```

[104th Congress Public Law 239]
[From the U.S. Government Printing Office]

<DOC>
[DOCID: f:publ239.104]

[[Page 3117]]

                      MARITIME SECURITY ACT OF 1996

[[Page 110 STAT. 3118]]

Public Law 104-239
104th Congress

                                 An Act

 
 To amend the Merchant Marine Act, 1936 to revitalize the United States-
     flag merchant marine, and for other purposes. <<NOTE: Oct. 8, 
                         1996 -  [H.R. 1350]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of <<NOTE: Maritime Security Act of 1996. National 
defense.>>  America in Congress assembled,

SECTION 1. <<NOTE: 46 USC app. 1245 note.>>  SHORT TITLE.

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

SEC. 2. MARITIME SECURITY PROGRAM.

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

            ``Title VI--Vessel Operating Assistance Programs

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

        and

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

              ``Subtitle B--Maritime Security Fleet Program

                        ``establishment of fleet

    ``Sec. 651. <<NOTE: 46 USC app. 1187.>>  (a) In General.--The 
Secretary of Transportation shall establish a fleet of active, 
militarily useful, privately-owned vessels to meet national defense and 
other security requirements and maintain a United States presence in 
international commercial shipping. The Fleet shall consist of privately 
owned, United States-flag vessels for which there are in effect 
operating agreements under this subtitle, and shall be known as the 
Maritime Security Fleet.

    ``(b) Vessel Eligibility.--A vessel is eligible to be included in 
the Fleet if the vessel is self-propelled and--
            ``(1)(A) is operated by a person as an ocean common carrier;
            ``(B) whether in commercial service, on charter to the 
        Department of Defense, or in other employment, is either--
                    ``(i) a roll-on/roll-off vessel with a carrying 
                capacity of at least 80,000 square feet or 500 twenty-
                foot equivalent units; or
                    ``(ii) a lighter aboard ship vessel with a barge 
                capacity of at least 75 barges; or
            ``(C) any other type of vessel that is determined by the 
        Secretary to be suitable for use by the United States for

[[Page 110 STAT. 3119]]

        national defense or military purposes in time of war or national 
        emergency;
            ``(2)(A)(i) is a United States-documented vessel; and
            ``(ii) on the date an operating agreement covering the 
        vessel is entered into under this subtitle, is--
                    ``(I) a LASH vessel that is 25 years of age or 
                less; or
                    ``(II) any other type of vessel that is 15 years of 
                age or less;
        except that the Secretary of Transportation may waive the 
        application of clause (ii) if the Secretary, in consultation 
        with the Secretary of Defense, determines that the waiver is in 
        the national interest; or
            ``(B) it is not a United States-documented vessel, but the 
        owner of the vessel has demonstrated an intent to have the 
        vessel documented under chapter 121 of title 46, United States 
        Code, if it is included in the Fleet, and the vessel will be 
        less than 10 years of age on the date of that documentation;
            ``(3) the Secretary of Transportation determines that the 
        vessel is necessary to maintain a United States presence in 
        international commercial shipping or, after consultation with 
        the Secretary of Defense, determines that the vessel is 
        militarily useful for meeting the sealift needs of the United 
        States with respect to national emergencies; and
            ``(4) at the time an operating agreement for the vessel is 
        entered into under this subtitle, the vessel will be eligible 
        for documentation under chapter 121 of title 46, United States 
        Code.

                         ``operating agreements

    ``Sec. 652. <<NOTE: 46 USC app. 1187a.>>  (a) In General.--The 
Secretary of Transportation shall require, as a condition of including 
any vessel in the Fleet, that the owner or operator of the vessel enter 
into an operating agreement with the Secretary under this section. 
Notwithstanding subsection (g), the Secretary may enter into an 
operating agreement for, among other vessels that are eligible to be 
included in the Fleet, any vessel which continues to operate under an 
operating-differential subsidy contract under subtitle A or which is 
under charter to the Department of Defense.

    ``(b) Requirements for Operation.--An operating agreement under this 
section shall require that, during the period a vessel is operating 
under the agreement--
            ``(1) the vessel--
                    ``(A) shall be operated exclusively in the foreign 
                trade or in mixed foreign and domestic trade allowed 
                under a registry endorsement issued under section 12105 
                of title 46, United States Code, and
                    ``(B) shall not otherwise be operated in the 
                coastwise trade; and
            ``(2) the vessel shall be documented under chapter 121 of 
        title 46, United States Code.

    ``(c) Regulatory Relief.--A contractor of a vessel included in an 
operating agreement under this subtitle may operate the vessel in the 
foreign commerce of the United States without restriction, and shall not 
be subject to any requirement under section 801, 808, 809, or 810. 
Participation in the program established

[[Page 110 STAT. 3120]]

by this subtitle shall not subject a contractor to section 805 or to any 
provision of subtitle A.
    ``(d) Effectiveness and Annual Payment Requirements of Operating 
Agreements.--
            ``(1) Effectiveness.--The Secretary of Transportation may 
        enter into an operating agreement under this subtitle for fiscal 
        year 1996. The agreement shall be effective only for 1 fiscal 
        year, but shall be renewable, subject to the availability of 
        appropriations, for each subsequent fiscal year through the end 
        of fiscal year 2005.
            ``(2) Annual payment.--An operating agreement under this 
        subtitle shall require, subject to the availability of 
        appropriations and the other provisions of this section, that 
        the Secretary of Transportation pay each fiscal year to the 
        contractor, for each vessel that is covered by the operating 
        agreement, an amount equal to $2,300,000 for fiscal year 1996 
        and $2,100,000 for each fiscal year thereafter in which the 
        agreement is in effect. The amount shall be paid in equal 
        monthly installments at the end of each month. The amount shall 
        not be reduced except as provided by this section.

    ``(e) Certification Required for Payment.--As a condition of 
receiving payment under this section for a fiscal year for a vessel, the 
contractor for the vessel shall certify, in accordance with regulations 
issued by the Secretary of Transportation, that the vessel has been and 
will be operated in accordance with subsection (b)(1) for
at least 320 days in the fiscal year. Days during which the vessel is 
drydocked, surveyed, inspected, or repaired shall be considered days of 
operation for purposes of this subsection.

    ``(f) Operating Agreement is Obligation of United States 
Government.--An operating agreement under this subtitle constitutes a 
contractual obligation of the United States Government to pay the 
amounts provided for in the agreement to the extent of actual 
appropriations.
    ``(g) Limitations.--The Secretary of Transportation shall not make 
any payment under this subtitle for a vessel with respect to any days 
for which the vessel is--
            ``(1) subject to an operating-differential subsidy contract 
        under subtitle A or under a charter to the United States 
        Government, other than a charter pursuant to section 653;
            ``(2) not operated or maintained in accordance with an 
        operating agreement under this subtitle; or
            ``(3) more than 25 years of age, except that the Secretary 
        may make such payments for a LASH vessel for any day for which 
        the vessel is more than 25 years of age if that vessel--
                    ``(A) is modernized after January 1, 1994,
                    ``(B) is modernized before it is 25 years of age, 
                and
                    ``(C) is not more than 30 years of age.

