charters, contracts of affreightment, transportation 

agreements, or similar agreements or undertakings relevant to 

the employment of the vessel; 

(v) other relevant criteria; and 

(vi) for inland waterways, the need for technical improvements, including but not limited to increased fuel efficiency, or 

improved safety. 

(B) No commitment to guarantee, or guarantee of, and obligation 

shall be made by the Secretary of Commerce unless the Secretary 

finds, at or prior to the time such commitment is made or guarantee becomes effective, that the property or project with respect 

to which the obligation will be executed will be, in the Secretary’s 

opinion, economically sound and in the case of fishing vessels, that 

the purpose of the financing or refinancing is consistent with the 

wise use of the fisheries resources and with the development, advancement, management, conservation, and protection of the fisheries resources, or with the need for technical improvements including but not limited to increased fuel efficiency or improved 

safety. 

(2) No commitment to guarantee, or guarantee of an obligation 

may be made by the Secretary under this title for the purchase of 

a used fishing vessel or used fishery facility unless—

(A) the vessel or facility will be reconstructed or reconditioned in the United States and will contribute to the development of the United States fishing industry; or 

(B) the vessel or facility will be used in the harvesting of fish 

from, or for a purpose described in section 1101(k) with respect 

to, an underutilized fishery. 

(3) No commitment to guarantee, or guarantee of an obligation 

may be made by the øSecretary¿ Administrator under this title for 

the construction, reconstruction, or reconditioning of an eligible export vessel unless—

(A) the øSecretary¿ Administrator finds that the construction, reconstruction, or reconditioning of that vessel will aid in 

the transition of United States shipyards to commercial activities or will preserve shipbuilding assets that would be essential 

in time of war or national emergency, and 

29 

(B) the owner of the vessel agrees with the øSecretary of 

Transportation¿ Administrator that the vessel shall not be 

transferred to any country designated by the Secretary of Defense as a country whose interests are hostile to the interests 

of the United States. 

(4) The Secretary shall promulgate regulations concerning circumstances under which waivers of or exceptions to otherwise applicable regulatory requirements concerning financial condition can 

be made. The regulations shall require that— (A) the economic soundness requirements set forth in paragraph (1)(A) of this subsection are met after the waiver of the 

financial condition requirement; and 

(B) øthe waiver¿ if deemed necessary by the Secretary or Administrator, the waiver shall provide for the imposition of other 

requirements on the obligor designed to compensate for øthe 

increased¿ any significant increase in risk associated with the 

obligor’s failure to meet regulatory requirements applicable to 

financial condition. 

(e) GUARANTEE FEES.—(1) Except as otherwise provided in this 

subsection, the øSecretary¿ Secretary or Administrator shall prescribe regulations to assess in accordance with this subsection a fee 

for the guarantee of an obligation under this title. 

(2)(A) The amount of a fee under this subsection for a guarantee 

is equal to the sum determined by adding the amounts determined 

under subparagraph (B) for the years in which the guarantee is in 

effect. 

(B) The amount referred to in subparagraph (A) for a year is the 

present value (determined by applying the discount rate determined under subparagraph (F)) of the amount determined by multiplying—

(i) the estimated average unpaid principal amount of the obligation that will be outstanding during the year (determined 

in accordance with subparagraph (E)), by 

(ii) the fee rate established under subparagraph (C) for the 

obligation for each year. 

(C) The fee rate referred to in subparagraph (B)(ii) for an obligation shall be— (i) in the case of an obligation for a delivered vessel or equipment, not less than one-half of 1 percent and not more than 

1 percent, determined by the øSecretary¿ Secretary or Administrator for the obligation under the formula established under 

subparagraph (D); or 

(ii) in the case of an obligation for a vessel to be constructed, 

reconstructed, or reconditioned, or of equipment to be delivered, not less than one-quarter of 1 percent and not more than 

one-half of 1 percent, determined by the øSecretary¿ Secretary 

or Administrator for the obligation under the formula established under subparagraph (D). 

(D) The øSecretary¿ Secretary or Administrator shall establish a 

formula for determining the fee rate for an obligation for purposes 

of subparagraph (C), that—

(i) is a sliding scale based on the creditworthiness of the obligor; 

(ii) takes into account the security provided for a guarantee 

under this title for the obligation; and 

30 

(iii) uses— (I) in the case of the most creditworthy obligors, the lowest rate authorized under subparagraph (C)(i) or (ii), as applicable; and 

(II) in the case of the least creditworthy obligors, the 

highest rate authorized under subparagraph (C)(i) or (ii), 

as applicable. 

(E) For purposes of subparagraph (B)(i), the estimated average 

unpaid principal amount does not include the average amount (except interest) on deposit in a year in the escrow fund under section 

1108. 

(F) For purposes of determining present value under subparagraph (B) for an obligation, the øSecretary¿ Secretary or Administrator shall apply a discount rate determined by the Secretary of 

the Treasury taking into consideration current market yields on 

outstanding obligations of the United States having periods to maturity comparable to the period to maturity for the obligation with 

respect to which the determination of present value is made. 

(3) A fee under this subsection shall be assessed and collected not 

later than the date on which amounts are first paid under an obligation with respect to which the fee is assessed. 

(4) A fee paid under this subsection is not refundable. However, 

an obligor shall receive credit for the amount paid for the remaining term of the guaranteed obligation if the obligation is refinanced 

and guaranteed under this title after such refinancing. 

(5) A fee paid under subsection (e) shall be included in the 

amount of the actual cost of the obligation guaranteed under this 

title and is eligible to be financed under this title. 

(f) INVESTIGATION OF APPLICATIONS.—(1) The øSecretary¿ Secretary or Administrator shall charge and collect from the obligor 

such amounts as he may deem reasonable for the investigation of 

applications for a guarantee, for the appraisal of properties offered 

as security for a guarantee, for the issuance of commitments, for 

services in connection with the escrow fund authorized by section 

1108 and for the inspection of such properties during construction, 

reconstruction, or reconditioning: Provided, That such charges shall 

not aggregate more than one-half of 1 per centum of the original 

principal amount of the obligations to be guaranteed. 

(2) The øSecretary¿ Secretary or Administrator may make a determination that aspects of an application under this title require 

independent analysis to be conducted by third party experts due to 

risk factors associated with markets, technology, øfinancial structures, or other risk factors identified by the Secretary¿ or financial 

structures. Any independent analysis conducted pursuant to this 

provision shall be performed by a party chosen by the øSecretary¿ 

Secretary or Administrator. The Secretary or Administrator shall 

not establish by rule, regulation, or procedure any requirement for 

independent analysis that is, or is intended to be, applied uniformly 

to loan guarantee applications without regard to such risk factors. 

(3) Notwithstanding any other provision of this title, the øSecretary¿ Secretary or Administrator may make a determination that 

an application under this title requires additional equity because of 

increased risk factors associated with markets, technology, øfinancial structures, or other risk factors identified by the Secretary.¿ or 

financial structures. 

31 

(4) The øSecretary¿ Secretary or Administrator may charge and 

collect fees to cover the costs of independent analysis under paragraph (2). Notwithstanding section 3302 of title 31, United States 

Code, any fee collected under this paragraph shall— (A) be credit as an offsetting collection to the account that 

finances the administration of the loan guarantee program; 

(B) shall be available for expenditure only to pay the costs 

of activities and services for which the fee is imposed; and 

(C) shall remain available until expended. 

(5) A third party independent analysis conducted under paragraph (2) shall be performed by a private sector expert in assessing 

such risk factors who is selected by the Administrator. No Federal 

funds shall be expended to conduct any review of any application 

under this title, or any modification of an existing loan guarantee, 

by any party that is not an expert in maritime finance or operations. 

(g) DISPOSITION OF MONEYS.—All moneys received by the øSecretary¿ Secretary or Administrator under the provisions of sections 

1101–1107 of this title shall be deposited in the Fund. 

(h) ADDITIONAL REQUIREMENTS.—Obligations guaranteed under 

this title and agreements relating thereto shall contain such other 

provisions with respect to the protection of the security interests of 

the United States (including acceleration, assumptions, and subrogation provisions and the issuance of notes by the obligor to the 

øSecretary¿ Secretary or Administrator), liens and releases of liens, 

payments of taxes, and such other matters as the øSecretary¿ Secretary or Administrator may, in his discretion, prescribe. 

(i) LIMITATION ON ESTABLISHMENT OF PERCENTAGE.—The øSecretary¿ Secretary or Administrator may not, with respect to— (1) the general 75 percent or less limitation in subsection 

(b)(2); 

(2) the 871⁄2 percent or less limitation in the 1st, 2nd, 4th, 

or 5th proviso to subsection (b)(2) or section 1112(b); or 

(3) the 80 percent or less limitation in the 3rd proviso to 

such subsection; establish by rule, regulation, or procedure any 

percentage within any such limitation that is, or is intended to 

be, applied uniformly to all guarantees or commitments to 

guarantee made under this section that are subject to the limitation. 

(j) PROCEDURE UPON RECEIVING LOAN GUARANTEE APPLICA- TION.—(1) Upon receiving an application for a loan guarantee for 

an eligible export vessel, the øSecretary¿ Administrator shall 

promptly provide to the Secretary of Defense notice of the receipt 

of the application. During the 30-day period beginning on the date 

on which the Secretary of Defense receives such notice, the Secretary of Defense may disapprove the loan guarantee based on the 

assessment of the øSecretary¿ Administrator of the potential use of 

the vessel in a manner that may cause harm to United States national security interests. The Secretary of Defense may not disapprove a loan guarantee under this section solely on the basis of 

the type of vessel to be constructed with the loan guarantee. The 

authority of the øSecretary¿ Administrator to disapprove a loan 

guarantee under this section may not be delegated to any official 

other than a civilian officer of the Department of Defense appointed by the President, by and with the advice and consent of the 

Senate. 

32 

(2) øThe Secretary of Transportation¿ The Administrator may 

not make a loan guarantee disapproved by the Secretary of Defense 

under paragraph (1). 

(k) MONITORING.—The øSecretary¿ Secretary or Administrator 

shall monitor the financial conditions and operations of the obligor 

on a regular basis during the term of the guarantee. The øSecretary¿ Secretary or Administrator shall document the results of 

the monitoring on an annual or quarterly basis depending upon the 

condition of the obligor. If the øSecretary¿ Secretary or Administrator determines that the financial condition of the obligor warrants additional protections to the øSecretary¿ Secretary or Administrator, then the øSecretary¿ Secretary or Administrator shall take 

appropriate action under subsection (m) of this section. If the øSecretary¿ Secretary or Administrator determines that the financial 

condition of the obligor jeopardizes its continued ability to perform 

its responsibilities in connection with the guarantee of obligations 

by the øSecretary¿ Secretary or Administrator, the øSecretary¿ 

Secretary or Administrator shall make an immediate determination 

whether default should take place and whether further measures 

described in subsection (m) should be taken to protect the interests 

of the øSecretary¿ Secretary or Administrator while insuring that 

program objectives are met. 

(l) REVIEW OF APPLICATIONS.—No commitment to guarantee, or 

guarantee of, an obligation shall be made by the øSecretary¿ Secretary or Administrator unless the øSecretary¿ Secretary or Administrator certifies that a full and fair consideration of all the regulatory requirements, including economic soundness and financial 

requirements applicable to obligors and related parties, and a thorough assessment of the technical, economic, and financial aspects 

of the loan application has been made. The Administrator shall retain in the Maritime Administration adequate resources with sufficient expertise to perform the functions prescribed by this title so 

that no assistance from the Department of Transportation or any 

other Federal agency is required to carry out this title. 

(m) AGREEMENT WITH OBLIGOR.—The øSecretary¿ Secretary or 

Administrator shall include provisions in loan agreements with obligors that provide additional authority to the øSecretary¿ Secretary or Administrator to take action to limit potential losses in 

connection with defaulted loans or loans that are in jeopardy due 

to the deteriorating financial condition of obligors. øProvisions that 

the Secretary shall include in loan agreements include requirements for additional collateral or greater equity contributions that 

are effective upon the occurrence of verifiable conditions relating to 

the obligors financial condition or the status of the vessel or shipyard project.¿ If the Secretary or Administrator has waived a requirement under section 1104A(d), the loan agreement shall include 

requirements for additional payments, collateral, or equity contributions to meet such waived requirement upon the occurrence of 

verifiable conditions indicating that the obligor’s financial condition 

enables the obligor to meet the waived requirement. 

(n) DECISION PERIOD.—(1) IN GENERAL.—øThe Secretary of 

Transportation¿ The Administrator shall approve or deny an application for a loan guarantee under this title within 270 days after 

the date on which the signed application is received by the øSecretary¿ Administrator. 

33 

(2) EXTENSION.—Upon request by an applicant, the Secretary 

may extend the 270-day period in paragraph (1) to a date not later 

than 2 years after the date on which the signed application for the 

loan guarantee was received by the Secretary. 

SEC. 1104B. FINANCING CONTRACT FOR CONSTRUCTION OR RECONSTRUCTION OF COMMERCIAL VESSEL; VESSEL REPLACEMENT GUARANTEE FUND. 

