205 
‘‘(B) if the Board of Trustees of the recipient has decided to dis-
solve the recipient according to the laws of the State in which the 
recipient is incorporated, then— 
‘‘(i) the recipient shall distribute the vessel, as an asset of 
the recipient, to a person that has been determined exempt 
from taxation under section 501(c)(3) of the Internal Revenue 
Code of 1986 (26 U.S.C. 501(c)(3)), or to the Federal Govern-
ment or a State or local government for a public purpose; and 
‘‘(ii) the vessel shall be disposed of by a court of competent 
jurisdiction of the county in which the principal office of the 
recipient is located, for such purposes as the court shall deter-
mine, or to such organizations as the court shall determine are 
organized exclusively for public purposes. 
‘‘(b) OTHER EQUIPMENT.—At the Secretary’s discretion, additional equip-
ment from other obsolete vessels of the Fleet may be conveyed to assist the re-
cipient with maintenance, repairs, or modifications. 
‘‘(c) ADDITIONAL TERMS.—The Secretary may require any additional 
terms the Secretary considers appropriate. 
‘‘(d) DELIVERY OF VESSEL.—If conveyance is made under this section, the 
vessel shall be delivered to the recipient at a time and place to be determined 
by the Secretary. The vessel shall be conveyed in an ‘as is’ condition. 
‘‘(e) LIMITATIONS.—If at any time prior to delivery of the vessel to the re-
cipient, the Secretary determines that a different disposition of the vessel 
would better serve the interests of the Government, the Secretary shall pursue 
the more favorable disposition of the obsolete vessel and shall not be liable for 
any damages that may result from an intended recipient’s reliance upon a 
proposed transfer. 
‘‘(f) REVERSION.—The Secretary shall include in any conveyance under 
this section terms under which all right, title, and interest conveyed by the 
Secretary shall revert to the Government if the Secretary determines the vessel 
has been used other than as described in the business plan required under sub-
section (a)(5). 
‘‘§ 57104. Acquisition of vessels from sale of obsolete vessels 
‘‘(a) IN GENERAL.—The Secretary of Transportation may acquire suitable 
documented vessels with amounts in the Vessel Operations Revolving Fund de-
rived from the sale of obsolete vessels in the National Defense Reserve Fleet. 
‘‘(b) VALUATION.—The acquired and obsolete vessels shall be valued at their 
scrap value in domestic or foreign markets as of the date of the acquisition 
for or sale from the Fleet. However, the value assigned to those vessels shall 
be determined on the same basis, with consideration given to the fair value 
of the cost of moving the vessel sold from the Fleet to the place of scrapping.
206 
‘‘(c) COSTS INCIDENT TO LAY-UP.—Costs incident to the lay-up of the ves-
sel acquired under this section may be paid from amounts in the Fund. 
‘‘(d) TRANSFERS TO NON-CITIZENS.—A vessel sold from the Fleet under 
this section may be scrapped in an approved foreign market without obtain-
ing additional separate approval from the Secretary to transfer the vessel to 
a person not a citizen of the United States. 
‘‘§ 57105. Acquisition of vessels for essential services, routes, 
or lines 
‘‘(a) IN GENERAL.—The Secretary of Transportation may acquire a vessel, 
by purchase or otherwise, if— 
‘‘(1) the Secretary considers the vessel necessary to establish, maintain, 
improve, or serve as a replacement on an essential service, route, or line 
in the foreign commerce of the United States, as determined under sec-
tion 50103 of this title; 
‘‘(2) the vessel was constructed in the United States; and 
‘‘(3) the Secretary of the Navy has certified to the Secretary of Trans-
portation that the vessel is suitable for economical and speedy conversion 
into a naval or military auxiliary or otherwise suitable for use by the 
United States Government in time of war or national emergency. 
‘‘(b) PRICE.—The price paid for the vessel shall be based on a fair and rea-
sonable valuation. However, the price may not exceed by more than 5 percent 
the cost of the vessel to the owner (excluding any construction-differential sub-
sidy and the cost of national defense features paid by the Secretary of Trans-
portation) plus the actual cost previously expended for reconditioning, less de-
preciation based on a 25-year life for a dry-cargo or passenger vessel and a 
20-year life for a tanker or other liquid bulk carrier vessel. 
‘‘(c) DOCUMENTATION.—A vessel acquired under this section that is not 
documented under the laws of the United States at the time of acquisition 
shall be so documented as soon as practicable. 
