210
from taxation under section 501(c)(3) of the Internal Rev-
enue Code of 1986 (26 U.S.C. 501(c)(3)), or to the Federal 
Government or a State or local government for a public pur-
pose; and 
‘‘(ii) the vessel shall be disposed of by a court of competent 
jurisdiction of the county in which the principal office of the 
recipient is located, for such purposes as the court shall de-
termine, or to such organizations as the court shall determine 
are organized exclusively for public purposes. 
‘‘(b) OTHER EQUIPMENT.—At the Secretary’s discretion, additional 
equipment from other obsolete vessels of the Fleet may be conveyed to assist 
the recipient with maintenance, repairs, or modifications. 
‘‘(c) ADDITIONAL TERMS.—The Secretary may require any additional 
terms the Secretary considers appropriate. 
‘‘(d) DELIVERY OF VESSEL.—If conveyance is made under this section, 
the vessel shall be delivered to the recipient at a time and place to be deter-
mined by the Secretary. The vessel shall be conveyed in an ‘as is’ condition. 
‘‘(e) LIMITATIONS.—If at any time prior to delivery of the vessel to the 
recipient, the Secretary determines that a different disposition of the vessel 
would better serve the interests of the Government, the Secretary shall pur-
sue the more favorable disposition of the obsolete vessel and shall not be 
liable for any damages that may result from an intended recipient’s reliance 
upon a proposed transfer. 
‘‘(f) REVERSION.—The Secretary shall include in any conveyance under 
this section terms under which all right, title, and interest conveyed by the 
Secretary shall revert to the Government if the Secretary determines the 
vessel has been used other than as described in the business plan required 
under subsection (a)(5). 
‘‘§ 57104. Acquisition of vessels from sale of obsolete vessels 
‘‘(a) IN GENERAL.—The Secretary of Transportation may acquire suit-
able documented vessels with amounts in the Vessel Operations Revolving 
Fund derived from the sale of obsolete vessels in the National Defense Re-
serve Fleet. 
‘‘(b) VALUATION.—The acquired and obsolete vessels shall be valued at 
their scrap value in domestic or foreign markets as of the date of the acqui-
sition for or sale from the Fleet. However, the value assigned to those ves-
sels shall be determined on the same basis, with consideration given to the 
fair value of the cost of moving the vessel sold from the Fleet to the place 
of scrapping. 
‘‘(c) COSTS INCIDENT TO LAY-UP.—Costs incident to the lay-up of the 
vessel acquired under this section may be paid from amounts in the Fund.
211
‘‘(d) TRANSFERS TO NON-CITIZENS.—A vessel sold from the Fleet under 
this section may be scrapped in an approved foreign market without obtain-
ing additional separate approval from the Secretary to transfer the vessel 
to a person not a citizen of the United States. 
‘‘§ 57105. Acquisition of vessels for essential services, routes, 
or lines 
‘‘(a) IN GENERAL.—The Secretary of Transportation may acquire a ves-
sel, by purchase or otherwise, if—
‘‘(1) the Secretary considers the vessel necessary to establish, main-
tain, improve, or serve as a replacement on an essential service, route, 
or line in the foreign commerce of the United States, as determined 
under section 50103 of this title; 
‘‘(2) the vessel was constructed in the United States; and 
‘‘(3) the Secretary of the Navy has certified to the Secretary of 
Transportation that the vessel is suitable for economical and speedy 
conversion into a naval or military auxiliary or otherwise suitable for 
use by the United States Government in time of war or national emer-
gency. 
‘‘(b) PRICE.—The price paid for the vessel shall be based on a fair and 
reasonable valuation. However, the price may not exceed by more than 5 
percent the cost of the vessel to the owner (excluding any construction-dif-
ferential subsidy and the cost of national defense features paid by the Sec-
retary of Transportation) plus the actual cost previously expended for recon-
ditioning, less depreciation based on a 25-year life for a dry-cargo or pas-
senger vessel and a 20-year life for a tanker or other liquid bulk carrier 
vessel. 
‘‘(c) DOCUMENTATION.—A vessel acquired under this section that is not 
documented under the laws of the United States at the time of acquisition 
shall be so documented as soon as practicable. 