    ``(h) Payments.--With respect to payments under this subtitle for a 
vessel covered by an operating agreement, the Secretary of 
Transportation--
            ``(1) except as provided in paragraph (2), shall not reduce 
        any payment for the operation of a vessel to carry military or 
        other preference cargoes under section 2631 of title 10, United 
        States Code, the Act of March 26, 1934 (46 U.S.C. App. 1241-1), 
        section 901(a), 901(b), or 901b of this Act, or any other cargo 
        preference law of the United States;

[[Page 110 STAT. 3121]]

            ``(2) shall not make any payment for any day that a vessel 
        is engaged in transporting more than 7,500 tons of civilian bulk 
        preference cargoes pursuant to section 901(a), 901(b), or 901b 
        that is bulk cargo; and
            ``(3) shall make a pro rata reduction in payment for each 
        day less than 320 in a fiscal year that a vessel covered by an 
        operating agreement is not operated in accordance with 
        subsection (b)(1), with days during which the vessel is 
        drydocked or undergoing survey, inspection, or repair considered 
        to be days on which the vessel is operated.

    ``(i) Priority for Awarding Agreements.--Subject to the availability 
of appropriations, the Secretary shall enter into operating agreements 
according to the following priority:
            ``(1) Vessels owned by citizens.--
                    ``(A) Priority.--First, for any vessel that is--
                          ``(i) owned and operated by persons who are 
                      citizens of the United States under section 2 of 
                      the Shipping Act, 1916; or
                          ``(ii) less than 10 years of age and owned and 
                      operated by a corporation that is--
                                    ``(I) eligible to document a vessel 
                                under chapter 121 of title 46, United 
                                States Code; and
                                    ``(II) affiliated with a corporation 
                                operating or managing for the Secretary 
                                of Defense other vessels documented 
                                under that chapter, or chartering other 
                                vessels to the Secretary of Defense.
                    ``(B) Limitation on number of operating 
                agreements.--The total number of operating agreements 
                that may be entered into by a person under the priority 
                in subparagraph (A)--
                          ``(i) for vessels described in subparagraph 
                      (A)(i), may not exceed the sum of--
                                    ``(I) the number of United States-
                                documented vessels the person operated 
                                in the foreign commerce of the United 
                                States (except mixed coastwise and 
                                foreign commerce) on May 17, 1995; and
                                    ``(II) the number of United States-
                                documented vessels the person chartered 
                                to the Secretary of Defense on that 
                                date; and
                          ``(ii) for vessels described in subparagraph 
                      (A)(ii), may not exceed 5 vessels.
                    ``(C) Treatment of related parties.--For purposes of 
                subparagraph (B), a related party with respect to a 
                person shall be treated as the person.
            ``(2) Other vessels owned by citizens and government 
        contractors.--To the extent that amounts are available after 
        applying paragraph (1), any vessel that is owned and operated by 
        a person who is--
                    ``(A) a citizen of the United States under section 2 
                of the Shipping Act, 1916, that has not been awarded an 
                operating agreement under the priority established under 
                paragraph (1); or
                    ``(B)(i) eligible to document a vessel under chapter 
                121 of title 46, United States Code; and
                    ``(ii) affiliated with a corporation operating or 
                managing other United States-documented vessels for the 
                Secretary

[[Page 110 STAT. 3122]]

                of Defense or chartering other vessels to the Secretary 
                of Defense.
            ``(3) Other vessels.--To the extent that amounts are 
        available after applying paragraphs (1) and (2), any other 
        eligible vessel.

    ``(j) Transfer of Operating Agreements.--A contractor under an 
operating agreement may transfer the agreement (including all rights and 
obligations under the agreement) to any person eligible to enter into 
that operating agreement under this subtitle after notification of the 
Secretary in accordance with regulations prescribed by the Secretary, 
unless the transfer is disapproved by the Secretary within 90 days after 
the date of that notification. A person to whom an operating agreement 
is transferred may receive payments from the Secretary under the 
agreement only if each vessel to be covered by the agreement after the 
transfer is an eligible vessel under section 651(b).
    ``(k) Reversion of Unused Authority.--The obligation of the 
Secretary to make payments under an operating agreement under this 
subtitle shall terminate with respect to a vessel if the contractor 
fails to engage in operation of the vessel for which such payment is 
required--
            ``(1) within one year after the effective date of the 
        operating agreement, in the case of a vessel in existence on the 
        effective date of the agreement, or
            ``(2) within 30 months after the effective date of the 
        operating agreement, in the case of a vessel to be constructed 
        after that effective date.

    ``(l) Procedure for Considering Application; Effective Date for 
Certain Vessels.--
            ``(1) Procedures.--No later than 30 days after the date of 
        the enactment of the Maritime Security Act of 1996, the 
        Secretary shall accept applications for enrollment of vessels in 
        the Fleet, and within 90 days after receipt of an application 
        for enrollment of a vessel in the Fleet, the Secretary shall 
        enter into an operating agreement with the applicant or provide 
        in writing the reason for denial of that application.
            ``(2) Effective date.--Unless an earlier date is requested 
        by the applicant, the effective date for an operating agreement 
        with respect to a vessel which is, on the date of entry into an 
        operating agreement, either subject to a contract under subtitle 
        A or on charter to the United States Government, other than a 
        charter under section 653, shall be the expiration or 
        termination date of the contract under subtitle A or of the 
        Government charter covering the vessel, respectively, or any 
        earlier date the vessel is withdrawn from that contract or 
        charter.

    ``(m) Early Termination.--An operating agreement under this subtitle 
shall terminate on a date specified by the contractor if the contractor 
notifies the Secretary, by not later than 60 days before the effective 
date of the termination, that the contractor intends to terminate the 
agreement. Vessels covered by an operating agreement terminated under 
this subsection shall remain documented under chapter 121 of title 46, 
United States Code, until the date the operating agreement would have 
terminated according to its terms. A contractor who terminates an 
operating agreement pursuant to this subsection shall continue to be 
bound by the provisions of section 653 until the date the operating 
agreement

[[Page 110 STAT. 3123]]

would have terminated according to its terms. All terms and conditions 
of an Emergency Preparedness Agreement entered into under section 653 
shall remain in effect until the date the operating agreement would have 
terminated according to its terms, except that the terms of such 
Emergency Preparedness Agreement may be modified by the mutual consent 
of the contractor and the Secretary of Transportation and the Secretary 
of Defense.
    ``(n) Nonrenewal for Lack of Funds.--If, by the first day of a 
fiscal year, sufficient funds have not been appropriated under the 
authority provided by section 655 for that fiscal year, the Secretary of 
Transportation shall notify the Congress that operating agreements 
authorized under this subtitle for which sufficient funds are not 
available will not be renewed for that fiscal year if sufficient funds 
are not appropriated by the 60th day of that fiscal year. If funds are 
not appropriated under the authority provided by section 655 for any 
fiscal year by the 60th day of that fiscal year, then each vessel 
covered by an operating agreement under this subtitle for which funds 
are not available is thereby released from any further obligation under 
the operating agreement, and the vessel owner or operator may transfer 
and register such vessel under a foreign registry deemed acceptable by 
the Secretary of Transportation, notwithstanding any other provision of 
law. If section 902 is applicable to such vessel after registration of 
the vessel under such a registry, the vessel is available to be 
requisitioned by the Secretary of Transportation pursuant to section 
902.
