H. R. 1442—81
out the purposes of this subtitle, but consistent with sound business 
practice. 
‘‘(c) AVAILABILITY OF AMOUNTS.—Amounts received by the Sec-
retary from a transaction under this section are available for 
expenditure by the Secretary as provided in this subtitle. 
‘‘§ 50304. Sale and transfer of property 
‘‘(a) AUTHORITY TO SELL.—The Secretary of Transportation may 
sell property (other than vessels transferred under section 4 of 
the Merchant Marine Act, 1920 (ch. 250, 41 Stat. 990)) on terms 
the Secretary considers appropriate. 
‘‘(b) TRANSFERS FROM MILITARY TO CIVILIAN CONTROL.—When 
the President considers it in the interest of the United States, 
the President may transfer to the Secretary of Transportation 
possession and control of property described in the second paragraph 
of section 17 of the Merchant Marine Act, 1920 (ch. 250, 41 Stat. 
994), as originally enacted, that is possessed and controlled by 
the Secretary of a military department. 
‘‘(c) TRANSFERS FROM CIVILIAN TO MILITARY CONTROL.—When 
the President considers it necessary, the President by executive 
order may transfer to the Secretary of a military department posses-
sion and control of property described in section 17 of the Merchant 
Marine Act, 1920 (ch. 250, 41 Stat. 994), as originally enacted, 
that is possessed and controlled by the Secretary of Transportation. 
The President’s order shall state the need for the transfer and 
the period of the need. When the President decides that the need 
has ended, the possession and control shall revert to the Secretary 
of Transportation. The property may not be sold except as provided 
by law. 
‘‘§ 50305. Appointment of trustee or receiver and operation 
of vessels 
‘‘(a) APPOINTMENT OF TRUSTEES AND RECEIVERS.—
‘‘(1) APPOINTMENT OF SECRETARY.—In a proceeding in a 
court of the United States in which a trustee or receiver may 
be appointed for a corporation operating a vessel of United 
States registry between the United States and a foreign 
country, on which the United States Government holds a mort-
gage, the court may appoint the Secretary of Transportation 
as the sole trustee or receiver (subject to the direction of the 
court) if—
‘‘(A) the court finds that the appointment will—
‘‘(i) inure to the advantage of the estate and the 
parties in interest; and 
‘‘(ii) tend to carry out the purposes of this subtitle; 
and 
‘‘(B) the Secretary expressly consents to the appoint-
ment. 
‘‘(2) APPOINTMENT
OF
OTHER
PERSON.—The appointment 
of another person as trustee or receiver without a hearing 
becomes effective when ratified by the Secretary, but the Sec-
retary may demand a hearing. 
‘‘(b) OPERATION OF VESSELS.—
‘‘(1) IN GENERAL.—If the court is unwilling to allow the 
trustee or receiver to operate the vessel in foreign commerce 
without financial aid from the Government pending termination 
of the proceeding, and the Secretary certifies to the court that
H. R. 1442—82
the continued operation of the vessel is essential to the foreign 
commerce of the United States and is reasonably calculated 
to carry out the purposes of this subtitle, the court may allow 
the Secretary to operate the vessel, either directly or through 
a managing agent or operator employed by the Secretary. The 
Secretary must agree to comply with terms imposed by the 
court sufficient to protect the parties in interest. The Secretary 
also must agree to pay all operating losses resulting from 
the operation. The operation shall be for the account of the 
trustee or receiver. 
‘‘(2) PAYMENT OF OPERATING LOSSES AND OTHER AMOUNTS.—
The Secretary has no claim against the corporation, its estate, 
or its assets for operating losses paid by the Secretary, but 
the Secretary may pay amounts for depreciation the Secretary 
considers reasonable and other amounts the court considers 
just. The payment of operating losses and the other amounts 
and compliance with terms imposed by the court shall be in 
satisfaction of any claim against the Secretary resulting from 
the operation of the vessel. 
‘‘(3) DEEMED OPERATION BY GOVERNMENT.—A vessel oper-
ated by the Secretary under this subsection is deemed to be 
a vessel operated by the United States under chapter 309 
of this title. 
‘‘§ 50306. Requiring testimony and records in investigations 
‘‘(a) IN GENERAL.—In conducting an investigation that the Sec-
retary of Transportation considers necessary and proper to carry 
out this subtitle, the Secretary may administer oaths, take evidence, 
and subpoena persons to testify and produce documents relevant 
to the matter under investigation. Persons may be required to 
attend or produce documents from any place in the United States 
at any designated place of hearing. 
‘‘(b) FEES AND MILEAGE.—Persons subpoenaed by the Secretary 
under subsection (a) shall be paid the same fees and mileage 
paid to witnesses in the courts of the United States. 
‘‘(c) ENFORCEMENT OF SUBPOENAS.—If a person disobeys a sub-
poena issued under subsection (a), the Secretary may seek an 
order enforcing the subpoena from the district court of the United 
States for the district in which the person resides or does business. 
Process may be served in the judicial district in which the person 
resides or is found. The court may issue an order to obey the 
subpoena and punish a refusal to obey as a contempt of court.
‘‘CHAPTER 505—OTHER GENERAL PROVISIONS
‘‘Sec. 
‘‘50501.
Entities deemed citizens of the United States. 
‘‘50502.
Applicability to receivers, trustees, successors, and assigns. 
‘‘50503.
Oceanographic research vessels. 
‘‘50504.
Sailing school vessels.
‘‘§ 50501. Entities deemed citizens of the United States 
‘‘(a) IN GENERAL.—In this subtitle, a corporation, partnership, 
or association is deemed to be a citizen of the United States only 
if the controlling interest is owned by citizens of the United States. 
However, if the corporation, partnership, or association is operating 
a vessel in the coastwise trade, at least 75 percent of the interest 
must be owned by citizens of the United States.
H. R. 1442—83
‘‘(b) ADDITIONAL REQUIREMENTS FOR CORPORATIONS.—In this 
subtitle, a corporation is deemed to be a citizen of the United 
States only if, in addition to satisfying the requirements in sub-
section (a)—
‘‘(1) it is incorporated under the laws of the United States 
or a State; 
‘‘(2) its chief executive officer, by whatever title, and the 
chairman of its board of directors are citizens of the United 
States; and 
‘‘(3) no more of its directors are noncitizens than a minority 
of the number necessary to constitute a quorum. 
‘‘(c) DETERMINATION OF CONTROLLING CORPORATE INTEREST.—
The controlling interest in a corporation is owned by citizens of 
the United States under subsection (a) only if—
‘‘(1) title to the majority of the stock in the corporation 
is vested in citizens of the United States free from any trust 
or fiduciary obligation in favor of a person not a citizen of 
the United States; 
‘‘(2) the majority of the voting power in the corporation 
is vested in citizens of the United States; 
‘‘(3) there is no contract or understanding by which the 
majority of the voting power in the corporation may be exer-
cised, directly or indirectly, in behalf of a person not a citizen 
of the United States; and 
‘‘(4) there is no other means by which control of the corpora-
tion is given to or permitted to be exercised by a person not 
a citizen of the United States. 
‘‘(d) DETERMINATION OF 75 PERCENT CORPORATE INTEREST.—
At least 75 percent of the interest in a corporation is owned by 
citizens of the United States under subsection (a) only if—
‘‘(1) title to at least 75 percent of the stock in the corpora-
tion is vested in citizens of the United States free from any 
trust or fiduciary obligation in favor of a person not a citizen 
of the United States; 
‘‘(2) at least 75 percent of the voting power in the corpora-
tion is vested in citizens of the United States; 
‘‘(3) there is no contract or understanding by which more 
than 25 percent of the voting power in the corporation may 
be exercised, directly or indirectly, in behalf of a person not 
a citizen of the United States; and 
‘‘(4) there is no other means by which control of more 
than 25 percent of any interest in the corporation is given 
to or permitted to be exercised by a person not a citizen of 
the United States. 
‘‘§ 50502. Applicability to receivers, trustees, successors, and 
assigns 
‘‘This subtitle applies to receivers, trustees, successors, and 
assigns of any person to whom this subtitle applies. 
‘‘§ 50503. Oceanographic research vessels 
‘‘An oceanographic research vessel (as defined in section 2101 
of this title) is deemed not to be engaged in trade or commerce.
H. R. 1442—84
‘‘§ 50504. Sailing school vessels 
‘‘(a) DEFINITIONS.—In this section, the terms ‘sailing school 
instructor’, ‘sailing school student’, and ‘sailing school vessel’ have 
the meaning given those terms in section 2101 of this title. 
‘‘(b) NOT SEAMEN.—A sailing school student or sailing school 
instructor is deemed not to be a seaman under—
‘‘(1) parts B, F, and G of subtitle II of this title; or 
‘‘(2) the maritime law doctrines of maintenance and cure 
or warranty of seaworthiness. 
‘‘(c) NOT MERCHANT VESSEL OR ENGAGED IN TRADE OR COM-
MERCE.—A sailing school vessel is deemed not to be—
‘‘(1) a merchant vessel under section 11101(a)–(c) of this 
title; or 
‘‘(2) a vessel engaged in trade or commerce. 
‘‘(d) EVIDENCE OF FINANCIAL RESPONSIBILITY.—The owner or 
charterer of a sailing school vessel shall maintain evidence of finan-
cial responsibility to meet liability for death or injury to sailing 
school students and sailing school instructors on a voyage on the 
vessel. The amount of financial responsibility shall be at least 
$50,000 for each student and instructor. Financial responsibility 
under this subsection may be evidenced by insurance or other 
adequate financial resources.
‘‘PART B—MERCHANT MARINE SERVICE 
‘‘CHAPTER 511—GENERAL
‘‘Sec. 
‘‘51101.
Policy. 
‘‘51102.
Definitions. 
‘‘51103.
General authority of Secretary of Transportation. 
‘‘51104.
General authority of Secretary of the Navy.
‘‘§ 51101. Policy 
‘‘It is the policy of the United States that merchant marine 
vessels of the United States should be operated by highly trained 
and efficient citizens of the United States and that the United 
States Navy and the merchant marine of the United States should 
work closely together to promote the maximum integration of the 
total seapower forces of the United States. 
‘‘§ 51102. Definitions 
‘‘In this part: 
‘‘(1) ACADEMY.—The term ‘Academy’ means the United 
States Merchant Marine Academy located at Kings Point, New 
York, and maintained under chapter 513 of this title. 
‘‘(2) COST OF EDUCATION PROVIDED.—The term ‘cost of edu-
cation provided’ means the financial costs incurred by the 
United States Government for providing training or financial 
assistance to students at the Academy and the State maritime 
academies, including direct financial assistance, room, board, 
classroom academics, and other training activities. 
‘‘(3) MERCHANT
MARINE
OFFICER.—The term ‘merchant 
marine officer’ means an individual issued a license by the 
Coast Guard authorizing service as—
‘‘(A) a master, mate, or pilot on a documented vessel 
that—
H. R. 1442—85
‘‘(i) is of at least 1,000 gross tons as measured 
under section 14502 of this title or an alternate tonnage 
measured under section 14302 of this title as pre-
scribed by the Secretary under section 14104 of this 
title; and 
‘‘(ii) operates on the oceans or the Great Lakes; 
or 
‘‘(B) an engineer officer on a documented vessel pro-
pelled by machinery of at least 4,000 horsepower. 
‘‘(4) STATE MARITIME ACADEMY.—The term ‘State maritime 
academy’ means—
‘‘(A) a State maritime academy or college sponsored 
by a State and assisted under chapter 515 of this title; 
and 
‘‘(B) a regional maritime academy or college sponsored 
by a group of States and assisted under chapter 515 of 
this title. 
‘‘§ 51103. General authority of Secretary of Transportation 
‘‘(a) EDUCATION AND TRAINING.—The Secretary of Transpor-
tation may provide for the education and training of citizens of 
the United States for the safe and efficient operation of the mer-
chant marine of the United States at all times, including operation 
as a naval and military auxiliary in time of war or national emer-
gency. 
‘‘(b) SURPLUS PROPERTY FOR INSTRUCTIONAL PURPOSES.—
‘‘(1) IN GENERAL.—The Secretary may cooperate with and 
assist the institutions named in paragraph (2) by making ves-
sels, shipboard equipment, and other marine equipment, owned 
by the United States Government and determined to be excess 
or surplus, available to those institutions for instructional pur-
poses, by gift, loan, sale, lease, or charter on terms the Secretary 
considers appropriate. 
‘‘(2) INSTITUTIONS.—The institutions referred to in para-
graph (1) are—
‘‘(A) the United States Merchant Marine Academy; 
‘‘(B) a State maritime academy; and 
‘‘(C) a nonprofit training institution jointly approved 
by the Secretary of Transportation and the Secretary of 
the department in which the Coast Guard is operating 
as offering training courses that meet Federal regulations 
for maritime training. 
‘‘(c) ASSISTANCE FROM OTHER AGENCIES.—
‘‘(1) IN GENERAL.—The Secretary of Transportation may 
secure directly from an agency, on a reimbursable basis, 
information, facilities, and equipment necessary to carry out 
this part. 
‘‘(2) DETAILING
PERSONNEL.—At the request of the Sec-
retary, the head of an agency (including a military department) 
may detail, on a reimbursable basis, personnel from the agency 
to the Secretary to assist in carrying out this part. 
‘‘(d) ACADEMY PERSONNEL.—To carry out this part, the Sec-
retary may—
‘‘(1) employ an individual as a professor, lecturer, or 
instructor at the Academy, without regard to the provisions 
of title 5 governing appointments in the competitive service; 
and
H. R. 1442—86
‘‘(2) pay the individual without regard to chapter 51 and 
subchapter III of chapter 53 of title 5. 
‘‘§ 51104. General authority of Secretary of the Navy 
‘‘The Secretary of the Navy, in cooperation with the Maritime 
Administrator and the head of each State maritime academy, shall 
ensure that—
‘‘(1) the training of future merchant marine officers at 
the United States Merchant Marine Academy and at State 
maritime academies includes programs for naval science 
training in the operation of merchant vessels as a naval and 
military auxiliary; and 
‘‘(2) naval officer training programs for future officers, 
insofar as possible, are maintained at designated maritime 
academies consistent with Navy standards and needs. 
‘‘CHAPTER 513—UNITED STATES MERCHANT MARINE 
ACADEMY
‘‘Sec. 
‘‘51301.
Maintenance of the Academy. 
‘‘51302.
Nomination and competitive appointment of cadets. 
‘‘51303.
Non-competitive appointments. 
‘‘51304.
Additional appointments from particular areas. 
‘‘51305.
Prohibited basis for appointment. 
‘‘51306.
Cadet commitment agreements. 
‘‘51307.
Places of training. 
‘‘51308.
Uniforms, textbooks, and transportation allowances. 
‘‘51309.
Academic degree. 
‘‘51310.
Deferment of service obligation under cadet commitment agreements. 
‘‘51311.
Midshipman status in the Naval Reserve. 
‘‘51312.
Board of Visitors. 
‘‘51313.
Advisory Board. 
‘‘51314.
Limitation on charges and fees for attendance.
‘‘§ 51301. Maintenance of the Academy 
‘‘The Secretary of Transportation shall maintain the United 
States Merchant Marine Academy to provide instruction to individ-
uals to prepare them for service in the merchant marine of the 
United States. 
‘‘§ 51302. Nomination and competitive appointment of cadets 
‘‘(a) REQUIREMENTS.—An individual may be nominated for a 
competitive appointment as a cadet at the United States Merchant 
Marine Academy only if the individual—
‘‘(1) is a citizen or national of the United States; and 
‘‘(2) meets the minimum requirements that the Secretary 
of Transportation shall establish. 
‘‘(b) NOMINATORS.—Nominations for competitive appointments 
for the positions allocated under subsection (c) may be made as 
follows: 
‘‘(1) A Senator may nominate residents of the State rep-
resented by that Senator. 
‘‘(2) A Member of the House of Representatives may nomi-
nate residents of the State in which the congressional district 
represented by that Member is located. 
‘‘(3) A Delegate to the House of Representatives from the 
District of Columbia, the Virgin Islands, Guam, or American 
Samoa may nominate residents of the jurisdiction represented 
by that Delegate.
H. R. 1442—87
‘‘(4) The Resident Commissioner to the United States from 
Puerto Rico may nominate residents of Puerto Rico. 
‘‘(5) The Governor of the Northern Mariana Islands may 
nominate residents of the Northern Mariana Islands. 
