IB
Union Calendar No. 141
103D CONGRESS
1ST SESSION
H. R. 2151
[Report No. 103–251]
To amend the Merchant Marine Act, 1936, to establish the Maritime Security
Fleet program, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 19, 1993
Mr. STUDDS (for himself, Mr. LIPINSKI, Mr. FIELDS of Texas, Mr. BATEMAN,
Mr. YOUNG of Alaska, Mr. HUGHES, Mr. HUTTO, Mr. TAUZIN, Mr.
ORTIZ, Mr. MANTON, Mr. PICKETT, Mrs. UNSOELD, Mr. REED, Mr.
LANCASTER, Mr. ANDREWS of Maine, Ms. FURSE, Ms. SCHENK, Mr.
GENE GREEN of Texas, Mr. HASTINGS, Mr. BARLOW, Mr. THOMPSON of
Mississippi, Mr. ACKERMAN, Mr. KING, and Mrs. BENTLEY) introduced
the following bill; which was referred to the Committee on Merchant Ma-
rine and Fisheries
SEPTEMBER 22, 1993
Additional sponsors: Mr. DIAZ-BALART, Mrs. FOWLER, Mr. INHOFE, Mr.
FOGLIETTA, Mr. HOCHBRUECKNER, Mr. PALLONE, Mr. STUPAK, Mr.
WELDON, Mr. RAVENEL, Mr. FRANK of Massachusetts, Mr. SMITH of
New Jersey, Mr. BACCHUS of Florida, Mr. PETERSON of Minnesota, Mr.
TORKILDSEN, Mr. JOHNSTON
of Florida, Mr. MACHTLEY, Mrs.
MALONEY, Mr. WILSON, Mr. ABERCROMBIE, Mr. OWENS, Mr. PRICE of
North Carolina, Mr. ENGEL, Mr. WHEAT, Mr. PASTOR, Ms. MOLINARI,
Mr. GUTIERREZ, Mr. DELLUMS, Mr. HINCHEY, Mr. EVANS, Mr. HAM-
BURG, Mr. BORSKI, Mr. SOLOMON, Mr. ANDREWS of New Jersey, Mr.
MCCLOSKEY, Mr. HOYER, Mr. CALLAHAN, Mr. GILCHREST, Ms. PELOSI,
Mr. NEAL of Massachusetts, Mr. VISCLOSKY, Mr. GOSS, and Mr. GEJD-
ENSON
SEPTEMBER 22, 1993
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on May 19, 1993]
A BILL
To amend the Merchant Marine Act, 1936, to establish the
Maritime Security Fleet program, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Maritime Security and
Competitiveness Act of 1993’’.
SEC. 2. PURPOSE OF THE MERCHANT MARINE ACT, 1936.
Section 101 of the Merchant Marine Act, 1936 (46
App. U.S.C. 1101) is amended to read as follows:
‘‘SEC. 101. FOSTERING DEVELOPMENT AND MAINTENANCE
OF MERCHANT MARINE.
‘‘The Secretary of Transportation shall carry out this
Act in a manner that ensures the existence of an operating
fleet of United States documented vessels that is—
‘‘(1) sufficient to carry the domestic water-borne
commerce of the United States and a substantial por-
tion of the water-borne export and import foreign
commerce of the United States and to provide ship-
ping service essential for maintaining the flow of such
domestic and foreign water-borne commerce at all
times;
‘‘(2) adequate to serve as a naval auxiliary in
time of war or national emergency;
‘‘(3) owned and operated by citizens of the
United States, to the extent practicable;
‘‘(4) composed of the best-equipped, safest, and
most modern vessels;
‘‘(5) manned with the best trained and efficient
personnel who are citizens of the United States; and
‘‘(6) supplemented by modern and efficient
United States facilities for shipbuilding and ship re-
pair.’’.
SEC. 3. MARITIME SECURITY FLEET PROGRAM.
(a) The Merchant Marine Act, 1936 (46 App. U.S.C.
1101 et seq.) is amended by inserting after title III the fol-
lowing new title:
‘‘TITLE IV—MARITIME SECURITY
FLEET PROGRAM
‘‘SEC. 401. ESTABLISHMENT OF MARITIME SECURITY FLEET.
‘‘The Secretary of Transportation shall establish a fleet
of active commercial vessels to enhance sealift capabilities
and maintain a presence in international commercial ship-
ping of United States documented vessels. The fleet shall
be known as the ‘Maritime Security Fleet’.
‘‘SEC. 402. COMPOSITION OF FLEET.
‘‘The Fleet shall consist of privately owned United
States documented vessels for which there are in effect oper-
ating agreements.
‘‘SEC. 403. VESSELS ELIGIBLE FOR ENROLLMENT IN FLEET.
‘‘(a) IN GENERAL.—A vessel is eligible to be enrolled
in the Fleet if the Secretary decides, in accordance with
this section, that it is eligible. The Secretary may decide
whether a vessel is eligible to be enrolled in the Fleet only
pursuant to an eligibility decision application submitted
to the Secretary by the owner or operator of the vessel. The
Secretary shall make such a decision by not later than 90
days after the date of submittal of an eligibility decision
application for the vessel by the owner or operator of the
vessel.
‘‘(b) VESSEL ELIGIBILITY, GENERALLY.—Except as
provided in subsection (c), the Secretary shall decide that
a vessel is eligible to be enrolled in the Fleet if—
‘‘(1) the person that will be the contractor with
respect to an operating agreement for the vessel agrees
to enter into an operating agreement with the Sec-
retary for the vessel under section 404;
‘‘(2) the person that will be a contractor with re-
spect to an operating agreement for the vessel is a cit-
izen of the United States;
‘‘(3)(A) the vessel is a United States documented
vessel on May 19, 1993;
‘‘(B) the vessel is—
‘‘(i) in existence on May 19, 1993;
‘‘(ii) a United States documented vessel
after May 19, 1993; and
‘‘(iii) not more than 10 years of age on the
date of that documentation;
‘‘(C) the vessel is built and, if rebuilt, rebuilt in
a United States shipyard;
‘‘(D) the vessel is built in a shipyard that is not
a foreign subsidized shipyard under a contract en-
tered into before May 19, 1993;
‘‘(E)(i) the vessel is built in a foreign shipyard
under a contract entered into on or before May 19,
1993; and
‘‘(ii) the owner has contracted to build another
vessel for enrollment in the Fleet in a United States
shipyard that will be delivered within 30 months
after the effective date of an operating agreement for
the vessel referred to in clause (i), or the Secretary
finds and certifies in writing that a United States
shipyard cannot sell a vessel to the owner at the world
price due to the unavailability of series transition
payments under title XIV to build that vessel; or
‘‘(F)(i) the vessel is built under a contract en-
tered into after May 19, 1993;
‘‘(ii) the proposed owner of the vessel solicited
nationwide bids for at least 6 months to build the ves-
sel in a United States shipyard;
‘‘(iii) the Secretary finds and certifies in writing
that a United States shipyard cannot sell a vessel to
the proposed owner at the world price due to the un-
availability of series transition payments under title
XIV to build that vessel;
‘‘(iv) the vessel is delivered from the foreign ship-
yard within 30 months after the Secretary’s certifi-
cation under clause (iii); and
‘‘(v) the vessel is substantially the same type and
design as the vessel described in the solicitation made
under clause (ii); and
‘‘(4) the vessel is self-propelled and is—
‘‘(A) a container vessel with a capacity of
at least 750 Twenty-foot Equivalent Units;
‘‘(B) a roll-on/roll-off vessel with a carrying
capacity of at least 80,000 square feet or 500
Twenty-foot Equivalent Units;
‘‘(C) a LASH vessel with a barge capacity
of at least 75 barges;
‘‘(D) a vessel subject to a contract under
title VI on May 19, 1993; or
‘‘(E) any other type of vessel that is deter-
mined by the Secretary to be suitable for use by
the United States for national defense or mili-
tary purposes in time of war or national emer-
gency.
‘‘(c) DETERMINATIONS OF ELIGIBILITY.—
‘‘(1) DETERMINATIONS
REQUIRED.—The Sec-
retary shall make determinations under subsection (b)
for each vessel for which an eligibility decision appli-
cation is submitted under this section.
‘‘(2) 
DETERMINATION
REGARDING
CERTIFI-
CATION.—The Secretary shall—
‘‘(A) make the finding and certification
under paragraph (3)(E)(ii) for a vessel, or deter-
mine not to, by not later than 60 days after the
date of receipt of an eligibility decision applica-
tion for the vessel; and
‘‘(B) make the finding and certification
under paragraph (3)(F)(iii) for a vessel, or de-
termine not to, by not later than 60 days after
the closing date of the solicitation pursuant to
paragraph (3)(F)(ii) for the vessel.
‘‘(3) WRITTEN
EXPLANATION.—The Secretary
shall provide to the person that submits an eligibility
application for a vessel a written explanation of any
decision that the vessel is not eligible for enrollment
in the Fleet.
‘‘(d) LIST OF ELIGIBLE VESSELS.—
‘‘(1) IN GENERAL.—The Secretary shall main-
tain a list of vessels that the Secretary decides in ac-
cordance with this section are eligible to be enrolled
in the Fleet.