‘‘§ 57106. Maintenance, improvement, and operation of ves-
sels 
‘‘(a) IN GENERAL.—The Secretary of Transportation may maintain, re-
pair, recondition, remodel, and improve vessels owned by the United States 
Government and in the possession or under the control of the Secretary, to 
equip them adequately for competition in the foreign trade of the United 
States. The Secretary may operate such a vessel or charter the vessel on 
terms and conditions the Secretary considers appropriate to carry out the 
purposes of this subtitle. 
‘‘(b) DOCUMENTATION AND RESTRICTIONS ON OPERATION.—A vessel re-
conditioned, remodeled, or improved under subsection (a) shall be docu-
mented under the laws of the United States and remain so documented for
212
at least 5 years after completion of the reconditioning, remodeling, or im-
provement. During that period, it shall be operated on voyages that are not 
exclusively coastwise. 
‘‘§ 57107. Vessels for other agencies 
‘‘(a) IN GENERAL.—The Secretary of Transportation may construct, re-
construct, repair, equip, and outfit, by contract or otherwise, vessels or 
parts thereof, for any other department or agency of the United States Gov-
ernment to the extent the other department or agency is authorized by law 
to do so for its own account. 
‘‘(b) EFFECT ON CONTRACT AUTHORIZATION.—An obligation incurred or 
expenditure made by the Secretary under this section does not affect any 
contract authorization of the Secretary, but instead shall be charged against 
the existing appropriation or contract authorization of the department or 
agency. 
‘‘§ 57108. Consideration of ballast and equipment in deter-
mining selling price 
‘‘The Maritime Administration may not sell a vessel until its ballast and 
equipment have been inventoried and their value considered in determining 
the selling price of the vessel. 
‘‘§ 57109. Operation of vessels purchased, chartered, or 
leased from Secretary of Transportation 
‘‘Unless otherwise authorized by the Secretary of Transportation, a vessel 
purchased, chartered, or leased from the Secretary may be operated only 
under a certificate of documentation with a registry or coastwise endorse-
ment. Such a vessel, while employed solely as a merchant vessel, is subject 
to the laws, regulations, and liabilities governing merchant vessels, whether 
the United States Government has an interest in the vessel as an owner or 
holds a mortgage, lien, or other interest.
‘‘CHAPTER 573—VESSEL TRADE-IN PROGRAM
‘‘Sec. 
‘‘57301.
Definitions. 
‘‘57302.
Authority to acquire vessels. 
‘‘57303.
Utility value and tonnage requirements. 
‘‘57304.
Eligible acquisition dates. 
‘‘57305.
Determination of trade-in allowance. 
‘‘57306.
Payment of trade-in allowance. 
‘‘57307.
Recognition of gain for tax purposes. 
‘‘57308.
Use of vessels at least 25 years old.
‘‘§ 57301. Definitions 
‘‘In this chapter: 
‘‘(1) NEW VESSEL.—The term ‘new vessel’ means a vessel—
‘‘(A) constructed under this subtitle and acquired within 2 years 
after the date of completion; or
213
‘‘(B) constructed in a domestic shipyard on private account and 
not under this subtitle, and documented under the laws of the 
United States. 
‘‘(2) OBSOLETE VESSEL.—The term ‘obsolete vessel’ means a vessel 
that—
‘‘(A) is of at least 1,350 gross tons; 
‘‘(B) the Secretary of Transportation believes should, because of 
its age, obsolescence, or other reasons, be replaced in the public 
interest; and 
‘‘(C) has been owned by a citizen of the United States for at 
least 3 years immediately before its acquisition under this chapter. 
‘‘§ 57302. Authority to acquire vessels 
‘‘To promote the construction of new, safe, and efficient vessels to carry 
the domestic and foreign waterborne commerce of the United States, the 
Secretary of Transportation may acquire an obsolete vessel in exchange for 
an allowance of credit toward the cost of construction or purchase of a new 
vessel as provided in this chapter. 
‘‘§ 57303. Utility value and tonnage requirements 
‘‘(a) UTILITY VALUE.—The utility value of a new vessel to be acquired 
under this chapter for operation in the domestic or foreign commerce of the 
United States may not be substantially less than that of the obsolete vessel 
acquired in exchange under this chapter. 
‘‘(b) TONNAGE.—If the Secretary of Transportation finds that the new 
vessel will have a utility value at least equal to that of the obsolete vessel, 
the new vessel may be of lesser gross tonnage than the obsolete vessel. How-
ever, the gross tonnage of the new vessel must be at least one-third the 
gross tonnage of the obsolete vessel. 