‘‘(6) The Panama Canal Commission may nominate—
‘‘(A) residents, or sons or daughters of residents, of 
an area or installation in Panama and made available 
to the United States under the Panama Canal Treaty of 
1977, the agreements relating to and implementing that 
Treaty, signed September 7, 1977, and the Agreement 
Between the United States of America and the Republic 
of Panama Concerning Air Traffic Control and Related 
Services, concluded January 8, 1979; and 
‘‘(B) sons or daughters of personnel of the United States 
Government and the Panama Canal Commission residing 
in Panama. 
‘‘(c) ALLOCATION
OF
POSITIONS.—Positions for competitive 
appointments shall be allocated each year as follows: 
‘‘(1) Positions shall be allocated for residents of each State 
nominated by the Members of Congress from that State in 
proportion to the representation in Congress from that State. 
‘‘(2) Four positions shall be allocated for residents of the 
District of Columbia nominated by the Delegate to the House 
of Representatives from the District of Columbia. 
‘‘(3) One position each shall be allocated for residents of 
the Virgin Islands, Guam, and American Samoa nominated 
by the Delegates to the House of Representatives from the 
Virgin Islands, Guam, and American Samoa, respectively. 
‘‘(4) One position shall be allocated for a resident of Puerto 
Rico nominated by the Resident Commissioner to the United 
States from Puerto Rico. 
‘‘(5) One position shall be allocated for a resident of the 
Northern Mariana Islands nominated by the Governor of the 
Northern Mariana Islands. 
‘‘(6) Two positions shall be allocated for individuals nomi-
nated by the Panama Canal Commission. 
‘‘(d) COMPETITIVE SYSTEM FOR APPOINTMENT.—
‘‘(1) ESTABLISHMENT
OF
SYSTEM.—The Secretary shall 
establish a competitive system for selecting individuals nomi-
nated under subsection (b) to fill the positions allocated under 
subsection (c). The system must determine the relative merit 
of each individual based on competitive examinations, an 
assessment of the individual’s academic background, and other 
effective indicators of motivation and probability of successful 
completion of training at the Academy. 
‘‘(2) APPOINTMENTS BY JURISDICTION.—The Secretary shall 
appoint individuals to fill the positions allocated under sub-
section (c) for each jurisdiction in the order of merit of the 
individuals nominated from that jurisdiction. 
‘‘(3) REMAINING UNFILLED POSITIONS.—If positions remain 
unfilled after the appointments are made under paragraph 
(2), the Secretary shall appoint individuals to fill the positions 
in the order of merit of the remaining individuals nominated 
from all jurisdictions.
H. R. 1442—88
‘‘§ 51303. Non-competitive appointments 
‘‘The Secretary of Transportation may appoint each year with-
out competition as cadets at the United States Merchant Marine 
Academy not more than 40 qualified individuals with qualities 
the Secretary considers to be of special value to the Academy. 
In making these appointments, the Secretary shall try to achieve 
a national demographic balance at the Academy. 
‘‘§ 51304. Additional appointments from particular areas 
‘‘(a) OTHER COUNTRIES IN WESTERN HEMISPHERE.—The Presi-
dent may appoint individuals from countries in the Western Hemi-
sphere other than the United States to receive instruction at the 
United States Merchant Marine Academy. Not more than 12 
individuals may receive instruction under this subsection at the 
same time, and not more than 2 individuals from the same country 
may receive instruction under this subsection at the same time. 
‘‘(b) OTHER COUNTRIES GENERALLY.—
‘‘(1) APPOINTMENT.—The Secretary of Transportation, with 
the approval of the Secretary of State, may appoint individuals 
from countries other than the United States to receive instruc-
tion at the Academy. Not more than 30 individuals may receive 
instruction under this subsection at the same time. 
‘‘(2) REIMBURSEMENT.—The Secretary of Transportation 
shall ensure that the country from which an individual comes 
under this subsection will reimburse the Secretary for the 
cost (as determined by the Secretary) of the instruction and 
allowances received by the individual. 
‘‘(c) PANAMA.—
‘‘(1) APPOINTMENT.—The Secretary of Transportation, with 
the approval of the Secretary of State, may appoint individuals 
from Panama to receive instruction at the Academy. Individuals 
appointed under this subsection are in addition to those 
appointed under any other provision of this chapter. 
‘‘(2) REIMBURSEMENT.—The Secretary of Transportation 
shall be reimbursed for the cost (as determined by the Sec-
retary) of the instruction and allowances received by an indi-
vidual appointed under this subsection. 
‘‘(d) ALLOWANCES
AND REGULATIONS.—Individuals receiving 
instruction under this section are entitled to the same allowances 
and are subject to the same regulations on admission, attendance, 
discipline, resignation, discharge, dismissal, and graduation, as 
cadets at the Academy appointed from the United States. 
‘‘§ 51305. Prohibited basis for appointment 
‘‘Preference may not be given to an individual for appointment 
as a cadet at the United States Merchant Marine Academy because 
one or more members of the individual’s immediate family are 
alumni of the Academy. 
‘‘§ 51306. Cadet commitment agreements 
‘‘(a) AGREEMENT REQUIREMENTS.—A citizen of the United States 
appointed as a cadet at the United States Merchant Marine 
Academy must sign, as a condition of the appointment, an agree-
ment to—
‘‘(1) complete the course of instruction at the Academy;
H. R. 1442—89
‘‘(2) fulfill the requirements for a license as an officer 
in the merchant marine of the United States before graduation 
from the Academy; 
‘‘(3) maintain a valid license as an officer in the merchant 
marine of the United States for at least 6 years after graduation 
from the Academy, accompanied by the appropriate national 
and international endorsements and certification required by 
the Coast Guard for service aboard vessels on domestic and 
international voyages; 
‘‘(4) apply for, and accept if tendered, an appointment as 
a commissioned officer in the Naval Reserve (including the 
Merchant Marine Reserve, Naval Reserve), the Coast Guard 
Reserve, or any other reserve unit of an armed force of the 
United States, and, if tendered the appointment, to serve for 
at least 6 years after graduation from the Academy; 
‘‘(5) serve the foreign and domestic commerce and the 
national defense of the United States for at least 5 years 
after graduation from the Academy—
‘‘(A) as a merchant marine officer on a documented 
vessel or a vessel owned and operated by the United States 
Government or by a State; 
‘‘(B) as an employee in a United States maritime-
related industry, profession, or marine science (as deter-
mined by the Secretary of Transportation), if the Secretary 
determines that service under subparagraph (A) is not 
available to the individual; 
‘‘(C) as a commissioned officer on active duty in an 
armed force of the United States, as a commissioned officer 
in the National Oceanic and Atmospheric Administration, 
or in other maritime-related Federal employment which 
serves the national security interests of the United States, 
as determined by the Secretary; or 
‘‘(D) by a combination of the service alternatives 
referred to in subparagraphs (A)–(C); and 
‘‘(6) report to the Secretary on compliance with this sub-
section. 
‘‘(b) FAILURE TO COMPLETE COURSE OF INSTRUCTION.—
‘‘(1) ACTIVE DUTY.—If the Secretary of Transportation deter-
mines that an individual who has attended the Academy for 
at least 2 years has failed to fulfill the part of the agreement 
described in subsection (a)(1), the individual may be ordered 
by the Secretary of Defense to serve on active duty in one 
of the armed forces of the United States for a period of not 
more than 2 years. In cases of hardship as determined by 
the Secretary of Transportation, the Secretary of Transportation 
may waive this paragraph in whole or in part. 
‘‘(2) RECOVERY OF COST.—If the Secretary of Defense is 
unable or unwilling to order an individual to serve on active 
duty under paragraph (1), or if the Secretary of Transportation 
determines that reimbursement of the cost of education pro-
vided would better serve the interests of the United States, 
the Secretary of Transportation may recover from the individual 
the cost of education provided by the Government. 
‘‘(c) FAILURE TO CARRY OUT OTHER REQUIREMENTS.—
‘‘(1) ACTIVE DUTY.—If the Secretary of Transportation deter-
mines that an individual has failed to fulfill any part of the 
agreement described in subsection (a)(2)–(6), the individual may
H. R. 1442—90
be ordered to serve on active duty for a period of at least 
3 years but not more than the unexpired period (as determined 
by the Secretary) of the service required by subsection (a)(5). 
The Secretary of Transportation, in consultation with the Sec-
retary of Defense, shall determine in which service the indi-
vidual shall serve. In cases of hardship as determined by the 
Secretary of Transportation, the Secretary of Transportation 
may waive this paragraph in whole or in part. 
‘‘(2) RECOVERY OF COST.—If the Secretary of Defense is 
unable or unwilling to order an individual to serve on active 
duty under paragraph (1), or if the Secretary of Transportation 
determines that reimbursement of the cost of education pro-
vided would better serve the interests of the United States, 
the Secretary of Transportation may recover from the individual 
the cost of education provided. The Secretary may reduce the 
amount to be recovered to reflect partial performance of service 
obligations and other factors the Secretary determines merit 
a reduction. 
‘‘(d) ACTIONS TO RECOVER COST.—To aid in the recovery of 
the cost of education provided by the Government under a commit-
ment agreement under this section, the Secretary of Transportation 
may—
‘‘(1) request the Attorney General to bring a civil action 
against the individual; and 
‘‘(2) make use of the Federal debt collection procedures 
in chapter 176 of title 28 or other applicable administrative 
remedies. 
‘‘§ 51307. Places of training 
‘‘The Secretary of Transportation may provide for the training 
of cadets at the United States Merchant Marine Academy—
‘‘(1) on vessels owned or subsidized by the United States 
Government; 
‘‘(2) on other documented vessels, with the permission of 
the owner; and 
‘‘(3) in shipyards or plants and with industrial or edu-
cational organizations. 
‘‘§ 51308. Uniforms, textbooks, and transportation allow-
ances 
‘‘The Secretary of Transportation shall provide cadets at the 
United States Merchant Marine Academy—
‘‘(1) all required uniforms and textbooks; and 
‘‘(2) allowances for transportation (including reimburse-
ment of traveling expenses) when traveling under orders as 
a cadet. 
‘‘§ 51309. Academic degree 
‘‘(a) BACHELOR’S DEGREE.—
‘‘(1) IN GENERAL.—The Superintendent of the United States 
Merchant Marine Academy may confer the degree of bachelor 
of science on an individual who—
‘‘(A) has met the conditions prescribed by the Secretary 
of Transportation; and 
‘‘(B) if a citizen of the United States, has passed the 
examination for a merchant marine officer’s license.
H. R. 1442—91
‘‘(2) EFFECT OF PHYSICAL DISQUALIFICATION.—An individual 
not allowed to take the examination for a merchant marine 
officer’s license only because of physical disqualification may 
not be denied a degree for not taking the examination. 
‘‘(b) MASTER’S DEGREE.—The Superintendent of the Academy 
may confer a master’s degree on an individual who has met the 
conditions prescribed by the Secretary. A master’s degree program 
may be funded through non-appropriated funds. To maintain the 
appropriate academic standards, the program shall be accredited 
by the appropriate accreditation body. The Secretary may prescribe 
regulations necessary to administer such a program. 
‘‘(c) GRADUATION
NOT
ENTITLEMENT
TO
HOLD
LICENSE.—
Graduation from the Academy does not entitle an individual to 
hold a license authorizing service on a merchant vessel. 
‘‘§ 51310. Deferment 
of 
service 
obligation 
under 
cadet 
commitment agreements 
‘‘The Secretary of Transportation may defer the service commit-
ment of an individual under section 51306(a)(5) of this title (as 
specified in the cadet commitment agreement) for not more than 
2 years if the individual is engaged in a graduate course of study 
approved by the Secretary. However, deferment of service as a 
commissioned officer under section 51306(a)(5) must be approved 
by the Secretary of the military department that has jurisdiction 
over the service or by the Secretary of Commerce for service with 
the National Oceanic and Atmospheric Administration. 
‘‘§ 51311. Midshipman status in the Naval Reserve 
‘‘(a) APPLICATION REQUIREMENT.—Before being appointed as 
a cadet at the United States Merchant Marine Academy, a citizen 
of the United States must agree to apply for midshipman status 
in the Naval Reserve (including the Merchant Marine Reserve, 
Naval Reserve). 
‘‘(b) APPOINTMENT.—
‘‘(1) IN GENERAL.—A citizen of the United States appointed 
as a cadet at the Academy shall be appointed by the Secretary 
of the Navy as a midshipman in the Naval Reserve (including 
the Merchant Marine Reserve, Naval Reserve). 
‘‘(2) RIGHTS AND PRIVILEGES.—The Secretary of the Navy 
shall provide for cadets of the Academy who are midshipmen 
in the United States Naval Reserve to be—
‘‘(A) issued an identification card (referred to as a 
‘military ID card’); and 
‘‘(B) entitled to all rights and privileges in accordance 
with the same eligibility criteria as apply to other members 
of the Ready Reserve of the reserve components of the 
armed forces. 
‘‘(3) COORDINATION.—The Secretary of the Navy shall carry 
out paragraphs (1) and (2) in coordination with the Secretary 
of Transportation. 
‘‘§ 51312. Board of Visitors 
‘‘(a) IN GENERAL.—A Board of Visitors to the United States 
Merchant Marine Academy shall be established, for a term of 2 
years commencing at the beginning of each Congress, to visit the 
Academy annually on a date determined by the Secretary of
H. R. 1442—92
Transportation and to make recommendations on the operation 
of the Academy. 
‘‘(b) APPOINTMENT.—
‘‘(1) IN GENERAL.—The Board shall be composed of—
‘‘(A) 2 Senators appointed by the chairman of the Com-
mittee on Commerce, Science, and Transportation of the 
Senate; 
‘‘(B) 3 Members of the House of Representatives 
appointed by the chairman of the Committee on Armed 
Services of the House of Representatives; 
‘‘(C) 1 Senator appointed by the Vice President; 
‘‘(D) 2 Members of the House of Representatives 
appointed by the Speaker of the House of Representatives; 
and 
‘‘(E) the chairmen of the Committee on Commerce, 
Science, and Transportation of the Senate and the Com-
mittee on Armed Services of the House of Representatives, 
as ex officio members. 
‘‘(2) SUBSTITUTE APPOINTMENT.—If an appointed member 
of the Board is unable to visit the Academy as provided in 
subsection (a), another individual may be appointed as a sub-
stitute in the manner provided in paragraph (1). 
‘‘(c) STAFF.—The chairmen of the Committee on Commerce, 
Science, and Transportation of the Senate and the Committee on 
Armed Services of the House of Representatives may designate 
staff members of their committees to serve without reimbursement 
as staff for the Board. 
‘‘(d) TRAVEL EXPENSES.—When serving away from home or 
regular place of business, a member of the Board or a staff member 
designated under subsection (c) shall be allowed travel expenses, 
including per diem in lieu of subsistence, as authorized by section 
5703 of title 5. 
‘‘§ 51313. Advisory Board 
‘‘(a) IN GENERAL.—An Advisory Board to the United States 
Merchant Marine Academy shall be established to visit the Academy 
at least once during each academic year, for the purpose of exam-
ining the course of instruction and management of the Academy 
and advising the Maritime Administrator and the Superintendent 
of the Academy. 
‘‘(b) APPOINTMENT AND TERMS.—The Board shall be composed 
of not more than 7 individuals appointed by the Secretary of 
Transportation. The individuals must be distinguished in education 
and other fields related to the Academy. Members of the Board 
shall be appointed for terms of not more than 3 years and may 
be reappointed. The Secretary shall designate one of the members 
as chairman. 
‘‘(c) TRAVEL EXPENSES.—When serving away from home or reg-
ular place of business, a member of the Board shall be allowed 
travel expenses, including per diem in lieu of subsistence, as author-
ized by section 5703 of title 5. 
‘‘(d) RELATIONSHIP TO OTHER LAW.—The Federal Advisory Com-
mittee Act (5 App. U.S.C.) does not apply to the Board. 
‘‘§ 51314. Limitation on charges and fees for attendance 
‘‘(a) PROHIBITION.—Except as provided in subsection (b), no 
charge or fee for tuition, room, or board for attendance at the
H. R. 1442—93
United States Merchant Marine Academy may be imposed unless 
the charge or fee is specifically authorized by a law enacted after 
October 5, 1994. 
‘‘(b) EXCEPTION.—The prohibition specified in subsection (a) 
does not apply with respect to any item or service provided to 
cadets for which a charge or fee is imposed as of October 5, 1994. 
The Secretary of Transportation shall notify Congress of any change 
made by the Academy in the amount of a charge or fee authorized 
under this subsection. 
‘‘CHAPTER 515—STATE MARITIME ACADEMY SUPPORT 
PROGRAM
‘‘Sec. 
‘‘51501.
General support program. 
‘‘51502.
Detailing of personnel. 
‘‘51503.
Regional maritime academies. 
‘‘51504.
Use of training vessels. 
‘‘51505.
