‘‘(ii) tend to carry out the purposes of this subtitle; and 
‘‘(B) the Secretary expressly consents to the appointment. 
‘‘(2) APPOINTMENT OF OTHER PERSON.—The appointment of an-
other person as trustee or receiver without a hearing becomes effective 
when ratified by the Secretary, but the Secretary may demand a hear-
ing. 
‘‘(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 the continued operation of the ves-
sel is essential to the foreign commerce of the United States and is rea-
sonably 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 Sec-
retary 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 operated 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 Secretary 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 subpoena 
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 ju-
dicial 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 asso-
ciation 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 corpora-
tion, 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. 
‘‘(b) ADDITIONAL REQUIREMENTS FOR CORPORATIONS.—In this subtitle, 
a corporation is deemed to be a citizen of the United States only if, in addi-
tion to satisfying the requirements in subsection (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 obliga-
tion 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 exercised, directly or indi-
rectly, in behalf of a person not a citizen of the United States; and 
‘‘(4) there is no other means by which control of the corporation 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 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) at least 75 percent of the voting power in the corporation 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, di-
rectly 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 per-
cent 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. 
‘‘§ 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 war-
ranty of seaworthiness. 
‘‘(c) NOT MERCHANT VESSEL OR ENGAGED IN TRADE OR COMMERCE.—
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 financial re-
sponsibility to meet liability for death or injury to sailing school students 
and sailing school instructors on a voyage on the vessel. The amount of fi-
nancial responsibility shall be at least $50,000 for each student and instruc-
100
tor. Financial responsibility under this subsection may be evidenced by in-
surance 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 ma-
rine of the United States should work closely together to promote the max-
imum integration of the total seapower forces of the United States. 
‘‘§ 51102. Definitions 
‘‘In this part: 
‘‘(1) ACADEMY.—The term ‘Academy’ means the United States Mer-
chant Marine Academy located at Kings Point, New York, and main-
tained under chapter 513 of this title. 
‘‘(2) COST OF EDUCATION PROVIDED.—The term ‘cost of education 
provided’ means the financial costs incurred by the United States Gov-
ernment for providing training or financial assistance to students at 
the Academy and the State maritime academies, including direct finan-
cial assistance, room, board, classroom academics, and other training 
activities. 
‘‘(3) MERCHANT MARINE OFFICER.—The term ‘merchant marine of-
ficer’ means an individual issued a license by the Coast Guard author-
izing service as—
‘‘(A) a master, mate, or pilot on a documented vessel that—
‘‘(i) is of at least 1,000 gross tons as measured under sec-
tion 14502 of this title or an alternate tonnage measured 
under section 14302 of this title as prescribed by the Sec-
retary 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 propelled by 
machinery of at least 4,000 horsepower. 
‘‘(4) STATE MARITIME ACADEMY.—The term ‘State maritime acad-
emy’ 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.
101
‘‘§ 51103. General authority of Secretary of Transportation 
‘‘(a) EDUCATION AND TRAINING.—The Secretary of Transportation may 
provide for the education and training of citizens of the United States for 
the safe and efficient operation of the merchant marine of the United States 
at all times, including operation as a naval and military auxiliary in time 
of war or national emergency. 
‘‘(b) SURPLUS PROPERTY FOR INSTRUCTIONAL PURPOSES.—
‘‘(1) IN GENERAL.—The Secretary may cooperate with and assist the 
institutions named in paragraph (2) by making vessels, 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 purposes, by gift, loan, sale, lease, or char-
ter on terms the Secretary considers appropriate. 
‘‘(2) INSTITUTIONS.—The institutions referred to in paragraph (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 di-
rectly 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 Secretary, the 
head of an agency (including a military department) may detail, on a 
reimbursable basis, personnel from the agency to the Secretary to as-
sist in carrying out this part. 
‘‘(d) ACADEMY PERSONNEL.—To carry out this part, the Secretary 
may—
‘‘(1) employ an individual as a professor, lecturer, or instructor at 
the Academy, without regard to the provisions of title 5 governing ap-
pointments in the competitive service; and 
‘‘(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 Adminis-
trator 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 in-
102
cludes 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 Mer-
chant Marine Academy to provide instruction to individuals to prepare them 
for service in the merchant marine of the United States. 