‘‘§ 57304. Eligible acquisition dates 
‘‘At the option of the owner, the acquisition of an obsolete vessel under 
this chapter shall occur—
‘‘(1) when the owner contracts for the construction or purchase of 
a new vessel; or 
‘‘(2) within 5 days of the actual date of delivery of the new vessel 
to the owner. 
‘‘§ 57305. Determination of trade-in allowance 
‘‘(a) IN GENERAL.—The Secretary of Transportation shall determine the 
trade-in allowance for an obsolete vessel at the time of acquisition of the 
vessel. The allowance shall be the fair value of the vessel. In determining 
the value, the Secretary shall consider—
‘‘(1) the scrap value of the obsolete vessel in American and foreign 
markets;
214
‘‘(2) the depreciated value based on a 20-year or 25-year life, which-
ever applies to the obsolete vessel; and 
‘‘(3) the market value of the obsolete vessel for operation in world 
commerce or in the domestic or foreign commerce of the United States. 
‘‘(b) USE OF OBSOLETE VESSELS.—If acquisition of the obsolete vessel 
occurs when the owner contracts for the construction of the new vessel, and 
the owner uses the obsolete vessel during the period of construction of the 
new vessel, the Secretary shall reduce the trade-in allowance by an amount 
representing the fair value of that use. The Secretary shall establish the 
rate for use of the obsolete vessel when the contract for construction of the 
new vessel is made. 
‘‘§ 57306. Payment of trade-in allowance 
‘‘(a) ACQUISITION AT TIME OF CONTRACT.—If acquisition of an obsolete 
vessel under this chapter occurs when the owner contracts for the construc-
tion or purchase of the new vessel, the Secretary of Transportation shall 
apply the trade-in allowance to the purchase price of the new vessel rather 
than paying it to the owner. If the new vessel is constructed under this sub-
title, the Secretary may apply the trade-in allowance to the required cash 
payments on terms and conditions the Secretary may prescribe. If the new 
vessel is not constructed under this subtitle, the Secretary shall pay the 
trade-in allowance to the builder of the vessel for the account of the owner 
when the Secretary acquires the obsolete vessel. 
‘‘(b) ACQUISITION AT TIME OF DELIVERY.—If acquisition of the obsolete 
vessel occurs when the new vessel is delivered to the owner, the Secretary 
shall deposit the trade-in allowance in the owner’s capital construction fund. 
‘‘§ 57307. Recognition of gain for tax purposes 
‘‘The owner of an obsolete vessel does not recognize a gain under the 
Federal income tax laws when the vessel is transferred to the Secretary of 
Transportation in exchange for a trade-in allowance under this chapter. The 
basis of the new vessel acquired with the allowance is the same as the basis 
of the obsolete vessel—
‘‘(1) increased by the difference between the cost of the new vessel 
and the trade-in allowance of the obsolete vessel; and 
‘‘(2) decreased by the amount of loss recognized on the transfer. 
‘‘§ 57308. Use of vessels at least 25 years old 
‘‘An obsolete vessel acquired under this chapter that is or becomes at 
least 25 years old may not be used for commercial operation. However, the 
vessel may be used—
‘‘(1) during a period in which vessels may be requisitioned under 
chapter 563 of this title; or
215
‘‘(2) except as otherwise provided in this subtitle, on trade routes 
serving only the foreign trade of the United States.
‘‘CHAPTER 575—CONSTRUCTION, CHARTER, AND SALE 
OF VESSELS
‘‘SUBCHAPTER I—GENERAL 
‘‘Sec. 
‘‘57501.
Completion of long-range program. 
‘‘57502.
Construction, reconditioning, and remodeling of vessels. 
‘‘57503.
Competitive bidding. 
‘‘57504.
Charter or sale of vessels acquired by Department of Transportation. 
‘‘57505.
Employment of vessels on foreign trade routes. 
‘‘57506.
Minimum selling price of vessels. 
‘‘SUBCHAPTER II—CHARTERS 
‘‘57511.
Demise charters. 
‘‘57512.
Competitive bidding. 
‘‘57513.
Minimum bid. 
‘‘57514.
Qualifications of bidders. 
‘‘57515.
Awarding of charters. 
‘‘57516.
Operating-differential subsidies. 
‘‘57517.
Recovery of excess profits. 
‘‘57518.
Performance bond. 
‘‘57519.
Insurance. 
‘‘57520.
Vessel maintenance. 
