$200 for each passage sold, to be assessed by the Federal Maritime Commis-
sion. The Commission may remit or mitigate the penalty on terms the Com-
mission considers proper. 
‘‘§ 44105. Refusal of clearance 
‘‘The Secretary of Homeland Security shall refuse the clearance required by 
section 60105 of this title, at the port or place of departure from the United 
States, of a vessel that is subject to this chapter and does not have evidence 
issued by the Federal Maritime Commission of compliance with sections 
44102 and 44103 of this title. 
‘‘§ 44106. Conduct of proceedings 
‘‘Part A of this subtitle applies to proceedings conducted by the Federal 
Maritime Commission under this chapter.’’. 
SEC. 7. SUBTITLE V OF TITLE 46. 
(a) SUBTITLE ANALYSIS.—The analysis of subtitle V of title 46, United 
States Code, is amended to read as follows: 
‘‘PART A—GENERAL 
‘‘Chapter 
Sec. 
‘‘501. Policy, Studies, and Reports .......................................................................
50101 
‘‘503. Administrative ...................................................................................................
50301 
‘‘505. Other General Provisions ............................................................................
50501 
‘‘PART B—MERCHANT MARINE SERVICE 
‘‘511. General ..................................................................................................................
51101 
‘‘513. United States Merchant Marine Academy ...........................................
51301 
‘‘515. State Maritime Academy Support Program .......................................
51501 
‘‘517. Other Support for Merchant Marine Training .................................
51701 
‘‘519. Merchant Marine Awards ............................................................................
51901 
‘‘521. Miscellaneous .....................................................................................................
52101 
‘‘PART C—FINANCIAL ASSISTANCE PROGRAMS 
‘‘531. Maritime Security Fleet ................................................................................
53101 
‘‘533. Construction Reserve Funds .......................................................................
53301 
‘‘535. Capital Construction Funds .......................................................................
53501 
‘‘537. Loans and Guarantees ..................................................................................
53701 
‘‘539. War Risk Insurance ........................................................................................
53901 
‘‘PART D—PROMOTIONAL PROGRAMS 
‘‘551. Coastwise Trade ...............................................................................................
55101 
‘‘553. Passenger and Cargo Preferences ...........................................................
55301 
‘‘555. Miscellaneous .....................................................................................................
55501 
‘‘PART E—CONTROL OF MERCHANT MARINE CAPABILITIES 
‘‘561. Restrictions on Transfers .............................................................................
56101 
‘‘563. Emergency Acquisition of Vessels ............................................................
56301 
‘‘565. Essential Vessels Affected by Neutrality Act ......................................
56501 
‘‘PART F—GOVERNMENT-OWNED MERCHANT VESSELS 
‘‘571. General Authority ............................................................................................
57101 
‘‘573. Vessel Trade-In Program .............................................................................
57301 
‘‘575. Construction, Charter, and Sale of Vessels ........................................
57501 
‘‘PART G—RESTRICTIONS AND PENALTIES 
‘‘581. Restrictions and Penalties ..........................................................................
58101’’.
(b) CHAPTERS PRECEDING CHAPTER 531.—Subtitle V of title 46, United 
States Code, is amended by inserting after the subtitle analysis the following: 
‘‘PART A—GENERAL 
‘‘CHAPTER 501—POLICY, STUDIES, AND REPORTS 
‘‘Sec. 
‘‘50101.
Objectives and policy. 
‘‘50102.
Survey of merchant marine. 
‘‘50103.
Determinations of essential services. 
‘‘50104.
Studies of general maritime problems. 
‘‘50105.
Studies and cooperation relating to the construction of vessels. 
‘‘50106.
Studies on the operation of vessels. 
‘‘50107.
Studies on marine insurance. 
‘‘50108.
Studies on cargo carriage and cargo containers. 
‘‘50109.
Miscellaneous studies. 
‘‘50110.
Securing preference to vessels of the United States. 
‘‘50111.
Reports to Congress. 
‘‘50112.
National Maritime Enhancement Institutes. 
‘‘50113.
Use and performance reports by operators of vessels. 
‘‘§ 50101. Objectives and policy 
‘‘(a) OBJECTIVES.—It is necessary for the national defense and the develop-
ment of the domestic and foreign commerce of the United States that the 
United States have a merchant marine— 
‘‘(1) sufficient to carry the waterborne domestic commerce and a sub-
stantial part of the waterborne export and import foreign commerce of 
the United States and to provide shipping service essential for maintain-
ing the flow of the waterborne domestic and foreign commerce at all 
times; 
‘‘(2) capable of serving as a naval and military auxiliary in time of 
war or national emergency; 
‘‘(3) owned and operated under United States flag by citizens of the 
United States insofar as practicable; 
‘‘(4) composed of the best-equipped, safest, and most suitable types of 
vessels, built in the United States and manned with a trained and effi-
cient citizen personnel; and 
‘‘(5) supplemented by efficient facilities for building and repairing 
vessels. 
‘‘(b) POLICY.—It is the policy of the United States Government to encour-
age and aid the development and maintenance of a merchant marine satis-
fying the objectives described in subsection (a). 
‘‘§ 50102. Survey of merchant marine 
‘‘(a) IN GENERAL.—The Secretary of Transportation shall survey the mer-
chant marine of the United States to determine whether replacements and ad-
ditions are required to carry out the objectives and policy of section 50101 
of this title. The Secretary shall study, perfect, and adopt a long-range pro-
gram for replacements and additions that will result, as soon as practicable, 
in—
‘‘(1) an adequate and well-balanced merchant fleet, including vessels 
of all types, that will provide shipping service essential for maintaining 
the flow of foreign commerce by vessels designed to be readily and quickly 
convertible into transport and supply vessels in a time of national emer-
gency; 
‘‘(2) ownership and operation of the fleet by citizens of the United 
States insofar as practicable; 
‘‘(3) vessels designed to afford the best and most complete protection 
for passengers and crew against fire and all marine perils; and 
‘‘(4) an efficient capacity for building and repairing vessels in the 
United States with an adequate number of skilled personnel to provide 
an adequate mobilization base. 
‘‘(b) COOPERATION WITH SECRETARY OF NAVY.—In carrying out sub-
section (a)(1), the Secretary of Transportation shall cooperate closely with the 
Secretary of the Navy as to national defense requirements. 
‘‘§ 50103. Determinations of essential services 
‘‘(a) ESSENTIAL SERVICES, ROUTES, AND LINES.— 
‘‘(1) IN GENERAL.—The Secretary of Transportation shall investigate, 
determine, and keep current records of the ocean services, routes, and 
lines from ports in the United States, or in the territories and posses-
sions of the United States, to foreign markets, which the Secretary deter-
mines to be essential for the promotion, development, expansion, and 
maintenance of the foreign commerce of the United States. In making 
such a determination, the Secretary shall consider and give due weight 
to— 
‘‘(A) the cost of maintaining each line; 
‘‘(B) the probability that a line cannot be maintained except at 
a heavy loss disproportionate to the benefit to foreign trade; 
‘‘(C) the number of voyages and types of vessels that should be 
employed in a line; 
‘‘(D) the intangible benefit of maintaining a line to the foreign 
commerce of the United States, the national defense, and other na-
tional requirements; and 
‘‘(E) any other facts and conditions a prudent business person 
would consider when dealing with the person’s own business. 
‘‘(2) SAINT LAWRENCE SEAWAY.—For purposes of paragraph (1), the 
Secretary shall establish services, routes, and lines that reflect the sea-
sonal closing of the Saint Lawrence Seaway and provide for alternate 
routing of vessels through a different range of ports during that closing 
to maintain continuity of service on a year-round basis.
‘‘(b) BULK CARGO CARRYING SERVICES.—The Secretary shall investigate, 
determine, and keep current records of the bulk cargo carrying services that 
should be provided by United States-flag vessels (whether or not operating on 
particular services, routes, or lines) for the promotion, development, expan-
sion, and maintenance of the foreign commerce of the United States and the 
national defense or other national requirements. 
‘‘(c) TYPES OF VESSELS.—The Secretary shall investigate, determine, and 
keep current records of the type, size, speed, method of propulsion, and other 
requirements of the vessels, including express-liner or super-liner vessels, that 
should be employed in— 
‘‘(1) the services, routes, or lines described in subsection (a), and the 
frequency and regularity of the voyages of the vessels, with a view to fur-
nishing adequate, regular, certain, and permanent service; and 
‘‘(2) the bulk cargo carrying services described in subsection (b). 
‘‘§ 50104. Studies of general maritime problems 
‘‘The Secretary of Transportation shall study all maritime problems aris-
ing in carrying out the policy in section 50101 of this title. 
‘‘§ 50105. Studies and cooperation relating to the construc-
tion of vessels 
‘‘(a) RELATIVE COSTS AND NEW DESIGNS.—The Secretary of Transpor-
tation shall investigate, determine, and keep current records of— 
‘‘(1) the relative cost of construction of comparable vessels in the 
United States and in foreign countries; and 
‘‘(2) new designs, new methods of construction, and new types of 
equipment for vessels. 
‘‘(b) RULES, CLASSIFICATIONS, AND RATINGS.—The Secretary shall exam-
ine the rules under which vessels are constructed abroad and in the United 
States and the methods of classifying and rating the vessels. 
‘‘(c) COLLABORATION WITH OWNERS AND BUILDERS.—The Secretary shall 
collaborate with vessel owners and shipbuilders in developing plans for the ec-
onomical construction of vessels and their propelling machinery, of most mod-
ern economical types, giving thorough consideration to all well-recognized 
means of propulsion and taking into account the benefits from standardized 
production where practicable and desirable. 
‘‘(d) EXPRESS-LINER AND SUPER-LINER VESSELS.—The Secretary shall 
study and cooperate with vessel owners in devising means by which there may 
be constructed, by or with the aid of the United States Government, express- 
liner or super-liner vessels comparable to those of other nations, especially 
with a view to their use in a national emergency, and the use of transoceanic 
aircraft service in connection with or in lieu of those vessels.
‘‘§ 50106. Studies on the operation of vessels 
‘‘(a) RELATIVE COSTS.—The Secretary of Transportation shall investigate, 
determine, and keep current records of the relative cost of marine insurance, 
maintenance, repairs, wages and subsistence of officers and crews, and all 
other items of expense, in the operation of comparable vessels under the laws 
and regulations of the United States and those of the foreign countries whose 
vessels are substantial competitors of American vessels. 
‘‘(b) SHIPYARDS.—The Secretary shall investigate, determine, and keep cur-
rent records of the number, location, and efficiency of shipyards in the United 
States. 
‘‘(c) NAVIGATION LAWS.—The Secretary shall examine the navigation laws 
and regulations of the United States and make such recommendations to Con-
gress as the Secretary considers proper for the amendment, improvement, and 
revision of those laws and for the development of the merchant marine of the 
United States. 
‘‘§ 50107. Studies on marine insurance 
‘‘The Secretary of Transportation shall— 
‘‘(1) examine into the subject of marine insurance, the number of com-
panies in the United States, domestic and foreign, engaging in marine 
insurance, the extent of the insurance on hulls and cargoes placed or 
written in the United States, and the extent of reinsurance of American 
maritime risks in foreign companies; and 
‘‘(2) ascertain what steps may be necessary to develop an ample ma-
rine insurance system as an aid in the development of the merchant ma-
rine of the United States. 
‘‘§ 50108. Studies on cargo carriage and cargo containers 
‘‘(a) STUDIES.—The Secretary of Transportation shall study— 
‘‘(1) the methods of encouraging the development and implementation 
of new concepts for the carriage of cargo in the domestic and foreign 
commerce of the United States; and 
‘‘(2) the economic and technological aspects of the use of cargo con-
tainers as a method of carrying out the policy in section 50101 of this 
title. 
‘‘(b) RESTRICTION.—In carrying out subsection (a) and the policy in sec-
tion 50101 of this title, the United States Government may not give preference 
as between carriers based on the length, height, or width of cargo containers 
or the length, height, or width of cargo container cells. This restriction applies 
to all existing container vessels and any container vessel to be constructed or 
rebuilt.
‘‘§ 50109. Miscellaneous studies 
‘‘(a) FOREIGN SUBSIDIES.—The Secretary of Transportation shall inves-
tigate, determine, and keep current records of the extent and character of the 
governmental aid and subsidies granted by foreign governments to their mer-
chant marine. 
‘‘(b) LAWS APPLICABLE TO AIRCRAFT.—The Secretary shall investigate, de-
termine, and keep current records of the provisions of law relating to shipping 
that should be made applicable to aircraft engaged in foreign commerce to 
further the policy in section 50101 of this title, and any appropriate legisla-
tion in this regard. 
‘‘(c) AID FOR COTTON, COAL, LUMBER, AND CEMENT.—The Secretary shall 
investigate, determine, and keep current records of the advisability of enact-
ment of suitable legislation authorizing the Secretary, in an economic or com-
mercial emergency, to aid farmers and producers of cotton, coal, lumber, and 
cement in any section of the United States in the transportation and landing 
of their products in any foreign port, which products can be carried in dry- 
cargo vessels by reducing rates, by supplying additional tonnage to any 
American operator, or by operation of vessels directly by the Secretary, until 
the Secretary considers the special rate reduction and operation unnecessary 
for the benefit of those farmers and producers. 
‘‘(d) INTERCOASTAL
AND INLAND WATER TRANSPORTATION.—The Sec-
retary shall investigate, determine, and keep current records of intercoastal 
and inland water transportation, including their relation to transportation 
by land and air. 
‘‘(e) OBSOLETE TONNAGE AND TRAMP SERVICE.—The Secretary shall make 
studies and reports to Congress on— 
‘‘(1) the scrapping or removal from service of old or obsolete merchant 
tonnage owned by the United States Government or in use in the mer-
chant marine; and 
‘‘(2) tramp shipping service and the advisability of citizens of the 
United States participating in that service with vessels under United 
States registry. 
‘‘(f) MORTGAGE LOANS.—The Secretary shall investigate the legal status of 
mortgage loans on vessel property, with a view to the means of improving 
the security of those loans and of encouraging investment in American ship-
ping. 
‘‘§ 50110. Securing preference to vessels of the United States 
‘‘(a) POSSIBILITIES OF PROMOTING CARRIAGE.—The Secretary of Trans-
portation shall investigate, determine, and keep current records of the possi-
bilities of promoting the carriage of United States foreign trade in vessels of 
the United States.
‘‘(b) INDUCEMENTS TO IMPORTERS AND EXPORTERS.—The Secretary shall 
study and cooperate with vessel owners in devising means by which the im-
porters and exporters of the United States can be induced to give preference 
to vessels of the United States. 
‘‘(c) LIAISON WITH AGENCIES AND ORGANIZATIONS.—The Secretary shall 
establish and maintain liaison with such other agencies of the United States 
Government, and with such representative trade organizations throughout the 
United States, as may be concerned, directly or indirectly, with any move-
ment of commodities in the waterborne export and import foreign commerce 
of the United States, for the purpose of securing preference to vessels of the 
United States in the shipment of those commodities. 
‘‘§ 50111. Reports to Congress 
‘‘(a) IN GENERAL.—Not later than April 1 of each year, the Secretary of 
Transportation shall submit a report to Congress. The report shall include, 
with respect to activities of the Secretary under this subtitle, the results of 
investigations, a summary of transactions, a statement of all expenditures 
and receipts, the purposes for which all expenditures were made, and any rec-
ommendations for legislation. 
‘‘(b) ADMINISTERED AND OVERSIGHT FUNDS.—The Secretary, in the report 
under subsection (a) and in the annual budget estimate for the Maritime Ad-
ministration submitted to Congress, shall state separately the amount, source, 
intended use, and nature of any funds (other than funds appropriated to the 
Administration or to the Secretary of Transportation for use by the Adminis-
tration) administered, or subject to oversight, by the Administration. 
‘‘(c) ADDITIONAL RECOMMENDATIONS FOR LEGISLATION.—The Secretary, 
from time to time, shall make recommendations to Congress for legislation the 
Secretary considers necessary to better achieve the objectives and policy of sec-
tion 50101 of this title. 
‘‘§ 50112. National Maritime Enhancement Institutes 
‘‘(a) DESIGNATION.—The Secretary of Transportation may designate Na-
tional Maritime Enhancement Institutes. 
‘‘(b) ACTIVITIES.—Activities undertaken by an institute may include— 
‘‘(1) conducting research about methods to improve the performance of 
maritime industries; 
‘‘(2) enhancing the competitiveness of domestic maritime industries in 
international trade; 
‘‘(3) forecasting trends in maritime trade; 
‘‘(4) assessing technological advancements; 
‘‘(5) developing management initiatives and training;
‘‘(6) analyzing economic and operational impacts of regulatory poli-
cies and international negotiations or agreements pending before inter-
national bodies; 
‘‘(7) assessing the compatibility of domestic maritime infrastructure 
systems with overseas transport systems; 
‘‘(8) fostering innovations in maritime transportation pricing; and 
‘‘(9) improving maritime economics and finance. 
‘‘(c) APPLICATION FOR DESIGNATION.—An institution seeking designation 
as a National Maritime Enhancement Institute shall submit an application 
under regulations prescribed by the Secretary. 
‘‘(d) CRITERIA FOR DESIGNATION.—The Secretary shall designate an insti-
tute under this section on the basis of the following criteria: 
‘‘(1) The demonstrated research and extension resources available to 
the applicant for carrying out the activities specified in subsection (b). 
‘‘(2) The ability of the applicant to provide leadership in making na-
tional and regional contributions to the solution of both long-range and 
immediate problems of the domestic maritime industry. 
‘‘(3) The existence of an established program of the applicant encom-
passing research and training directed to enhancing maritime industries. 
‘‘(4) The demonstrated ability of the applicant to assemble and evalu-
ate pertinent information from national and international sources and 
to disseminate results of maritime industry research and educational 
programs through a continuing education program. 
‘‘(5) The qualification of the applicant as a nonprofit institution of 
higher learning. 
‘‘(e) FINANCIAL AWARDS.—The Secretary may make awards on an equal 
matching basis to an institute designated under subsection (a) from amounts 
appropriated. The aggregate annual amount of the Federal share of the 
awards by the Secretary may not exceed $500,000. 
‘‘(f) UNIVERSITY TRANSPORTATION RESEARCH FUNDS.—The Secretary 
may make a grant under section 5505 of title 49 to an institute designated 
under subsection (a) for maritime and maritime intermodal research under 
that section as if the institute were a university transportation center. In 
making a grant, the Secretary, through the Research and Special Programs 
Administration, shall advise the Maritime Administration on the availability 
of funds for the grants and consult with the Administration on making the 
grants. 
‘‘§ 50113. Use and performance reports by operators of vessels 
‘‘(a) FILING REQUIREMENT.—The Secretary of Transportation by regula-
tion may require the operator of a vessel in the waterborne foreign commerce 
of the United States to file such report, account, record, or memorandum on
the use and performance of the vessel as the Secretary considers desirable to 
assist in carrying out this subtitle. The report, account, record, or memo-
randum shall be signed and verified, and be filed at the times and in the 
manner, as provided by regulation. 
‘‘(b) CIVIL PENALTY.—An operator not filing a report, account, record, or 
memorandum required by the Secretary under this section is liable to the 
United States Government for a civil penalty of $50 for each day of the viola-
tion. A penalty imposed under this section on the operator of a vessel con-
stitutes a lien on the vessel involved in the violation. A civil action in rem 
to enforce the lien may be brought in the district court of the United States 
for any district in which the vessel is found. The Secretary may remit or 
mitigate any penalty imposed under this section. 
‘‘CHAPTER 503—ADMINISTRATIVE 
‘‘Sec. 
‘‘50301.
Vessel Operations Revolving Fund. 
‘‘50302.
Port development. 
‘‘50303.
Operating property and extending term of notes. 
‘‘50304.
Sale and transfer of property. 
‘‘50305.
Appointment of trustee or receiver and operation of vessels. 
‘‘50306.
Requiring testimony and records in investigations. 
‘‘§ 50301. Vessel Operations Revolving Fund 
‘‘(a) IN GENERAL.—There is a ‘Vessel Operations Revolving Fund’ for use 
by the Secretary of Transportation in carrying out duties and powers related 
to vessel operations, including charter, operation, maintenance, repair, recon-
ditioning, and improvement of merchant vessels under the jurisdiction of the 
Secretary. The Fund has a working capital of $20,000,000, to remain avail-
able until expended. 
‘‘(b) RELATIONSHIP TO OTHER LAWS.—Notwithstanding any other law, 
rates for shipping services provided under the Fund shall be prescribed by the 
Secretary and the Fund shall be credited with receipts from vessel operations 
conducted under the Fund. 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), apply to those 
operations and to seamen employed through general agents as employees of 
the United States Government. Notwithstanding any other law on the employ-
ment of persons by the Government, the seamen may be employed in accord-
ance with customary commercial practices in the maritime industry. 
‘‘(c) ADVANCEMENTS.—With the approval of the Director of the Office of 
Management and Budget, the Secretary may advance amounts the Secretary 
considers necessary, but not more than 2 percent of vessel operating expenses, 
from the Fund to the appropriation ‘Salaries and Expenses’ in carrying out 
duties and powers related to vessel operations, without regard to the limita-
tions on amounts stated in that appropriation. 
‘‘(d) TRANSFERS.—The unexpended balances of working funds or of alloca-
tion accounts established after January 1, 1951, for the activities provided
for in subsection (a), and receipts received from those activities, may be trans-
ferred to the Fund, which shall be available for the purposes of those working 
funds or allocation accounts. 
‘‘(e) LIMITATION.— 
‘‘(1) IN GENERAL.—Amounts made available to the Secretary for mar-
itime activities by this section or any other law may not be used to pay 
for a vessel described in paragraph (2) unless the compensation to be 
paid is computed under section 56303 of this title as that section is in-
terpreted by the Comptroller General. 
‘‘(2) APPLICABLE VESSELS.—Paragraph (1) applies to a vessel— 
‘‘(A) the title to which is acquired by the Government by requisi-
tion or purchase; 
‘‘(B) the use of which is taken by requisition or agreement; or 
‘‘(C) lost while insured by the Government. 
‘‘(3) NONAPPLICABLE VESSELS.—Paragraph (1) does not apply to a 
vessel under a construction-differential subsidy contract. 
‘‘(f) AVAILABILITY FOR ADDITIONAL PURPOSES.—The Fund is available 
for— 
‘‘(1) necessary expenses incurred in the protection, preservation, main-
tenance, acquisition, or use of vessels involved in mortgage foreclosure or 
forfeiture proceedings instituted by the Government, including payment 
of prior claims and liens, expenses of sale, or other related charges; 
‘‘(2) necessary expenses incident to the redelivery and lay-up, in the 
United States, of vessels chartered as of June 20, 1956, under agreements 
not calling for their return to the Government; 
‘‘(3) the activation, repair, and deactivation of merchant vessels char-
tered for limited emergency purposes during fiscal year 1957 under the 
jurisdiction of the Secretary; and 
‘‘(4) payment of expenses of custody and maintenance of Government- 
owned vessels not in the National Defense Reserve Fleet. 
‘‘(g) EXPENSES AND RECEIPTS RELATED TO CHARTER OPERATIONS.—The 
Fund is available for expenses incurred in activating, repairing, and deacti-
vating merchant vessels chartered under the jurisdiction of the Secretary. Re-
ceipts from charter operations of Government-owned vessels under the juris-
diction of the Secretary shall be credited to the Fund. 
