H. R. 1442—175
its further preservation, the Secretary may scrap the vessel or 
sell the vessel for cash. 
‘‘(b) SELLING PROCEDURE.—The sale of a vessel under subsection 
(a) shall be made on the basis of competitive sealed bids, after 
an appraisal and due advertisement. The purchaser does not have 
to be a citizen of the United States. The purchaser shall provide 
a surety bond, with a surety approved by the Secretary, to ensure 
that the vessel will not be operated in the foreign trade of the 
United States at any time within 10 years after the sale, in competi-
tion with a vessel owned by a citizen of the United States and 
documented under the laws of the United States. 
‘‘§ 57103. Sale of obsolete vessels in National Defense Reserve 
Fleet 
‘‘(a) IN GENERAL.—The Secretary of Transportation may convey 
the right, title, and interest of the United States Government in 
any vessel of the National Defense Reserve Fleet that has been 
identified by the Secretary as an obsolete vessel of insufficient 
value to warrant its further preservation, if the recipient—
‘‘(1) is a non-profit organization, a State, or a municipal 
corporation or political subdivision of a State; 
‘‘(2) agrees not to use, or allow others to use, the vessel 
for commercial transportation purposes; 
‘‘(3) agrees to make the vessel available to the Government 
whenever the Secretary indicates that it is needed by the 
Government; 
‘‘(4) agrees to hold the Government harmless for any claims 
arising from exposure to asbestos, polychlorinated biphenyls, 
lead paint, or other hazardous substances after conveyance 
of the vessel, except for claims arising from use of the vessel 
by the Government; 
‘‘(5) has a conveyance plan and a business plan that 
describes the intended use of the vessel, each of which has 
been submitted to and approved by the Secretary; 
‘‘(6) has provided proof, as determined by the Secretary, 
of resources sufficient to accomplish the transfer, necessary 
repairs and modifications, and initiation of the intended use 
of the vessel; and 
‘‘(7) agrees that when the recipient no longer requires the 
vessel for use as described in the business plan required under 
paragraph (5)—
‘‘(A) the recipient will, at the discretion of the Sec-
retary, reconvey the vessel to the Government in good 
condition except for ordinary wear and tear; or 
‘‘(B) if the Board of Trustees of the recipient has 
decided to dissolve the recipient according to the laws 
of the State in which the recipient is incorporated, then—
‘‘(i) the recipient shall distribute the vessel, as 
an asset of the recipient, to a person that has been 
determined exempt from taxation under section 
501(c)(3) of the Internal Revenue Code of 1986 (26 
U.S.C. 501(c)(3)), or to the Federal Government or 
a State or local government for a public purpose; and 
‘‘(ii) the vessel shall be disposed of by a court 
of competent jurisdiction of the county in which the 
principal office of the recipient is located, for such 
purposes as the court shall determine, or to such
H. R. 1442—176
organizations as the court shall determine are orga-
nized exclusively for public purposes. 
‘‘(b) OTHER EQUIPMENT.—At the Secretary’s discretion, addi-
tional equipment from other obsolete vessels of the Fleet may 
be conveyed to assist the recipient with maintenance, repairs, or 
modifications. 
‘‘(c) ADDITIONAL TERMS.—The Secretary may require any addi-
tional terms the Secretary considers appropriate. 
‘‘(d) DELIVERY OF VESSEL.—If conveyance is made under this 
section, the vessel shall be delivered to the recipient at a time 
and place to be determined by the Secretary. The vessel shall 
be conveyed in an ‘as is’ condition. 
‘‘(e) LIMITATIONS.—If at any time prior to delivery of the vessel 
to the recipient, the Secretary determines that a different disposi-
tion of the vessel would better serve the interests of the Govern-
ment, the Secretary shall pursue the more favorable disposition 
of the obsolete vessel and shall not be liable for any damages 
that may result from an intended recipient’s reliance upon a pro-
posed transfer. 
‘‘(f) REVERSION.—The Secretary shall include in any conveyance 
under this section terms under which all right, title, and interest 
conveyed by the Secretary shall revert to the Government if the 
Secretary determines the vessel has been used other than as 
described in the business plan required under subsection (a)(5). 