‘‘(2) REMOVAL
OF
VESSELS
FROM
LIST.—The
Secretary shall remove a vessel from the list main-
tained under this subsection, and the vessel shall not
be an eligible vessel for purposes of this title—
‘‘(A) at any time that the conditions for eli-
gibility under subsection (b) are not fulfilled for
the vessel; or
‘‘(B) if the status of the person who submit-
ted an eligibility decision application for the ves-
sel, as owner or operator of the vessel, changes
and after that change—
‘‘(i) the owner or operator of the vessel
fails to submit a new eligibility decision ap-
plication for the vessel; or
‘‘(ii) such an application is not ap-
proved by the Secretary.
‘‘SEC. 404. OPERATING AGREEMENTS, GENERALLY.
‘‘(a) REQUIREMENT FOR ENROLLMENT OF VESSELS.—
A vessel may be enrolled in the Fleet only if it is an eligible
vessel for which the owner or operator of the vessel applies
for and enters into an operating agreement with the Sec-
retary under this section.
‘‘(b) PRIORITY FOR AWARDING AGREEMENTS.—Sub-
ject to the availability of appropriations, the Secretary shall
enter into operating agreements according to the following
priority:
‘‘(1) VESSELS OWNED BY CITIZENS.—
‘‘(A) PRIORITY.—First, for any vessel that
is—
‘‘(i) owned and operated by persons
who are citizens of the United States under
section 2 of the Shipping Act, 1916; or
‘‘(ii) less than 5 years of age and
owned and operated by a corporation that
is—
‘‘(I) eligible to document a vessel
under chapter 121 of title 46, United
States Code; and
‘‘(II) affiliated with a corporation
operating or managing other United
States documented vessels for the Sec-
retary of Defense or chartering other
vessels to the Secretary of Defense.
‘‘(B) LIMITATION ON NUMBER OF OPERAT-
ING AGREEMENTS.—The total number of operat-
ing agreements that may be entered into by a
person under the priority in subparagraph
(A)—
‘‘(i) for vessels described in subpara-
graph (A)(i), may not exceed the sum of—
‘‘(I) the number of United States
documented vessels the person operated
in the foreign commerce of the United
States (except mixed coastwise and for-
eign commerce) on January 1, 1993;
and
‘‘(II) the number of United States
documented vessels the person chartered
to the Secretary of Defense on that
date; and
‘‘(ii) for vessels described in subpara-
graph (A)(ii), may not exceed 4 vessels.
‘‘(C) TREATMENT OF RELATED PARTIES.—
For purposes of subparagraph (B), a related
party with respect to a person shall be treated as
the person.
‘‘(2) OTHER VESSELS OWNED BY CITIZENS AND
GOVERNMENT
CONTRACTORS.—To the extent that
amounts are available after applying paragraph (1),
any vessel that is—
‘‘(A) owned and operated by—
‘‘(i) citizens of the United States under
section 2 of the Shipping Act, 1916, that
have not been awarded an operating agree-
ment under the priority established under
paragraph (1); or
‘‘(ii)(I) eligible to document a vessel
under chapter 121 of title 46, United States
Code; and
‘‘(II) affiliated with a corporation op-
erating or managing other United States
documented vessels for the Secretary of De-
fense or chartering other vessels to the Sec-
retary of Defense; and
‘‘(B) on the list maintained under section
403(d).
‘‘(3) OTHER
VESSELS.—To the extent that
amounts are available after applying paragraphs (1)
and (2), any vessel that is—
‘‘(A) owned and operated by a person that
is eligible to document a vessel under chapter
121 of title 46, United States Code; and
‘‘(B) on the list maintained under section
403(d).
‘‘(c) AWARD OF AGREEMENTS.—
‘‘(1) IN GENERAL.—The Secretary shall award
operating agreements within each priority under sub-
section (b) (1), (2), and (3) under regulations pre-
scribed by the Secretary.
‘‘(2) NUMBER OF AGREEMENTS AWARDED.—Reg-
ulations under paragraph (1) shall provide that if
appropriated amounts are not sufficient for operating
agreements for all vessels within a priority under sub-
section (b) (1), (2), or (3), the Secretary shall award
to each person submitting a request a number of oper-
ating agreements that bears approximately the same
ratio to the total number of vessels in the priority, as
the amount of appropriations available for operating
agreements for vessels in the priority bears to the
amount of appropriations necessary for operating
agreements for all vessels in the priority.
‘‘(3) TREATMENT
OF
RELATED
PARTIES.—For
purposes of paragraph (2), a related party with re-
spect to a person shall be treated as the person.
‘‘(d) TIME LIMIT FOR DECISION ON ENTERING OPER-
ATING AGREEMENT.—The Secretary shall enter an operat-
ing agreement for a vessel within 90 days after making the
decision that the vessel is eligible to be enrolled in the Fleet
under section 403(a).
‘‘(e) EFFECTIVE DATE OF OPERATING AGREEMENT.—
The effective date of an operating agreement may not be
later than the later of—
‘‘(1) the date the vessel covered by the agreement
enters 
into 
the 
trade 
required 
under 
section
405(a)(1)(A);
‘‘(2) the date the vessel covered by the agreement
is withdrawn from an operating differential subsidy
contract under title VI;
‘‘(3) the date of termination of an operating dif-
ferential subsidy contract under title VI that applies
to the vessel; or
‘‘(4) the date of the expiration or termination of
a charter of the vessel to the United States Govern-
ment that was entered into before the date of the en-
actment of the Maritime Security and Competitive-
ness Act of 1993.
‘‘(f) EXPIRATION OF OFFERS FOR AGREEMENTS.—Un-
less extended by the Secretary, an offer by the Secretary
to enter into an operating agreement under this section ex-
pires 120 days after the date the offer is made.
‘‘(g) LENGTH OF AGREEMENTS.—An operating agree-
ment is effective for 10 years from the effective date of the
agreement.
‘‘(h) REPAYMENT REQUIREMENTS.—
‘‘(1) NONCOMPLIANCE.—A contractor that fails
to comply with the terms of an operating agreement
shall be liable to the United States Government for all
amounts received by the contractor as payments for
the vessel under this title with respect to the period
of that noncompliance, and for interest on those
amounts determined under paragraph (3).
‘‘(2) FAILURE TO OPERATE REPLACEMENT VES-
SEL.—A contractor under an operating agreement
that covers a vessel that is 25 or more years of age
and that fails to replace the vessel as provided in sec-
tion 405(a)(3) (A) or (B) shall be liable to the United
States Government for all amounts received by the
contractor as payments for the vessel under this title
with respect to periods after the date the vessel be-
comes 25 years of age, and for interest on those
amounts determined under paragraph (3).
‘‘(3) DETERMINATION
OF
INTEREST.—Interest
under paragraphs (1) and (2) shall be at an annual
rate equal to 125 percent of the coupon issue yield
equivalent (as determined by the Secretary of the
Treasury) of the average accepted auction price for
auctions of 3 month United States Treasury bills set-
tled during the quarter preceding the date of the fail-
ure to comply or the failure to replace, respectively.
‘‘(i) PROHIBITION
ON AGREEMENTS
FOR CERTAIN
VESSELS.—The Secretary may not enter into an operating
agreement for a vessel that is owned or operated by a person
that was a contractor for the vessel under an operating
agreement terminated under section 405(a)(10), before the
end of the term of the agreement that was terminated.
‘‘(j) BINDING OBLIGATION OF GOVERNMENT.—An op-
erating agreement constitutes a contractual obligation of the
United States Government to pay the amounts provided for
under that agreement.
‘‘SEC. 405. TERMS OF OPERATING AGREEMENTS.
‘‘(a) OPERATING AGREEMENT REQUIREMENTS.—An
operating agreement shall, during the effective period of the
agreement, provide the following:
‘‘(1) OPERATION
AND
DOCUMENTATION.—The
vessel covered by the operating agreement—
‘‘(A) shall be operated in the foreign trade
or domestic trade allowed under a registry en-
dorsement for the vessel issued under section
12105 of title 46, United States Code;
‘‘(B) may not be operated in the coastwise
trade of the United States or in mixed coastwise
and foreign trade, except for coastwise trade al-
lowed under a registry endorsement issued for
the vessel under section 12105 of title 46, United
States Code; and
‘‘(C) shall be documented under chapter 121
of title 46, United States Code.
‘‘(2) ANNUAL PAYMENTS.—
‘‘(A) IN GENERAL.—The Secretary shall pay
the contractor, in accordance with this sub-
section, the following amounts for each fiscal
year in which the vessel is operated in accord-
ance with the agreement:
‘‘(i) For fiscal year 1994, $2,300,000.
‘‘(ii) For each fiscal year thereafter,
$2,100,000.
‘‘(B) LIMITATION.—The Secretary shall not
pay any amount pursuant to this paragraph for
any day in which the vessel is—
‘‘(i) under a charter to the United
States Government that was entered into be-
fore the date of the enactment of the Mari-
time Security and Competitiveness Act of
1993; or
‘‘(ii) covered by an operating differen-
tial subsidy contract under title VI.