[46 U.S.C. App. 1274a] 

(a) Notwithstanding the provisions of this title, except as provided in subsection (d) of this section, the øSecretary¿ Secretary or 

Administrator, upon the terms the øSecretary¿ Secretary or Administrator may prescribe, may guarantee or make a commitment to 

guarantee, payment of the principal of and interest on an obligation which aids in financing and refinancing, including reimbursement to an obligor for expenditures previously made, of a contract 

for construction or reconstruction of a vessel or vessels which are 

designed and to be employed for commercial use in the coastwise 

or intercoastal trade or in foreign trade as defined in section 905 

of this Act if—

(1) the construction or reconstruction by an applicant is 

made necessary to replace vessels the continued operation of 

which is denied by virtue of the imposition of a statutorily 

mandated change in standards for the operation of vessels, and 

where, as a matter of law, the applicant would otherwise be 

denied the right to continue operating vessels in the trades in 

which the applicant operated prior to the taking effect of the 

statutory or regulatory change; 

(2) the applicant is presently engaged in transporting cargoes in vessels of the type and class that will be constructed 

or reconstructed under this section, and agrees to employ vessels constructed or reconstructed under this section as replacements only for vessels made obsolete by changes in operating 

standards imposed by statute; 

(3) the capacity of the vessels to be constructed or reconstructed under this title will not increase the cargo carrying capacity of the vessels being replaced; 

(4) the øSecretary¿ Secretary or Administrator has not made 

a determination that the market demand for the vessel over its 

useful life will diminish so as to make the granting of the guarantee fiduciarily imprudent; and 

(5) the øSecretary¿ Secretary or Administrator has considered the provisions of section 1104A(d)(1)(A)(iii), (iv), and (v) of 

this title. 

(b) For the purposes of this section—

(1) the maximum term for obligations guaranteed under this 

program may not exceed 25 years; 

(2) obligations guaranteed may not exceed 871⁄2 percent of 

the actual cost or depreciated actual cost to the applicant for 

the construction or reconstruction of the vessel; and 

(3) reconstruction cost obligations may not be guaranteed unless the vessel after reconstruction will have a useful life of at 

least 15 years. The øSecretary¿ Secretary or Administrator 

may not by rule, regulation, or procedure establish any percentage within the 871⁄2 percent or less limitation in paragraph 

34 

(2) that is, or is intended to be, applied uniformly to all guarantees or commitments to guarantee made under this section. 

(c)(1) The øSecretary¿ Secretary or Administrator shall by rule 

require that the applicant provide adequate security against default. The øSecretary¿ Secretary or Administrator may, in addition 

to any fees assessed under section 1104A(e), establish a Vessel Replacement Guarantee Fund into which shall be paid by obligors 

under this section— (A) annual fees which may be an additional amount on the 

loan guarantee fee in section 1104A(e) not to exceed an additional 1 percent; or 

(B) fees based on the amount of the obligation versus the 

percentage of the obligor’s fleet being replaced by vessels constructed or reconstructed under this section. 

(2) The Vessel Replacement Guarantee Fund shall be a subaccount in the Federal Ship Financing Fund, and shall— (A) be the depository for all moneys received by the øSecretary¿ Secretary or Administrator under sections 1101 

through 1107 of this title with respect to guarantee or commitments to guarantee made under this section; 

(B) not include investigation fees payable under section 

1104A(f) which shall be paid to the Federal Ship Financing 

Fund; and 

(C) be the depository, whenever there shall be outstanding 

any notes or obligations issued by the øSecretary¿ Secretary or 

Administrator under section 1105(d) with respect to the Vessel 

Replacement Guarantee Fund, for all moneys received by the 

øSecretary¿ Secretary or Administrator under sections 1101 

through 1107 from applicants under this section. 

(d) The program created by this section shall, in addition to the 

requirements of this section, be subject to the provisions of sections 

1101 through 1103; 1104A(b)(1), (4), (5), (6); 1104A(e); 1104A(f); 

1104A(h); and 1105 through 1107; except that the Federal Ship Financing Fund is not liable for any guarantees or commitments to 

guarantee issued under this section. 

SEC. 1105. DEFAULTS. 

[46 U.S.C. App. 1275] 

(a) RIGHTS OF OBLIGEE.—In the event of a default, which has 

continued for thirty days, in any payment by the obligor of principal or interest due under an obligation guaranteed under this 

title, the obligee or his agent shall have the right to demand (unless the øSecretary¿ Secretary or Administrator shall, upon such 

terms as may be provided in the obligation or related agreements, 

prior to that demand, have assumed the obligor’s rights and duties 

under the obligation and agreements and shall have made any payments in default) at or before the expiration of such period as may 

be specified in the guarantee or related agreements, but not later 

than ninety days from the date of such default, payment by the 

øSecretary¿ Secretary or Administrator of the unpaid principal 

amount of said obligation and of the unpaid interest thereon to the 

date of payment. Within such period as may be specified in the 

guarantee or related agreements, but not later than thirty days 

from the date of such demand, the øSecretary¿ Secretary or Administrator shall promptly pay to the obligee or his agent the unpaid 

principal amount of said obligation and unpaid interest thereon to 

35 

the date of payment: Provided, That the øSecretary¿ Secretary or 

Administrator shall not be required to make such payment if prior 

to the expiration of said period he shall find that there was no default by the obligor in the payment of principal or interest or that 

such default has been remedied prior to any such demand. 

(b) NOTICE OF DEFAULT.—In the event of a default under a mortgage, loan agreement, or other security agreement between the obligor and the øSecretary¿ Secretary or Administrator, the øSecretary¿ Secretary or Administrator may upon such terms as may 

be provided in the obligation or related agreement, either: 

(1) assume the obligor’s rights and duties under the agreement, make any payment in default, and notify the obligee or 

the obligee’s agent of the default and the assumption by the 

øSecretary¿ Secretary or Administrator; or 

(2) notify the obligee or the obligee’s agent of the default, 

and the obligee or the obligee’s agent shall have the right to 

demand at or before the expiration of such period as may be 

specified in the guarantee or related agreements, but not later 

than 60 days from the date of such notice, payment by the 

øSecretary¿ Secretary or Administrator of the unpaid principal 

amount of said obligation and of the unpaid interest thereon. 

Within such period as may be specified in the guarantee or related agreements, but not later than 30 days from the date of 

such demand, the øSecretary¿ Secretary or Administrator shall 

promptly pay to the obligee or the obligee’s agent the unpaid 

principal amount of said obligation and unpaid interest thereon to the date of payment. 

(c) øSECRETARY¿ SECRETARY OR ADMINISTRATOR TO COMPLETE, SELL OR OPERATE PROPERTY.—In the event of any payment or assumption by the øSecretary¿ Secretary or Administrator under subsection (a) or (b) of this section, the øSecretary¿ Secretary or Administrator shall have all rights in any security held by him relating to his guarantee of such obligations as are conferred upon him 

under any security agreement with the obligor. Notwithstanding 

any other provision of law relating to the acquisition, handling, or 

disposal of property by the United States, the øSecretary¿ Secretary or Administrator shall have the right, in his discretion, to 

complete, recondition, reconstruct, renovate, repair, maintain, operate, charter, or sell any property acquired by him pursuant to a security agreement with the obligor or may place a vessel in the national defense reserve. The terms of the sale shall be as approved 

by the øSecretary¿ Secretary or Administrator. (d) CASH PAYMENTS; ISSUANCE OF NOTES OF OBLIGATIONS.—Any 

amount required to be paid by the øSecretary¿ Secretary or Administrator pursuant to subsection (a) or (b) of this section, shall be 

paid in cash. If at any time the moneys in the Fund authorized by 

section 1102 of this Act are not sufficient to pay any amount the 

øSecretary¿ Secretary or Administrator is required to pay by subsection (a) or (b) of this section, the øSecretary¿ Secretary or Administrator is authorized to issue to the Secretary of the Treasury 

notes or other obligations in such forms and denominations, bearing such maturities, and subject to such terms and conditions as 

may be prescribed by the øSecretary¿ Secretary or Administrator, with the approval of the Secretary of the Treasury. Such notes or 

other obligations shall bear interest at a rate determined by the 

36 

Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the 

United States of comparable maturities during the month preceding the issuance of such notes or other obligations. The Secretary of the Treasury is authorized and directed to purchase any 

notes and other obligations to be issued hereunder and for such 

purpose he is authorized to use as a public debt transaction the 

proceeds from the sale of any securities issued under the Second 

Liberty Bond Act, as amended, and the purposes for which securities may be issued under such Act, as amended, are extended to 

include any purchases of such notes and obligations. The Secretary 

of the Treasury may at any time sell any of the notes or other obligations acquired by him under this section. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes or 

other obligations shall be treated as public debt transactions of the 

United States. Funds borrowed under this section shall be deposited in the Fund and redemptions of such notes and obligations 

shall be made by the øSecretary¿ Secretary or Administrator from 

such Fund. 

(e) ACTIONS AGAINST OBLIGOR.—In the event of a default under 

any guaranteed obligation or any related agreement, the øSecretary¿ Secretary or Administrator shall take such action against 

the obligor or any other parties liable thereunder that, in his discretion, may be required to protect the interests of the United 

States. Any suit may be brought in the name of the United States 

or in the name of the obligee and the obligee shall make available 

to the United States all records and evidence necessary to prosecute any such suit. The øSecretary¿ Secretary or Administrator 

shall have the right, in his discretion, to accept a conveyance of 

title to and possession of property from the obligor or other parties 

liable to the øSecretary¿ Secretary or Administrator, and may purchase the property for an amount not greater than the unpaid principal amount of such obligation and interest thereon. In the event 

that the øSecretary¿ Secretary or Administrator shall receive 

through the sale of property an amount of cash in excess of the unpaid principal amount of the obligation and unpaid interest on the 

obligation and the expenses of collection of those amounts, the 

øSecretary¿ Secretary or Administrator shall pay the excess to the 

obligor. 

(f) DEFAULT RESPONSE.—In the event of default on an obligation, 

the Secretary shall conduct operations under this title in a manner 

which—

(1) maximizes the net present value return from the sale or 

disposition of assets associated with the obligation, including 

prompt referral to the Attorney General for collection as appropriate; 

(2) minimizes the amount of any loss realized in the resolution of the guarantee; 

(3) ensures adequate competition and fair and consistent 

treatment of offerors; and 

(4) requires appraisal of assets by an independent appraiser. 

* * * * * * * 

37 

SEC. 1108. ESCROW FUND. 

[46 U.S.C. App. 1279a] 

(a) CREATION.—If the proceeds of an obligation guaranteed under 

this title are to be used to finance the construction, reconstruction, 

or reconditioning of a vessel or vessels which will serve as security 

for the guarantee of the, the øSecretary¿ Secretary or Administrator is authorized to accept and hold, in escrow under an escrow 

agreement with the obligor, a portion of the proceeds of all obligations guaranteed under this title whose proceeds are to be so used 

which is equal to: 

(i) the excess of the principal amount of all obligations whose 

proceeds are to be so used over 75 per centum, or 871⁄2 per centum, whichever is applicable under section 1104 of this title, 

paid by or for the account of the obligor for the construction, 

reconstruction, or reconditioning of the vessel or vessels; 

(ii) with such interest thereon, if any, as the øSecretary¿ 

Secretary or Administrator may require: Provided, That in the 

event the security for the guarantee of an obligation by the 

øSecretary¿ Secretary or Administrator relates both to a vessel 

or vessels to be constructed, reconstructed or reconditioned and 

to a delivered vessel or vessels, the principal amount of such 

obligation shall be prorated for purposes of this subsection (a) 

under regulations prescribed by the øSecretary¿ Secretary or 

Administrator. 

(b) DISBURSEMENT PRIOR TO TERMINATION OF ESCROW AGREEMENT.—The øSecretary¿ Secretary or Administrator shall, as specified in the escrow agreement, disburse the escrow fund to pay 

amounts the obligor is obligated to pay as interest on such obligations or for the construction, reconstruction, or reconditioning of 

the vessel or vessels used as security for the guarantee of the øSecretary¿ Secretary or Administrator under this title, to redeem such 

obligations in connection with a refinancing under paragraph (4) of 

subsection (a) of section 1104 or to pay to the obligor at such times 

as may be provided for in the escrow agreement any excess interest 

deposits, except that if payments become due under the guarantee 

prior to the termination of the escrow agreement, all amounts in 

the escrow fund at the time such payments become due (including 

realized income which has not yet been paid to the obligor) shall 

be paid into the Fund and (i) be credited against any amounts due 

or to become due to the øSecretary¿ Secretary or Administrator 

from the obligor with respect to the guaranteed obligations and (ii) 

to the extent not so required, be paid to the obligor. 