‘‘57521.
Termination of charter during national emergency. 
‘‘SUBCHAPTER III—MISCELLANEOUS 
‘‘57531.
Construction and charter of vessels for unsuccessful routes. 
‘‘57532.
Operation of experimental vessels.
‘‘SUBCHAPTER I—GENERAL 
‘‘§ 57501. Completion of long-range program 
‘‘Whenever the Secretary of Transportation determines that the objectives 
and policies declared in sections 50101 and 50102 of this title cannot be 
fully realized within a reasonable time under titles V and VI of the Mer-
chant Marine Act, 1936, and the President approves the determination, the 
Secretary, in accordance with this chapter, shall complete the long-range 
program described in section 50102 of this title. 
‘‘§ 57502. Construction, reconditioning, and remodeling of 
vessels 
‘‘(a) IN GENERAL.—The Secretary of Transportation may have new ves-
sels constructed, and have old vessels reconditioned or remodeled, as the 
Secretary determines necessary to carry out the objectives of this subtitle. 
‘‘(b) PLACE OF WORK.—Construction, reconditioning, and remodeling of 
vessels under subsection (a) shall take place in shipyards in the continental 
United States (including Alaska and Hawaii). However, if satisfactory con-
tracts cannot be obtained from private shipbuilders, the Secretary may have 
the work done in navy yards. 
‘‘(c) APPLICABILITY OF CONSTRUCTION-DIFFERENTIAL SUBSIDY PROVI-
SIONS.—Contracts for the construction, reconstruction, or reconditioning of 
a vessel by a private shipbuilder under this chapter are subject to the provi-
sions of title V of the Merchant Marine Act, 1936, applicable to a contract
216
with a private shipbuilder for the construction of a vessel under title V of 
that Act. 
‘‘§ 57503. Competitive bidding 
‘‘(a) ADVERTISEMENT AND BIDDING.—The Secretary of Transportation 
may make a contract with a private shipbuilder for the construction of a 
new vessel, or for the reconstruction or reconditioning of an existing vessel, 
only after due advertisement and upon sealed competitive bids. 
‘‘(b) OPENING
OF BIDS.—Bids required under this section shall be 
opened at the time and place stated in the advertisement for bids. All inter-
ested persons, including representatives of the press, shall be permitted to 
attend. The results of the bidding shall be publicly announced. 
‘‘§ 57504. Charter or sale of vessels acquired by Department 
of Transportation 
‘‘Vessels transferred to or otherwise acquired by the Department of 
Transportation in any manner may be chartered or sold by the Secretary 
of Transportation as provided in this chapter. 
‘‘§ 57505. Employment of vessels on foreign trade routes 
‘‘(a) IN GENERAL.—The Secretary of Transportation shall arrange for 
the employment of the Department of Transportation’s vessels in steamship 
lines on such trade routes, exclusively serving the foreign trade of the 
United States, as the Secretary determines are essential for the development 
and maintenance of the commerce of the United States and the national de-
fense. However, the Secretary shall first determine that those routes are not 
being adequately served by existing steamship lines privately owned and op-
erated by citizens of the United States and documented under the laws of 
the United States. 
‘‘(b) POLICY TO ENCOURAGE PRIVATE OPERATION.—The Secretary shall 
have a policy of encouraging private operation of each essential steamship 
line now owned by the United States Government by—
‘‘(1) selling the line to a citizen of the United States; or 
‘‘(2) demising the Secretary’s vessels on bareboat charter to citizens 
of the United States who agree to maintain the line in the manner pro-
vided in this chapter. 
‘‘§ 57506. Minimum selling price of vessels 
‘‘(a) IN GENERAL.—A vessel constructed under this subtitle or the Mer-
chant Marine Act, 1936, may not be sold by the Secretary of Transpor-
tation for less than the price specified in this section. 
‘‘(b) OPERATION IN FOREIGN TRADE.—If the vessel is to be operated in 
foreign trade, the minimum price is the estimated foreign construction cost 
(exclusive of national defense features) determined as of the date the con-
struction contract is executed, less depreciation under subsection (d).
217
‘‘(c) OPERATION IN DOMESTIC TRADE.—If the vessel is to be operated 
in domestic trade, the minimum price is the cost of construction in the 
United States (exclusive of national defense features), less depreciation 
under subsection (d). 