‘‘(3) TERMINATION BASED ON AGE OF VESSEL.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the operating agreement shall
terminate on the later of—
‘‘(i) the date the vessel covered by the
agreement is 25 years of age, or
‘‘(ii) the date the vessel covered by the
agreement is 30 years of age, in the case of
an agreement that covers a vessel that is
repowered in a United States shipyard after
the effective date of the operating agreement
and before the vessel is 25 years of age.
‘‘(B) EXCEPTION.—The operating agree-
ment shall not terminate under subparagraph
(A) if the contractor agrees to acquire a replace-
ment for the vessel from among vessels on the list
maintained under section 403(d), and—
‘‘(i) in the case of a vessel to be re-
placed with a new vessel, the contractor en-
ters into a binding contract with a ship-
yard that requires the shipyard to deliver
the replacement vessel by not later than 30
months after the later of the date the operat-
ing agreement is entered into or the date the
operating agreement would otherwise termi-
nate under subparagraph (A); or
‘‘(ii) in the case of a vessel to be re-
placed with an existing vessel, the contrac-
tor acquires the replacement vessel from
among vessels on the list maintained under
section 403(d), by not later than 12 months
after the later of the date the operating
agreement is entered into or the date the op-
erating agreement would otherwise expire
under subparagraph (A).
‘‘(4) AVAILABILITY OF VESSEL.—
‘‘(A) IN
GENERAL.—On a request of the
President during time of war or national emer-
gency or when considered by the President, act-
ing through the Secretary in consultation with
the Secretary of Defense, to be necessary in the
interest of national security, and subject to sub-
paragraph (B), the contractor as soon as prac-
ticable shall, as specified by the Secretary—
‘‘(i) make the vessel covered by the
agreement available to the Secretary under
a time charter; or
‘‘(ii) provide space on the vessel cov-
ered by the agreement to the Secretary on a
guaranteed basis.
‘‘(B) CONDITION FOR CHARTER.—The Sec-
retary shall allow a contractor to comply with
this paragraph by providing space on a vessel
under subparagraph (A)(ii) unless the Secretary
determines that it is necessary in the interest of
national security that the contractor make the
vessel available under a time charter.
‘‘(5) DELIVERY
OF
VESSEL.—The contractor
shall deliver a vessel to the Secretary pursuant to a
time charter under paragraph (4)(A)(i), as specified
in the request for the vessel—
‘‘(A) at the first port in the United States
the vessel is scheduled to call after the date of re-
ceipt of the request;
‘‘(B) at the port in the United States to
which the vessel is nearest on the date of receipt
of the request; or
‘‘(C) in any other reasonable manner au-
thorized by the agreement and specified in the
request.
‘‘(6) DELIVERY COSTS.—In addition to amounts
paid under paragraph (2), the Secretary shall reim-
burse the contractor for costs incurred by the contrac-
tor in delivering the vessel covered by the agreement
to the Secretary in accordance with the agreement.
‘‘(7) COMPENSATION.—In addition to amounts
paid under paragraph (2), the Secretary shall pay the
contractor, as provided in the operating agreement,
reasonable compensation at reasonable commercial
rates for the period of time the vessel is chartered or
the contractor provides space on the vessel under
paragraph (4).
‘‘(8) REQUIRED OPERATION.—
‘‘(A) IN GENERAL.—A vessel covered by the
operating agreement shall be operated in the
trade required under paragraph (1), and under
conditions eligible for payment under this title,
for at least 320 days in a fiscal year, including
days during which the vessel is dry-docked, sur-
veyed, inspected, or repaired.
‘‘(B) REDUCTION IN PAYMENTS.—If a vessel
operates in the trade required under paragraph
(1), and under conditions eligible for payment
under this title, for less than the time required
under subparagraph (A), the payments required
under paragraph (2) shall be reduced on a pro-
rata basis to reflect the lesser time in that oper-
ation.
‘‘(9) SUBSTITUTION OF VESSELS AUTHORIZED.—
The contractor may substitute for the vessel covered
by the agreement another vessel on the list main-
tained under section 403(d).
‘‘(10) OTHER
TERMINATION.—The operating
agreement shall terminate if—
‘‘(A) in the case of a vessel that transports
less than 12,000 tons of bulk cargo under the
agreement—
‘‘(i) the vessel covered by the agreement
is not operated under an operating agree-
ment for one year; and
‘‘(ii) a substitute for that vessel is not
operated under the agreement during that
year; or
‘‘(B) the contractor notifies the Secretary
that the contractor intends to terminate the
agreement, by not later than 60 days before the
effective date of the termination.
‘‘(b) PAYMENTS.—
‘‘(1) IN GENERAL.—The amount required to be
paid by the Secretary each year to a contractor under
an operating agreement pursuant to subsection
(a)(2)—
‘‘(A) shall be paid at a pro rated amount
at the beginning of each month in equal install-
ments; and
‘‘(B) except as provided in paragraph (2),
may not be reduced by reason of operation of the
vessel covered by the agreement to carry civilian
or military preference cargoes under—
‘‘(i) section 901(a), 901(b), or 901b;
‘‘(ii) section 2631 of title 10, United
States Code; or
‘‘(iii) the Act of March 26, 1934 (48
Stat. 500).
‘‘(2) REDUCTION FOR PREFERENCE CARGO.—A
contractor with respect to a vessel may not receive
any payment under this title for any day in which
the vessel is engaged in transporting more than
12,000 tons of preference cargo described in para-
graph (1)(B) that is bulk cargo (as defined in section
3 of the Shipping Act of 1984).
‘‘(c) REDELIVERY OF VESSELS.—The Secretary shall,
upon the termination of the need for which a vessel is deliv-
ered under subsection (a)(4), return the vessel to the con-
tractor—
‘‘(1) at a place that is mutually agreed upon by
the Secretary of Defense and the contractor; and
‘‘(2) in the condition in which it was delivered
to the Secretary, excluding normal wear and tear.
‘‘(d) TRANSFER OF OPERATING AGREEMENTS.—A con-
tractor under an operating agreement may transfer the
agreement (including all rights and obligations under the
agreement) to any other person that is a citizen of the
United States, after notification of the Secretary in accord-
ance with regulations prescribed by the Secretary, unless
the transfer is disapproved by the Secretary within 90 days
after the date of that notification. A transfer shall not be
effective before the end of that 90-day period. A person to
whom an agreement is transferred may receive payments
from the Secretary under the agreement only if the vessel
to be covered by the agreement after the transfer is on the
list maintained under section 403(d).
‘‘SEC. 406. NONCONTIGUOUS TRADE RESTRICTIONS.
‘‘(a) PROHIBITION.—
‘‘(1) IN GENERAL.—Except as provided in this
section, a contractor may not receive any payment
under this title—
‘‘(A) if the contractor or a related party
with respect to the contractor, directly or indi-
rectly owns, charters, or operates a vessel en-
gaged in the transportation of cargo in non-
contiguous trade other than in accordance with
a waiver under subsection (b), (c), or (d); or
‘‘(B) if the contractor is authorized to oper-
ate a vessel in noncontiguous trade under such
a waiver, and there is a—
‘‘(i) material change in the domestic
ports served by the contractor from the ports
permitted to be served under the waiver;
‘‘(ii) material increase in the annual
number or the frequency of sailings by the
contractor from the number or frequency
permitted under the waiver; or
‘‘(iii) material increase in the annual
volume of cargo carried or annual capacity
utilized by the contractor from the annual
volume of cargo or annual capacity per-
mitted under the waiver.
‘‘(2) LIMITATIONS ON PROHIBITION.—Paragraph
(1) applies to a contractor only in the years specified
for payments under the operating agreement entered
into by the contractor.
‘‘(b) GENERAL WAIVER AUTHORITY.—
‘‘(1) IN GENERAL.—Except as provided in sub-
section (c), the Secretary may waive, in writing, the
application of subsection (a) to a contractor pursuant
to an application submitted in accordance with this
subsection, unless the Secretary finds that—
‘‘(A) the waiver would result in unfair com-
petition to any person that operates vessels as a
carrier of cargo in a service exclusively in the
noncontiguous trade for which the waiver is ap-
plied;
‘‘(B) subject to paragraph (6), existing serv-
ice in that noncontiguous trade is adequate; or
‘‘(C) the waiver will result in prejudice to
the objects or policy of this title or Act.
‘‘(2) TERMS OF WAIVER.—Any waiver granted
by the Secretary under this subsection shall state—
‘‘(A) the domestic ports permitted to be
served;
‘‘(B) the annual number or frequency of
sailings that may be provided; and
‘‘(C)(i) the annual volume of cargo per-
mitted,
‘‘(ii) for containerized or trailer service, the
annual 40-foot equivalent unit shipboard con-
tainer and trailer or vehicle or general cargo ca-
pacity permitted, or
‘‘(iii) for tug and barge service, the annual
barge house cubic foot capacity and the annual
barge deck general cargo capacity, or 40-foot
equivalent unit container, trailer, or vehicle ca-
pacity, permitted.