    ``(o) Award of Operating Agreements.--
            ``(1) In general.--The Secretary of Transportation, subject 
        to paragraph (4), shall award operating agreements within each 
        priority under subsection (i) (1), (2), and (3) under 
        regulations prescribed by the Secretary.
            ``(2) Number of agreements awarded.--Regulations under 
        paragraph (1) shall provide that if appropriated amounts are not 
        sufficient for operating agreements for all vessels within a 
        priority under subsection (i) (1), (2), or (3), the Secretary 
        shall award to each person submitting a request a number of 
        operating agreements that bears approximately the same ratio to 
        the total number of vessels in the priority, as the amount of 
        appropriations available for operating agreements for vessels in 
        the priority bears to the amount of appropriations necessary for 
        operating agreements for all vessels in the 
        priority.
            ``(3) Treatment of related parties.--For purposes of 
        paragraph (2), a related party with respect to a person shall be 
        treated as the person.
            ``(4) Preference for united states-built vessels.--In 
        awarding operating agreements for vessels within a priority 
        under subsection (i) (1), (2), or (3), the Secretary shall give 
        preference to a vessel that was constructed in the United 
        States, to the extent such preference is consistent with 
        establishment of a fleet described in the first sentence of 
        section 651(a) (taking into account the age of the vessel, the 
        nature of service provided by the vessel, and the commercial 
        viability of the vessel).

    ``(p) Notice to United States Shipbuilders Required.--The Secretary 
shall include in any operating agreement under this subtitle a 
requirement that the contractor under the agreement shall, by not later 
than 30 days after soliciting any bid or offer for the construction of 
any vessel in a foreign shipyard and before

[[Page 110 STAT. 3124]]

entering into a contract for construction of a vessel in a foreign 
shipyard, provide notice of the intent of the contractor to enter into 
such a contract to each shipyard in the United States that is capable of 
constructing the vessel.

                    ``national security requirements

    ``Sec. 653. (a) <<NOTE: 46 USC app. 1187b.>>  Emergency Preparedness 
Agreement.--
            ``(1) Requirement <<NOTE: Establishment.>>  to enter 
        agreement.--The Secretary of Transportation shall establish an 
        Emergency Preparedness Program under this section that is 
        approved by the Secretary of Defense. Under the program, the 
        Secretary of Transportation shall include in each operating 
        agreement under this subtitle a requirement that the contractor 
        enter into an Emergency Preparedness Agreement under this 
        section with the Secretary. The Secretary shall negotiate and 
        enter into an Emergency Preparedness Agreement with each 
        contractor as promptly as practicable after the contractor has 
        entered into an operating agreement under this subtitle.
            ``(2) Terms of agreement.--An Emergency Preparedness 
        Agreement under this section shall require that upon a request 
        by the Secretary of Defense during time of war or national 
        emergency, or whenever determined by the Secretary of Defense to 
        be necessary for national security (including any natural 
        disaster, international peace operation, or contingency 
        operation (as that term is defined in section 101 of title 10, 
        United States Code)), a contractor for a vessel covered by an 
        operating agreement under this subtitle shall make available 
        commercial transportation resources (including services). The 
        basic terms of the Emergency Preparedness Agreements shall be 
        established pursuant to consultations among the Secretary, the 
        Secretary of Defense, and Maritime Security Program contractors. 
        In any Emergency Preparedness Agreement, the Secretary and a 
        contractor may agree to additional or modifying terms 
        appropriate to the contractor's circumstances if those terms 
        have been approved by the Secretary of Defense.
            ``(3) Participation after expiration of operating 
        agreement.--Except as provided by section 652(m), the Secretary 
        may not require, through an Emergency Preparedness Agreement or 
        operating agreement, that a contractor continue to participate 
        in an Emergency Preparedness Agreement when the operating 
        agreement with the contractor has expired according to its terms 
        or is otherwise no longer in effect. After expiration of an 
        Emergency Preparedness Agreement, a contractor may volunteer to 
        continue to participate in such an agreement.

    ``(b) Resources Made Available.--The commercial transportation 
resources to be made available under an Emergency Preparedness Agreement 
shall include vessels or capacity in vessels, intermodal systems and 
equipment, terminal facilities, intermodal and management services, and 
other related services, or any agreed portion of such nonvessel 
resources for activation as the Secretary may determine to be necessary, 
seeking to minimize disruption of the contractor's service to commercial 
shippers.
    ``(c) Compensation.--
            ``(1) In general.--The Secretary of Transportation shall 
        provide in each Emergency Preparedness Agreement for fair and 
        reasonable compensation for all commercial transportation 
        resources provided pursuant to this section.

[[Page 110 STAT. 3125]]

            ``(2) Specific requirements.--Compensation under this 
        subsection--
                    ``(A) shall not be less than the contractor's 
                commercial market charges for like transportation 
                resources;
                    ``(B) shall include all the contractor's costs 
                associated with provision and use of the contractor's 
                commercial resources to meet emergency requirements;
                    ``(C) in the case of a charter of an entire vessel, 
                shall be fair and reasonable;
                    ``(D) shall be in addition to and shall not in any 
                way reflect amounts payable under section 652; and
                    ``(E) shall be provided from the time that a vessel 
                or resource is diverted from commercial service until 
                the time that it reenters commercial service.
            ``(3) Approval of amount by secretary of defense.--No 
        compensation may be provided for a vessel under this 
        subsection unless the amount of the compensation is approved by 
        the Secretary of Defense.

    ``(d) Temporary Replacement Vessels.--Notwithstanding any other 
provision of this subtitle or of other law to the contrary--
            ``(1) a contractor may operate or employ in foreign 
        commerce a foreign-flag vessel or foreign-flag vessel capacity, 
        as a temporary replacement for a United States-documented vessel 
        or United States-documented vessel capacity that is activated 
        under an Emergency Preparedness Agreement; and
            ``(2) such replacement vessel or vessel capacity shall be 
        eligible during the replacement period to transport preference 
        cargoes subject to section 2631 of title 10, United States Code, 
        the Act of March 26, 1934 (46 U.S.C. App. 1241-1), and sections 
        901(a), 901(b), and 901b of this Act to the same extent as the 
        eligibility of the vessel or vessel capacity replaced.

    ``(e) Redelivery and Liability of United States for 
Damages.--
            ``(1) In general.--All commercial transportation resources 
        activated under an Emergency Preparedness Agreement shall, upon 
        termination of the period of activation, be redelivered to the 
        contractor in the same good order and condition as when 
        received, less ordinary wear and tear, or the Government shall 
        fully compensate the contractor for any necessary repair or 
        replacement.
            ``(2) Limitation on liability of united states.--Except as 
        may be expressly agreed to in an Emergency Preparedness 
        Agreement, or as otherwise provided by law, the Government shall 
        not be liable for disruption of a contractor's commercial 
        business or other consequential damages to a contractor arising 
        from activation of commercial transportation resources under an 
        Emergency Preparedness Agreement.