(c) DISBURSEMENT UPON TERMINATION OF ESCROW AGREEMENT.—If payments under the guarantee have not become due 

prior to the termination of the escrow agreement, any balance of 

the escrow fund at the time of such termination shall be disbursed 

to prepay the excess of the principal of all obligations whose proceeds are to be used to finance the construction, reconstruction, or 

reconditioning of the vessel or vessels which serve or will serve as 

security for such guarantee over 75 per centum or 871⁄2 per centum, whichever is applicable under section 1104 of this title, of the 

actual cost of such vessel or vessels to the extent paid, and to pay 

interest on such prepaid amount of principal, and the remainder of 

such balance of the escrow fund shall be paid to the obligor. 

38 

(d) INVESTMENT OF FUND.—The øSecretary¿ Secretary or Administrator may invest and reinvest all or any part of the escrow fund 

in obligations of the United States with such maturities that the 

escrow fund will be available as required for purposes of the escrow 

agreement. 

(e) PAYMENT OF INCOME.—Any income realized on the escrow 

fund shall, upon receipt, be paid to the obligor. 

(f) TERMS OF ESCROW AGREEMENT.—The escrow agreement shall 

contain such other terms as the øSecretary¿ Secretary or Administrator may consider necessary to protect fully the interests of the 

United States. 

(g) PAYMENTS REQUIRED BEFORE DISBURSEMENT.—(1) IN GEN- ERAL.—No disbursement shall be made under subsection (b) to any 

person until the total amount paid by or for the account of the obligor from sources other than the proceeds of the obligation equals 

at least 25 percent or 121⁄2 percent, whichever is applicable under 

section 1104A, of the aggregate actual cost of the vessel, as previously approved by the øSecretary¿ Secretary or Administrator. If 

the aggregate actual cost of the vessel has increased since the øSecretary’s¿ Secretary’s or Administrator’s initial approval or if it increases after the first disbursement is permitted under this subsection, then no further disbursements shall be made under subsection (b) until the total amount paid by or for the account of the 

obligor from sources other than the proceeds of the obligation 

equals at least 25 percent or 121⁄2 percent, as applicable, of the increase, as determined by the øSecretary¿ Secretary or Administrator, in the aggregate actual cost of the vessel. Nothing in this 

paragraph shall require the øSecretary¿ Secretary or Administrator 

to consent to finance any increase in actual cost unless the øSecretary¿ Secretary or Administrator determines that such an increase in the obligation meets all the terms and conditions of this 

title or other applicable law. 

(2) DOCUMENTED PROOF OF PROGRESS REQUIREMENT.—The øSecretary¿ Secretary or Administrator shall, by regulation, establish a 

transparent, independent, and risk-based process for verifying and 

documenting the progress of projects under construction before disbursing guaranteed loan funds. At a minimum, the process shall 

require documented proof of progress in connection with the construction, reconstruction, or reconditioning of a vessel or vessels before disbursements are made from the escrow fund. The øSecretary¿ Secretary or Administrator may require that the obligor 

provide a certificate from an independent party certifying that the 

requisite progress in construction, reconstruction, or reconditioning 

has taken place. 

SEC. 1109. DEPOSIT FUND. 

[46 U.S.C. App. 1279b.] 

(a) ESTABLISHMENT OF DEPOSIT FUND.—There is established in 

the Treasury a deposit fund for purposes of this section. The øSecretary¿ Secretary or Administrator may, in accordance with an 

agreement under subsection (b), deposit into and hold in the deposit fund cash belonging to an obligor to serve as collateral for a 

guarantee under this title made with respect to the obligor. 

(b) AGREEMENT.—(1) IN GENERAL.—The øSecretary¿ Secretary or 

Administrator and an obligor shall enter into a reserve fund or 

other collateral account agreement to govern the deposit, withVerDate Aug 31 2005 01:30 Nov 23, 2005 Jkt 049010 PO 00000 Frm 00040 Fmt 6659 Sfmt 6601 E:\HR\OC\SR183.XXX SR183
39 

drawal, retention, use, and reinvestment of cash of the obligor held 

in the deposit fund established by subsection (a). 

(2) TERMS.—The agreement shall contain such terms and conditions as are required under this section and such additional terms 

as are considered by the øSecretary¿ Secretary or Administrator to 

be necessary to protect fully the interests of the United States. 

(3) SECURITY INTEREST OF UNITED STATES.—The agreement shall 

include terms that grant to the United States a security interest 

in all amounts deposited into the deposit fund. 

(c) INVESTMENT.—The may invest and reinvest any part of the 

amounts in the deposit fund established by subsection (a) in obligations of the United States with such maturities as ensure that 

amounts in the deposit fund will be available as required for purposes of agreements under subsection (b). Cash balances of the deposit fund in excess of current requirements shall be maintained in 

a form of uninvested funds and the Secretary of the Treasury shall 

pay interest on these funds. 

(d) WITHDRAWALS.—(1) IN GENERAL.—The cash deposited into 

the deposit fund established by subsection (a) may not be withdrawn without the consent of the øSecretary¿ Secretary or Administrator. (2) USE OF INCOME.—Subject to paragraph (3), the øSecretary¿ 

Secretary or Administrator may pay any income earned on cash of 

an obligor deposited into the deposit fund in accordance with the 

terms of the agreement with the obligor under subsection (b). 

(3) RETENTION AGAINST DEFAULT.—The øSecretary¿ Secretary or 

Administrator may retain and offset any or all of the cash of an 

obligor in the deposit fund, and any income realized thereon, as 

part of the øSecretary’s¿ Secretary’s or Administrator’s recovery 

against the obligor in case of a default by the obligor on an obligation. 

SEC. 1110. OCEAN THERMAL ENERGY CONVERSION DEMONSTRATION 

FACILITIES AND PLANTSHIPS. 

[46 U.S.C. App. 1279c] 

(a) FINANCING OF CONSTRUCTION, RECONSTRUCTION, OR RECONDITIONING.—Pursuant to the authority granted under section 1103(a) 

of this title, the øSecretary¿ Administrator, upon such terms as he 

shall prescribe, may guarantee or make a commitment to guarantee, payment of the principal of and interest on an obligation 

which aids in financing, including reimbursement of an obligor for 

expenditures previously made for, construction, reconstruction, or 

reconditioning of a commercial demonstration ocean thermal energy conversion facility or plantship. Guarantees or commitments 

to guarantee under this subsection shall be subject to all the provisos, requirements, regulations, and procedures which apply to 

guarantees or commitments to guarantee made pursuant to section 

1104(a)(1) of this title, except that—

(1) no guarantees or commitments to guarantee may be 

made by the øSecretary¿ Administrator under this subsection 

before October 1, 1981; 

(2) the provisions of subsection (d) of section 1104 of this title 

shall apply to guarantees or commitments to guarantee for 

that portion of a commercial demonstration ocean thermal energy conversion facility or plantship not to be supported with 

appropriated Federal funds; 

40 

(3) guarantees or commitments to guarantee made pursuant 

to this section may be in an aggregate principal amount which 

does not exceed 871⁄2 percent of the actual cost or depreciated 

actual cost of the commercial demonstration ocean thermal energy conversion facility or plantship: Provided, That, if the 

commercial demonstration ocean thermal energy conversion facility or plantship is supported with appropriated Federal 

funds, such guarantees or commitments to guarantee may not 

exceed 871⁄2 percent of the aggregate principal amount of that 

portion of the actual cost or depreciated actual cost for which 

the obligor has an obligation to secure financing in accordance 

with the terms of the agreement between the obligor and the 

Department of Energy or other Federal agency; and 

(4) the provisions of this section may be used to guarantee 

obligations for a total of not more than 5 separate commercial 

demonstration ocean thermal energy conversion facilities and 

plantships or a demonstrated 400 megawatt capacity, whichever comes first. 

(b) CERTIFICATION OF REASONABLENESS OF RISK.—A guarantee or 

commitment to guarantee shall not be made under this section unless the Secretary of Energy, in consultation with the øSecretary¿ 

Administrator, certifies to the øSecretary¿ Administrator that, for 

the ocean thermal energy conversion facility or plantship for which 

the guarantee or commitment to guarantee is sought, there is sufficient guarantee of performance and payment to lower the risk to 

the Federal Government to a level which is reasonable. The Secretary of Energy must base his considerations on the following: 

(1) the successful demonstration of the technology to be used 

in such facility at a scale sufficient to establish the likelihood 

of technical and economic viability in the proposed market; and 

(2) the need of the United States to develop new and renewable sources of energy and the benefits to be realized from the 

construction and successful operation of such facility or 

plantship. 

(c) OTEC DEMONSTRATION FUND.—A special subaccount in the 

Federal Ship Financing Fund, to be known as the OTEC Demonstration Fund, shall be established on October 1, 1981. The 

OTEC Demonstration Fund shall be used for obligation guarantees 

authorized under this section which do not qualify under other sections of this title. Except as specified otherwise in this section, the 

operation of the OTEC Demonstration Fund shall be identical with 

that of the parent Federal Ship Financing Fund: except that, notwithstanding the provisions of section 1104(g), (1) all moneys received by the øSecretary¿ Administrator pursuant to sections 1101 

through 1107 of this title with respect to guarantees or commitments to guarantee made pursuant to this section shall be deposited only in the OTEC Demonstration Fund, and (2) whenever 

there shall be outstanding any notes or other obligations issued by 

the øSecretary¿ Administrator pursuant to section 1105(d) of this 

title with respect to the OTEC Demonstration Fund, all moneys received by the øSecretary¿ Administrator pursuant to sections 1101 

through 1107 of this title with respect to ocean thermal energy 

conversional facilities or plantships shall be deposited in the OTEC 

Demonstration Fund. Assets in the OTEC Demonstration Fund 

may at any time be transferred to the parent fund whenever and 

41 

to the extent that the balance thereof exceeds the total guarantees 

or commitments to guarantee made pursuant to this section then 

outstanding, plus any notes or other obligations issued by the øSecretary¿ Administrator pursuant to section 1105(d) of this title with 

respect to the OTEC Demonstration Fund. The Federal Ship Financing Fund shall not be liable for any guarantees or commitments to guarantee issued pursuant to this section. The aggregate 

unpaid principal amount of the obligations guaranteed with the 

backing of the OTEC Demonstration Fund and outstanding at any 

one time shall not exceed $1,650,000,000. 

(d) NOTES AND OBLIGATIONS.—The provisions of section 1105(d) 

of this title shall apply specifically to the OTEC Demonstration 

Fund as well as to the Fund: Provided, however, That any notes 

or obligations issued by the øSecretary¿ Administrator pursuant to 

section 1105(d) of this title with respect to the OTEC Demonstration Fund shall be payable solely from proceeds realized by the 

OTEC Demonstration Fund. 

(e) TAXABILITY OF INTEREST.—The interest on any obligation 

guaranteed under this section shall be included in gross income for 

purposes of chapter 1 of the Internal Revenue Code of 1954. 

SEC. 1111. AUTHORITY FOR øSECRETARY OF TRANSPORTATION¿ ADMINISTRATOR TO MAKE LOAN GUARANTEES. 

[46 U.S.C. App. 1279d] 

(a) AUTHORITY TO GUARANTEE OBLIGATIONS FOR ELIGIBLE EX- PORT VESSELS.—The øSecretary¿ Administrator may guarantee obligations for eligible export vessels— (1) in accordance with the terms and conditions of this title 

applicable to loan guarantees in the case of vessels documented 

under the laws of the United States; or 

(2) in accordance with such other terms as the øSecretary¿ 

Administrator determines to be more favorable than the terms 

otherwise provided in this title and to be compatible with export credit terms offered by foreign governments for the sale 

of vessels built in foreign shipyards. 

(b) INTERAGENCY COUNCIL.—(1) ESTABLISHMENT; COMPOSITION.—

There is hereby established an interagency council for the purposes 

of this section. The council shall be composed of the øSecretary of 

Transportation¿ Administrator, who shall be chairman of the 

Council, the Secretary of the Treasury, the Secretary of State, the 

Assistant to the President for Economic Policy, the United States 

Trade Representative, and the President and Chairman of the 

United States Export-Import Bank, or their designees. 

(2) PURPOSE OF THE COUNCIL.—The council shall—

(A) obtain information on shipbuilding loan guarantees, on 

direct and indirect subsidies, and on other favorable treatment 

of shipyards provided by foreign governments to shipyards in 

competition with United States shipyards; and 

(B) provide guidance to the øSecretary¿ Administrator in establishing terms for loan guarantees for eligible export vessels 

under subsection (a)(2). 

(3) CONSULTATION WITH U.S. SHIPBUILDERS.—The council shall 

consult regularly with United States shipbuilders to obtain the essential information concerning international shipbuilding competition on which to set terms and conditions for loan guarantees 

under subsection (a)(2). 

42 

(4) ANNUAL REPORT.—Not later than January 31 of each year 

(beginning in 1995), the øSecretary of Transportation¿ Administrator shall submit to Congress a report on the activities of the 

øSecretary¿ Administrator under this section during the preceding 

year. Each report shall include documentation of sources of information on assistance provided by the governments of other nations 

to shipyards in those nations and a summary of recommendations 

made to the øSecretary¿ Administrator during the preceding year 

regarding applications submitted to the øSecretary¿ Administrator 

during that year for loan guarantees under this title for construction of eligible export vessels. 