Annual payments for maintenance and support. 
‘‘51506.
Conditions to receiving payments and use of vessels. 
‘‘51507.
Places of training. 
‘‘51508.
Allowances for students. 
‘‘51509.
Student incentive payment agreements. 
‘‘51510.
Deferment of service obligation under student incentive payment agree-
ments. 
‘‘51511.
Midshipman status in the Naval Reserve.
‘‘§ 51501. General support program 
‘‘(a) ASSISTANCE
TO STATE MARITIME ACADEMIES.—The Sec-
retary of Transportation shall cooperate with and assist State mari-
time academies in providing instruction to individuals to prepare 
them for service in the merchant marine of the United States. 
‘‘(b) COURSE DEVELOPMENT.—The Secretary shall provide to 
each State maritime academy guidance and assistance in developing 
courses on the operation and maintenance of new vessels, on equip-
ment, and on innovations being introduced to the merchant marine 
of the United States. 
‘‘§ 51502. Detailing of personnel 
‘‘At the request of the Governor of a State, the President 
may detail, without reimbursement, personnel of the Navy, the 
Coast Guard, and the Maritime Service to a State maritime 
academy to serve as a superintendent, professor, lecturer, or 
instructor at the academy. 
‘‘§ 51503. Regional maritime academies 
‘‘The Governors of the States cooperating to sponsor a regional 
maritime academy shall designate in writing one of those States 
to conduct the affairs of that academy. A regional maritime academy 
is eligible for assistance from the United States Government on 
the same basis as a State maritime academy sponsored by a single 
State. 
‘‘§ 51504. Use of training vessels 
‘‘(a) APPLICATIONS TO USE VESSELS.—The Governor of a State 
sponsoring a State maritime academy (or the Governor of the State 
designated to conduct the affairs of a regional maritime academy) 
may apply in writing to the Secretary of Transportation to obtain 
the use of a training vessel for the academy. A vessel provided 
under this section remains the property of the United States 
Government.
H. R. 1442—94
‘‘(b) GENERAL AUTHORITY.—Subject to subsection (c), the Sec-
retary may provide to a State maritime academy, for use as a 
training vessel, a suitable vessel under the control of the Secretary 
or made available to the Secretary under subsection (e). If a suitable 
vessel is not available, the Secretary may build and provide a 
suitable vessel. 
‘‘(c) APPROVAL REQUIREMENTS.—The Secretary may provide a 
vessel under this section only if—
‘‘(1) an application has been made under subsection (a); 
‘‘(2) the State maritime academy satisfies section 51506(a) 
of this title; and 
‘‘(3) a suitable port will be available for the safe mooring 
of the vessel while the academy is using the vessel. 
‘‘(d) PREPARATION AND MAINTENANCE.—A vessel provided under 
this section shall be—
‘‘(1) repaired, reconditioned, and equipped (with all apparel, 
charts, books, and instruments of navigation) as necessary for 
use as a training vessel; and 
‘‘(2) maintained in good repair by the Secretary. 
‘‘(e) AGENCY VESSELS.—An agency may provide to the Secretary, 
for use by a State maritime academy, a vessel (including equipment) 
that—
‘‘(1) is suitable for training purposes; and 
‘‘(2) can be provided without detriment to the service to 
which the vessel is assigned. 
‘‘(f) FUEL COSTS.—The Secretary may pay to a State maritime 
academy the costs of fuel used by a vessel provided under this 
section while used for training. 
‘‘(g) REMOVING VESSELS FROM SERVICE AND VESSEL SHARING.—
The Secretary may not—
‘‘(1) take a vessel, currently in use as a training vessel 
under this section, out of service to implement an alternative 
program (including vessel sharing) unless the vessel is 
incapable of being maintained in good repair as required by 
subsection (d); or 
‘‘(2) implement a program requiring a State maritime 
academy to share its training vessel with another State mari-
time academy, except with the express consent of Congress. 
‘‘§ 51505. Annual payments for maintenance and support 
‘‘(a) PAYMENT AGREEMENTS.—The Secretary of Transportation 
may make an agreement (effective for not more than 4 years) 
with the following academies to provide annual payments to those 
academies for their maintenance and support: 
‘‘(1) One State maritime academy in each State that satis-
fies section 51506(a) of this title. 
‘‘(2) Each regional maritime academy that satisfies section 
51506(a) of this title. 
‘‘(b) PAYMENTS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), an annual pay-
ment to an academy under subsection (a) shall be at least 
equal to the amount given to the academy for its maintenance 
and support by the State in which it is located, or, for a 
regional maritime academy, by all States cooperating to sponsor 
the academy.
H. R. 1442—95
‘‘(2) MAXIMUM.—The amount under paragraph (1) may not 
be more than $25,000. However, if the academy satisfies section 
51506(b) of this title, the amount shall be—
‘‘(A) $100,000 for a State maritime academy; and 
‘‘(B) $200,000 for a regional maritime academy. 
‘‘§ 51506. Conditions to receiving payments and use of vessels 
‘‘(a) GENERAL
CONDITIONS.—As conditions of receiving an 
annual payment or the use of a vessel under this chapter, a State 
maritime academy must—
‘‘(1) provide courses of instruction on navigation, marine 
engineering (including steam and diesel propulsion), the oper-
ation and maintenance of new vessels and equipment, and 
innovations being introduced to the merchant marine of the 
United States; 
‘‘(2) agree in writing to conform to the standards for 
courses, training facilities, admissions, and instruction that 
the Secretary of Transportation may establish after consultation 
with the superintendents of State maritime academies; and 
‘‘(3) agree in writing to require, as a condition for gradua-
tion, that each individual who is a citizen of the United States 
and who is attending the academy in a merchant marine officer 
preparation program pass the examination required for the 
issuance of a license under section 7101 of this title. 
‘‘(b) ADDITIONAL CONDITION
TO PAYMENTS
OF MORE THAN 
$25,000.—As a condition of receiving an annual payment of more 
than $25,000 under section 51505 of this title, a State maritime 
academy also must agree to admit each year a number of citizens 
of the United States who meet its admission requirements and 
reside in a State not supporting that academy. The Secretary shall 
determine the number of individuals to be admitted by each 
academy under this subsection. The number may not be more 
than one-third of the total number of individuals attending the 
academy at any time. 
‘‘§ 51507. Places of training 
‘‘The Secretary of Transportation may provide for the training 
of students attending a State maritime academy—
‘‘(1) on vessels owned or subsidized by the United States 
Government; 
‘‘(2) on other documented vessels, with the permission of 
the owner; and 
‘‘(3) in shipyards or plants and with industrial or edu-
cational organizations. 
‘‘§ 51508. Allowances for students 
‘‘Under regulations prescribed by the Secretary of Transpor-
tation, a student at a State maritime academy shall receive from 
the Secretary allowances for transportation (including reimburse-
ment of traveling expenses) when traveling under orders to receive 
training under section 51507 of this title. 
‘‘§ 51509. Student incentive payment agreements 
‘‘(a) GENERAL AUTHORITY.—If a State maritime academy has 
an agreement with the Secretary of Transportation under section 
51505 of this title, the Secretary may make an agreement with 
a student at the academy who is a citizen of the United States
H. R. 1442—96
to make student incentive payments to the individual. An agree-
ment with a student may not be effective for more than 4 academic 
years. The Secretary shall allocate payments under this section 
among the various State maritime academies in an equitable 
manner. 
‘‘(b) PAYMENTS.—Payments under an agreement under this sec-
tion shall be equal to $4,000 each academic year and be paid, 
as prescribed by the Secretary, while the individual is attending 
the academy. The payments shall be used for uniforms, books, 
and subsistence. 
‘‘(c) MIDSHIPMAN AND ENLISTED RESERVE STATUS.—An agree-
ment under this section shall require the student to accept mid-
shipman and enlisted reserve status in the Naval Reserve (including 
the Merchant Marine Reserve, Naval Reserve) before receiving any 
payments under the agreement. 
‘‘(d) AGREEMENT REQUIREMENTS.—An agreement under this sec-
tion shall require the student to—
‘‘(1) complete the course of instruction at the academy 
the individual is attending; 
‘‘(2) take the examination for a license as an officer in 
the merchant marine of the United States before graduation 
from the academy and fulfill the requirements for such a license 
within 3 months after graduation from the academy; 
‘‘(3) maintain a valid license as an officer in the merchant 
marine of the United States for at least 6 years after graduation 
from the academy, accompanied by the appropriate national 
and international endorsements and certification required by 
the Coast Guard for service aboard vessels on domestic and 
international voyages; 
‘‘(4) accept, if tendered, an appointment as a commissioned 
officer in the Naval Reserve (including the Merchant Marine 
Reserve, Naval Reserve), the Coast Guard Reserve, or any 
other reserve unit of an armed force of the United States, 
and, if tendered the appointment, to serve for at least 6 years 
after graduation from the academy; 
‘‘(5) serve the foreign and domestic commerce and the 
national defense of the United States for at least 3 years 
after graduation from the academy—
‘‘(A) as a merchant marine officer on a documented 
vessel or a vessel owned and operated by the United States 
Government or by a State; 
‘‘(B) as an employee in a United States maritime-
related industry, profession, or marine science (as deter-
mined by the Secretary), if the Secretary determines that 
service under subparagraph (A) is not available to the 
individual; 
‘‘(C) as a commissioned officer on active duty in an 
armed force of the United States, as a commissioned officer 
in the National Oceanic and Atmospheric Administration, 
or in other maritime-related Federal employment which 
serves the national security interests of the United States, 
as determined by the Secretary; or 
‘‘(D) by a combination of the service alternatives 
referred to in subparagraphs (A)–(C); and 
‘‘(6) report to the Secretary on compliance with this sub-
section. 
‘‘(e) FAILURE TO COMPLETE COURSE OF INSTRUCTION.—
H. R. 1442—97
‘‘(1) ACTIVE DUTY.—If the Secretary of Transportation deter-
mines that an individual who has accepted the payments 
described in subsection (b) for a minimum of 2 academic years 
has failed to fulfill the part of the agreement described in 
subsection (d)(1), the individual may be ordered by the Sec-
retary of Defense to serve on active duty in the armed forces 
of the United States for a period of not more than 2 years. 
In cases of hardship as determined by the Secretary of 
Transportation, the Secretary of Transportation may waive this 
paragraph in whole or in part. 
‘‘(2) RECOVERY OF COST.—If the Secretary of Defense is 
unable or unwilling to order an individual to serve on active 
duty under paragraph (1), or if the Secretary of Transportation 
determines that reimbursement of the cost of education pro-
vided would better serve the interests of the United States, 
the Secretary of Transportation may recover from the individual 
the amount of student incentive payments, plus interest and 
attorney fees. The Secretary may reduce the amount to be 
recovered to reflect partial performance of service obligations 
and other factors the Secretary determines merit a reduction. 
‘‘(f) FAILURE TO CARRY OUT OTHER REQUIREMENTS.—
‘‘(1) ACTIVE DUTY.—If the Secretary of Transportation deter-
mines that an individual has failed to fulfill any part of the 
agreement described in subsection (d)(2)–(6), the individual may 
be ordered to serve on active duty for a period of at least 
2 years but not more than the unexpired period (as determined 
by the Secretary) of the service required by subsection (d)(5). 
The Secretary of Transportation, in consultation with the Sec-
retary of Defense, shall determine in which service the indi-
vidual shall serve. In cases of hardship as determined by the 
Secretary of Transportation, the Secretary of Transportation 
may waive this paragraph in whole or in part. 
‘‘(2) RECOVERY OF COST.—If the Secretary of Defense is 
unable or unwilling to order an individual to serve on active 
duty under paragraph (1), or if the Secretary of Transportation 
determines that reimbursement of the cost of education pro-
vided would better serve the interests of the United States, 
the Secretary of Transportation may recover from the individual 
the amount of student incentive payments, plus interest and 
attorney fees. The Secretary may reduce the amount to be 
recovered to reflect partial performance of service obligations 
and other factors the Secretary determines merit a reduction. 
‘‘(g) ACTIONS TO RECOVER COST.—To aid in the recovery of 
the cost of education provided by the Government under a commit-
ment agreement under this section, the Secretary of Transportation 
may—
‘‘(1) request the Attorney General to bring a civil action 
against the individual; and 
‘‘(2) make use of the Federal debt collection procedures 
in chapter 176 of title 28 or other applicable administrative 
remedies. 
‘‘§ 51510. Deferment of service obligation under student 
incentive payment agreements 
‘‘The Secretary of Transportation may defer the service commit-
ment of an individual under section 51509(d)(5) of this title (as 
specified in the agreement under section 51509) for not more than
H. R. 1442—98
2 years if the individual is engaged in a graduate course of study 
approved by the Secretary. However, deferment of service as a 
commissioned officer on active duty must be approved by the Sec-
retary of the affected military department (or the Secretary of 
Commerce, for service with the National Oceanic and Atmospheric 
Administration). 
‘‘§ 51511. Midshipman status in the Naval Reserve 
‘‘A citizen of the United States attending a State maritime 
academy may be appointed by the Secretary of the Navy as a 
midshipman in the Naval Reserve (including the Merchant Marine 
Reserve, Naval Reserve). 
‘‘CHAPTER 517—OTHER SUPPORT FOR MERCHANT 
MARINE TRAINING
‘‘Sec. 
‘‘51701.
United States Maritime Service. 
‘‘51702.
Civilian nautical schools. 
‘‘51703.
Additional training. 
‘‘51704.
Training for maritime oil pollution prevention, response, and clean-up.
‘‘§ 51701. United States Maritime Service 
‘‘(a) GENERAL AUTHORITY.—The Secretary of Transportation 
may establish and maintain a voluntary organization, to be known 
as the United States Maritime Service, for the training of citizens 
of the United States to serve on merchant vessels of the United 
States. 
‘‘(b) SPECIFIC AUTHORITY.—The Secretary may—
‘‘(1) determine the number of individuals to be enrolled 
for training and reserve purposes in the Service; 
‘‘(2) fix the rates of pay and allowances of the individuals 
without regard to chapter 51 or subchapter III of chapter 53 
of title 5; 
‘‘(3) prescribe the course of study and the periods of training 
for the Service; and 
‘‘(4) prescribe the uniform of the Service and the rules 
on providing and wearing the uniform. 
‘‘(c) RANKS, GRADES, AND RATINGS.—The ranks, grades, and 
ratings for personnel of the Service shall be the same as those 
prescribed for personnel of the Coast Guard. 
‘‘(d) MEDALS AND AWARDS.—The Secretary may establish and 
maintain a medals and awards program to recognize distinguished 
service, superior achievement, professional performance, and other 
commendable achievement by personnel of the Service. 
‘‘§ 51702. Civilian nautical schools 
‘‘(a) DEFINITION.—In this section, the term ‘civilian nautical 
school’ means a school operated in the United States (except the 
United States Merchant Marine Academy, a State maritime 
academy, or another school operated by the United States Govern-
ment) that offers instruction to individuals quartered on a vessel 
primarily to train them for service in the merchant marine. 
‘‘(b) INSPECTION.—Each civilian nautical school is subject to 
inspection by the Secretary of Transportation. 
‘‘(c) RATING AND CERTIFICATION.—The Secretary may, under 
regulations the Secretary may prescribe, provide for the rating 
and certification of civilian nautical schools as to the adequacy
H. R. 1442—99
of their course of instruction, the competence of their instructors, 
and the suitability of the equipment used in their course of instruc-
tion. 
‘‘§ 51703. Additional training 
‘‘(a) GENERAL AUTHORITY.—The Secretary of Transportation 
may provide additional training on maritime subjects to supplement 
other training opportunities and make the training available to 
the personnel of the merchant marine of the United States and 
individuals preparing for a career in the merchant marine of the 
United States. 
‘‘(b) EQUIPMENT, SUPPLIES, AND CONTRACTS.—The Secretary 
may—
‘‘(1) prepare or buy equipment or supplies required for 
the additional training; and 
‘‘(2) without regard to section 3709 of the Revised Statutes 
(41 U.S.C. 5), make contracts for services the Secretary con-
siders necessary to prepare the equipment and supplies and 
to supervise and administer the additional training. 
‘‘§ 51704. Training for maritime oil pollution prevention, 
response, and clean-up 
‘‘(a) ASSISTANCE
IN ESTABLISHING PROGRAM.—The Secretary 
of Transportation shall assist maritime training institutions 
approved by the Secretary in establishing a training program for 
maritime oil pollution prevention, response, and clean-up. 
‘‘(b) PROVIDING TRAINING VESSELS.—Subject to subsection (c), 
the Secretary may provide, with title free of all liens, to maritime 
training institutions that have a program established under sub-
section (a), offshore supply vessels and tug/supply vessels that 
were built in the United States and are in the possession of the 
Maritime Administration because of a default on a loan guaranteed 
under chapter 537 of this title. 