            ``(3) Limitation on application of other requirements.--
        Sections 902 and 909 of this Act shall not apply to a vessel 
        while it is covered by an Emergency Preparedness Agreement under 
        this subtitle. Any Emergency Preparedness Agreement entered into 
        by a contractor shall supersede any other agreement between that 
        contractor and the Government for vessel availability in time of 
        war or national emergency.

[[Page 110 STAT. 3126]]

                              ``definitions

    ``Sec. <<NOTE: 46 USC app. 1187c.>>  654. In this subtitle:
            ``(1) Bulk cargo.--The term `bulk cargo' means cargo that is 
        loaded and carried in bulk without mark or count.
            ``(2) Contractor.--The term `contractor' means an owner or 
        operator of a vessel that enters into an operating agreement for 
        the vessel with the Secretary of Transportation under 
        section 652.
            ``(3) Ocean common carrier.--The term `ocean common carrier' 
        means a person holding itself out to the general public to 
        operate vessels to provide transportation by water of passengers 
        or cargo between the United States and a foreign country for 
        compensation, that--
                    ``(A) assumes responsibility for the transportation 
                from the port or point of receipt to the port or point 
                of destination, and
                    ``(B) utilizes, for all or part of that 
                transportation, a vessel operating on the high seas or 
                the Great Lakes between a port in the United States and 
                a port in a foreign country, except that the term does 
                not include a common carrier engaged in ocean 
                transportation by ferry boat, ocean tramp, or chemical 
                parcel-tanker. As used in this paragraph, `chemical 
                parcel-tanker' means a vessel whose cargo-carrying 
                capability consists of individual cargo tanks for bulk 
                chemicals that are a permanent part of the vessel, that 
                have segregation capability with piping systems to 
                permit simultaneous carriage of several bulk chemical 
                cargoes with minimum risk of cross-contamination, and 
                that has a valid certificate of fitness under the 
                International Maritime Organization Code for the 
                Construction and Equipment of Ships Carrying Dangerous 
                Chemicals in Bulk.
            ``(4) Fleet.--The term `Fleet' means the Maritime Security 
        Fleet established pursuant to section 651(a).
            ``(5) LASH vessel.--The term `LASH vessel' means a lighter 
        aboard ship vessel.
            ``(6) United states-documented vessel.--The term `United 
        States-documented vessel' means a vessel documented under 
        chapter 121 of title 46, United States Code.

                    ``authorization of appropriations

    ``Sec. 655. <<NOTE: 46 USC app. 1187d.>>  There are authorized to be 
appropriated for operating agreements under this subtitle, to remain 
available until expended, $100,000,000 for fiscal year 1996 and such 
sums as may be necessary, not to exceed $100,000,000, for each fiscal 
year thereafter through fiscal year 2005.''.

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

    (a) Limitation on Payments for Older Vessels.--Section 605(b) of the 
Merchant Marine Act, 1936 (46 U.S.C. App. 1175(b)), is amended to read 
as follows:
    ``(b) No operating-differential subsidy shall be paid for the 
operation of a vessel after the calendar year the vessel becomes 25 
years of age, unless the Secretary of Transportation has determined, 
before the date of enactment of the Maritime Security Act of 1996,

[[Page 110 STAT. 3127]]

that it is in the public interest to grant such financial aid for the 
operation of such vessel.''.
    (b) Wind-Up of Program.--Subtitle A of such Act (46 U.S.C. App. 1171 
et seq.), as designated by the amendment made by section 2(1), is 
further amended by adding at the end the following new section:
    ``Sec. 616. <<NOTE: 46 USC app. 1185a.>>  (a) After the date of 
enactment of the Maritime Security Act of 1996, the Secretary of 
Transportation shall not enter into any new contract for operating-
differential subsidy under this subtitle.

    ``(b) Notwithstanding any other provision of this Act, any 
operating-differential subsidy contract in effect under this title on 
the day before the date of enactment of the Maritime Security Act of 
1996 shall continue in effect and terminate as set forth in the 
contract, unless voluntarily terminated at an earlier date by the 
parties (other than the United States Government) to the contract.
    ``(c) The essential service requirements of section 601(a) and 
603(b), and the provisions of sections 605(c) and 809(a), shall not 
apply to the operating-differential subsidy program under this subtitle 
effective upon the earlier of--
            ``(1) <<NOTE: Federal Register, publication.>>  the date 
        that a payment is made, under the Maritime Security Program 
        established by subtitle B to a contractor under that subtitle 
        who is not party to an operating-differential subsidy contract 
        under this subtitle, with the Secretary to cause notice of the 
        date of such payment to be published in the Federal Register as 
        soon as possible; or
            ``(2) with respect to a particular contractor under the 
        operating-differential subsidy program, the date that contractor 
        enters into a contract with the Secretary under the Maritime 
        Security Program established by subtitle B.

    ``(d)(1) Notwithstanding any other provision of law, a vessel may be 
transferred and registered under an effective United States-controlled 
foreign flag if--
            ``(A) the operator of the vessel receives an operating-
        differential subsidy pursuant to a contract under this subtitle 
        which is in force on October 1, 1994, and
the Secretary approves the replacement of such vessel with a comparable 
vessel, or
            ``(B) the vessel is covered by an operating agreement under 
        subtitle B, and the Secretary approves the replacement of such 
        vessel with a comparable vessel for inclusion in the Maritime 
        Security Fleet established under subtitle B.

    ``(2) Any such vessel may be requisitioned by the Secretary of 
Transportation pursuant to section 902.''.

SEC. 4. DOMESTIC OPERATIONS.

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

                     ``noncontiguous domestic trades

    ``Sec. 656. <<NOTE: 46 USC app. 1187e.>>  (a)(1) Except as otherwise 
provided in this section, no contractor or related party shall receive 
payments pursuant to this subtitle during a period when it participates 
in a noncontiguous domestic trade, except upon written permission of the 

Secretary of Transportation. Such written permission shall also be 
required for any material change in the number or frequency

[[Page 110 STAT. 3128]]

of sailings, the capacity offered, or the domestic ports called by a 
contractor or related party in a noncontiguous domestic trade. The 
Secretary may grant such written permission pursuant to written 
application of such contractor or related party unless the Secretary 
finds that--
            ``(A) existing service in that trade is adequate; or
            ``(B) the service sought to be provided by the contractor or 
        related party--
                    ``(i) would result in unfair competition to any 
                other person operating vessels in such noncontiguous 
                domestic trade, or
                    ``(ii) would be contrary to the objects and policy 
                of this Act.

    ``(2) For purposes of this subsection, `written permission of the 
Secretary' means permission which states the capacity offered, the 
number and frequency of sailings, and the domestic ports called, and 
which is granted following--
            ``(A) written <<NOTE: Federal Register, publication.>>  
        application containing the information required by paragraph 
        (e)(1) by a person seeking such written permission, notice of 
        which application shall be published in the Federal Register 
        within 15 days of filing of such application with the Secretary;
            ``(B) <<NOTE: Hearings.>>  holding of a hearing on the 
        application under section 554 of title 5, United States Code, in 
        which every person, firm or corporation having any interest in 
        the application shall be permitted to intervene and be heard; 
        and
            ``(C) final decision on the application by the Secretary 
        within 120 days following conclusion of such hearing.