‘‘(3) APPLICATIONS FOR WAIVERS.—An applica-
tion for a waiver under this subsection may be sub-
mitted by a contractor and shall describe, as applica-
ble, the nature and scope of—
‘‘(A) the service proposed to be conducted in
a noncontiguous trade under the waiver; or
‘‘(B) any proposed material change or in-
crease in a service in a noncontiguous trade per-
mitted under a previous waiver.
‘‘(4) ACTION ON APPLICATION AND HEARING.—
‘‘(A) NOTICE AND PROCEEDING.—Within 30
days after receipt of an application for a waiver
under this subsection, the Secretary shall—
‘‘(i) publish a notice of the application;
and
‘‘(ii) begin a proceeding on the appli-
cation under section 554 of title 5, United
States Code, to receive—
‘‘(I) evidence of the nature, quan-
tity, and quality of the existing service
in the noncontiguous trade for which
the waiver is applied;
‘‘(II) a description of the proposed
service or proposed material change or
increase in a previously permitted
service;
‘‘(III) the projected effect of the
proposed service or proposed material
change or increase in existing service;
and
‘‘(IV) recommendations on condi-
tions that should be contained in any
waiver for the proposed service or ma-
terial change or increase.
‘‘(B) INTERVENTION.—An applicant for a
waiver under this subsection, and any person
that operates cargo vessels in the noncontiguous
trade for which a waiver is applied and that has
any interest in the application, may intervene in
the proceedings on the application.
‘‘(C) HEARING.—Before deciding whether to
grant a waiver under this subsection, the Sec-
retary shall hold a public hearing in an expedi-
tious manner, reasonable notice of which shall be
published.
‘‘(5) DECISION.—The Secretary shall complete
all proceedings and hearings on an application under
this subsection and issue a decision on the record
within 90 days after receipt of the final briefs submit-
ted for the record.
‘‘(6) LIMITATION ON CONSIDERATION OF CERTAIN
EXISTING SERVICE.—
‘‘(A) LIMITATION.—In determining whether
to grant a waiver under this subsection for non-
contiguous trade with Hawaii, the Secretary
shall not consider the criterion set forth in para-
graph (1)(B) if a qualified operator—
‘‘(i) is a contractor, and
‘‘(ii) operates 4 or more vessels in for-
eign commerce in competition with another
contractor.
‘‘(B) QUALIFIED OPERATOR.—In this para-
graph, the term ‘qualified operator’ means a per-
son that on July 1, 1992, offered service as an
operator of containerized vessels, trailer vessels,
or combination container and trailer vessels in
noncontiguous trade with Hawaii and the John-
ston Islands (including a related party with re-
spect to the person).
‘‘(c) WAIVERS FOR EXISTING NONCONTIGUOUS TRADE
OPERATORS.—
‘‘(1) IN GENERAL.—The Secretary shall waive
the application of subsection (a) to a contractor pur-
suant to an application submitted in accordance with
this subsection if the Secretary finds that the contrac-
tor, or a related party or predecessor in interest with
respect to the contractor—
‘‘(A) engaged in bona fide operation of a
vessel as a carrier of cargo by water—
‘‘(i) in a noncontiguous trade on July
1, 1992; or
‘‘(ii) in furnishing seasonal service in
a season ordinarily covered by its oper-
ation, during the 12 calendar months pre-
ceding July 1, 1992; and
‘‘(B) has operated in that service since that
time, except for interruptions of service resulting
from military contingency or over which the con-
tractor (or related party or predecessor in inter-
est) had no control.
‘‘(2) TERMS OF WAIVER.—
‘‘(A) IN
GENERAL.—Except as otherwise
provided in this paragraph, the level of service
permitted under a waiver under this subsection
shall be the level of service provided by the appli-
cant (or related party or predecessor in interest)
in the relevant noncontiguous trade during, for
year-round service, the 6 calendar months pre-
ceding July 1, 1992, or for seasonal service, the
12 calendar months preceding July 1, 1992, de-
termined by—
‘‘(i) the domestic ports called;
‘‘(ii) the number of sailings actually
made, except as to interruptions in the serv-
ice in the noncontiguous trade resulting
from military contingency or over which the
applicant (or related party or predecessor
in interest) had no control; and
‘‘(iii) the volume of cargo carried or,
for containerized or trailer service, the 40-
foot equivalent unit shipboard container,
trailer, or vehicle or general cargo capacity
employed, or, for tug and barge service, the
barge house cubic foot capacity and barge
deck general cargo capacity or 40-foot
equivalent unit container, trailer, or vehicle
capacity, employed.
‘‘(B) CERTAIN CONTAINERIZED VESSELS.—
If an applicant under this subsection was offer-
ing service as an operator of containerized ves-
sels in noncontiguous trades with Hawaii, Puer-
to Rico, and Alaska on July 1, 1992, a waiver
under this subsection for the applicant shall per-
mit a level of service consisting of—
‘‘(i) 104 sailings each year from the
West Coast of the United States to Hawaii
with an annual capacity allocated to the
service of 75 percent of the total capacity of
the vessels employed in the service on July
1, 1992;
‘‘(ii) 156 sailings each year in each di-
rection between the East Coast or Gulf
Coast of the United States and Puerto Rico
with an annual capacity allocated to the
service of 75 percent of the total capacity of
its vessels employed in the service on the
date of the enactment of the Maritime Secu-
rity and Competitiveness Act of 1993; and
‘‘(iii) 103 sailings each year in each
direction between Washington and Alaska
with an annual capacity allocated to the
service in each direction of 100 percent of
the total capacity of its vessels employed in
the service on July 1, 1992.
‘‘(C) CERTAIN TUGS AND BARGES.—If an
applicant under this subsection was offering
service as an operator of tugs and barges in non-
contiguous trades with Hawaii, Puerto Rico,
and Alaska on July 1, 1992, a waiver under this
subsection for the applicant shall permit a level
of service consisting of—
‘‘(i) 17 sailings each year in each di-
rection between ports in Washington, Or-
egon, and Northern California and ports in
Hawaii with an annual barge house cubic
foot capacity and annual barge deck 40-foot
equivalent unit container capacity in each
direction of 100 percent of the total of the
capacity of its vessels employed in the serv-
ice during the 6 calendar months preceding
July 1, 1992, annualized;
‘‘(ii) 253 sailings each year in each di-
rection between the East Coast or Gulf
Coast of the United States and Puerto Rico
with an annual 40-foot equivalent unit con-
tainer or trailer capacity equal to 100 per-
cent of the capacity of its barges employed
in the service on the date of the enactment
of the Maritime Security and Competitive-
ness Act of 1993;
‘‘(iii) 37 regularly scheduled tandem
tow rail barge sailings and 10 additional
single tow rail barge sailings each year in
each direction between Washington and the
Alaskan port range between and including
Anchorage and Whittier with an annual ca-
pacity allocated to the service in each direc-
tion of 100 percent of the total rail car ca-
pacity of its vessels employed in the service
on July 1, 1992;
‘‘(iv) 8 regularly scheduled single tow
sailings each year in each direction between
Washington and points in Alaska (not in-
cluding the port range between and includ-
ing Anchorage and Whittier, except occa-
sional deviations to discharge incidental
quantities of cargo) with an annual capac-
ity allocated to the service in each direction
of 100 percent of the total capacity of its
vessels employed in the service on July 1,
1992; and
‘‘(v) unscheduled, contract carrier tug
and barge service between points in Alaska
south of the Arctic Circle not served by the
common carrier service permitted under
clause (iii) and points in the contiguous 48
States, with an annual capacity allocated
to that service not exceeding 100 percent of
the total capacity of the equipment that was
dedicated to service south of the Arctic Cir-
cle on July 1, 1992, and actually utilized in
that service in the 2-year period preceding
that date.
‘‘(D) ANNUALIZATION.—Capacity otherwise
required by this paragraph to be permitted
under a waiver under this subsection shall be
annualized if not a seasonal service.
‘‘(E) ADJUSTMENTS.—
‘‘(i) Each written waiver granted by
the Secretary under this subsection shall
contain a statement that the annual capac-
ity permitted under this waiver in any di-
rection shall increase for a calendar year by
the percentage of increase during the preced-
ing calendar year in the real gross product
of the State or territory to which goods are
transported in the noncontiguous trade cov-
ered by the waiver, or its equivalent eco-
nomic measure as determined by the Sec-
retary if the real gross product is not avail-
able, and that the increase shall not be con-
sidered to be a material change or increase
for purposes of subsection (a)(1)(B).
‘‘(ii) The increase in permitted capac-
ity under clause (i) in the noncontiguous
trade with Alaska shall be allowed only to
the extent the operator actually uses that in-
creased capacity to carry cargo in the per-
mitted service in the calendar year imme-
diately following the preceding increase in
gross product. However, if an operator oper-
ating exclusively containerized vessels in
that trade on July 1, 1992, carries an aver-
age loan factor of at least 90 percent of per-
mitted capacity (including the capacity, if
any, both authorized and used under the
previous sentence) during 9 months of any
one calendar year, than in the next follow-
ing calendar year and thereafter, the re-
quirement that additional capacity must be
used in the immediately following year does
not apply.