SEC. 1112. LOAN GUARANTEES FOR SHIPYARD MODERNIZATION AND 

IMPROVEMENT. 

[46 U.S.C. App. 1279e] 

(a) The Secretary, under section 1103(a) and subject to the terms 

the Secretary shall prescribe, may guarantee or make a commitment to guarantee the payment of the principal of, and the interest 

on, an obligation for advanced shipbuilding technology and modern 

shipbuilding technology of a general shipyard facility located in the 

United States. 

(b) Guarantees or commitments to guarantee under this section 

are subject to the extent applicable to all the laws, requirements, 

regulations, and procedures that apply to guarantees or commitments to guarantee made under this title, except that guarantees 

or commitments to guarantee made under this section may be in 

the aggregate principal amount that does not exceed 871⁄2 percent 

of the actual cost of the advanced shipbuilding technology or modern shipbuilding technology. 

(c) The Secretary may accept the transfer of funds from any 

other department, agency, or instrumentality of the United States 

Government and may use those funds to cover the cost (as defined 

in section 502 of the Federal Credit Reform Act of 1990) of making 

guarantees or commitments to guarantee loans entered into under 

this section. 

(d) For purposes of this section: 

(1) The term ‘‘advanced shipbuilding technology’’ includes—

(A) numerically controlled machine tools, robots, automated process control equipment, computerized flexible 

manufacturing systems, associated computer software, and 

other technology for improving shipbuilding and related industrial production which advance the state- of-the-art; 

and 

(B) novel techniques and processes designed to improve 

shipbuilding quality, productivity, and practice, and to promote sustainable development, including engineering design, quality assurance, concurrent engineering, continuous process production technology, energy efficiency, 

waste minimization, design for recyclability or parts reuse, 

inventory management, upgraded worker skills, and communications with customers and suppliers. 

(2) The term ‘‘modern shipbuilding technology’’ means the 

best available proven technology, techniques, and processes appropriate to enhancing the productivity of shipyards. 

(3) The term ‘‘general shipyard facility’’ means—

(A) for operations on land—

43 

(i) any structure or appurtenance thereto designed 

for the construction, repair, rehabilitation, refurbishment or rebuilding of any vessel (as defined in title 1, 

United States Code) and including graving docks, 

building ways, ship lifts, wharves, and pier cranes; 

(ii) the land necessary for any structure or appurtenance described in clause (i); and 

(iii) equipment that is for the use in connection with 

any structure or appurtenance and that is necessary 

for the performance of any function referred to in subparagraph (A); 

(B) for operations other than on land, any vessel, floating drydock or barge built in the United States and used 

for, equipped to be used for, or of a type that is normally 

used for activities referred to in subparagraph (A)(i) of this 

paragraph. 

SEC. ø1111.¿ 1113. DEBT OBLIGATIONS GUARANTEED BY SECRETARY; 

FISHING CAPACITY REDUCTION FUND. 

[46 U.S.C. 1279f] 

(a) The øSecretary¿ Secretary or Administrator is authorized to 

guarantee the repayment of debt obligations issued by entities 

under this section. Debt obligations to be guaranteed may be issued 

by any entity that has been approved by the øSecretary¿ Secretary 

or Administrator and has agreed with the øSecretary¿ Secretary or 

Administrator to such conditions as the øSecretary¿ Secretary or 

Administrator deems necessary for this section to achieve the objective of the program and to protect the interest of the United States. 

(b) Any debt obligation guaranteed under this section shall— (1) be treated in the same manner and to the same extent 

as other obligations guaranteed under this title, except with respect to provisions of this title that by their nature cannot be 

applied to obligations guaranteed under this section; 

(2) have the fishing fees established under the program paid 

into a separate subaccount of the fishing capacity reduction 

fund established under this section; 

(3) not exceed $100,000,000 in an unpaid principal amount 

outstanding at any one time for a program; 

(4) have such maturity (not to exceed 20 years), take such 

form, and contain such conditions as the øSecretary¿ Secretary 

or Administrator determines necessary for the program to 

which they relate; 

(5) have as the exclusive source of repayment (subject to the 

proviso in subsection (c)(2)) and as the exclusive payment security, the fishing fees established under the program; and 

(6) at the discretion of the øSecretary¿ Secretary or Administrator be issued in the public market or sold to the Federal Financing Bank. 

(c)(1) There is established in the Treasury of the United States 

a separate account which shall be known as the fishing capacity reduction fund (referred to in this section as the ‘‘fund’’). Within the 

fund, at least one subaccount shall be established for each program 

into which shall be paid all fishing fees established under the program and other amounts authorized for the program. 

(2) Amounts in the fund shall be available, without appropriation 

or fiscal year limitation, to the øSecretary¿ Secretary or AdminisVerDate Aug 31 2005 01:30 Nov 23, 2005 Jkt 049010 PO 00000 Frm 00045 Fmt 6659 Sfmt 6601 E:\HR\OC\SR183.XXX SR183
44 

trator to pay the cost of the program, including payments to financial institutions to pay debt obligations incurred by entities under 

this section: Provided, That funds available for this purpose from 

other amounts available for the program may also be used to pay 

such debt obligations. 

(3) Sums in the fund that are not currently needed for the purpose of this section shall be kept on deposit or invested in obligations of the United States. 

(d) The øSecretary¿ Secretary or Administrator is authorized and 

directed to issue such regulations as the øSecretary¿ Secretary or 

Administrator deems necessary to carry out this section. 

(e) For the purposes of this section, the term ‘‘program’’ means 

a fishing capacity reduction program established under section 312 

of the Magnuson-Stevens Fishery Conservation and Management 

Act. 

SEC. ø1112.¿ 1114. DIRECT LOAN OBLIGATIONS; ANNUAL RATE OF INTEREST. 

[46 U.S.C. 1279g] 

(a) Notwithstanding any other provision of this title, all obligations involving any fishing vessel, fishery facility, aquaculture facility, individual fishing quota, or fishing capacity reduction program 

issued under this title after the date of enactment of the Sustainable Fisheries Act shall be direct loan obligations, for which the 

Secretary shall be the obligee, rather than obligations issued to 

obligees other than the Secretary and guaranteed by the Secretary. 

All direct loan obligations under this section shall be treated in the 

same manner and to the same extent as obligations guaranteed 

under this title except with respect to provisions of this title which 

by their nature can only be applied to obligations guaranteed under 

this title. 

(b) Notwithstanding any other provisions of this title, the annual 

rate of interest which obligors shall pay on direct loan obligations 

under this section shall be fixed at two percent of the principal 

amount of such obligations outstanding plus such additional percent as the Secretary shall be obligated to pay as the interest cost 

of borrowing from the United States Treasury the funds with which 

to make such direct loans. 

MERCHANT MARINE ACT, 1936 

TITLE XII—WAR RISK INSURANCE

* * * * * * * 

SEC. 1208. INSURANCE FUND; INVESTMENTS; APPROPRIATIONS. 

[46 U.S.C. 1288] 

(a) The Secretary shall create an insurance fund in the Treasury 

to enable him to carry out the provisions of this title. Moneys appropriated by Congress to carry out the provisions of this title and 

all moneys received from premiums, salvage, or other recoveries 

and all receipts in connection with this title shall be deposited in 

the Treasury to the credit of such fund. The Secretary of Transportation may request the Secretary of the Treasury to invest such 

portion of the Fund as is not, in the judgment of the Secretary of 

Transportation, required to meet the current needs of the fund. 

Such investments shall be made by the Secretary of the Treasury 

45 

in public debt securities of the United States, with maturities suitable to the needs of the fund, and bearing interest rates determined by the Secretary of the Treasury, taking into consideration 

current market yields on outstanding marketable obligations of the 

United States of comparable maturity. øUpon the request of the 

Secretary of Transportation, the Secretary of the Treasury may invest or reinvest all or any part of the fund in securities of the 

United States or in securities guaranteed as to principal and interest by the United States.¿ The Secretary of Transportation may request the Secretary of the Treasury to invest such portion of the 

fund as is not, in the judgment of the Secretary of Transportation, 

required to meet the current needs of the fund. Such investments 

shall be made by the Secretary of the Treasury in public debt securities of the United States, with maturities suitable to the need of the 

fund, and bearing interest rates determined by the Secretary of the 

Treasury, taking into consideration current market yields on outstanding marketable obligations of the United States of comparable 

maturity. The interest and benefits accruing from such securities 

shall be deposited to the credit of the fund. 

(b) Such sums as shall be necessary to carry out the provisions 

of this title are authorized to be appropriated to such fund. 

* * * * * * * 

SEC. 1295. CONGRESSIONAL DECLARATION OF POLICY. 

[46 U.S.C. App. 1295] 

It is the policy of the United States that merchant marine vessels 

of the United States should be operated by highly trained and efficient citizens of the United States and that the United States Navy 

and the merchant marine of the United States should work closely 

together to promote the maximum integration of the total seapower 

forces of the United States. In furtherance of this policy—

(1) the Secretary of Transportation is authorized to take the 

steps necessary to provide for the education and training of 

citizens of the United States who are capable of providing for 

the safe and efficient operation of the merchant marine of the 

United States at all times and as a naval and military auxiliary in time of war or national emergency; and 

(2) the Secretary of Navy, in cooperation with the Maritime 

Administrator and the head of each State maritime academy, 

shall assure that the training of future merchant marine officers at the United States Merchant Marine Academy and at 

the State maritime academies includes programs for naval 

science training in the operation of merchant marine vessels as 

a naval and military auxiliary and that naval officer training 

programs for the training of future officers, insofar as possible, 

be maintained at designated maritime academies consistent 

with United States Navy standards and needs. 

MERCHANT MARINE ACT, 1936 

SEC. 1303. MAINTENANCE OF ACADEMY. 

[46 U.S.C. App. 1295b] 

(a) DUTY OF SECRETARY.—The Secretary shall maintain the 

Academy for providing instruction to individuals to prepare them 

for service in the merchant marine of the United States. 

46 

(b) NOMINATION AND APPOINTMENT OF CADETS; DESIGNATION AND

LICENSING OF INDIVIDUALS FROM THE TRUST TERRITORY OF THE PACIFIC ISLANDS, WESTERN HEMISPHERE NATIONS AND NATIONS

OTHER THAN THE UNITED STATES.—

(1) Each Senator and Member of the House of Representatives, the Panama Canal Commission, the Governor of the 

Northern Mariana Islands, and the Delegate from American 

Samoa. may nominate for appointment as a cadet at the Academy any individual who is—

(A) a citizen of the United States or a national of the 

United States; and 

(B) a resident of the State represented by such Senator 

if the individual is nominated by a Senator, a resident of 

the State in which the congressional district represented 

by such Member of the House of Representatives is located 

if the individual is nominated by a Member of the House 

of Representatives (or a resident of Guam, the Virgin Islands, the District of Columbia, the Commonwealth of 

Puerto Rico, or American Samoa if the individual is nominated by a Member of the House of Representatives representing such area), a resident of the area or installation 

described in paragraph (3)(A)(ii), or a son or daughter of 

the personnel described in such paragraph, if the individual is nominated by the Panama Canal Commission, or 

a resident of the Northern Mariana Islands if the individual is nominated by the Governor of the Northern Mariana Islands. 

(2)(A) The Secretary shall establish minimum requirements 

for the individuals nominated pursuant to paragraph (1) and 

shall establish a system of competition for the selection of individuals qualified for appointment as cadets at the Academy. 

(B) Such system of competition shall determine the relative 

merit of appointing each such individual to the Academy 

through the use of competitive examinations, an assessment of 

the academic background of the individual, and such other factors as are considered effective indicators of motivation and the 

probability of successful completion of training at the Academy. 

(C) Notwithstanding any other provision of law, an individual appointed as a cadet may not be admitted to the Academy as a student, unless at the time of the taking of the official 

oath upon entry into the Merchant Marine Academy, that individual satisfies the physical and mental requirements of the Department of Defense to be appointed or enlisted as a Midshipman, United States Naval Reserve. Following admission to 

the Academy, notwithstanding any other provision of law, such 

individual may continue as a student only if that individual 

continues to satisfy the physical and mental standards set forth 

in this subparagraph unless the Secretary of Transportation 

waives the standards. 

(3)(A) Qualified individuals nominated pursuant to paragraph (1) shall be selected each year for appointment as cadets 

at the Academy to fill positions allocated as follows: 

(i) Positions shall be allocated each year for individuals 

who are residents of each State and are nominated by the 

47 

Members of the Congress from such State in proportion to 

the representation in Congress from that State. 

(ii) Two positions shall be allocated each year for individuals nominated by the Panama Canal Commission who are 

sons or daughters of residents of any area or installation 

located in the Republic of Panama which is made available 

to the United States pursuant to the Panama Canal Treaty of 1977, the agreements relating to and implementing 

that Treaty, signed September 7, 1977, and the Agreement 

Between the United States of America and the Republic of 

Panama Concerning Air Traffic Control and Related Services, concluded January 8, 1979, and sons or daughters of 

personnel of the United States Government and the Panama Canal Commission residing in the Republic of Panama, nominated by the Panama Canal Commission. 

