PUBLIC LAW 104–239—OCT. 8, 1996

MARITIME SECURITY ACT OF 1996
110 STAT. 3118 PUBLIC LAW 104–239—OCT. 8, 1996

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.

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Maritime Security Act of 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. (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 Statesflag 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

46 USC app.

1187.

46 USC app.

1245 note.

Maritime

Security Act of

1996.

National defense.

Oct. 8, 1996

[H.R. 1350]
PUBLIC LAW 104–239—OCT. 8, 1996 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. (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 operatingdifferential 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

Oct. 8, 1996

[H.R. 1350]
110 STAT. 3120 PUBLIC LAW 104–239—OCT. 8, 1996

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;
PUBLIC LAW 104–239—OCT. 8, 1996 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
110 STAT. 3122 PUBLIC LAW 104–239—OCT. 8, 1996

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
PUBLIC LAW 104–239—OCT. 8, 1996 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
110 STAT. 3124 PUBLIC LAW 104–239—OCT. 8, 1996

entering into a contract for construction of a vessel in a foreign

shipyard, provide notice of the intent of the contractor to enter

into such a contract to each shipyard in the United States that

is capable of constructing the vessel.

‘‘NATIONAL SECURITY REQUIREMENTS

‘‘SEC. 653. (a) EMERGENCY PREPAREDNESS AGREEMENT.— ‘‘(1) REQUIREMENT TO ENTER AGREEMENT.—The Secretary

of Transportation shall establish an Emergency Preparedness

Program under this section that is approved by the Secretary

of Defense. Under the program, the Secretary of Transportation

shall include in each operating agreement under this subtitle

a requirement that the contractor enter into an Emergency

Preparedness Agreement under this section with the Secretary.

The Secretary shall negotiate and enter into an Emergency

Preparedness Agreement with each contractor as promptly as

practicable after the contractor has entered into an operating

agreement under this subtitle.

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

Agreement under this section shall require that upon a request

by the Secretary of Defense during time of war or national

emergency, 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.

Establishment.

46 USC app.

1187b.
PUBLIC LAW 104–239—OCT. 8, 1996 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.
110 STAT. 3126 PUBLIC LAW 104–239—OCT. 8, 1996

‘‘DEFINITIONS

‘‘SEC. 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 cargocarrying 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. 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,

46 USC app.

1187d.

46 USC app.

1187c.
PUBLIC LAW 104–239—OCT. 8, 1996 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. (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) 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 Statescontrolled foreign flag if—

‘‘(A) the operator of the vessel receives an operatingdifferential 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. (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

46 USC app.

1187e.

Federal Register,

publication.

46 USC app.

1185a.
110 STAT. 3128 PUBLIC LAW 104–239—OCT. 8, 1996

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 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) 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. 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

Federal Register,

publication.

Hearings.

Federal Register,

publication.
PUBLIC LAW 104–239—OCT. 8, 1996 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 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.

Federal Register,

publication.
110 STAT. 3130 PUBLIC LAW 104–239—OCT. 8, 1996

‘‘(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
PUBLIC LAW 104–239—OCT. 8, 1996 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
110 STAT. 3132 PUBLIC LAW 104–239—OCT. 8, 1996

flag of an effective United States-controlled foreign flag,

and available to be requisitioned by the Secretary of

Transportation pursuant to section 902 of this Act;

‘‘(3) owning, chartering, or operating foreign-flag bulk cargo

vessels that are operated in foreign-to-foreign service or the

foreign commerce of the United States;

‘‘(4) chartering or operating foreign-flag vessels that are

operated solely as replacement vessels for United States-flag

vessels or vessel capacity that are made available to the

Secretary of Defense pursuant to section 653 of this Act; or

‘‘(5) entering into time or space charter or other cooperative

agreements with respect to foreign-flag vessels or acting as

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

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply to a contractor under subtitle B of title VI of the

Merchant Marine Act, 1936, as amended by this Act, upon enactment of this Act, and shall apply to a contractor under subtitle

A of title VI of that Act, upon the earlier of—

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

Security Program under subtitle B of that title to a contractor

under subtitle B of that title who is not party to an operatingdifferential 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

Federal Register,

publication.

46 USC app.

1222 note.
PUBLIC LAW 104–239—OCT. 8, 1996 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. LIMITATION ON RESTRICTIONS.

‘‘Notwithstanding any other provision of law or contract, all

restrictions and requirements under sections 503, 506, and 802

applicable to a liner vessel constructed, reconstructed, or

reconditioned with the aid of construction-differential subsidy shall

terminate upon the expiration of the 25-year period beginning on

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

SEC. 8. REGULATIONS.

(a) IN GENERAL.—The Secretary of Transportation may prescribe rules as necessary to carry out this Act and the amendments

made by this Act.

(b) INTERIM RULES.—The Secretary of Transportation may

prescribe interim rules necessary to carry out this Act and the

amendments made by this Act. For this purpose, the Secretary

of Transportation is excepted from compliance with the notice and

comment requirements of section 553 of title 5, United States

Code. All rules prescribed under the authority of this subsection

that are not earlier superseded by final rules shall expire no later

than 270 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. (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—

46 USC app.

1132.

46 USC app.

1187 note.

46 USC app.

1162.
110 STAT. 3134 PUBLIC LAW 104–239—OCT. 8, 1996

‘‘(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) 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) 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) in section 1101(b), by striking ‘‘owned by citizens of

the United States’’;

(2) in section 1104B(a), in the material preceding paragraph

(1), by striking ‘‘owned by citizens of the United States’’; and

(3) 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

46 USC app.

1279c.

46 USC app.

1274a.

46 USC app.

1271.

46 USC app.

1132 note.

46 USC app.

1132 note.
PUBLIC LAW 104–239—OCT. 8, 1996 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) 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

46 USC app.

1273 note.
110 STAT. 3136 PUBLIC LAW 104–239—OCT. 8, 1996

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
PUBLIC LAW 104–239—OCT. 8, 1996 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
110 STAT. 3138 PUBLIC LAW 104–239—OCT. 8, 1996

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. 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

46 USC app.

1744 note.
PUBLIC LAW 104–239—OCT. 8, 1996 110 STAT. 3139

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.

Æ

(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 section

901b(c) of that Act is repealed.

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

paragraph (4).

Approved October 8, 1996.

46 USC app.

1241f.