    ``(b) Subsection (a) shall not apply in any way to provision by a 
contractor of service within the level of service provided by that 
contractor as of the date established by subsection (c) or to provision 
of service permitted by subsection (d).
    ``(c) The date referred to in subsection (b) shall be August 9, 
1995: Provided however, That with respect to tug and barge service to 
Alaska the date referred to in subsection (b) shall be July 1, 1992.
    ``(d) A contractor may provide service in a trade in addition to the 
level of service provided as of the applicable date established by 
subsection (c) in proportion to the annual increase in real gross 
product of the noncontiguous State or Commonwealth served since the 
applicable date established by subsection (c).
    ``(e)(1) A person applying for award of an agreement under this 
subtitle shall include with the application a description of the level 
of service provided by that person in each noncontiguous domestic trade 
served as of the date applicable under subsection (c). The application 
also shall include, for each such noncontiguous domestic trade: a list 
of vessels operated by that person in such trade, their container 
carrying capacity expressed in twenty-foot equivalent units (TEUs) or 
other carrying capacity, the itinerary for each such vessel, and such 
other information as the Secretary may require by regulation. Such 
description and information shall be made available to the 
public. <<NOTE: Federal Register, publication.>>  Within 15 days of the 
date of an application for an agreement by a person seeking to provide 
service pursuant to subsections (b) and (c) of this section, the 
Secretary shall cause to be published in the Federal Register notice of 
such description, along with a request for public comment thereon. 
Comments on such description shall be submitted to the

[[Page 110 STAT. 3129]]

Secretary within 30 days of publication in the Federal Register. Within 
15 days after receipt of comments, the Secretary shall issue a 
determination in writing either accepting, in whole or part, or 
rejecting use of the applicant's description to establish the level of 
service provided as of the date applicable under subsection (c): 
Provided, That notwithstanding the provisions of this subsection, 
processing of the application for an award of an agreement shall not be 
suspended or delayed during the time in which comments may be submitted 
with respect to the determination or during the time prior to issuance 
by the Secretary of the required 
determination: Provided further, That if the Secretary does not make the 
determination required by this paragraph within the time provided by 
this paragraph, the description of the level of service provided by the 
applicant shall be deemed to be the level of service provided as of the 
applicable date until such time as the Secretary makes the 
determination.

    ``(2) No contractor shall implement the authority granted in 
subsection (d) of this section except as follows:
            ``(A) An application shall be filed with the Secretary which 
        shall state the increase in capacity sought to be offered, a 
        description of the means by which such additional capacity would 
        be provided, the basis for applicant's position that such 
        increase in capacity would be in proportion to or less than the 
        increase in real gross product of the relevant noncontiguous 
        State or Commonwealth since the applicable date established by 
        subsection (c), and such information as the Secretary may 
        require so that the Secretary may accurately determine such 
        increase in real gross product of the relevant noncontiguous 
        State or Commonwealth.
            ``(B) Such increase in capacity sought by applicant and such 
        information shall be made available to the public.
            ``(C) Within 15 <<NOTE: Federal Register, publication.>>  
        days of the date of an application pursuant to this paragraph 
        the Secretary shall cause to be published in the Federal 
        Register notice of such application, along with a request for 
        public comment thereon.
            ``(D) Comments on such application shall be submitted to the 
        Secretary within 30 days of publication in the Federal Register.
            ``(E) Within 15 days after receipt of comments, the 
        Secretary shall issue a determination in writing either 
        accepting, in whole or part, or rejecting, the increase in 
        capacity sought by the applicant as being in proportion to or 
        less than the increase in real gross product of the relevant 
        noncontiguous State or Commonwealth since the applicable date 
        established by subsection (c): Provided, That, notwithstanding 
        the provisions of this section, if the Secretary does not make 
        the determination required by this paragraph within the time 
        provided by this paragraph, the increase in capacity sought by 
        applicant shall be permitted as being in proportion to or less 
        than such increase in real gross product until such time as the 
        Secretary makes the determination.

    ``(f) With respect to provision by a contractor of service in a 
noncontiguous domestic trade not authorized by this section, the 
Secretary shall deny payments under the operating agreement with respect 
to the period of provision of such service but shall deny payments only 
in part if the extent of provision of such unauthorized service was de 
minimis or not material.

[[Page 110 STAT. 3130]]

    ``(g) Notwithstanding any other provision of this subtitle, the 
Secretary may issue temporary permission for any United States citizen, 
as that term is defined in section 2 of the Shipping Act, 1916, to 
provide service to a noncontiguous State or Commonwealth upon the 
request of the Governor of such noncontiguous State or Commonwealth, in 
circumstances where an Act of God, a declaration of war or national 
emergency, or any other condition occurs that prevents ocean 
transportation service to such noncontiguous State or Commonwealth from 
being provided by persons currently providing such service. Such 
temporary permission shall expire 90 days from date of grant, unless 
extended by the Secretary upon written request of the Governor of such 
State or Commonwealth.
    ``(h) As used in this section:
            ``(1) The term `level of service provided by a contractor' 
        in a trade as of a date means--
                    ``(A) with respect to service other than service 
                described in (B), the total annual capacity provided by 
                the contractor in that trade for the 12 calendar months 
                preceding that date: Provided, That, with respect to 
                unscheduled, contract carrier tug and barge service 
                between points in Alaska south of the Arctic Circle and 
                points in the contiguous 48 States, the level of service 
                provided by a contractor shall include 100 percent of 
                the capacity of the equipment dedicated to such service 
                on the date specified in subsection (c) and actually 
                utilized in that service in the two-year period 
                preceding that date, excluding service to points between 
                Anchorage, Alaska and Whittier, Alaska, served by common 
                carrier service unless such unscheduled service is only 
                for carriage of oil or pursuant to a contract with the 
                United States military: Provided further, That, with 
                respect to scheduled barge service between the 
                contiguous 48 States and Puerto Rico, such total annual 
                capacity shall be deemed as such total annual capacity 
                plus the annual capacity of two additional barges, each 
                capable of carrying 185 trailers and 100 automobiles; 
                and
                    ``(B) with respect to service provided by container 
                vessels, the overall capacity equal to the sum of--
                          ``(i) 100 percent of the capacity of vessels 
                      operated by or for the contractor on that date, 
                      with the vessels' configuration and frequency of 
                      sailing in effect on that date, and which 
                      participate solely in that noncontiguous domestic 
                      trade; and
                          ``(ii) 75 percent of the capacity of vessels 
                      operated by or for the contractor on that date, 
                      with the vessels' configuration and frequency of 
                      sailing in effect on that date, and which 
                      participate in that noncontiguous domestic trade 
                      and in another trade, provided that the term does 
                      not include any restriction on frequency, or 
                      number of sailings, or on ports called within such 
                      overall capacity.