‘‘(F) SERVICE LEVELS NOT INCREASED BY
TERMINATION OF AGREEMENT.—The termination
of 
an 
operating 
agreement 
under 
section
405(a)(10) shall not be considered to increase a
level of service specified in subparagraph (A),
(B), or (C) if the contractor under the agreement
enters into another operating agreement after
that termination.
‘‘(3) APPLICATIONS FOR WAIVERS.—For a waiv-
er under this subsection a contractor shall submit to
the Secretary an application certifying the facts re-
quired to be found under paragraph (1) (A) or (B),
as applicable.
‘‘(4) ACTION ON APPLICATION.—
‘‘(A) NOTICE.—The Secretary shall publish
a notice of receipt of an application for a waiver
under this subsection within 30 days after re-
ceiving the application.
‘‘(B) HEARING
PROHIBITED.—The Sec-
retary may not conduct a hearing on an appli-
cation for a waiver under this subsection.
‘‘(C) SUBMISSION OF COMMENTS.—The Sec-
retary shall give every person operating a cargo
vessel in a noncontiguous trade for which a
waiver is applied for under this subsection and
who has any interest in the application a rea-
sonable opportunity to submit comments on the
application and on the description of the service
that would be permitted by any waiver that is
granted by the Secretary under the application.
‘‘(5) DECISION ON APPLICATION.—Subject to the
time required for publication of notice and for receipt
and evaluation of comments by the Secretary, an ap-
plication for a waiver under this subsection submitted
at the same time the applicant applies for inclusion
of a vessel in the Fleet shall be granted in accordance
with the level of service determined by the Secretary
under this subsection by not later than the date on
which the Secretary offers to the applicant an operat-
ing agreement with respect to that vessel.
‘‘(6) CHANGE OR INCREASE IN SERVICE.—Any
material change or increase in a service that is sub-
ject to a waiver under this subsection is not author-
ized except to the extent the change or increase is per-
mitted by a waiver under subsection (b).
‘‘(d) EMERGENCY
WAIVER.—Notwithstanding any
other provision of this section, the Secretary may, without
hearing, temporarily waive the application of subsection
(a)(1)(B) if the Secretary finds that a material change or
increase is essential in order to respond adequately to (1)
an environmental or natural disaster or emergency, or (2)
another emergency declared by the President. Any waiver
shall be for a period of not to exceed 45 days, except that
a waiver may be renewed for 30-day periods if the Sec-
retary finds that adequate capacity continues to be other-
wise unavailable.
‘‘(e) ANNUAL REPORT
ON WAIVERS.—Each waiver
under this section shall require the person who is granted
the waiver to submit to the Secretary each year an annual
report setting forth for the service authorized by the waiv-
er—
‘‘(1) the ports served during the year;
‘‘(2) the number or frequency of sailings per-
formed during the year; and
‘‘(3) the volume of cargo carried or, for contain-
erized or trailer service, the annual 40-foot equivalent
unit shipboard container, trailer, or vehicle capacity
utilized during the year, or for tug and barge service,
the annual barge house and barge deck capacity uti-
lized during the year.
‘‘(f) DEFINITIONS.—In this section—
‘‘(1) the term ‘noncontiguous trade’ means trade
between—
‘‘(A) a point in the contiguous 48 States;
and
‘‘(B) a point in Alaska, Hawaii, or Puerto
Rico, other than a point in Alaska north of the
Arctic Circle; and
‘‘(2) the term ‘related party’ means—
‘‘(A) a holding company, subsidiary, affili-
ate, or associate of a contractor; and
‘‘(B) an officer, director, agency, or other
executive of a contractor or of a person referred
to in subparagraph (A).
‘‘SEC. 407. OPERATING COMPETING FOREIGN VESSELS.
‘‘(a) IN GENERAL.—Except as provided in this section,
a contractor (including a related party with respect to a
contractor) may not own, charter, or operate a foreign ves-
sel in competition with a United States documented vessel.
‘‘(b) EXCEPTION.—Subsection (a) does not apply to a
foreign vessel if—
‘‘(1)(A) the contractor has applied for an operat-
ing agreement for a vessel to be operated in the same
service as the foreign vessel; and
‘‘(B) the Secretary, due to the unavailability of
funds, does not award an operating agreement to that
contractor for a United States documented vessel for
that service within 60 days after that application is
submitted;
‘‘(2) the Secretary, after notice and an oppor-
tunity for a hearing, under special circumstances,
and for good cause shown, waives subsection (a) for
the contractor for a specified period of time; or
‘‘(3) the foreign vessel was operated by that con-
tractor on August 5, 1993.
‘‘SEC. 408. FUNDING FOR OPERATING AGREEMENTS.
‘‘(a) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated to the Secretary any
amounts necessary to liquidate obligations under operating
agreements.
‘‘(b) TRANSFER OF BALANCES FROM OPERATING DIF-
FERENTIAL SUBSIDY PROGRAM.—Any amounts otherwise
available for operating differential subsidy contracts under
title VI that are no longer required for those contracts are
available, until expended, for operating agreements.
‘‘SEC. 409. DEFINITIONS.
‘‘In this title:
‘‘(1) CONTRACTOR.—The term ‘contractor’ means
an owner or operator of a vessel that enters into an
operating agreement for the vessel with the Secretary.
‘‘(2) ELIGIBILITY DECISION APPLICATION.—The
term ‘eligibility decision application’ means an ap-
plication for a decision by the Secretary under section
403 that a vessel is eligible to be enrolled in the Fleet.
‘‘(3) ELIGIBLE VESSEL.—The term ‘eligible ves-
sel’ means a vessel that the Secretary decides under
section 403 is eligible to be enrolled in the Fleet.
‘‘(4) FLEET.—The term ‘Fleet’ means the Mari-
time Security Fleet established under section 402.
‘‘(5) OPERATING AGREEMENT.—The term ‘oper-
ating agreement’ means an operating agreement en-
tered into by the Secretary under section 404.
‘‘(6) RELATED PARTY.—The term ‘related party’
means, with respect to a contractor or other person—
‘‘(A) a holding company, subsidiary, affili-
ate, or association of the person; and
‘‘(B) an officer, director, other executive, or
agent of the person or of an entity referred to in
paragraph (1).
‘‘(7) SECRETARY.—The term ‘Secretary’ means
the Secretary of Transportation.
‘‘(8) UNITED STATES DOCUMENTED VESSEL.—
The term ‘United States documented vessel’ means a
vessel that is documented under chapter 121 of title
46, United States Code.’’.
SEC. 4. OPERATING-DIFFERENTIAL SUBSIDY CONTRACTS.
(a) TERMINATION
OF EXISTING CONTRACTS.—Not-
withstanding any other provision of this Act, any contract
in effect under title VI of the Merchant Marine Act, 1936
(46 App. U.S.C. 1171 et seq.), on the day before the date
of enactment of this Act shall continue in effect under its
terms and terminate as set forth in the contract, unless vol-
untarily terminated on an earlier date by the persons (other
than the United States Government) that are parties to the
contract.
(b) AGE ACCELERATION OF BULK CARGO ODS VES-
SELS.—Section 506 of the Merchant Marine Act, 1936 (46
App. U.S.C. 1156) is amended—
(1) by inserting ‘‘(a)’’ after ‘‘SEC. 506.’’; and
(2) by adding at the end the following new sub-
section:
‘‘(b) For purposes of this section, any liquid or dry
bulk cargo vessel for which operating-differential subsidy is
required to be paid under a contract under title VI that
is in force on May 19, 1993, shall, effective upon the termi-
nation date of the contract (as set forth in the contract as
in effect on May 19, 1993, be deemed to have reached the
age of 20 years.’’.
(c) RESTRICTIONS
ON OPERATIONS
OF ODS VES-
SELS.—Title VI of the Merchant Marine Act, 1936 (46 App.
U.S.C. 1171 et seq.), as amended by this Act, is further
amended by adding at the end the following:
‘‘SEC. 616. LIMITATION ON APPLICATION OF RESTRICTIONS
ON OPERATIONS.
‘‘(a) Sections 605(c) and 804, this section, and the es-
sential service requirements in section 601(a) and 603(a),
do not apply to a contractor if—
‘‘(1) the contractor submits an eligibility deci-
sion application to the Secretary under title IV for all
of the vessels operated by the contractor under an op-
erating-differential subsidy contract; and
‘‘(2) all of those vessels for which operating
agreements are offered by the Secretary under title IV
are enrolled in the Maritime Security Fleet.
‘‘(b)(1) With respect to the operations of a contractor
receiving operating-differential subsidy for liner vessels on
a particular trade route, as defined in that contractor’s con-
tract in effect on January 1, 1993, that operator shall not
be subject to the restrictions of either section 605(c) or sec-
tion 804 with respect to operations on that trade route, com-
mencing at such time as—
‘‘(A) that operator transfers 50 percent or more
of its vessels that were operating on that trade route
as of January 1, 1993, from the operating-differential
subsidy program to the Maritime Security Fleet pro-
gram under title IV; or
‘‘(B) that operator is the only contractor receiv-
ing operating-differential subsidy with respect to that
trade route, and all other United States-flag liner op-
erators operating a vessel on that trade route are op-
erating on that trade route only vessels for which
there are in effect operating agreements under title
IV.