‘‘(c) REQUIREMENTS.—In addition to any other requirements 
the Secretary considers appropriate, the following requirements 
apply to vessels provided under this section: 
‘‘(1) The vessel shall be offered to the institution at a 
location selected by the Secretary. 
‘‘(2) The institution shall use the vessel to train students 
and appropriate maritime industry personnel in oil spill preven-
tion, response, clean-up, and related skills. 
‘‘(3) The institution shall make the vessel and qualified 
students available to appropriate Federal, State, and local oil 
spill response authorities when there is a maritime oil spill. 
‘‘(4) The institution may not sell, trade, charter, donate, 
scrap, or in any way alter or dispose of the vessel without 
prior approval of the Secretary. 
‘‘(5) The institution may not use the vessel in competition 
with a privately-owned vessel documented under chapter 121 
of this title or titled under the law of a State, unless necessary 
to carry out this section. 
‘‘(6) When the institution can no longer use the vessel 
for its training program, the institution shall return the vessel 
to the Secretary. The Secretary shall take possession at the 
institution and thereafter may provide the vessel to another 
institution under this section or dispose of the vessel.
H. R. 1442—100
‘‘CHAPTER 519—MERCHANT MARINE AWARDS
‘‘Sec. 
‘‘51901.
Awards for individual acts or service. 
‘‘51902.
Gallant Ship Award. 
‘‘51903.
Multiple awards. 
‘‘51904.
Presentation to representatives. 
‘‘51905.
Flags and grave markers. 
‘‘51906.
Special certificates for civilian service to armed forces. 
‘‘51907.
Manufacture and sale of awards and replacements. 
‘‘51908.
Prohibition against unauthorized manufacture, sale, possession, or display 
of awards.
‘‘§ 51901. Awards for individual acts or service 
‘‘(a) GENERAL AUTHORITY.—The Secretary of Transportation 
may award decorations and medals of appropriate design (including 
ribbons, ribbon bars, emblems, rosettes, miniature facsimiles, 
plaques, citations, or other suitable devices or insignia) for indi-
vidual acts or service in the merchant marine of the United States. 
The design may be similar to the design of a decoration or medal 
authorized for members of the armed forces for similar acts or 
service. 
‘‘(b) SPECIFIC AUTHORITY.—The Secretary may award—
‘‘(1) a Merchant Marine Distinguished Service Medal to 
an individual for outstanding acts, conduct, or valor beyond 
the line of duty; 
‘‘(2) a Merchant Marine Meritorious Service Medal to an 
individual for meritorious acts, conduct, or valor in the line 
of duty, but not of the outstanding character that would warrant 
the award of the Merchant Marine Distinguished Service 
Medal; 
‘‘(3) a decoration or medal to an individual for service 
during a war, national emergency proclaimed by the President 
or Congress, or operations by the armed forces outside the 
continental United States under conditions of danger to life 
and property; and 
‘‘(4) a decoration or medal to an individual for other acts 
or service of conspicuous gallantry, intrepidity, and extraor-
dinary heroism under conditions of danger to life and property 
that would warrant a similar decoration or medal for a member 
of the armed forces. 
‘‘§ 51902. Gallant Ship Award 
‘‘(a) AWARDS
TO VESSELS.—The Secretary of Transportation 
may award a Gallant Ship Award and a citation to a vessel 
(including a foreign vessel) participating in outstanding or gallant 
action in a marine disaster or other emergency to save life or 
property at sea. The Secretary may award a plaque to the vessel, 
and a replica of the plaque may be preserved as a permanent 
historical record. 
‘‘(b) AWARDS TO CREWS.—The Secretary of Transportation may 
award an appropriate citation ribbon bar to the master and each 
individual serving, at the time of the action, on a vessel issued 
an award under subsection (a). 
‘‘(c) CONSULTATION.—The Secretary of Transportation shall con-
sult with the Secretary of State before awarding an award or 
citation to a foreign vessel or its crew under this section.
H. R. 1442—101
‘‘§ 51903. Multiple awards 
‘‘An individual may not be awarded more than one of any 
type of decoration or medal under this chapter. For each succeeding 
act or service justifying the same decoration or medal, a suitable 
device may be awarded to be worn with the decoration or medal. 
‘‘§ 51904. Presentation to representatives 
‘‘If an individual to be issued an award under this chapter 
is unable to accept the award personally, the Secretary of Transpor-
tation may present the award to an appropriate representative. 
‘‘§ 51905. Flags and grave markers 
‘‘Except as authorized under another law, the Secretary of 
Transportation may issue, at no cost, a flag of the United States 
and a grave marker to the family or personal representative of 
a deceased individual who served in the merchant marine of the 
United States in support of the armed forces of the United States 
or its allies during a war or national emergency. 
‘‘§ 51906. Special certificates for civilian service to armed 
forces 
‘‘(a) GENERAL AUTHORITY.—The Maritime Administrator may 
issue a special certificate to an individual, or the personal represent-
ative of an individual, in recognition of service of that individual 
in the merchant marine of the United States, if the service has 
been determined to be active duty under section 401 of the GI 
Bill Improvement Act of 1977 (Public Law 95–202; 38 U.S.C. 106 
note). 
‘‘(b) RELATIONSHIP TO OTHER LAWS.—Issuance of a certificate 
under subsection (a) does not entitle an individual to any rights, 
privileges, or benefits under a law of the United States. 
‘‘§ 51907. Manufacture and sale of awards and replacements 
‘‘The Secretary of Transportation may—
‘‘(1) authorize private persons to manufacture decorations 
and medals authorized under this chapter or a prior law; and 
‘‘(2) provide at cost, or authorize private persons to sell 
at reasonable prices, replacements for those decorations and 
medals. 
‘‘§ 51908. Prohibition against unauthorized manufacture, 
sale, possession, or display of awards 
‘‘(a) PROHIBITION.—Except as authorized under this chapter, 
a person may not manufacture, sell, possess, or display a decoration 
or medal provided for in this chapter. 
‘‘(b) CIVIL PENALTY.—A person violating this section is liable 
to the United States Government for a civil penalty of not more 
than $2,000. 
‘‘CHAPTER 521—MISCELLANEOUS
‘‘Sec. 
‘‘52101.
Reemployment rights for certain merchant seamen.
‘‘§ 52101. Reemployment rights for certain merchant seamen 
‘‘(a) IN GENERAL.—An individual who is certified by the Sec-
retary of Transportation under subsection (c) shall be entitled to
H. R. 1442—102
reemployment rights and other benefits substantially equivalent 
to the rights and benefits provided for by chapter 43 of title 38 
for any member of a reserve component of the armed forces of 
the United States who is ordered to active duty. 
‘‘(b) TIME
FOR APPLICATION.—An individual may submit an 
application for certification under subsection (c) to the Secretary 
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) CERTIFICATION DETERMINATION.—Not later than 20 days 
after the date the Secretary receives from an individual an applica-
tion for certification under this subsection, the Secretary shall—
‘‘(1) determine whether the individual—
‘‘(A) was employed in the activation or operation of 
a vessel—
‘‘(i) in the National Defense Reserve Fleet main-
tained under section 11 of the Merchant Ship Sales 
Act of 1946 (50 App. U.S.C. 1744) in a period in which 
the vessel was in use or being activated for use under 
subsection (b) of that section; 
‘‘(ii) requisitioned or purchased under chapter 563 
of this title; or 
‘‘(iii) owned, chartered, or controlled by the United 
States Government and used by the Government 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 73 of this title; and 
‘‘(2) if the Secretary makes affirmative determinations 
under subparagraphs (A) and (B) of paragraph (1), certify that 
individual under this subsection. 
‘‘(d) EQUIVALENCE TO MILITARY SELECTIVE SERVICE ACT CER-
TIFICATE.—For purposes of reemployment rights and benefits pro-
vided by this section, a certification under subsection (c) shall 
be considered to be the equivalent of a certificate described in 
section 9(a) of the Military Selective Service Act (50 App. U.S.C. 
459(a)).
‘‘PART C—FINANCIAL ASSISTANCE PROGRAMS’’. 
(c) CHAPTERS FOLLOWING CHAPTER 531.—Subtitle V of title 
46, United States Code, is amended by adding at the end the 
following:
‘‘CHAPTER 533—CONSTRUCTION RESERVE FUNDS
‘‘Sec. 
‘‘53301.
Definitions. 
‘‘53302.
Authority for construction reserve funds. 
‘‘53303.
Persons eligible to establish funds. 
‘‘53304.
Vessel ownership. 
‘‘53305.
Eligible fund deposits. 
‘‘53306.
Recognition of gain for tax purposes. 
‘‘53307.
Basis for determining gain or loss and for depreciating new vessels. 
‘‘53308.
Order and proportions of deposits and withdrawals. 
‘‘53309.
Accumulation of deposits. 
‘‘53310.
Obligation of deposits and period for construction of certain vessels.
H. R. 1442—103
‘‘53311.
Taxation of deposits on failure of conditions. 
‘‘53312.
Assessment and collection of deficiency tax.
‘‘§ 53301. Definitions 
‘‘(a) IN GENERAL.—In this chapter: 
‘‘(1) CONSTRUCTION CONTRACT.—The term ‘construction con-
tract’ includes, for a taxpayer constructing a new vessel in 
a shipyard owned by that taxpayer, an agreement between 
the taxpayer and the Secretary of Transportation for that 
construction containing provisions the Secretary considers 
advisable to carry out this chapter. 
‘‘(2) NEW VESSEL.—The term ‘new vessel’ means—
‘‘(A) a vessel—
‘‘(i) constructed in the United States after 
December 31, 1939, constructed with a construction-
differential subsidy under title V of the Merchant 
Marine Act, 1936, or constructed with financing or 
a financing guarantee under chapter 537 or 575 of 
this title; 
‘‘(ii) documented or agreed with the Secretary to 
be documented under the laws of the United States; 
and 
‘‘(iii)(I) of a type, size, and speed that the Secretary 
determines is suitable for use on the high seas or 
Great Lakes in carrying out this subtitle, but not less 
than 2,000 gross tons or less than 12 knots speed 
unless the Secretary certifies in each case that a vessel 
of lesser tonnage or speed is desirable for use by the 
United States Government in case of war or national 
emergency; or 
‘‘(II) constructed to replace a vessel bought or 
requisitioned by the Government; and 
‘‘(B) a vessel reconstructed or reconditioned for use 
only on the Great Lakes, including the Saint Lawrence 
River and Gulf, if the Secretary finds that the reconstruc-
tion or reconditioning will promote the objectives of this 
subtitle. 
‘‘(b) ADDITIONAL TAX-RELATED TERMS.—Other terms used in 
this chapter have the same meaning as in chapter 1 of the Internal 
Revenue Code of 1986 (26 U.S.C. ch. 1). 
‘‘§ 53302. Authority for construction reserve funds 
‘‘(a) GENERAL AUTHORITY.—An eligible person under section 
53303 of this title may establish a construction reserve fund for 
the construction, reconstruction, reconditioning, or acquisition of 
a new vessel or for other purposes authorized by this chapter. 
‘‘(b) APPLICATION OF CERTAIN LAWS AND REGULATIONS.—The 
fund shall be established, maintained, expended, and used as pro-
vided by this chapter and regulations prescribed jointly by the 
Secretary of Transportation and the Secretary of the Treasury. 
‘‘§ 53303. Persons eligible to establish funds 
‘‘A construction reserve fund may be established by a citizen 
of the United States that—
‘‘(1) is operating a vessel in the foreign or domestic com-
merce of the United States or in the fisheries;
H. R. 1442—104
‘‘(2) owns, in whole or in part, a vessel being operated 
in the foreign or domestic commerce of the United States or 
in the fisheries; 
‘‘(3) was operating a vessel in the foreign or domestic 
commerce of the United States or in the fisheries when it 
was bought or requisitioned by the United States Government; 
‘‘(4) owned, in whole or in part, a vessel being operated 
in the foreign or domestic commerce of the United States or 
in the fisheries when it was bought or requisitioned by the 
Government; or 
‘‘(5) had acquired or was having constructed a vessel to 
operate in the foreign or domestic commerce of the United 
States or in the fisheries when it was bought or requisitioned 
by the Government. 
‘‘§ 53304. Vessel ownership 
‘‘In this chapter, a vessel is deemed to be constructed or 
acquired by a taxpayer if constructed or acquired by a corporation 
when the taxpayer owns at least 95 percent of each class of stock 
of the corporation. 
‘‘§ 53305. Eligible fund deposits 
‘‘A construction reserve fund may include deposits of—
‘‘(1) the proceeds from the sale of a vessel; 
‘‘(2) indemnities for the loss of a vessel; 
‘‘(3) earnings from the operation of a documented vessel 
and from services incident to the operation; and 
‘‘(4) interest or other amounts accrued on deposits in the 
fund. 
‘‘§ 53306. Recognition of gain for tax purposes 
‘‘(a) DEFINITIONS.—In this section, the terms ‘net proceeds’ and 
‘net indemnity’ mean the sum of—
‘‘(1) the adjusted basis of the vessel; and 
‘‘(2) the amount of gain the taxpayer would recognize with-
out regard to this section. 
‘‘(b) RECOGNITION OF GAIN.—In computing net income under 
the income or excess profits tax laws of the United States, a tax-
payer does not recognize a gain on the sale or the actual or construc-
tive total loss of a vessel if the taxpayer—
‘‘(1) deposits an amount equal to the net proceeds of the 
sale or the net indemnity for the loss in a construction reserve 
fund within 60 days after receiving the payment of proceeds 
or indemnity; and 
‘‘(2) elects under this section not to recognize the gain. 
‘‘(c) WHEN ELECTION MUST BE MADE.—
‘‘(1) IN GENERAL.—Except as provided in paragraph (2), 
the taxpayer must make the election referred to in subsection 
(b) in the taxpayer’s income tax return for the taxable year 
in which the gain was realized. 
‘‘(2) RECEIPT AFTER TAXABLE YEAR.—If the vessel is bought 
or requisitioned by the United States Government, or is lost, 
and the taxpayer receives payment for the vessel or indemnity 
for the loss from the Government after the end of the taxable 
year in which it was bought, requisitioned, or lost, the taxpayer 
must make the election referred to in subsection (b) within
H. R. 1442—105
60 days after receiving the payment or indemnity, on a form 
prescribed by the Secretary of the Treasury. 
‘‘(d) EFFECT OF STATUTE OF LIMITATION.—If the taxpayer makes 
an election under subsection (c)(2), and computation or recomputa-
tion under this section is otherwise allowable but is prevented 
by a statute of limitation on the date the election is made or 
within 6 months thereafter, the computation or recomputation 
nevertheless shall be made notwithstanding the statute if the tax-
payer files a claim for the computation or recomputation within 
6 months after the date of making the election. 
‘‘§ 53307. Basis for determining gain or loss and for depre-
ciating new vessels 
‘‘Under the income or excess profits tax laws of the United 
States, the basis for determining a gain or loss and for depreciation 
of a new vessel constructed, reconstructed, reconditioned, or 
acquired by the taxpayer, or for which purchase-money indebtedness 
is liquidated as provided in section 53310 of this title, with amounts 
from a construction reserve fund, shall be reduced by that part 
of the deposits in the fund expended in the construction, reconstruc-
tion, reconditioning, acquisition, or liquidation of purchase-money 
indebtedness of the new vessel that represents a gain not recognized 
for tax purposes under section 53306 of this title. 
‘‘§ 53308. Order and proportions of deposits and withdrawals 
‘‘In this chapter—
‘‘(1) if the net proceeds of a sale or the net indemnity 
for a loss is deposited in more than one deposit, the amount 
consisting of the gain shall be deemed to be deposited first; 
‘‘(2) amounts expended, obligated, or otherwise withdrawn 
shall be applied against the amounts deposited in the fund 
in the order of deposit; and 
‘‘(3) if a deposit consists in part of a gain not recognized 
under section 53306 of this title, any expenditure, obligation, 
or withdrawal applied against that deposit shall be deemed 
to be a gain in the proportion that the part of the deposit 
consisting of a gain bears to the total amount of the deposit. 
‘‘§ 53309. Accumulation of deposits 
‘‘For any taxable year, amounts on deposit in a construction 
reserve fund on the last day of the taxable year, for which the 
requirements of section 53310 of this title have been satisfied (to 
the extent they apply on the last day of the taxable year), are 
deemed to have been retained for the reasonable needs of the 
business within the meaning of section 537(a) of the Internal Rev-
enue Code of 1986 (26 U.S.C. 537(a)). 