‘‘§ 51302. Nomination and competitive appointment of ca-
dets 
‘‘(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 Trans-
portation 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 represented by 
that Senator. 
‘‘(2) A Member of the House of Representatives may nominate resi-
dents 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 nomi-
nate residents of the jurisdiction represented by that Delegate. 
‘‘(4) The Resident Commissioner to the United States from Puerto 
Rico may nominate residents of Puerto Rico.
103
‘‘(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 Re-
public of Panama Concerning Air Traffic Control and Related 
Services, concluded January 8, 1979; and 
‘‘(B) sons or daughters of personnel of the United States Gov-
ernment 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 nomi-
nated 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 Representa-
tives 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 nominated by 
the Panama Canal Commission. 
‘‘(d) COMPETITIVE SYSTEM FOR APPOINTMENT.—
‘‘(1) ESTABLISHMENT OF SYSTEM.—The Secretary shall establish a 
competitive system for selecting individuals nominated under subsection 
(b) to fill the positions allocated under subsection (c). The system must 
determine the relative merit of each individual based on competitive ex-
aminations, an assessment of the individual’s academic background, 
and other effective indicators of motivation and probability of success-
ful completion of training at the Academy.
104
‘‘(2) APPOINTMENTS
BY
JURISDICTION.—The Secretary shall ap-
point individuals to fill the positions allocated under subsection (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. 
‘‘§ 51303. Non-competitive appointments 
‘‘The Secretary of Transportation may appoint each year without com-
petition 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 President 
may appoint individuals from countries in the Western Hemisphere 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 ap-
proval of the Secretary of State, may appoint individuals from coun-
tries other than the United States to receive instruction at the Acad-
emy. Not more than 30 individuals may receive instruction under this 
subsection at the same time. 
‘‘(2) REIMBURSEMENT.—The Secretary of Transportation shall en-
sure that the country from which an individual comes under this sub-
section 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 ap-
proval 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 Secretary) of the instruc-
105
tion and allowances received by an individual appointed under this sub-
section. 
‘‘(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, dis-
charge, 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 mem-
bers of the individual’s immediate family are alumni of the Academy. 
‘‘§ 51306. Cadet commitment agreements 
‘‘(a) AGREEMENT REQUIREMENTS.—A citizen of the United States ap-
pointed as a cadet at the United States Merchant Marine Academy must 
sign, as a condition of the appointment, an agreement to—
‘‘(1) complete the course of instruction at the Academy; 
‘‘(2) fulfill the requirements for a license as an officer in the mer-
chant marine of the United States before graduation from the Acad-
emy; 
‘‘(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 commis-
sioned officer in the Naval Reserve (including the Merchant Marine Re-
serve, Naval Reserve), the Coast Guard Reserve, or any other reserve 
unit of an armed force of the United States, and, if tendered the ap-
pointment, to serve for at least 6 years after graduation from the Acad-
emy; 
‘‘(5) serve the foreign and domestic commerce and the national de-
fense 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 indus-
try, profession, or marine science (as determined by the Secretary 
of Transportation), if the Secretary determines that service under 
subparagraph (A) is not available to the individual;
106
‘‘(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-re-
lated Federal employment which serves the national security inter-
ests 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 subsection. 
‘‘(b) FAILURE TO COMPLETE COURSE OF INSTRUCTION.—
‘‘(1) ACTIVE DUTY.—If the Secretary of Transportation determines 
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 deter-
mined by the Secretary of Transportation, the Secretary of Transpor-
tation 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 para-
graph (1), or if the Secretary of Transportation determines that reim-
bursement of the cost of education provided would better serve the in-
terests of the United States, the Secretary of Transportation may re-
cover from the individual the cost of education provided by the Govern-
ment. 