‘‘(d) DEPRECIATION.—Depreciation under subsections (b) and (c) shall be 
based on—
‘‘(1) a 25-year life for dry-cargo and passenger vessels; and 
‘‘(2) a 20-year life for tankers and other bulk liquid carrier vessels. 
‘‘SUBCHAPTER II—CHARTERS 
‘‘§ 57511. Demise charters 
‘‘A charter by the Secretary of Transportation under this chapter shall 
demise the vessel to the charterer subject to all usual conditions contained 
in a bareboat charter. The charter shall be for a term the Secretary con-
siders to be in the best interest of the United States Government and the 
merchant marine. 
‘‘§ 57512. Competitive bidding 
‘‘(a) IN GENERAL.—The Secretary of Transportation may charter a ves-
sel of the Department of Transportation to a private operator only on the 
basis of competitive sealed bidding. The bids must be submitted in strict 
compliance with the terms and conditions of a public advertisement solic-
iting the bids. 
‘‘(b) ADVERTISEMENT
FOR BIDS.—An advertisement for bids shall 
state—
‘‘(1) the number, type, and tonnage of the vessels being offered for 
bareboat charter for operation as a steamship line on a designated 
trade route; 
‘‘(2) the minimum number of sailings required; 
‘‘(3) the length of time of the charter; 
‘‘(4) the right of the Secretary to reject all bids; and 
‘‘(5) other information the Secretary considers necessary for the in-
formation of prospective bidders. 
‘‘(c) OPENING
OF BIDS.—Bids required under this section shall be 
opened at the time and place stated in the advertisement for bids. All inter-
ested persons, including representatives of the press, shall be permitted to 
attend. The results of the bidding shall be publicly announced. 
‘‘§ 57513. Minimum bid 
‘‘The Secretary of Transportation shall reject any bid for the charter 
under this subchapter of a vessel constructed under this subtitle or the Mer-
chant Marine Act, 1936, if the charter hire offered is lower than the min-
imum charter hire would be if the vessel were chartered under section 
57531 of this title.
218
‘‘§ 57514. Qualifications of bidders 
‘‘(a) CONSIDERATIONS.—In deciding whether to award a charter to a bid-
der, the Secretary of Transportation shall consider—
‘‘(1) the bidder’s financial resources, credit standing, and practical 
experience in operating vessels; and 
‘‘(2) other factors a prudent business person would consider in enter-
ing into a transaction involving a large capital investment. 
‘‘(b) DISQUALIFICATIONS.—The Secretary may not charter a vessel to a 
person appearing to lack sufficient capital, credit, and experience to operate 
the vessel successfully over the period covered by the charter. 
‘‘§ 57515. Awarding of charters 
‘‘(a) IN GENERAL.—The Secretary of Transportation shall award the 
charter to the bidder proposing to pay the highest monthly charter hire. 
However, the Secretary may reject the highest or most advantageous or any 
other bid if the Secretary considers the charter hire offered too low or deter-
mines that the bidder lacks the qualifications required by section 57514 of 
this title. 
‘‘(b) HIGHEST BID REJECTED.—If the Secretary rejects the highest bid, 
the Secretary may—
‘‘(1) award the charter to the next highest bidder; or 
‘‘(2) reject all bids and either readvertise the line or operate the line 
until conditions appear more favorable to reoffer the line for private 
charter. 
‘‘(c) REASON FOR REJECTION.—On request of a bidder, the reason for 
rejection shall be stated in writing to the bidder. 
‘‘§ 57516. Operating-differential subsidies 
‘‘If the Secretary of Transportation considers it necessary, the Secretary 
may make a contract with a charterer of a vessel owned by the Secretary 
for payment of an operating-differential subsidy, on the same terms and 
conditions, and subject to the same limitations and restrictions, as otherwise 
provided with respect to payment of operating-differential subsidies to oper-
ators of privately-owned vessels. 
‘‘§ 57517. Recovery of excess profits 
‘‘(a) IN GENERAL.—A charter under this chapter shall provide that if, 
at the end of a calendar year subsequent to the execution of the charter, 
the cumulative net voyage profit (after payment of the charter hire reserved 
in the charter and payment of the charterer’s fair and reasonable overhead 
expenses applicable to operation of the chartered vessel) exceeds 10 percent 
a year of the charterer’s capital necessarily employed in the business of the 
chartered vessel, the charterer shall pay to the Secretary of Transportation, 
as additional charter hire, half the cumulative net voyage profit in excess