‘‘§ 53310. Obligation of deposits and period for construction 
of certain vessels 
‘‘(a) APPLICATION
OF SECTIONS 53306 AND 53309.—Sections 
53306 and 53309 of this title apply to a deposit in a construction 
reserve fund only if, within 3 years after the date of the deposit 
(and any extension under subsection (c))—
‘‘(1)(A) a contract is made for the construction or acquisition 
of a new vessel or, with the approval of the Secretary of 
Transportation, for a part interest in a new vessel or for the 
reconstruction or reconditioning of a new vessel;
H. R. 1442—106
‘‘(B) the deposit is expended or obligated for expenditure 
under that contract; 
‘‘(C) at least 12.5 percent of the construction or contract 
price of the vessel is paid or irrevocably committed for payment; 
and 
‘‘(D) the plans and specifications for the vessel are approved 
by the Secretary to the extent the Secretary considers nec-
essary; or 
‘‘(2) the deposit is expended or obligated for expenditure 
for the liquidation of existing or subsequently incurred pur-
chase-money indebtedness to a person not a parent company 
of, or a company affiliated or associated with, the mortgagor 
on a new vessel. 
‘‘(b) ADDITIONAL REQUIREMENTS
FOR CERTAIN VESSELS.—In 
addition to the requirements of subsection (a)(1), for a vessel not 
constructed under a construction-differential subsidy contract or 
not bought from the Secretary of Transportation—
‘‘(1) at least 5 percent of the construction (or, if the contract 
covers more than one vessel, at least 5 percent of the construc-
tion of the first vessel) must be completed within 6 months 
after the date of the construction contract (or within the period 
of an extension under subsection (c)), as estimated by the 
Secretary and certified by the Secretary to the Secretary of 
the Treasury; and 
‘‘(2) construction under the contract must be completed 
with reasonable dispatch thereafter. 
‘‘(c) EXTENSIONS.—The Secretary of Transportation may grant 
extensions of the period within which the deposits must be expended 
or obligated or within which the construction must have progressed 
to the extent of 5 percent completion under this section. However, 
the extensions may not be for a total of more than 2 years for 
the expenditure or obligation of deposits or one year for the progress 
of construction. 
‘‘§ 53311. Taxation of deposits on failure of conditions 
‘‘A deposited gain, if otherwise taxable income under the law 
applicable to the taxable year in which the gain was realized, 
shall be included in gross income for that taxable year, except 
for purposes of the declared value excess profits tax and the capital 
stock tax, if—
‘‘(1) the deposited gain is not expended or obligated within 
the appropriate period under section 53310 of this title; 
‘‘(2) the deposited gain is withdrawn before the end of 
that period; 
‘‘(3) the construction related to that deposited gain has 
not progressed to the extent of 5 percent of completion within 
the appropriate period under section 53310 of this title; or 
‘‘(4) the Secretary of Transportation finds and certifies to 
the Secretary of the Treasury that, for causes within the control 
of the taxpayer, the entire construction related to that deposited 
gain is not completed with reasonable dispatch. 
‘‘§ 53312. Assessment and collection of deficiency tax 
‘‘Notwithstanding any other provision of law, a deficiency in 
tax for a taxable year resulting from the inclusion of an amount 
in gross income as provided by section 53311 of this title, and 
the amount to be treated as a deficiency under section 53311
H. R. 1442—107
instead of as an adjustment for the declared value excess profits 
tax, may be assessed or a civil action may be brought to collect 
the deficiency without assessment, at any time. Interest on a defi-
ciency or amount to be treated as a deficiency does not begin 
until the date the deposited gain or part of the deposited gain 
in question is required to be included in gross income under section 
51111.
‘‘CHAPTER 535—CAPITAL CONSTRUCTION FUNDS
‘‘Sec. 
‘‘53501.
Definitions. 
‘‘53502.
Regulations. 
‘‘53503.
Establishing a capital construction fund. 
‘‘53504.
Deposits and withdrawals. 
‘‘53505.
Ceiling on deposits. 
‘‘53506.
Investment and fiduciary requirements. 
‘‘53507.
Nontaxation of deposits. 
‘‘53508.
Separate accounts within a fund. 
‘‘53509.
Qualified withdrawals. 
‘‘53510.
Tax treatment of qualified withdrawals and basis of property. 
‘‘53511.
Tax treatment of nonqualified withdrawals. 
‘‘53512.
FIFO and LIFO withdrawals. 
‘‘53513.
Corporate reorganizations and partnership changes. 
‘‘53514.
Relationship of old fund to new fund. 
‘‘53515.
Records and reports. 
‘‘53516.
Termination of agreement after change in regulations. 
‘‘53517.
Reports.
‘‘§ 53501. Definitions 
‘‘In this chapter: 
‘‘(1) AGREEMENT
VESSEL.—The term ‘agreement vessel’ 
means—
‘‘(A) an eligible vessel or a qualified vessel that is 
subject to an agreement under this chapter; and 
‘‘(B) a barge or container that is part of the complement 
of a vessel described in subparagraph (A) if provided for 
in the agreement. 
‘‘(2) ELIGIBLE VESSEL.—The term ‘eligible vessel’ means—
‘‘(A) a vessel—
‘‘(i) constructed in the United States (and, if 
reconstructed, reconstructed in the United States), con-
structed outside the United States but documented 
under the laws of the United States on April 15, 1970, 
or constructed outside the United States for use in 
the United States foreign trade pursuant to a contract 
made before April 15, 1970; 
‘‘(ii) documented under the laws of the United 
States; and 
‘‘(iii) operated in the foreign or domestic trade 
of the United States or in the fisheries of the United 
States; and 
‘‘(B) a commercial fishing vessel—
‘‘(i) constructed in the United States and, if 
reconstructed, reconstructed in the United States; 
‘‘(ii) of at least 2 net tons but less than 5 net 
tons; 
‘‘(iii) owned by a citizen of the United States; 
‘‘(iv) having its home port in the United States; 
and 
‘‘(v) operated in the commercial fisheries of the 
United States.
H. R. 1442—108
‘‘(3) JOINT
REGULATIONS.—The term ‘joint regulations’ 
means regulations prescribed jointly by the Secretary and the 
Secretary of the Treasury under section 53502(b) of this title. 
‘‘(4) NONCONTIGUOUS
TRADE.—The term ‘noncontiguous 
trade’ means—
‘‘(A) trade between—
‘‘(i) one of the contiguous 48 States; and 
‘‘(ii) Alaska, Hawaii, Puerto Rico, or an insular 
territory or possession of the United States; and 
‘‘(B) trade between—
‘‘(i) a place in Alaska, Hawaii, Puerto Rico, or 
an insular territory or possession of the United States; 
and 
‘‘(ii) another place in Alaska, Hawaii, Puerto Rico, 
or an insular territory or possession of the United 
States. 
‘‘(5) 
QUALIFIED
VESSEL.—The 
term 
‘qualified 
vessel’ 
means—
‘‘(A) a vessel—
‘‘(i) constructed in the United States (and, if 
reconstructed, reconstructed in the United States), con-
structed outside the United States but documented 
under the laws of the United States on April 15, 1970, 
or constructed outside the United States for use in 
the United States foreign trade pursuant to a contract 
made before April 15, 1970; 
‘‘(ii) documented under the laws of the United 
States; and 
‘‘(iii) agreed, between the Secretary and the person 
maintaining the capital construction fund established 
under section 53503 of this title, to be operated in 
the United States foreign, Great Lakes, or noncontig-
uous domestic trade or in the fisheries of the United 
States; and 
‘‘(B) a commercial fishing vessel—
‘‘(i) constructed in the United States and, if 
reconstructed, reconstructed in the United States; 
‘‘(ii) of at least 2 net tons but less than 5 net 
tons; 
‘‘(iii) owned by a citizen of the United States; 
‘‘(iv) having its home port in the United States; 
and 
‘‘(v) operated in the commercial fisheries of the 
United States. 
‘‘(6) SECRETARY.—The term ‘Secretary’ means—
‘‘(A) the Secretary of Commerce with respect to an 
eligible vessel or a qualified vessel operated or to be oper-
ated in the fisheries of the United States; and 
‘‘(B) the Secretary of Transportation with respect to 
other vessels. 
‘‘(7) UNITED
STATES
FOREIGN
TRADE.—The term ‘United 
States foreign trade’ includes those areas in domestic trade 
in which a vessel built with a construction-differential subsidy 
is allowed to operate under the first sentence of section 506 
of the Merchant Marine Act, 1936. 
‘‘(8) VESSEL.—The term ‘vessel’ includes—
H. R. 1442—109
‘‘(A) cargo handling equipment that the Secretary 
determines is intended for use primarily on the vessel; 
and 
‘‘(B) an ocean-going towing vessel, an ocean-going 
barge, or a comparable towing vessel or barge operated 
on the Great Lakes. 
‘‘§ 53502. Regulations 
‘‘(a) IN GENERAL.—Except as provided in subsection (b), the 
Secretary shall prescribe regulations to carry out this chapter. 
‘‘(b) TAX LIABILITY.—The Secretary and the Secretary of the 
Treasury shall prescribe joint regulations for the determination 
of tax liability under this chapter. 
‘‘§ 53503. Establishing a capital construction fund 
‘‘(a) IN GENERAL.—A citizen of the United States owning or 
leasing an eligible vessel may make an agreement with the Sec-
retary under this chapter to establish a capital construction fund 
for the vessel. 
‘‘(b) ALLOWABLE PURPOSE.—The purpose of the agreement shall 
be 
to 
provide 
replacement 
vessels, 
additional 
vessels, 
or 
reconstructed vessels, built in the United States and documented 
under the laws of the United States, for operation in the United 
States foreign, Great Lakes, or noncontiguous domestic trade or 
in the fisheries of the United States. 
‘‘§ 53504. Deposits and withdrawals 
‘‘(a) REQUIRED DEPOSITS.—An agreement to establish a capital 
construction fund shall provide for the deposit in the fund of the 
amounts agreed to be appropriate to provide for qualified with-
drawals under section 53509 of this title. 
‘‘(b) APPLICABLE REQUIREMENTS.—Deposits in and withdrawals 
from the fund are subject to the requirements included in the 
agreement or prescribed by the Secretary by regulation. However, 
the Secretary may not require a person to deposit in the fund 
for a taxable year more than 50 percent of that portion of the 
person’s taxable income for that year (as determined under section 
53505(a)(1) of this title) that is attributable to the operation of 
an agreement vessel. 
‘‘§ 53505. Ceiling on deposits 
‘‘(a) MAXIMUM DEPOSITS.—The amount deposited in a capital 
construction fund for a taxable year may not exceed the sum of—
‘‘(1) that portion of the taxable income of the owner or 
lessee for the taxable year (computed under chapter 1 of the 
Internal Revenue Code of 1986 (26 U.S.C. ch. 1) but without 
regard to the carryback of net operating loss or net capital 
loss or this chapter) that is attributable to the operation of 
agreement vessels in the foreign or domestic trade of the United 
States or in the fisheries of the United States; 
‘‘(2) the amount allowable as a deduction under section 
167 of such Code (26 U.S.C. 167) for the taxable year for 
agreement vessels; 
‘‘(3) if the transaction is not taken into account for purposes 
of paragraph (1), the net proceeds (as defined in joint regula-
tions) from the disposition of an agreement vessel or from
H. R. 1442—110
insurance or indemnity attributable to an agreement vessel; 
and 
‘‘(4) the receipts from the investment or reinvestment of 
amounts held in the fund. 
‘‘(b) REDUCTIONS FOR LESSEES.—For a lessee, the maximum 
amount that may be deposited for an agreement vessel under sub-
section (a)(2) for any period shall be reduced by any amount the 
owner is required or permitted, under the capital construction fund 
agreement, to deposit for that period for the vessel under subsection 
(a)(2). 
‘‘§ 53506. Investment and fiduciary requirements 
‘‘(a) IN GENERAL.—Amounts in a capital construction fund shall 
be kept in the depository specified in the agreement and shall 
be subject to trustee and other fiduciary requirements prescribed 
by the Secretary. Except as provided in subsection (b), amounts 
in the fund may be invested only in interest-bearing securities 
approved by the Secretary. 
‘‘(b) STOCK INVESTMENTS.—
‘‘(1) IN GENERAL.—With the approval of the Secretary, an 
agreed percentage (but not more than 60 percent) of the assets 
of the fund may be invested in the stock of domestic corpora-
tions that—
‘‘(A) is fully listed and registered on an exchange reg-
istered with the Securities and Exchange Commission as 
a national securities exchange; and 
‘‘(B) would be acquired by a prudent investor seeking 
a reasonable income and the preservation of capital. 
‘‘(2) PREFERRED STOCK.—The preferred stock of a corpora-
tion is deemed to satisfy the requirements of this subsection, 
even though it may not be registered and listed because it 
is nonvoting stock, if the common stock of the corporation 
satisfies the requirements and the preferred stock otherwise 
would satisfy the requirements. 
‘‘(c) MAINTAINING AGREED PERCENTAGE.—If at any time the 
fair market value of the stock in the fund is more than the agreed 
percentage of the assets in the fund, any subsequent investment 
of amounts deposited in the fund, and any subsequent withdrawal 
from the fund, shall be made in a way that tends to restore the 
fair market value of the stock to not more than the agreed percent-
age. 
‘‘§ 53507. Nontaxation of deposits 
‘‘(a) TAX TREATMENT.—Subject to subsection (b), under the 
Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.)—
‘‘(1) taxable income (determined without regard to this 
chapter and section 7518 of such Code (26 U.S.C. 7518)) for 
the taxable year shall be reduced by the amount deposited 
for the taxable year out of amounts referred to in section 
53505(a)(1) of this title; 
‘‘(2) a gain from a transaction referred to in section 
53505(a)(3) of this title shall not be taken into account if 
an amount equal to the net proceeds (as defined in joint regula-
tions) from the transaction is deposited in the fund; 
‘‘(3) the earnings (including gains and losses) from the 
investment and reinvestment of amounts held in the fund shall 
not be taken into account;
H. R. 1442—111
‘‘(4) the earnings and profits of a corporation (within the 
meaning of section 316 of such Code (26 U.S.C. 316)) shall 
be determined without regard to this chapter and section 7518 
of such Code (26 U.S.C. 7518); and 
‘‘(5) in applying the tax imposed by section 531 of such 
Code (26 U.S.C. 531), amounts held in the fund shall not 
be taken into account. 
‘‘(b) CONDITION.—This section applies to an amount only if 
the amount is deposited in the fund under the agreement within 
the time provided in joint regulations. 
‘‘§ 53508. Separate accounts within a fund 
‘‘(a) IN GENERAL.—A capital construction fund shall have three 
accounts: 
‘‘(1) The capital account. 
‘‘(2) The capital gain account. 
‘‘(3) The ordinary income account. 
‘‘(b) CAPITAL ACCOUNT.—The capital account shall consist of—
‘‘(1) amounts referred to in section 53505(a)(2) of this title; 
‘‘(2) amounts referred to in section 53505(a)(3) of this title, 
except that portion representing a gain not taken into account 
because of section 53507(a)(2) of this title; 
‘‘(3) the percentage applicable under section 243(a)(1) of 
the Internal Revenue Code of 1986 (26 U.S.C. 243(a)(1)) of 
any dividend received by the fund for which the person 
maintaining the fund would be allowed (were it not for section 
53507(a)(3) of this title) a deduction under section 243 of such 
Code (26 U.S.C. 243); and 
‘‘(4) interest income exempt from taxation under section 
103 of such Code (26 U.S.C. 103). 
‘‘(c) CAPITAL GAIN ACCOUNT.—The capital gain account shall 
consist of—
‘‘(1) amounts representing capital gains on assets held for 
more than 6 months and referred to in section 53505(a)(3) 
or (4) of this title; minus 
‘‘(2) amounts representing capital losses on assets held 
in the fund for more than 6 months. 
‘‘(d) ORDINARY INCOME ACCOUNT.—The ordinary income account 
shall consist of—
‘‘(1) amounts referred to in section 53505(a)(1) of this title; 
‘‘(2)(A) amounts representing capital gains on assets held 
for not more than 6 months and referred to in section 
53505(a)(3) or (4) of this title; minus 
‘‘(B) amounts representing capital losses on assets held 
in the fund for not more than 6 months; 
‘‘(3) interest (except tax-exempt interest referred to in sub-
section (b)(4)) and other ordinary income (except any dividend 
referred to in paragraph (5)) received on assets held in the 
fund; 
‘‘(4) ordinary income from a transaction described in section 
53505(a)(3) of this title; and 
‘‘(5) that portion of any dividend referred to in subsection 
(b)(3) not taken into account under subsection (b)(3). 