‘‘§ 57106. Maintenance, improvement, and operation of ves-
sels 
‘‘(a) IN GENERAL.—The Secretary of Transportation may maintain, re-
pair, recondition, remodel, and improve vessels owned by the United States 
Government and in the possession or under the control of the Secretary, to 
equip them adequately for competition in the foreign trade of the United 
States. The Secretary may operate such a vessel or charter the vessel on terms 
and conditions the Secretary considers appropriate to carry out the purposes 
of this subtitle. 
‘‘(b) DOCUMENTATION AND RESTRICTIONS ON OPERATION.—A vessel recon-
ditioned, remodeled, or improved under subsection (a) shall be documented 
under the laws of the United States and remain so documented for at least
207 
5 years after completion of the reconditioning, remodeling, or improvement. 
During that period, it shall be operated on voyages that are not exclusively 
coastwise. 
‘‘§ 57107. Vessels for other agencies 
‘‘(a) IN GENERAL.—The Secretary of Transportation may construct, recon-
struct, repair, equip, and outfit, by contract or otherwise, vessels or parts 
thereof, for any other department or agency of the United States Government 
to the extent the other department or agency is authorized by law to do so 
for its own account. 
‘‘(b) EFFECT ON CONTRACT AUTHORIZATION.—An obligation incurred or 
expenditure made by the Secretary under this section does not affect any con-
tract authorization of the Secretary, but instead shall be charged against the 
existing appropriation or contract authorization of the department or agency. 
‘‘§ 57108. Consideration of ballast and equipment in deter-
mining selling price 
‘‘The Maritime Administration may not sell a vessel until its ballast and 
equipment have been inventoried and their value considered in determining 
the selling price of the vessel. 
‘‘§ 57109. Operation of vessels purchased, chartered, or 
leased from Secretary of Transportation 
‘‘Unless otherwise authorized by the Secretary of Transportation, a vessel 
purchased, chartered, or leased from the Secretary may be operated only 
under a certificate of documentation with a registry or coastwise endorsement. 
Such a vessel, while employed solely as a merchant vessel, is subject to the 
laws, regulations, and liabilities governing merchant vessels, whether the 
United States Government has an interest in the vessel as an owner or holds 
a mortgage, lien, or other interest. 
‘‘CHAPTER 573—VESSEL TRADE-IN PROGRAM 
‘‘Sec. 
‘‘57301.
Definitions. 
‘‘57302.
Authority to acquire vessels. 
‘‘57303.
Utility value and tonnage requirements. 
‘‘57304.
Eligible acquisition dates. 
‘‘57305.
Determination of trade-in allowance. 
‘‘57306.
Payment of trade-in allowance. 
‘‘57307.
Recognition of gain for tax purposes. 
‘‘57308.
Use of vessels at least 25 years old. 
‘‘§ 57301. Definitions 
‘‘In this chapter: 
‘‘(1) NEW VESSEL.—The term ‘new vessel’ means a vessel— 
‘‘(A) constructed under this subtitle and acquired within 2 years 
after the date of completion; or
208 
‘‘(B) constructed in a domestic shipyard on private account and 
not under this subtitle, and documented under the laws of the 
United States. 
‘‘(2) OBSOLETE VESSEL.—The term ‘obsolete vessel’ means a vessel 
that— 
‘‘(A) is of at least 1,350 gross tons; 
‘‘(B) the Secretary of Transportation believes should, because of 
its age, obsolescence, or other reasons, be replaced in the public in-
terest; and 
‘‘(C) has been owned by a citizen of the United States for at least 
3 years immediately before its acquisition under this chapter. 
‘‘§ 57302. Authority to acquire vessels 
‘‘To promote the construction of new, safe, and efficient vessels to carry the 
domestic and foreign waterborne commerce of the United States, the Secretary 
of Transportation may acquire an obsolete vessel in exchange for an allowance 
of credit toward the cost of construction or purchase of a new vessel as pro-
vided in this chapter. 
‘‘§ 57303. Utility value and tonnage requirements 
‘‘(a) UTILITY VALUE.—The utility value of a new vessel to be acquired 
under this chapter for operation in the domestic or foreign commerce of the 
United States may not be substantially less than that of the obsolete vessel 
acquired in exchange under this chapter. 
‘‘(b) TONNAGE.—If the Secretary of Transportation finds that the new ves-
sel will have a utility value at least equal to that of the obsolete vessel, the 
new vessel may be of lesser gross tonnage than the obsolete vessel. However, 
the gross tonnage of the new vessel must be at least one-third the gross tonnage 
of the obsolete vessel. 