‘‘(2) With respect to any contractor receiving operat-
ing-differential subsidy for liner vessels on Maritime Ad-
ministration Essential Trade Route 1, 2, or 8, that operator
shall not be subject to the restrictions of either section 605(c)
or section 804 with respect to operations on any of those
trade routes, commencing at such time as payments begin
to accrue on behalf of another United States-flag operator
that is a party to an operating agreement under title IV
which provides liner service on Maritime Administration
Essential Trade Route 2.’’.
(d) ELIMINATION OF TRADE ROUTE RESTRICTIONS.—
Section 809(a) of the Merchant Marine Act, 1936 (46
U.S.C. 1213(a)) is amended by adding at the end the follow-
ing: ‘‘This subsection shall not apply to contracts under
title IV or funds for such contracts.’’.
SEC. 5. ELIMINATION OF CONSTRUCTION DIFFERENTIAL
SUBSIDY RESTRICTIONS.
Title V of the Merchant Marine Act, 1936 (46 App.
U.S.C. 1151 et seq.), is amended by adding at the end the
following:
‘‘SEC. 512. LIMITATION ON RESTRICTIONS.
‘‘Notwithstanding any other provision of law or con-
tract, all restrictions and requirements under sections 503,
506, and 802 applicable to a liner vessel constructed, recon-
structed, or reconditioned with the aid of construction-dif-
ferential subsidy shall terminate upon the expiration of the
25-year period beginning on the date of the original deliv-
ery of the vessel from the shipyard.’’.
SEC. 6. DEFINITIONS APPLICABLE TO MERCHANT MARINE
ACT, 1936.
Section 905 of the Merchant Marine Act, 1936 (46
App. U.S.C. 1244), is amended—
(1) by striking subsection (a) and inserting the
following:
‘‘(a) Each of the terms ‘foreign commerce’ and ‘foreign
trade’ mean—
‘‘(1) trade between the United States and a for-
eign country; or
‘‘(2) trade between foreign ports.’’;
(2) by striking subsection (c) and inserting the
following:
‘‘(c) The term ‘citizen of the United States’ means a
person eligible to own a documented vessel under chapter
121 of title 46, United States Code.’’, and
(3) by adding at the end the following:
‘‘(h) The term ‘foreign subsidized shipyard’ means a
shipyard that—
‘‘(1) receives or benefits from, directly or indi-
rectly, a shipyard subsidy for the construction of ves-
sels; and
‘‘(2) is located in a foreign country that has not
signed a trade agreement with the United States that
provides for the elimination of subsidies for that ship-
yard.
‘‘(i) The term ‘subsidy’ includes any of the following:
‘‘(1) Officially supported export credits and de-
velopment assistance.
‘‘(2) Direct official operating support to the com-
mercial shipbuilding and repair industry, or to a re-
lated entity that favors the operation of shipbuilding
and repair, including—
‘‘(A) grants;
‘‘(B) loans and loan guarantees other than
those available on the commercial market;
‘‘(C) forgiveness of debt;
‘‘(D) equity infusions on terms inconsistent
with commercially reasonable investment prac-
tices;
‘‘(E) preferential provision of goods and
services; and
‘‘(F) public sector ownership of commercial
shipyards on terms inconsistent with commer-
cially reasonable investment practices.
‘‘(3) Direct official support for investment in the
commercial shipbuilding and repair industry, or to a
related entity that favors the operation of shipbuild-
ing and repair, including the kinds of support listed
in clauses (i) through (v) of subparagraph (B), and
any restructuring support, except public support for
social purposes directly and effectively linked to ship-
yard closures.
‘‘(4) Assistance in the form of grants, pref-
erential loans, preferential tax treatment, or other-
wise, that benefits or is directly related to shipbuild-
ing and repair for purposes of research and develop-
ment that is not equally open to domestic and foreign
enterprises.
‘‘(5) Tax policies and practices that favor the
shipbuilding and repair industry, directly or indi-
rectly, such as tax credits, deductions, exemptions and
preferences, including accelerated depreciation, if the
benefits are not generally available to persons or
firms not engaged in shipbuilding or repair.
‘‘(6) Any official regulation or practice that au-
thorizes or encourages persons or firms engaged in
shipbuilding or repair to enter into anticompetitive
arrangements.
‘‘(7) Any indirect support directly related, in
law or in fact, to shipbuilding and repair at national
yards, including any public assistance favoring ship-
owners with an indirect effect on shipbuilding or re-
pair activities, and any assistance provided to sup-
pliers of significant inputs to shipbuilding, which re-
sults in benefits to domestic shipbuilders.
‘‘(8) Any export subsidy identified in the Illus-
trative List of Export Subsidies in the Annex to the
Agreement on Interpretation and Application of Arti-
cles VI, XVI, and XXIII of the General Agreement on
Tariffs and Trade or any other export subsidy that
may be prohibited as a result of the Uruguay Round
of trade negotiations.’’.
SEC. 7. GOVERNMENT-IMPELLED CARGOES.
(a) VESSELS
ELIGIBLE
FOR
CARGOES.—Section
901(b) of the Merchant Marine Act, 1936 (46 App. U.S.C.
1241(b)) is amended—
(1) in paragraph (1), by striking ‘‘For purposes
of this section, the term ‘privately owned United
States-flag commercial vessels’ ’’ and all that follows
through the end of the paragraph; and
(2) by adding at the end the following new para-
graphs:
‘‘(3) In this section and section 901b, the term ‘pri-
vately owned United States-flag commercial vessel’ means
a privately owned vessel that is documented under chapter
121 of title 46, United States Code, that—
‘‘(A) was built in the United States;
‘‘(B) was documented under chapter 121 of title
46, United States Code, before May 19, 1993;
‘‘(C) does not transport under section 901b or
this section on any voyage more than 12,000 tons of
bulk cargo (as defined in section 3 of the Shipping
Act of 1984), and—
‘‘(i) was built in a foreign shipyard under
a contract entered into on or before May 19,
1993;
‘‘(ii) is built under a contract entered into
after that date, in a foreign shipyard that on the
date the contract is entered is not a foreign sub-
sidized shipyard; or
‘‘(iii) is subject to an operating agreement
under title IV;
‘‘(D)(i) is built under a contract entered into
after May 19, 1993, in a foreign shipyard that on the
date the contract was entered is not a foreign sub-
sidized shipyard; and
‘‘(ii) has not been documented in a foreign coun-
try before it is documented under chapter 121 of title
46, United States Code; or
‘‘(E) has been documented under chapter 121 of
title 46, United States Code, for at least 3 consecutive
years, did not transport any equipment, materials, or
commodities during that period under this section or
section 901b, and—
‘‘(i) was built in a foreign shipyard under
a contract entered into before May 19, 1993; or
‘‘(ii) is built under a contract entered into
after that date, in a foreign shipyard that on the
date the contract was entered is not a foreign
subsidized shipyard.
‘‘(4) In paragraph (3), the term ‘built’ includes re-
built.’’.
(b) CLERICAL AMENDMENT.—Section 901b of the Mer-
chant Marine Act, 1936 (46 App. U.S.C. 1241f) is amended
by adding at the end the following:
‘‘(f) For the definition of the term ‘privately owned
United 
States-flag 
commercial 
vessel’, 
see 
section
901(b)(3).’’.
SEC. 8. VESSEL FINANCING.
(a) ELIMINATION OF MORTGAGEE RESTRICTIONS.—
Section 31322(a) of title 46, United States Code, is amend-
ed to read as follows:
‘‘(a) A preferred mortgage is a mortgage, whenever
made, that—
‘‘(1) includes the whole of the vessel;
‘‘(2) is filed in substantial compliance with sec-
tion 31321 of this title; and
‘‘(3)(A) covers a documented vessel; or
‘‘(B) covers a vessel for which an application for
documentation is filed that is in substantial compli-
ance with the requirements of chapter 121 of this title
and the regulations prescribed under that chapter.’’.
(b) ELIMINATION OF TRUSTEE RESTRICTIONS.—
(1) REPEAL.—Section 31328 of title 46, United
States Code, is repealed.
(2) 
CONFORMING
AMENDMENT.—Section
31330(b) of title 46, United States Code, is amended
in paragraphs (1), (2), and (3) by striking ‘‘31328
or’’ each place it appears.
(c) REMOVAL OF MORTGAGE RESTRICTIONS.—Section
9 of the Shipping Act, 1916 (46 App. U.S.C. 808), as
amended by this Act, is further amended—
(1) in subsection (c)—
(A) by striking ‘‘31328’’ and inserting
‘‘12106(e)’’; and
(B) in paragraph (1) by striking ‘‘mort-
gage,’’ each place it appears; and
(2) in subsection (d)—
(A) in paragraph (1) by striking ‘‘transfer,
or mortgage’’ and inserting ‘‘or transfer’’;
(B) in paragraph (2) by striking ‘‘transfers,
or mortgages’’ and inserting ‘‘or transfers’’;
(C) in paragraph (3)(B) by striking ‘‘trans-
fers, or mortgages’’ and inserting ‘‘or transfers’’;
and
(D) in paragraph (4) by striking ‘‘transfers,
or mortgages’’ and inserting ‘‘or transfers’’.