‘‘§ 57104. Acquisition of vessels from sale of obsolete vessels 
‘‘(a) IN GENERAL.—The Secretary of Transportation may acquire 
suitable documented vessels with amounts in the Vessel Operations 
Revolving Fund derived from the sale of obsolete vessels in the 
National Defense Reserve Fleet. 
‘‘(b) VALUATION.—The acquired and obsolete vessels shall be 
valued at their scrap value in domestic or foreign markets as 
of the date of the acquisition for or sale from the Fleet. However, 
the value assigned to those vessels shall be determined on the 
same basis, with consideration given to the fair value of the cost 
of moving the vessel sold from the Fleet to the place of scrapping. 
‘‘(c) COSTS INCIDENT TO LAY-UP.—Costs incident to the lay-
up of the vessel acquired under this section may be paid from 
amounts in the Fund. 
‘‘(d) TRANSFERS TO NON-CITIZENS.—A vessel sold from the Fleet 
under this section may be scrapped in an approved foreign market 
without obtaining additional separate approval from the Secretary 
to transfer the vessel to a person not a citizen of the United 
States. 
‘‘§ 57105. Acquisition of vessels for essential services, routes, 
or lines 
‘‘(a) IN GENERAL.—The Secretary of Transportation may acquire 
a vessel, by purchase or otherwise, if—
‘‘(1) the Secretary considers the vessel necessary to estab-
lish, maintain, improve, or serve as a replacement on an essen-
tial service, route, or line in the foreign commerce of the United 
States, as determined under section 50103 of this title; 
‘‘(2) the vessel was constructed in the United States; and 
‘‘(3) the Secretary of the Navy has certified to the Secretary 
of Transportation that the vessel is suitable for economical 
and speedy conversion into a naval or military auxiliary or
H. R. 1442—177
otherwise suitable for use by the United States Government 
in time of war or national emergency. 
‘‘(b) PRICE.—The price paid for the vessel shall be based on 
a fair and reasonable valuation. However, the price may not exceed 
by more than 5 percent the cost of the vessel to the owner (excluding 
any construction-differential subsidy and the cost of national 
defense features paid by the Secretary of Transportation) plus the 
actual cost previously expended for reconditioning, less depreciation 
based on a 25-year life for a dry-cargo or passenger vessel and 
a 20-year life for a tanker or other liquid bulk carrier vessel. 
‘‘(c) DOCUMENTATION.—A vessel acquired under this section 
that is not documented under the laws of the United States at 
the time of acquisition shall be so documented as soon as prac-
ticable. 
‘‘§ 57106. Maintenance, improvement, and operation of ves-
sels 
‘‘(a) IN GENERAL.—The Secretary of Transportation may main-
tain, repair, recondition, remodel, and improve vessels owned by 
the United States Government and in the possession or under 
the control of the Secretary, to equip them adequately for competi-
tion in the foreign trade of the United States. The Secretary may 
operate such a vessel or charter the vessel on terms and conditions 
the Secretary considers appropriate to carry out the purposes of 
this subtitle. 
‘‘(b) DOCUMENTATION
AND RESTRICTIONS
ON OPERATION.—A 
vessel reconditioned, remodeled, or improved under subsection (a) 
shall be documented under the laws of the United States and 
remain so documented for at least 5 years after completion of 
the reconditioning, remodeling, or improvement. During that period, 
it shall be operated on voyages that are not exclusively coastwise. 
‘‘§ 57107. Vessels for other agencies 
‘‘(a) IN GENERAL.—The Secretary of Transportation may con-
struct, reconstruct, repair, equip, and outfit, by contract or other-
wise, vessels or parts thereof, for any other department or agency 
of the United States Government to the extent the other department 
or agency is authorized by law to do so for its own account. 
‘‘(b) EFFECT
ON
CONTRACT
AUTHORIZATION.—An obligation 
incurred or expenditure made by the Secretary under this section 
does not affect any contract authorization of the Secretary, but 
instead shall be charged against the existing appropriation or con-
tract authorization of the department or agency. 
‘‘§ 57108. Consideration of ballast and equipment in deter-
mining selling price 
‘‘The Maritime Administration may not sell a vessel until its 
ballast and equipment have been inventoried and their value consid-
ered in determining the selling price of the vessel. 