‘‘(e) WHEN LOSSES ALLOWED.—Except on termination of a fund, 
capital losses referred to in subsection (c) or (d)(2) shall be allowed 
only as an offset to gains referred to in subsection (c) or (d)(2), 
respectively.
H. R. 1442—112
‘‘§ 53509. Qualified withdrawals 
‘‘(a) IN GENERAL.—Subject to subsection (b), a withdrawal from 
a capital construction fund is a qualified withdrawal if it is made 
under the terms of the agreement and is for—
‘‘(1) the acquisition, construction, or reconstruction of a 
qualified vessel or a barge or container that is part of the 
complement of a qualified vessel; or 
‘‘(2) the payment of the principal on indebtedness incurred 
in the acquisition, construction, or reconstruction of a qualified 
vessel or a barge or container that is part of the complement 
of a qualified vessel. 
‘‘(b) BARGES AND CONTAINERS.—Except as provided in regula-
tions prescribed by the Secretary, subsection (a) applies to a barge 
or container only if it is constructed in the United States. 
‘‘(c) TREATMENT AS NONQUALIFIED WITHDRAWAL.—Under joint 
regulations, if the Secretary determines that a substantial obliga-
tion under an agreement is not being fulfilled, the Secretary, after 
notice and opportunity for a hearing to the person maintaining 
the fund, may treat any amount in the fund as an amount with-
drawn from the fund in a nonqualified withdrawal. 
‘‘§ 53510. Tax treatment of qualified withdrawals and basis 
of property 
‘‘(a) ORDER OF WITHDRAWALS.—A qualified withdrawal from 
a capital construction fund shall be treated as made—
‘‘(1) first from the capital account; 
‘‘(2) second from the capital gain account; and 
‘‘(3) third from the ordinary income account. 
‘‘(b) ORDINARY INCOME ACCOUNT WITHDRAWALS.—If a portion 
of a qualified withdrawal for a vessel, barge, or container is made 
from the ordinary income account, the basis of the vessel, barge, 
or container shall be reduced by an amount equal to that portion. 
‘‘(c) CAPITAL GAIN ACCOUNT WITHDRAWALS.—If a portion of 
a qualified withdrawal for a vessel, barge, or container is made 
from the capital gain account, the basis of the vessel, barge, or 
container shall be reduced by an amount equal to that portion. 
‘‘(d) WITHDRAWALS TO PAY PRINCIPAL.—If a portion of a quali-
fied withdrawal to pay the principal on indebtedness is made from 
the ordinary income account or the capital gain account, an amount 
equal to the total reduction that would be required by subsections 
(b) and (c) if the withdrawal were a qualified withdrawal for a 
purpose described in those subsections shall be applied, in the 
order provided in joint regulations, to reduce the basis of vessels, 
barges, and containers owned by the person maintaining the fund. 
The remaining amount of the withdrawal shall be treated as a 
nonqualified withdrawal. 
‘‘(e) GAIN ON PROPERTY WITH REDUCED BASIS.—If property, 
the basis of which was reduced under subsection (b), (c), or (d), 
is disposed of, any gain realized on the disposition, to the extent 
it does not exceed the total reduction in the basis of the property 
under those subsections, shall be treated as an amount referred 
to in section 53511(c)(1) of this title withdrawn on the date of 
disposition of the property. Subject to conditions prescribed in joint 
regulations, this subsection does not apply to a disposition if there 
is a redeposit, in an amount determined under joint regulations, 
that restores the fund as far as practicable to the position it was 
in before the withdrawal.
H. R. 1442—113
‘‘§ 53511. Tax treatment of nonqualified withdrawals 
‘‘(a) IN GENERAL.—Except as provided in section 53513 of this 
title, a withdrawal from a fund that is not a qualified withdrawal 
shall be treated as a nonqualified withdrawal. 
‘‘(b) ORDER OF WITHDRAWALS.—A nonqualified withdrawal shall 
be treated as made—
‘‘(1) first from the ordinary income account; 
‘‘(2) second from the capital gain account; and 
‘‘(3) third from the capital account. 
‘‘(c) TAX TREATMENT.—For purposes of the Internal Revenue 
Code of 1986 (26 U.S.C. 1 et seq.)—
‘‘(1) a nonqualified withdrawal from the ordinary income 
account shall be included in income as an item of ordinary 
income for the taxable year in which the withdrawal is made; 
‘‘(2) a nonqualified withdrawal from the capital gain 
account shall be included in income for the taxable year in 
which the withdrawal is made as an item of gain realized 
during that year from the disposition of an asset held for 
more than 6 months; and 
‘‘(3) for the period through the last date prescribed for 
payment of tax for the taxable year in which the withdrawal 
is made—
‘‘(A) no interest shall be payable under section 6601 
of such Code (26 U.S.C. 6601) and no addition to the 
tax shall be payable under section 6651 of such Code (26 
U.S.C. 6651); 
‘‘(B) interest on the amount of the additional tax attrib-
utable to an amount treated as a nonqualified withdrawal 
from the ordinary income account or the capital gain 
account shall be paid at the rate determined under sub-
section (d) from the last date prescribed for payment of 
the tax for the taxable year for which the amount was 
deposited in the fund; and 
‘‘(C) no interest shall be payable on amounts treated 
as withdrawn on a last-in-first-out basis under section 
53512 of this title. 
‘‘(d) INTEREST RATE.—The rate of interest under subsection 
(c)(3)(B) for a nonqualified withdrawal made in a taxable year 
beginning after 1971 shall be determined and published jointly 
by the Secretary and the Secretary of the Treasury. The rate 
shall be such that its relationship to 8 percent is comparable, 
as determined by the Secretaries under joint regulations, to the 
relationship between—
‘‘(1) the money rates and investment yields for the calendar 
year immediately before the beginning of the taxable year; 
and 
‘‘(2) the money rates and investment yields for the calendar 
year 1970. 
‘‘(e) NONQUALIFIED WITHDRAWALS.—
‘‘(1) IN GENERAL.—The following applicable percentage of 
any amount that remains in a capital construction fund at 
the close of the following specified taxable year following the 
taxable year for which the amount was deposited shall be 
treated as a nonqualified withdrawal:
H. R. 1442—114
‘‘If the amount remains in the fund at 
The 
applicable 
the close of the—
percentage 
is—
‘‘26th taxable year ............................................................................
20 percent
‘‘27th taxable year ............................................................................
40 percent
‘‘28th taxable year ............................................................................
60 percent
‘‘29th taxable year ............................................................................
80 percent
‘‘30th taxable year ............................................................................
100 percent.
‘‘(2) EARNINGS.—The earnings of a capital construction fund 
for any taxable year (except net gains) shall be treated under 
this subsection as an amount deposited for the taxable year. 
‘‘(3) CONTRACT FOR QUALIFIED WITHDRAWAL.—Under para-
graph (1), an amount shall not be treated as remaining in 
a capital construction fund at the close of a taxable year to 
the extent there is a binding contract at the close of the taxable 
year for a qualified withdrawal of the amount for an identified 
item for which the withdrawal may be made. 
‘‘(4) EXCESS EARNINGS.—If the Secretary determines that 
the balance in a capital construction fund exceeds the amount 
appropriate to meet the vessel construction program objectives 
of the person that established the fund, the amount of the 
excess shall be treated as a nonqualified withdrawal under 
paragraph (1) unless the person develops appropriate program 
objectives within 3 years to dissipate the excess. 
‘‘(5) AMOUNTS IN FUND ON JANUARY 1, 1987.—Under this 
subsection, amounts in a capital construction fund on January 
1, 1987, shall be treated as having been deposited in that 
fund on that date. 
‘‘(f) TAX DETERMINATIONS.—
‘‘(1) IN GENERAL.—For a taxable year for which there is 
a nonqualified withdrawal (including an amount treated as 
a nonqualified withdrawal under subsection (e)), the tax 
imposed by chapter 1 of the Internal Revenue Code of 1986 
(26 U.S.C. ch. 1) shall be determined by—
‘‘(A) excluding the withdrawal from gross income; and 
‘‘(B) increasing the tax imposed by chapter 1 of such 
Code by the product of the amount of the withdrawal 
and the highest tax rate specified in section 1 (or section 
11 for a corporation) of such Code (26 U.S.C. 1, 11). 
‘‘(2) MAXIMUM TAX RATE.—For that portion of a nonqualified 
withdrawal made from the capital gain account during a taxable 
year to which section 1(h) or 1201(a) of such Code (26 U.S.C. 
1(h), 1201(a)) applies, the tax rate used under paragraph (1)(B) 
may not exceed 15 percent (or 34 percent for a corporation). 
‘‘(3) TAX BENEFIT RULE.—If any portion of a nonqualified 
withdrawal is properly attributable to deposits (except earnings 
on deposits) made by the taxpayer in a taxable year that 
did not reduce the taxpayer’s liability for tax under chapter 
1 of such Code (26 U.S.C. ch. 1) for a taxable year before 
the taxable year in which the withdrawal occurs—
‘‘(A) that portion shall not be taken into account under 
paragraph (1); and 
‘‘(B) an amount equal to that portion shall be allowed 
as a deduction under section 172 of such Code (26 U.S.C. 
172) for the taxable year in which the withdrawal occurs. 
‘‘(4) COORDINATION WITH DEDUCTION FOR NET OPERATING 
LOSSES.—A nonqualified withdrawal excluded from gross 
income under paragraph (1) shall be excluded in determining
H. R. 1442—115
taxable income under section 172(b)(2) of such Code (26 U.S.C. 
172(b)(2)). 
‘‘§ 53512. FIFO and LIFO withdrawals 
‘‘(a) FIFO.—Except as provided in subsection (b), an amount 
withdrawn from an account under this chapter shall be treated 
as withdrawn on a first-in-first-out basis. 
‘‘(b) LIFO.—An amount withdrawn from an account under this 
chapter shall be treated as withdrawn on a last-in-first-out basis 
if it is—
‘‘(1) a nonqualified withdrawal for research, development, 
and design expenses incident to new and advanced vessel 
design, machinery, and equipment; or 
‘‘(2) an amount treated as a nonqualified withdrawal under 
section 53510(d) of this title. 
‘‘§ 53513. Corporate 
reorganizations 
and 
partnership 
changes 
‘‘Under joint regulations—
‘‘(1) a transfer of a capital construction fund from one 
person to another person in a transaction to which section 
381 of the Internal Revenue Code of 1986 (26 U.S.C. 381) 
applies may be treated as if the transaction is not a nonqualified 
withdrawal; and 
‘‘(2) a similar rule shall be applied to a continuation of 
a partnership (within the meaning of subchapter K of chapter 
1 of such Code (26 U.S.C. 701 et seq.)). 
‘‘§ 53514. Relationship of old fund to new fund 
‘‘(a) DEFINITION.—In this section, the term ‘old fund’ means 
a capital construction fund maintained before October 21, 1970. 
‘‘(b) ELECTION TO MAINTAIN OLD FUND.—A person maintaining 
an old fund may elect to continue the old fund, but may not—
‘‘(1) hold amounts in the old fund beyond the expiration 
date provided in the agreement under which the old fund 
is maintained (determined without regard to an extension or 
renewal made after April 14, 1970); or 
‘‘(2) maintain simultaneously the old fund and a new fund 
established under this chapter. 
‘‘(c) APPLICATION
OF NEW FUND AGREEMENT
TO OLD FUND 
AMOUNTS.—If a person makes an agreement under this chapter 
to establish a new fund, the person may agree to extend the agree-
ment to some or all of the amounts in an old fund. Each item 
in the old fund to be transferred shall be transferred in a nontaxable 
transaction to the appropriate account in the new fund. For pur-
poses of section 53511(c)(3) of this title, the date of the deposit 
of an item so transferred shall be July 1, 1971, or the date of 
the deposit in the old fund, whichever is later. 
‘‘§ 53515. Records and reports 
‘‘A person maintaining a fund under this chapter shall keep 
records and make reports as required by the Secretary or the 
Secretary of the Treasury.
H. R. 1442—116
‘‘§ 53516. Termination of agreement after change in regula-
tions 
‘‘If, after an agreement has been made under this chapter, 
a change is made either in the joint regulations or in the regulations 
prescribed by the Secretary under this chapter that could have 
a substantial effect on the rights or duties of a person maintaining 
a fund under this chapter, that person may terminate the agree-
ment. 
‘‘§ 53517. Reports 
‘‘(a) IN GENERAL.—Within 120 days after the close of each 
calendar year, the Secretary of Transportation and the Secretary 
of Commerce each shall provide the Secretary of the Treasury 
a written report on the capital construction funds under the par-
ticular Secretary’s jurisdiction for the calendar year. 
‘‘(b) CONTENTS.—The report shall state the name and taxpayer 
identification number of each person—
‘‘(1) establishing a capital construction fund during the 
calendar year; 
‘‘(2) maintaining a capital construction fund on the last 
day of the calendar year; 
‘‘(3) terminating a capital construction fund during the 
calendar year; 
‘‘(4) making a deposit to or withdrawal from a capital 
construction fund during the calendar year, and the amount 
of the deposit or withdrawal; or 
‘‘(5) having been determined during the calendar year to 
have failed to fulfill a substantial obligation under a capital 
construction fund agreement to which the person is a party.
‘‘CHAPTER 537—LOANS AND GUARANTEES
‘‘SUBCHAPTER I—GENERAL 
‘‘Sec. 
‘‘53701.
Definitions. 
‘‘53702.
General authority. 
‘‘53703.
Application procedures. 
‘‘53704.
Funding limits. 
‘‘53705.
Pledge of United States Government. 
‘‘53706.
Eligible purposes of obligations. 
‘‘53707.
Findings related to obligors and operators. 
‘‘53708.
Findings related to economic soundness. 
‘‘53709.
Amount of obligations. 
‘‘53710.
Contents of obligations. 
‘‘53711.
Security interest. 
‘‘53712.
Monitoring financial condition and operations of obligor. 
‘‘53713.
Administrative fees. 
‘‘53714.
Guarantee fees. 
‘‘53715.
Escrow fund. 
‘‘53716.
Deposit fund. 
‘‘53717.
Management of funds in the Treasury. 
‘‘53718.
Annual report to Congress. 
‘‘SUBCHAPTER II—DEFAULT PROVISIONS 
‘‘53721.
Rights of obligee. 
‘‘53722.
Actions by Secretary. 
‘‘53723.
Payments by Secretary and issuance of obligations. 
‘‘53724.
Rights to secured property. 
‘‘53725.
Actions against obligor. 
‘‘SUBCHAPTER III—PARTICULAR PROJECTS 
‘‘53731.
Commercial demonstration ocean thermal energy conversion facilities and 
plantships.
H. R. 1442—117
‘‘53732.
Eligible export vessels. 
‘‘53733.
Shipyard modernization and improvement. 
‘‘53734.
Replacement of vessels because of changes in operating standards. 
‘‘53735.
Fisheries financing and capacity reduction.
‘‘SUBCHAPTER I—GENERAL 
‘‘§ 53701. Definitions 
‘‘In this chapter: 
‘‘(1) ACTUAL COST.—The term ‘actual cost’ means the sum 
of—
‘‘(A) all amounts paid by or for the account of the 
obligor as of the date on which a determination is made 
under section 53715(d)(1) of this title; and 
‘‘(B) all amounts that the Secretary reasonably esti-
mates the obligor will become obligated to pay from time 
to time thereafter, for the construction, reconstruction, or 
reconditioning of the vessel, including guarantee fees that 
will become payable under section 53714 of this title in 
connection with all obligations issued for construction, 
reconstruction, or reconditioning of the vessel or equipment 
to be delivered, and all obligations issued for the delivered 
vessel or equipment. 
‘‘(2) 
CONSTRUCTION, 
RECONSTRUCTION, 
AND
RECONDI-
TIONING.—The 
terms 
‘construction’, 
‘reconstruction’, 
and 
‘reconditioning’ include designing, inspecting, outfitting, and 
equipping. 
‘‘(3) DEPRECIATED
ACTUAL
COST.—The term ‘depreciated 
actual cost’ of a vessel means—
‘‘(A) 
if 
the 
vessel 
was 
not 
reconstructed 
or 
reconditioned, the actual cost of the vessel depreciated 
on a straight line basis over the useful life of the vessel 
as determined by the Secretary, not to exceed 25 years 
from the date of delivery by the builder; or 
‘‘(B) if the vessel was reconstructed or reconditioned, 
the sum of—
‘‘(i) the actual cost of the vessel depreciated on 
a straight line basis from the date of delivery by the 
builder to the date of the reconstruction or recondi-
tioning, using the original useful life of the vessel, 
and from the date of the reconstruction or recondi-
tioning, using a useful life of the vessel determined 
by the Secretary; and 
‘‘(ii) any amount paid or obligated to be paid for 
the reconstruction or reconditioning, depreciated on 
a straight line basis using a useful life of the vessel 
determined by the Secretary. 