‘‘§ 50302. Port development 
‘‘(a) GENERAL REQUIREMENTS.—With the objective of promoting, encour-
aging, and developing ports and transportation facilities in connection with 
water commerce over which the Secretary of Transportation has jurisdiction, 
the Secretary, in cooperation with the Secretary of the Army, shall—
‘‘(1) investigate territorial regions and zones tributary to ports, taking 
into consideration the economies of transportation by rail, water, and 
highway and the natural direction of the flow of commerce; 
‘‘(2) investigate the causes of congestion of commerce at ports and ap-
plicable remedies; 
‘‘(3) investigate the subject of water terminals, including the necessary 
docks, warehouses, and equipment, to devise and suggest the types most 
appropriate for different locations and for the most expeditious and eco-
nomical transfer or interchange of passengers or property between water 
carriers and rail carriers; 
‘‘(4) consult with communities on the appropriate location and plan 
of construction of wharves, piers, and water terminals; 
‘‘(5) investigate the practicability and advantages of harbor, river, 
and port improvements in connection with foreign and coastwise trade; 
and 
‘‘(6) investigate any other matter that may tend to promote and en-
courage the use by vessels of ports adequate to care for the freight that 
naturally would pass through those ports. 
‘‘(b) SUBMISSION OF FINDINGS TO SURFACE TRANSPORTATION BOARD.— 
After an investigation under subsection (a), if the Secretary of Transportation 
believes that the rates or practices of a rail carrier subject to the jurisdiction 
of the Surface Transportation Board are detrimental to the objective specified 
in subsection (a), or that new rates or practices, new or additional port ter-
minal facilities, or affirmative action by a rail carrier is necessary to pro-
mote that objective, the Secretary may submit findings to the Board for action 
the Board considers appropriate under existing law. 
‘‘§ 50303. Operating property and extending term of notes 
‘‘(a) GENERAL AUTHORITY.—The Secretary of Transportation may— 
‘‘(1) operate or lease docks, wharves, piers, or real property under the 
Secretary’s control; and 
‘‘(2) make extensions and accept renewals of— 
‘‘(A) promissory notes and other evidences of indebtedness on 
property; and 
‘‘(B) mortgages and other contracts securing the property. 
‘‘(b) TERMS OF TRANSACTIONS.—A transaction under subsection (a) shall 
be on terms the Secretary considers necessary to carry out the purposes of this 
subtitle, but consistent with sound business practice. 
‘‘(c) AVAILABILITY OF AMOUNTS.—Amounts received by the Secretary from 
a transaction under this section are available for expenditure by the Secretary 
as provided in this subtitle.
‘‘§ 50304. Sale and transfer of property 
‘‘(a) AUTHORITY TO SELL.—The Secretary of Transportation may sell 
property (other than vessels transferred under section 4 of the Merchant Ma-
rine Act, 1920 (ch. 250, 41 Stat. 990)) on terms the Secretary considers ap-
propriate. 
‘‘(b) TRANSFERS FROM MILITARY TO CIVILIAN CONTROL.—When the Presi-
dent considers it in the interest of the United States, the President may trans-
fer to the Secretary of Transportation possession and control of property de-
scribed in the second paragraph of section 17 of the Merchant Marine Act, 
1920 (ch. 250, 41 Stat. 994), as originally enacted, that is possessed and con-
trolled by the Secretary of a military department. 
‘‘(c) TRANSFERS FROM CIVILIAN TO MILITARY CONTROL.—When the Presi-
dent considers it necessary, the President by executive order may transfer to 
the Secretary of a military department possession and control of property de-
scribed in section 17 of the Merchant Marine Act, 1920 (ch. 250, 41 Stat. 
994), as originally enacted, that is possessed and controlled by the Secretary 
of Transportation. The President’s order shall state the need for the transfer 
and the period of the need. When the President decides that the need has 
ended, the possession and control shall revert to the Secretary of Transpor-
tation. The property may not be sold except as provided by law. 
‘‘§ 50305. Appointment of trustee or receiver and operation of 
vessels 
‘‘(a) APPOINTMENT OF TRUSTEES AND RECEIVERS.— 
‘‘(1) APPOINTMENT OF SECRETARY.—In a proceeding in a court of the 
United States in which a trustee or receiver may be appointed for a cor-
poration operating a vessel of United States registry between the United 
States and a foreign country, on which the United States Government 
holds a mortgage, the court may appoint the Secretary of Transportation 
as the sole trustee or receiver (subject to the direction of the court) if— 
‘‘(A) the court finds that the appointment will— 
‘‘(i) inure to the advantage of the estate and the parties in 
interest; and 
‘‘(ii) tend to carry out the purposes of this subtitle; and 
‘‘(B) the Secretary expressly consents to the appointment. 
‘‘(2) APPOINTMENT OF OTHER PERSON.—The appointment of another 
person as trustee or receiver without a hearing becomes effective when 
ratified by the Secretary, but the Secretary may demand a hearing. 
‘‘(b) OPERATION OF VESSELS.— 
‘‘(1) IN GENERAL.—If the court is unwilling to allow the trustee or 
receiver to operate the vessel in foreign commerce without financial aid 
from the Government pending termination of the proceeding, and the
Secretary certifies to the court that the continued operation of the vessel 
is essential to the foreign commerce of the United States and is reason-
ably calculated to carry out the purposes of this subtitle, the court may 
allow the Secretary to operate the vessel, either directly or through a 
managing agent or operator employed by the Secretary. The Secretary 
must agree to comply with terms imposed by the court sufficient to pro-
tect the parties in interest. The Secretary also must agree to pay all op-
erating losses resulting from the operation. The operation shall be for the 
account of the trustee or receiver. 
‘‘(2) PAYMENT OF OPERATING LOSSES AND OTHER AMOUNTS.—The 
Secretary has no claim against the corporation, its estate, or its assets 
for operating losses paid by the Secretary, but the Secretary may pay 
amounts for depreciation the Secretary considers reasonable and other 
amounts the court considers just. The payment of operating losses and 
the other amounts and compliance with terms imposed by the court shall 
be in satisfaction of any claim against the Secretary resulting from the 
operation of the vessel. 
‘‘(3) DEEMED OPERATION BY GOVERNMENT.—A vessel operated by the 
Secretary under this subsection is deemed to be a vessel operated by the 
Government under chapter 309 of this title. 
‘‘§ 50306. Requiring testimony and records in investigations 
‘‘(a) IN GENERAL.—In conducting an investigation that the Secretary of 
Transportation considers necessary and proper to carry out this subtitle, the 
Secretary may administer oaths, take evidence, and subpoena persons to tes-
tify and produce documents relevant to the matter under investigation. Per-
sons may be required to attend or produce documents from any place in the 
United States at any designated place of hearing. 
‘‘(b) FEES AND MILEAGE.—Persons subpoenaed by the Secretary under sub-
section (a) shall be paid the same fees and mileage paid to witnesses in the 
courts of the United States. 
‘‘(c) ENFORCEMENT OF SUBPOENAS.—If a person disobeys a subpoena 
issued under subsection (a), the Secretary may seek an order enforcing the 
subpoena from the district court of the United States for the district in which 
the person resides or does business. Process may be served in the judicial dis-
trict in which the person resides or is found. The court may issue an order 
to obey the subpoena and punish a refusal to obey as a contempt of court. 
‘‘CHAPTER 505—OTHER GENERAL PROVISIONS 
‘‘Sec. 
‘‘50501.
Entities deemed citizens of the United States. 
‘‘50502.
Applicability to receivers, trustees, successors, and assigns. 
‘‘50503.
Oceanographic research vessels. 
‘‘50504.
Sailing school vessels.
‘‘§ 50501. Entities deemed citizens of the United States 
‘‘(a) IN GENERAL.—In this subtitle, a corporation, partnership, or associa-
tion is deemed to be a citizen of the United States only if the controlling in-
terest is owned by citizens of the United States. However, if the corporation, 
partnership, or association is operating a vessel in the coastwise trade, at 
least 75 percent of the interest must be owned by citizens of the United States. 
‘‘(b) ADDITIONAL REQUIREMENTS FOR CORPORATIONS.—In this subtitle, a 
corporation is deemed to be a citizen of the United States only if, in addition 
to satisfying the requirements in subsection (a)— 
‘‘(1) it is incorporated under the laws of the United States or a State; 
‘‘(2) its chief executive officer, by whatever title, and the chairman of 
its board of directors are citizens of the United States; and 
‘‘(3) no more of its directors are noncitizens than a minority of the 
number necessary to constitute a quorum. 
‘‘(c) DETERMINATION OF CONTROLLING CORPORATE INTEREST.—The con-
trolling interest in a corporation is owned by citizens of the United States 
under subsection (a) only if— 
‘‘(1) title to the majority of the stock in the corporation is vested in 
citizens of the United States free from any trust or fiduciary obligation 
in favor of a person not a citizen of the United States; 
‘‘(2) the majority of the voting power in the corporation is vested in 
citizens of the United States; 
‘‘(3) there is no contract or understanding by which the majority of 
the voting power in the corporation may be exercised, directly or indi-
rectly, in behalf of a person not a citizen of the United States; and 
‘‘(4) there is no other means by which control of the corporation is 
given to or permitted to be exercised by a person not a citizen of the 
United States. 
‘‘(d) DETERMINATION OF 75 PERCENT CORPORATE INTEREST.—At least 75 
percent of the interest in a corporation is owned by citizens of the United 
States under subsection (a) only if— 
‘‘(1) title to at least 75 percent of the stock in the corporation is vested 
in citizens of the United States free from any trust or fiduciary obliga-
tion in favor of a person not a citizen of the United States; 
‘‘(2) at least 75 percent of the voting power in the corporation is vest-
ed in citizens of the United States; 
‘‘(3) there is no contract or understanding by which more than 25 per-
cent of the voting power in the corporation may be exercised, directly 
or indirectly, in behalf of a person not a citizen of the United States; 
and
‘‘(4) there is no other means by which control of more than 25 percent 
of any interest in the corporation is given to or permitted to be exercised 
by a person not a citizen of the United States. 
‘‘§ 50502. Applicability to receivers, trustees, successors, and 
assigns 
‘‘This subtitle applies to receivers, trustees, successors, and assigns of any 
person to whom this subtitle applies. 
‘‘§ 50503. Oceanographic research vessels 
‘‘An oceanographic research vessel (as defined in section 2101 of this title) 
is deemed not to be engaged in trade or commerce. 
‘‘§ 50504. Sailing school vessels 
‘‘(a) DEFINITIONS.—In this section, the terms ‘sailing school instructor’, 
‘sailing school student’, and ‘sailing school vessel’ have the meaning given 
those terms in section 2101 of this title. 
‘‘(b) NOT SEAMEN.—A sailing school student or sailing school instructor 
is deemed not to be a seaman under— 
‘‘(1) parts B, F, and G of subtitle II of this title; or 
‘‘(2) the maritime law doctrines of maintenance and cure or warranty 
of seaworthiness. 
‘‘(c) NOT MERCHANT VESSEL OR ENGAGED IN TRADE OR COMMERCE.— 
A sailing school vessel is deemed not to be— 
‘‘(1) a merchant vessel under section 11101(a)–(c) of this title; or 
‘‘(2) a vessel engaged in trade or commerce. 
‘‘(d) EVIDENCE OF FINANCIAL RESPONSIBILITY.—The owner or charterer 
of a sailing school vessel shall maintain evidence of financial responsibility 
to meet liability for death or injury to sailing school students and sailing 
school instructors on a voyage on the vessel. The amount of financial responsi-
bility shall be at least $50,000 for each student and instructor. Financial re-
sponsibility under this subsection may be evidenced by insurance or other 
adequate financial resources. 
‘‘PART B—MERCHANT MARINE SERVICE 
‘‘CHAPTER 511—GENERAL 
‘‘Sec. 
‘‘51101.
Policy. 
‘‘51102.
Definitions. 
‘‘51103.
General authority of Secretary of Transportation. 
‘‘51104.
General authority of Secretary of the Navy. 
‘‘§ 51101. Policy 
‘‘It is the policy of the United States Government that merchant marine 
vessels of the United States should be operated by highly trained and efficient 
citizens of the United States and that the United States Navy and the mer-
chant marine of the United States should work closely together to promote the 
maximum integration of the total seapower forces of the United States.
‘‘§ 51102. Definitions 
‘‘In this part: 
‘‘(1) ACADEMY.—The term ‘Academy’ means the United States Mer-
chant Marine Academy located at Kings Point, New York, and main-
tained under chapter 513 of this title. 
‘‘(2) COST OF EDUCATION PROVIDED.—The term ‘cost of education 
provided’ means the financial costs incurred by the United States Gov-
ernment for providing training or financial assistance to students at the 
Academy and the State maritime academies, including direct financial 
assistance, room, board, classroom academics, and other training activi-
ties. 
‘‘(3) MERCHANT MARINE OFFICER.—The term ‘merchant marine offi-
cer’ means an individual issued a license by the Coast Guard author-
izing service as— 
‘‘(A) a master, mate, or pilot on a documented vessel that— 
‘‘(i) is of at least 1,000 gross tons as measured under section 
14502 of this title or an alternate tonnage measured under sec-
tion 14302 of this title as prescribed by the Secretary under 
section 14104 of this title; and 
‘‘(ii) operates on the oceans or the Great Lakes; or 
‘‘(B) an engineer officer on a documented vessel propelled by ma-
chinery of at least 4,000 horsepower. 
‘‘(4) STATE MARITIME ACADEMY.—The term ‘State maritime academy’ 
means— 
‘‘(A) a State maritime academy or college sponsored by a State 
and assisted under chapter 515 of this title; and 
‘‘(B) a regional maritime academy or college sponsored by a 
group of States and assisted under chapter 515 of this title. 
‘‘§ 51103. General authority of Secretary of Transportation 
‘‘(a) EDUCATION AND TRAINING.—The Secretary of Transportation may 
provide for the education and training of citizens of the United States for the 
safe and efficient operation of the merchant marine of the United States at 
all times, including operation as a naval and military auxiliary in time of 
war or national emergency. 
‘‘(b) SURPLUS PROPERTY FOR INSTRUCTIONAL PURPOSES.— 
‘‘(1) IN GENERAL.—The Secretary may cooperate with and assist the 
institutions named in paragraph (2) by making vessels, shipboard equip-
ment, and other marine equipment, owned by the United States Govern-
ment and determined to be excess or surplus, available to those institu-
tions for instructional purposes, by gift, loan, sale, lease, or charter on 
terms the Secretary considers appropriate.
‘‘(2) INSTITUTIONS.—The institutions referred to in paragraph (1) 
are— 
‘‘(A) the United States Merchant Marine Academy; 
‘‘(B) a State maritime academy; and 
‘‘(C) a nonprofit training institution jointly approved by the Sec-
retary of Transportation and the Secretary of the department in 
which the Coast Guard is operating as offering training courses that 
meet Federal regulations for maritime training. 
‘‘(c) ASSISTANCE FROM OTHER AGENCIES.— 
‘‘(1) IN GENERAL.—The Secretary of Transportation may secure di-
rectly from an agency, on a reimbursable basis, information, facilities, 
and equipment necessary to carry out this part. 
‘‘(2) DETAILING PERSONNEL.—At the request of the Secretary, the 
head of an agency (including a military department) may detail, on a 
reimbursable basis, personnel from the agency to the Secretary to assist 
in carrying out this part. 
‘‘(d) ACADEMY PERSONNEL.—To carry out this part, the Secretary may— 
‘‘(1) employ an individual as a professor, lecturer, or instructor at the 
Academy, without regard to the provisions of title 5 governing appoint-
ments in the competitive service; and 
‘‘(2) pay the individual without regard to chapter 51 and subchapter 
III of chapter 53 of title 5. 
‘‘§ 51104. General authority of Secretary of the Navy 
‘‘The Secretary of the Navy, in cooperation with the Maritime Adminis-
trator and the head of each State maritime academy, shall ensure that— 
‘‘(1) the training of future merchant marine officers at the United 
States Merchant Marine Academy and at State maritime academies in-
cludes programs for naval science training in the operation of merchant 
vessels as a naval and military auxiliary; and 
‘‘(2) naval officer training programs for future officers, insofar as pos-
sible, are maintained at designated maritime academies consistent with 
Navy standards and needs. 
‘‘CHAPTER 513—UNITED STATES MERCHANT MARINE 
ACADEMY 
‘‘Sec. 
‘‘51301.
Maintenance of the Academy. 
‘‘51302.
Nomination and competitive appointment of cadets. 
‘‘51303.
Non-competitive appointments. 
‘‘51304.
Additional appointments from particular areas. 
‘‘51305.
Prohibited basis for appointment. 
‘‘51306.
Cadet commitment agreements. 
‘‘51307.
Places of training. 
‘‘51308.
Uniforms, textbooks, and transportation allowances. 
‘‘51309.
Academic degree. 
‘‘51310.
Deferment of service obligation under cadet commitment agreements.
100 
‘‘51311.
Midshipman status in the Naval Reserve. 
‘‘51312.
Board of Visitors. 
‘‘51313.
Advisory Board. 
‘‘§ 51301. Maintenance of the Academy 
‘‘The Secretary of Transportation shall maintain the United States Mer-
chant Marine Academy to provide instruction to individuals to prepare them 
for service in the merchant marine of the United States. 
‘‘§ 51302. Nomination and competitive appointment of cadets 
‘‘(a) REQUIREMENTS.—An individual may be nominated for a competitive 
appointment as a cadet at the United States Merchant Marine Academy only 
if the individual— 
‘‘(1) is a citizen or national of the United States; and 
‘‘(2) meets the minimum requirements that the Secretary of Transpor-
tation shall establish. 
‘‘(b) NOMINATORS.—Nominations for competitive appointments for the po-
sitions allocated under subsection (c) may be made as follows: 
‘‘(1) A Senator may nominate residents of the State represented by 
that Senator. 
‘‘(2) A Member of the House of Representatives may nominate resi-
dents of the State in which the congressional district represented by that 
Member is located. 
‘‘(3) A Delegate to the House of Representatives from the District of 
Columbia, the Virgin Islands, Guam, or American Samoa may nominate 
residents of the jurisdiction represented by that Delegate. 
‘‘(4) The Resident Commissioner to the United States from Puerto 
Rico may nominate residents of Puerto Rico. 
‘‘(5) The Governor of the Northern Mariana Islands may nominate 
residents of the Northern Mariana Islands. 
‘‘(6) The Panama Canal Commission may nominate— 
‘‘(A) residents, or sons or daughters of residents, of an area or 
installation in Panama and made available to the United States 
under the Panama Canal Treaty of 1977, the agreements relating 
to and implementing that Treaty, signed September 7, 1977, and 
the Agreement Between the United States of America and the Re-
public of Panama Concerning Air Traffic Control and Related 
Services, concluded January 8, 1979; and 
‘‘(B) sons or daughters of personnel of the United States Govern-
ment and the Panama Canal Commission residing in Panama. 
‘‘(c) ALLOCATION OF POSITIONS.—Positions for competitive appointments 
shall be allocated each year as follows:
101 
‘‘(1) Positions shall be allocated for residents of each State nominated 
by the Members of Congress from that State in proportion to the rep-
resentation in Congress from that State. 
‘‘(2) Four positions shall be allocated for residents of the District of 
Columbia nominated by the Delegate to the House of Representatives 
from the District of Columbia. 
‘‘(3) One position each shall be allocated for residents of the Virgin 
Islands, Guam, and American Samoa nominated by the Delegates to the 
House of Representatives from the Virgin Islands, Guam, and American 
Samoa, respectively. 
‘‘(4) One position shall be allocated for a resident of Puerto Rico nom-
inated by the Resident Commissioner to the United States from Puerto 
Rico. 
‘‘(5) One position shall be allocated for a resident of the Northern 
Mariana Islands nominated by the Governor of the Northern Mariana 
Islands. 
‘‘(6) Two positions shall be allocated for individuals nominated by the 
Panama Canal Commission. 
‘‘(d) COMPETITIVE SYSTEM FOR APPOINTMENT.— 
‘‘(1) ESTABLISHMENT OF SYSTEM.—The Secretary shall establish a 
competitive system for selecting individuals nominated under subsection 
(b) to fill the positions allocated under subsection (c). The system must 
determine the relative merit of each individual based on competitive ex-
aminations, an assessment of the individual’s academic background, and 
other effective indicators of motivation and probability of successful com-
pletion of training at the Academy. 
‘‘(2) APPOINTMENTS BY JURISDICTION.—The Secretary shall appoint 
individuals to fill the positions allocated under subsection (c) for each 
jurisdiction in the order of merit of the individuals nominated from that 
jurisdiction. 
‘‘(3) REMAINING UNFILLED POSITIONS.—If positions remain unfilled 
after the appointments are made under paragraph (2), the Secretary 
shall appoint individuals to fill the positions in the order of merit of 
the remaining individuals nominated from all jurisdictions. 
‘‘§ 51303. Non-competitive appointments 
‘‘The Secretary of Transportation may appoint each year without competi-
tion as cadets at the United States Merchant Marine Academy not more than 
40 qualified individuals with qualities the Secretary considers to be of special 
value to the Academy. In making these appointments, the Secretary shall try 
to achieve a national demographic balance at the Academy.
102 
‘‘§ 51304. Additional appointments from particular areas 
‘‘(a) OTHER COUNTRIES IN WESTERN HEMISPHERE.—The President may 
appoint individuals from countries in the Western Hemisphere other than the 
United States to receive instruction at the United States Merchant Marine 
Academy. Not more than 12 individuals may receive instruction under this 
subsection at the same time, and not more than 2 individuals from the same 
country may receive instruction under this subsection at the same time. 
‘‘(b) OTHER COUNTRIES GENERALLY.— 
‘‘(1) APPOINTMENT.—The Secretary of Transportation, with the ap-
proval of the Secretary of State, may appoint individuals from countries 
other than the United States to receive instruction at the Academy. Not 
more than 30 individuals may receive instruction under this subsection 
at the same time. 
‘‘(2) REIMBURSEMENT.—The Secretary of Transportation shall ensure 
that the country from which an individual comes under this subsection 
will reimburse the Secretary for the cost (as determined by the Secretary) 
of the instruction and allowances received by the individual. 
‘‘(c) PANAMA.— 
‘‘(1) APPOINTMENT.—The Secretary of Transportation, with the ap-
proval of the Secretary of State, may appoint individuals from Panama 
to receive instruction at the Academy. Individuals appointed under this 
subsection are in addition to those appointed under any other provision 
of this chapter. 
‘‘(2) REIMBURSEMENT.—The Secretary of Transportation shall be re-
imbursed for the cost (as determined by the Secretary) of the instruction 
and allowances received by an individual appointed under this sub-
section. 
‘‘(d) ALLOWANCES AND REGULATIONS.—Individuals receiving instruction 
under this section are entitled to the same allowances and are subject to the 
same regulations on admission, attendance, discipline, resignation, discharge, 
dismissal, and graduation, as cadets at the Academy appointed from the 
United States. 
‘‘§ 51305. Prohibited basis for appointment 
‘‘Preference may not be given to an individual for appointment as a cadet 
at the United States Merchant Marine Academy because one or more members 
of the individual’s immediate family are alumni of the Academy. 