‘‘§ 57109. Operation of vessels purchased, chartered, or 
leased from Secretary of Transportation 
‘‘Unless otherwise authorized by the Secretary of Transpor-
tation, a vessel purchased, chartered, or leased from the Secretary 
may be operated only under a certificate of documentation with 
a registry or coastwise endorsement. Such a vessel, while employed 
solely as a merchant vessel, is subject to the laws, regulations,
H. R. 1442—178
and liabilities governing merchant vessels, whether the United 
States Government has an interest in the vessel as an owner 
or holds a mortgage, lien, or other interest.
‘‘CHAPTER 573—VESSEL TRADE-IN PROGRAM
‘‘Sec. 
‘‘57301.
Definitions. 
‘‘57302.
Authority to acquire vessels. 
‘‘57303.
Utility value and tonnage requirements. 
‘‘57304.
Eligible acquisition dates. 
‘‘57305.
Determination of trade-in allowance. 
‘‘57306.
Payment of trade-in allowance. 
‘‘57307.
Recognition of gain for tax purposes. 
‘‘57308.
Use of vessels at least 25 years old.
‘‘§ 57301. Definitions 
‘‘In this chapter: 
‘‘(1) NEW VESSEL.—The term ‘new vessel’ means a vessel—
‘‘(A) constructed under this subtitle and acquired 
within 2 years after the date of completion; or 
‘‘(B) constructed in a domestic shipyard on private 
account and not under this subtitle, and documented under 
the laws of the United States. 
‘‘(2) OBSOLETE VESSEL.—The term ‘obsolete vessel’ means 
a vessel that—
‘‘(A) is of at least 1,350 gross tons; 
‘‘(B) the Secretary of Transportation believes should, 
because of its age, obsolescence, or other reasons, be 
replaced in the public interest; and 
‘‘(C) has been owned by a citizen of the United States 
for at least 3 years immediately before its acquisition under 
this chapter. 
‘‘§ 57302. Authority to acquire vessels 
‘‘To promote the construction of new, safe, and efficient vessels 
to carry the domestic and foreign waterborne commerce of the 
United States, the Secretary of Transportation may acquire an 
obsolete vessel in exchange for an allowance of credit toward the 
cost of construction or purchase of a new vessel as provided in 
this chapter. 
‘‘§ 57303. Utility value and tonnage requirements 
‘‘(a) UTILITY VALUE.—The utility value of a new vessel to be 
acquired under this chapter for operation in the domestic or foreign 
commerce of the United States may not be substantially less than 
that of the obsolete vessel acquired in exchange under this chapter. 
‘‘(b) TONNAGE.—If the Secretary of Transportation finds that 
the new vessel will have a utility value at least equal to that 
of the obsolete vessel, the new vessel may be of lesser gross tonnage 
than the obsolete vessel. However, the gross tonnage of the new 
vessel must be at least one-third the gross tonnage of the obsolete 
vessel. 
‘‘§ 57304. Eligible acquisition dates 
‘‘At the option of the owner, the acquisition of an obsolete 
vessel under this chapter shall occur—
‘‘(1) when the owner contracts for the construction or pur-
chase of a new vessel; or
H. R. 1442—179
‘‘(2) within 5 days of the actual date of delivery of the 
new vessel to the owner. 
‘‘§ 57305. Determination of trade-in allowance 
‘‘(a) IN GENERAL.—The Secretary of Transportation shall deter-
mine the trade-in allowance for an obsolete vessel at the time 
of acquisition of the vessel. The allowance shall be the fair value 
of the vessel. In determining the value, the Secretary shall con-
sider—
‘‘(1) the scrap value of the obsolete vessel in American 
and foreign markets; 
‘‘(2) the depreciated value based on a 20-year or 25-year 
life, whichever applies to the obsolete vessel; and 
‘‘(3) the market value of the obsolete vessel for operation 
in world commerce or in the domestic or foreign commerce 
of the United States. 
‘‘(b) USE OF OBSOLETE VESSELS.—If acquisition of the obsolete 
vessel occurs when the owner contracts for the construction of 
the new vessel, and the owner uses the obsolete vessel during 
the period of construction of the new vessel, the Secretary shall 
reduce the trade-in allowance by an amount representing the fair 
value of that use. The Secretary shall establish the rate for use 
of the obsolete vessel when the contract for construction of the 
new vessel is made. 