‘‘(4) ELIGIBLE EXPORT VESSEL.—The term ‘eligible export 
vessel’ means a vessel that—
‘‘(A) is constructed, reconstructed, or reconditioned in 
the United States for use in world-wide trade; and 
‘‘(B) will, on delivery or redelivery, become or remain 
documented under the laws of a country other than the 
United States. 
‘‘(5) FISHERY FACILITY.—
‘‘(A) IN GENERAL.—Subject to subparagraph (B), the 
term ‘fishery facility’ means—
‘‘(i) for operations on land—
H. R. 1442—118
‘‘(I) a structure or appurtenance thereto 
designed for the unloading and receiving from ves-
sels, the processing, the holding pending proc-
essing, the distribution after processing, or the 
holding pending distribution, of fish from a fishery; 
‘‘(II) the land necessary for the structure or 
appurtenance; and 
‘‘(III) equipment that is for use with the struc-
ture or appurtenance and that is necessary for 
performing a function referred to in subclause (I); 
‘‘(ii) for operations not on land, a vessel built in 
the United States and used for, equipped to be used 
for, or of a type normally used for, the processing 
of fish; or 
‘‘(iii) for aquaculture, including operations on land 
or elsewhere—
‘‘(I) a structure or appurtenance thereto 
designed for aquaculture; 
‘‘(II) the land necessary for the structure or 
appurtenance; 
‘‘(III) equipment that is for use with the struc-
ture or appurtenance and that is necessary for 
performing a function referred to in subclause (I); 
and 
‘‘(IV) a vessel built in the United States and 
used for, equipped to be used for, or of a type 
normally used for, aquaculture. 
‘‘(B) REQUIRED OWNERSHIP.—Under subparagraph (A), 
the structure, appurtenance, land, equipment, or vessel 
must be owned by—
‘‘(i) an individual who is a citizen of the United 
States; or 
‘‘(ii) an entity that is a citizen of the United States 
under section 50501 of this title and that is at least 
75 percent owned (as determined under that section) 
by citizens of the United States. 
‘‘(6) FISHING VESSEL.—The term ‘fishing vessel’ has the 
meaning given that term in section 3 of the Magnuson-Stevens 
Fishery Conservation and Management Act (16 U.S.C. 1802), 
and any reference in this chapter to a vessel designed prin-
cipally for commercial use in the fishing trade or industry 
is deemed to be a reference to a fishing vessel. 
‘‘(7) MORTGAGE.—The term ‘mortgage’ includes—
‘‘(A) a preferred mortgage as defined in section 31301 
of this title; and 
‘‘(B) a mortgage on a vessel that will become a pre-
ferred mortgage when filed or recorded under chapter 313 
of this title. 
‘‘(8) 
OBLIGATION.—The 
term 
‘obligation’ 
means 
an 
instrument of indebtedness issued for a purpose described in 
section 53706 of this title, except—
‘‘(A) an obligation issued by the Secretary under section 
53723 of this title; and 
‘‘(B) an obligation eligible for investment of funds under 
section 53715(f) or 53717 of this title. 
‘‘(9) OBLIGEE.—The term ‘obligee’ means the holder of an 
obligation.
H. R. 1442—119
‘‘(10) OBLIGOR.—The term ‘obligor’ means a party primarily 
liable for payment of the principal of or interest on an obliga-
tion. 
‘‘(11) OCEAN
THERMAL
ENERGY
CONVERSION
FACILITY
OR 
PLANTSHIP.—The term ‘ocean thermal energy conversion facility 
or plantship’ means an at-sea facility or vessel, whether mobile, 
floating unmoored, moored, or standing on the seabed, that 
uses temperature differences in ocean water to produce elec-
tricity or another form of energy capable of being used directly 
to perform work, and includes—
‘‘(A) equipment installed on the facility or vessel to 
use the electricity or other form of energy to produce, 
process, refine, or manufacture a product; 
‘‘(B) a cable or pipeline used to deliver the electricity, 
freshwater, or product to shore; and 
‘‘(C) other associated equipment and appurtenances 
of the facility or vessel to the extent they are located 
seaward of the high water mark. 
‘‘(12) SECRETARY.—The term ‘Secretary’ means—
‘‘(A) the Secretary of Commerce with respect to fishing 
vessels and fishery facilities; and 
‘‘(B) the Secretary of Transportation with respect to 
other vessels and general shipyard facilities (as defined 
in section 53733(a) of this title). 
‘‘(13) VESSEL.—The term ‘vessel’ means any type of vessel, 
whether in existence or under construction, including—
‘‘(A) a cargo vessel; 
‘‘(B) a passenger vessel; 
‘‘(C) a combination cargo and passenger vessel; 
‘‘(D) a tanker; 
‘‘(E) a tug or towboat; 
‘‘(F) a barge; 
‘‘(G) a dredge; 
‘‘(H) a floating drydock with a capacity of at least 
35,000 lifting tons and a beam of at least 125 feet between 
the wing walls; 
‘‘(I) an oceanographic research vessel; 
‘‘(J) an instruction vessel; 
‘‘(K) a pollution treatment, abatement, or control 
vessel; 
‘‘(L) a fishing vessel whose ownership meets the citizen-
ship requirements under section 50501 of this title for 
documenting vessels to operate in the coastwise trade; and 
‘‘(M) an ocean thermal energy conversion facility or 
plantship that is or will be documented under the laws 
of the United States. 
‘‘§ 53702. General authority 
‘‘(a) IN GENERAL.—The Secretary, on terms the Secretary may 
prescribe, may guarantee or make a commitment to guarantee 
the payment of the principal of and interest on an obligation eligible 
to be guaranteed under this chapter. A guarantee or commitment 
to guarantee shall cover 100 percent of the principal and interest. 
‘‘(b) DIRECT LOANS FOR FISHERIES.—
‘‘(1) IN GENERAL.—Notwithstanding any other provision of 
this chapter, any obligation involving a fishing vessel, fishery 
facility, aquaculture facility, individual fishing quota, or fishing
H. R. 1442—120
capacity reduction program issued under this chapter after 
October 11, 1996, shall be a direct loan obligation for which 
the Secretary shall be the obligee, rather than an obligation 
issued to an obligee other than the Secretary and guaranteed 
by the Secretary. A direct loan obligation under this subsection 
shall be treated in the same manner and to the same extent 
as an obligation guaranteed under this chapter except with 
respect to provisions of this chapter that by their nature can 
only be applied to obligations guaranteed under this chapter. 
‘‘(2) INTEREST RATE.—Notwithstanding any other provision 
of this chapter, the annual rate of interest an obligor shall 
pay on a direct loan obligation under this subsection is 2 
percent plus the additional percent the Secretary must pay 
as interest to borrow from the Treasury the funds to make 
the loan. 
‘‘§ 53703. Application procedures 
‘‘(a) TIME FOR DECISION.—
‘‘(1) IN
GENERAL.—The Secretary shall approve or deny 
an application for a loan guarantee under this chapter within 
270 days after the date on which the signed application is 
received by the Secretary. 
‘‘(2) EXTENSION.—On request by an applicant, the Secretary 
may extend the 270-day period in paragraph (1) to a date 
not later than 2 years after the date on which the signed 
application was received by the Secretary. 
‘‘(b) CERTIFICATION OF REVIEW.—The Secretary may not guar-
antee or make a commitment to guarantee an obligation under 
this chapter unless the Secretary certifies that a full and fair 
consideration of all the regulatory requirements, including economic 
soundness and financial requirements applicable to the obligor and 
related parties, and a thorough assessment of the technical, eco-
nomic, and financial aspects of the loan application, has been made. 
‘‘§ 53704. Funding limits 
‘‘(a) GENERAL LIMITATIONS.—The total unpaid principal amount 
of obligations guaranteed under this chapter and outstanding at 
one time may not exceed $12,000,000,000. Of that amount—
‘‘(1) $850,000,000 shall be limited to obligations related 
to fishing vessels and fishery facilities; and 
‘‘(2) $3,000,000,000 shall be limited to obligations related 
to eligible export vessels. 
‘‘(b) ADDITIONAL LIMITATIONS.—Additional limitations may not 
be imposed on new commitments to guarantee loans for any fiscal 
year, except in amounts established in advance by annual authoriza-
tion laws. A vessel eligible for a guarantee under this chapter 
may not be denied eligibility because of its type. 
‘‘(c) LIMITS BASED ON RISK FACTORS.—
‘‘(1) DEFINITION.—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). 
‘‘(2) SYSTEM OF RISK CATEGORIES.—The Secretary shall—
‘‘(A) establish, and update annually, a system of risk 
categories for obligations guaranteed under this chapter 
that categorizes the relative risk of guarantees based on 
the risk factors set forth in paragraph (4);
H. R. 1442—121
‘‘(B) determine annually for each risk category a sub-
sidy rate equivalent to the cost of obligations in the cat-
egory, expressed as a percentage of the amount guaranteed 
for obligations in the category; and 
‘‘(C) ensure that each risk category is comprised of 
loans that are relatively homogeneous in cost and share 
characteristics predictive of defaults and other costs, given 
the facts known at the time of obligation or commitment, 
using a risk category system that is based on historical 
analysis of program data and statistical evidence con-
cerning the likely costs of defaults or other costs that 
are expected to be associated with the loans in the category. 
‘‘(3) USE OF SYSTEM.—
‘‘(A) 
PLACING
OBLIGATION
IN
CATEGORY.—Before 
making a guarantee under this chapter for an obligation, 
and annually for projects subject to a guarantee, the Sec-
retary shall apply the risk factors specified in paragraph 
(4) to place the obligation in a risk category established 
under paragraph (2). 
‘‘(B) REDUCTION OF AVAILABLE AMOUNT.—The Secretary 
shall consider the total amount available to the Secretary 
for making guarantees under this chapter to be reduced 
by the amount determined by multiplying—
‘‘(i) the amount guaranteed under this chapter for 
an obligation; by 
‘‘(ii) the subsidy rate for the category in which 
the obligation is placed under subparagraph (A). 
‘‘(C) ESTIMATED
COST.—The estimated cost to the 
United States Government of a guarantee under this 
chapter for an obligation is deemed to be the amount 
determined under subparagraph (B) for the obligation. 
‘‘(D) RESTRICTION ON FURTHER GUARANTEES.—The Sec-
retary may not guarantee obligations under this chapter 
after the total amount available to the Secretary under 
appropriations laws for the cost of loan guarantees is 
considered to be reduced to zero under subparagraph (B). 
‘‘(4) RISK FACTORS.—The risk factors referred to in this 
subsection are—
‘‘(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 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, other guarantees related to the 
project; 
‘‘(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;
H. R. 1442—122
‘‘(I) the management and operating experience of an 
obligor or applicant for a guarantee; 
‘‘(J) whether a guarantee under this chapter is or will 
be in effect during the construction period of the project; 
and 
‘‘(K) the concentration risk presented by an unduly 
large percentage of loans outstanding by any one borrower 
or group of affiliated borrowers. 
‘‘§ 53705. Pledge of United States Government 
‘‘(a) FULL FAITH
AND CREDIT.—The full faith and credit of 
the United States Government is pledged to the payment of a 
guarantee made under this chapter, for both principal and interest, 
including interest (as may be provided for in the guarantee) accruing 
between the date of default under a guaranteed obligation and 
the date of payment in full of the guarantee. 
‘‘(b) INCONTESTABILITY.—A guarantee or commitment to guar-
antee made under this chapter is conclusive evidence of the eligi-
bility of the obligation for the guarantee. The validity of a guarantee 
or commitment to guarantee made under this chapter is incontest-
able. 
‘‘§ 53706. Eligible purposes of obligations 
‘‘(a) IN GENERAL.—To be eligible for a guarantee under this 
chapter, an obligation must aid in any of the following: 
‘‘(1)(A) Financing (including reimbursement of an obligor 
for expenditures previously made for) the construction, 
reconstruction, or reconditioning of a vessel (including an 
eligible export vessel) designed principally for research, or for 
commercial use—
‘‘(i) in the coastwise or intercoastal trade; 
‘‘(ii) on the Great Lakes, or on bays, sounds, rivers, 
harbors, or inland lakes of the United States; 
‘‘(iii) in foreign trade as defined in section 109(b) of 
this title; 
‘‘(iv) as an ocean thermal energy conversion facility 
or plantship; 
‘‘(v) as a floating drydock in the construction, 
reconstruction, reconditioning, or repair of vessels; or 
‘‘(vi) as an eligible export vessel in worldwide trade. 
‘‘(B) A guarantee under subparagraph (A) may not be made 
more than one year after delivery of the vessel (or redelivery 
if the vessel was reconstructed or reconditioned) unless the 
proceeds of the obligation are used to finance the construction, 
reconstruction, or reconditioning of a vessel or of facilities or 
equipment related to marine operations. 
‘‘(2) Financing (including reimbursement of an obligor for 
expenditures previously made for) the construction, reconstruc-
tion, reconditioning, or purchase of a vessel owned by citizens 
of the United States and designed principally for research, 
or for commercial use in the fishing industry. 
‘‘(3) Financing the purchase, reconstruction, or recondi-
tioning of a vessel or fishery facility—
‘‘(A) for which an obligation was guaranteed under 
this chapter; and 
‘‘(B) that, under subchapter II of this chapter—
H. R. 1442—123
‘‘(i) is a vessel or fishery facility for which an 
obligation was accelerated and paid; 
‘‘(ii) was acquired by the Federal Ship Financing 
Fund or successor account under section 53717 of this 
title; or 
‘‘(iii) was sold at foreclosure begun or intervened 
in by the Secretary. 
‘‘(4) Financing any part of the repayment to the United 
States Government of any amount of a construction-differential 
subsidy paid for a vessel. 
‘‘(5) Refinancing an existing obligation (regardless of 
whether guaranteed under this chapter) issued for a purpose 
described in paragraphs (1)–(4), including a short-term obliga-
tion incurred to obtain temporary funds with the intention 
of refinancing. 
‘‘(6) Financing or refinancing (including reimbursement of 
an obligor for expenditures previously made for) the construc-
tion, reconstruction, reconditioning, or purchase of a fishery 
facility. 
‘‘(7) Financing or refinancing (including reimbursement of 
an obligor for expenditures previously made for) the purchase 
of an individual fishing quota in accordance with section 
303(d)(4) of the Magnuson-Stevens Fishery Conservation and 
Management Act (16 U.S.C. 1853(d)(4)). 
‘‘(b) NON-VESSELS TREATED AS VESSELS.—An obligation guaran-
teed under subsection (a)(6) or (7) shall be treated, for purposes 
of this chapter, in the same manner and to the same extent as 
an obligation that aids in financing the construction, reconstruction, 
reconditioning, or purchase of a vessel, except with respect to provi-
sions that by their nature can only be applied to vessels. 
‘‘(c) PRIORITIES
FOR CERTAIN VESSELS.—In guaranteeing or 
making a commitment to guarantee an obligation under this 
chapter, the Secretary shall give priority to—
‘‘(1) a vessel that is otherwise eligible for a guarantee 
and is constructed with assistance under subtitle D of the 
Maritime Security Act of 2003 (46 U.S.C. 53101 note); and 
‘‘(2) after applying paragraph (1), a vessel that is otherwise 
eligible for a guarantee and that the Secretary of Defense 
determines—
‘‘(A) is suitable for service as a naval auxiliary in 
time of war or national emergency; and 
‘‘(B) meets a shortfall in sealift capacity or capability. 
‘‘§ 53707. Findings related to obligors and operators 
‘‘(a) RESPONSIBLE OBLIGOR.—The Secretary may not guarantee 
or make a commitment to guarantee an obligation under this 
chapter unless the Secretary finds that the obligor is responsible 
and has the ability, experience, financial resources, and other quali-
fications necessary for the adequate operation and maintenance 
of each vessel that will serve as security for the guarantee. 
‘‘(b) OPERATORS OF LINER VESSELS.—The Secretary of Transpor-
tation may not guarantee or make a commitment to guarantee 
a loan for the construction, reconstruction, or reconditioning of 
a liner vessel under this chapter unless the Chairman of the Federal 
Maritime Commission certifies that the operator of the vessel has 
not been found by the Commission to have committed, within the 
previous 5 years—
H. R. 1442—124
‘‘(1) a violation of part A of subtitle IV of this title that 
involves unjust or unfair discriminatory treatment or undue 
or unreasonable prejudice or disadvantage with respect to a 
United States shipper, ocean transportation intermediary, 
ocean common carrier, or port; or 
‘‘(2) a violation of part B of subtitle IV of this title. 
