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‘‘(b) TERMS TO BE DEFINED AND USED.—The Secretary shall define the 
terms ‘net voyage profit’, ‘fair and reasonable overhead expenses’, and ‘capital 
necessarily employed’ for this section. Each advertisement for bids and each 
charter shall contain these definitions, stating the formula for determining 
each of these three amounts. 
‘‘§ 57518. Performance bond 
‘‘The Secretary of Transportation shall require a charterer of a vessel of 
the Secretary to deposit with the Secretary an undertaking, with approved 
sureties, in such amount as the Secretary may require as security for the 
faithful performance of the terms of the charter, including indemnity against 
liens on the chartered vessel. 
‘‘§ 57519. Insurance 
‘‘A charter under this chapter shall require the charterer to carry, at the 
charterer’s expense, insurance on the chartered vessel covering all marine and 
port risks, protection and indemnity risks, and all other hazards and liabil-
ities, adequate to cover damages claimed against and losses sustained by the 
chartered vessel arising during the term of the charter. The insurance shall 
be in such form, in such amount, and with such companies as the Secretary 
of Transportation may require. In accordance with law, any of the insurance 
risks may be underwritten by the Secretary. 
‘‘§ 57520. Vessel maintenance 
‘‘(a) IN GENERAL.—A charter under this chapter shall require the 
charterer, at the charterer’s expense, to— 
‘‘(1) keep the chartered vessel in good repair and efficient operating 
condition; and 
‘‘(2) make any repairs required by the Secretary of Transportation. 
‘‘(b) INSPECTION.—The charter shall provide that the Secretary has the 
right to inspect the vessel at any time to ascertain its condition. 
‘‘§ 57521. Termination of charter during national emergency 
‘‘A charter under this chapter shall provide that during a national emer-
gency proclaimed by the President or a period for which the President has 
proclaimed that the security of the national defense makes it advisable, the 
Secretary of Transportation may terminate the charter without cost to the 
United States Government on such notice to the charterer as the President 
determines. 
‘‘SUBCHAPTER III—MISCELLANEOUS 
‘‘§ 57531. Construction and charter of vessels for unsuccess-
ful routes 
‘‘(a) IN GENERAL.—If the Secretary of Transportation finds that a trade 
route determined to be essential under section 50103 of this title cannot be 
successfully developed and maintained and the Secretary’s replacement pro-
215 
gram cannot be achieved under private operation of the trade route by a cit-
izen of the United States with vessels documented under chapter 121 of this 
title, without further aid by the United States Government in addition to the 
financial aid authorized under titles V and VI of the Merchant Marine Act, 
1936, the Secretary, without advertisement or competition, may— 
‘‘(1) have constructed, in private shipyards or in navy yards, vessels 
of the types necessary for the trade route; and 
‘‘(2) demise charter those new vessels to the operator of vessels of the 
United States established on the trade route. 
‘‘(b) AMOUNT OF CHARTER HIRE.— 
‘‘(1) IN GENERAL.—The annual charter hire under subsection (a) shall 
be at least 4 percent of the price (referred to in this section as the ‘for-
eign cost’) at which the vessel would be sold if constructed under title 
V of the Merchant Marine Act, 1936, plus— 
‘‘(A) a percentage of the depreciated foreign cost computed annu-
ally determined by the Secretary of the Treasury, taking into con-
sideration the current average market yield on outstanding market-
able obligations of the Government with remaining periods to matu-
rity comparable to the term of the charter, adjusted to the nearest 
one-eighth percent; and 
‘‘(B) an allowance adequate in the judgment of the Secretary of 
Transportation to cover administrative costs. 
‘‘(2) DEPRECIATION.—Depreciation under paragraph (1)(A) shall be 
based on— 
‘‘(A) a 25-year life for dry-cargo and passenger vessels; and 
‘‘(B) a 20-year life for tankers and other bulk liquid carrier ves-
sels. 
‘‘(c) OPTION TO PURCHASE.—The charter may contain an option to the 
charterer to purchase the vessels from the Secretary of Transportation within 
5 years after delivery under the charter, on the same terms and conditions 
as provided in title V of the Merchant Marine Act, 1936, for the purchase 
of new vessels from the Secretary. However— 
‘‘(1) the purchase price shall be the foreign cost less depreciation to 
the date of purchase based on the useful life specified in subsection (b)(2); 
‘‘(2) the required cash payment payable at the time of the purchase 
shall be 25 percent of the purchase price; 
‘‘(3) the charter may provide that any part of the charter hire paid 
in excess of the minimum charter hire provided for in this section may 
be credited against the cash payment payable at the time of the purchase; 
‘‘(4) the balance of the purchase price shall be paid within the remain-
ing years of useful life (as specified in subsection (b)(2)) after the date
216 
of delivery of the vessel under the charter and in approximately equal 
annual installments, except that the first installment, which shall be 
payable on the next ensuing anniversary date of the delivery under the 
charter, shall be a proportionate part of the annual installment; and 
‘‘(5) interest shall be payable on the unpaid balances from the date 
of purchase, at a rate not less than— 
‘‘(A) a rate determined by the Secretary of the Treasury, taking 
into consideration the current average market yield on outstanding 
marketable obligations of the Government with remaining periods to 
maturity comparable to the average maturities of the loans, adjusted 
to the nearest one-eighth percent; plus 
‘‘(B) an allowance adequate in the judgment of the Secretary of 
Transportation to cover administrative costs. 
