IB
Union Calendar No. 121
104TH CONGRESS
1ST SESSION
H. R. 1350
[Report No. 104–229]
To amend the Merchant Marine Act, 1936 to revitalize the United States-
flag merchant marine, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MARCH 29, 1995
Mr. SPENCE (for himself, Mr. DELLUMS, and Mr. BATEMAN) (all by request)
introduced the following bill; which was referred to the Committee on Na-
tional Security
AUGUST 3, 1995
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on March 29, 1995]
A BILL
To amend the Merchant Marine Act, 1936 to revitalize the
United States-flag merchant marine, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Maritime Security Act
of 1995’’.
SEC. 2. MARITIME SECURITY PROGRAM.
Title VI of the Merchant Marine Act, 1936 (46 App.
U.S.C. 1171 et seq.) is amended—
(1) by striking the title heading and inserting
the following:
‘‘TITLE VI—VESSEL OPERATING ASSISTANCE PROGRAMS
‘‘Subtitle A—Operating-Differential Subsidy Program’’;
and
(2) by adding at the end the following new sub-
title:
‘‘Subtitle B—Maritime Security Fleet Program
‘‘ESTABLISHMENT OF FLEET
‘‘SEC. 651. (a) IN GENERAL.—The Secretary of Trans-
portation shall establish a fleet of active, militarily useful,
privately-owned vessels to meet national defense and other
security requirements and maintain a United States pres-
ence in international commercial shipping. The Fleet shall
consist of privately owned, United States-flag vessels for
which there are in effect operating agreements under this
subtitle, and shall be known as the Maritime Security Fleet.
‘‘(b) VESSEL ELIGIBILITY.—A vessel is eligible to be
included in the Fleet if the vessel is self-propelled and—
‘‘(1)(A) is operated by a person as an ocean
common carrier (as that term is used in the Shipping
Act of 1984 (46 App. U.S.C. 1701 et seq.));
‘‘(B) whether in commercial service, on charter
to the Department of Defense, or in other employ-
ment, is either—
‘‘(i) a roll-on/roll-off vessel with a carrying
capacity of at least 80,000 square feet or 500
twenty-foot equivalent units; or
‘‘(ii) a lighter aboard ship vessel with a
barge capacity of at least 75 barges; or
‘‘(C) any other type of vessel that is determined
by the Secretary to be suitable for use by the United
States for national defense or military purposes in
time of war or national emergency;
‘‘(2)(A)(i) is a United States-documented vessel;
and
‘‘(ii) on the date an operating agreement cover-
ing the vessel is entered into under this subtitle, is—
‘‘(I) a LASH vessel that is 25 years of age
or less; or
‘‘(II) any other type of vessel that is 15
years of age or less;
except that the Secretary of Transportation may
waive the application of clause (ii) if the Secretary,
in consultation with the Secretary of Defense, deter-
mines that the waiver is in the national interest; or
‘‘(B) it is not a United States-documented vessel,
but the owner of the vessel has demonstrated an intent
to have the vessel documented under chapter 121 of
title 46, United States Code, if it is included in the
Fleet, and the vessel will be less than 10 years of age
on the date of that documentation;
‘‘(3) the Secretary of Transportation determines
that the vessel is necessary to maintain a United
States presence in international commercial shipping
or, after consultation with the Secretary of Defense,
determines that the vessel is militarily useful for
meeting the sealift needs of the United States with re-
spect to national emergencies; and
‘‘(4) at the time an operating agreement for the
vessel is entered into under this subtitle, the vessel
will be eligible for documentation under chapter 121
of title 46, United States Code.
‘‘OPERATING AGREEMENTS
‘‘SEC. 652. (a) IN GENERAL.—The Secretary of Trans-
portation shall require, as a condition of including any ves-
sel in the Fleet, that the owner or operator of the vessel enter
into an operating agreement with the Secretary under this
section. Notwithstanding subsection (g), the Secretary may
enter into an operating agreement for, among other vessels
that are eligible to be included in the Fleet, any vessel which
continues to operate under an operating-differential subsidy
contract under subtitle A or which is under charter to the
Department of Defense.
‘‘(b) REQUIREMENTS FOR OPERATION.—An operating
agreement under this section shall require that, during the
period a vessel is operating under the agreement—
‘‘(1) the vessel—
‘‘(A) shall be operated exclusively in the for-
eign trade or in mixed foreign and domestic
trade allowed under a registry endorsement is-
sued under section 12105 of title 46, United
States Code, and
‘‘(B) shall not otherwise be operated in the
coastwise trade; and
‘‘(2) the vessel shall be documented under chapter
121 of title 46, United States Code.