            ``(2) The level of service set forth in paragraph (1) shall 
        be described with the specificity required by subsection (e)(1) 
        and shall be the level of service in a trade with respect to the 
        applicable date established by subsection (c) only if the 
        service is not abandoned thereafter, except for interruptions

[[Page 110 STAT. 3131]]

        due to military contingency or other events beyond the 
        contractor's control.
            ``(3) The term `participates in a noncontiguous domestic 
        trade' means directly or indirectly owns, charters, or operates 
        a vessel engaged in transportation of cargo between a point in 
        the contiguous 48 states and a point in Alaska, Hawaii, or 
        Puerto Rico, other than a point in Alaska north of the Arctic 
        Circle.
            ``(4) The term `related party' means--
                    ``(A) a holding company, subsidiary, affiliate, or 
                associate of a contractor who is a party to an operating 
                agreement under this subtitle; and
                    ``(B) an officer, director, agent, or other 
                executive of a contractor or of a person referred to in 
                subparagraph (A).''.

    (b) Conforming Amendment.--Section 805 of the Merchant Marine Act, 
1936 (46 U.S.C. App. 1223) is amended--
            (1) by striking ``title VI of this Act'' each place it 
        appears and inserting ``subtitle A of title VI of this Act''; 
        and
            (2) by striking ``under title VI'' each place it appears and 
        inserting ``under subtitle A of title VI''.

SEC. 5. USE OF FOREIGN-FLAG VESSELS.

    (a) In General.--Section 804 of the Merchant Marine Act, 1936 (46 
U.S.C. App. 1222) is amended by adding at the end the following new 
subsection:
    ``(f) The provisions of subsection (a) shall not preclude a 
contractor receiving assistance under subtitle A or B of title VI, or 
any holding company, subsidiary, or affiliate of the contractor, or any 
officer, director, agent, or executive thereof, from--
            ``(1) owning, chartering, or operating any foreign-flag 
        vessel on a voyage or a segment of a voyage that does not call 
        at a port in the United States;
            ``(2) owning, chartering, or operating any foreign-flag 
        vessel in line haul service between the United States and 
        foreign ports if--
                    ``(A) the foreign-flag vessel was owned, chartered, 
                or operated by, or is a replacement for a foreign-flag 
                vessel owned, chartered, or operated by, such owner or 
                operator, or any holding company, subsidiary, affiliate, 
                or associate of such owner or operator, on the date of 
                enactment of the Maritime Security Act of 1996;
                    ``(B) the owner or operator, with respect to each 
                additional foreign-flag vessel, other than a time 
                chartered vessel, has first applied to have that vessel 
                covered by an operating agreement under subtitle B of 
                title VI, and the Secretary has not awarded an operating 
                agreement with respect to that vessel within 90 days 
                after the filing of the application; or
                    ``(C) the vessel has been placed under foreign 
                documentation pursuant to section 9 of the Shipping Act, 
                1916 (46 U.S.C. App. 808), except that any foreign-flag 
                vessel, other than a time chartered vessel, a 
                replacement vessel under section 653(d), or a vessel 
                operated by the owner or operator on the date of 
                enactment of the Maritime Security Act of 1996, in line 
                haul service between the United States and foreign ports 
                is registered under the

[[Page 110 STAT. 3132]]

                flag of an effective United States-controlled foreign 
                flag, and available to be requisitioned by the Secretary 
                of Transportation pursuant to section 902 of this Act;
            ``(3) owning, chartering, or operating foreign-flag bulk 
        cargo vessels that are operated in foreign-to-foreign service or 
        the foreign commerce of the United States;
            ``(4) chartering or operating foreign-flag vessels that are 
        operated solely as replacement vessels for United States-flag 
        vessels or vessel capacity that are made available to the 
        Secretary of Defense pursuant to section 653 of this Act; or
            ``(5) entering into time or space charter or other 
        cooperative agreements with respect to foreign-flag vessels or 
        acting as agent or broker for a foreign-flag vessel or 
        vessels.''.

    (b) Effective <<NOTE: 46 USC app. 1222 note.>>  Date.--The amendment 
made by subsection (a) shall apply to a contractor under subtitle B of 
title VI of the Merchant Marine Act, 1936, as amended by this Act, upon 
enactment of this Act, and shall apply to a contractor under subtitle A 
of title VI of that Act, upon the earlier of--
            (1) <<NOTE: Federal Register, publication.>>  the date that 
        a payment is made, under the Maritime Security Program under 
        subtitle B of that title to a contractor under subtitle B of 
        that title who is not party to an operating-differential subsidy 
        contract under subtitle A of that title, with the Secretary of 
        Transportation to cause notice of the date of such payment to be 
        published in the Federal Register as soon as possible; or
            (2) with respect to a particular contractor under the 
        operating-differential subsidy program under subtitle A of that 
        title, the date that contractor enters into a contract with the 
        Secretary under the Maritime Security Program established by 
        subtitle B of that title.

SEC. 6. AMENDMENT TO SHIPPING ACT, 1916.

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

[[Page 110 STAT. 3133]]

        that vessel is more than 15 years of age on the date the 
        contract expires; or
            ``(4) an operating agreement covering the vessel under 
        subtitle B of title VI of the Merchant Marine Act, 1936 has 
        expired.''.

SEC. 7. CONSTRUCTION DIFFERENTIAL SUBSIDY RESTRICTIONS.

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

``SEC. 512. <<NOTE: 46 USC app. 1162.>>  LIMITATION ON RESTRICTIONS.

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

SEC. 8. <<NOTE: 46 USC app. 1187 note.>>  REGULATIONS.

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

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

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

SEC. 10. REEMPLOYMENT RIGHTS FOR CERTAIN MERCHANT SEAMEN.

    (a) In General.--Title III of the Merchant Marine Act, 1936 (46 
U.S.C. App. 1131) is amended by inserting after section 301 the 
following new section:
    ``Sec. 302. <<NOTE: 46 USC app. 1132.>>  (a) An individual who is 
certified by the Secretary of Transportation under subsection (c) shall 
be entitled to reemployment rights and other benefits substantially 
equivalent to the rights and benefits provided for by chapter 43 of 
title 38, United States Code, for any member of a Reserve component of 
the Armed Forces of the United States who is ordered to active duty.

    ``(b) An individual may submit an application for certification 
under subsection (c) to the Secretary of Transportation not later than 
45 days after the date the individual completes a period of employment 
described in subsection (c)(1)(A) with respect to which the application 
is submitted.
    ``(c) Not later than 20 days after the date the Secretary of 
Transportation receives from an individual an application for 
certification under this subsection, the Secretary shall--

[[Page 110 STAT. 3134]]

            ``(1) determine whether or not the individual--
                    ``(A) was employed in the activation or operation of 
                a vessel--
                          ``(i) in the National Defense Reserve Fleet 
                      maintained under section 11 of the Merchant Ship 
                      Sales Act of 1946, in a period in which that 
                      vessel was in use or being activated for use under 
                      subsection (b) of that section;
                          ``(ii) that is requisitioned or purchased 
                      under 
                      section 902 of this Act; or
                          ``(iii) that is owned, chartered, or 
                      controlled by the United States and used by the 
                      United States for a war, armed conflict, national 
                      emergency, or maritime mobilization need 
                      (including for training purposes or testing for 
                      readiness and suitability for mission 
                      performance); and
                    ``(B) during the period of that employment, 
                possessed a valid license, certificate of registry, or 
                merchant mariner's document issued under chapter 71 or 
                chapter 73 (as applicable) of title 46, United States 
                Code; and
            ``(2) if the Secretary makes affirmative determinations 
        under paragraph (1) (A) and (B), certify that individual under 
        this subsection.