‘‘§ 51306. Cadet commitment agreements 
‘‘(a) AGREEMENT REQUIREMENTS.—A citizen of the United States ap-
pointed as a cadet at the United States Merchant Marine Academy must sign, 
as a condition of the appointment, an agreement to— 
‘‘(1) complete the course of instruction at the Academy;
103 
‘‘(2) fulfill the requirements for a license as an officer in the merchant 
marine of the United States before graduation from the Academy; 
‘‘(3) maintain a valid license as an officer in the merchant marine 
of the United States for at least 6 years after graduation from the Acad-
emy, accompanied by the appropriate national and international en-
dorsements and certification required by the Coast Guard for service 
aboard vessels on domestic and international voyages; 
‘‘(4) apply for, and accept if tendered, an appointment as a commis-
sioned officer in the Naval Reserve (including the Merchant Marine Re-
serve, Naval Reserve), the Coast Guard Reserve, or any other reserve unit 
of an armed force of the United States, and, if tendered the appointment, 
to serve for at least 6 years after graduation from the Academy; 
‘‘(5) serve the foreign and domestic commerce and the national defense 
of the United States for at least 5 years after graduation from the Acad-
emy— 
‘‘(A) as a merchant marine officer on a documented vessel or a 
vessel owned and operated by the United States Government or by 
a State; 
‘‘(B) as an employee in a United States maritime-related indus-
try, profession, or marine science (as determined by the Secretary 
of Transportation), if the Secretary determines that service under 
subclause (A) is not available to the individual; 
‘‘(C) as a commissioned officer on active duty in an armed force 
of the United States, as a commissioned officer in the National Oce-
anic and Atmospheric Administration, or in other maritime-related 
Federal employment which serves the national security interests of 
the United States, as determined by the Secretary; or 
‘‘(D) by a combination of the service alternatives referred to in 
subclauses (A)–(C); and 
‘‘(6) report to the Secretary on compliance with this subsection. 
‘‘(b) FAILURE TO COMPLETE COURSE OF INSTRUCTION.— 
‘‘(1) ACTIVE DUTY.—If the Secretary of Transportation determines 
that an individual who has attended the Academy for at least 2 years 
has failed to fulfill the part of the agreement described in subsection 
(a)(1), the individual may be ordered by the Secretary of Defense to serve 
on active duty in one of the armed forces of the United States for a pe-
riod of not more than 2 years. In cases of hardship as determined by 
the Secretary of Transportation, the Secretary of Transportation may 
waive this paragraph in whole or in part. 
‘‘(2) RECOVERY OF COST.—If the Secretary of Defense is unable or un-
willing to order an individual to serve on active duty under paragraph
104 
(1), or if the Secretary of Transportation determines that reimbursement 
of the cost of education provided would better serve the interests of the 
United States, the Secretary of Transportation may recover from the in-
dividual the cost of education provided by the Government. 
‘‘(c) FAILURE TO CARRY OUT OTHER REQUIREMENTS.— 
‘‘(1) ACTIVE DUTY.—If the Secretary of Transportation determines 
that an individual has failed to fulfill any part of the agreement de-
scribed in subsection (a)(2)–(6), the individual may be ordered to serve 
on active duty for a period of at least 3 years but not more than the 
unexpired period (as determined by the Secretary) of the service required 
by subsection (a)(5). The Secretary of Transportation, in consultation 
with the Secretary of Defense, shall determine in which service the indi-
vidual shall serve. In cases of hardship as determined by the Secretary 
of Transportation, the Secretary of Transportation may waive this para-
graph in whole or in part. 
‘‘(2) RECOVERY OF COST.—If the Secretary of Defense is unable or un-
willing to order an individual to serve on active duty under paragraph 
(1), or if the Secretary of Transportation determines that reimbursement 
of the cost of education provided would better serve the interests of the 
United States, the Secretary of Transportation may recover from the in-
dividual the cost of education provided. The Secretary may reduce the 
amount to be recovered to reflect partial performance of service obliga-
tions and other factors the Secretary determines merit a reduction. 
‘‘(d) ACTIONS TO RECOVER COST.—To aid in the recovery of the cost of 
education provided by the Government under a commitment agreement under 
this section, the Secretary of Transportation may— 
‘‘(1) request the Attorney General to bring a civil action against the 
individual; and 
‘‘(2) make use of the Federal debt collection procedures in chapter 176 
of title 28 or other applicable administrative remedies. 
‘‘§ 51307. Places of training 
‘‘The Secretary of Transportation may provide for the training of cadets 
at the United States Merchant Marine Academy— 
‘‘(1) on vessels owned or subsidized by the United States Government; 
‘‘(2) on other documented vessels, with the permission of the owner; 
and 
‘‘(3) in shipyards or plants and with industrial or educational organi-
zations.
105 
‘‘§ 51308. Uniforms, textbooks, and transportation allow-
ances 
‘‘The Secretary of Transportation shall provide cadets at the United States 
Merchant Marine Academy— 
‘‘(1) all required uniforms and textbooks; and 
‘‘(2) allowances for transportation (including reimbursement of trav-
eling expenses) when traveling under orders as a cadet. 
‘‘§ 51309. Academic degree 
‘‘(a) BACHELOR’S DEGREE.— 
‘‘(1) IN GENERAL.—The Superintendent of the United States Merchant 
Marine Academy may confer the degree of bachelor of science on an indi-
vidual who— 
‘‘(A) has met the conditions prescribed by the Secretary of Trans-
portation; and 
‘‘(B) if a citizen of the United States, has passed the examination 
for a merchant marine officer’s license. 
‘‘(2) EFFECT OF PHYSICAL DISQUALIFICATION.—An individual not al-
lowed to take the examination for a merchant marine officer’s license 
only because of physical disqualification may not be denied a degree for 
not taking the examination. 
‘‘(b) MASTER’S DEGREE.—The Superintendent of the Academy may confer 
a master’s degree on an individual who has met the conditions prescribed by 
the Secretary. A master’s degree program may be funded through non-appro-
priated funds. To maintain the appropriate academic standards, the program 
shall be accredited by the appropriate accreditation body. The Secretary may 
prescribe regulations necessary to administer such a program. 
‘‘(c) GRADUATION NOT ENTITLEMENT TO HOLD LICENSE.—Graduation 
from the Academy does not entitle an individual to hold a license authorizing 
service on a merchant vessel. 
‘‘§ 51310. Deferment of service obligation under cadet com-
mitment agreements 
‘‘The Secretary of Transportation may defer the service commitment of an 
individual under section 51306(a)(5) of this title (as specified in the cadet 
commitment agreement) for not more than 2 years if the individual is en-
gaged in a graduate course of study approved by the Secretary. However, 
deferment of service as a commissioned officer under section 51306(a)(5) must 
be approved by the Secretary of the military department that has jurisdiction 
over the service or by the Secretary of Commerce for service with the National 
Oceanic and Atmospheric Administration.
106 
‘‘§ 51311. Midshipman status in the Naval Reserve 
‘‘(a) APPLICATION REQUIREMENT.—Before being appointed as a cadet at 
the United States Merchant Marine Academy, a citizen of the United States 
must agree to apply for midshipman status in the Naval Reserve (including 
the Merchant Marine Reserve, Naval Reserve). 
‘‘(b) APPOINTMENT.— 
‘‘(1) IN GENERAL.—A citizen of the United States appointed as a 
cadet at the Academy shall be appointed by the Secretary of the Navy 
as a midshipman in the Naval Reserve (including the Merchant Marine 
Reserve, Naval Reserve). 
‘‘(2) RIGHTS AND PRIVILEGES.—The Secretary of the Navy shall pro-
vide for cadets of the Academy who are midshipmen in the United States 
Naval Reserve to be— 
‘‘(A) issued an identification card (referred to as a ‘military ID 
card’); and 
‘‘(B) entitled to all rights and privileges in accordance with the 
same eligibility criteria as apply to other members of the Ready Re-
serve of the reserve components of the armed forces. 
‘‘(3) COORDINATION.—The Secretary of the Navy shall carry out para-
graphs (1) and (2) in coordination with the Secretary of Transportation. 
‘‘§ 51312. Board of Visitors 
‘‘(a) IN GENERAL.—A Board of Visitors to the United States Merchant Ma-
rine Academy shall be established, for a term of 2 years commencing at the 
beginning of each Congress, to visit the Academy annually on a date deter-
mined by the Secretary of Transportation and to make recommendations on 
the operation of the Academy. 
‘‘(b) APPOINTMENT.— 
‘‘(1) IN GENERAL.—The Board shall be composed of— 
‘‘(A) 2 Senators appointed by the chairman of the Committee on 
Commerce, Science, and Transportation of the Senate; 
‘‘(B) 3 Members of the House of Representatives appointed by the 
chairman of the Committee on Armed Services of the House of Rep-
resentatives; 
‘‘(C) 1 Senator appointed by the Vice President; 
‘‘(D) 2 Members of the House of Representatives appointed by the 
Speaker of the House of Representatives; and 
‘‘(E) the chairmen of the Committee on Commerce, Science, and 
Transportation of the Senate and the Committee on Armed Services 
of the House of Representatives, as ex officio members. 
‘‘(2) SUBSTITUTE
APPOINTMENT.—If an appointed member of the 
Board is unable to visit the Academy as provided in subsection (a), an-
107 
other individual may be appointed as a substitute in the manner pro-
vided in paragraph (1). 
‘‘(c) STAFF.—The chairmen of the Committee on Commerce, Science, and 
Transportation of the Senate and the Committee on Armed Services of the 
House of Representatives may designate staff members of their committees to 
serve without reimbursement as staff for the Board. 
‘‘(d) TRAVEL EXPENSES.—When serving away from home or regular place 
of business, a member of the Board or a staff member designated under sub-
section (c) shall be allowed travel expenses, including per diem in lieu of sub-
sistence, as authorized by section 5703 of title 5. 
‘‘§ 51313. Advisory Board 
‘‘(a) IN GENERAL.—An Advisory Board to the United States Merchant Ma-
rine Academy shall be established to visit the Academy at least once during 
each academic year, for the purpose of examining the course of instruction 
and management of the Academy and advising the Maritime Administrator 
and the Superintendent of the Academy. 
‘‘(b) APPOINTMENT AND TERMS.—The Board shall be composed of not more 
than 7 individuals appointed by the Secretary of Transportation. The indi-
viduals must be distinguished in education and other fields related to the 
Academy. Members of the Board shall be appointed for terms of not more than 
3 years and may be reappointed. The Secretary shall designate one of the 
members as chairman. 
‘‘(c) TRAVEL EXPENSES.—When serving away from home or regular place 
of business, a member of the Board shall be allowed travel expenses, including 
per diem in lieu of subsistence, as authorized by section 5703 of title 5. 
‘‘(d) RELATIONSHIP TO OTHER LAW.—The Federal Advisory Committee 
Act (5 App. U.S.C.) does not apply to the Board. 
‘‘CHAPTER 515—STATE MARITIME ACADEMY SUPPORT 
PROGRAM 
‘‘Sec. 
‘‘51501.
General support program. 
‘‘51502.
Detailing of personnel. 
‘‘51503.
Regional maritime academies. 
‘‘51504.
Use of training vessels. 
‘‘51505.
Annual payments for maintenance and support. 
‘‘51506.
Conditions to receiving payments and use of vessels. 
‘‘51507.
Places of training. 
‘‘51508.
Allowances for students. 
‘‘51509.
Student incentive payment agreements. 
‘‘51510.
Deferment of service obligation under student incentive payment agreements. 
‘‘51511.
Midshipman status in the Naval Reserve. 
‘‘§ 51501. General support program 
‘‘(a) ASSISTANCE
TO STATE MARITIME ACADEMIES.—The Secretary of 
Transportation shall cooperate with and assist State maritime academies in
108 
providing instruction to individuals to prepare them for service in the mer-
chant marine of the United States. 
‘‘(b) COURSE DEVELOPMENT.—The Secretary shall provide to each State 
maritime academy guidance and assistance in developing courses on the oper-
ation and maintenance of new vessels, on equipment, and on innovations 
being introduced to the merchant marine of the United States. 
‘‘§ 51502. Detailing of personnel 
‘‘At the request of the Governor of a State, the President may detail, with-
out reimbursement, personnel of the Navy, the Coast Guard, and the Maritime 
Service to a State maritime academy to serve as a superintendent, professor, 
lecturer, or instructor at the academy. 
‘‘§ 51503. Regional maritime academies 
‘‘The Governors of the States cooperating to sponsor a regional maritime 
academy shall designate in writing one of those States to conduct the affairs 
of that academy. A regional maritime academy is eligible for assistance from 
the United States Government on the same basis as a State maritime acad-
emy sponsored by a single State. 
‘‘§ 51504. Use of training vessels 
‘‘(a) APPLICATIONS TO USE VESSELS.—The Governor of a State spon-
soring a State maritime academy (or the Governor of the State designated 
to conduct the affairs of a regional maritime academy) may apply in writing 
to the Secretary of Transportation to obtain the use of a training vessel for 
the academy. A vessel provided under this section remains the property of the 
United States Government. 
‘‘(b) GENERAL AUTHORITY.—Subject to subsection (c), the Secretary may 
provide to a State maritime academy, for use as a training vessel, a suitable 
vessel under the control of the Secretary or made available to the Secretary 
under subsection (e). If a suitable vessel is not available, the Secretary may 
build and provide a suitable vessel. 
‘‘(c) APPROVAL REQUIREMENTS.—The Secretary may provide a vessel 
under this section only if— 
‘‘(1) an application has been made under subsection (a); 
‘‘(2) the State maritime academy satisfies section 51506(a) of this 
title; and 
‘‘(3) a suitable port will be available for the safe mooring of the vessel 
while the academy is using the vessel. 
‘‘(d) PREPARATION AND MAINTENANCE.—A vessel provided under this sec-
tion shall be— 
‘‘(1) repaired, reconditioned, and equipped (with all apparel, charts, 
books, and instruments of navigation) as necessary for use as a training 
vessel; and
109 
‘‘(2) maintained in good repair by the Secretary. 
‘‘(e) AGENCY VESSELS.—An agency may provide to the Secretary, for use 
by a State maritime academy, a vessel (including equipment) that— 
‘‘(1) is suitable for training purposes; and 
‘‘(2) can be provided without detriment to the service to which the ves-
sel is assigned. 
‘‘(f) FUEL COSTS.—The Secretary may pay to a State maritime academy 
the costs of fuel used by a vessel provided under this section while used for 
training. 
‘‘(g) REMOVING VESSELS FROM SERVICE AND VESSEL SHARING.—The Sec-
retary may not— 
‘‘(1) take a vessel, currently in use as a training vessel under this sec-
tion, out of service to implement an alternative program (including ves-
sel sharing) unless the vessel is incapable of being maintained in good 
repair as required by subsection (d); or 
‘‘(2) implement a program requiring a State maritime academy to 
share its training vessel with another State maritime academy, except 
with the express consent of Congress. 
‘‘§ 51505. Annual payments for maintenance and support 
‘‘(a) PAYMENT AGREEMENTS.—The Secretary of Transportation may make 
an agreement (effective for not more than 4 years) with the following acad-
emies to provide annual payments to those academies for their maintenance 
and support: 
‘‘(1) One State maritime academy in each State that satisfies section 
51506(a) of this title. 
‘‘(2) Each regional maritime academy that satisfies section 51506(a) 
of this title. 
‘‘(b) PAYMENTS.— 
‘‘(1) IN GENERAL.—Subject to paragraph (2), an annual payment to 
an academy under subsection (a) shall be at least equal to the amount 
given to the academy for its maintenance and support by the State in 
which it is located, or, for a regional maritime academy, by all States 
cooperating to sponsor the academy. 
‘‘(2) MAXIMUM.—The amount under paragraph (1) may not be more 
than $25,000. However, if the academy satisfies section 51506(b) of this 
title, the amount shall be— 
‘‘(A) $100,000 for a State maritime academy; and 
‘‘(B) $200,000 for a regional maritime academy.
110 
‘‘§ 51506. Conditions to receiving payments and use of vessels 
‘‘(a) GENERAL CONDITIONS.—As conditions of receiving an annual pay-
ment or the use of a vessel under this chapter, a State maritime academy 
must— 
‘‘(1) provide courses of instruction on navigation, marine engineering 
(including steam and diesel propulsion), the operation and maintenance 
of new vessels and equipment, and innovations being introduced to the 
merchant marine of the United States; 
‘‘(2) agree in writing to conform to the standards for courses, training 
facilities, admissions, and instruction that the Secretary of Transpor-
tation may establish after consultation with the superintendents of State 
maritime academies; and 
‘‘(3) agree in writing to require, as a condition for graduation, that 
each individual who is a citizen of the United States and who is attend-
ing the academy in a merchant marine officer preparation program pass 
the examination required for the issuance of a license under section 7101 
of this title. 
‘‘(b) ADDITIONAL CONDITION TO PAYMENTS OF MORE THAN $25,000.—As 
a condition of receiving an annual payment of more than $25,000 under sec-
tion 51505 of this title, a State maritime academy also must agree to admit 
each year a number of citizens of the United States who meet its admission 
requirements and reside in a State not supporting that academy. The Sec-
retary shall determine the number of individuals to be admitted by each acad-
emy under this subsection. The number may not be more than one-third of 
the total number of individuals attending the academy at any time. 
‘‘§ 51507. Places of training 
‘‘The Secretary of Transportation may provide for the training of students 
attending a State maritime academy— 
‘‘(1) on vessels owned or subsidized by the United States Government; 
‘‘(2) on other documented vessels, with the permission of the owner; 
and 
‘‘(3) in shipyards or plants and with industrial or educational organi-
zations. 
‘‘§ 51508. Allowances for students 
‘‘Under regulations prescribed by the Secretary of Transportation, a stu-
dent at a State maritime academy shall receive from the Secretary allowances 
for transportation (including reimbursement of traveling expenses) when trav-
eling under orders to receive training under section 51507 of this title. 
‘‘§ 51509. Student incentive payment agreements 
‘‘(a) GENERAL AUTHORITY.—If a State maritime academy has an agree-
ment with the Secretary of Transportation under section 51505 of this title,
111 
the Secretary may make an agreement with a student at the academy who 
is a citizen of the United States to make student incentive payments to the 
individual. An agreement with a student may not be effective for more than 
4 academic years. The Secretary shall allocate payments under this section 
among the various State maritime academies in an equitable manner. 
‘‘(b) PAYMENTS.—Payments under an agreement under this section shall 
be equal to $4,000 each academic year and be paid, as prescribed by the Sec-
retary, while the individual is attending the academy. The payments shall be 
used for uniforms, books, and subsistence. 
‘‘(c) MIDSHIPMAN AND ENLISTED RESERVE STATUS.—An agreement under 
this section shall require the student to accept midshipman and enlisted re-
serve status in the Naval Reserve (including the Merchant Marine Reserve, 
Naval Reserve) before receiving any payments under the agreement. 
‘‘(d) AGREEMENT REQUIREMENTS.—An agreement under this section shall 
require the student to— 
‘‘(1) complete the course of instruction at the academy the individual 
is attending; 
‘‘(2) take the examination for a license as an officer in the merchant 
marine of the United States before graduation from the academy and ful-
fill the requirements for such a license within 3 months after graduation 
from the academy; 
‘‘(3) maintain a valid license as an officer in the merchant marine 
of the United States for at least 6 years after graduation from the acad-
emy, accompanied by the appropriate national and international en-
dorsements and certification required by the Coast Guard for service 
aboard vessels on domestic and international voyages; 
‘‘(4) accept, if tendered, an appointment as a commissioned officer in 
the Naval Reserve (including the Merchant Marine Reserve, Naval Re-
serve), the Coast Guard Reserve, or any other reserve unit of an armed 
force of the United States, and, if tendered the appointment, to serve for 
at least 6 years after graduation from the academy; 
‘‘(5) serve the foreign and domestic commerce and the national defense 
of the United States for at least 3 years after graduation from the acad-
emy— 
‘‘(A) as a merchant marine officer on a documented vessel or a 
vessel owned and operated by the United States Government or by 
a State; 
‘‘(B) as an employee in a United States maritime-related indus-
try, profession, or marine science (as determined by the Secretary), 
if the Secretary determines that service under subclause (A) is not 
available to the individual;
112 
‘‘(C) as a commissioned officer on active duty in an armed force 
of the United States, as a commissioned officer in the National Oce-
anic and Atmospheric Administration, or in other maritime-related 
Federal employment which serves the national security interests of 
the United States, as determined by the Secretary; or 
‘‘(D) by a combination of the service alternatives referred to in 
subclauses (A)–(C); and 
‘‘(6) report to the Secretary on compliance with this subsection. 
‘‘(e) FAILURE TO COMPLETE COURSE OF INSTRUCTION.— 
‘‘(1) ACTIVE DUTY.—If the Secretary of Transportation determines 
that an individual who has accepted the payments described in sub-
section (b) for a minimum of 2 academic years has failed to fulfill the 
part of the agreement described in subsection (d)(1), the individual may 
be ordered by the Secretary of Defense to serve on active duty in the 
armed forces of the United States for a period of not more than 2 years. 
In cases of hardship as determined by the Secretary of Transportation, 
the Secretary of Transportation may waive this paragraph in whole or 
in part. 
‘‘(2) RECOVERY OF COST.—If the Secretary of Defense is unable or un-
willing to order an individual to serve on active duty under paragraph 
(1), or if the Secretary of Transportation determines that reimbursement 
of the cost of education provided would better serve the interests of the 
United States, the Secretary of Transportation may recover from the in-
dividual the amount of student incentive payments, plus interest and at-
torney fees. The Secretary may reduce the amount to be recovered to re-
flect partial performance of service obligations and other factors the Sec-
retary determines merit a reduction. 
‘‘(f) FAILURE TO CARRY OUT OTHER REQUIREMENTS.— 
‘‘(1) ACTIVE DUTY.—If the Secretary of Transportation determines 
that an individual has failed to fulfill any part of the agreement de-
scribed in subsection (d)(2)–(6), the individual may be ordered to serve 
on active duty for a period of at least 2 years but not more than the 
unexpired period (as determined by the Secretary) of the service required 
by subsection (d)(5). The Secretary of Transportation, in consultation 
with the Secretary of Defense, shall determine in which service the indi-
vidual shall serve. In cases of hardship as determined by the Secretary 
of Transportation, the Secretary of Transportation may waive this para-
graph in whole or in part. 
‘‘(2) RECOVERY OF COST.—If the Secretary of Defense is unable or un-
willing to order an individual to serve on active duty under paragraph 
(1), or if the Secretary of Transportation determines that reimbursement
113 
of the cost of education provided would better serve the interests of the 
United States, the Secretary of Transportation may recover from the in-
dividual the amount of student incentive payments, plus interest and at-
torney fees. The Secretary may reduce the amount to be recovered to re-
flect partial performance of service obligations and other factors the Sec-
retary determines merit a reduction. 
‘‘(g) ACTIONS TO RECOVER COST.—To aid in the recovery of the cost of 
education provided by the Government under a commitment agreement under 
this section, the Secretary of Transportation may— 
‘‘(1) request the Attorney General to bring a civil action against the 
individual; and 
‘‘(2) make use of the Federal debt collection procedures in chapter 176 
of title 28 or other applicable administrative remedies. 
‘‘§ 51510. Deferment of service obligation under student in-
centive payment agreements 
‘‘The Secretary of Transportation may defer the service commitment of an 
individual under section 51509(d)(5) of this title (as specified in the agree-
ment under section 51509) for not more than 2 years if the individual is en-
gaged in a graduate course of study approved by the Secretary. However, 
deferment of service as a commissioned officer on active duty must be ap-
proved by the Secretary of the affected military department (or the Secretary 
of Commerce, for service with the National Oceanic and Atmospheric Admin-
istration). 