‘‘§ 57306. Payment of trade-in allowance 
‘‘(a) ACQUISITION AT TIME OF CONTRACT.—If acquisition of an 
obsolete vessel under this chapter occurs when the owner contracts 
for the construction or purchase of the new vessel, the Secretary 
of Transportation shall apply the trade-in allowance to the purchase 
price of the new vessel rather than paying it to the owner. If 
the new vessel is constructed under this subtitle, the Secretary 
may apply the trade-in allowance to the required cash payments 
on terms and conditions the Secretary may prescribe. If the new 
vessel is not constructed under this subtitle, the Secretary shall 
pay the trade-in allowance to the builder of the vessel for the 
account of the owner when the Secretary acquires the obsolete 
vessel. 
‘‘(b) ACQUISITION AT TIME OF DELIVERY.—If acquisition of the 
obsolete vessel occurs when the new vessel is delivered to the 
owner, the Secretary shall deposit the trade-in allowance in the 
owner’s capital construction fund. 
‘‘§ 57307. Recognition of gain for tax purposes 
‘‘The owner of an obsolete vessel does not recognize a gain 
under the Federal income tax laws when the vessel is transferred 
to the Secretary of Transportation in exchange for a trade-in allow-
ance under this chapter. The basis of the new vessel acquired 
with the allowance is the same as the basis of the obsolete vessel—
‘‘(1) increased by the difference between the cost of the 
new vessel and the trade-in allowance of the obsolete vessel; 
and 
‘‘(2) decreased by the amount of loss recognized on the 
transfer.
H. R. 1442—180
‘‘§ 57308. Use of vessels at least 25 years old 
‘‘An obsolete vessel acquired under this chapter that is or 
becomes at least 25 years old may not be used for commercial 
operation. However, the vessel may be used—
‘‘(1) during a period in which vessels may be requisitioned 
under chapter 563 of this title; or 
‘‘(2) except as otherwise provided in this subtitle, on trade 
routes serving only the foreign trade of the United States.
‘‘CHAPTER 575—CONSTRUCTION, CHARTER, AND SALE 
OF VESSELS
‘‘SUBCHAPTER I—GENERAL 
‘‘Sec. 
‘‘57501.
Completion of long-range program. 
‘‘57502.
Construction, reconditioning, and remodeling of vessels. 
‘‘57503.
Competitive bidding. 
‘‘57504.
Charter or sale of vessels acquired by Department of Transportation. 
‘‘57505.
Employment of vessels on foreign trade routes. 
‘‘57506.
Minimum selling price of vessels. 
‘‘SUBCHAPTER II—CHARTERS 
‘‘57511.
Demise charters. 
‘‘57512.
Competitive bidding. 
‘‘57513.
Minimum bid. 
‘‘57514.
Qualifications of bidders. 
‘‘57515.
Awarding of charters. 
‘‘57516.
Operating-differential subsidies. 
‘‘57517.
Recovery of excess profits. 
‘‘57518.
Performance bond. 
‘‘57519.
Insurance. 
‘‘57520.
Vessel maintenance. 
‘‘57521.
Termination of charter during national emergency. 
‘‘SUBCHAPTER III—MISCELLANEOUS 
‘‘57531.
Construction and charter of vessels for unsuccessful routes. 
‘‘57532.
Operation of experimental vessels.
‘‘SUBCHAPTER I—GENERAL 
‘‘§ 57501. Completion of long-range program 
‘‘Whenever the Secretary of Transportation determines that 
the objectives and policies declared in sections 50101 and 50102 
of this title cannot be fully realized within a reasonable time under 
titles V and VI of the Merchant Marine Act, 1936, and the President 
approves the determination, the Secretary, in accordance with this 
chapter, shall complete the long-range program described in section 
50102 of this title. 
‘‘§ 57502. Construction, reconditioning, and remodeling of 
vessels 
‘‘(a) IN GENERAL.—The Secretary of Transportation may have 
new vessels constructed, and have old vessels reconditioned or 
remodeled, as the Secretary determines necessary to carry out 
the objectives of this subtitle. 
‘‘(b) PLACE OF WORK.—Construction, reconditioning, and remod-
eling of vessels under subsection (a) shall take place in shipyards 
in the continental United States (including Alaska and Hawaii). 
However, if satisfactory contracts cannot be obtained from private 
shipbuilders, the Secretary may have the work done in navy yards. 