‘‘(c) FAILURE TO CARRY OUT OTHER REQUIREMENTS.—
‘‘(1) ACTIVE DUTY.—If the Secretary of Transportation determines 
that an individual has failed to fulfill any part of the agreement de-
scribed in subsection (a)(2)–(6), the individual may 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 re-
quired by subsection (a)(5). The Secretary of Transportation, in con-
sultation with the Secretary of Defense, shall determine in which serv-
ice the individual 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 para-
graph (1), or if the Secretary of Transportation determines that reim-
bursement of the cost of education provided would better serve the in-
terests of the United States, the Secretary of Transportation may re-
cover from the individual the cost of education provided. The Secretary
107
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 commitment 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 Govern-
ment; 
‘‘(2) on other documented vessels, with the permission of the owner; 
and 
‘‘(3) in shipyards or plants and with industrial or educational organi-
zations. 
‘‘§ 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 reimbursement of trav-
eling expenses) when traveling under orders as a cadet. 
‘‘§ 51309. Academic degree 
‘‘(a) BACHELOR’S DEGREE.—
‘‘(1) IN GENERAL.—The Superintendent of the United States Mer-
chant 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 examina-
tion for a merchant marine officer’s license. 
‘‘(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 con-
fer a master’s degree on an individual who has met the conditions pre-
108
scribed 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 author-
izing service on a merchant vessel. 
‘‘§ 51310. Deferment of service obligation under cadet com-
mitment agreements 
‘‘The Secretary of Transportation may defer the service commitment 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. How-
ever, 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 Transpor-
tation.
109
‘‘§ 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 Transportation and to make recommenda-
tions 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 Committee 
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 Committee on Armed Serv-
ices 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), an-
other individual may be appointed as a substitute in the manner pro-
vided 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 dur-
ing each academic year, for the purpose of examining the course of instruc-
tion and management of the Academy and advising the Maritime Adminis-
trator 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
110
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 regular 
place of business, a member of the Board shall be allowed travel expenses, 
including per diem in lieu of subsistence, as authorized by section 5703 of 
title 5. 
‘‘(d) RELATIONSHIP TO OTHER LAW.—The Federal Advisory Committee 
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 United States Merchant 
Marine Academy may be imposed unless the charge or fee is specifically au-
thorized 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 Transpor-
tation 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 agreements. 
‘‘51511.
Midshipman status in the Naval Reserve.
‘‘§ 51501. General support program 
‘‘(a) ASSISTANCE TO STATE MARITIME ACADEMIES.—The Secretary of 
Transportation shall cooperate with and assist State maritime academies in 
providing instruction to individuals to prepare them for service in the mer-
chant 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 op-
eration and maintenance of new vessels, on equipment, 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
111
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 acad-
emy sponsored by a single State. 
‘‘§ 51504. Use of training vessels 
‘‘(a) APPLICATIONS TO USE VESSELS.—The Governor of a State spon-
soring 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. 
‘‘(b) GENERAL AUTHORITY.—Subject to subsection (c), the Secretary 
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 Sec-
retary 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 ves-
sel 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 train-
ing 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.
112
‘‘(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 maritime 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 mainte-
nance and support: 
‘‘(1) One State maritime academy in each State that satisfies 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 payment 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. 
‘‘(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 ves-
sels 
‘‘(a) GENERAL CONDITIONS.—As conditions of receiving an annual pay-
ment 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 operation 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, train-
ing facilities, admissions, and instruction that the Secretary of Trans-
113
portation may establish after consultation with the superintendents of 
State maritime academies; and 
‘‘(3) agree in writing to require, as a condition for graduation, that 
each individual who is a citizen of the United States and who is attend-
ing the academy in a merchant marine officer preparation program 
pass the examination required for the issuance of a license under sec-
tion 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 ad-
mission 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 stu-
dents attending a State maritime academy—
‘‘(1) on vessels owned or subsidized by the United States Govern-
ment; 
‘‘(2) on other documented vessels, with the permission of the owner; 
and 
‘‘(3) in shipyards or plants and with industrial or educational organi-
zations. 