‘‘(c) OPERATORS OF FISHING VESSELS.—The Secretary of Com-
merce may not guarantee or make a commitment to guarantee 
a loan for the construction, reconstruction, or reconditioning of 
a fishing vessel under this chapter if the operator of the vessel 
has been—
‘‘(1) held liable, or the vessel has been held liable in rem, 
for a civil penalty under section 308 of the Magnuson-Stevens 
Fishery Conservation and Management Act (16 U.S.C. 1858) 
and the operator has not paid the penalty; 
‘‘(2) found guilty of an offense under section 309 of the 
Magnuson-Stevens Fishery Conservation and Management Act 
(16 U.S.C. 1859) and not paid the assessed fine or served 
the assessed sentence; 
‘‘(3) held liable for a civil or criminal penalty under section 
105 of the Marine Mammal Protection Act of 1972 (16 U.S.C. 
1375) and not paid the assessed fine or served the assessed 
sentence; or 
‘‘(4) held liable for a civil penalty by the Coast Guard 
under this title or title 33 and not paid the assessed fine. 
‘‘(d) WAIVERS CONCERNING FINANCIAL CONDITION.—The Sec-
retary shall prescribe regulations concerning circumstances under 
which waivers of, or exceptions to, otherwise applicable regulatory 
requirements concerning financial condition can be made. The regu-
lations shall require that—
‘‘(1) the economic soundness requirements in section 
53708(a) of this title are met after the waiver of the financial 
condition requirement; and 
‘‘(2) the waiver shall provide for the imposition of other 
requirements on the obligor designed to compensate for the 
increased risk associated with the obligor’s failure to meet 
regulatory requirements applicable to financial condition. 
‘‘§ 53708. Findings related to economic soundness 
‘‘(a) BY SECRETARY
OF TRANSPORTATION.—The Secretary of 
Transportation may not guarantee or make a commitment to guar-
antee an obligation under this chapter unless the Secretary finds 
that the property or project for which the obligation will be executed 
will be economically sound. In making that finding, the Secretary 
shall consider—
‘‘(1) the need in the particular segment of the maritime 
industry for new or additional capacity, including any impact 
on existing equipment for which a guarantee under this chapter 
is in effect; 
‘‘(2) the market potential for employment of the vessel 
over the life of the guarantee; 
‘‘(3) projected revenues and expenses associated with 
employment of the vessel; 
‘‘(4) any charter, contract of affreightment, transportation 
agreement, or similar agreement or undertaking relevant to 
the employment of the vessel; 
‘‘(5) other relevant criteria; and
H. R. 1442—125
‘‘(6) for inland waterways, the need for technical improve-
ments, including increased fuel efficiency or improved safety. 
‘‘(b) BY SECRETARY OF COMMERCE.—The Secretary of Commerce 
may not guarantee or make a commitment to guarantee an obliga-
tion under this chapter unless the Secretary finds, at or prior 
to the time the commitment is made or the guarantee becomes 
effective, that—
‘‘(1) the property or project for which the obligation will 
be executed will be economically sound; and 
‘‘(2) for a fishing vessel, the purpose of the financing or 
refinancing is consistent with—
‘‘(A) the wise use of the fisheries resources and the 
development, advancement, management, conservation, 
and protection of the fisheries resources; or 
‘‘(B) the need for technical improvements, including 
increased fuel efficiency or improved safety. 
‘‘(c) USED FISHING VESSELS
AND FACILITIES.—The Secretary 
of Commerce may not guarantee or make a commitment to guar-
antee an obligation under this chapter for the purchase of a used 
fishing vessel or used fishery facility unless the vessel or facility 
will be—
‘‘(1) reconstructed or reconditioned in the United States 
and will contribute to the development of the United States 
fishing industry; or 
‘‘(2) used—
‘‘(A) in the harvesting of fish from an underused 
fishery; or 
‘‘(B) for a purpose described in the definition of ‘fishery 
facility’ in section 53701 of this title with respect to an 
underused fishery. 
‘‘(d) INDEPENDENT ANALYSIS.—The Secretary may make a deter-
mination that aspects of an application under this chapter require 
independent analysis to be conducted by third party experts due 
to risk factors associated with markets, technology, financial struc-
tures, or other risk factors identified by the Secretary. Any inde-
pendent analysis conducted under this subsection shall be per-
formed by a party chosen by the Secretary. 
‘‘(e) ADDITIONAL EQUITY BECAUSE OF INCREASED RISKS.—Not-
withstanding any other provision of this chapter, the Secretary 
may make a determination that an application under this title 
requires additional equity because of increased risk factors associ-
ated with markets, technology, financial structures, or other risk 
factors identified by the Secretary. 
‘‘§ 53709. Amount of obligations 
‘‘(a) IN GENERAL.—The principal of an obligation may not be 
guaranteed in an amount greater than the amount determined 
by multiplying the percentage applicable under subsection (b) by—
‘‘(1) the amount paid by or for the account of the obligor 
(as determined by the Secretary, which determination shall 
be conclusive) for the construction, reconstruction, or recondi-
tioning of the vessel used as security for the guarantee; or 
‘‘(2) if the obligor creates an escrow fund under section 
53715 of this title, the actual cost of the vessel. 
‘‘(b) LIMITATIONS ON AMOUNT BORROWED.—
‘‘(1) IN GENERAL.—Except as otherwise provided, the prin-
cipal amount of an obligation guaranteed under this chapter
H. R. 1442—126
may not exceed 75 percent of the actual cost or depreciated 
actual cost, as determined by the Secretary, of the vessel used 
as security for the guarantee. 
‘‘(2) CERTAIN APPROVED VESSELS.—The principal amount 
may not exceed 87.5 percent of the actual cost or depreciated 
actual cost if—
‘‘(A) the size and speed of the vessel are approved 
by the Secretary; 
‘‘(B) the vessel is or would have been eligible for mort-
gage aid for construction under section 509 of the Merchant 
Marine Act, 1936, or would have been eligible except that 
the vessel was built with a construction-differential subsidy 
and the subsidy has been repaid; and 
‘‘(C) the vessel is of a type described in that section 
for which the minimum down payment required by that 
section is 12.5 percent of the cost of the vessel. 
‘‘(3) BARGES.—For a barge constructed without a construc-
tion-differential subsidy or for which the subsidy has been 
repaid, the principal amount may not exceed 87.5 percent of 
the actual cost or depreciated actual cost. 
‘‘(4) FISHING
VESSELS
AND
FISHERY
FACILITIES.—For a 
fishing vessel or fishery facility, the principal amount may 
not exceed 80 percent of the actual cost or depreciated actual 
cost. However, debt for the vessel or facility may not be placed 
through the Federal Financing Bank. 
‘‘(5) OTEC.—For an ocean thermal energy conversion 
facility or plantship constructed without a construction-differen-
tial subsidy, the principal amount may not exceed 87.5 percent 
of the actual cost or depreciated actual cost of the facility 
or plantship. 
‘‘(6) ELIGIBLE
EXPORT
VESSELS.—For an eligible export 
vessel, the principal amount may not exceed 87.5 percent of 
the actual cost or depreciated actual cost. 
‘‘(c) SECURITY INVOLVING MULTIPLE VESSELS.—The principal 
amount of an obligation having more than one vessel as security 
for the guarantee may not exceed the sum of the principal amounts 
allowable for all the vessels. 
‘‘(d) PROHIBITION ON UNIFORM PERCENTAGE LIMITATIONS.—The 
Secretary may not establish a percentage under any provision of 
subsection (b) that is to be applied uniformly to all guarantees 
or commitments to guarantee made under that provision. 
‘‘(e) PROHIBITION ON MINIMUM PRINCIPAL AMOUNT.—The Sec-
retary may not establish, as a condition of eligibility for a guarantee 
under this chapter, a minimum principal amount for an obligation 
covering the reconstruction or reconditioning of a fishing vessel 
or fishery facility. For purposes of this chapter, the reconstruction 
or reconditioning of a fishing vessel or fishery facility does not 
include the routine minor repair or maintenance of the vessel 
or facility. 
‘‘§ 53710. Contents of obligations 
‘‘(a) IN GENERAL.—An obligation guaranteed under this chapter 
must—
‘‘(1) provide for payments by the obligor satisfactory to 
the Secretary; 
‘‘(2) provide for interest (exclusive of guarantee fees and 
other fees) at a rate not more than the annual rate on the
H. R. 1442—127
unpaid principal that the Secretary determines is reasonable, 
considering the range of interest rates prevailing in the private 
market for similar loans and the risks assumed by the Sec-
retary; 
‘‘(3) have a maturity date satisfactory to the Secretary, 
but—
‘‘(A) not more than 25 years after the date of delivery 
of the vessel used as security for the guarantee; or 
‘‘(B) 
if 
the 
vessel 
has 
been 
reconstructed 
or 
reconditioned, not more than the later of—
‘‘(i) 25 years after the date of delivery of the vessel; 
or 
‘‘(ii) the remaining years of useful life of the vessel 
as determined by the Secretary; and 
‘‘(4) provide, or a related agreement must provide, that 
if the vessel used as security for the guarantee is a delivered 
vessel, the vessel shall be—
‘‘(A) in class A–1, American Bureau of Shipping, or 
meet other standards acceptable to the Secretary, with 
all required certificates, including marine inspection certifi-
cates of the Coast Guard or, in the case of an eligible 
export vessel, of the appropriate foreign authorities under 
a treaty, convention, or other international agreement to 
which the United States is a party, and with all out-
standing requirements and recommendations necessary for 
class retention accomplished, unless the Secretary permits 
a deferment of repairs necessary to meet these require-
ments; and 
‘‘(B) well equipped, in good repair, and in every respect 
seaworthy and fit for service. 
‘‘(b) PROVISIONS FOR CERTAIN PASSENGER VESSELS.—
‘‘(1) IN GENERAL.—With the Secretary’s approval, if the 
vessel used as security for the guarantee is a passenger vessel 
having the tonnage, speed, passenger accommodations, and 
other characteristics described in section 503 of the Merchant 
Marine Act, 1936, an obligation guaranteed under this chapter 
or a related agreement may provide that—
‘‘(A) the only recourse by the United States Govern-
ment against the obligor for payments under the guarantee 
will be repossession of the vessel and assignment of insur-
ance claims; and 
‘‘(B) the obligor’s liability for payments under the guar-
antee will be satisfied and discharged by the surrender 
of the vessel and all interest in the vessel to the Govern-
ment in the condition described in paragraph (2). 
‘‘(2) SURRENDER OF VESSEL.—
‘‘(A) IN GENERAL.—On surrender, the vessel must be—
‘‘(i) free and clear of all liens and encumbrances 
except the security interest conveyed to the Secretary 
under this chapter; 
‘‘(ii) in class; and 
‘‘(iii) in as good order and condition (ordinary wear 
and tear excepted) as when acquired by the obligor. 
‘‘(B) COVERING DEFICIENCIES BY INSURANCE.—To the 
extent covered by insurance, a deficiency related to a 
requirement in subparagraph (A) may be satisfied by
H. R. 1442—128
assignment of the obligor’s insurance claims to the Govern-
ment. 
‘‘(c) OTHER PROVISIONS TO PROTECT SECURITY INTERESTS.—
An obligation guaranteed under this chapter and any related agree-
ment must contain other provisions for the protection of the security 
interests of the Government (including acceleration, assumption, 
and subrogation provisions and the issuance of notes by the obligor 
to the Secretary), liens and releases of liens, payment of taxes, 
and other matters that the Secretary may prescribe. 
‘‘§ 53711. Security interest 
‘‘(a) IN GENERAL.—The Secretary may guarantee an obligation 
under this chapter only if the obligor conveys or agrees to convey 
to the Secretary a security interest the Secretary considers nec-
essary to protect the interest of the United States Government. 
‘‘(b) MULTIPLE VESSELS AND TYPES OF SECURITY.—The security 
interest may relate to more than one vessel and may consist of 
more than one type of security. If the security interest relates 
to more than one vessel, the obligation may have the latest maturity 
date allowable under section 53710(a)(3) of this title for any of 
the vessels used as security for the guarantee. However, the Sec-
retary may require such payments of principal prior to maturity, 
with respect to all related obligations, as the Secretary considers 
necessary to maintain adequate security for the guarantee. 
‘‘§ 53712. Monitoring financial condition and operations of 
obligor 
‘‘(a) IN GENERAL.—The Secretary shall monitor the financial 
condition and operations of the obligor on a regular basis during 
the term of the guarantee. The Secretary shall document the results 
of the monitoring on an annual or quarterly basis depending on 
the condition of the obligor. If the Secretary determines that the 
financial condition of the obligor warrants additional protections 
to the Secretary, the Secretary shall take appropriate action under 
subsection (b). If the Secretary determines that the financial condi-
tion of the obligor jeopardizes its continued ability to perform its 
responsibilities in connection with the guarantee of an obligation 
by the Secretary, the Secretary shall make an immediate determina-
tion whether default should take place and whether further meas-
ures described in subsection (b) should be taken to protect the 
interests of the Secretary while ensuring that program objectives 
are met. 
‘‘(b) CONTRACT PROVISIONS TO PROTECT SECRETARY.—The Sec-
retary shall include provisions in a loan agreement with an obligor 
that provides additional authority to the Secretary to take action 
to limit potential losses in connection with a defaulted loan or 
a loan that is in jeopardy due to the deteriorating financial condition 
of the obligor. These provisions include requirements for additional 
collateral or greater equity contributions that are effective upon 
the occurrence of verifiable conditions relating to the obligor’s finan-
cial condition or the status of the vessel or shipyard project. 
‘‘§ 53713. Administrative fees 
‘‘(a) IN GENERAL.—The Secretary shall charge and collect from 
the obligor fees the Secretary considers reasonable for—
‘‘(1) investigating an application for a guarantee; 
‘‘(2) appraising property offered as security for a guarantee;
H. R. 1442—129
‘‘(3) issuing a commitment; 
‘‘(4) providing services related to an escrow fund under 
section 53715 of this title; and 
‘‘(5) inspecting property during construction, reconstruction, 
or reconditioning. 
‘‘(b) TOTAL FEE LIMITATION.—The total fees under subsection 
(a) may not exceed 0.5 percent of the original principal amount 
of the obligations to be guaranteed. 
‘‘(c) FEES
FOR INDEPENDENT ANALYSIS.—The Secretary may 
charge and collect fees to cover the costs of independent analysis 
under section 53708(d) of this title. Notwithstanding section 3302 
of title 31, any fee collected under this subsection shall—
‘‘(1) be credited as an offsetting collection to the account 
that finances the administration of the loan guarantee program; 
‘‘(2) be available for expenditure only to pay the costs 
of activities and services for which the fee is imposed; and 
‘‘(3) remain available until expended. 
‘‘§ 53714. Guarantee fees 
‘‘(a) REGULATIONS.—Subject to this section, the Secretary shall 
prescribe regulations to assess a fee for guaranteeing an obligation 
under this chapter. 
‘‘(b) COMPUTATION OF FEE.—
‘‘(1) IN GENERAL.—The amount of the fee for a guarantee 
under this chapter shall be equal to the sum of the amounts 
determined under paragraph (2) for the years in which the 
guarantee is in effect. 
‘‘(2) PRESENT VALUE FOR EACH YEAR.—The amount referred 
to in paragraph (1) for a year in which the guarantee is in 
effect is the present value of the amount calculated under 
paragraph (3). To determine the present value, the Secretary 
shall apply a discount rate determined by the Secretary of 
the Treasury, considering current market yields on outstanding 
obligations of the United States Government having periods 
to maturity comparable to the period to maturity for the 
guaranteed obligation. 
‘‘(3) CALCULATION OF AMOUNT.—The amount referred to 
in paragraph (2) shall be calculated by multiplying—
‘‘(A) the estimated average unpaid principal amount 
of the obligation that will be outstanding during the year 
(excluding the average amount, other than interest, on 
deposit during the year in an escrow fund under section 
53715 of this title); by 
‘‘(B) the fee rate set under paragraph (4). 
‘‘(4) SETTING FEE RATES.—To set the fee rate referred to 
in paragraph (3)(B), the Secretary shall establish a formula 
that—
‘‘(A) takes into account the security provided for the 
guaranteed obligation; and 
‘‘(B) is a sliding scale based on the creditworthiness 
of the obligor, using—
‘‘(i) the lowest allowable rate under paragraph (5) 
for the most creditworthy obligors; and 
‘‘(ii) the highest allowable rate under paragraph 
(5) for the least creditworthy obligors. 
‘‘(5) PERMISSIBLE RANGE OF RATES.—The fee rate set under 
paragraph (4) shall be—