104TH CONGRESS
1ST SESSION
H. R. 1350
AN ACT
To amend the Merchant Marine Act, 1936 to revi-
talize the United States-flag merchant marine,
and for other purposes.
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
Transportation shall establish a fleet of active, militarily
useful, privately-owned vessels to meet national defense
and other security requirements and maintain a United
States presence 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;
‘‘(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 ves-
sel; 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 ves-
sel, 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 deter-
mines 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 use-
ful for meeting the sealift needs of the United States
with respect 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
Transportation shall require, as a condition of including
any vessel in the Fleet, that the owner or operator of the
vessel enter into an operating agreement with the Sec-
retary 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 op-
erating-differential subsidy contract under subtitle A or
which is under charter to the Department of Defense.
‘‘(b) REQUIREMENTS FOR OPERATION.—An operat-
ing 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
foreign 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 chap-
ter 121 of title 46, United States Code.
‘‘(c) REGULATORY RELIEF.—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.
Participation in the program established by this subtitle
shall not subject a contractor to section 805 or to any
provision of subtitle A.
‘‘(d) EFFECTIVENESS AND ANNUAL PAYMENT RE-
QUIREMENTS OF OPERATING AGREEMENTS.—
‘‘(1) 
EFFECTIVENESS.—The 
Secretary 
of
Transportation may enter into an operating agree-
ment 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
appropriations, 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 agree-
ment, 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
fiscal year for a vessel, the contractor for the vessel shall
certify, in accordance with regulations issued by the Sec-
retary of Transportation, that the vessel has been and will
be operated in accordance with subsection (b)(1) for at
least 320 days in the fiscal year. Days during which the
vessel is drydocked, surveyed, inspected, or repaired shall
be considered days of operation for purposes of this sub-
section.
‘‘(f) OPERATING AGREEMENT
IS OBLIGATION
OF
UNITED STATES GOVERNMENT.—An operating agree-
ment under this subtitle constitutes a contractual obliga-
tion of the United States Government to pay the amounts
provided for in the agreement to the extent of actual ap-
propriations.
‘‘(g) LIMITATIONS.—The Secretary of Transpor-
tation shall not make any payment under this subtitle for
a vessel with respect to any days for which the vessel is—
‘‘(1) subject to an operating-differential subsidy
contract under subtitle A or under a charter to the
United States Government, other than a charter
pursuant to section 653;
‘‘(2) not operated or maintained in accordance
with an operating agreement under this subtitle; or
‘‘(3) more than 25 years of age, except that the
Secretary may make such payments for a LASH
vessel for any day for which the vessel is more than
25 years of age if that vessel—
‘‘(A) is modernized after January 1, 1994,
‘‘(B) is modernized before it is 25 years of
age, and
‘‘(C) is not more than 30 years of age.
‘‘(h) PAYMENTS.—With respect to payments under
this subtitle for a vessel covered by an operating agree-
ment, the Secretary of Transportation—
‘‘(1) except as provided in paragraph (2), shall
not reduce any payment for the operation of a vessel
to carry military or other preference cargoes under
section 2631 of title 10, United States Code, the Act
of March 26, 1934 (46 App. U.S.C. 1241–1), sec-
tion 901(a), 901(b), or 901b of this Act, or any
other cargo preference law of the United States;
‘‘(2) shall not make any payment for any day
that a vessel is engaged in transporting more than
7,500 tons of civilian bulk preference cargoes pursu-
ant to section 901(a), 901(b), or 901b that is cargo;
and
‘‘(3) shall make a pro rata reduction in pay-
ment for each day less than 320 in a fiscal year that
a vessel covered by an operating agreement is not
operated in accordance with subsection (b)(1), with
days during which the vessel is drydocked or under-
going survey, inspection, or repair considered to be
days on which the vessel is operated.
ating agreements that may be entered into by
a person under the priority in subparagraph
(A)—
‘‘(i) for vessels described in subpara-
graph (A)(i), may not exceed the sum of—
‘‘(I) 
the 
number 
of 
United
States-documented vessels the person
operated in the foreign commerce of
the United States (except mixed
coastwise and foreign 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
PAR-
TIES.—For purposes of subparagraph (B), a re-
lated 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 charter-
ing 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
contractor 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 ob-
ligation of the Secretary to make payments under an oper-
ating agreement under this subtitle shall terminate with
respect to a vessel if the contractor fails to engage in oper-
ation 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
existence 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;
EFFECTIVE DATE FOR CERTAIN VESSELS.—
‘‘(1) PROCEDURES.—No later than 30 days
after the date of the enactment of the Maritime Se-
curity Act of 1995, the Secretary shall accept appli-
cations for enrollment of vessels in the Fleet, and
within 90 days after receipt of an application for en-
rollment 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, either subject to a contract under sub-
title A or on charter to the United States Govern-
ment, 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 cover-
ing the vessel, respectively, or any earlier date the
vessel is withdrawn from that contract or charter.