(iii) One position shall be allocated each year for an individual who is a resident of Guam and is nominated by the 

Delegate to the House of Representatives from Guam. 

(iv) One position shall be allocated each year for an individual who is a resident of the Virgin Islands and is nominated by the Delegate to the House of Representatives 

from the Virgin Islands. 

(v) One position shall be allocated each year for an individual who is a resident of the Northern Mariana Islands 

and is nominated by the Governor of the Northern Mariana Islands. 

(vi) One position shall be allocated each year for an individual who is a resident of American Samoa and is nominated by the Delegate to the House of Representatives 

from American Samoa. 

(vii) Four positions shall be allocated each year for individuals who are residents of the District of Columbia and 

are nominated by the Delegate to the House of Representatives from the District of Columbia. 

(viii) One position shall be allocated each year for an individual who is a resident of the Commonwealth of Puerto 

Rico and is nominated by the Resident Commissioner to 

the United States from Puerto Rico. 

(B) The Secretary shall make appointments of qualified individuals to fill the positions allocated pursuant to subparagraph 

(A) (from among the individuals nominated pursuant to paragraph (1)) in the order of merit determined pursuant to paragraph (2)(B) among residents of each State, Guam, the Virgin 

Islands, the Northern Mariana Islands, American Samoa, the 

District of Columbia, and the Commonwealth of Puerto Rico 

and among individuals nominated by the Panama Canal Commission. 

(C) If positions are not filled after the appointments are 

made pursuant to subparagraph (B), the Secretary shall make 

appointments of qualified individuals to fill such positions from 

among all individuals nominated pursuant to paragraph (1) in 

the order of merit determined pursuant to paragraph (2)(B) 

among all such individuals. 

(D) In addition, the Secretary may each year appoint without 

competition as cadets at the Academy not more than 40 qualiVerDate Aug 31 2005 01:30 Nov 23, 2005 Jkt 049010 PO 00000 Frm 00049 Fmt 6659 Sfmt 6601 E:\HR\OC\SR183.XXX SR183
48 

fied individuals possessing qualities deemed to be of special 

value to the Academy. In making such appointments the Secretary shall attempt to achieve a national demographic balance 

at the Academy. 

(E) No preference shall be granted in selecting individuals 

for appointment as cadets at the Academy because one or more 

members of the immediate family of any such individual are 

alumni of the Academy. 

(F) Any citizen of the United States selected for appointment 

pursuant to this paragraph must agree to apply for midshipman status in the United States Naval Reserve (including 

the Merchant Marine Reserve, United States Naval Reserve) 

before being appointed as a cadet at the Academy. 

(G) For purposes of this paragraph, the term ‘‘State’’ means 

the several States. 

(4)(A) In addition to paragraph (3), the Secretary may permit, upon designation by the Secretary of the Interior, individuals from the Trust Territory of the Pacific Islands to receive 

instruction at the Academy. 

(B) Not more than 4 individuals may receive instruction 

under this paragraph at any one time. 

(C) Any individual receiving instruction under the authority 

of this paragraph shall receive the same allowances and shall 

be subject to the same rules and regulations governing admission, attendance, discipline, resignation, discharge, dismissal, 

and graduation as cadets at the Academy appointed from the 

United States, subject to such exceptions as shall be jointly 

agreed upon by the Secretary and the Secretary of the Interior. 

(5)(A) In addition to paragraphs (3) and (4), the President 

may designate individuals from nations located in the Western 

Hemisphere other than the United States to receive instruction 

at the Academy. 

(B) Not more than 12 individuals may receive instruction 

under this paragraph at any one time, and not more than 2 individuals receiving instruction under this paragraph at any 

one time may be from the same nation. 

(C) Any individual receiving instruction under this subparagraph is entitled to the same allowances and shall be subject 

to the same rules and regulations governing admission, attendance, discipline, resignation, discharge, dismissal, and graduation as cadets at the Academy appointed from the United 

States. 

(6)(A) In addition to paragraphs (3), (4), and (5), the Secretary may permit, upon approval of the Secretary of State, individuals from nations other than the United States to receive 

instruction at the Academy. 

(B) Not more than 30 individuals may receive instruction 

under this paragraph at any one time. 

(C) The Secretary shall insure that each nation from which 

an individual comes to receive instruction under this paragraph shall reimburse the Secretary for the cost of such instruction (including the same allowances as received by cadets 

at the Academy appointed from the United States) as determined by the Secretary. 

49 

(D) Any individual receiving instruction at the Academy 

under this paragraph shall be subject to the same rules and 

regulations governing admission, attendance, discipline, resignation, discharge, dismissal, and graduation as cadets at the 

Academy appointed from the United States. 

(7)(A) The Secretary may permit, upon approval of the Secretary of State, additional individuals from the Republic of 

Panama to receive instruction at the Academy, in addition to 

those individuals appointed under paragraphs (3), (4), (5), and 

(6) of this subsection. 

(B) The Secretary shall be reimbursed for the cost of that instruction (including the same allowances as received by cadets 

at the Academy appointed from the United States) as determined by the Secretary. 

(C) An individual receiving instructions at the Academy 

under this paragraph shall be subject to the same rules and 

regulations governing admission, attendance, discipline, resignation, discharge, dismissal, and graduation as cadets at the 

Academy appointed from the United States. 

(8) An individual appointed as a cadet under paragraph (3), 

or receiving instruction under paragraph (4), (5), (6), or (7) of 

this subsection is not entitled to hold a license authorizing 

service on a merchant marine vessel of the United States solely 

by reason of graduation from the Academy. 

(c) APPOINTMENT OF CADET AS MIDSHIPMAN IN THE UNITED

STATES NAVAL RESERVE.—

(1) Any citizen of the United States who is appointed as a 

cadet at the Academy shall be appointed by the Secretary of 

the Navy as a midshipman in the United States Naval Reserve 

(including the Merchant Marine Reserve, United States Naval 

Reserve). 

(2) The Secretary of the Navy shall provide for cadets of the 

Academy who are midshipmen in the United States Naval Reserve to be issued an identification card (referred to as a ‘‘military ID card’’) and to be entitled to all rights and privileges in 

accordance with the same eligibility criteria as apply to other 

members of the Ready Reserve of the reserve components of 

the Armed Forces. 

(3) The Secretary of the Navy shall carry out paragraphs (1) 

and (2) in coordination with the Secretary. 

(d) UNIFORMS, TEXTBOOKS, AND TRANSPORTATION ALLOWANCES.—

The Secretary shall provide to any cadet at the Academy all required uniforms and textbooks and allowances for transportation 

(including reimbursement of traveling expenses) while traveling 

under orders as a cadet of the Academy. 

(e) COMMITMENT AGREEMENTS.—

(1) Each individual appointed as a cadet at the Academy 

after the date occurring 6 months after the effective date of the 

Maritime Education and Training Act of 1980, who is a citizen 

of the United States, shall as a condition of appointment to the 

Academy sign an agreement committing such individual—

(A) to complete the course of instruction at the Academy; 

(B) to fulfill the requirements for a license as an officer 

in the merchant marine of the United States on or before 

50 

the date of graduation from the Academy of such individual; 

(C) to maintain a valid license as an officer in the merchant marine of the United States for at least 6 years following the date of graduation from the Academy of such 

individual, accompanied by the appropriate national and 

international endorsements and certification as required 

by the United States Coast Guard for service aboard vessels on domestic and international voyages; 

ø(D) to apply for an appointment as, to accept if tendered an appointment as, and to serve as a commissioned 

officer in the United States Naval Reserve (including the 

Merchant Marine Reserve, United States Naval Reserve), 

the United States Coast Guard Reserve, or any other Reserve unit of an armed force of the United States, for at 

least 6 years following the date of graduation from the 

Academy of such individual;¿ 

(D) to apply for an appointment as, to accept if tendered 

an appointment as, and to serve and perform all required 

duties and comply with all requirements as, a commissioned officer in Ready Reserve status in the United States 

Naval Reserve (including the Merchant Marine Reserve 

and the United States Naval Reserve), any other Reserve 

component of an armed force of the United States, or any 

other equivalent, as determined by the Secretary; 

(E) to serve the foreign and domestic commerce and the 

national defense of the United States for at least 5 years 

following the date of graduation from the Academy— (i) as a merchant marine officer serving on vessels 

documented under the laws of the United States or on 

vessels owned and operated by the United States or by 

any State or territory of the United States; 

(ii) as an employee in a United States maritime-related industry, profession, or marine science (as determined by the Secretary), if the Secretary determines 

that service under clause (i) is not available to such 

individual; 

(iii) as a commissioned officer on active duty in an 

armed force of the United States, as a commissioned 

officer in the National Oceanic and Atmospheric Administration, or other maritime-related employment 

with the Federal Government which serves the national security interests of the United States, as determined by the Secretary; or 

(iv) by combining the services specified in clauses (i), 

(ii), and (iii); and (F) to report to the Secretary on the 

compliance by the individual to this paragraph. 

(2)(A) If the Secretary determines that any individual who 

has attended the Academy for not less than 2 years has failed 

to fulfill the part of the agreement required by paragraph 

(1)(A), such individual may be ordered by the Secretary of Defense to active duty in one of the armed forces of the United 

States to serve for a period of time not to exceed 2 years. In 

cases of hardship as determined by the Secretary, the Secretary may waive this provision in whole or in part. 

51 

(B) If the Secretary of Defense is unable or unwilling to 

order an individual to active duty under subparagraph (A), or 

if the Secretary of Transportation determines that reimbursement of the cost of education provided would better serve the 

interests of the United States, the Secretary may recover from 

the individual the cost of education provided by the Federal 

Government. 

(3)(A) If the Secretary determines that an individual has 

failed to fulfill any part of the agreement required by paragraph (1), as described in paragraph (1)(B), (C), (D), (E), or (F), 

such individual may be ordered to active duty to serve a period 

of time not less than 3 years and not more than the unexpired 

portion, as determined by the Secretary, of the service required 

by paragraph (1)(E). The Secretary, in consultation with the 

Secretary of Defense, shall determine in which service the individual shall be ordered to active duty to serve such period of 

time. In cases of hardship, as determined by the Secretary, the 

Secretary may waive this provision in whole or in part. 

(B) If the Secretary of Defense is unable or unwilling to 

order an individual to active duty under subparagraph (A), or 

if the Secretary of Transportation determines that reimbursement of the cost of education provided would better serve the 

interests of the United States, the Secretary may recover from 

the individual the cost of education provided and may reduce 

the amount to be recovered from such individual to reflect partial performance of service obligations and such other factors 

as the Secretary determines merit such a reduction. 

(4) To aid in the recovery of the cost of education provided 

by the Federal Government pursuant to a commitment agreement under this section, the Secretary may request the Attorney General to begin court proceedings, and the Secretary may 

make use of the Federal debt collection procedures in chapter 

176 of title 28, United States Code, or other applicable administrative remedies. 

(5) The Secretary may defer the service commitment of any 

individual pursuant to subparagraph (E) of paragraph (1) (as 

specified in the agreement required by such paragraph) for a 

period of not more than 2 years if such individual is engaged 

in a graduate course of study approved by the Secretary, except that any deferment of service as a commissioned officer 

pursuant to paragraph (1)(E) must be approved by the Secretary of the military department (including the Secretary of 

Commerce with respect to the National Oceanic and Atmospheric Administration) which has jurisdiction over such service. 

(6)(A) In order to meet the requirements of paragraph (1)(D), a 

graduate of the Academy shall perform all directed training and 

obey all orders and directions required by the relevant Reserve Component and remain qualified in Ready Reserve classification for a 

period of not less than 6 years, as required by the regulations of the 

applicable armed service unless such compliance is waived by the 

Secretary of Defense or the Secretary of the Department in which the 

United States Coast Guard is operating. 

(B) Notwithstanding section 552a of title 5, United States Code, 

the Secretary of Defense or the Secretary of the Department in which 

52 

the Coast Guard is operating, and the Administrator of the National Oceanic and Atmospheric Administration—

(i) shall report the status of obligated service of an individual 

graduate upon request of the Maritime Administration; and 

(ii) may, in their discretion, notify the Maritime Administration of the default in performance of an graduate in the performance of the graduate’s duties, either on active duty or in the 

Ready Reserve Component of their respective service, or as a 

commissioned officer of the National Oceanic and Atmospheric 

Administration. 

(C) A report or notice under subparagraph (B) shall identify the 

graduate determined to have been defaulted and provide all required information as to why such graduate has been defaulted. 

Upon receipt of such a report or notice, such graduate may be considered to be in default of the graduate’s service obligations by the 

Maritime Administration, and be subject to all remedies the Maritime Administration may have with respect to such a default. 

(6) An individual who serves as a commissioned officer on active 

duty in an armed force of the United States or in the National Oceanic and Atmospheric Administration for the 5 years immediately 

following graduation from the Academy shall be excused from the 

requirements of subparagraphs (1)(C), (1)(D), and (1)(E). 