‘‘§ 51508. Allowances for students 
‘‘Under regulations prescribed by the Secretary of Transportation, a stu-
dent at a State maritime academy shall receive from the Secretary allow-
ances for transportation (including reimbursement 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 agree-
ment 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 to make student incentive payments to the 
individual. An agreement 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 section shall 
be equal to $4,000 each academic year and be paid, as prescribed by the
114
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 agreement 
under this section shall require the student to accept midshipman and en-
listed reserve status in the Naval Reserve (including the Merchant Marine 
Reserve, Naval Reserve) before receiving any payments under the agree-
ment. 
‘‘(d) AGREEMENT REQUIREMENTS.—An agreement under this section 
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 grad-
uation 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 de-
fense 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 indus-
try, profession, or marine science (as determined by the Sec-
retary), if the Secretary determines that service under subpara-
graph (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-re-
lated Federal employment which serves the national security inter-
ests of the United States, as determined by the Secretary; or
115
‘‘(D) by a combination of the service alternatives referred to in 
subparagraphs (A)–(C); and 
‘‘(6) report to the Secretary on compliance with this subsection. 
‘‘(e) FAILURE TO COMPLETE COURSE OF INSTRUCTION.—
‘‘(1) ACTIVE DUTY.—If the Secretary of Transportation determines 
that an individual who has accepted the payments described in sub-
section (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 Secretary 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 Trans-
portation, 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 para-
graph (1), or if the Secretary of Transportation determines that reim-
bursement of the cost of education provided would better serve the in-
terests of the United States, the Secretary of Transportation may re-
cover 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 determines 
that an individual has failed to fulfill any part of the agreement de-
scribed 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 re-
quired by subsection (d)(5). The Secretary of Transportation, in con-
sultation with the Secretary of Defense, shall determine in which serv-
ice the individual 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 para-
graph (1), or if the Secretary of Transportation determines that reim-
bursement of the cost of education provided would better serve the in-
terests of the United States, the Secretary of Transportation may re-
cover from the individual the amount of student incentive payments, 
plus interest and attorney fees. The Secretary may reduce the amount
116
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 commitment 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 in-
centive payment agreements 
‘‘The Secretary of Transportation may defer the service commitment of 
an individual under section 51509(d)(5) of this title (as specified in the 
agreement under section 51509) for not more than 2 years if the individual 
is engaged in a graduate course of study approved by the Secretary. How-
ever, deferment of service as a commissioned officer on active duty must be 
approved by the Secretary of the affected military department (or the Sec-
retary 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 es-
tablish 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
117
‘‘(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 Government) that offers instruction to indi-
viduals quartered on a vessel primarily to train them for service in the mer-
chant marine. 
‘‘(b) INSPECTION.—Each civilian nautical school is subject to inspection 
by the Secretary of Transportation. 
‘‘(c) RATING AND CERTIFICATION.—The Secretary may, under regula-
tions the Secretary may prescribe, provide for the rating and certification 
of civilian nautical schools as to the adequacy of their course of instruction, 
the competence of their instructors, and the suitability of the equipment 
used in their course of instruction. 
‘‘§ 51703. Additional training 
‘‘(a) GENERAL AUTHORITY.—The Secretary of Transportation may pro-
vide additional training on maritime subjects to supplement other training 
opportunities and make the training available to the personnel of the mer-
chant 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 considers nec-
essary to prepare the equipment and supplies and to supervise and ad-
minister the additional training. 
‘‘§ 51704. Training for maritime oil pollution prevention, re-
sponse, and clean-up 
‘‘(a) ASSISTANCE IN ESTABLISHING PROGRAM.—The Secretary of Trans-
portation shall assist maritime training institutions approved by the Sec-
118
retary in establishing a training program for maritime oil pollution preven-
tion, response, and clean-up. 
‘‘(b) PROVIDING TRAINING VESSELS.—Subject to subsection (c), the Sec-
retary may provide, with title free of all liens, to maritime training institu-
tions that have a program established under subsection (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 Sec-
retary considers appropriate, the following requirements apply to vessels 
provided under this section: 
‘‘(1) The vessel shall be offered to the institution at a location se-
lected by the Secretary. 