‘‘§ 51511. Midshipman status in the Naval Reserve 
‘‘A citizen of the United States attending a State maritime academy may 
be appointed by the Secretary of the Navy as a midshipman in the Naval 
Reserve (including the Merchant Marine Reserve, Naval Reserve). 
‘‘CHAPTER 517—OTHER SUPPORT FOR MERCHANT 
MARINE TRAINING 
‘‘Sec. 
‘‘51701.
United States Maritime Service. 
‘‘51702.
Civilian nautical schools. 
‘‘51703.
Additional training. 
‘‘51704.
Training for maritime oil pollution prevention, response, and clean-up. 
‘‘§ 51701. United States Maritime Service 
‘‘(a) GENERAL AUTHORITY.—The Secretary of Transportation may estab-
lish and maintain a voluntary organization, to be known as the United 
States Maritime Service, for the training of citizens of the United States to 
serve on merchant vessels of the United States. 
‘‘(b) SPECIFIC AUTHORITY.—The Secretary may— 
‘‘(1) determine the number of individuals to be enrolled for training 
and reserve purposes in the Service;
114 
‘‘(2) fix the rates of pay and allowances of the individuals without re-
gard to chapter 51 or subchapter III of chapter 53 of title 5; 
‘‘(3) prescribe the course of study and the periods of training for the 
Service; and 
‘‘(4) prescribe the uniform of the Service and the rules on providing 
and wearing the uniform. 
‘‘(c) RANKS, GRADES, AND RATINGS.—The ranks, grades, and ratings for 
personnel of the Service shall be the same as those prescribed for personnel 
of the Coast Guard. 
‘‘(d) MEDALS AND AWARDS.—The Secretary may establish and maintain 
a medals and awards program to recognize distinguished service, superior 
achievement, professional performance, and other commendable achievement 
by personnel of the Service. 
‘‘§ 51702. Civilian nautical schools 
‘‘(a) DEFINITION.—In this section, the term ‘civilian nautical school’ 
means a school operated in the United States (except the United States Mer-
chant Marine Academy, a State maritime academy, or another school oper-
ated by the United States Government) that offers instruction to individuals 
quartered on a vessel primarily to train them for service in the merchant ma-
rine. 
‘‘(b) INSPECTION.—Each civilian nautical school is subject to inspection by 
the Secretary of Transportation. 
‘‘(c) RATING AND CERTIFICATION.—The Secretary may, under regulations 
the Secretary may prescribe, provide for the rating and certification of civil-
ian nautical schools as to the adequacy of their course of instruction, the com-
petence of their instructors, and the suitability of the equipment used in their 
course of instruction. 
‘‘§ 51703. Additional training 
‘‘(a) GENERAL AUTHORITY.—The Secretary of Transportation may provide 
additional training on maritime subjects to supplement other training oppor-
tunities and make the training available to the personnel of the merchant ma-
rine of the United States and individuals preparing for a career in the mer-
chant marine of the United States. 
‘‘(b) EQUIPMENT, SUPPLIES, AND CONTRACTS.—The Secretary may— 
‘‘(1) prepare or buy equipment or supplies required for the additional 
training; and 
‘‘(2) without regard to section 3709 of the Revised Statutes (41 U.S.C. 
5), make contracts for services the Secretary considers necessary to pre-
pare the equipment and supplies and to supervise and administer the 
additional training.
115 
‘‘§ 51704. Training for maritime oil pollution prevention, re-
sponse, and clean-up 
‘‘(a) ASSISTANCE IN ESTABLISHING PROGRAM.—The Secretary of Trans-
portation shall assist maritime training institutions approved by the Sec-
retary in establishing a training program for maritime oil pollution preven-
tion, response, and clean-up. 
‘‘(b) PROVIDING TRAINING VESSELS.—Subject to subsection (c), the Sec-
retary may provide, with title free of all liens, to maritime training institu-
tions that have a program established under subsection (a), offshore supply 
vessels and tug/supply vessels that were built in the United States and are 
in the possession of the Maritime Administration because of a default on a 
loan guaranteed under chapter 537 of this title. 
‘‘(c) REQUIREMENTS.—In addition to any other requirements the Secretary 
considers appropriate, the following requirements apply to vessels provided 
under this section: 
‘‘(1) The vessel shall be offered to the institution at a location selected 
by the Secretary. 
‘‘(2) The institution shall use the vessel to train students and appro-
priate maritime industry personnel in oil spill prevention, response, 
clean-up, and related skills. 
‘‘(3) The institution shall make the vessel and qualified students avail-
able to appropriate Federal, State, and local oil spill response authorities 
when there is a maritime oil spill. 
‘‘(4) The institution may not sell, trade, charter, donate, scrap, or in 
any way alter or dispose of the vessel without prior approval of the Sec-
retary. 
‘‘(5) The institution may not use the vessel in competition with a pri-
vately-owned vessel documented under chapter 121 of this title or titled 
under the law of a State, unless necessary to carry out this section. 
‘‘(6) When the institution can no longer use the vessel for its training 
program, the institution shall return the vessel to the Secretary. The Sec-
retary shall take possession at the institution and thereafter may provide 
the vessel to another institution under this section or dispose of the vessel. 
‘‘CHAPTER 519—MERCHANT MARINE AWARDS 
‘‘Sec. 
‘‘51901.
Awards for individual acts or service. 
‘‘51902.
Gallant Ship Award. 
‘‘51903.
Multiple awards. 
‘‘51904.
Presentation to representatives. 
‘‘51905.
Flags and grave markers. 
‘‘51906.
Special certificates for civilian service to armed forces. 
‘‘51907.
Manufacture and sale of awards and replacements. 
‘‘51908.
Prohibition against unauthorized manufacture, sale, possession, or display of awards.
116 
‘‘§ 51901. Awards for individual acts or service 
‘‘(a) GENERAL AUTHORITY.—The Secretary of Transportation may award 
decorations and medals of appropriate design (including ribbons, ribbon bars, 
emblems, rosettes, miniature facsimiles, plaques, citations, or other suitable 
devices or insignia) for individual acts or service in the merchant marine of 
the United States. The design may be similar to the design of a decoration 
or medal authorized for members of the armed forces for similar acts or serv-
ice. 
‘‘(b) SPECIFIC AUTHORITY.—The Secretary may award— 
‘‘(1) a Merchant Marine Distinguished Service Medal to an individual 
for outstanding acts, conduct, or valor beyond the line of duty; 
‘‘(2) a Merchant Marine Meritorious Service Medal to an individual 
for meritorious acts, conduct, or valor in the line of duty, but not of the 
outstanding character that would warrant the award of the Merchant 
Marine Distinguished Service Medal; 
‘‘(3) a decoration or medal to an individual for service during a war, 
national emergency proclaimed by the President or Congress, or oper-
ations by the armed forces outside the continental United States under 
conditions of danger to life and property; and 
‘‘(4) a decoration or medal to an individual for other acts or service 
of conspicuous gallantry, intrepidity, and extraordinary heroism under 
conditions of danger to life and property that would warrant a similar 
decoration or medal for a member of the armed forces. 
‘‘§ 51902. Gallant Ship Award 
‘‘(a) AWARDS TO VESSELS.—The Secretary of Transportation may award 
a Gallant Ship Award and a citation to a vessel (including a foreign vessel) 
participating in outstanding or gallant action in a marine disaster or other 
emergency to save life or property at sea. The Secretary may award a plaque 
to the vessel, and a replica of the plaque may be preserved as a permanent 
historical record. 
‘‘(b) AWARDS TO CREWS.—The Secretary of Transportation may award an 
appropriate citation ribbon bar to the master and each individual serving, 
at the time of the action, on a vessel issued an award under subsection (a). 
‘‘(c) CONSULTATION.—The Secretary of Transportation shall consult with 
the Secretary of State before awarding an award or citation to a foreign ves-
sel or its crew under this section. 
‘‘§ 51903. Multiple awards 
‘‘An individual may not be awarded more than one of any type of decora-
tion or medal under this chapter. For each succeeding act or service justifying 
the same decoration or medal, a suitable device may be awarded to be worn 
with the decoration or medal.
117 
‘‘§ 51904. Presentation to representatives 
‘‘If an individual to be issued an award under this chapter is unable to 
accept the award personally, the Secretary of Transportation may present the 
award to an appropriate representative. 
‘‘§ 51905. Flags and grave markers 
‘‘Except as authorized under another law, the Secretary of Transportation 
may issue, at no cost, a flag of the United States and a grave marker to the 
family or personal representative of a deceased individual who served in the 
merchant marine of the United States in support of the armed forces of the 
United States or its allies during a war or national emergency. 
‘‘§ 51906. Special certificates for civilian service to armed 
forces 
‘‘(a) GENERAL AUTHORITY.—The Maritime Administrator may issue a 
special certificate to an individual, or the personal representative of an indi-
vidual, in recognition of service of that individual in the merchant marine 
of the United States, if the service has been determined to be active duty 
under section 401 of the GI Bill Improvement Act of 1977 (Public Law 95– 
202; 38 U.S.C. 106 note). 
‘‘(b) RELATIONSHIP TO OTHER LAWS.—Issuance of a certificate under sub-
section (a) does not entitle an individual to any rights, privileges, or benefits 
under a law of the United States. 
‘‘§ 51907. Manufacture and sale of awards and replacements 
‘‘The Secretary of Transportation may— 
‘‘(1) authorize private persons to manufacture decorations and medals 
authorized under this chapter or a prior law; and 
‘‘(2) provide at cost, or authorize private persons to sell at reasonable 
prices, replacements for those decorations and medals. 
‘‘§ 51908. Prohibition against unauthorized manufacture, 
sale, possession, or display of awards 
‘‘(a) PROHIBITION.—Except as authorized under this chapter, a person 
may not manufacture, sell, possess, or display a decoration or medal provided 
for in this chapter. 
‘‘(b) CIVIL PENALTY.—A person violating this section is liable to the 
United States Government for a civil penalty of not more than $2,000. 
‘‘CHAPTER 521—MISCELLANEOUS 
‘‘Sec. 
‘‘52101.
Reemployment rights for certain merchant seamen. 
‘‘§ 52101. Reemployment rights for certain merchant seamen 
‘‘(a) IN GENERAL.—An individual who is certified by the Secretary of 
Transportation under subsection (c) shall be entitled to reemployment rights 
and other benefits substantially equivalent to the rights and benefits provided
118 
for by chapter 43 of title 38 for any member of a reserve component of the 
armed forces of the United States who is ordered to active duty. 
‘‘(b) TIME FOR APPLICATION.—An individual may submit an application 
for certification under subsection (c) to the Secretary not later than 45 days 
after the date the individual completes a period of employment described in 
subsection (c)(1)(A) with respect to which the application is submitted. 
‘‘(c) CERTIFICATION DETERMINATION.—Not later than 20 days after the 
date the Secretary receives from an individual an application for certification 
under this subsection, the Secretary shall— 
‘‘(1) determine whether the individual— 
‘‘(A) was employed in the activation or operation of a vessel— 
‘‘(i) in the National Defense Reserve Fleet maintained under 
section 11 of the Merchant Ship Sales Act of 1946 (50 App. 
U.S.C. 1744) in a period in which the vessel was in use or 
being activated for use under subsection (b) of that section; 
‘‘(ii) requisitioned or purchased under chapter 563 of this 
title; or 
‘‘(iii) owned, chartered, or controlled by the United States 
Government and used by the Government for a war, armed 
conflict, national emergency, or maritime mobilization need 
(including for training purposes or testing for readiness and 
suitability for mission performance); and 
‘‘(B) during the period of that employment, possessed a valid li-
cense, certificate of registry, or merchant mariner’s document issued 
under chapter 71 or 73 of this title; and 
‘‘(2) if the Secretary makes affirmative determinations under para-
graph (1)(A) and (B), certify that individual under this subsection. 
‘‘(d) EQUIVALENCE
TO MILITARY SELECTIVE SERVICE ACT CERTIFI-
CATE.—For purposes of reemployment rights and benefits provided by this 
section, a certification under subsection (c) shall be considered to be the equiv-
alent of a certificate described in section 9(a) of the Military Selective Service 
Act (50 App. U.S.C. 459(a)). 
‘‘PART C—FINANCIAL ASSISTANCE PROGRAMS’’. 
(c) CHAPTERS FOLLOWING CHAPTER 531.—Subtitle V of title 46, United 
States Code, is amended by adding at the end the following: 
‘‘CHAPTER 533—CONSTRUCTION RESERVE FUNDS 
‘‘Sec. 
‘‘53301.
Definitions. 
‘‘53302.
Authority for construction reserve funds. 
‘‘53303.
Persons eligible to establish funds. 
‘‘53304.
Vessel ownership. 
‘‘53305.
Eligible fund deposits. 
‘‘53306.
Recognition of gain for tax purposes. 
‘‘53307.
Basis for determining gain or loss and for depreciating new vessels.
119 
‘‘53308.
Order and proportions of deposits and withdrawals. 
‘‘53309.
Accumulation of deposits. 
‘‘53310.
Obligation of deposits and period for construction of certain vessels. 
‘‘53311.
Taxation of deposits on failure of conditions. 
‘‘53312.
Assessment and collection of deficiency tax. 
‘‘§ 53301. Definitions 
‘‘(a) IN GENERAL.—In this chapter: 
‘‘(1) CONSTRUCTION CONTRACT.—The term ‘construction contract’ in-
cludes, for a taxpayer constructing a new vessel in a shipyard owned by 
that taxpayer, an agreement between the taxpayer and the Secretary of 
Transportation for that construction containing provisions the Secretary 
considers advisable to carry out this chapter. 
‘‘(2) NEW VESSEL.—The term ‘new vessel’ means— 
‘‘(A) a vessel— 
‘‘(i) constructed in the United States after December 31, 
1939, constructed with a construction-differential subsidy 
under title V of the Merchant Marine Act, 1936, or constructed 
with financing or a financing guarantee under chapter 537 or 
575 of this title; 
‘‘(ii) documented or agreed with the Secretary to be docu-
mented under the laws of the United States; and 
‘‘(iii)(I) of a type, size, and speed that the Secretary deter-
mines is suitable for use on the high seas or Great Lakes in 
carrying out this subtitle, but not less than 2,000 gross tons or 
less than 12 knots speed unless the Secretary certifies in each 
case that a vessel of lesser tonnage or speed is desirable for use 
by the United States Government in case of war or national 
emergency; or 
‘‘(II) constructed to replace a vessel bought or requisitioned 
by the Government; and 
‘‘(B) a vessel reconstructed or reconditioned for use only on the 
Great Lakes, including the Saint Lawrence River and Gulf, if the 
Secretary finds that the reconstruction or reconditioning will pro-
mote the objectives of this subtitle. 
‘‘(b) ADDITIONAL TAX-RELATED TERMS.—Other terms used in this chapter 
have the same meaning as in chapter 1 of the Internal Revenue Code of 1986 
(26 U.S.C. ch. 1). 
‘‘§ 53302. Authority for construction reserve funds 
‘‘(a) GENERAL AUTHORITY.—An eligible person under section 53303 of this 
title may establish a construction reserve fund for the construction, recon-
struction, reconditioning, or acquisition of a new vessel or for other purposes 
authorized by this chapter.
120 
‘‘(b) APPLICATION OF CERTAIN LAWS AND REGULATIONS.—The fund shall 
be established, maintained, expended, and used as provided by this chapter 
and regulations prescribed jointly by the Secretary of Transportation and the 
Secretary of the Treasury. 
‘‘§ 53303. Persons eligible to establish funds 
‘‘A construction reserve fund may be established by a citizen of the United 
States that— 
‘‘(1) is operating a vessel in the foreign or domestic commerce of the 
United States or in the fisheries; 
‘‘(2) owns, in whole or in part, a vessel being operated in the foreign 
or domestic commerce of the United States or in the fisheries; 
‘‘(3) was operating a vessel in the foreign or domestic commerce of the 
United States or in the fisheries when it was bought or requisitioned by 
the United States Government; 
‘‘(4) owned, in whole or in part, a vessel being operated in the foreign 
or domestic commerce of the United States or in the fisheries when it 
was bought or requisitioned by the Government; or 
‘‘(5) had acquired or was having constructed a vessel to operate in the 
foreign or domestic commerce of the United States or in the fisheries 
when it was bought or requisitioned by the Government. 
‘‘§ 53304. Vessel ownership 
‘‘In this chapter, a vessel is deemed to be constructed or acquired by a tax-
payer if constructed or acquired by a corporation when the taxpayer owns 
at least 95 percent of each class of stock of the corporation. 
‘‘§ 53305. Eligible fund deposits 
‘‘A construction reserve fund may include deposits of— 
‘‘(1) the proceeds from the sale of a vessel; 
‘‘(2) indemnities for the loss of a vessel; 
‘‘(3) earnings from the operation of a documented vessel and from 
services incident to the operation; and 
‘‘(4) interest or other amounts accrued on deposits in the fund. 
‘‘§ 53306. Recognition of gain for tax purposes 
‘‘(a) DEFINITIONS.—In this section, the terms ‘net proceeds’ and ‘net in-
demnity’ mean the sum of— 
‘‘(1) the adjusted basis of the vessel; and 
‘‘(2) the amount of gain the taxpayer would recognize without regard 
to this section. 
‘‘(b) RECOGNITION OF GAIN.—In computing net income under the income 
or excess profits tax laws of the United States, a taxpayer does not recognize 
a gain on the sale or the actual or constructive total loss of a vessel if the 
taxpayer—
121 
‘‘(1) deposits an amount equal to the net proceeds of the sale or the 
net indemnity for the loss in a construction reserve fund within 60 days 
after receiving the payment of proceeds or indemnity; and 
‘‘(2) elects under this section not to recognize the gain. 
‘‘(c) WHEN ELECTION MUST BE MADE.— 
‘‘(1) IN GENERAL.—Except as provided in paragraph (2), the taxpayer 
must make the election referred to in subsection (b) in the taxpayer’s in-
come tax return for the taxable year in which the gain was realized. 
‘‘(2) RECEIPT AFTER TAXABLE YEAR.—If the vessel is bought or requi-
sitioned by the United States Government, or is lost, and the taxpayer 
receives payment for the vessel or indemnity for the loss from the Govern-
ment after the end of the taxable year in which it was bought, requi-
sitioned, or lost, the taxpayer must make the election referred to in sub-
section (b) within 60 days after receiving the payment or indemnity, on 
a form prescribed by the Secretary of the Treasury. 
‘‘(d) EFFECT OF STATUTE OF LIMITATION.—If the taxpayer makes an elec-
tion under subsection (c)(2), and computation or recomputation under this 
section is otherwise allowable but is prevented by a statute of limitation on 
the date the election is made or within 6 months thereafter, the computation 
or recomputation nevertheless shall be made notwithstanding the statute if the 
taxpayer files a claim for the computation or recomputation within 6 months 
after the date of making the election. 
‘‘§ 53307. Basis for determining gain or loss and for depre-
ciating new vessels 
‘‘Under the income or excess profits tax laws of the United States, the basis 
for determining a gain or loss and for depreciation of a new vessel con-
structed, reconstructed, reconditioned, or acquired by the taxpayer, or for 
which purchase-money indebtedness is liquidated as provided in section 53310 
of this title, with amounts from a construction reserve fund, shall be reduced 
by that part of the deposits in the fund expended in the construction, recon-
struction, reconditioning, acquisition, or liquidation of purchase-money in-
debtedness of the new vessel that represents a gain not recognized for tax pur-
poses under section 53306 of this title. 
‘‘§ 53308. Order and proportions of deposits and withdrawals 
‘‘In this chapter— 
‘‘(1) if the net proceeds of a sale or the net indemnity for a loss is 
deposited in more than one deposit, the amount consisting of the gain 
shall be deemed to be deposited first; 
‘‘(2) amounts expended, obligated, or otherwise withdrawn shall be ap-
plied against the amounts deposited in the fund in the order of deposit; 
and
122 
‘‘(3) if a deposit consists in part of a gain not recognized under sec-
tion 53306 of this title, any expenditure, obligation, or withdrawal ap-
plied against that deposit shall be deemed to be a gain in the proportion 
that the part of the deposit consisting of a gain bears to the total amount 
of the deposit. 
‘‘§ 53309. Accumulation of deposits 
‘‘For any taxable year, amounts on deposit in a construction reserve fund 
on the last day of the taxable year, for which the requirements of section 
53310 of this title have been satisfied (to the extent they apply on the last 
day of the taxable year), are deemed to have been retained for the reasonable 
needs of the business within the meaning of section 537(a) of the Internal 
Revenue Code of 1986 (26 U.S.C. 537(a)). 
‘‘§ 53310. Obligation of deposits and period for construction 
of certain vessels 
‘‘(a) APPLICATION OF SECTIONS 53306 AND 53309.—Sections 53306 and 
53309 of this title apply to a deposit in a construction reserve fund only if, 
within 3 years after the date of the deposit (and any extension under sub-
section (c))— 
‘‘(1)(A) a contract is made for the construction or acquisition of a new 
vessel or, with the approval of the Secretary of Transportation, for a 
part interest in a new vessel or for the reconstruction or reconditioning 
of a new vessel; 
‘‘(B) the deposit is expended or obligated for expenditure under that 
contract; 
‘‘(C) at least 12.5 percent of the construction or contract price of the 
vessel is paid or irrevocably committed for payment; and 
‘‘(D) the plans and specifications for the vessel are approved by the 
Secretary to the extent the Secretary considers necessary; or 
‘‘(2) the deposit is expended or obligated for expenditure for the liq-
uidation of existing or subsequently incurred purchase-money indebted-
ness to a person not a parent company of, or a company affiliated or 
associated with, the mortgagor on a new vessel. 
‘‘(b) ADDITIONAL REQUIREMENTS FOR CERTAIN VESSELS.—In addition to 
the requirements of subsection (a)(1), for a vessel not constructed under a con-
struction-differential subsidy contract or not bought from the Secretary of 
Transportation— 
‘‘(1) at least 5 percent of the construction (or, if the contract covers 
more than one vessel, at least 5 percent of the construction of the first 
vessel) must be completed within 6 months after the date of the construc-
tion contract (or within the period of an extension under subsection (c)),
123 
as estimated by the Secretary and certified by the Secretary to the Sec-
retary of the Treasury; and 
‘‘(2) construction under the contract must be completed with reason-
able dispatch thereafter. 
‘‘(c) EXTENSIONS.—The Secretary of Transportation may grant extensions 
of the period within which the deposits must be expended or obligated or with-
in which the construction must have progressed to the extent of 5 percent com-
pletion under this section. However, the extensions may not be for a total of 
more than 2 years for the expenditure or obligation of deposits or one year 
for the progress of construction. 
‘‘§ 53311. Taxation of deposits on failure of conditions 
‘‘A deposited gain, if otherwise taxable income under the law applicable to 
the taxable year in which the gain was realized, shall be included in gross 
income for that taxable year, except for purposes of the declared value excess 
profits tax and the capital stock tax, if— 
‘‘(1) the deposited gain is not expended or obligated within the appro-
priate period under section 53310 of this title; 
‘‘(2) the deposited gain is withdrawn before the end of that period; 
‘‘(3) the construction related to that deposited gain has not progressed 
to the extent of 5 percent of completion within the appropriate period 
under section 53310 of this title; or 
‘‘(4) the Secretary of Transportation finds and certifies to the Sec-
retary of the Treasury that, for causes within the control of the taxpayer, 
the entire construction related to that deposited gain is not completed 
with reasonable dispatch. 