(d) LEASE FINANCING.—Section 12106 of title 46,
United States Code, is amended by adding at the end the
following new subsections:
‘‘(e)(1) A certificate of documentation for a vessel may
be endorsed with a coastwise endorsement if—
‘‘(A) the vessel is eligible for documentation
under section 12102;
‘‘(B) the vessel is otherwise qualified under this
section to be employed in the coastwise trade;
‘‘(C) the person that owns the vessel, or any
other person that owns or controls the person that
owns the vessel, is primarily engaged in leasing or
other financing transactions;
‘‘(D) the vessel is under a demise charter to a
person qualifying as a citizen of the United States for
engaging in the coastwise trade under section 2 of the
Shipping Act, 1916; and
‘‘(E) the demise charter is for—
‘‘(i) a period of at least 3 years; or
‘‘(ii) such shorter period as may be pre-
scribed by the Secretary.
‘‘(2) On termination of a demise charter required
under paragraph (1)(D), the coastwise endorsement may be
continued for a period not to exceed 6 months on any terms
and conditions that the Secretary of Transportation may
prescribe.
‘‘(f) For purposes of the first proviso of section 27 of
the Merchant Marine Act, 1920, section 2 of the Shipping
Act, 1916, and section 12102(a), a vessel meeting the cri-
teria of subsection (d) or (e) is deemed to be owned exclu-
sively by citizens of the United States.’’.
SEC. 9. PLACEMENT OF VESSELS UNDER FOREIGN REG-
ISTRY.
(a) IN GENERAL.—Section 9 of the Shipping Act, 1916
(46 App. U.S.C. 808), as amended by this Act, is further
amended by adding at the end the following:
‘‘(e) Notwithstanding subsection (c)(2), the Merchant
Marine Act, 1936, or any contract entered into with the
Secretary under that Act, a vessel may be placed under a
foreign registry, without approval of the Secretary, if—
‘‘(1)(A) the Secretary determines that at least
one replacement vessel of a capacity that is equivalent
or greater, as measured by deadweight tons, gross
tons, or container equivalent units, as appropriate, is
documented under chapter 121 of title 46, United
States Code, by the owner of the vessel placed under
the foreign registry; and
‘‘(B) the replacement vessel is not more than 10
years of age on the date of that documentation;
‘‘(2)(A) the owner of the vessel has applied for an
operating agreement under title IV of the Merchant
Marine Act, 1936; and
‘‘(B) the Secretary, due to the unavailability of
funds, has not awarded that owner an operating
agreement within 60 days after the date of that appli-
cation; or
‘‘(3)(A) before the expiration of an operating
agreement entered into under title IV of the Merchant
Marine Act, 1936, the owner has applied for a new
operating agreement; and
‘‘(B) the Secretary, due to the unavailability of
funds, has not awarded the owner an operating agree-
ment before the later of—
‘‘(i) 60 days after the application for a new
operating agreement; or
‘‘(ii) the date of expiration of the operating
agreement.
‘‘(f) The Secretary shall give notice and an oppor-
tunity for a hearing for all approvals applied for under
subsection (c)(2) for oceangoing merchant vessels that are
of at least 3,000 gross tons.’’.
(b) APPLICATION.—The amendment made by sub-
section (a) applies to vessels that are placed under foreign
registry after the date of enactment of this Act and replace-
ment vessels documented in the United States after that
date.
(c) COURT SALES OF VESSELS.—Section 31329 of title
46, United States Code, is amended to read as follows:
‘‘§ 31329. Court sales of documented vessels
‘‘When a documented vessel is sold by order of a dis-
trict court to a mortgagee not eligible to own a documented
vessel—
‘‘(1) that sale is not a sale foreign within the
terms of the first proviso of section 27 of the Merchant
Marine Act, 1920 (46 App. U.S.C. 883); and
‘‘(2) unless the vessel is transferred to a foreign
registry, the vessel may be operated only with the ap-
proval of the Secretary of Transportation.’’.
SEC. 10. SERIES CONSTRUCTION ASSISTANCE.
The Merchant Marine Act, 1936 (46 App. U.S.C. 1101
et seq.) is amended by adding at the end the following:
‘‘TITLE XIV—SERIES
CONSTRUCTION ASSISTANCE
‘‘SEC. 1401. PAYMENT OF ASSISTANCE AUTHORIZED.
‘‘(a) IN GENERAL.—The Secretary of Transportation
(hereinafter in this title referred to as the ‘Secretary’) may,
subject to the availability of appropriations, pay assistance
in accordance with this title to the owner of a shipyard
that is located in the United States for the construction (in-
cluding outfitting and equipping) of any commercial vessel
that is one of a series of vessels for which payment of assist-
ance under this section to the owner is approved by the Sec-
retary under section 1402.
‘‘(b) AMOUNT OF ASSISTANCE.—The total amount of
assistance paid under this section with respect to a vessel
shall be equal to the series transition payment determined
for the vessel under section 1403(a).
‘‘SEC. 1402. APPROVAL OF ASSISTANCE FOR CONSTRUC-
TION OF SERIES OF VESSELS.
‘‘(a) APPROVAL OF ASSISTANCE.—
‘‘(1) IN GENERAL.—The Secretary may approve
payment of assistance under section 1401 for con-
struction of a series of vessels in a shipyard if—
‘‘(A) the owner of the shipyard submits an
application for that assistance in accordance
with section 1405;
‘‘(B) the Secretary makes the determina-
tions described in subsection (b); and
‘‘(C) the Secretary determines that payment
of the assistance will contribute to maintaining
national vessel construction capabilities that are
essential in time of war or national emergency.
‘‘(2) LIMITATION.—The Secretary may not ap-
prove assistance under this section for a series of ves-
sels if the series transition payment determined under
section 1403(a) for any vessel in the series is greater
than 50 percent of the estimate of the cost of con-
structing the vessel determined by the Secretary under
section 1403(b)(2).
‘‘(b) DETERMINATIONS
BY SECRETARY.—The Sec-
retary may not approve assistance for construction of a se-
ries of vessels in a shipyard unless the Secretary has deter-
mined the following:
‘‘(1) VESSEL REQUIREMENTS.—The vessels are—
‘‘(A) commercial vessels of at least 10,000
gross tons; and
‘‘(B) commercially marketable on the inter-
national market.
‘‘(2) SHIPYARD REQUIREMENTS.—The shipyard
in which the vessels will be constructed—
‘‘(A) is located in the United States; and
‘‘(B) upon completion of construction of the
vessels, will be capable of constructing additional
vessels of the same type as those in the series for
a price that is competitive in the international
market.
‘‘(3) APPLICANT REQUIREMENTS.—The applicant
for the assistance—
‘‘(A) has the ability, financial resources,
and other qualifications necessary for construc-
tion of the vessels;
‘‘(B) has entered into a contract for the con-
struction of each of the first 2 vessels to be con-
structed in the series, which may include a con-
tract for a vessel that will be constructed without
assistance under this title; and
‘‘(C) is the owner of the shipyard in which
the vessels will be constructed.
‘‘(4) CONTRACT
REQUIREMENTS.—Each of the
contracts required under paragraph (3)(B) are bind-
ing obligations on the applicant and all other parties
to the contracts, except that such a contract may be
contingent on—
‘‘(A) the approval of assistance under this
title for construction of a vessel under the con-
tract; and
‘‘(B) the making of a guarantee or commit-
ment to guarantee obligations under title XI for
construction under the contract.
‘‘(5) PURCHASER REQUIREMENTS.—Each person
that is a purchaser of a vessel under a contract re-
quired under paragraph (3)(B)—
‘‘(A) has the ability, financial resources,
and other qualifications necessary to own and
operate the vessel in commercial service; and
‘‘(B) is a party to the contract.
‘‘(6) SERIES TRANSITION PAYMENT.—The series
transition payment under section 1403 for each vessel
in the series.
‘‘(c) PRIORITY FOR CERTAIN SERIES OF VESSELS.—
In approving assistance under this title, the Secretary may
give priority to a series of vessels—
‘‘(1) if a smaller number of vessels in the series
are required to be constructed with assistance before
construction of that type of vessel becomes cost effec-
tive;
‘‘(2) for which the total of the series transition
payments determined under section 1403 for all ves-
sels in the series is less than that total for other series
of vessels for which applications are submitted for as-
sistance under this title;
‘‘(3) that will be constructed in a shipyard with
respect to which assistance under this title has not
been provided; or
‘‘(4) that would contribute to the preservation of
a shipyard that would be essential in a time of war
or national emergency.
‘‘SEC. 1403. DETERMINATION OF SERIES TRANSITION PAY-
MENTS.
‘‘(a) IN GENERAL.—The Secretary shall determine the
series transition payment for each vessel in a series of ves-
payment of assistance under the agreement, that is
based on the construction schedule for vessels for
which the assistance is paid.