    ``(d) For purposes of reemployment rights and benefits provided by 
this section, a certification under subsection (c) shall be considered 
to be the equivalent of a certificate referred to in paragraph (1) of 
section 4301(a) of title 38, United States Code.''.
    (b) <<NOTE: 46 USC app. 1132 note.>>  Application.--The amendment 
made by subsection (a) shall apply to employment described in section 
302(c)(1)(A) of the 
Merchant Marine Act, 1936, as amended by subsection (a), occurring after 
the date of enactment of this Act.

    (c) <<NOTE: 46 USC app. 1132 note.>>  Regulation.--Not later than 
120 days after the date of the enactment of this Act, the Secretary of 
Transportation shall issue regulations implementing this section.

SEC. 11. TITLE XI LOAN GUARANTEES.

    Title XI of the Merchant Marine Act, 1936 (46 U.S.C. App. 1271 et 
seq.) is amended--
            (1) <<NOTE: 46 USC app. 1271.>>  in section 1101(b), by 
        striking ``owned by citizens of the United States'';
            (2) <<NOTE: 46 USC app. 1274a.>>  in section 1104B(a), in 
        the material preceding paragraph (1), by striking ``owned by 
        citizens of the United States''; and
            (3) <<NOTE: 46 USC app. 1279c.>>  in section 1110(a), by 
        striking ``owned by citizens of the United States''.

SEC. 12. EXTENSION OF WAR RISK INSURANCE AUTHORITY.

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

SEC. 13. VESSEL LOAN GUARANTEE PROGRAM.

    (a) Risk Factor Determinations.--Section 1103 of the 
Merchant Marine Act, 1936 (46 U.S.C. App. 1273) is amended by adding at 
the end the following new subsection:
    ``(h)(1) The Secretary shall--
            ``(A) establish in accordance with this subsection a system 
        of risk categories for obligations guaranteed under this title, 
        that categorizes the relative risk of guarantees made under

[[Page 110 STAT. 3135]]

        this title with respect to the risk factors set forth in 
        paragraph (3); and
            ``(B) determine for each of the risk categories a subsidy 
        rate equivalent to the cost of obligations in the category, 
        expressed as a percentage of the amount guaranteed under this 
        title for obligations in the category.

    ``(2)(A) Before making a guarantee under this section for an 
obligation, the Secretary shall apply the risk factors set forth in 
paragraph (3) to place the obligation in a risk category established 
under paragraph (1)(A).
    ``(B) The Secretary shall consider the aggregate amount available to 
the Secretary for making guarantees under this title to be reduced by 
the amount determined by multiplying--
            ``(i) the amount guaranteed under this title for an 
        obligation, by
            ``(ii) the subsidy rate for the category in which the 
        obligation is placed under subparagraph (A) of this paragraph.

    ``(C) The estimated cost to the Government of a guarantee made by 
the Secretary under this title for an obligation is deemed to be the 
amount determined under subparagraph (B) for the 
obligation.
    ``(D) The Secretary may not guarantee obligations under this title 
after the aggregate amount available to the Secretary under 
appropriations Acts for the cost of loan guarantees is required by 
subparagraph (B) to be considered reduced to zero.
    ``(3) The risk factors referred to in paragraphs (1) and (2) are the 
following:
            ``(A) If applicable, the country risk for each eligible 
        export vessel financed or to be financed by an obligation.
            ``(B) The period for which an obligation is guaranteed or to 
        be guaranteed.
            ``(C) The amount of an obligation, which is guaranteed or to 
        be guaranteed, in relation to the total cost of the project 
        financed or to be financed by the obligation.
            ``(D) The financial condition of an obligor or applicant for 
        a guarantee.
            ``(E) If applicable, any guarantee related to the project, 
        other than the guarantee under this title for which the risk 
        factor is applied.
            ``(F) If applicable, the projected employment of each vessel 
        or equipment to be financed with an obligation.
            ``(G) If applicable, the projected market that will be 
        served by each vessel or equipment to be financed with an 
        obligation.
            ``(H) The collateral provided for a guarantee for an 
        obligation.
            ``(I) The management and operating experience of an obligor 
        or applicant for a guarantee.
            ``(J) Whether a guarantee under this title is or will be in 
        effect during the construction period of the project.

    ``(4) In this subsection, the term `cost' has the meaning given that 
term in section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 
661a).''.

    (b) <<NOTE: 46 USC app. 1273 note.>>  Application.--Subsection 
(h)(2) of section 1103 of the 
Merchant Marine Act, 1936 (46 U.S.C. App. 1273), as amended by 
subsection (a) of this section, shall apply to guarantees that the 
Secretary of Transportation makes or commits to make with

[[Page 110 STAT. 3136]]

any amounts that are unobligated on or after the date of enactment of 
this Act.

    (c) Guarantee Fees.--Section 1104A(e) of title XI of the 
Merchant Marine Act, 1936 (46 U.S.C. App. 1274(e)) is amended to read as 
follows:
    ``(e)(1) Except as otherwise provided in this subsection, the 
Secretary shall prescribe regulations to assess in accordance with this 
subsection a fee for the guarantee of an obligation under this title.
    ``(2)(A) The amount of a fee under this subsection for a 
guarantee is equal to the sum determined by adding the amounts 
determined under subparagraph (B) for the years in which the guarantee 
is in effect.
    ``(B) The amount referred to in subparagraph (A) for a year is the 
present value (determined by applying the discount rate determined under 
subparagraph (F)) of the amount determined by multiplying--
            ``(i) the estimated average unpaid principal amount of the 
        obligation that will be outstanding during the year (determined 
        in accordance with subparagraph (E)), by
            ``(ii) the fee rate established under subparagraph (C) for 
        the obligation for each year.

    ``(C) The fee rate referred to in subparagraph (B)(ii) for an 
obligation shall be--
            ``(i) in the case of an obligation for a delivered vessel or 
        equipment, not less than one-half of 1 percent and not more than 
        1 percent, determined by the Secretary for the obligation under 
        the formula established under subparagraph (D); or
            ``(ii) in the case of an obligation for a vessel to be 
        constructed, reconstructed, or reconditioned, or of equipment to 
        be delivered, not less than one-quarter of 1 percent and not 
        more than one-half of 1 percent, determined by the Secretary for 
        the obligation under the formula established under subparagraph 
        (D).

    ``(D) The Secretary shall establish a formula for determining the 
fee rate for an obligation for purposes of subparagraph (C), that--
            ``(i) is a sliding scale based on the creditworthiness of 
        the obligor;
            ``(ii) takes into account the security provided for a 
        guarantee under this title for the obligation; and
            ``(iii) uses--
                    ``(I) in the case of the most creditworthy obligors, 
                the lowest rate authorized under subparagraph (C) (i) or 
                (ii), as applicable; and
                    ``(II) in the case of the least creditworthy 
                obligors, the highest rate authorized under subparagraph 
                (C) (i) or (ii), as applicable.