‘‘§ 53312. Assessment and collection of deficiency tax 
‘‘Notwithstanding any other provision of law, a deficiency in tax for a tax-
able year resulting from the inclusion of an amount in gross income as pro-
vided by section 53311 of this title, and the amount to be treated as a defi-
ciency under section 53311 instead of as an adjustment for the declared value 
excess profits tax, may be assessed or a civil action may be brought to collect 
the deficiency without assessment, at any time. Interest on a deficiency or 
amount to be treated as a deficiency does not begin until the date the depos-
ited gain or part of the deposited gain in question is required to be included 
in gross income under section 51111. 
‘‘CHAPTER 535—CAPITAL CONSTRUCTION FUNDS 
‘‘Sec. 
‘‘53501.
Definitions. 
‘‘53502.
Regulations. 
‘‘53503.
Establishing a capital construction fund. 
‘‘53504.
Deposits and withdrawals. 
‘‘53505.
Ceiling on deposits. 
‘‘53506.
Investment and fiduciary requirements. 
‘‘53507.
Nontaxation of deposits.
124 
‘‘53508.
Separate accounts within a fund. 
‘‘53509.
Qualified withdrawals. 
‘‘53510.
Tax treatment of qualified withdrawals and basis of property. 
‘‘53511.
Tax treatment of nonqualified withdrawals. 
‘‘53512.
FIFO and LIFO withdrawals. 
‘‘53513.
Corporate reorganizations and partnership changes. 
‘‘53514.
Relationship of old fund to new fund. 
‘‘53515.
Records and reports. 
‘‘53516.
Termination of agreement after change in regulations. 
‘‘53517.
Reports. 
‘‘§ 53501. Definitions 
‘‘In this chapter: 
‘‘(1) AGREEMENT VESSEL.—The term ‘agreement vessel’ means— 
‘‘(A) an eligible vessel or a qualified vessel that is subject to an 
agreement under this chapter; and 
‘‘(B) a barge or container that is part of the complement of a 
vessel described in subclause (A) if provided for in the agreement. 
‘‘(2) ELIGIBLE VESSEL.—The term ‘eligible vessel’ means— 
‘‘(A) a vessel— 
‘‘(i) constructed in the United States (and, if reconstructed, 
reconstructed in the United States), constructed outside the 
United States but documented under the laws of the United 
States on April 15, 1970, or constructed outside the United 
States for use in the United States foreign trade pursuant to 
a contract made before April 15, 1970; 
‘‘(ii) documented under the laws of the United States; and 
‘‘(iii) operated in the foreign or domestic trade of the United 
States or in the fisheries of the United States; and 
‘‘(B) a commercial fishing vessel— 
‘‘(i) constructed in the United States and, if reconstructed, 
reconstructed in the United States; 
‘‘(ii) of at least 2 net tons but less than 5 net tons; 
‘‘(iii) owned by a citizen of the United States; 
‘‘(iv) having its home port in the United States; and 
‘‘(v) operated in the commercial fisheries of the United 
States. 
‘‘(3) JOINT REGULATIONS.—The term ‘joint regulations’ means regula-
tions prescribed jointly by the Secretary and the Secretary of the Treas-
ury under section 53502(b) of this title. 
‘‘(4) NONCONTIGUOUS
TRADE.—The term ‘noncontiguous trade’ 
means— 
‘‘(A) trade between— 
‘‘(i) one of the contiguous 48 States; and 
‘‘(ii) Alaska, Hawaii, Puerto Rico, or an insular territory 
or possession of the United States; and
125 
‘‘(B) trade between— 
‘‘(i) a place in Alaska, Hawaii, Puerto Rico, or an insular 
territory or possession of the United States; and 
‘‘(ii) another place in Alaska, Hawaii, Puerto Rico, or an 
insular territory or possession of the United States. 
‘‘(5) QUALIFIED VESSEL.—The term ‘qualified vessel’ means— 
‘‘(A) a vessel— 
‘‘(i) constructed in the United States (and, if reconstructed, 
reconstructed in the United States), constructed outside the 
United States but documented under the laws of the United 
States on April 15, 1970, or constructed outside the United 
States for use in the United States foreign trade pursuant to 
a contract made before April 15, 1970; 
‘‘(ii) documented under the laws of the United States; and 
‘‘(iii) agreed, between the Secretary and the person main-
taining the capital construction fund established under section 
53503 of this title, to be operated in the United States foreign, 
Great Lakes, or noncontiguous domestic trade or in the fish-
eries of the United States; and 
‘‘(B) a commercial fishing vessel— 
‘‘(i) constructed in the United States and, if reconstructed, 
reconstructed in the United States; 
‘‘(ii) of at least 2 net tons but less than 5 net tons; 
‘‘(iii) owned by a citizen of the United States; 
‘‘(iv) having its home port in the United States; and 
‘‘(v) operated in the commercial fisheries of the United 
States. 
‘‘(6) SECRETARY.—The term ‘Secretary’ means— 
‘‘(A) the Secretary of Commerce with respect to an eligible vessel 
or a qualified vessel operated or to be operated in the fisheries of 
the United States; and 
‘‘(B) the Secretary of Transportation with respect to other vessels. 
‘‘(7) UNITED STATES FOREIGN TRADE.—The term ‘United States for-
eign trade’ includes those areas in domestic trade in which a vessel built 
with a construction-differential subsidy is allowed to operate under the 
first sentence of section 506 of the Merchant Marine Act, 1936. 
‘‘(8) VESSEL.—The term ‘vessel’ includes— 
‘‘(A) cargo handling equipment that the Secretary determines is 
intended for use primarily on the vessel; and 
‘‘(B) an ocean-going towing vessel, an ocean-going barge, or a 
comparable towing vessel or barge operated on the Great Lakes.
126 
‘‘§ 53502. Regulations 
‘‘(a) IN GENERAL.—Except as provided in subsection (b), the Secretary 
shall prescribe regulations to carry out this chapter. 
‘‘(b) TAX LIABILITY.—The Secretary and the Secretary of the Treasury 
shall prescribe joint regulations for the determination of tax liability under 
this chapter. 
‘‘§ 53503. Establishing a capital construction fund 
‘‘(a) IN GENERAL.—A citizen of the United States owning or leasing an 
eligible vessel may make an agreement with the Secretary under this chapter 
to establish a capital construction fund for the vessel. 
‘‘(b) ALLOWABLE PURPOSE.—The purpose of the agreement shall be to pro-
vide replacement vessels, additional vessels, or reconstructed vessels, built in 
the United States and documented under the laws of the United States, for 
operation in the United States foreign, Great Lakes, or noncontiguous domes-
tic trade or in the fisheries of the United States. 
‘‘§ 53504. Deposits and withdrawals 
‘‘(a) REQUIRED DEPOSITS.—An agreement to establish a capital construc-
tion fund shall provide for the deposit in the fund of the amounts agreed to 
be appropriate to provide for qualified withdrawals under section 53509 of 
this title. 
‘‘(b) APPLICABLE REQUIREMENTS.—Deposits in and withdrawals from the 
fund are subject to the requirements included in the agreement or prescribed 
by the Secretary by regulation. However, the Secretary may not require a 
person to deposit in the fund for a taxable year more than 50 percent of that 
portion of the person’s taxable income for that year (as determined under sec-
tion 53505(a)(1) of this title) that is attributable to the operation of an agree-
ment vessel. 
‘‘§ 53505. Ceiling on deposits 
‘‘(a) MAXIMUM DEPOSITS.—The amount deposited in a capital construc-
tion fund for a taxable year may not exceed the sum of— 
‘‘(1) that portion of the taxable income of the owner or lessee for the 
taxable year (computed under chapter 1 of the Internal Revenue Code 
of 1986 (26 U.S.C. ch. 1) but without regard to the carryback of net op-
erating loss or net capital loss or this chapter) that is attributable to the 
operation of agreement vessels in the foreign or domestic trade of the 
United States or in the fisheries of the United States; 
‘‘(2) the amount allowable as a deduction under section 167 of such 
Code (26 U.S.C. 167) for the taxable year for agreement vessels; 
‘‘(3) if the transaction is not taken into account for purposes of clause 
(1), the net proceeds (as defined in joint regulations) from the disposition
127 
of an agreement vessel or from insurance or indemnity attributable to 
an agreement vessel; and 
‘‘(4) the receipts from the investment or reinvestment of amounts held 
in the fund. 
‘‘(b) REDUCTIONS FOR LESSEES.—For a lessee, the maximum amount that 
may be deposited for an agreement vessel under subsection (a)(2) for any pe-
riod shall be reduced by any amount the owner is required or permitted, 
under the capital construction fund agreement, to deposit for that period for 
the vessel under subsection (a)(2). 
‘‘§ 53506. Investment and fiduciary requirements 
‘‘(a) IN GENERAL.—Amounts in a capital construction fund shall be kept 
in the depository specified in the agreement and shall be subject to trustee 
and other fiduciary requirements prescribed by the Secretary. Except as pro-
vided in subsection (b), amounts in the fund may be invested only in interest- 
bearing securities approved by the Secretary. 
‘‘(b) STOCK INVESTMENTS.— 
‘‘(1) IN GENERAL.—With the approval of the Secretary, an agreed per-
centage (but not more than 60 percent) of the assets of the fund may be 
invested in the stock of domestic corporations that— 
‘‘(A) is fully listed and registered on an exchange registered with 
the Securities and Exchange Commission as a national securities 
exchange; and 
‘‘(B) would be acquired by a prudent investor seeking a reason-
able income and the preservation of capital. 
‘‘(2) PREFERRED STOCK.—The preferred stock of a corporation is 
deemed to satisfy the requirements of this subsection, even though it may 
not be registered and listed because it is nonvoting stock, if the common 
stock of the corporation satisfies the requirements and the preferred stock 
otherwise would satisfy the requirements. 
‘‘(c) MAINTAINING AGREED PERCENTAGE.—If at any time the fair market 
value of the stock in the fund is more than the agreed percentage of the assets 
in the fund, any subsequent investment of amounts deposited in the fund, and 
any subsequent withdrawal from the fund, shall be made in a way that tends 
to restore the fair market value of the stock to not more than the agreed per-
centage. 
‘‘§ 53507. Nontaxation of deposits 
‘‘(a) TAX TREATMENT.—Subject to subsection (b), under the Internal Rev-
enue Code of 1986 (26 U.S.C. 1 et seq.)— 
‘‘(1) taxable income (determined without regard to this chapter and 
section 7518 of such Code (26 U.S.C. 7518)) for the taxable year shall
128 
be reduced by the amount deposited for the taxable year out of amounts 
referred to in section 53505(a)(1) of this title; 
‘‘(2) a gain from a transaction referred to in section 53505(a)(3) of 
this title shall not be taken into account if an amount equal to the net 
proceeds (as defined in joint regulations) from the transaction is depos-
ited in the fund; 
‘‘(3) the earnings (including gains and losses) from the investment and 
reinvestment of amounts held in the fund shall not be taken into account; 
‘‘(4) the earnings and profits of a corporation (within the meaning 
of section 316 of such Code (26 U.S.C. 316)) shall be determined without 
regard to this chapter and section 7518 of such Code (26 U.S.C. 7518); 
and 
‘‘(5) in applying the tax imposed by section 531 of such Code (26 
U.S.C. 531), amounts held in the fund shall not be taken into account. 
‘‘(b) CONDITION.—This section applies to an amount only if the amount 
is deposited in the fund under the agreement within the time provided in 
joint regulations. 
‘‘§ 53508. Separate accounts within a fund 
‘‘(a) IN GENERAL.—A capital construction fund shall have three accounts: 
‘‘(1) The capital account. 
‘‘(2) The capital gain account. 
‘‘(3) The ordinary income account. 
‘‘(b) CAPITAL ACCOUNT.—The capital account shall consist of— 
‘‘(1) amounts referred to in section 53505(a)(2) of this title; 
‘‘(2) amounts referred to in section 53505(a)(3) of this title, except 
that portion representing a gain not taken into account because of sec-
tion 53507(a)(2) of this title; 
‘‘(3) the percentage applicable under section 243(a)(1) of the Internal 
Revenue Code of 1986 (26 U.S.C. 243(a)(1)) of any dividend received by 
the fund for which the person maintaining the fund would be allowed 
(were it not for section 53507(a)(3) of this title) a deduction under sec-
tion 243 of such Code (26 U.S.C. 243); and 
‘‘(4) interest income exempt from taxation under section 103 of such 
Code (26 U.S.C. 103). 
‘‘(c) CAPITAL GAIN ACCOUNT.—The capital gain account shall consist of— 
‘‘(1) amounts representing capital gains on assets held for more than 
6 months and referred to in section 53505(a)(3) or (4) of this title; 
minus 
‘‘(2) amounts representing capital losses on assets held in the fund for 
more than 6 months.
129 
‘‘(d) ORDINARY INCOME ACCOUNT.—The ordinary income account shall 
consist of— 
‘‘(1) amounts referred to in section 53505(a)(1) of this title; 
‘‘(2)(A) amounts representing capital gains on assets held for not more 
than 6 months and referred to in section 53505(a)(3) or (4) of this title; 
minus 
‘‘(B) amounts representing capital losses on assets held in the fund for 
not more than 6 months; 
‘‘(3) interest (except tax-exempt interest referred to in subsection 
(b)(4)) and other ordinary income (except any dividend referred to in 
clause (5)) received on assets held in the fund; 
‘‘(4) ordinary income from a transaction described in section 
53505(a)(3) of this title; and 
‘‘(5) that portion of any dividend referred to in subsection (b)(3) not 
taken into account under subsection (b)(3). 
‘‘(e) WHEN LOSSES ALLOWED.—Except on termination of a fund, capital 
losses referred to in subsection (c) or (d)(2) shall be allowed only as an offset 
to gains referred to in subsection (c) or (d)(2), respectively. 
‘‘§ 53509. Qualified withdrawals 
‘‘(a) IN GENERAL.—Subject to subsection (b), a withdrawal from a capital 
construction fund is a qualified withdrawal if it is made under the terms of 
the agreement and is for— 
‘‘(1) the acquisition, construction, or reconstruction of a qualified ves-
sel or a barge or container that is part of the complement of a qualified 
vessel; or 
‘‘(2) the payment of the principal on indebtedness incurred in the ac-
quisition, construction, or reconstruction of a qualified vessel or a barge 
or container that is part of the complement of a qualified vessel. 
‘‘(b) BARGES AND CONTAINERS.—Except as provided in regulations pre-
scribed by the Secretary, subsection (a) applies to a barge or container only 
if it is constructed in the United States. 
‘‘(c) TREATMENT AS NONQUALIFIED WITHDRAWAL.—Under joint regula-
tions, if the Secretary determines that a substantial obligation under an 
agreement is not being fulfilled, the Secretary, after notice and opportunity 
for a hearing to the person maintaining the fund, may treat any amount in 
the fund as an amount withdrawn from the fund in a nonqualified with-
drawal. 
‘‘§ 53510. Tax treatment of qualified withdrawals and basis 
of property 
‘‘(a) ORDER OF WITHDRAWALS.—A qualified withdrawal from a capital 
construction fund shall be treated as made—
130 
‘‘(1) first from the capital account; 
‘‘(2) second from the capital gain account; and 
‘‘(3) third from the ordinary income account. 
‘‘(b) ORDINARY INCOME ACCOUNT WITHDRAWALS.—If a portion of a quali-
fied withdrawal for a vessel, barge, or container is made from the ordinary 
income account, the basis of the vessel, barge, or container shall be reduced 
by an amount equal to that portion. 
‘‘(c) CAPITAL GAIN ACCOUNT WITHDRAWALS.—If a portion of a qualified 
withdrawal for a vessel, barge, or container is made from the capital gain 
account, the basis of the vessel, barge, or container shall be reduced by an 
amount equal to that portion. 
‘‘(d) WITHDRAWALS TO PAY PRINCIPAL.—If a portion of a qualified with-
drawal to pay the principal on indebtedness is made from the ordinary in-
come account or the capital gain account, an amount equal to the total reduc-
tion that would be required by subsections (b) and (c) if the withdrawal were 
a qualified withdrawal for a purpose described in those subsections shall be 
applied, in the order provided in joint regulations, to reduce the basis of ves-
sels, barges, and containers owned by the person maintaining the fund. The 
remaining amount of the withdrawal shall be treated as a nonqualified with-
drawal. 
‘‘(e) GAIN ON PROPERTY WITH REDUCED BASIS.—If property, the basis of 
which was reduced under subsection (b), (c), or (d), is disposed of, any gain 
realized on the disposition, to the extent it does not exceed the total reduction 
in the basis of the property under those subsections, shall be treated as an 
amount referred to in section 53511(c)(1) of this title withdrawn on the date 
of disposition of the property. Subject to conditions prescribed in joint regula-
tions, this subsection does not apply to a disposition if there is a redeposit, 
in an amount determined under joint regulations, that restores the fund as 
far as practicable to the position it was in before the withdrawal. 
‘‘§ 53511. Tax treatment of nonqualified withdrawals 
‘‘(a) IN GENERAL.—Except as provided in section 53513 of this title, a 
withdrawal from a fund that is not a qualified withdrawal shall be treated 
as a nonqualified withdrawal. 
‘‘(b) ORDER OF WITHDRAWALS.—A nonqualified withdrawal shall be treat-
ed as made— 
‘‘(1) first from the ordinary income account; 
‘‘(2) second from the capital gain account; and 
‘‘(3) third from the capital account. 
‘‘(c) TAX TREATMENT.—For purposes of the Internal Revenue Code of 1986 
(26 U.S.C. 1 et seq.)—
131 
‘‘(1) a nonqualified withdrawal from the ordinary income account 
shall be included in income as an item of ordinary income for the tax-
able year in which the withdrawal is made; 
‘‘(2) a nonqualified withdrawal from the capital gain account shall 
be included in income for the taxable year in which the withdrawal is 
made as an item of gain realized during that year from the disposition 
of an asset held for more than 6 months; and 
‘‘(3) for the period through the last date prescribed for payment of tax 
for the taxable year in which the withdrawal is made— 
‘‘(A) no interest shall be payable under section 6601 of such Code 
(26 U.S.C. 6601) and no addition to the tax shall be payable under 
section 6651 of such Code (26 U.S.C. 6651); 
‘‘(B) interest on the amount of the additional tax attributable to 
an amount treated as a nonqualified withdrawal from the ordinary 
income account or the capital gain account shall be paid at the rate 
determined under subsection (d) from the last date prescribed for 
payment of the tax for the taxable year for which the amount was 
deposited in the fund; and 
‘‘(C) no interest shall be payable on amounts treated as with-
drawn on a last-in-first-out basis under section 53512 of this title. 
‘‘(d) INTEREST RATE.—The rate of interest under subsection (c)(3)(B) for 
a nonqualified withdrawal made in a taxable year beginning after 1971 shall 
be determined and published jointly by the Secretary and the Secretary of the 
Treasury. The rate shall be such that its relationship to 8 percent is com-
parable, as determined by the Secretaries under joint regulations, to the rela-
tionship between— 
‘‘(1) the money rates and investment yields for the calendar year im-
mediately before the beginning of the taxable year; and 
‘‘(2) the money rates and investment yields for the calendar year 1970. 
‘‘(e) NONQUALIFIED WITHDRAWALS.— 
‘‘(1) IN
GENERAL.—The following applicable percentage of any 
amount that remains in a capital construction fund at the close of the 
following specified taxable year following the taxable year for which the 
amount was deposited shall be treated as a nonqualified withdrawal: 
‘‘If the amount remains in the fund at 
The applicable 
the close of the— 
percentage is— 
‘‘26th taxable year ...................................................................................................
20 percent
‘‘27th taxable year ...................................................................................................
40 percent
‘‘28th taxable year ...................................................................................................
60 percent
‘‘29th taxable year ...................................................................................................
80 percent
‘‘30th taxable year ...................................................................................................
100 percent.
132 
‘‘(2) EARNINGS.—The earnings of a capital construction fund for any 
taxable year (except net gains) shall be treated under this subsection as 
an amount deposited for the taxable year. 
‘‘(3) CONTRACT FOR QUALIFIED WITHDRAWAL.—Under paragraph (1), 
an amount shall not be treated as remaining in a capital construction 
fund at the close of a taxable year to the extent there is a binding con-
tract at the close of the taxable year for a qualified withdrawal of the 
amount for an identified item for which the withdrawal may be made. 
‘‘(4) EXCESS EARNINGS.—If the Secretary determines that the balance 
in a capital construction fund exceeds the amount appropriate to meet 
the vessel construction program objectives of the person that established 
the fund, the amount of the excess shall be treated as a nonqualified 
withdrawal under paragraph (1) unless the person develops appropriate 
program objectives within 3 years to dissipate the excess. 
‘‘(5) AMOUNTS IN FUND ON JANUARY 1, 1987.—Under this subsection, 
amounts in a capital construction fund on January 1, 1987, shall be 
treated as having been deposited in that fund on that date. 
‘‘(f) TAX DETERMINATIONS.— 
‘‘(1) IN GENERAL.—For a taxable year for which there is a non-
qualified withdrawal (including an amount treated as a nonqualified 
withdrawal under subsection (e)), the tax imposed by chapter 1 of the 
Internal Revenue Code of 1986 (26 U.S.C. ch. 1) shall be determined 
by— 
‘‘(A) excluding the withdrawal from gross income; and 
‘‘(B) increasing the tax imposed by chapter 1 of such Code by the 
product of the amount of the withdrawal and the highest tax rate 
specified in section 1 (or section 11 for a corporation) of such Code 
(26 U.S.C. 1, 11). 
‘‘(2) MAXIMUM TAX RATE.—For that portion of a nonqualified with-
drawal made from the capital gain account during a taxable year to 
which section 1(h) or 1201(a) of such Code (26 U.S.C. 1(h), 1201(a)) ap-
plies, the tax rate used under subparagraph (A)(ii) may not exceed 15 
percent (or 34 percent for a corporation). 
‘‘(3) TAX BENEFIT RULE.—If any portion of a nonqualified with-
drawal is properly attributable to deposits (except earnings on deposits) 
made by the taxpayer in a taxable year that did not reduce the tax-
payer’s liability for tax under chapter 1 of such Code (26 U.S.C. ch. 1) 
for a taxable year before the taxable year in which the withdrawal oc-
curs— 
‘‘(A) that portion shall not be taken into account under para-
graph (1); and
133 
‘‘(B) an amount equal to that portion shall be allowed as a de-
duction under section 172 of such Code (26 U.S.C. 172) for the tax-
able year in which the withdrawal occurs. 
‘‘(4) COORDINATION WITH DEDUCTION FOR NET OPERATING LOSSES.— 
A nonqualified withdrawal excluded from gross income under paragraph 
(1) shall be excluded in determining taxable income under section 
172(b)(2) of such Code (26 U.S.C. 172(b)(2)). 
‘‘§ 53512. FIFO and LIFO withdrawals 
‘‘(a) FIFO.—Except as provided in subsection (b), an amount withdrawn 
from an account under this chapter shall be treated as withdrawn on a first- 
in-first-out basis. 
‘‘(b) LIFO.—An amount withdrawn from an account under this chapter 
shall be treated as withdrawn on a last-in-first-out basis if it is— 
‘‘(1) a nonqualified withdrawal for research, development, and design 
expenses incident to new and advanced vessel design, machinery, and 
equipment; or 
‘‘(2) an amount treated as a nonqualified withdrawal under section 
53510(d) of this title. 