‘‘(m) EARLY TERMINATION.—An operating agree-
ment under this subtitle shall terminate on a date speci-
fied by the contractor if the contractor notifies the Sec-
retary, by not later than 60 days before the effective date
of the termination, that the contractor intends to termi-
nate the agreement. Vessels covered by an operating
agreement terminated under 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 termi-
nates 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 termi-
nated according to its terms. All terms and conditions of
an Emergency Preparedness Agreement entered into
under 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 Pre-
paredness Agreement may be modified by the mutual con-
sent of the contractor and the Secretary of Transportation
and the Secretary of Defense.
‘‘(n) NONRENEWAL FOR LACK OF FUNDS.—If, by
the first day of a fiscal year, sufficient funds have not
been appropriated under the authority provided by section
655 for that fiscal year, the Secretary of Transportation
shall notify the Congress that operating agreements au-
thorized under this subtitle for which sufficient funds are
not available will not be renewed for that fiscal year if
sufficient funds are not appropriated by the 60th day of
that fiscal year. If funds are not appropriated under the
authority provided by section 655 for any fiscal year by
the 60th day of that fiscal year, then each vessel covered
by an operating agreement under this subtitle for which
funds are not available is thereby released from any fur-
ther obligation under the operating agreement, and the
vessel owner or operator may transfer and register such
vessel under a foreign registry deemed acceptable by the
Secretary of Transportation, notwithstanding any other
provision of law. If section 902 is applicable to such vessel
after registration of the vessel under such a registry, the
vessel is available to be requisitioned by the Secretary of
Transportation pursuant 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.—
Regulations under paragraph (1) shall provide that
if appropriated amounts are not sufficient for oper-
ating agreements for all vessels within a priority
under subsection (i)(1), (2), or (3), the Secretary
shall award to each person submitting a request a
number of operating agreements that bears approxi-
mately 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 nec-
essary 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
Secretary shall give preference to a vessel that was
constructed in the United States, to the extent such
preference is consistent with establishment of a fleet
described 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
soliciting 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 sec-
tion that is approved by the Secretary of Defense.
Under the program, the Secretary of Transportation
shall include in each operating agreement under this
subtitle a requirement that the contractor enter into
an Emergency Preparedness Agreement under this
section with the Secretary. The Secretary shall nego-
tiate and enter into an Emergency Preparedness
Agreement 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 De-
fense during time of war or national emergency, or
whenever determined by the Secretary of Defense to
be necessary for national security (including any
natural disaster, international peace operation, or
contingency operation (as that term is defined in
section 101 of title 10, United States Code)), a con-
tractor for a vessel covered by an operating agree-
ment under this subtitle shall make available com-
mercial transportation resources (including services).
‘‘(E) shall be provided from the time that
a vessel or resource is diverted from commercial
service until the time that it reenters commer-
cial service.
‘‘(3) APPROVAL OF AMOUNT BY SECRETARY OF
DEFENSE.—No compensation may be provided for a
vessel under this subsection unless the amount of
the compensation is approved by the Secretary of
Defense.
‘‘(d) TEMPORARY REPLACEMENT VESSELS.—Not-
withstanding any other provision of this subtitle or of
other law to the contrary—
‘‘(1) a contractor may operate or employ in for-
eign commerce a foreign-flag vessel or foreign-flag
vessel capacity, as a temporary replacement for a
United States-documented vessel or United States-
documented vessel capacity that is activated under
an Emergency Preparedness Agreement; and
‘‘(2) such replacement vessel or vessel capacity
shall be eligible during the replacement period to
transport preference cargoes subject to section 2631
of title 10, United States Code, the Act of March
26, 1934 (46 App. U.S.C. 1241–1), and sections
901(a), 901(b), and 901b of this Act to the same ex-
tent as the eligibility of the vessel or vessel capacity
replaced.
‘‘(e) REDELIVERY AND LIABILITY OF U.S. FOR DAM-
AGES.—
‘‘(1) IN
GENERAL.—All commercial transpor-
tation resources activated under an Emergency Pre-
paredness Agreement shall, upon termination of the
period of activation, be redelivered to the contractor
in the same good order and condition as when re-
ceived, less ordinary wear and tear, or the Govern-
ment shall fully compensate the contractor for any
necessary repair or replacement.
‘‘(2) LIMITATION ON LIABILITY OF U.S.—Ex-
cept as may be expressly agreed to in an Emergency
Preparedness Agreement, or as otherwise provided
by law, the Government shall not be liable for dis-
ruption of a contractor’s commercial business or
other consequential damages to a contractor arising
from activation of commercial transportation re-
sources under an Emergency Preparedness Agree-
ment.