‘‘(c) APPLICABILITY
OF CONSTRUCTION-DIFFERENTIAL SUBSIDY 
PROVISIONS.—Contracts for the construction, reconstruction, or
H. R. 1442—181
reconditioning of a vessel by a private shipbuilder under this 
chapter are subject to the provisions of title V of the Merchant 
Marine Act, 1936, applicable to a contract with a private shipbuilder 
for the construction of a vessel under title V of that Act. 
‘‘§ 57503. Competitive bidding 
‘‘(a) ADVERTISEMENT AND BIDDING.—The Secretary of Transpor-
tation may make a contract with a private shipbuilder for the 
construction of a new vessel, or for the reconstruction or recondi-
tioning of an existing vessel, only after due advertisement and 
upon sealed competitive bids. 
‘‘(b) OPENING OF BIDS.—Bids required under this section shall 
be opened at the time and place stated in the advertisement for 
bids. All interested persons, including representatives of the press, 
shall be permitted to attend. The results of the bidding shall be 
publicly announced. 
‘‘§ 57504. Charter or sale of vessels acquired by Department 
of Transportation 
‘‘Vessels transferred to or otherwise acquired by the Depart-
ment of Transportation in any manner may be chartered or sold 
by the Secretary of Transportation as provided in this chapter. 
‘‘§ 57505. Employment of vessels on foreign trade routes 
‘‘(a) IN
GENERAL.—The Secretary of Transportation shall 
arrange for the employment of the Department of Transportation’s 
vessels in steamship lines on such trade routes, exclusively serving 
the foreign trade of the United States, as the Secretary determines 
are essential for the development and maintenance of the commerce 
of the United States and the national defense. However, the Sec-
retary shall first determine that those routes are not being ade-
quately served by existing steamship lines privately owned and 
operated by citizens of the United States and documented under 
the laws of the United States. 
‘‘(b) POLICY TO ENCOURAGE PRIVATE OPERATION.—The Sec-
retary shall have a policy of encouraging private operation of each 
essential steamship line now owned by the United States Govern-
ment by—
‘‘(1) selling the line to a citizen of the United States; or 
‘‘(2) demising the Secretary’s vessels on bareboat charter 
to citizens of the United States who agree to maintain the 
line in the manner provided in this chapter. 
‘‘§ 57506. Minimum selling price of vessels 
‘‘(a) IN GENERAL.—A vessel constructed under this subtitle or 
the Merchant Marine Act, 1936, may not be sold by the Secretary 
of Transportation for less than the price specified in this section. 
‘‘(b) OPERATION
IN FOREIGN TRADE.—If the vessel is to be 
operated in foreign trade, the minimum price is the estimated 
foreign construction cost (exclusive of national defense features) 
determined as of the date the construction contract is executed, 
less depreciation under subsection (d). 
‘‘(c) OPERATION IN DOMESTIC TRADE.—If the vessel is to be 
operated in domestic trade, the minimum price is the cost of 
construction in the United States (exclusive of national defense 
features), less depreciation under subsection (d).
H. R. 1442—182
‘‘(d) DEPRECIATION.—Depreciation under subsections (b) and 
(c) shall be based on—
‘‘(1) a 25-year life for dry-cargo and passenger vessels; 
and 
‘‘(2) a 20-year life for tankers and other bulk liquid carrier 
vessels. 
‘‘SUBCHAPTER II—CHARTERS 
‘‘§ 57511. Demise charters 
‘‘A charter by the Secretary of Transportation under this 
chapter shall demise the vessel to the charterer subject to all 
usual conditions contained in a bareboat charter. The charter shall 
be for a term the Secretary considers to be in the best interest 
of the United States Government and the merchant marine. 
‘‘§ 57512. Competitive bidding 
‘‘(a) IN GENERAL.—The Secretary of Transportation may charter 
a vessel of the Department of Transportation to a private operator 
only on the basis of competitive sealed bidding. The bids must 
be submitted in strict compliance with the terms and conditions 
of a public advertisement soliciting the bids. 
‘‘(b) ADVERTISEMENT FOR BIDS.—An advertisement for bids shall 
state—
‘‘(1) the number, type, and tonnage of the vessels being 
offered for bareboat charter for operation as a steamship line 
on a designated trade route; 
‘‘(2) the minimum number of sailings required; 
‘‘(3) the length of time of the charter; 
‘‘(4) the right of the Secretary to reject all bids; and 
‘‘(5) other information the Secretary considers necessary 
for the information of prospective bidders. 