‘‘§ 53513. Corporate 
reorganizations 
and 
partnership 
changes 
‘‘Under joint regulations— 
‘‘(1) a transfer of a capital construction fund from one person to an-
other person in a transaction to which section 381 of the Internal Rev-
enue Code of 1986 (26 U.S.C. 381) applies may be treated as if the 
transaction is not a nonqualified withdrawal; and 
‘‘(2) a similar rule shall be applied to a continuation of a partnership 
(within the meaning of subchapter K of chapter 1 of such Code (26 
U.S.C. 701 et seq.)). 
‘‘§ 53514. Relationship of old fund to new fund 
‘‘(a) DEFINITION.—In this section, the term ‘old fund’ means a capital con-
struction fund maintained before October 21, 1970. 
‘‘(b) ELECTION TO MAINTAIN OLD FUND.—A person maintaining an old 
fund may elect to continue the old fund, but may not— 
‘‘(1) hold amounts in the old fund beyond the expiration date provided 
in the agreement under which the old fund is maintained (determined 
without regard to an extension or renewal made after April 14, 1970); 
or 
‘‘(2) maintain simultaneously the old fund and a new fund established 
under this chapter. 
‘‘(c) APPLICATION OF NEW FUND AGREEMENT TO OLD FUND AMOUNTS.— 
If a person makes an agreement under this chapter to establish a new fund,
134 
the person may agree to extend the agreement to some or all of the amounts 
in an old fund. Each item in the old fund to be transferred shall be trans-
ferred in a nontaxable transaction to the appropriate account in the new 
fund. For purposes of section 53511(c)(3) of this title, the date of the deposit 
of an item so transferred shall be July 1, 1971, or the date of the deposit 
in the old fund, whichever is later. 
‘‘§ 53515. Records and reports 
‘‘A person maintaining a fund under this chapter shall keep records and 
make reports as required by the Secretary or the Secretary of the Treasury. 
‘‘§ 53516. Termination of agreement after change in regula-
tions 
‘‘If, after an agreement has been made under this chapter, a change is made 
either in the joint regulations or in the regulations prescribed by the Sec-
retary under this chapter that could have a substantial effect on the rights 
or duties of a person maintaining a fund under this chapter, that person may 
terminate the agreement. 
‘‘§ 53517. Reports 
‘‘(a) IN GENERAL.—Within 120 days after the close of each calendar year, 
the Secretary of Transportation and the Secretary of Commerce each shall 
provide the Secretary of the Treasury a written report on the capital con-
struction funds under the particular Secretary’s jurisdiction for the calendar 
year. 
‘‘(b) CONTENTS.—The report shall state the name and taxpayer identifica-
tion number of each person— 
‘‘(1) establishing a capital construction fund during the calendar year; 
‘‘(2) maintaining a capital construction fund on the last day of the 
calendar year; 
‘‘(3) terminating a capital construction fund during the calendar 
year; 
‘‘(4) making a deposit to or withdrawal from a capital construction 
fund during the calendar year, and the amount of the deposit or with-
drawal; or 
‘‘(5) having been determined during the calendar year to have failed 
to fulfill a substantial obligation under a capital construction fund 
agreement to which the person is a party. 
‘‘CHAPTER 537—LOANS AND GUARANTEES 
‘‘SUBCHAPTER I—GENERAL 
‘‘Sec. 
‘‘53701.
Definitions. 
‘‘53702.
General authority. 
‘‘53703.
Application procedures. 
‘‘53704.
Funding limits. 
‘‘53705.
Pledge of United States Government. 
‘‘53706.
Eligible purposes of obligations.
135 
‘‘53707.
Findings related to obligors and operators. 
‘‘53708.
Findings related to economic soundness. 
‘‘53709.
Amount of obligations. 
‘‘53710.
Contents of obligations. 
‘‘53711.
Security interest. 
‘‘53712.
Monitoring financial condition and operations of obligor. 
‘‘53713.
Administrative fees. 
‘‘53714.
Guarantee fees. 
‘‘53715.
Escrow fund. 
‘‘53716.
Deposit fund. 
‘‘53717.
Management of funds in the Treasury. 
‘‘53718.
Annual report to Congress. 
‘‘SUBCHAPTER II—DEFAULT PROVISIONS 
‘‘53721.
Rights of obligee. 
‘‘53722.
Actions by Secretary. 
‘‘53723.
Payments by Secretary and issuance of obligations. 
‘‘53724.
Rights to secured property. 
‘‘53725.
Actions against obligor. 
‘‘SUBCHAPTER III—PARTICULAR PROJECTS 
‘‘53731.
Commercial demonstration ocean thermal energy conversion facilities and plantships. 
‘‘53732.
Eligible export vessels. 
‘‘53733.
Shipyard modernization and improvement. 
‘‘53734.
Replacement of vessels because of changes in operating standards. 
‘‘53735.
Fisheries financing and capacity reduction. 
‘‘SUBCHAPTER I—GENERAL 
‘‘§ 53701. Definitions 
‘‘In this chapter: 
‘‘(1) ACTUAL COST.—The term ‘actual cost’ means the sum of— 
‘‘(A) all amounts paid by or for the account of the obligor as of 
the date on which a determination is made under section 
53715(d)(1) of this title; and 
‘‘(B) all amounts that the Secretary reasonably estimates the obli-
gor will become obligated to pay from time to time thereafter, for 
the construction, reconstruction, or reconditioning of the vessel, in-
cluding guarantee fees that will become payable under section 53714 
of this title in connection with all obligations issued for construc-
tion, reconstruction, or reconditioning of the vessel or equipment to 
be delivered, and all obligations issued for the delivered vessel or 
equipment. 
‘‘(2) CONSTRUCTION, RECONSTRUCTION, AND RECONDITIONING.—The 
terms ‘construction’, ‘reconstruction’, and ‘reconditioning’ include de-
signing, inspecting, outfitting, and equipping. 
‘‘(3) DEPRECIATED ACTUAL COST.—The term ‘depreciated actual cost’ 
of a vessel means— 
‘‘(A) if the vessel was not reconstructed or reconditioned, the ac-
tual cost of the vessel depreciated on a straight line basis over the 
useful life of the vessel as determined by the Secretary, not to exceed 
25 years from the date of delivery by the builder; or 
‘‘(B) if the vessel was reconstructed or reconditioned, the sum of—
136 
‘‘(i) the actual cost of the vessel depreciated on a straight 
line basis from the date of delivery by the builder to the date 
of the reconstruction or reconditioning, using the original use-
ful life of the vessel, and from the date of the reconstruction or 
reconditioning, using a useful life of the vessel determined by 
the Secretary; and 
‘‘(ii) any amount paid or obligated to be paid for the recon-
struction or reconditioning, depreciated on a straight line basis 
using a useful life of the vessel determined by the Secretary. 
‘‘(4) ELIGIBLE
EXPORT
VESSEL.—The term ‘eligible export vessel’ 
means a vessel that— 
‘‘(A) is constructed, reconstructed, or reconditioned in the United 
States for use in world-wide trade; and 
‘‘(B) will, on delivery or redelivery, become or remain docu-
mented under the laws of a country other than the United States. 
‘‘(5) FISHERY FACILITY.— 
‘‘(A) IN GENERAL.—Subject to paragraph (B), the term ‘fishery 
facility’ means— 
‘‘(i) for operations on land— 
‘‘(I) a structure or appurtenance thereto designed for 
the unloading and receiving from vessels, the processing, 
the holding pending processing, the distribution after 
processing, or the holding pending distribution, of fish 
from a fishery; 
‘‘(II) the land necessary for the structure or appur-
tenance; and 
‘‘(III) equipment that is for use with the structure or 
appurtenance and that is necessary for performing a func-
tion referred to in clause (I); 
‘‘(ii) for operations not on land, a vessel built in the United 
States and used for, equipped to be used for, or of a type nor-
mally used for, the processing of fish; or 
‘‘(iii) for aquaculture, including operations on land or else-
where— 
‘‘(I) a structure or appurtenance thereto designed for 
aquaculture; 
‘‘(II) the land necessary for the structure or appur-
tenance; 
‘‘(III) equipment that is for use with the structure or 
appurtenance and that is necessary for performing a func-
tion referred to in clause (I); and
137 
‘‘(IV) a vessel built in the United States and used for, 
equipped to be used for, or of a type normally used for, 
aquaculture. 
‘‘(B) REQUIRED OWNERSHIP.—Under paragraph (A), the struc-
ture, appurtenance, land, equipment, or vessel must be owned by— 
‘‘(i) an individual who is a citizen of the United States; or 
‘‘(ii) an entity that is a citizen of the United States under 
section 50501 of this title and that is at least 75 percent owned 
(as determined under that section) by citizens of the United 
States. 
‘‘(6) FISHING VESSEL.—The term ‘fishing vessel’ has the meaning 
given that term in section 3 of the Magnuson-Stevens Fishery Conserva-
tion and Management Act (16 U.S.C. 1802), and any reference in this 
chapter to a vessel designed principally for commercial use in the fishing 
trade or industry is deemed to be a reference to a fishing vessel. 
‘‘(7) MORTGAGE.—The term ‘mortgage’ includes— 
‘‘(A) a preferred mortgage as defined in section 31301 of this 
title; and 
‘‘(B) a mortgage on a vessel that will become a preferred mort-
gage when filed or recorded under chapter 313 of this title. 
‘‘(8) OBLIGATION.—The term ‘obligation’ means an instrument of in-
debtedness issued for a purpose described in section 53706 of this title, 
except— 
‘‘(A) an obligation issued by the Secretary under section 53723 
of this title; and 
‘‘(B) an obligation eligible for investment of funds under section 
53715(f) or 53717 of this title. 
‘‘(9) OBLIGEE.—The term ‘obligee’ means the holder of an obligation. 
‘‘(10) OBLIGOR.—The term ‘obligor’ means a party primarily liable 
for payment of the principal of or interest on an obligation. 
‘‘(11) 
OCEAN
THERMAL
ENERGY
CONVERSION
FACILITY
OR 
PLANTSHIP.—The term ‘ocean thermal energy conversion facility or 
plantship’ means an at-sea facility or vessel, whether mobile, floating 
unmoored, moored, or standing on the seabed, that uses temperature dif-
ferences in ocean water to produce electricity or another form of energy 
capable of being used directly to perform work, and includes— 
‘‘(A) equipment installed on the facility or vessel to use the elec-
tricity or other form of energy to produce, process, refine, or manu-
facture a product; 
‘‘(B) a cable or pipeline used to deliver the electricity, freshwater, 
or product to shore; and
138 
‘‘(C) other associated equipment and appurtenances of the facility 
or vessel to the extent they are located seaward of the high water 
mark. 
‘‘(12) SECRETARY.—The term ‘Secretary’ means— 
‘‘(A) the Secretary of Commerce with respect to fishing vessels 
and fishery facilities; and 
‘‘(B) the Secretary of Transportation with respect to other vessels 
and general shipyard facilities (as defined in section 53733(a) of 
this title). 
‘‘(13) VESSEL.—The term ‘vessel’ means any type of vessel, whether 
in existence or under construction, including— 
‘‘(A) a cargo vessel; 
‘‘(B) a passenger vessel; 
‘‘(C) a combination cargo and passenger vessel; 
‘‘(D) a tanker; 
‘‘(E) a tug or towboat; 
‘‘(F) a barge; 
‘‘(G) a dredge; 
‘‘(H) a floating drydock with a capacity of at least 35,000 lifting 
tons and a beam of at least 125 feet between the wing walls; 
‘‘(I) an oceanographic research vessel; 
‘‘(J) an instruction vessel; 
‘‘(K) a pollution treatment, abatement, or control vessel; 
‘‘(L) a fishing vessel whose ownership meets the citizenship re-
quirements under section 50501 of this title for documenting vessels 
to operate in the coastwise trade; and 
‘‘(M) an ocean thermal energy conversion facility or plantship 
that is or will be documented under the laws of the United States. 
‘‘§ 53702. General authority 
‘‘(a) IN GENERAL.—The Secretary, on terms the Secretary may prescribe, 
may guarantee or make a commitment to guarantee the payment of the prin-
cipal of and interest on an obligation eligible to be guaranteed under this 
chapter. A guarantee or commitment to guarantee shall cover 100 percent of 
the principal and interest. 
‘‘(b) DIRECT LOANS FOR FISHERIES.— 
‘‘(1) IN GENERAL.—Notwithstanding any other provision of this chap-
ter, any obligation involving a fishing vessel, fishery facility, aquaculture 
facility, individual fishing quota, or fishing capacity reduction program 
issued under this chapter after October 11, 1996, shall be a direct loan 
obligation for which the Secretary shall be the obligee, rather than an 
obligation issued to an obligee other than the Secretary and guaranteed
139 
by the Secretary. A direct loan obligation under this subsection shall be 
treated in the same manner and to the same extent as an obligation 
guaranteed under this chapter except with respect to provisions of this 
chapter that by their nature can only be applied to obligations guaran-
teed under this chapter. 
‘‘(2) INTEREST RATE.—Notwithstanding any other provision of this 
chapter, the annual rate of interest an obligor shall pay on a direct loan 
obligation under this subsection is 2 percent plus the additional percent 
the Secretary must pay as interest to borrow from the Treasury the funds 
to make the loan. 
‘‘§ 53703. Application procedures 
‘‘(a) TIME FOR DECISION.— 
‘‘(1) IN GENERAL.—The Secretary shall approve or deny an applica-
tion for a loan guarantee under this chapter within 270 days after the 
date on which the signed application is received by the Secretary. 
‘‘(2) EXTENSION.—On request by an applicant, the Secretary may ex-
tend the 270-day period in paragraph (1) to a date not later than 2 
years after the date on which the signed application was received by the 
Secretary. 
‘‘(b) CERTIFICATION OF REVIEW.—The Secretary may not guarantee or 
make a commitment to guarantee an obligation under this chapter unless the 
Secretary certifies that a full and fair consideration of all the regulatory re-
quirements, including economic soundness and financial requirements appli-
cable to the obligor and related parties, and a thorough assessment of the tech-
nical, economic, and financial aspects of the loan application, has been made. 
‘‘§ 53704. Funding limits 
‘‘(a) GENERAL LIMITATIONS.—The total unpaid principal amount of obli-
gations guaranteed under this chapter and outstanding at one time may not 
exceed $12,000,000,000. Of that amount— 
‘‘(1) $850,000,000 shall be limited to obligations related to fishing ves-
sels and fishery facilities; and 
‘‘(2) $3,000,000,000 shall be limited to obligations related to eligible 
export vessels. 
‘‘(b) ADDITIONAL LIMITATIONS.—Additional limitations may not be im-
posed on new commitments to guarantee loans for any fiscal year, except in 
amounts established in advance by annual authorization laws. A vessel eligi-
ble for a guarantee under this chapter may not be denied eligibility because 
of its type. 
‘‘(c) LIMITS BASED ON RISK FACTORS.—
140 
‘‘(1) DEFINITION.—In this subsection, the term ‘cost’ has the meaning 
given that term in section 502 of the Federal Credit Reform Act of 1990 
(2 U.S.C. 661a). 
‘‘(2) SYSTEM OF RISK CATEGORIES.—The Secretary shall— 
‘‘(A) establish, and update annually, a system of risk categories 
for obligations guaranteed under this chapter that categorizes the 
relative risk of guarantees based on the risk factors set forth in 
paragraph (4); 
‘‘(B) determine annually for each risk category a subsidy rate 
equivalent to the cost of obligations in the category, expressed as a 
percentage of the amount guaranteed for obligations in the category; 
and 
‘‘(C) ensure that each risk category is comprised of loans that are 
relatively homogeneous in cost and share characteristics predictive 
of defaults and other costs, given the facts known at the time of obli-
gation or commitment, using a risk category system that is based 
on historical analysis of program data and statistical evidence con-
cerning the likely costs of defaults or other costs that are expected 
to be associated with the loans in the category. 
‘‘(3) USE OF SYSTEM.— 
‘‘(A) PLACING
OBLIGATION
IN
CATEGORY.—Before making a 
guarantee under this chapter for an obligation, and annually for 
projects subject to a guarantee, the Secretary shall apply the risk 
factors specified in paragraph (4) to place the obligation in a risk 
category established under paragraph (2). 
‘‘(B) REDUCTION OF AVAILABLE AMOUNT.—The Secretary shall 
consider the total amount available to the Secretary for making 
guarantees under this chapter to be reduced by the amount deter-
mined by multiplying— 
‘‘(i) the amount guaranteed under this chapter for an obliga-
tion; by 
‘‘(ii) the subsidy rate for the category in which the obligation 
is placed under subparagraph (A). 
‘‘(C) ESTIMATED COST.—The estimated cost to the United States 
Government of a guarantee under this chapter for an obligation is 
deemed to be the amount determined under subparagraph (B) for 
the obligation. 
‘‘(D) RESTRICTION ON FURTHER GUARANTEES.—The Secretary 
may not guarantee obligations under this chapter after the total 
amount available to the Secretary under appropriations laws for the
141 
cost of loan guarantees is considered to be reduced to zero under sub-
paragraph (B). 
‘‘(4) RISK FACTORS.—The risk factors referred to in this subsection 
are— 
‘‘(A) if applicable, the country risk for each eligible export vessel 
financed or to be financed by an obligation; 
‘‘(B) the period for which an obligation is guaranteed or to be 
guaranteed; 
‘‘(C) the amount of an obligation guaranteed or to be guaranteed 
in relation to the total cost of the project financed or to be financed 
by the obligation; 
‘‘(D) the financial condition of an obligor or applicant for a 
guarantee; 
‘‘(E) if applicable, other guarantees related to the project; 
‘‘(F) if applicable, the projected employment of each vessel or 
equipment to be financed with an obligation; 
‘‘(G) if applicable, the projected market that will be served by 
each vessel or equipment to be financed with an obligation; 
‘‘(H) the collateral provided for a guarantee for an obligation; 
‘‘(I) the management and operating experience of an obligor or 
applicant for a guarantee; 
‘‘(J) whether a guarantee under this chapter is or will be in effect 
during the construction period of the project; and 
‘‘(K) the concentration risk presented by an unduly large percent-
age of loans outstanding by any one borrower or group of affiliated 
borrowers. 
‘‘§ 53705. Pledge of United States Government 
‘‘(a) FULL FAITH AND CREDIT.—The full faith and credit of the United 
States Government is pledged to the payment of a guarantee made under this 
chapter, for both principal and interest, including interest (as may be pro-
vided for in the guarantee) accruing between the date of default under a guar-
anteed obligation and the date of payment in full of the guarantee. 
‘‘(b) INCONTESTABILITY.—A guarantee or commitment to guarantee made 
under this chapter is conclusive evidence of the eligibility of the obligation for 
the guarantee. The validity of a guarantee or commitment to guarantee made 
under this chapter is incontestable. 
‘‘§ 53706. Eligible purposes of obligations 
‘‘(a) IN GENERAL.—To be eligible for a guarantee under this chapter, an 
obligation must aid in any of the following: 
‘‘(1)(A) Financing (including reimbursement of an obligor for expend-
itures previously made for) the construction, reconstruction, or recondi-
142 
tioning of a vessel (including an eligible export vessel) designed prin-
cipally for research, or for commercial use— 
‘‘(i) in the coastwise or intercoastal trade; 
‘‘(ii) on the Great Lakes, or on bays, sounds, rivers, harbors, or 
inland lakes of the United States; 
‘‘(iii) in foreign trade as defined in section 109(b) of this title; 
‘‘(iv) as an ocean thermal energy conversion facility or plantship; 
‘‘(v) as a floating drydock in the construction, reconstruction, re-
conditioning, or repair of vessels; or 
‘‘(vi) as an eligible export vessel in worldwide trade. 
‘‘(B) A guarantee under subparagraph (A) may not be made more 
than one year after delivery of the vessel (or redelivery if the vessel was 
reconstructed or reconditioned) unless the proceeds of the obligation are 
used to finance the construction, reconstruction, or reconditioning of a 
vessel or of facilities or equipment related to marine operations. 
‘‘(2) Financing (including reimbursement of an obligor for expendi-
tures previously made for) the construction, reconstruction, recondi-
tioning, or purchase of a vessel owned by citizens of the United States 
and designed principally for research, or for commercial use in the fish-
ing industry. 
‘‘(3) Financing the purchase, reconstruction, or reconditioning of a 
vessel or fishery facility— 
‘‘(A) for which an obligation was guaranteed under this chapter; 
and 
‘‘(B) that, under subchapter II of this chapter— 
‘‘(i) is a vessel or fishery facility for which an obligation 
was accelerated and paid; 
‘‘(ii) was acquired by the Federal Ship Financing Fund or 
successor account under section 53717 of this title; or 
‘‘(iii) was sold at foreclosure begun by the Secretary. 
‘‘(4) Financing any part of the repayment to the United States Gov-
ernment of any amount of a construction-differential subsidy paid for 
a vessel. 
‘‘(5) Refinancing an existing obligation (regardless of whether guaran-
teed under this chapter) issued for a purpose described in clauses (1)– 
(4), including a short-term obligation incurred to obtain temporary 
funds with the intention of refinancing. 
‘‘(6) Financing or refinancing (including reimbursement of an obligor 
for expenditures previously made for) the construction, reconstruction, re-
conditioning, or purchase of a fishery facility.
143 
‘‘(7) Financing or refinancing (including reimbursement of an obligor 
for expenditures previously made for) the purchase of an individual fish-
ing quota in accordance with section 303(d)(4) of the Magnuson-Stevens 
Fishery Conservation and Management Act (16 U.S.C. 1853(d)(4)). 
‘‘(b) NON-VESSELS TREATED
AS VESSELS.—An obligation guaranteed 
under subsection (a)(6) or (7) shall be treated, for purposes of this chapter, 
in the same manner and to the same extent as an obligation that aids in 
financing the construction, reconstruction, reconditioning, or purchase of a 
vessel, except with respect to provisions that by their nature can only be ap-
plied to vessels. 
‘‘(c) PRIORITIES FOR CERTAIN VESSELS.—In guaranteeing or making a 
commitment to guarantee an obligation under this chapter, the Secretary 
shall give priority to— 
‘‘(1) a vessel that is otherwise eligible for a guarantee and is con-
structed with assistance under subtitle D of the Maritime Security Act 
of 2003 (46 U.S.C. 53101 note); and 
‘‘(2) after applying clause (1), a vessel that is otherwise eligible for 
a guarantee and that the Secretary of Defense determines— 
‘‘(A) is suitable for service as a naval auxiliary in time of war 
or national emergency; and 
‘‘(B) meets a shortfall in sealift capacity or capability. 
‘‘§ 53707. Findings related to obligors and operators 
‘‘(a) RESPONSIBLE OBLIGOR.—The Secretary may not guarantee or make 
a commitment to guarantee an obligation under this chapter unless the Sec-
retary finds that the obligor is responsible and has the ability, experience, fi-
nancial resources, and other qualifications necessary for the adequate oper-
ation and maintenance of each vessel that will serve as security for the guar-
antee. 