(7) The Secretary may modify or waive any of the terms and conditions set forth in paragraph (1) through the imposition of alternative service requirements. 

(f) PLACES OF TRAINING.—The Secretary may provide for the 

training of cadets at the Academy—

(1) on vessels owned or subsidized by the United States; 

(2) on other vessels documented under the laws of the United 

States if the owner of any such vessel cooperates in such use; 

øand¿ 

(3) in shipyards or plants and with any industrial or educational øorganizations.¿ organizations; and 

(4) on such other vessels as the Secretary determines to be 

valuable for the education of cadets at the Academy or in the 

interest of national security. 

(g) DEGREES AWARDED.—

(1) BACHELOR’S DEGREE.—The Superintendent of the Academy may confer the degree of bachelor of science upon any individual who has met the conditions prescribed by the Secretary and who, if a citizen of the United States, has passed 

the examination for a merchant marine officer’s license. No individual may be denied a degree under this subsection because 

the individual is not permitted to take such examination solely 

because of physical disqualification. 

(2) MASTER’S DEGREE.—The Superintendent of the Academy 

may confer a master’s degree upon any individual who has met 

the conditions prescribed by the Secretary. Any master’s degree program may be funded through non-appropriated funds. 

In order to maintain the appropriate academic standards, the 

program shall be accredited by the appropriate accreditation 

body. The Secretary may make regulations necessary to administer such a program. 

(h) BOARD OF VISITORS.—

53 

(1) A Board of Visitors to the Academy shall be established, 

for a term of two years commencing at the beginning of each 

Congress, to visit the Academy annually on a date determined 

by the Secretary and to make recommendations on the operation of the Academy. 

(2) The Board shall be composed of— (A) 2 Senators appointed by the chairman of the Commerce, Science, and Transportation Committee of the Senate; 

(B) 3 Members of the House of Representatives appointed by the chairman of the Merchant Marine and Fisheries Committee of the House of Representatives; 

(C) 1 Senator appointed by the Vice President; 

(D) 2 Members of the House of Representatives appointed by the Speaker of the House of Representatives; 

and 

(E) the chairman of the Commerce, Science, and Transportation Committee of the Senate and the chairman of 

the Merchant Marine and Fisheries Committee of the 

House of Representatives, as ex officio members. 

(3) Whenever a member of the Board is unable to attend the 

annual meeting provided in paragraph (1), another individual 

may be appointed in the manner provided by paragraph (2) as 

a substitute for such member. 

(4) The chairmen of the Commerce, Science, and Transportation Committee of the Senate and the Merchant Marine and 

Fisheries Committee of the House of Representatives may designate staff members of such committees to serve without reimbursement as staff for the Board. 

(5) While away from their homes or regular places of business in the performance of services for the Board, members of 

the Board and any staff members designated under paragraph 

(4) shall be allowed travel expenses, including per diem in lieu 

of subsistence, in the same manner as persons employed intermittently in the Government service are allowed expenses 

under section 5703 of title 5, United States Code. 

(i) ADVISORY BOARD.— (1) An Advisory Board to the Academy shall be established 

to visit the Academy at least once during each academic year, 

for the purpose of examining the course of instruction and 

management of the Academy and advising the Maritime Administrator and the Superintendent of the Academy. 

(2) The Advisory Board shall be composed of not more than 

7 persons of distinction in education and other fields relating 

to the Academy who shall be appointed by the Secretary for 

terms not to exceed 3 years and may be reappointed. 

(3) The Secretary shall appoint a chairman from among the 

members of the Advisory Board. 

(4) While away from their homes or regular places of business in the performance of service for the Advisory Board, 

members of the Advisory Board shall be allowed travel expenses, including per diem in lieu of subsistence, in the same 

manner as persons employed intermittently in the Government 

service are allowed expenses under section 5703 of title 5, 

United States Code. 

54 

(5) The Federal Advisory Committee Act (5 U.S.C. App. 1 et 

seq.) shall not apply to the Advisory Board established pursuant to this subsection. 

(j) LIMITATION ON CHARGES AND FEES FOR ATTENDANCE.— (1) Except as provided in paragraph (2), no charge or fee for 

tuition, room, or board for attendance at the Academy may be 

imposed unless the charge or fee is specifically authorized by 

a law enacted after October 5, 1994. 

(2) The prohibition specified in paragraph (1) does not apply 

with respect to any item or service provided to cadets for which 

a charge or fee is imposed as of October 5, 1994. The Secretary 

of Transportation shall notify Congress of any change made by 

the Academy in the amount of a charge or fee authorized 

under this paragraph. 

TITLE XIII—MARITIME EDUCATION AND TRAINING

* * * * * * * 

SEC. 1304. STATE MARITIME ACADEMIES. 

[46 U.S.C. App. 1295c] 

(a) COOPERATION AND ASSISTANCE.—The Secretary shall cooperate with and assist any State maritime academy in providing instruction to individuals to prepare them for service in the merchant 

marine of the United States. 

(b) REGIONAL MARITIME ACADEMIES.—The Governors of all States 

or territories of the United States, or both, cooperating to sponsor 

a regional maritime academy shall designate in writing one State 

or territory of the United States, from among the sponsoring States 

or territories, or both, to conduct the affairs of such regional maritime academy. Any regional maritime academy shall be eligible for 

assistance from the Federal Government on the same basis as any 

State maritime academy sponsored by a single State or territory of 

the United States. 

(c) TRAINING VESSELS.—

(1)(A) The Secretary may furnish for training purposes any 

suitable vessel under the control of the Secretary or provided 

under subparagraph (B), or construct and furnish a suitable 

vessel if such a vessel is not available, to any State maritime 

academy meeting the requirements of subsection (f)(1). Any 

such vessel—

(i) shall be repaired, reconditioned, and equipped (including supplying all apparel, charts, books, and instruments of navigation) as necessary for use as a training 

ship; 

(ii) shall be furnished to such State maritime academy 

only after application for such vessel is made in writing by 

the Governor of the State or territory sponsoring such 

State maritime academy or, with respect to a regional 

maritime academy the Governor of the State or territory 

designated pursuant to subsection (b); 

(iii) shall be furnished to such State maritime academy 

only if a suitable port for the safe mooring of such vessel 

is available while it is being used by such academy; 

(iv) shall be maintained in good repair by the Secretary; 

and 

55 

(v) shall remain the property of the United States. 

(B) Any department or agency of the United States may provide to the Secretary to be furnished to any State maritime 

academy any vessel (including equipment) which is suitable for 

the purposes of this paragraph and which can be provided 

without detriment to the service to which such vessel is assigned. 

(2) øThe Secretary may pay to any State maritime academy¿ 

(A) The Secretary shall, subject to the availability of appropriations, pay to each State maritime academy the amount of the 

costs of all fuel consumed by any vessel furnished under paragraph (1) while such vessel is being used for training purposes 

by such academy. 

(B) The amount of the payment to a State maritime academy 

under this paragraph shall not exceed— (i) $100,000 for fiscal year 2006; 

(ii) $200,000 for fiscal year 2007; and 

(iii) $300,000 for fiscal year 2008 and each fiscal year 

thereafter. 

(3)(A) The Secretary may provide for the training of individuals attending a State maritime academy— (i) on vessels owned or subsidized by the United States; 

(ii) on other vessels documented under the laws of the 

United States if the owner of any such vessel cooperates 

in such use; and 

(iii) in shipyards or plants and with any industrial or 

educational organizations. 

(B) While traveling under orders for purposes of receiving 

training under this paragraph, any individual who is attending 

a State maritime academy shall receive from the Secretary allowances for transportation (including reimbursement of traveling expenses) in accordance with any regulations promulgated by the Secretary. 

(d) ANNUAL PAYMENTS.—

(1)(A) The Secretary may enter into an agreement, which 

shall be effective for not more than 4 years, with one State 

maritime academy (not including regional maritime academies) 

located in each State or territory of the United States which 

meets the requirements of subsection (f)(1), and with each regional maritime academy which meets the requirements of 

subsection (f)(1), to make annual payments to each such academy for the maintenance and support of such academy. 

(B) Subject to subparagraph (C), the annual payment to such 

State maritime academy shall be at least equal to the amount 

given to the academy for its maintenance and support by the 

State in which it is located, and to such regional maritime 

academy shall be at least equal to the amount given the academy by all States and territories cooperating to sponsor the 

academy. 

(C) The amount under subparagraph (B) may not be more 

than $25,000, except that the amount shall be—

(i) $100,000 to such State maritime academy if the academy meets the condition set forth in subsection (f)(2); or 

(ii) ø$200,000¿ subject to the availability of appropriations, $300,000 for fiscal year 2006, $400,000 for fiscal year 

56 

2007, and $500,000 for fiscal year 2008 and each fiscal 

year thereafter to such regional maritime academy if the 

academy meets the condition set forth in subsection (f)(2). 

(2) The Secretary shall provide to each State maritime academy guidance and assistance in developing courses on the operation and maintenance of new vessels, on equipment, and on 

innovations being introduced to the merchant marine of the 

United States. 

(e) DETAILING OF PERSONNEL.—Upon the request of the Governor 

of any State or territory, the President may detail, without reimbursement, any of the personnel of the United States Navy, the 

United States Coast Guard, or the United States Maritime Service 

to any State maritime academy to serve as superintendents, professors, lecturers, or instructors at such academy. 

(f) CONDITIONS TO RECEIVING PAYMENTS OR USE OF VESSELS.—

(1) As a condition to receiving any payment or the use of any 

vessel under this section, any State maritime academy shall—

(A) provide courses of instruction on navigation, marine 

engineering (including steam and diesel propulsion), the 

operation and maintenance of new vessels and equipment, 

and innovations being introduced to the merchant marine 

of the United States; 

(B) agree in writing to conform to such standards for 

courses, training facilities, admissions, and instruction as 

are established by the Secretary after consultation with 

the superintendents of the State maritime academies; and 

(C) agree in writing to require, as a condition for graduation, that each individual who is a citizen of the United 

States and who is attending the academy in a merchant 

marine officer preparation program shall pass the examination administered by the Coast Guard required for 

issuance of a license under section 7101 of title 46, United 

States Code. 

(2) As a condition to receiving an annual payment of any amount in excess of $25,000 under subsection (d), a State maritime academy shall agree to admit to such academy each year 

a number of individuals who meet the admission requirements 

of such academy and who are citizens of the United States residing in States and territories of the United States other than 

the States or territories, or both, supporting such academy. 

The Secretary shall determine the number of individuals under 

this paragraph for each State maritime academy so that such 

number does not exceed one-third of the total number of individuals attending such academy at any time. 

(g) STUDENT INCENTIVE PAYMENT AGREEMENTS.—

(1) The Secretary may enter into an agreement, which shall 

be effective for not more than 4 academic years, with any individual, who is a citizen of the United States and is attending 

a State maritime academy which entered into an agreement 

with the Secretary under subsection (d)(1), to make student incentive payments to such individual, which payments shall be 

in amounts equaling $4,000 for each academic year and which 

payments shall be— (A) allocated among the various State maritime academies in a fair and equitable manner; 

57 

(B) used to assist the individual in paying the cost of 

uniforms, books, and subsistence; and 

(C) paid by the Secretary as the Secretary shall prescribe while the individual is attending the academy. 

(2) Each agreement entered into under paragraph (1) shall 

require the individual to accept midshipman and enlisted reserve status in the United States Naval Reserve (including the 

Merchant Marine Reserve, United States Naval Reserve) before receiving any student incentive payments under this subsection. 

(3) Each agreement entered into under paragraph (1) shall 

obligate the individual receiving student incentive payments 

under the agreement— (A) to complete the course of instruction at the State 

maritime academy which the individual is attending; 

(B) to take the examination for a license as an officer in 

the merchant marine of the United States on or before the 

date of graduation from such State maritime academy of 

such individual and to fulfill the requirements for such license not later than 3 months after such graduation date; 

(C) to maintain a valid license as an officer in the merchant marine of the United States for at least 6 years following the date of graduation from such State maritime 

academy of such individual, accompanied by the appropriate national and international endorsements and certification as required by the United States Coast Guard for 

service aboard vessels on domestic and international voyages; 

(D) to accept if tendered an appointment as, and to serve 

as a commissioned officer in the United States Naval Reserve (including the Merchant Marine Reserve, United 

States Naval Reserve), the United States Coast Guard Reserve, or any other reserve unit of an armed force of the 

United States, for at least 6 years following the date of 

graduation from such State maritime academy of such individual; 

(E) to serve the foreign and domestic commerce and the 

national defense of the United States for at least 3 years 

following the date of graduation from the Academy—

(i) as a merchant marine officer serving on vessels 

documented under the laws of the United States or on 

vessels owned and operated by the United States or by 

any State or territory of the United States; 

(ii) as an employee in a United States maritime-related industry, profession, or marine science (as determined by the Secretary), if the Secretary determines 

that service under clause (i) is not available to such 

individual; 

(iii) as a commissioned officer on active duty in an 

armed force of the United States, as a commissioned 

officer in the National Oceanic and Atmospheric Administration, or in other maritime-related employment 

with the Federal Government which serves the national security interests of the United States, as determined by the Secretary; or 

58 

(iv) by combining the services specified in clauses (i), 

(ii), and (iii); and 

(F) to report to the Secretary on the compliance by the 

individual to this paragraph. 