‘‘(c) OPENING OF BIDS.—Bids required under this section shall 
be opened at the time and place stated in the advertisement for 
bids. All interested persons, including representatives of the press, 
shall be permitted to attend. The results of the bidding shall be 
publicly announced. 
‘‘§ 57513. Minimum bid 
‘‘The Secretary of Transportation shall reject any bid for the 
charter under this subchapter of a vessel constructed under this 
subtitle or the Merchant Marine Act, 1936, if the charter hire 
offered is lower than the minimum charter hire would be if the 
vessel were chartered under section 57531 of this title. 
‘‘§ 57514. Qualifications of bidders 
‘‘(a) CONSIDERATIONS.—In deciding whether to award a charter 
to a bidder, the Secretary of Transportation shall consider—
‘‘(1) the bidder’s financial resources, credit standing, and 
practical experience in operating vessels; and 
‘‘(2) other factors a prudent business person would consider 
in entering into a transaction involving a large capital invest-
ment. 
‘‘(b) DISQUALIFICATIONS.—The Secretary may not charter a 
vessel to a person appearing to lack sufficient capital, credit, and 
experience to operate the vessel successfully over the period covered 
by the charter.
H. R. 1442—183
‘‘§ 57515. Awarding of charters 
‘‘(a) IN GENERAL.—The Secretary of Transportation shall award 
the charter to the bidder proposing to pay the highest monthly 
charter hire. However, the Secretary may reject the highest or 
most advantageous or any other bid if the Secretary considers 
the charter hire offered too low or determines that the bidder 
lacks the qualifications required by section 57514 of this title. 
‘‘(b) HIGHEST BID REJECTED.—If the Secretary rejects the 
highest bid, the Secretary may—
‘‘(1) award the charter to the next highest bidder; or 
‘‘(2) reject all bids and either readvertise the line or operate 
the line until conditions appear more favorable to reoffer the 
line for private charter. 
‘‘(c) REASON FOR REJECTION.—On request of a bidder, the reason 
for rejection shall be stated in writing to the bidder. 
‘‘§ 57516. Operating-differential subsidies 
‘‘If the Secretary of Transportation considers it necessary, the 
Secretary may make a contract with a charterer of a vessel owned 
by the Secretary for payment of an operating-differential subsidy, 
on the same terms and conditions, and subject to the same limita-
tions and restrictions, as otherwise provided with respect to pay-
ment of operating-differential subsidies to operators of privately-
owned vessels. 
‘‘§ 57517. Recovery of excess profits 
‘‘(a) IN GENERAL.—A charter under this chapter shall provide 
that if, at the end of a calendar year subsequent to the execution 
of the charter, the cumulative net voyage profit (after payment 
of the charter hire reserved in the charter and payment of the 
charterer’s fair and reasonable overhead expenses applicable to 
operation of the chartered vessel) exceeds 10 percent a year of 
the charterer’s capital necessarily employed in the business of the 
chartered vessel, the charterer shall pay to the Secretary of 
Transportation, as additional charter hire, half the cumulative net 
voyage profit in excess of 10 percent a year. However, any cumu-
lative net voyage profit accounted for under this subsection is 
not to be included in the calculation of cumulative net voyage 
profit in any subsequent year. 
‘‘(b) TERMS TO BE DEFINED AND USED.—The Secretary shall 
define the terms ‘net voyage profit’, ‘fair and reasonable overhead 
expenses’, and ‘capital necessarily employed’ for this section. Each 
advertisement for bids and each charter shall contain these defini-
tions, stating the formula for determining each of these three 
amounts. 
‘‘§ 57518. Performance bond 
‘‘The Secretary of Transportation shall require a charterer of 
a vessel of the Secretary to deposit with the Secretary an under-
taking, with approved sureties, in such amount as the Secretary 
may require as security for the faithful performance of the terms 
of the charter, including indemnity against liens on the chartered 
vessel. 
‘‘§ 57519. Insurance 
‘‘A charter under this chapter shall require the charterer to 
carry, at the charterer’s expense, insurance on the chartered vessel