H. R. 1442—184
covering all marine and port risks, protection and indemnity risks, 
and all other hazards and liabilities, adequate to cover damages 
claimed against and losses sustained by the chartered vessel arising 
during the term of the charter. The insurance shall be in such 
form, in such amount, and with such companies as the Secretary 
of Transportation may require. In accordance with law, any of 
the insurance risks may be underwritten by the Secretary. 
‘‘§ 57520. Vessel maintenance 
‘‘(a) IN GENERAL.—A charter under this chapter shall require 
the charterer, at the charterer’s expense, to—
‘‘(1) keep the chartered vessel in good repair and efficient 
operating condition; and 
‘‘(2) make any repairs required by the Secretary of 
Transportation. 
‘‘(b) INSPECTION.—The charter shall provide that the Secretary 
has the right to inspect the vessel at any time to ascertain its 
condition. 
‘‘§ 57521. Termination of charter during national emergency 
‘‘A charter under this chapter shall provide that during a 
national emergency proclaimed by the President or a period for 
which the President has proclaimed that the security of the national 
defense makes it advisable, the Secretary of Transportation may 
terminate the charter without cost to the United States Government 
on such notice to the charterer as the President determines. 
‘‘SUBCHAPTER III—MISCELLANEOUS 
‘‘§ 57531. Construction and charter of vessels for unsuccess-
ful routes 
‘‘(a) IN GENERAL.—If the Secretary of Transportation finds that 
a trade route determined to be essential under section 50103 of 
this title cannot be successfully developed and maintained and 
the Secretary’s replacement program cannot be achieved under 
private operation of the trade route by a citizen of the United 
States with vessels documented under chapter 121 of this title, 
without further aid by the United States Government in addition 
to the financial aid authorized under titles V and VI of the Merchant 
Marine Act, 1936, the Secretary, without advertisement or competi-
tion, may—
‘‘(1) have constructed, in private shipyards or in navy yards, 
vessels of the types necessary for the trade route; and 
‘‘(2) demise charter those new vessels to the operator of 
vessels of the United States established on the trade route. 
‘‘(b) AMOUNT OF CHARTER HIRE.—
‘‘(1) IN
GENERAL.—The annual charter hire under sub-
section (a) shall be at least 4 percent of the price (referred 
to in this section as the ‘foreign cost’) at which the vessel 
would be sold if constructed under title V of the Merchant 
Marine Act, 1936, plus—
‘‘(A) a percentage of the depreciated foreign cost com-
puted annually determined by the Secretary of the 
Treasury, taking into consideration the current average 
market yield on outstanding marketable obligations of the
H. R. 1442—185
Government with remaining periods to maturity com-
parable to the term of the charter, adjusted to the nearest 
one-eighth percent; and 
‘‘(B) an allowance adequate in the judgment of the 
Secretary of Transportation to cover administrative costs. 
‘‘(2) DEPRECIATION.—Depreciation under paragraph (1)(A) 
shall be based on—
‘‘(A) a 25-year life for dry-cargo and passenger vessels; 
and 
‘‘(B) a 20-year life for tankers and other bulk liquid 
carrier vessels. 
‘‘(c) OPTION TO PURCHASE.—The charter may contain an option 
to the charterer to purchase the vessels from the Secretary of 
Transportation within 5 years after delivery under the charter, 
on the same terms and conditions as provided in title V of the 
Merchant Marine Act, 1936, for the purchase of new vessels from 
the Secretary. However—
‘‘(1) the purchase price shall be the foreign cost less depre-
ciation to the date of purchase based on the useful life specified 
in subsection (b)(2); 
‘‘(2) the required cash payment payable at the time of 
the purchase shall be 25 percent of the purchase price; 
‘‘(3) the charter may provide that any part of the charter 
hire paid in excess of the minimum charter hire provided for 
in this section may be credited against the cash payment pay-
able at the time of the purchase; 
‘‘(4) the balance of the purchase price shall be paid within 
the remaining years of useful life (as specified in subsection 
(b)(2)) after the date of delivery of the vessel under the charter 
and in approximately equal annual installments, except that 
the first installment, which shall be payable on the next ensuing 
anniversary date of the delivery under the charter, shall be 
a proportionate part of the annual installment; and 
‘‘(5) interest shall be payable on the unpaid balances from 
the date of purchase, at a rate not less than—
‘‘(A) a rate determined by the Secretary of the 
Treasury, taking into consideration the current average 
market yield on outstanding marketable obligations of the 
Government with remaining periods to maturity com-
parable to the average maturities of the loans, adjusted 
to the nearest one-eighth percent; plus 
‘‘(B) an allowance adequate in the judgment of the 
Secretary of Transportation to cover administrative costs. 
‘‘(d) OPERATION OF VESSEL.—
‘‘(1) PERMISSIBLE VOYAGES.—The charter shall provide for 
operation of the vessel exclusively—
‘‘(A) in foreign trade; 
‘‘(B) on a round-the-world voyage; 
‘‘(C) on a round voyage from the west coast of the 
United States to a European port that includes an inter-
coastal port of the United States; 
‘‘(D) on a round voyage from the Atlantic coast of 
the United States to the Orient that includes an inter-
coastal port of the United States; or 
‘‘(E) on a voyage in foreign trade on which the vessel 
may stop at Hawaii or an island territory or possession 
of the United States.
H. R. 1442—186
‘‘(2) DOMESTIC TRADE.—The charter shall provide if the 
vessel is operated in domestic trade on any of the services 
specified in paragraph (1), the charterer will pay annually 
to the Secretary of Transportation that proportion of 1⁄25 of 
the difference between the domestic and foreign cost of the 
vessel as the gross revenue derived from the domestic trade 
bears to the gross revenue derived from the entire voyages 
completed during the preceding year. 