‘‘(b) OPERATORS OF LINER VESSELS.—The Secretary of Transportation 
may not guarantee or make a commitment to guarantee a loan for the con-
struction, reconstruction, or reconditioning of a liner vessel under this chapter 
unless the Chairman of the Federal Maritime Commission certifies that the 
operator of the vessel has not been found by the Commission to have com-
mitted, within the previous 5 years— 
‘‘(1) a violation of part A of subtitle IV of this title that involves un-
just or unfair discriminatory treatment or undue or unreasonable preju-
dice or disadvantage with respect to a United States shipper, ocean 
transportation intermediary, ocean common carrier, or port; or 
‘‘(2) a violation of part B of subtitle IV of this title. 
‘‘(c) OPERATORS OF FISHING VESSELS.—The Secretary of Commerce may 
not guarantee or make a commitment to guarantee a loan for the construc-
144 
tion, reconstruction, or reconditioning of a fishing vessel under this chapter 
if the operator of the vessel has been— 
‘‘(1) held liable or liable in rem for a civil penalty under section 1858 
of title 16 and not paid the penalty; 
‘‘(2) found guilty of an offense under section 1859 of title 16 and not 
paid the assessed fine or served the assessed sentence; 
‘‘(3) held liable for a civil or criminal penalty under section 1375 of 
title 16 and not paid the assessed fine or served the assessed sentence; 
or 
‘‘(4) held liable for a civil penalty by the Coast Guard under this title 
or title 33 and not paid the assessed fine. 
‘‘(d) WAIVERS CONCERNING FINANCIAL CONDITION.—The Secretary shall 
prescribe regulations concerning circumstances under which waivers of, or ex-
ceptions to, otherwise applicable regulatory requirements concerning financial 
condition can be made. The regulations shall require that— 
‘‘(1) the economic soundness requirements in section 53708(a) of this 
title are met after the waiver of the financial condition requirement; and 
‘‘(2) the waiver shall provide for the imposition of other requirements 
on the obligor designed to compensate for the increased risk associated 
with the obligor’s failure to meet regulatory requirements applicable to 
financial condition. 
‘‘§ 53708. Findings related to economic soundness 
‘‘(a) BY SECRETARY OF TRANSPORTATION.—The Secretary of Transpor-
tation may not guarantee or make a commitment to guarantee an obligation 
under this chapter unless the Secretary finds that the property or project for 
which the obligation will be executed will be economically sound. In making 
that finding, the Secretary shall consider— 
‘‘(1) the need in the particular segment of the maritime industry for 
new or additional capacity, including any impact on existing equipment 
for which a guarantee under this chapter is in effect; 
‘‘(2) the market potential for employment of the vessel over the life of 
the guarantee; 
‘‘(3) projected revenues and expenses associated with employment of 
the vessel; 
‘‘(4) any charter, contract of affreightment, transportation agreement, 
or similar agreement or undertaking relevant to the employment of the 
vessel; 
‘‘(5) other relevant criteria; and 
‘‘(6) for inland waterways, the need for technical improvements, in-
cluding increased fuel efficiency or improved safety.
145 
‘‘(b) BY SECRETARY OF COMMERCE.—The Secretary of Commerce may not 
guarantee or make a commitment to guarantee an obligation under this chap-
ter unless the Secretary finds, at or prior to the time the commitment is made 
or the guarantee becomes effective, that— 
‘‘(1) the property or project for which the obligation will be executed 
will be economically sound; and 
‘‘(2) for a fishing vessel, the purpose of the financing or refinancing 
is consistent with— 
‘‘(A) the wise use of the fisheries resources and the development, 
advancement, management, conservation, and protection of the fish-
eries resources; or 
‘‘(B) the need for technical improvements, including increased 
fuel efficiency or improved safety. 
‘‘(c) USED FISHING VESSELS AND FACILITIES.—The Secretary of Com-
merce may not guarantee or make a commitment to guarantee an obligation 
under this chapter for the purchase of a used fishing vessel or used fishery 
facility unless the vessel or facility will be— 
‘‘(1) reconstructed or reconditioned in the United States and will con-
tribute to the development of the United States fishing industry; or 
‘‘(2) used— 
‘‘(A) in the harvesting of fish from an underused fishery; or 
‘‘(B) for a purpose described in the definition of ‘fishery facility’ 
in section 53701 of this title with respect to an underused fishery. 
‘‘(d) INDEPENDENT ANALYSIS.—The Secretary may make a determination 
that aspects of an application under this chapter require independent anal-
ysis to be conducted by third party experts due to risk factors associated with 
markets, technology, financial structures, or other risk factors identified by the 
Secretary. Any independent analysis conducted under this subsection shall be 
performed by a party chosen by the Secretary. 
‘‘(e) ADDITIONAL EQUITY BECAUSE
OF INCREASED RISKS.—Notwith-
standing any other provision of this chapter, the Secretary may make a deter-
mination that an application under this title requires additional equity be-
cause of increased risk factors associated with markets, technology, financial 
structures, or other risk factors identified by the Secretary. 
‘‘§ 53709. Amount of obligations 
‘‘(a) IN GENERAL.—The principal of an obligation may not be guaranteed 
in an amount greater than the amount determined by multiplying the per-
centage applicable under subsection (b) by— 
‘‘(1) the amount paid by or for the account of the obligor (as deter-
mined by the Secretary, which determination shall be conclusive) for the
146 
construction, reconstruction, or reconditioning of the vessel used as secu-
rity for the guarantee; or 
‘‘(2) if the obligor creates an escrow fund under section 53715 of this 
title, the actual cost of the vessel. 
‘‘(b) LIMITATIONS ON AMOUNT BORROWED.— 
‘‘(1) IN
GENERAL.—Except as otherwise provided, the principal 
amount of an obligation guaranteed under this chapter may not exceed 
75 percent of the actual cost or depreciated actual cost, as determined 
by the Secretary, of the vessel used as security for the guarantee. 
‘‘(2) CERTAIN APPROVED VESSELS.—The principal amount may not 
exceed 87.5 percent of the actual cost or depreciated actual cost if— 
‘‘(A) the size and speed of the vessel are approved by the Sec-
retary; 
‘‘(B) the vessel is or would have been eligible for mortgage aid 
for construction under section 509 of the Merchant Marine Act, 
1936, or would have been eligible except that the vessel was built 
with a construction-differential subsidy and the subsidy has been re-
paid; and 
‘‘(C) the vessel is of a type described in that section for which 
the minimum down payment required by that section is 12.5 per-
cent of the cost of the vessel. 
‘‘(3) BARGES.—For a barge constructed without a construction-dif-
ferential subsidy or for which the subsidy has been repaid, the principal 
amount may not exceed 87.5 percent of the actual cost or depreciated ac-
tual cost. 
‘‘(4) FISHING VESSELS AND FISHERY FACILITIES.—For a fishing vessel 
or fishery facility, the principal amount may not exceed 80 percent of 
the actual cost or depreciated actual cost. However, debt for the vessel 
or facility may not be placed through the Federal Financing Bank. 
‘‘(5) OTEC.—For an ocean thermal energy conversion facility or 
plantship constructed without a construction-differential subsidy, the 
principal amount may not exceed 87.5 percent of the actual cost or de-
preciated actual cost of the facility or plantship. 
‘‘(6) ELIGIBLE EXPORT VESSELS.—For an eligible export vessel, the 
principal amount may not exceed 87.5 percent of the actual cost or de-
preciated actual cost. 
‘‘(c) SECURITY INVOLVING MULTIPLE VESSELS.—The principal amount of 
an obligation having more than one vessel as security for the guarantee may 
not exceed the sum of the principal amounts allowable for all the vessels. 
‘‘(d) PROHIBITION
ON UNIFORM PERCENTAGE LIMITATIONS.—The Sec-
retary may not establish a percentage under any provision of subsection (b)
147 
that is to be applied uniformly to all guarantees or commitments to guarantee 
made under that provision. 
‘‘(e) PROHIBITION ON MINIMUM PRINCIPAL AMOUNT.—The Secretary may 
not establish, as a condition of eligibility for a guarantee under this chapter, 
a minimum principal amount for an obligation covering the reconstruction 
or reconditioning of a fishing vessel or fishery facility. For purposes of this 
chapter, the reconstruction or reconditioning of a fishing vessel or fishery fa-
cility does not include the routine minor repair or maintenance of the vessel 
or facility. 
‘‘§ 53710. Contents of obligations 
‘‘(a) IN GENERAL.—An obligation guaranteed under this chapter must— 
‘‘(1) provide for payments by the obligor satisfactory to the Secretary; 
‘‘(2) provide for interest (exclusive of guarantee fees and other fees) at 
a rate not more than the annual rate on the unpaid principal that the 
Secretary determines is reasonable, considering the range of interest rates 
prevailing in the private market for similar loans and the risks assumed 
by the Secretary; 
‘‘(3) have a maturity date satisfactory to the Secretary, but— 
‘‘(A) not more than 25 years after the date of delivery of the ves-
sel used as security for the guarantee; or 
‘‘(B) if the vessel has been reconstructed or reconditioned, not 
more than the later of— 
‘‘(i) 25 years after the date of delivery of the vessel; or 
‘‘(ii) the remaining years of useful life of the vessel as deter-
mined by the Secretary; and 
‘‘(4) provide, or a related agreement must provide, that if the vessel 
used as security for the guarantee is a delivered vessel, the vessel shall 
be— 
‘‘(A) in class A–1, American Bureau of Shipping, or meet other 
standards acceptable to the Secretary, with all required certificates, 
including marine inspection certificates of the Coast Guard or, in 
the case of an eligible export vessel, of the appropriate national flag 
authorities under a treaty, convention, or other international agree-
ment to which the United States Government is a party, and with 
all outstanding requirements and recommendations necessary for 
class retention accomplished, unless the Secretary permits a 
deferment of repairs necessary to meet these requirements; and 
‘‘(B) well equipped, in good repair, and in every respect sea-
worthy and fit for service. 
‘‘(b) PROVISIONS FOR CERTAIN PASSENGER VESSELS.—
148 
‘‘(1) IN GENERAL.—With the Secretary’s approval, if the vessel used 
as security for the guarantee is a passenger vessel having the tonnage, 
speed, passenger accommodations, and other characteristics described in 
section 503 of the Merchant Marine Act, 1936, an obligation guaranteed 
under this chapter or a related agreement may provide that— 
‘‘(A) the only recourse by the Government against the obligor for 
payments under the guarantee will be repossession of the vessel and 
assignment of insurance claims; and 
‘‘(B) the obligor’s liability for payments under the guarantee will 
be satisfied and discharged by the surrender of the vessel and all 
interest in the vessel to the Government in the condition described 
in paragraph (2). 
‘‘(2) SURRENDER OF VESSEL.— 
‘‘(A) IN GENERAL.—On surrender, the vessel must be— 
‘‘(i) free and clear of all liens and encumbrances except the 
security interest conveyed to the Secretary under this chapter; 
‘‘(ii) in class; and 
‘‘(iii) in as good order and condition (ordinary wear and 
tear excepted) as when acquired by the obligor. 
‘‘(B) COVERING DEFICIENCIES BY INSURANCE.—To the extent cov-
ered by insurance, a deficiency related to a requirement in subpara-
graph (A) may be satisfied by assignment of the obligor’s insurance 
claims to the Government. 
‘‘(c) OTHER PROVISIONS TO PROTECT SECURITY INTERESTS.—An obliga-
tion guaranteed under this chapter and any related agreement must contain 
other provisions for the protection of the security interests of the Government 
(including acceleration, assumption, and subrogation provisions and the 
issuance of notes by the obligor to the Secretary), liens and releases of liens, 
payment of taxes, and other matters that the Secretary may prescribe. 
‘‘§ 53711. Security interest 
‘‘(a) IN GENERAL.—The Secretary may guarantee an obligation under this 
chapter only if the obligor conveys or agrees to convey to the Secretary a secu-
rity interest the Secretary considers necessary to protect the interest of the 
United States Government. 
‘‘(b) MULTIPLE VESSELS AND TYPES OF SECURITY.—The security interest 
may relate to more than one vessel and may consist of more than one type 
of security. If the security interest relates to more than one vessel, the obliga-
tion may have the latest maturity date allowable under section 53710(a)(3) 
of this title for any of the vessels used as security for the guarantee. However, 
the Secretary may require such payments of principal prior to maturity, with
149 
respect to all related obligations, as the Secretary considers necessary to main-
tain adequate security for the guarantee. 
‘‘§ 53712. Monitoring financial condition and operations of 
obligor 
‘‘(a) IN GENERAL.—The Secretary shall monitor the financial condition 
and operations of the obligor on a regular basis during the term of the guar-
antee. The Secretary shall document the results of the monitoring on an an-
nual or quarterly basis depending on the condition of the obligor. If the Sec-
retary determines that the financial condition of the obligor warrants addi-
tional protections to the Secretary, the Secretary shall take appropriate action 
under subsection (b). If the Secretary determines that the financial condition 
of the obligor jeopardizes its continued ability to perform its responsibilities 
in connection with the guarantee of an obligation by the Secretary, the Sec-
retary shall make an immediate determination whether default should take 
place and whether further measures described in subsection (b) should be 
taken to protect the interests of the Secretary while ensuring that program 
objectives are met. 
‘‘(b) CONTRACT PROVISIONS TO PROTECT SECRETARY.—The Secretary 
shall include provisions in a loan agreement with an obligor that provides 
additional authority to the Secretary to take action to limit potential losses 
in connection with a defaulted loan or a loan that is in jeopardy due to the 
deteriorating financial condition of the obligor. These provisions include re-
quirements for additional collateral or greater equity contributions that are 
effective upon the occurrence of verifiable conditions relating to the obligor’s 
financial condition or the status of the vessel or shipyard project. 
‘‘§ 53713. Administrative fees 
‘‘(a) IN GENERAL.—The Secretary shall charge and collect from the obligor 
fees the Secretary considers reasonable for— 
‘‘(1) investigating an application for a guarantee; 
‘‘(2) appraising property offered as security for a guarantee; 
‘‘(3) issuing a commitment; 
‘‘(4) providing services related to an escrow fund under section 53715 
of this title; and 
‘‘(5) inspecting property during construction, reconstruction, or recon-
ditioning. 
‘‘(b) TOTAL FEE LIMITATION.—The total fees under subsection (a) may not 
exceed 0.5 percent of the original principal amount of the obligations to be 
guaranteed. 
‘‘(c) FEES FOR INDEPENDENT ANALYSIS.—The Secretary may charge and 
collect fees to cover the costs of independent analysis under section 53708(d)
150 
of this title. Notwithstanding section 3302 of title 31, any fee collected under 
this subsection shall— 
‘‘(1) be credited as an offsetting collection to the account that finances 
the administration of the loan guarantee program; 
‘‘(2) be available for expenditure only to pay the costs of activities and 
services for which the fee is imposed; and 
‘‘(3) remain available until expended. 
‘‘§ 53714. Guarantee fees 
‘‘(a) REGULATIONS.—Subject to this section, the Secretary shall prescribe 
regulations to assess a fee for guaranteeing an obligation under this chapter. 
‘‘(b) COMPUTATION OF FEE.— 
‘‘(1) IN GENERAL.—The amount of the fee for a guarantee under this 
chapter shall be equal to the sum of the amounts determined under para-
graph (2) for the years in which the guarantee is in effect. 
‘‘(2) PRESENT VALUE FOR EACH YEAR.—The amount referred to in 
paragraph (1) for a year in which the guarantee is in effect is the 
present value of the amount calculated under paragraph (3). To deter-
mine the present value, the Secretary shall apply a discount rate deter-
mined by the Secretary of the Treasury, considering current market 
yields on outstanding obligations of the United States Government hav-
ing periods to maturity comparable to the period to maturity for the 
guaranteed obligation. 
‘‘(3) CALCULATION OF AMOUNT.—The amount referred to in para-
graph (2) shall be calculated by multiplying— 
‘‘(A) the estimated average unpaid principal amount of the obli-
gation that will be outstanding during the year (excluding the aver-
age amount, other than interest, on deposit during the year in an 
escrow fund under section 53715 of this title); by 
‘‘(B) the fee rate set under paragraph (4). 
‘‘(4) SETTING FEE RATES.—To set the fee rate referred to in para-
graph (3)(B), the Secretary shall establish a formula that— 
‘‘(A) takes into account the security provided for the guaranteed 
obligation; and 
‘‘(B) is a sliding scale based on the creditworthiness of the obli-
gor, using— 
‘‘(i) the lowest allowable rate under paragraph (5) for the 
most creditworthy obligors; and 
‘‘(ii) the highest allowable rate under paragraph (5) for the 
least creditworthy obligors. 
‘‘(5) PERMISSIBLE RANGE OF RATES.—The fee rate set under para-
graph (4) shall be—
151 
‘‘(A) for a delivered vessel or equipment, at least 0.5 percent and 
not more than 1 percent; and 
‘‘(B) for a vessel to be constructed, reconstructed, or reconditioned 
or equipment to be delivered, at least 0.25 percent and not more 
than 0.5 percent. 
‘‘(c) WHEN FEE COLLECTED.—A fee for the guarantee of an obligation 
under this chapter shall be collected not later than the date on which an 
amount is first paid on the obligation. 
‘‘(d) FINANCING THE FEE.—A fee paid under this section is eligible to be 
financed under this chapter and shall be included in the actual cost of the 
obligation guaranteed. 
‘‘(e) NOT REFUNDABLE.—A fee paid under this section is not refundable. 
However, an obligor shall receive credit for the amount paid for the remain-
ing term of the obligation if the obligation is refinanced and guaranteed 
under this chapter after the refinancing. 
‘‘§ 53715. Escrow fund 
‘‘(a) IN GENERAL.—If the proceeds of an obligation guaranteed under this 
chapter are to be used to finance the construction, reconstruction, or recondi-
tioning of a vessel that will serve as security for a guarantee under this chap-
ter, the Secretary may accept and hold in escrow, under an escrow agreement 
with the obligor, a portion of the proceeds of all obligations guaranteed under 
this chapter whose proceeds are to be so used which is equal to— 
‘‘(1) the excess of— 
‘‘(A) the principal amount of all obligations whose proceeds are 
to be so used; over 
‘‘(B) 75 percent or 87.5 percent, whichever is applicable under 
section 53709(b) of this title, of the amount paid by or for the ac-
count of the obligor for the construction, reconstruction, or recondi-
tioning of the vessel; plus 
‘‘(2) any interest the Secretary may require on the amount described 
in clause (1). 
‘‘(b) SECURITY INVOLVING BOTH UNCOMPLETED AND DELIVERED VES-
SELS.—If the security for the guarantee of an obligation relates both to a ves-
sel to be constructed, reconstructed, or reconditioned and to a delivered vessel, 
the principal amount of the obligation shall be prorated for purposes of sub-
section (a) under regulations prescribed by the Secretary. 
‘‘(c) DISBURSEMENT BEFORE TERMINATION OF AGREEMENT.— 
‘‘(1) PURPOSES.—The Secretary shall disburse amounts in the escrow 
fund, as specified in the escrow agreement, to— 
‘‘(A) pay amounts the obligor is obligated to pay for—
152 
‘‘(i) the construction, reconstruction, or reconditioning of a 
vessel used as security for the guarantee; and 
‘‘(ii) interest on the obligations; 
‘‘(B) redeem the obligations under a refinancing guaranteed 
under this chapter; and 
‘‘(C) pay any excess interest deposits to the obligor at times pro-
vided for in the escrow agreement. 
‘‘(2) MANNER OF PAYMENT.—If a payment becomes due under the 
guarantee before the termination of the escrow agreement, the amount in 
the escrow fund at the time the payment becomes due, including realized 
income not yet paid to the obligor, shall be paid into the appropriate 
account under section 53717 of this title. The amount shall be credited 
against amounts due or to become due from the obligor to the Secretary 
on the guaranteed obligations or, to the extent not so required, be paid 
to the obligor. 
‘‘(d) PAYMENTS REQUIRED BEFORE DISBURSEMENT.— 
‘‘(1) IN GENERAL.—No disbursement shall be made under subsection 
(c) to any person until the total amount paid by or for the account of 
the obligor from sources other than the proceeds of the obligation equals 
at least 25 percent or 12.5 percent, whichever is applicable under section 
53709(b) of this title, of the aggregate actual cost of the vessel, as pre-
viously approved by the Secretary. If the aggregate actual cost of the ves-
sel has increased since the Secretary’s initial approval or if it increases 
after the first disbursement is permitted under this subsection, then no 
further disbursements shall be made under subsection (c) until the total 
amount paid by or for the account of the obligor from sources other than 
the proceeds of the obligation equals at least 25 percent or 12.5 percent, 
as applicable, of the increase, as determined by the Secretary, in the ag-
gregate actual cost of the vessel. This paragraph does not require the Sec-
retary to consent to finance any increase in actual cost unless the Sec-
retary determines that such an increase in the obligation meets all the 
terms and conditions of this chapter or other applicable law. 
‘‘(2) DOCUMENTED PROOF OF PROGRESS REQUIREMENT.—The Sec-
retary shall, by regulation, establish a transparent, independent, and 
risk-based process for verifying and documenting the progress of projects 
under construction before disbursing guaranteed loan funds. At a min-
imum, the process shall require documented proof of progress in connec-
tion with the construction, reconstruction, or reconditioning of a vessel 
or vessels before disbursements are made from the escrow fund. The Sec-
retary may require that the obligor provide a certificate from an inde-
153 
pendent party certifying that the requisite progress in construction, re-
construction, or reconditioning has taken place. 
‘‘(e) DISBURSEMENT ON TERMINATION OF AGREEMENT.— 
‘‘(1) IN GENERAL.—If a payment has not become due under the guar-
antee before the termination of the escrow agreement, the balance of the 
escrow fund at the time of termination shall be disbursed to— 
‘‘(A) prepay the excess of— 
‘‘(i) the principal amount of all obligations whose proceeds 
are to be used to finance the construction, reconstruction, or re-
conditioning of the vessel used or to be used as security for the 
guarantee; over 
‘‘(ii) 75 percent or 87.5 percent, whichever is applicable 
under section 53709(b) of this title, of the actual cost of the ves-
sel to the extent paid; and 
‘‘(B) pay interest on that prepaid amount of principal. 
‘‘(2) REMAINING
BALANCE.—Any remaining balance of the escrow 
fund shall be paid to the obligor. 
‘‘(f) INVESTMENT.—The Secretary may invest and reinvest any part of an 
escrow fund in obligations of the United States Government with maturities 
such that the escrow fund will be available as required for purposes of the 
escrow agreement. Investment income shall be paid to the obligor when re-
ceived. 
‘‘(g) TERMS TO PROTECT GOVERNMENT.—The escrow agreement shall con-
tain other terms the Secretary considers necessary to protect fully the interests 
of the Government. 
‘‘§ 53716. Deposit fund 
‘‘(a) IN GENERAL.—There is a deposit fund in the Treasury for purposes 
of this section. The Secretary, in accordance with an agreement under sub-
section (b), may deposit into and hold in the fund cash belonging to an obli-
gor to serve as collateral for a guarantee made under this chapter with respect 
to the obligor. 
‘‘(b) AGREEMENT.—The Secretary and an obligor shall make a reserve fund 
or other collateral account agreement to govern the deposit, withdrawal, reten-
tion, use, and reinvestment of cash of the obligor held in the fund. The agree-
ment shall contain— 
‘‘(1) terms and conditions required by this section; 
‘‘(2) terms that grant to the United States Government a security in-
terest in all amounts deposited into the fund; and 
‘‘(3) any additional terms considered by the Secretary to be necessary 
to protect fully the interests of the Government.