‘‘(2) The institution shall use the vessel to train students and appro-
priate maritime industry personnel in oil spill prevention, 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 au-
thorities 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 sec-
tion. 
‘‘(6) When the institution can no longer use the vessel for its train-
ing 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 dis-
pose of the vessel. 
‘‘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, rib-
119
bon bars, emblems, rosettes, miniature facsimiles, plaques, citations, or 
other suitable devices or insignia) for individual acts or service in the mer-
chant 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 indi-
vidual 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 Mer-
chant 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 oper-
ations 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 extraordinary 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 per-
manent historical record. 
‘‘(b) AWARDS TO CREWS.—The Secretary of Transportation may award 
an appropriate citation ribbon bar to the master and each individual serv-
ing, at the time of the action, on a vessel issued an award under subsection 
(a). 
‘‘(c) CONSULTATION.—The Secretary of Transportation shall consult with 
the Secretary of State before awarding an award or citation to a foreign 
vessel or its crew under this section. 
‘‘§ 51903. Multiple awards 
‘‘An individual may not be awarded more than one of any type of decora-
tion or medal under this chapter. For each succeeding act or service justi-
fying the same decoration or medal, a suitable device may be awarded to 
be worn with the decoration or medal.
120
‘‘§ 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 Transportation may present 
the award to an appropriate representative. 
‘‘§ 51905. Flags and grave markers 
‘‘Except as authorized under another law, the Secretary of Transpor-
tation 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 representative of an indi-
vidual, 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 ben-
efits 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 med-
als authorized under this chapter or a prior law; and 
‘‘(2) provide at cost, or authorize private persons to sell at reason-
able 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 pro-
vided 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 Secretary of 
Transportation under subsection (c) shall be entitled to reemployment rights 
and other benefits substantially equivalent to the rights and benefits pro-
121
vided 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 application for certifi-
cation 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 maintained 
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 sec-
tion; 
‘‘(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 sub-
paragraphs (A) and (B) of paragraph (1), certify that individual under 
this subsection. 
‘‘(d) EQUIVALENCE TO MILITARY SELECTIVE SERVICE ACT CERTIFI-
CATE.—For purposes of reemployment rights and benefits provided by this 
section, a certification under subsection (c) shall be considered to be the 
equivalent of a certificate 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.
122
‘‘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. 
‘‘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 contract’ 
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 Sec-
retary 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 con-
structed with financing or a financing guarantee under chap-
ter 537 or 575 of this title; 
‘‘(ii) documented or agreed with the Secretary to be docu-
mented under the laws of the United States; and 
‘‘(iii)(I) of a type, size, and speed that the Secretary deter-
mines 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 reconstruction or reconditioning will pro-
mote 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, re-
123
construction, reconditioning, or acquisition of a new vessel or for other pur-
poses authorized by this chapter. 
‘‘(b) APPLICATION OF CERTAIN LAWS AND REGULATIONS.—The fund 
shall be established, maintained, expended, and used as provided by this 
chapter and regulations prescribed jointly by the Secretary of Transpor-
tation 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 commerce of the 
United States or in the fisheries; 
‘‘(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 requi-
sitioned by the United States Government; 
‘‘(4) owned, in whole or in part, a vessel being operated in the for-
eign 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 fish-
eries 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 in-
demnity’ mean the sum of—
‘‘(1) the adjusted basis of the vessel; and 
‘‘(2) the amount of gain the taxpayer would recognize without 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 taxpayer does not recog-
124
nize a gain on the sale or the actual or constructive 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 tax-
payer must make the election referred to in subsection (b) in the tax-
payer’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 tax-
payer 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 re-
ferred to in subsection (b) within 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 recomputation 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 com-
putation or recomputation nevertheless shall be made notwithstanding the 
statute if the taxpayer 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 con-
struction, reconstruction, reconditioning, acquisition, or liquidation of pur-
chase-money indebtedness of the new vessel that represents a gain not rec-
ognized for tax purposes under section 53306 of this title. 