‘‘(c) CERTAIN REQUIREMENTS NOT TO APPLY.—A
contractor of a vessel included in an operating agreement
under this subtitle may operate the vessel in the foreign
commerce of the United States without restriction, and shall
not be subject to any requirement under section 801, 808,
809, or 810.
‘‘(d) EFFECTIVENESS
AND ANNUAL PAYMENT RE-
QUIREMENTS OF OPERATING AGREEMENTS.—
‘‘(1) EFFECTIVENESS.—The Secretary of Trans-
portation may enter into an operating agreement
under this subtitle for fiscal year 1996. The agreement
shall be effective only for 1 fiscal year, but shall be
renewable, subject to the availability of appropria-
tions, for each subsequent fiscal year through the end
of fiscal year 2005.
‘‘(2) ANNUAL
PAYMENT.—An operating agree-
ment under this subtitle shall require, subject to the
availability of appropriations and the other provi-
sions of this section, that the Secretary of Transpor-
tation pay each fiscal year to the contractor, for each
vessel that is covered by the operating agreement, an
amount equal to $2,300,000 for fiscal year 1996 and
$2,100,000 for each fiscal year thereafter in which the
agreement is in effect. The amount shall be paid in
equal monthly installments at the end of each month.
The amount shall not be reduced except as provided
by this section.
‘‘(e) CERTIFICATION REQUIRED FOR PAYMENT.—As a
condition of receiving payment under this section for a fis-
cal year for a vessel, the owner or operator of the vessel
shall certify, in accordance with regulations issued by the
Secretary of Transportation, that the vessel has been and
will be operated in accordance with subsection (b)(1) for
person under the priority in subparagraph
(A)—
‘‘(i) for vessels described in subpara-
graph (A)(i), may not exceed the sum of—
‘‘(I) the number of United States-
documented vessels the person operated
in the foreign commerce of the United
States (except mixed coastwise and for-
eign commerce) on May 17, 1995; and
‘‘(II) 
the 
number 
of 
United
States-documented vessels the person
chartered to the Secretary of Defense
on that date; and
‘‘(ii) for vessels described in subpara-
graph (A)(ii), may not exceed 5 vessels.
‘‘(C) TREATMENT OF RELATED PARTIES.—
For purposes of subparagraph (B), a related
party with respect to a person shall be treated as
the person.
‘‘(2) OTHER VESSELS OWNED BY CITIZENS AND
GOVERNMENT
CONTRACTORS.—To the extent that
amounts are available after applying paragraph (1),
any vessel that is owned and operated by a person
who is—
‘‘(A) a citizen of the United States under
section 2 of the Shipping Act, 1916, that has not
been awarded an operating agreement under the
priority established under paragraph (1); or
‘‘(B)(i) eligible to document a vessel under
chapter 121 of title 46, United States Code; and
‘‘(ii) affiliated with a corporation operating
or managing other United States-documented
vessels for the Secretary of Defense or chartering
other vessels to the Secretary of Defense.
‘‘(3) OTHER
VESSELS.—To the extent that
amounts are available after applying paragraphs (1)
and (2), any other eligible vessel.
‘‘(j) TRANSFER OF OPERATING AGREEMENTS.—A con-
tractor under an operating agreement may transfer the
agreement (including all rights and obligations under the
agreement) to any person eligible to enter into that operat-
ing agreement under this subtitle after notification of the
Secretary in accordance with regulations prescribed by the
Secretary, unless the transfer is disapproved by the Sec-
retary within 90 days after the date of that notification.
A person to whom an operating agreement is transferred
may receive payments from the Secretary under the agree-
ment only if each vessel to be covered by the agreement after
the transfer is an eligible vessel under section 651(b).
‘‘(k) REVERSION OF UNUSED AUTHORITY.—The obli-
gation of the Secretary to make payments under an operat-
ing agreement under this subtitle shall terminate with re-
spect to a vessel if the contractor fails to engage in operation
of the vessel for which such payment is required—
‘‘(1) within one year after the effective date of
the operating agreement, in the case of a vessel in ex-
istence on the effective date of the agreement, or
‘‘(2) within 30 months after the effective date of
the operating agreement, in the case of a vessel to be
constructed after that effective date.
‘‘(l) PROCEDURE FOR CONSIDERING APPLICATION; EF-
FECTIVE DATE FOR CERTAIN VESSELS.—
‘‘(1) PROCEDURES.—Within 90 days after re-
ceipt of an application for enrollment of a vessel in
the Fleet, the Secretary shall enter into an operating
agreement with the applicant or provide in writing
the reason for denial of that application.