154 
‘‘(c) INVESTMENT.—The Secretary may invest and reinvest any part of the 
amounts in the fund in obligations of the Government with maturities such 
that amounts in the fund will be available as required for purposes of the 
agreement under subsection (b). Cash balances in the fund in excess of current 
requirements shall be maintained in a form of uninvested funds, and the Sec-
retary of the Treasury shall pay interest on these funds. 
‘‘(d) WITHDRAWALS.— 
‘‘(1) IN GENERAL.—Cash deposited into the fund may not be with-
drawn without the consent of the Secretary. 
‘‘(2) USE OF INCOME.—Subject to paragraph (3), the Secretary may 
pay any income earned on cash of an obligor deposited into the fund 
in accordance with the agreement with the obligor under subsection (b). 
‘‘(3) RETENTION AGAINST DEFAULT.—The Secretary may retain and 
offset any or all of the cash of an obligor in the fund, and any income 
realized thereon, as part of the Secretary’s recovery against the obligor 
in case of a default by the obligor on an obligation. 
‘‘§ 53717. Management of funds in the Treasury 
‘‘(a) DEFINITION.—In this section, the term ‘FCRA’ means the Federal 
Credit Reform Act of 1990 (2 U.S.C. 661 et seq.). 
‘‘(b) LOAN GUARANTEES BY SECRETARY OF TRANSPORTATION.— 
‘‘(1) WHEN NOT SUBJECT TO FCRA.—The Secretary of Transportation 
shall account for payments and disbursements involving obligations 
guaranteed under this chapter and not subject to FCRA in an account 
in the Treasury entitled the Federal Ship Financing Fund Liquidating 
Account (a liquidating account as defined in FCRA). 
‘‘(2) WHEN SUBJECT TO FCRA.—The Secretary of Transportation shall 
account for payments and disbursements involving obligations guaran-
teed under this chapter and subject to FCRA in a separate account in 
the Treasury entitled the Federal Ship Financing Guaranteed Loan Fi-
nancing Account (a financing account as defined in FCRA). 
‘‘(c) LOAN GUARANTEES BY SECRETARY OF COMMERCE.— 
‘‘(1) WHEN NOT SUBJECT TO FCRA.—The Secretary of Commerce shall 
account for payments and disbursements involving obligations guaran-
teed under this chapter and not subject to FCRA in a separate account 
in the Treasury established for this purpose. 
‘‘(2) WHEN SUBJECT TO FCRA.—The Secretary of Commerce shall ac-
count for payments and disbursements involving obligations guaranteed 
under this chapter and subject to FCRA in a separate account in the 
Treasury established for this purpose. 
‘‘(d) DIRECT LOANS BY SECRETARY OF COMMERCE.—The Secretary of 
Commerce shall account for payments and disbursements involving direct
155 
loans made under this chapter in a separate account in the Treasury estab-
lished for this purpose. 
‘‘§ 53718. Annual report to Congress 
‘‘The Secretary of Transportation shall report to Congress annually on the 
loan guarantee program under this chapter. Each report shall include— 
‘‘(1) the size, in dollars, of the portfolio of loans guaranteed; 
‘‘(2) the size, in dollars, of projects in the portfolio facing financial 
difficulties; 
‘‘(3) the number and type of projects covered; 
‘‘(4) a profile of pending loan applications; 
‘‘(5) the amount of appropriations available for new guarantees; 
‘‘(6) a profile of each project approved since the last report; and 
‘‘(7) a profile of any defaults since the last report. 
‘‘SUBCHAPTER II—DEFAULT PROVISIONS 
‘‘§ 53721. Rights of obligee 
‘‘(a) DEMANDS BY OBLIGEES.—Except as provided in subsection (c), if an 
obligor has continued in default for 30 days in the payment of principal or 
interest on an obligation guaranteed under this chapter, the obligee or the 
obligee’s agent may demand that the Secretary pay the unpaid principal 
amount of the obligation and the unpaid interest on the obligation to the date 
of payment. The demand must be made within the earlier of— 
‘‘(1) a period that may be specified in the guarantee or a related 
agreement; or 
‘‘(2) 90 days from the date of the default. 
‘‘(b) PAYMENTS BY SECRETARY.— 
‘‘(1) IN GENERAL.—If a demand is made under subsection (a), the 
Secretary shall pay to the obligee or the obligee’s agent the unpaid prin-
cipal amount of the obligation and the unpaid interest on the obligation 
to the date of payment. Payment shall be made within the earlier of— 
‘‘(A) a period that may be specified in the guarantee or a related 
agreement; or 
‘‘(B) 30 days from the date of the demand. 
‘‘(2) IF NO EXISTING DEFAULT.—The Secretary is not required to 
make payment under this subsection if, within the appropriate period 
under paragraph (1), the Secretary finds that the obligor was not in de-
fault or that the default was remedied before the demand. 
‘‘(c) ASSUMPTION OF RIGHTS AND OBLIGATIONS BEFORE DEMAND.—An 
obligee or the obligee’s agent may not demand payment under this section if 
the Secretary, before the demand and on terms that may be provided in the 
obligation or a related agreement, has assumed the obligor’s rights and duties 
under the obligation and any related agreement and made any payment in
156 
default. However, the guarantee of the obligation remains in effect after the 
Secretary’s assumption. 
‘‘§ 53722. Actions by Secretary 
‘‘(a) GENERAL AUTHORITY.—On default under an obligation or related 
agreement between the Secretary and the obligor, the Secretary, on terms that 
may be provided in the obligation or agreement, may— 
‘‘(1) assume the obligor’s rights and duties under the obligation or 
agreement, make any payment in default, and notify the obligee or the 
obligee’s agent of the default and the Secretary’s assumption; or 
‘‘(2) notify the obligee or the obligee’s agent of the default. 
‘‘(b) DEMANDS BY OBLIGEES.— 
‘‘(1) DEMAND.—If the Secretary proceeds under subsection (a)(2), the 
obligee or the obligee’s agent may demand that the Secretary pay the un-
paid principal amount of the obligation and the unpaid interest on the 
obligation. The demand must be made within the earlier of— 
‘‘(A) a period that may be specified in the guarantee or a related 
agreement; or 
‘‘(B) 60 days from the date of the Secretary’s notice. 
‘‘(2) PAYMENT.—If a demand is made under paragraph (1), the Sec-
retary shall pay to the obligee or the obligee’s agent the unpaid principal 
amount of the obligation and the unpaid interest on the obligation to 
the date of payment. Payment shall be made within the earlier of— 
‘‘(A) a period that may be specified in the guarantee or a related 
agreement; or 
‘‘(B) 30 days from the date of the demand. 
‘‘(c) CONTINUED EFFECT OF GUARANTEE.—A guarantee of an obligation 
remains in effect after an assumption of the obligation by the Secretary. 
‘‘(d) ADDITIONAL RESPONSES.—If there is a default on an obligation, the 
Secretary shall conduct operations under this chapter in a manner that— 
‘‘(1) maximizes the net present value return from the sale or disposi-
tion of assets associated with the obligation, including prompt referral 
to the Attorney General for collection as appropriate; 
‘‘(2) minimizes the amount of any loss realized in the resolution of 
the guarantee; 
‘‘(3) ensures adequate competition and fair and consistent treatment 
of offerors; and 
‘‘(4) requires appraisal of assets by an independent appraiser. 
‘‘§ 53723. Payments by Secretary and issuance of obligations 
‘‘(a) CASH PAYMENT.—Amounts required to be paid by the Secretary under 
section 53721 or 53722 of this title shall be paid in cash.
157 
‘‘(b) ISSUANCE OF OBLIGATIONS.—If amounts in the appropriate account 
under section 53717 of this title are not sufficient to make a payment re-
quired under section 53721 or 53722 of this title, the Secretary may issue 
obligations to the Secretary of the Treasury. The Secretary, with the approval 
of the Secretary of the Treasury, shall prescribe the form, denomination, ma-
turity, and other terms (except the interest rate) of the obligations. The Sec-
retary of the Treasury shall set the interest rate for the obligations, consid-
ering the current average market yield on outstanding marketable obligations 
of the United States Government of comparable maturities during the month 
before the obligations are issued. 
‘‘(c) PURCHASE OF OBLIGATIONS.—The Secretary of the Treasury shall 
purchase the obligations issued under this section. To purchase the obliga-
tions, the Secretary of the Treasury may use as a public debt transaction the 
proceeds from the sale of securities issued under chapter 31 of title 31. The 
purposes for which securities may be issued under that chapter are extended 
to include the purchase of obligations under this subsection. The Secretary of 
the Treasury may sell obligations purchased under this section. A redemption, 
purchase, or sale of the obligations by the Secretary of the Treasury is a pub-
lic debt transaction of the Government. 
‘‘(d) DEPOSITS AND REDEMPTIONS.—The Secretary shall deposit amounts 
borrowed under this section in the appropriate account under section 53717 
of this title and make redemptions of the obligations from that account. 
‘‘§ 53724. Rights to secured property 
‘‘(a) ACQUISITION OF SECURITY RIGHTS.—When the Secretary makes a 
payment on, or assumes, an obligation under section 53721 or 53722 of this 
title, the Secretary acquires the rights under the security agreement with the 
obligor in the security held by the Secretary to guarantee the obligation. 
‘‘(b) USE AND DISPOSITION OF SECURED PROPERTY.—Notwithstanding 
any other law relating to the acquisition, handling, or disposal of property 
by the United States Government, the Secretary has the right, in the Sec-
retary’s discretion, to complete, reconstruct, recondition, renovate, repair, 
maintain, operate, charter, or sell any property acquired under a security 
agreement with an obligor, or to place a vessel so acquired in the National 
Defense Reserve Fleet. The terms of a sale under this subsection shall be as 
approved by the Secretary. 
‘‘§ 53725. Actions against obligor 
‘‘(a) IN GENERAL.—For a default under a guaranteed obligation or related 
agreement, the Secretary may take any action against the obligor or another 
liable party that the Secretary considers necessary to protect the interests of 
the United States Government. A civil action may be brought in the name
158 
of the Government or the obligee. The obligee shall make available to the Gov-
ernment all records and evidence necessary to prosecute the action. 
‘‘(b) TITLE, POSSESSION, AND PURCHASE.— 
‘‘(1) IN GENERAL.—The Secretary may— 
‘‘(A) accept a conveyance of title to and possession of property 
from the obligor or another party liable to the Secretary; and 
‘‘(B) purchase the property for an amount not greater than the 
unpaid principal amount of the obligation and interest thereon. 
‘‘(2) PAYMENT OF EXCESS.—If, through the sale of property, the Sec-
retary receives an amount of cash greater than the unpaid principal 
amount of the obligation, the unpaid interest on the obligation, and the 
expenses of collecting those amounts, the Secretary shall pay the excess 
to the obligor. 
‘‘SUBCHAPTER III—PARTICULAR PROJECTS 
‘‘§ 53731. Commercial demonstration ocean thermal energy 
conversion facilities and plantships 
‘‘(a) IN GENERAL.—Under subchapter I of this chapter, the Secretary may 
guarantee or make a commitment to guarantee the payment of the principal 
of and interest on an obligation that aids in financing (including reimburse-
ment of an obligor for expenditures previously made for) the construction, re-
construction, or reconditioning of a commercial demonstration ocean thermal 
energy conversion facility or plantship. This section may be used to guarantee 
obligations for a total of not more than 5 separate facilities and plantships 
or a demonstrated 400 megawatt capacity, whichever comes first. 
‘‘(b) APPLICABILITY OF OTHER PROVISIONS.—Except as otherwise provided 
in this section, a guarantee or commitment to guarantee under this section 
is subject to all the provisions applicable to a guarantee or commitment to 
guarantee under subchapter I of this chapter. 
‘‘(c) ECONOMIC SOUNDNESS.—The required determination of economic 
soundness under section 53708 of this title applies to a guarantee or commit-
ment to guarantee for that portion of a facility or plantship not to be sup-
ported with appropriated Federal funds. 
‘‘(d) REASONABLENESS OF RISK.—A guarantee or commitment to guar-
antee may not be made under this section unless the Secretary of Energy, in 
consultation with the Secretary, certifies to the Secretary that, for the facility 
or plantship for which the guarantee or commitment to guarantee is sought, 
there is sufficient guarantee of performance and payment to lower the risk 
to the United States Government to a reasonable level. In deciding whether 
to issue such a certification, the Secretary of Energy shall consider—
159 
‘‘(1) the successful demonstration of the technology to be used in the 
facility at a scale sufficient to establish the likelihood of technical and 
economic viability in the proposed market; and 
‘‘(2) the need of the United States to develop new and renewable 
sources of energy and the benefits to be realized from the construction 
and successful operation of the facility or plantship. 
‘‘(e) AMOUNT OF OBLIGATION.—The total principal amount of an obliga-
tion guaranteed under this section may not exceed 87.5 percent of— 
‘‘(1) the actual cost or depreciated actual cost of the facility or 
plantship; or 
‘‘(2) if the facility or plantship is supported with appropriated Fed-
eral funds, the total principal amount of that portion of the actual cost 
or depreciated actual cost for which the obligor is obligated to secure fi-
nancing under the agreement between the obligor and the Department of 
Energy or other Federal agency. 
‘‘(f) OTEC DEMONSTRATION FUND.— 
‘‘(1) IN GENERAL.—There is a special subaccount, known as the OTEC 
Demonstration Fund, in the account established under section 
53717(b)(1) of this title. 
‘‘(2) USE AND OPERATION.—The OTEC Demonstration Fund shall be 
used for obligation guarantees authorized under this section that do not 
qualify under subchapter I of this chapter. Except as otherwise provided 
in this section, the OTEC Demonstration Fund shall be operated in the 
same manner as the parent account. However— 
‘‘(A) amounts received by the Secretary under subchapter I of this 
chapter related to guarantees or commitments to guarantee made 
under this section shall be deposited only in the OTEC Demonstra-
tion Fund; and 
‘‘(B) when obligations issued by the Secretary under section 
53723 of this title related to the OTEC Demonstration Fund are 
outstanding, any amount received by the Secretary under sub-
chapter I of this chapter related to ocean thermal energy conversion 
facilities or plantships shall be deposited in the OTEC Demonstra-
tion Fund. 
‘‘(3) TRANSFERS.—Assets in the OTEC Demonstration Fund may be 
transferred to the parent account when and to the extent the balance in 
the OTEC Demonstration Fund exceeds the total guarantees or commit-
ments to guarantee made under this section then outstanding, plus obli-
gations issued by the Secretary under section 53723 of this title related 
to the OTEC Demonstration Fund.
160 
‘‘(4) LIABILITY.—The parent account is not liable for a guarantee or 
commitment to guarantee made under this section. 
‘‘(5) MAXIMUM UNPAID PRINCIPAL AMOUNT.—The total unpaid prin-
cipal amount of the obligations guaranteed with the backing of the 
OTEC Demonstration Fund and outstanding at any one time may not 
exceed $1,650,000,000. 
‘‘(g) ISSUANCE AND PAYMENT OF OBLIGATIONS.—Section 53723 of this title 
applies to the OTEC Demonstration Fund. However, obligations issued by the 
Secretary under that section related to the OTEC Demonstration Fund shall 
be payable only from proceeds realized by the OTEC Demonstration Fund. 
‘‘(h) TAXATION OF INTEREST.—Interest on an obligation guaranteed under 
this section shall be included in gross income under chapter 1 of the Internal 
Revenue Code of 1986 (26 U.S.C. ch. 1). 
‘‘§ 53732. Eligible export vessels 
‘‘(a) APPLICABLE TERMS.—The Secretary may guarantee an obligation for 
an eligible export vessel in accordance with— 
‘‘(1) the terms applicable under this chapter for vessels documented 
under the laws of the United States; or 
‘‘(2) other terms the Secretary determines are more favorable than 
those terms and compatible with export credit terms offered by foreign 
governments for the sale of vessels built in foreign shipyards. 
‘‘(b) INTERAGENCY COUNCIL.— 
‘‘(1) ESTABLISHMENT.—There is an interagency council to carry out 
this section. 
‘‘(2) COMPOSITION.—The council is composed of the following individ-
uals or their designees: 
‘‘(A) The Secretary of Transportation, who is the chairman of the 
council. 
‘‘(B) The Secretary of the Treasury. 
‘‘(C) The Secretary of State. 
‘‘(D) The Assistant to the President for Economic Policy. 
‘‘(E) The United States Trade Representative. 
‘‘(F) The President and Chairman of the Export-Import Bank of 
the United States. 
‘‘(3) FUNCTIONS.—The council shall— 
‘‘(A) obtain information on shipbuilding loan guarantees, direct 
and indirect subsidies, and other favorable treatment of shipyards 
provided by foreign governments to shipyards in competition with 
United States shipyards; 
‘‘(B) consult regularly with United States shipbuilders to obtain 
the essential information about international shipbuilding competi-
161 
tion on which to set terms for loan guarantees under subsection 
(a)(2); and 
‘‘(C) provide guidance to the Secretary in establishing terms for 
loan guarantees under subsection (a)(2). 
‘‘(4) ANNUAL REPORT.—Not later than January 31 of each year, the 
Secretary shall submit to Congress a report on activities of the Secretary 
under this section during the preceding year. The report shall include— 
‘‘(A) documentation of sources of information about assistance by 
governments of other countries to shipyards in those countries; and 
‘‘(B) a summary of recommendations made to the Secretary dur-
ing the preceding year about applications submitted to the Sec-
retary during that year for loan guarantees to construct eligible ex-
port vessels. 
‘‘(c) REQUIRED FINDINGS.— 
‘‘(1) BENEFIT TO SHIPBUILDING INDUSTRY.—The Secretary may not 
guarantee or make a commitment to guarantee an obligation for an eli-
gible export vessel unless the Secretary finds that the construction, recon-
struction, or reconditioning of the vessel will aid in the transition of 
United States shipyards to commercial activities or will preserve ship-
building assets that would be essential in time of war or national emer-
gency. 
‘‘(2) PRIORITY OF DOCUMENTED VESSELS.—The Secretary may not 
make a commitment to guarantee an obligation for an eligible export ves-
sel unless the Secretary determines that making the commitment will not 
result in denial of an economically sound application for a commitment 
to guarantee an obligation for a vessel documented under the laws of the 
United States and operating in the domestic or foreign commerce of the 
United States. The Secretary has sole discretion in making the deter-
mination. In making the determination, the Secretary shall consider— 
‘‘(A) the status and economic soundness of pending applications 
for commitments to guarantee obligations for vessels documented 
under the laws of the United States that are operating or will be 
operating in the domestic or foreign commerce of the United States; 
and 
‘‘(B) the amount of guarantee authority available. 
‘‘(d) RESTRICTION ON TRANSFER OF VESSEL.—The Secretary may not 
guarantee or make a commitment to guarantee an obligation for an eligible 
export vessel unless the owner of the vessel agrees with the Secretary that the 
vessel will not be transferred to a country designated by the Secretary of De-
fense as a country whose interests are hostile to the interests of the United 
States.
162 
‘‘(e) REVIEW BY SECRETARY OF DEFENSE.— 
‘‘(1) NOTIFICATION.—The Secretary shall promptly notify the Sec-
retary of Defense of the receipt of an application for a loan guarantee 
for an eligible export vessel. 
‘‘(2) DISAPPROVAL.—The Secretary of Defense, within 30 days after 
receiving the notice, may disapprove the guarantee based on an assess-
ment of the potential use of the vessel in a manner that may harm the 
national security interests of the United States. The Secretary may not 
disapprove a guarantee solely because of the type of vessel to be con-
structed. 
‘‘(3) DELEGATION.—The authority of the Secretary of Defense to dis-
approve a guarantee under this subsection may be delegated only to a 
civilian officer of the Department of Defense appointed by the President 
by and with the advice and consent of the Senate. 
‘‘(4) PROHIBITION.—The Secretary may not make a loan guarantee 
disapproved by the Secretary of Defense under this subsection. 
‘‘(f) EXPIRATION OF AUTHORITY.—The Secretary may not issue a commit-
ment to guarantee an obligation for an eligible export vessel under this chap-
ter after the last date on which such a commitment may be issued under any 
treaty or convention entered into after November 30, 1993, that prohibits 
guarantee of such an obligation. 
‘‘§ 53733. Shipyard modernization and improvement 
‘‘(a) DEFINITIONS.—In this section: 
‘‘(1) ADVANCED
SHIPBUILDING
TECHNOLOGY.—The term ‘advanced 
shipbuilding technology’ includes— 
‘‘(A) numerically controlled machine tools, robots, automated 
process control equipment, computerized flexible manufacturing sys-
tems, associated computer software, and other technology for im-
proving shipbuilding and related industrial production that ad-
vance the state-of-the-art; and 
‘‘(B) novel techniques and processes designed to improve ship-
building quality, productivity, and practice, and to promote sus-
tainable development, including engineering design, quality assur-
ance, concurrent engineering, continuous process production tech-
nology, 
energy 
efficiency, 
waste 
minimization, 
design 
for 
recyclability or parts reuse, inventory management, upgraded work-
er skills, and communications with customers and suppliers. 
‘‘(2) GENERAL SHIPYARD FACILITY.—The term ‘general shipyard facil-
ity’ means— 
‘‘(A) for operations on land—
163 
‘‘(i) a structure or appurtenance thereto designed for the 
construction, reconstruction, repair, rehabilitation, or refur-
bishment of a vessel, including a graving dock, building way, 
ship lift, wharf, or pier crane; 
‘‘(ii) the land necessary for the structure or appurtenance; 
and 
‘‘(iii) equipment that is for use with the structure or appur-
tenance and that is necessary for performing a function re-
ferred to in subclause (i); and 
‘‘(B) for operations not on land, a vessel, floating drydock, or 
barge built in the United States and used for, equipped to be used 
for, or of a type normally used for, performing a function referred 
to in subclause (A)(i). 
‘‘(3) MODERN SHIPBUILDING TECHNOLOGY.—The term ‘modern ship-
building technology’ means the best available proven technology, tech-
niques, and processes appropriate to enhancing the productivity of ship-
yards. 
‘‘(b) GENERAL AUTHORITY.—Under subchapter I of this chapter, the Sec-
retary may guarantee or make a commitment to guarantee the payment of 
the principal of and interest on an obligation for advanced shipbuilding tech-
nology and modern shipbuilding technology of a general shipyard facility in 
the United States. Only a private shipyard is eligible to receive a guarantee. 
‘‘(c) APPLICABILITY OF OTHER PROVISIONS.—Except as otherwise provided 
in this section, a guarantee or commitment to guarantee under this section 
is subject to all the provisions applicable to a guarantee or commitment to 
guarantee under subchapter I of this chapter. 
‘‘(d) AMOUNT OF OBLIGATION.—The principal amount of an obligation 
guaranteed under this chapter may not exceed 87.5 percent of the actual cost 
of the advanced shipbuilding technology or modern shipbuilding technology. 
‘‘(e) TRANSFER OF AMOUNTS.—The Secretary may accept the transfer of 
amounts from a department, agency, or instrumentality of the United States 
Government and may use those amounts to cover the cost (as defined in sec-
tion 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a)) of making 
guarantees or commitments to guarantee under this section. 
‘‘§ 53734. Replacement of vessels because of changes in oper-
ating standards 
‘‘(a) GENERAL AUTHORITY.—Notwithstanding any other provision of this 
chapter, the Secretary, on terms the Secretary may prescribe, may guarantee 
or make a commitment to guarantee the payment of the principal of and in-
terest on an obligation that aids in financing or refinancing (including reim-