(4)(A) If the Secretary determines that an individual who has 

accepted the payment described in paragraph (1) for a minimum of 2 academic years has failed to fulfill the part of the 

agreement required by paragraph (1) and described in paragraph (3)(A), such individual may be ordered by the Secretary 

of Defense to active duty in the Armed Forces of the United 

States to serve for a period of time not to exceed 2 years. In 

cases of hardship, as determined by the Secretary, the Secretary may waive this provision in whole or in part. 

(B) If the Secretary of Defense is unable or unwilling to 

order an individual to active duty under subparagraph (A), or 

if the Secretary of Transportation determines that reimbursement of the cost of education provided would better serve the 

interests of the United States, the Secretary—

(i) subject to clause (ii), may recover from the individual 

the amount of student incentive payments, plus interest 

and attorneys fees; and 

(ii) may reduce the amount to be recovered from 

such individual to reflect partial performance of service obligations and such other factors as the Secretary 

determines merit such reduction. 

(5)(A) If the Secretary determines that an individual has 

failed to fulfill any part of the agreement required by paragraph (1), as described in paragraph (3)(B), (C), (D), (E), or (F), 

such individual may be ordered to active duty to serve a period 

of time not less than 2 years and not more than the unexpired 

portion, as determined by the Secretary, of the service required 

by paragraph (3)(E). The Secretary, in consultation with the 

Secretary of Defense, shall determine in which service the individual shall be ordered to active duty to serve such period of 

time. In cases of hardship, as determined by the Secretary, the 

Secretary may waive this provision in whole or in part. 

(B) If the Secretary of Defense is unable or unwilling to 

order an individual to active duty under subparagraph (A), or 

if the Secretary of Transportation determines that reimbursement of the cost of education provided would better serve the 

interests of the United States, the Secretary—

(i) subject to clause (ii), may recover from the individual 

the amount of student incentive payments, plus interest 

and attorneys fees; and 

(ii) may reduce the amount to be recovered from 

such individual to reflect partial performance of service obligations and such other factors as the Secretary 

determines merit such reduction. 

(6) To aid in the recovery of student incentive payments plus 

interest and attorneys fees the Secretary may request the Attorney General to begin court proceedings, and the Secretary 

may make use of the Federal debt collection procedures in 

chapter 176 of title 28, United States Code, and other applicable administrative remedies. 

59 

(7) The Secretary may defer the service commitment of any 

individual pursuant to subparagraph (E) of paragraph (3) (as 

specified in the agreement required by such paragraph) for a 

period of not more than 2 years if such individual is engaged 

in a graduate course of study approved by the Secretary, except that any deferment of service as a commissioned officer 

pursuant to subparagraph (E) of such paragraph must be approved by the Secretary of the military department (including 

the Secretary of Commerce with respect to the National Oceanic and Atmospheric Administration) which has jurisdiction 

over such service. 

(8) This subsection shall apply only to individuals first entering a State maritime academy after the date occurring 6 

months after the effective date of the Maritime Education and 

Training Act of 1980. 

(h) APPOINTMENT OF CADET AS MIDSHIPMAN IN UNITED STATES

NAVAL RESERVE.—Any citizen of the United States attending a 

State maritime academy may be appointed by the Secretary of the 

Navy as a midshipman in the United States Naval Reserve (including the Merchant Marine Reserve, United States Naval Reserve). 

PUBLIC LAW 97–31; ACT OF JUNE 2, 1951 

øSEC. 801. VESSEL OPERATIONS REVOLVING FUND; ESTABLISHMENT; 

USES; LIMITATIONS. 

[46 U.S.C. App. 1241a] 

øFor working capital for the ‘‘Vessel Operations Revolving Fund’’, which is hereby created for the purpose of carrying out vessel operating functions of the Secretary of Transportation, including charter, operation, maintenance, repair, reconditioning, and betterment 

of merchant vessels under the jurisdiction of the Secretary of 

Transportation, $20,000,000, to remain available until expended. 

øNotwithstanding any other provision of law, rates for shipping 

services rendered under said Fund shall be prescribed by the Secretary of Transportation and the Fund shall be credited with all receipts from vessel operating activities conducted thereunder: Provided, That the provisions of sections 1(a), 1(c), 3(c) and 4 of Public 

Law 17, Seventy-eighth Congress (57 Stat. 45), as amended, shall 

be applicable in connection with such operations and to seamen 

employed through general agents as employees of the United 

States, who may be employed in accordance with customary commercial practices in the maritime industry, notwithstanding the 

provisions of any law applicable in terms to the employment of persons by the United States: Provided further, That such sums as 

may be determined to be necessary by the Secretary of Transportation, with the approval of the Bureau of the Budget, but not exceeding 2 per centum of vessel operating expenses, may be advanced from this Fund to the appropriation ‘‘Salaries and expenses’’ for the purposes of that appropriation in connection with 

vessel operating functions, but without regard to the limitations on 

amounts as stated therein: Provided further, That notwithstanding 

any other provisions of law, the unexpended balances of any working funds or of allocation accounts established, subsequent to January 1, 1951, for the activities provided for under this appropriation, 

together with receipts heretofore and hereafter received from such 

activities, may be transferred to and consolidated with this Fund, 

60 

which shall be available for the purposes of such working funds or 

allocation accounts. 

øNo money made available to the Department of Transportation, 

for Maritime Activities, by this or any other Act shall be used in 

payment for a vessel the title to which is acquired by the Government either by requisition or purchase, or the use of which is taken 

either by requisition or agreement, or which is insured by the Government and lost while so insured, unless the price or hire to be 

paid therefor, (except in cases where section 802 of the Merchant 

Marine Act, 1936, as amended, is applicable) is computed in accordance with subsection 902(a) of said Act, as that subsection is interpreted by the General Accounting Office.¿ 

SEC. 801. VESSEL OPERATIONS REVOLVING FUND. 

(a) IN GENERAL.—There is established in the Treasury, for the 

purposes set forth in subsection (b), a Vessel Operations Revolving 

Fund which shall be available without appropriation to the Secretary of Transportation. All amounts in the Fund shall be available for the purposes of the Fund, notwithstanding any other provision of law, and shall remain available until expended. 

(b) USES.—Amounts in the Fund shall be available for—

(1) all expenses and charges relating to the maintenance, repair, and operation of vessels under the jurisdiction of the Secretary; 

(2) all expenses and charges relating to the maintenance, repair, and operation of the facilities necessary to preserve and 

maintain such vessels; 

(3) payment of all costs of, and indirect costs that are reasonably related to, contracting, procurement, inspection, storage, 

management, distribution, and accountability of vessels under 

the jurisdiction of the Secretary and such property, facilities, 

and nonpersonal services as the Secretary deems necessary for 

the operation and maintenance of such vessels; 

(4) expenses incurred in activating, repairing, and deactivating vessels under the jurisdiction of the Secretary; 

(5) the acquisition of such vessels for the National Defense 

Reserve Fleet as both the Secretary and the Secretary of Navy 

deem necessary; 

(6) necessary expenses incurred in the protection, preservation, maintenance, acquisition, or use of vessels of the National 

Defense Reserve Fleet involved in mortgage foreclosure or forfeiture proceedings instituted by the United States Government, 

including payment of prior claims and liens, expenses of sale, 

and other related charges; and 

(7) costs and expenses incurred to repair damages to Government property under the jurisdiction or control of the Secretary 

that is used in connection with the National Defense Reserve 

Fleet. 

(c) CREDITS TO THE FUND.—

(1) IN GENERAL.—Notwithstanding any other provision of 

law, there shall be credited to and retained by the Fund—

(A) all amounts received in connection with vessel operations for vessels under the jurisdiction of the Secretary; except that there shall be no surcharge on charter hire or 

similar collection in connection with vessel operations for 

61 

the purpose of the reserve described in subsection (c)(2); 

and 

(B) any reimbursements, advances, setoffs, refunds, or recoveries arising out of or relating to the operation and 

maintenance of vessels of the National Defense Reserve 

Fleet under the jurisdiction of the Secretary, including any 

recoveries from litigation, arbitration, or otherwise. 

(2) RESERVE.—There shall be established and retained in the 

Fund from litigation and arbitration recoveries a reserve, not to 

exceed $30,000,000 at any one time, for use as a reserve for unscheduled repairs and other necessary expenses in connection 

with casualties to vessels in the National Reserve Fleet. 

(d) LAWS RELATING TO SEAMEN.—Subject to the provisions of sections 1(a) and (c), 3(c), and 4 of the Act of March 24, 1943 (50 

U.S.C. App. 1291(a) and (c), 1293(c), 1294), seamen employed on 

vessels in the custody of the Secretary and operated through the Secretary’s ship managers or general agents may be so employed by 

such ship managers or agents in accordance with customary commercial practices in the maritime industry without regard to any of 

the laws on employment of persons by the United States. 

(e) ADVANCEMENTS.—With the approval of the Director of the Office of Management and Budget, the Secretary may advance 

amounts the Secretary considers necessary from the Fund to the 

Maritime Administration Operations and Training appropriation 

account for purposes of carrying out duties and powers related to 

the maintenance, repair, and operation of vessels under the jurisdiction of the Secretary, without regard to the limitations on amounts 

stated in the Operations and Training appropriation. 

(f) LIMITATIONS.—

(1) IN GENERAL.—Amounts made available to the Secretary 

for purposes of this section or any other law may not be used 

to pay for a vessel described in paragraph (2) unless the compensation to be paid is computed under section 56303 of title 

46, United States Code, as that section is interpreted by the 

Comptroller General. 

(2) APPLICABLE VESSELS.—Paragraph (1) applies to a vessel—

(A) the title to which is acquired by the Government by 

requisition or purchase; 

(B) the use of which is taken by requisition or agreement; 

or 

(C) that is lost while insured by the Government. 

(3) NONAPPLICABLE VESSELS.—Paragraph (1) does not apply 

to a vessel under a construction-differential subsidy contract. 

MARITIME SECURITY ACT OF 2003 

øSEC. 3528. REVIEW OF PROGRAM. 

[46 U.S.C. App. 1271 note] 

ø(a) IN GENERAL.—The Secretary of Transportation shall conduct 

a comprehensive assessment of the human capital and other resource needs in connection with the Title XI loan guarantee program under the Merchant Marine Act, 1936 (46 U.S.C. App. 1271 

et seq.). In connection with this assessment, the Secretary shall develop an organizational framework for the program offices that insures that a clear separation of duties is established among the 

62 

loan application, project monitoring, and default management functions.¿ 

ø(b) PROGRAM ENHANCEMENTS.—¿ 

øAMENDMENTS EXECUTED UPON ENACTMENT OF MARITIME SECURITY

ACT OF 2003¿ 

ø(c) REPORT.The Secretary shall report to the Committee on 

Armed Services and the Committee on Commerce, Science, and 

Transportation of the Senate and the Committee on Armed Services of the House of Representatives on the results of the development of an organizational framework under subsection (a) by January 2, 2004.¿ 

OCEAN SHIPPING REFORM ACT OF 1998 

SEC. 401. CERTAIN LOAN GUARANTEES AND COMMITMENTS. 

[46 U.S.C. App. 1273a] 

(a) The øSecretary of Transportation¿ Administrator of the Maritime Administration may not issue a guarantee or commitment to 

guarantee a loan for the construction, reconstruction, or reconditioning of a liner vessel under the authority of title XI of the Merchant Marine Act, 1936 (46 U.S.C. App. 1271 et seq.) after the date 

of enactment of this Act unless the Chairman of the Federal Maritime Commission certifies that the operator of such vessel—

(1) has not been found by the Commission to have violated 

section 19 of the Merchant Marine Act, 1920 (46 U.S.C. App. 

876), or the Foreign Shipping Practices Act of 1988 (46 U.S.C. 

App. 1701a), within the previous 5 years; and 

(2) has not been found by the Commission to have committed 

a violation of the Shipping Act of 1984 (46 U.S.C. App. 1701 

et seq.), which involves unjust or unfair discriminatory treatment or undue or unreasonable prejudice or disadvantage with 

respect to a United States shipper, ocean transportation intermediary, ocean common carrier, or port within the previous 5 

years. 

(b) The Secretary of Commerce may not issue a guarantee or a 

commitment to guarantee a loan for the construction, reconstruction, or reconditioning of a fishing vessel under the authority of 

Title XI of the Merchant Marine Act, 1936 (46 U.S.C. App. 1271 

et seq.) if the fishing vessel operator has been—

(1) held liable or liable in rem for a civil penalty pursuant 

to section 308 of the Magnuson-Stevens Fishery Conservation 

and Management Act (16 U.S.C. 1858) and not paid the penalty; 

(2) found guilty of an offense pursuant to section 309 of the 

Magnuson-Stevens Fishery Conservation and Management Act 

(16 U.S.C. 1859) and not paid the assessed fine or served the 

assessed sentence; 

(3) held liable for a civil or criminal penalty pursuant to section 105 of the Marine Mammal Protection Act of 1972 (16 

U.S.C. 1375) and not paid the assessed fine or served the assessed sentence; or 

(4) held liable for a civil penalty by the Coast Guard pursuant to title 33 or 46, United States Code, and not paid the assessed fine. 