‘‘§ 57304. Eligible acquisition dates 
‘‘At the option of the owner, the acquisition of an obsolete vessel under this 
chapter shall occur— 
‘‘(1) when the owner contracts for the construction or purchase of a 
new vessel; or 
‘‘(2) within 5 days of the actual date of delivery of the new vessel to 
the owner. 
‘‘§ 57305. Determination of trade-in allowance 
‘‘(a) IN GENERAL.—The Secretary of Transportation shall determine the 
trade-in allowance for an obsolete vessel at the time of acquisition of the ves-
sel. The allowance shall be the fair value of the vessel. In determining the 
value, the Secretary shall consider— 
‘‘(1) the scrap value of the obsolete vessel in American and foreign 
markets;
209 
‘‘(2) the depreciated value based on a 20-year or 25-year life, which-
ever applies to the obsolete vessel; and 
‘‘(3) the market value of the obsolete vessel for operation in world com-
merce or in the domestic or foreign commerce of the United States. 
‘‘(b) USE OF OBSOLETE VESSELS.—If acquisition of the obsolete vessel oc-
curs when the owner contracts for the construction of the new vessel, and the 
owner uses the obsolete vessel during the period of construction of the new ves-
sel, the Secretary shall reduce the trade-in allowance by an amount rep-
resenting the fair value of that use. The Secretary shall establish the rate for 
use of the obsolete vessel when the contract for construction of the new vessel 
is made. 
‘‘§ 57306. Payment of trade-in allowance 
‘‘(a) ACQUISITION AT TIME OF CONTRACT.—If acquisition of an obsolete 
vessel under this chapter occurs when the owner contracts for the construction 
or purchase of the new vessel, the Secretary of Transportation shall apply the 
trade-in allowance to the purchase price of the new vessel rather than paying 
it to the owner. If the new vessel is constructed under this subtitle, the Sec-
retary may apply the trade-in allowance to the required cash payments on 
terms and conditions the Secretary may prescribe. If the new vessel is not 
constructed under this subtitle, the Secretary shall pay the trade-in allowance 
to the builder of the vessel for the account of the owner when the Secretary 
acquires the obsolete vessel. 
‘‘(b) ACQUISITION AT TIME OF DELIVERY.—If acquisition of the obsolete 
vessel occurs when the new vessel is delivered to the owner, the Secretary shall 
deposit the trade-in allowance in the owner’s capital construction fund. 
‘‘§ 57307. Recognition of gain for tax purposes 
‘‘The owner of an obsolete vessel does not recognize a gain under the Federal 
income tax laws when the vessel is transferred to the Secretary of Transpor-
tation in exchange for a trade-in allowance under this chapter. The basis of 
the new vessel acquired with the allowance is the same as the basis of the obso-
lete vessel— 
‘‘(1) increased by the difference between the cost of the new vessel and 
the trade-in allowance of the obsolete vessel; and 
‘‘(2) decreased by the amount of loss recognized on the transfer. 
‘‘§ 57308. Use of vessels at least 25 years old 
‘‘An obsolete vessel acquired under this chapter that is or becomes at least 
25 years old may not be used for commercial operation. However, the vessel 
may be used— 
‘‘(1) during a period in which vessels may be requisitioned under 
chapter 563 of this title; or
210 
‘‘(2) except as otherwise provided in this subtitle, on trade routes serv-
ing only the foreign trade of the United States. 
‘‘CHAPTER 575—CONSTRUCTION, CHARTER, AND SALE 
OF VESSELS 
‘‘SUBCHAPTER I—GENERAL 
‘‘Sec. 
‘‘57501.
Completion of long-range program. 
‘‘57502.
Construction, reconditioning, and remodeling of vessels. 
‘‘57503.
Competitive bidding. 
‘‘57504.
Charter or sale of vessels acquired by Department of Transportation. 
‘‘57505.
Employment of vessels on foreign trade routes. 
‘‘57506.
Minimum selling price of vessels. 
‘‘SUBCHAPTER II—CHARTERS 
‘‘57511.
Demise charters. 
‘‘57512.
Competitive bidding. 
‘‘57513.
Minimum bid. 
‘‘57514.
Qualifications of bidders. 
‘‘57515.
Awarding of charters. 
‘‘57516.
Operating-differential subsidies. 
‘‘57517.