‘‘§ 57532. Operation of experimental vessels 
‘‘(a) DEFINITION.—In this section, the term ‘experimental vessel’ 
means a vessel owned by the United States Government (including 
a vessel in the National Defense Reserve Fleet) that has been 
constructed, reconditioned, or remodeled for experimental or testing 
purposes. 
‘‘(b) AUTHORITY TO OPERATE.—The Secretary of Transportation, 
for the purpose of practical development, trial, and testing, may 
operate an experimental vessel under a bareboat charter or general 
agency agreement in the foreign or domestic trade of the United 
States or for use for the account of a department or agency of 
the Government, without regard to other provisions of this subtitle 
and other laws related to chartering and general agency operations. 
Not more than 10 vessels may be operated and tested under this 
section in any one year. 
‘‘(c) TERMS OF OPERATION.—Operation of a vessel under this 
section shall be on terms the Secretary considers appropriate to 
carry out the purposes of this subtitle. A bareboat charter under 
this section shall be at reasonable rates and include restrictions 
the Secretary considers appropriate to protect the public interest, 
including provisions for recapture of profits under section 57517 
of this title. A charter or general agency agreement under this 
section shall be reviewed annually to determine whether conditions 
exist to justify continuance of the charter or agreement. 
‘‘(d) RIGHTS OF SEAMEN.—A seaman engaged in vessel oper-
ations of the Secretary under this section and employed through 
a general agent in connection with a charter or agreement under 
this section is entitled to all the rights and remedies provided 
in sections 1(a) and (c), 3(c), and 4 of the Act of March 24, 1943 
(50 App. U.S.C. 1291(a), (c), 1293(c), 1294).
‘‘PART G—RESTRICTIONS AND PENALTIES 
‘‘CHAPTER 581—RESTRICTIONS AND PENALTIES
‘‘Sec. 
‘‘58101.
Operating in domestic intercoastal or coastwise service. 
‘‘58102.
Default on payment or maintenance of reserves. 
‘‘58103.
Employing another person as managing or operating agent. 
‘‘58104.
Willful violation constitutes breach of contract or charter. 
‘‘58105.
Preferences for cargo in which charterer has interest. 
‘‘58106.
Concerted discriminatory activities. 
‘‘58107.
Discrimination at ports by water common carriers. 
‘‘58108.
Charges for transportation subject to subtitle IV of title 49. 
‘‘58109.
Penalties.
‘‘§ 58101. Operating in domestic intercoastal or coastwise 
service 
‘‘(a) PROHIBITION.—A subsidy may not be awarded or paid 
to a contractor under the operating-differential subsidy program,
H. R. 1442—187
and a vessel may not be chartered to a person under chapter 
575 of this title, if the contractor or charterer, or a holding company, 
subsidiary, affiliate, or associate of the contractor or charterer, 
or an officer, director, agent, or executive thereof, directly or 
indirectly—
‘‘(1) owns, charters, or operates a vessel engaged in the 
domestic intercoastal or coastwise service; or 
‘‘(2) owns a pecuniary interest in a person that owns, 
charters, or operates a vessel in the domestic intercoastal or 
coastwise service. 
‘‘(b) WAIVER.—A person may apply to the Secretary of Transpor-
tation for a waiver of subsection (a). Before deciding on the waiver, 
the Secretary shall give the applicant and other interested persons 
an opportunity for a hearing. The Secretary may not grant the 
waiver if the Secretary finds it would—
‘‘(1) result in unfair competition to a person operating 
exclusively in the domestic intercoastal or coastwise service; 
or 
‘‘(2) be prejudicial to the objectives and policy of this sub-
title. 
‘‘(c) CONTINUOUS OPERATION SINCE 1935.—The Secretary shall 
grant an application under subsection (b) without requiring further 
proof that the public interest and convenience will be served and 
without further proceedings as to the competition in the route 
or trade, if the contractor or other person, or a predecessor in 
interest, was in bona-fide operation as a common carrier by water 
in the domestic intercoastal or coastwise trade in 1935 over the 
route or in the trade for which the application is made and has 
so operated since that time or, if engaged in furnishing seasonal 
service only, was in bona-fide operation in 1935 during the season 
ordinarily covered by its operation, except in either event as to 
interruptions of service over which the applicant or its predecessor 
in interest had no control. 
‘‘(d) DIVERSION
INTO
INTERCOASTAL
OR
COASTWISE
OPER-
ATIONS.—If an application under subsection (b) is approved, a person 
referred to in this section may not divert, directly or indirectly, 
money, property, or any other thing of value, used in a foreign-
trade operation for which a subsidy is paid by the United States 
Government, into intercoastal or coastwise operations. 
‘‘§ 58102. Default on payment or maintenance of reserves 
‘‘The Secretary of Transportation may supervise the number 
and compensation of all officers and employees of a contractor 
under the operating-differential subsidy program or a charterer 
under chapter 575 of this title, receiving an operating-differential 
subsidy, if the contractor or charterer—
‘‘(1) is in default on a mortgage, note, purchase contract, 
or other obligation to the Secretary; or 
‘‘(2) has not maintained, in a manner satisfactory to the 
Secretary, all of the reserves provided for in this subtitle. 
‘‘§ 58103. Employing another person as managing or oper-
ating agent 
‘‘(a) PROHIBITION.—Except with the written consent of the Sec-
retary of Transportation, a contractor holding a contract under 
the operating-differential subsidy program or under chapter 575 
of this title may not—