‘‘(d) OPERATION OF VESSEL.— 
‘‘(1) PERMISSIBLE VOYAGES.—The charter shall provide for operation 
of the vessel exclusively— 
‘‘(A) in foreign trade; 
‘‘(B) on a round-the-world voyage; 
‘‘(C) on a round voyage from the west coast of the United States 
to a European port that includes an intercoastal port of the United 
States; 
‘‘(D) on a round voyage from the Atlantic coast of the United 
States to the Orient that includes an intercoastal port of the United 
States; or 
‘‘(E) on a voyage in foreign trade on which the vessel may stop 
at Hawaii or an island territory or possession of the United States. 
‘‘(2) DOMESTIC TRADE.—The charter shall provide if the vessel is op-
erated in domestic trade on any of the services specified in paragraph 
(1), the charterer will pay annually to the Secretary of Transportation 
that proportion of 1⁄25 of the difference between the domestic and foreign 
cost of the vessel as the gross revenue derived from the domestic trade 
bears to the gross revenue derived from the entire voyages completed dur-
ing the preceding year. 
‘‘§ 57532. Operation of experimental vessels 
‘‘(a) DEFINITION.—In this section, the term ‘experimental vessel’ means a 
vessel owned by the United States Government (including a vessel in the Na-
tional Defense Reserve Fleet) that has been constructed, reconditioned, or re-
modeled for experimental or testing purposes. 
‘‘(b) AUTHORITY TO OPERATE.—The Secretary of Transportation, for the 
purpose of practical development, trial, and testing, may operate an experi-
mental vessel under a bareboat charter or general agency agreement in the
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foreign or domestic trade of the United States or for use for the account of 
a department or agency of the Government, without regard to other provisions 
of this subtitle and other laws related to chartering and general agency oper-
ations. Not more than 10 vessels may be operated and tested under this sec-
tion in any one year. 
‘‘(c) TERMS OF OPERATION.—Operation of a vessel under this section shall 
be on terms the Secretary considers appropriate to carry out the purposes of 
this subtitle. A bareboat charter under this section shall be at reasonable rates 
and include restrictions the Secretary considers appropriate to protect the 
public interest, including provisions for recapture of profits under section 
57517 of this title. A charter or general agency agreement under this section 
shall be reviewed annually to determine whether conditions exist to justify 
continuance of the charter or agreement. 
‘‘(d) RIGHTS OF SEAMEN.—A seaman engaged in vessel operations of the 
Secretary under this section and employed through a general agent in connec-
tion with a charter or agreement under this section is entitled to all the rights 
and remedies provided in sections 1(a) and (c), 3(c), and 4 of the Act of 
March 24, 1943 (50 App. U.S.C. 1291(a), (c), 1293(c), 1294). 
‘‘PART G—RESTRICTIONS AND PENALTIES 
‘‘CHAPTER 581—RESTRICTIONS AND PENALTIES 
‘‘Sec. 
‘‘58101.
Operating in domestic intercoastal or coastwise service. 
‘‘58102.
Default on payment or maintenance of reserves. 
‘‘58103.
Employing another person as managing or operating agent. 
‘‘58104.
Willful violation constitutes breach of contract or charter. 
‘‘58105.
Preferences for cargo in which charterer has interest. 
‘‘58106.
Concerted discriminatory activities. 
‘‘58107.
Discrimination at ports by water common carriers. 
‘‘58108.
Charges for transportation subject to subtitle IV of title 49. 
‘‘58109.
Penalties. 
‘‘§ 58101. Operating in domestic intercoastal or coastwise 
service 
‘‘(a) PROHIBITION.—A subsidy may not be awarded or paid to a contractor 
under the operating-differential subsidy program, and a vessel may not be 
chartered to a person under chapter 575 of this title, if the contractor or 
charterer, or a holding company, subsidiary, affiliate, or associate of the con-
tractor or charterer, or an officer, director, agent, or executive thereof, directly 
or indirectly— 
‘‘(1) owns, charters, or operates a vessel engaged in the domestic inter-
coastal or coastwise service; or 
‘‘(2) owns a pecuniary interest in a person that owns, charters, or op-
erates a vessel in the domestic intercoastal or coastwise service. 
‘‘(b) WAIVER.—A person may apply to the Secretary of Transportation for 
a waiver of subsection (a). Before deciding on the waiver, the Secretary shall