‘‘(3) TERMINATION OF AGREEMENT.—An agree-
ment under this subsection shall authorize the Sec-
retary to terminate the agreement if—
‘‘(A) a contract required under section
1402(b)(3)(B) is terminated by the purchaser of
the vessel under the contract, and the owner of
the shipyard does not enter into a new contract
for construction of the vessel within a period
which shall be specified in the agreement; or
‘‘(B) the owner of the shipyard fails to enter
into contracts for construction of all vessels in
the series of vessels to which the agreement ap-
plies, within a period which shall be specified in
the agreement.
‘‘(4) CONTINUING EFFECT OF AGREEMENT WITH
RESPECT TO VESSELS COVERED BY CONTRACTS.—The
termination of a series construction agreement under
paragraph (3) shall not affect the effectiveness of the
agreement with respect to vessels for which a construc-
tion contract is in effect on the date of termination.
‘‘(b) BINDING OBLIGATION OF THE UNITED STATES.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), a requirement that the Secretary make
payments under a series construction agreement
under subsection (a) shall constitute a binding obliga-
tion of the United States.
‘‘(2) TERMINATION OF OBLIGATION.—If the Sec-
retary terminates a series construction agreement
pursuant to subsection (a)(3), the obligation of the
United States under paragraph (1) to make payments
under the agreement shall terminate with respect to
vessels for which no construction contract is in effect
on the date of termination of the agreement.
‘‘(3) CONTINUING AVAILABILITY OF AMOUNTS.—
Amounts to be used to liquidate an obligation under
paragraph (1) that terminates under paragraph (2)
shall remain available to the Secretary for the pay-
ment of assistance under this title.
‘‘SEC. 1405. APPLICATIONS FOR ASSISTANCE.
‘‘(a) SUBMITTAL.—A person desiring assistance under
this title shall, in accordance with this section, submit an
application to the Secretary.
‘‘(b) CONTENTS OF APPLICATION.—An application for
assistance under this title with respect to a series of vessels
shall include the following:
‘‘(1) A detailed description of the type of vessels
included in the series, including plans and specifica-
tions for the vessels.
‘‘(2) Detailed estimates of the cost of completing
construction of each of the vessels in the series, includ-
ing such estimates from subcontractors for the con-
struction as may be required by the Secretary.
‘‘(3) Copies of the contracts required under sec-
tion 1402(b)(3)(B).
‘‘(4) Other information required by the Secretary
to fulfill the requirements of this title.
‘‘(c) REGULATIONS.—The Secretary shall issue regula-
tions setting forth the procedures for submitting an applica-
tion for assistance under this title.
‘‘SEC. 1406. RESTRICTION ON VESSEL OPERATIONS.
‘‘A vessel for which assistance is paid under this
title—
‘‘(1) may be operated only in foreign trade or
domestic trade authorized under a registry endorse-
ment for the vessel issued under section 12105 of title
46, United States Code; and
‘‘(2) may not be operated in the coastwise trade
of the United States (including mixed coastwise and
foreign trade), except coastwise trade authorized
under a registry endorsement for the vessel issued
under section 12105 of title 46, United States Code.
‘‘SEC. 1407. VESSEL DESIGN AWARDS.
‘‘The Secretary, subject to the availability of appro-
priations, may make an award to a United States shipyard
on an equal matching basis for the cost of vessel designs
and document and bid preparation for vessels described in
section 403(b)(4).’’.
SEC. 11. EFFECTIVE DATE.
The amendments made by this Act are effective on the
date which is 120 days after the date of enactment of this
Act.
SEC. 12. REGULATIONS.
(a) IN GENERAL.—The Secretary of Transportation
shall prescribe regulations as necessary to carry out this
Act.
(b) INTERIM REGULATIONS.—The Secretary of Trans-
portation may prescribe interim regulations necessary to
carry out this Act and for accepting eligibility decision ap-
plications under section 403 of the Merchant Marine Act,
1936, as amended by this Act. For this purpose, the Sec-
retary of Transportation is excepted from compliance with
the notice and comment requirements of section 553 of title
5, United States Code. All regulations prescribed under the
authority of this subsection that are not earlier superseded
by final rules shall expire 270 days after the date of enact-
ment of this Act.
SEC. 13. EXPANSION OF STANDING FOR MARITIME UNIONS.
Section 301 of the Merchant Marine Act, 1936 (46
App. U.S.C. 1131) is amended by adding at the end the
following:
‘‘(c) STANDING FOR MARITIME UNION REPRESENTA-
TIVES.—The duly-elected representative of any organization
that is certified by the Secretary of Labor as the proper
collective bargaining agency for officers or crew employed
on any type of United States documented vessel is an inter-
ested party in, and has standing to challenge, any proposed
or final order, action, or rule of the Secretary of Transpor-
tation under this Act or section 9(c)(2) of the Shipping Act,
1916.’’.
SEC. 14. STUDY.
(a) IN GENERAL.—After providing public notice and
opportunity for comment, the Secretary of Transportation
shall conduct a study of—
(1) the impact of this Act on the international
competitiveness of United States documented vessels
and whether this Act has had a favorable or unfavor-
able impact on the ability of United States docu-
mented vessels to compete successfully with foreign-
flag vessels;
(2) whether continuation of the Maritime Secu-
rity Fleet program established by this Act would as-
sist the international competitiveness of United States
documented vessels;
(3) whether the Maritime Security Fleet program
should be continued, modified, or discontinued;
(4) alternatives that are or should be available to
operators of United States documented vessels if the
Maritime Security Fleet program is discontinued;
and
(5) any other issues related to promoting the
international competitiveness of United States docu-
mented vessels that the Secretary considers appro-
priate.
(b) REPORT.—The Secretary of Transportation shall
submit to the Congress a report on the findings and conclu-
sions of the study required by subsection (a) by not later
than 4 years after the date of enactment of this Act, which
shall include such recommendations as the Secretary con-
siders appropriate.
SEC. 15. CARGO PREFERENCE ADMINISTRATIVE REFORM.
(a) FINDINGS.—The Congress finds and declares
that—
(1) the Congress continues to support the cargo
preference program as an important element of sup-
port for the United States-flag merchant marine be-
cause the United States merchant marine is critical
to the economic and national security of the United
States;
(2) reserving a small portion of Government
cargo for United States-flag vessels encourages com-
petition among United States-flag vessels; and
(3) administering the cargo preference program
in a centralized, commercially based manner reduces
costs of the program.
(b) ADMINISTRATIVE REFORM.—Section 901 of the
Merchant Marine Act, 1936 (46 App. U.S.C. 1241) is
amended by adding at the end the following new sub-
sections:
‘‘(d) A privately owned United States-flag commercial
vessel transporting any equipment, materials, or commod-
ities under this section or section 901b shall be engaged
under terms no less favorable than the most favorable terms
offered to any foreign-flag vessel transporting equipment,
materials, or commodities under this section or section
901b.
‘‘(e) A contract for the ocean transportation of any
equipment, materials, or commodities under this section or
section 901b, to the extent the Secretary of Transportation
determines necessary to further the purposes of this section
and section 901b, shall be based on contracts used for com-
mercial shipments.
‘‘(f) The Secretary of Transportation shall participate
in negotiations relating to agreements with recipient coun-
tries for equipment, materials, or commodities subject to
this section or section 901b to the extent the Secretary con-
siders to be necessary to ensure agreement provisions relat-
ing to or affecting the transportation of such equipment,
materials, or commodities permit fair and reasonable trans-
portation services to be provided.
‘‘(g) No later than 180 days after the date of the enact-
ment of the Maritime Security and Competitiveness Act of
1993, the heads of appropriate Federal agencies, or their
representatives, shall transmit to the Secretary of Transpor-
tation recommendations relating to the methodology used
by the Secretary of Transportation to determine whether
rates for United States-flag vessels are fair and reasonable
in compliance with section 901(b) and will achieve the pol-
icy objectives of this Act.’’.
SEC. 16. WAGES FOR WHICH PREFERRED MARITIME LIEN
MAY BE ESTABLISHED.
(a) IN GENERAL.—Section 31301(5)(D) of title 46,
United States Code, is amended by inserting before the
semicolon the following: ‘‘(including any payment described
in paragraph (5), (6), (7), (8), or (9) of section 302(c) of
the Labor Management Relations Act, 1947 for any indi-
vidual as a member of the crew of the vessel, that is due
from and unpaid by an owner or managing operator of
the vessel)’’.
(b) INCURRING OBLIGATIONS BEFORE EXECUTING
PREFERRED MORTGAGES.—Section 31323(b)(2) of title 46,
United States Code, is amended by inserting before the
semicolon the following: ‘‘(including any payment described
in paragraph (5), (6), (7), (8), or (9) of section 302(c) of
the Labor Management Relations Act, 1947 for any member
of the crew of the vessel)’’.
(c) MASTER’S LIEN FOR WAGES.—Section 11112 of
title 46, United States Code, is amended by inserting after
‘‘wages’’ the following: ‘‘(including any payment described
in paragraph (5), (6), (7), (8), or (9) of section 302(c) of
the Labor Management Relations Act, 1947 for an individ-
ual as master of the vessel, that is due from and unpaid
by an owner or managing operator of the vessel)’’.
(d) APPLICATION.—The amendments made by sub-
sections (a), (b), and (c) shall apply with respect to pay-
ments that first become due on or after the date of the enact-
ment of this Act.
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