    ``(E) For purposes of subparagraph (B)(i), the estimated average 
unpaid principal amount does not include the average amount (except 
interest) on deposit in a year in the escrow fund under section 1108.
    ``(F) For purposes of determining present value under subparagraph 
(B) for an obligation, the Secretary shall apply a discount rate 
determined by the Secretary of the Treasury taking into consideration 
current market yields on outstanding obligations of the

[[Page 110 STAT. 3137]]

United States having periods to maturity comparable to the period to 
maturity for the obligation with respect to which the determination of 
present value is made.
    ``(3) A fee under this subsection shall be assessed and collected 
not later than the date on which amounts are first paid under an 
obligation with respect to which the fee is assessed.
    ``(4) A fee paid under this subsection is not refundable. However, 
an obligor shall receive credit for the amount paid for the remaining 
term of the guaranteed obligation if the obligation is refinanced and 
guaranteed under this title after such refinancing.
    ``(5) A fee paid under subsection (e) shall be included in the 
amount of the actual cost of the obligation guaranteed under this title 
and is eligible to be financed under this title.''.

SEC. 14. MARITIME POLICY REPORT.

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

    (b) Date of Transmittal.--The report required under subsection (a) 
shall be transmitted along with the President's budget submission, under 
section 1105 of title 31, United States Code, for fiscal year 1997.

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

    (a) In General.--Notwithstanding any other law or any agreement with 
the United States Government, a vessel described in subsection (b) may 
be sold to a person that is not a citizen of

[[Page 110 STAT. 3138]]

the United States and transferred to or placed under a foreign registry.
    (b) Vessels Described.--The vessels referred to in subsection (a) 
are the following:
            (1) RAINBOW HOPE (United States official number 622178).
            (2) IOWA TRADER (United States official number 642934).
            (3) KANSAS TRADER (United States official number 634621).

SEC. 16. <<NOTE: 46 USC app. 1744 note.>>  VESSEL REPAIR AND MAINTENANCE 
            PILOT PROGRAM.

    (a) In General.--The Secretary of Transportation shall conduct a 
pilot program to evaluate the feasibility of using renewable contracts 
for the maintenance and repair of outported vessels in the Ready Reserve 
Force to enhance the readiness of those vessels. Under the pilot 
program, the Secretary, subject to the availability of appropriations 
and within 6 months after the date of the enactment of this Act, shall 
award 9 contracts for this purpose.
    (b) Use of Various Contracting Arrangements.--In conducting a pilot 
program under this section, the Secretary of Transportation shall use 
contracting arrangements similar to those used by the Department of 
Defense for procuring maintenance and repair of its vessels.
    (c) Contract Requirements.--Each contract with a shipyard under this 
section shall--
            (1) subject to subsection (d), provide for the procurement 
        from the shipyard of all repair and maintenance (including 
        activation, deactivation, and drydocking) for 1 vessel in the 
        Ready Reserve Force that is outported in the geographical 
        vicinity of the shipyard;
            (2) be effective for 1 fiscal year; and
            (3) be renewable, subject to the availability of 
        appropriations, for each subsequent fiscal year through fiscal 
        year 1998.

    (d) Limitation of Work Under Contracts.--A contract under this 
section may not provide for the procurement of operation or manning for 
a vessel that may be procured under another contract for the vessel to 
which section 11(d)(2) of the Merchant Ship Sales Act of 1946 (50 U.S.C. 
App. 1774(d)(2)) applies.
    (e) Geographic Distribution.--The Secretary shall seek to distribute 
contract awards under this section to shipyards located throughout the 
United States.
    (f) Reports.--The Secretary shall submit to the Congress--
            (1) an interim report on the effectiveness of each contract 
        under this section in providing for economic and efficient 
        repair and maintenance of the vessel included in the contract, 
        no later than 20 months after the date of the enactment of this 
        Act; and
            (2) a final report on that effectiveness no later than 6 
        months after the termination of all contracts awarded pursuant 
        to this section.

SEC. 17. STREAMLINING OF CARGO ALLOCATION PROCEDURES.

    (a) Amendments.--Section 901b(c)(3) of the Merchant Marine Act, 1936 
(46 U.S.C. App. 1241f(c)(3)) is amended--
            (1) in subparagraph (A)--
                    (A) by striking ``and consistent with those 
                sections,'' and inserting ``and, subject to subparagraph 
                (B) of this paragraph, consistent with those 
                sections,''; and

[[Page 110 STAT. 3139]]

                    (B) by striking ``50 percent'' and inserting ``25 
                percent''; and
            (2) by striking subparagraph (B) and inserting the following 
        new subparagraphs:

    ``(B) In carrying out this paragraph, there shall first be 
calculated the allocation of 100 percent of the quantity to be procured 
on an overall lowest landed cost basis without regard to the country of 
documentation of the vessel and there shall be allocated to the Great 
Lakes port range any cargoes for which it has the lowest landed cost 
under that calculation. The requirements for United States-flag 
transportation under section 901(b) and this section shall not apply to 
commodities allocated under subparagraph (A) to the Great Lakes port 
range, and commodities allocated under subparagraph (A) to that port 
range may not be reallocated or diverted to another port range to meet 
those requirements to the extent that the total tonnage of commodities 
to which subparagraph (A) applies that is furnished and transported from 
the Great Lakes port range is less than 25 percent of the total annual 
tonnage of such commodities furnished.
    ``(C) In awarding any contract for the transportation by vessel of 
commodities from the Great Lakes port range pursuant to an export 
activity referred to in subsection (b), each agency or instrumentality--
            ``(i) shall consider expressions of freight interest for any 
        vessel from a vessel operator who meets reasonable requirements 
        for financial and operational integrity; and
            ``(ii) may not deny award of the contract to a person based 
        on the type of vessel on which the transportation would be 
        provided (including on the basis that the transportation would 
        not be provided on a liner vessel (as that term is used in the 
        Shipping Act of 1984, as in effect on November 14, 1995)), if 
        the person otherwise satisfies reasonable requirements for 
        financial and operational integrity.''.

    (b) Conforming Amendments.--(1) Paragraph (4) of <<NOTE: 46 USC app. 
1241f.>>  section 901b(c) of that Act is repealed.

    (2) Paragraph (5) of that section is redesignated as 
paragraph (4).

    Approved October 8, 1996.

LEGISLATIVE HISTORY--H.R. 1350 (S. 1139):
---------------------------------------------------------------------------

HOUSE REPORTS: No. 104-229 (Comm. on National Security).
SENATE REPORTS: No. 104-167 accompanying S. 1139 (Comm. on Commerce, 
Science, and Transportation).
CONGRESSIONAL RECORD:
                                                        Vol. 141 (1995):
                                    Dec. 6, considered and passed House.
                                                        Vol. 142 (1996):
                                    Sept. 19, 20, 24, considered and 
                                        passed Senate.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 32 (1996):
            Oct. 8, Presidential statement.

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