‘‘(2) EFFECTIVE DATE.—Unless an earlier date
is requested by the applicant, the effective date for an
operating agreement with respect to a vessel which is,
on the date of entry into an operating agreement, ei-
ther subject to a contract under subtitle A or on char-
ter to the United States Government, other than a
charter under section 653, shall be the expiration or
termination date of the contract under subtitle A or
of the Government charter covering the vessel, respec-
tively, or any earlier date the vessel is withdrawn
from that contract or charter.
‘‘(m) EARLY TERMINATION.—An operating agreement
under this subtitle shall terminate on a date specified by
the contractor if the contractor notifies the Secretary, by
not later than 60 days before the effective date of the termi-
nation, that the contractor intends to terminate the agree-
ment. Vessels covered by an operating agreement terminated
under to this subsection shall remain documented under
chapter 121 of title 46, United States Code, until the date
the operating agreement would have terminated according
to its terms. A contractor who terminates an operating
agreement pursuant to this subsection shall continue to be
bound by the provisions of section 653 until the date the
operating agreement would have terminated according to
its terms. All terms and conditions of an Emergency Pre-
paredness Agreement entered into under to section 653 shall
remain in effect until the date the operating agreement
would have terminated according to its terms, except that
the terms of such Emergency Preparedness Agreement may
be modified by the mutual consent of the contractor and
the Secretary of Transportation.
‘‘(n) TERMINATION FOR LACK OF FUNDS.—If funds
are not appropriated under the authority provided by sec-
tion 655 for any fiscal year, then each vessel covered by
an operating agreement under this subtitle is thereby re-
leased from any further obligation under the operating
agreement, the operating agreement shall terminate, and the
vessel owner or operator may transfer and register such ves-
sel under an effective United States-controlled foreign flag,
notwithstanding any other provision of law. If section 902
is applicable to such vessel after registry under an effective
United States-controlled foreign flag, the vessel is available
to be requisitioned by the Secretary of Transportation pur-
suant to section 902.
‘‘(o) AWARD OF OPERATING AGREEMENTS.—
‘‘(1) IN GENERAL.—The Secretary of Transpor-
tation, subject to paragraph (4), shall award operat-
ing agreements within each priority under subsection
(i)(1), (2), and (3) under regulations prescribed by
the Secretary.
‘‘(2) NUMBER OF AGREEMENTS AWARDED.—Reg-
ulations under paragraph (1) shall provide that if
appropriated amounts are not sufficient for operating
agreements for all vessels within a priority under sub-
section (i)(1), (2), or (3), the Secretary shall award
to each person submitting a request a number of oper-
ating agreements that bears approximately the same
ratio to the total number of vessels in the priority, as
the amount of appropriations available for operating
agreements for vessels in the priority bears to the
amount of appropriations necessary for operating
agreements for all vessels in the priority.
‘‘(3) TREATMENT
OF
RELATED
PARTIES.—For
purposes of paragraph (2), a related party with re-
spect to a person shall be treated as the person.
‘‘(4) PREFERENCE FOR U.S.-BUILT VESSELS.—In
awarding operating agreements for vessels within a
priority under subsection (i) (1), (2), or (3), the Sec-
retary shall give preference to a vessel that was con-
structed in the United States, to the extent such pref-
erence is consistent with establishment of a fleet de-
scribed in the first sentence of section 651(a) (taking
into account the age of the vessel, the nature of service
provided by the vessel, and the commercial viability
of the vessel).
‘‘(p) NOTICE TO U.S. SHIPBUILDERS REQUIRED.—
The Secretary shall include in any operating agreement
under this subtitle a requirement that the contractor under
the agreement shall, by not later than 30 days after solicit-
ing any bid or offer for the construction of any vessel in
a foreign shipyard and before entering into a contract for
construction of a vessel in a foreign shipyard, provide notice
of the intent of the contractor to enter into such a contract
to each shipyard in the United States that is capable of
constructing the vessel.
‘‘NATIONAL SECURITY REQUIREMENTS
‘‘SEC. 653. (a) EMERGENCY PREPAREDNESS AGREE-
MENT.—
‘‘(1) REQUIREMENT
TO
ENTER
AGREEMENT.—
The Secretary of Transportation shall establish an
Emergency Preparedness Program under this section
that is approved by the Secretary of Defense. Under
the program, the Secretary of Transportation shall
include in each operating agreement under this sub-
title a requirement that the contractor enter into an
Emergency Preparedness Agreement under this sec-
tion with the Secretary. The Secretary shall negotiate
and enter into an Emergency Preparedness Agree-
ment with each contractor as promptly as practicable
after the contractor has entered into an operating
agreement under this subtitle.
‘‘(2) TERMS
OF
AGREEMENT.—An Emergency
Preparedness Agreement under this section shall re-
quire that upon a request by the Secretary of Defense
during time of war or national emergency, an owner
or operator of a vessel covered by an operating agree-
ment under this subtitle shall make available commer-