63 

PUBLIC LAW 85–469 

SEC. 101. ADVANCES TO FUND. 

[46 U.S.C. App. 1280] 

The Secretary or the Administrator of the Maritime Administration is authorized to advance to this account from the ‘‘Vessel operations revolving fund’’ (46 U. S. C. 1241a), such amounts as may 

be required for the payment, pursuant to section 1105 of the Merchant Marine Act, 1936, as amended (46 U. S. C. 1275), of unpaid 

principal amounts of defaulted mortgages and loans and of unpaid 

interest thereon: Provided, That such advances shall be repaid to 

the ‘‘Vessel operations revolving fund’’ as soon as practicable consistent with the status of this account: Provided further, That the 

total advances outstanding at any one time shall not exceed 

$10,000,000. 

MARITIME SECURITY ACT OF 2003 

SEC. 3527. ANNUAL REPORT ON PROGRAM. 

[46 U.S.C. App. 1280b] 

The øSecretary of Transportation¿ Administrator of the Maritime 

Administration shall report to Congress annually on the loan guarantee program under title XI of the Merchant Marine Act, 1936 (46 

U.S.C. App. 1271 et seq.). The reports shall include—

(1) the size, in dollars, of the portfolio of loans guaranteed; 

(2) the size, in dollars, of projects in the portfolio facing financial difficulties; 

(3) the number and type of projects covered; 

(4) a profile of pending loan applications; 

(5) the amount of appropriations available for new guarantees; 

(6) a profile of each project approved since the last report; 

and 

(7) a profile of any defaults since the last report. 

MARITIME EDUCATION AND TRAINING ACT OF 1980 

SEC. 1306. UNITED STATES MARITIME SERVICE. 

[46 U.S.C. App. 1295e] 

(a) ESTABLISHMENT AND MAINTENANCE.—The Secretary may establish and maintain a voluntary organization for the training of 

citizens of the United States to serve on merchant marine vessels 

of the United States and to perform functions to assist the United 

States merchant marine, as determined necessary by the Secretary, 

to be known as the United States Maritime Service. 

(b) ENROLLMENT; COMPENSATION; COURSE OF STUDY AND PERIODS OF TRAINING; UNIFORMS.—The Secretary may determine the 

number of individuals to be enrolled for training and reserve purposes in such service, to fix the rates of pay and allowances of such 

individuals without regard to the provisions of chapter 51 and subchapter III of chapter 53 of title 5, United States Code (relating to 

classification and General Schedule pay rates), to prescribe the 

course of study and the periods of training in such service, and to 

prescribe the uniform of such service and the rules governing the 

wearing and furnishing of such uniform. 

64 

(c) RANKS, GRADES, AND RATINGS SAME AS FOR UNITED STATES

COAST GUARD.—The ranks, grades, and ratings for personnel of the 

United States Maritime Service shall be the same as are then prescribed for the personnel of the United States Coast Guard. 

(d) AWARDS AND MEDALS.—The Secretary may establish and 

maintain a medals and awards program to recognize distinguished 

service, superior achievement, professional performance, and other 

commendable achievement by personnel of the United States Maritime Service. 

* * * * * * * 

SEC. 1309. OPERATION OF THE GLOBAL MARITIME AND TRANSPORTATION SCHOOL. 

(a) OPERATION AS NONAPPROPRIATED FUND INSTRUMENTALITY.—

After the date of enactment of the Maritime Administration Enhancement Act of 2005, the Global Maritime and Transportation 

School shall continue to operate as a nonappropriated fund instrumentality of the United States under the jurisdiction of the Department of Transportation, Maritime Administration. 

(b) ACTIVITIES.—

(1) IN GENERAL.—Under the general supervision of the Department of Transportation, Maritime Administration, GMATS 

shall develop, administer, and provide educational, training, 

and professional development activities, including educational 

activities, for Federal agencies, Federal employees, nonprofit organizations, other entities, and members of the general public, 

as well as carry out such other projects and activities that may 

be authorized by the Superintendent. 

(2) TRAINING SERVICES.—The training services and educational activities provided by GMATS shall be available to the 

Armed Forces of the United States and Commissioned Officers 

of the National Oceanic and Atmospheric Administration, Federal and State agencies, Federal and State employees, nonprofit 

organizations, private companies or organizations, and private 

individuals of the United States or foreign countries friendly to 

the United States. 

(3) FEDERAL REQUESTS FOR SERVICES.—Requests for training 

or other services from the Armed Forces of the United States or 

other agencies of the United States may be made pursuant to 

the provisions of section 1535 of title 31, United States Code. 

(c) FEES AND DONATIONS.—

(1) COLLECTION OF FEES.—GMATS may charge and retain 

fair and reasonable fees for the activities provided. 

(2) ACCEPTANCE AND MAKING OF DONATIONS.—

(A) GMATS may accept, use, hold, dispose, and administer gifts, bequests, and devises of money, securities, and 

other real or personal property made for the benefit of, or 

in connection with GMATS. 

(B) GMATS shall not accept a donation from a person 

that is actively engaged in a procurement activity with 

GMATS or has an interest that may be substantially affected by the performance or nonperformance of an official 

duty of a member of the Board or an employee of GMATS. 

65 

(C) GMATS is authorized to make gifts to the Department of Transportation and the Secretary is authorized to 

accept gifts from GMATS for any purpose. 

(3) NOT FEDERAL FUNDS.—Fees collected under paragraph (1) 

and amounts received under paragraph (2) shall not be considered to be Federal funds and shall not be required to be deposited in the Treasury of the United States. GMATS shall not be 

funded by appropriated funds. 

(d) USE OF USMMA FACULTY AND STAFF.— (1) PAYMENT.—GMATS may provide payment to United 

States Merchant Marine Academy faculty and staff for teaching 

and other services for GMATS, but only to the extent that the 

provision of such teaching or services does not interfere or conflict with the official duties of the faculty and staff and are approved by the Superintendent. 

(2) CONTRACTING AUTHORITY.—The Academy may enter into 

contracts with GMATS to provide faculty and staff of the Academy for teaching and other services and, to the extent of the actual costs incurred by the Academy under said contracts, credit 

such funds received under such contracts to the Academy’s appropriations, notwithstanding those provisions of law relating 

to the deposit of miscellaneous receipts into the Treasury. 

(e) GENERAL ADMINISTRATION.— (1) AUTHORITY OF SUPERINTENDENT.—The Superintendent is 

responsible for the overall supervision and administration of 

GMATS and the determination of its policies. In implementing 

this responsibility, the Superintendent shall appoint members 

to the Board and shall designate one member as the Senior 

Managing Director and may designate other Managing Directors as necessary. 

(2) AUTHORITY OF THE BOARD.—The Superintendent may delegate to the Board the Superintendent’s responsibility to advise 

and oversee the supervision and administration of GMATS. The 

Board may consist of both United States Merchant Marine 

Academy employees and non-Academy employees, as determined 

by the Superintendent. The Board shall be subject to regulation 

by the Secretary and shall report to the Superintendent. 

(3) AUTHORITY OF THE SENIOR MANAGING DIRECTOR.—The 

Superintendent may delegate to the Senior Managing Director 

of GMATS the authority to manage, administer, and operate 

GMATS. 

(4) DUTIES OF THE MANAGING DIRECTORS.—The Senior Managing Director shall be responsible, subject to the supervision 

and direction of the Board and the Superintendent, for carrying 

out the functions of GMATS. All other Managing Directors 

shall be responsible, subject to the supervision and direction of 

the Senior Managing Director, for carrying out the functions of 

GMATS. 

(5) BORROWING AND INVESTMENT AUTHORITY.—The Board, 

with the approval of the Superintendent, may authorize the 

Senior Managing Director— (A) to borrow money on the credit of GMATS; and 

(B) to invest funds held in excess of the current operating 

requirements of GMATS for purposes of maintaining a reasonable reserve. 

66 

(6) LIABILITY.—The Managing Directors and the other members of the Board shall not be held personally liable for any loss 

or damage that may accrue to GMATS as the result of any act 

performed within the scope of their duties under this section. 

(f) EMPLOYEES.—Employees of GMATS are employees of a nonappropriated fund instrumentality of the United States. 

(g) NOT A FEDERAL AGENCY.—The GMATS shall not be considered a Federal agency for purposes of—

(1) the Federal Advisory Committee Act (5 U.S.C. ); or 

(2) sections 552 and 552a of title 5, United States Code. 

(h) ACQUISITION AND DISPOSAL OF PROPERTY.—In order to carry 

out the activities of GMATS, GMATS may—

(1) acquire goods, services, and real property by lease, purchase. or otherwise; 

(2) maintain, enlarge, or remodel any such property; 

(3) have sole control of any such personal or real property; 

and 

(4) dispose of real and personal property without regard to 

the Federal Property and Administrative Services Act of 1949 

(40 U.S.C. 101 et seq.). 

(i) CONTRACT AUTHORITY.—GMATS may enter into contracts and 

leases without regard to the Federal Property and Administrative 

Services Act of 1949 (40 U.S.C. 101 et seq.) or any other law that 

prescribes procedures for the procurement of property or service by 

an executive agency. 

(j) USE OF DEPARTMENT FACILITIES AND RESOURCES.—GMATS 

may use the facilities and resources of the Department of Transportation, with the approval of the Superintendent, but only if any 

costs incurred by the Department that are attributable solely to 

GMATS operations and all costs incurred by GMATS arising out of 

such operations are paid using funds of GMATS or the Department 

of Transportation receives other consideration for paying for such 

costs. Any reimbursement may be retained by the United States 

Merchant Marine Academy and credited to the charged appropriations account. 

(k) AUDITS OF RECORDS.—The financial records of GMATS shall 

be made available to the Department of Transportation Inspector 

General, upon request, for purposes of conducting an audit. 

(l) DEFINITIONS.—In this section: 

(1) GMATS.—The term ‘‘GMATS’’ means the Global Maritime and Transportation School at the United States Merchant 

Marine Academy, a nonappropriated fund instrumentality of 

the Maritime Administration of the United States Department 

of Transportation. 

(2) BOARD.—The term ‘‘Board’’ means the GMATS Board of 

Directors. 

(3) DIRECTOR.—The term ‘‘Director’’ means a member of the 

GMATS Board. 

(4) MANAGING DIRECTOR.—The term ‘‘Managing Director’’

means a member of the Board who is an employee of GMATS 

with operational responsibility for the organization, but not a 

Federal employee. 

(5) SENIOR MANAGING DIRECTOR.—The term ‘‘Senior Managing Director’’ means the Managing Director designated the 

67 

‘‘Senior Managing Director’’ by the Superintendent, as set forth 

in subsection (e) of this section. 

(6) SECRETARY.—The term ‘‘Secretary’’ means the Secretary of 

Transportation. 

(7) SUPERINTENDENT.—The term ‘‘Superintendent’’ means the 

Superintendent of the United States Merchant Marine Academy 

at Kings Point, New York, operated by the Maritime Administration, United States Department of Transportation or, in the 

absence of the Superintendent, the Superintendent’s authorized 

designee or such other person as the Secretary may designate. 

MERCHANT MARINE DECORATIONS AND MEDALS ACT 

SEC. 5. INDIVIDUAL NOT TO RECEIVE MORE THAN ONE OF ANY TYPE 

OF DECORATION; ACCEPTANCE BY PERSONAL REPRESENTATIVE; REPLACEMENTS. 

[46 U.S.C. App. 2004] 

(a) The Secretary of Transportation may not award more than 

one of any type of decoration or medal to an individual. For each 

succeeding act or service justifying the same decoration or medal, 

a suitable device may be awarded to be worn with the decoration 

or medal. 

(b) When an individual scheduled to receive a decoration or 

medal under this Act is unable to accept it, the Secretary may 

make the award to an appropriate personal representative. 

(c) The Secretary may øprovide at cost, or authorize for the manufacture and sale at reasonable prices by private persons—¿ provide—(1) the decorations and medals authorized under section 2 of 

this Act and replacements for those decorations and medals; 

and 

(2) replacements for decorations and medals issued under a 

prior law. 

(d) Decorations and medals authorized under section 2 of this Act 

may be of similar design as are authorized for members of the 

Armed Forces of the United States for similar acts or service. 

* * * * * * * 

SEC. 8. EXCLUSIVENESS OF RIGHT TO DECORATION OR MEDAL; CIVIL 

PENALTY FOR VIOLATION. 

[46 U.S.C. App. 2007] 

Except as authorized by this Act or by the Secretary of Transportation, a person may not manufacture, sell, possess, or display a 

decoration or medal provided for in this Act. A person violating this 

section is liable to the United States Government for a civil penalty 

of $2,000. 

Æ