‘‘§ 53308. Order and proportions of deposits and with-
drawals 
‘‘In this chapter—
125
‘‘(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 de-
posit; and 
‘‘(3) if a deposit consists in part of a gain not recognized under sec-
tion 53306 of this title, any expenditure, obligation, or withdrawal ap-
plied against that deposit shall be deemed to be a gain in the propor-
tion 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 reason-
able needs of the business within the meaning of section 537(a) of the Inter-
nal Revenue 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 recondi-
tioning of a new vessel; 
‘‘(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 necessary; or 
‘‘(2) the deposit is expended or obligated for expenditure for the liq-
uidation of existing or subsequently incurred purchase-money indebted-
ness 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
126
a construction-differential subsidy contract or not bought from the Sec-
retary 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 construction of the first 
vessel) must be completed within 6 months after the date of the con-
struction contract (or within the period of an extension under sub-
section (c)), as estimated by the Secretary and certified by the Sec-
retary to the Secretary of the Treasury; and 
‘‘(2) construction under the contract must be completed with reason-
able dispatch thereafter. 
‘‘(c) EXTENSIONS.—The Secretary of Transportation may grant exten-
sions 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 ex-
cess profits tax and the capital stock tax, if—
‘‘(1) the deposited gain is not expended or obligated within the ap-
propriate 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 pro-
gressed 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 Sec-
retary of the Treasury that, for causes within the control of the tax-
payer, the entire construction related to that deposited gain is not com-
pleted with reasonable dispatch. 
‘‘§ 53312. Assessment and collection of deficiency tax 
‘‘Notwithstanding any other provision of law, a deficiency in tax for a tax-
able year resulting from the inclusion of an amount in gross income as pro-
vided by section 53311 of this title, and the amount to be treated as a defi-
ciency under section 53311 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.
127
‘‘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 agree-
ment. 
‘‘(2) ELIGIBLE VESSEL.—The term ‘eligible vessel’ means—
‘‘(A) a vessel—
‘‘(i) constructed in the United States (and, if recon-
structed, reconstructed in the United States), constructed 
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.
128
‘‘(3) JOINT REGULATIONS.—The term ‘joint regulations’ means reg-
ulations 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 recon-
structed, reconstructed in the United States), constructed 
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 main-
taining the capital construction fund established under sec-
tion 53503 of this title, to be operated in the United States 
foreign, Great Lakes, or noncontiguous 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 ves-
sel or a qualified vessel operated or to be operated in the fisheries 
of the United States; and
129
‘‘(B) the Secretary of Transportation with respect to other ves-
sels. 
‘‘(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—
‘‘(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 Secretary under this chap-
ter 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 non-
contiguous domestic trade or in the fisheries of the United States. 
‘‘§ 53504. Deposits and withdrawals 
‘‘(a) REQUIRED DEPOSITS.—An agreement to establish a capital con-
struction fund shall provide for the deposit in the fund of the amounts 
agreed to be appropriate to provide for qualified withdrawals 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 pre-
scribed by the Secretary by regulation. However, the Secretary may not re-
quire a person to deposit in the fund for a taxable year more than 50 per-
cent of that portion of the person’s taxable income for that year (as deter-
mined under section 53505(a)(1) of this title) that is attributable to the op-
eration of an agreement vessel.
130
‘‘§ 53505. Ceiling on deposits 
‘‘(a) MAXIMUM DEPOSITS.—The amount deposited in a capital construc-
tion 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 attrib-
utable 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 regulations) from 
the disposition of an agreement vessel or from 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 subsection (a)(2) for 
any period shall be reduced by any amount the owner is required or per-
mitted, 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 in-
terest-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 corporations that—
‘‘(A) is fully listed and registered on an exchange registered 
with the Securities and Exchange Commission as a national secu-
rities exchange; and 
‘‘(B) would be acquired by a prudent investor seeking a reason-
able income and the preservation of capital. 
‘‘(2) PREFERRED STOCK.—The preferred stock of a corporation 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
131
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 mar-
ket 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 percentage. 
‘‘§ 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 regulations) from the transaction is depos-
ited 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; 
‘‘(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 with-
out 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 ac-
counts: 
‘‘(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;