‘‘(3) LIMITATION ON APPLICATION OF OTHER
REQUIREMENTS.—Sections 902 and 909 of this Act
shall not apply to a vessel while it is covered by an
Emergency Preparedness Agreement under this sub-
title. Any Emergency Preparedness Agreement en-
tered into by a contractor shall supersede any other
agreement between that contractor and the Govern-
ment for vessel availability in time of war or na-
tional emergency.
‘‘DEFINITIONS
‘‘SEC. 654. In this subtitle:
‘‘(1) BULK
CARGO.—The term ‘bulk cargo’
means cargo that is loaded and carried in bulk with-
out mark or count.
‘‘(2) 
CONTRACTOR.—The 
term 
‘contractor’
means an owner or operator of a vessel that enters
into an operating agreement for the vessel with the
Secretary of Transportation under section 652.
‘‘(3) OCEAN
COMMON
CARRIER.—The term
‘ocean common carrier’ means a person holding it-
self out to the general public to operate vessels to
provide transportation by water of passengers or
cargo between the United States and a foreign coun-
try for compensation, that—
‘‘(A) assumes responsibility for the trans-
portation from the port or point of receipt to
the port or point of destination, and
‘‘(B) utilizes, for all or part of that trans-
portation, a vessel operating on the high seas or
the Great Lakes between a port in the United
States and a port in a foreign country, except
that the term does not include a common car-
rier engaged in ocean transportation by ferry
boat, ocean tramp, or chemical parcel-tanker.
As used in this paragraph, ‘chemical parcel-
tanker’ means a vessel whose cargo-carrying ca-
pability consists of individual cargo tanks for
bulk chemicals that are a permanent part of the
vessel, that have segregation capability with
piping systems to permit simultaneous carriage
of several bulk chemical cargoes with minimum
risk of cross-contamination, and that has a
valid certificate of fitness under the Inter-
national Maritime Organization Code for the
Construction and Equipment of Ships Carrying
Dangerous Chemicals in Bulk.
‘‘(4) FLEET.—The term ‘Fleet’ means the Mar-
itime Security Fleet established pursuant to section
651(a).
‘‘(5) LASH VESSEL.—The term ‘LASH vessel’
means a lighter aboard ship vessel.
‘‘(6) UNITED STATES-DOCUMENTED VESSEL.—
The term ‘United States-documented vessel’ means a
vessel documented under chapter 121 of title 46,
United States Code.
‘‘AUTHORIZATION OF APPROPRIATIONS
‘‘SEC. 655. There are authorized to be appropriated
for operating agreements under this subtitle, to remain
available until expended, $100,000,000 for fiscal year
1996 and such sums as may be necessary, not to exceed
$100,000,000, for each fiscal year thereafter through fis-
cal year 2005.’’.
SEC. 3. TERMINATION OF OPERATING-DIFFERENTIAL SUB-
SIDY PROGRAM.
(a) LIMITATION ON PAYMENTS FOR OLDER VES-
SELS.—Section 605(b) of the Merchant Marine Act, 1936
(46 App. U.S.C. 1175(b)), is amended to read as follows:
‘‘(b) No operating-differential subsidy shall be paid
for the operation of a vessel after the calendar year the
vessel becomes 25 years of age, unless the Secretary of
Transportation has determined, before the date of enact-
ment of the Maritime Security Act of 1995, that it is in
the public interest to grant such financial aid for the oper-
ation of such vessel.’’.
(b) WIND-UP OF PROGRAM.—Subtitle A of such Act
(46 App. U.S.C. 1171 et seq.), as designated by the
amendment made by section 2(1), is further amended by
adding at the end the following new section:
‘‘SEC. 616. (a) After the date of enactment of the
Maritime Security Act of 1995, the Secretary of Transpor-
tation shall not enter into any new contract for operating-
differential subsidy under this subtitle.
‘‘(b) Notwithstanding any other provision of this Act,
any operating-differential subsidy contract in effect under
this title on the day before the date of enactment of the
Maritime Security Act of 1995 shall continue in effect and
terminate as set forth in the contract, unless voluntarily
terminated at an earlier date by the parties (other than
the United States Government) to the contract.
‘‘(c) The essential service requirements of section
601(a) and 603(b), and the provisions of sections 605(c)
and 809(a), shall not apply to the operating-differential
subsidy program under this subtitle effective upon the ear-
lier of—
‘‘(1) the date that a payment is made, under
the Maritime Security Program established by sub-
title B to a contractor under that subtitle who is not
party to an operating-differential subsidy contract
under this subtitle, with the Secretary to cause no-
tice of the date of such payment to be published in
the Federal Register as soon as possible; or
‘‘(2) with respect to a particular contractor
under the operating-differential subsidy program,
the date that contractor enters into a contract with