Recovery of excess profits. 
‘‘57518.
Performance bond. 
‘‘57519.
Insurance. 
‘‘57520.
Vessel maintenance. 
‘‘57521.
Termination of charter during national emergency. 
‘‘SUBCHAPTER III—MISCELLANEOUS 
‘‘57531.
Construction and charter of vessels for unsuccessful routes. 
‘‘57532.
Operation of experimental vessels. 
‘‘SUBCHAPTER I—GENERAL 
‘‘§ 57501. Completion of long-range program 
‘‘Whenever the Secretary of Transportation determines that the objectives 
and policies declared in sections 50101 and 50102 of this title cannot be fully 
realized within a reasonable time under titles V and VI of the Merchant Ma-
rine Act, 1936, and the President approves the determination, the Secretary, 
in accordance with this chapter, shall complete the long-range program de-
scribed in section 50102 of this title. 
‘‘§ 57502. Construction, reconditioning, and remodeling of 
vessels 
‘‘(a) IN GENERAL.—The Secretary of Transportation may have new vessels 
constructed, and have old vessels reconditioned or remodeled, as the Secretary 
determines necessary to carry out the objectives of this subtitle. 
‘‘(b) PLACE OF WORK.—Construction, reconditioning, and remodeling of 
vessels under subsection (a) shall take place in shipyards in the continental 
United States (including Alaska and Hawaii). However, if satisfactory con-
tracts cannot be obtained from private shipbuilders, the Secretary may have 
the work done in navy yards. 
‘‘(c) APPLICABILITY
OF CONSTRUCTION-DIFFERENTIAL SUBSIDY PROVI-
SIONS.—Contracts for the construction, reconstruction, or reconditioning of a 
vessel by a private shipbuilder under this chapter are subject to the provisions
211 
of title V of the Merchant Marine Act, 1936, applicable to a contract with 
a private shipbuilder for the construction of a vessel under title V of that Act. 
‘‘§ 57503. Competitive bidding 
‘‘(a) ADVERTISEMENT
AND BIDDING.—The Secretary of Transportation 
may make a contract with a private shipbuilder for the construction of a new 
vessel, or for the reconstruction or reconditioning of an existing vessel, only 
after due advertisement and upon sealed competitive bids. 
‘‘(b) OPENING OF BIDS.—Bids required under this section shall be opened 
at the time and place stated in the advertisement for bids. All interested per-
sons, including representatives of the press, shall be permitted to attend. The 
results of the bidding shall be publicly announced. 
‘‘§ 57504. Charter or sale of vessels acquired by Department 
of Transportation 
‘‘Vessels transferred to or otherwise acquired by the Department of Trans-
portation in any manner may be chartered or sold by the Secretary of Trans-
portation as provided in this chapter. 
‘‘§ 57505. Employment of vessels on foreign trade routes 
‘‘(a) IN GENERAL.—The Secretary of Transportation shall arrange for the 
employment of the Department of Transportation’s vessels in steamship lines 
on such trade routes, exclusively serving the foreign trade of the United States, 
as the Secretary determines are essential for the development and mainte-
nance of the commerce of the United States and the national defense. How-
ever, the Secretary shall first determine that those routes are not being ade-
quately served by existing steamship lines privately owned and operated by 
citizens of the United States and documented under the laws of the United 
States. 
‘‘(b) POLICY TO ENCOURAGE PRIVATE OPERATION.—The Secretary shall 
have a policy of encouraging private operation of each essential steamship 
line now owned by the United States Government by— 
‘‘(1) selling the line to a citizen of the United States; or 
‘‘(2) demising the Secretary’s vessels on bareboat charter to citizens of 
the United States who agree to maintain the line in the manner provided 
in this chapter. 
‘‘§ 57506. Minimum selling price of vessels 
‘‘(a) IN GENERAL.—A vessel constructed under this subtitle or the Merchant 
Marine Act, 1936, may not be sold by the Secretary of Transportation for 
less than the price specified in this section. 
‘‘(b) OPERATION IN FOREIGN TRADE.—If the vessel is to be operated in for-
eign trade, the minimum price is the estimated foreign construction cost (ex-
clusive of national defense features) determined as of the date the construction 
contract is executed, less depreciation under subsection (d).
212 
‘‘(c) OPERATION IN DOMESTIC TRADE.—If the vessel is to be operated in 
domestic trade, the minimum price is the cost of construction in the United 
States (exclusive of national defense features), less depreciation under sub-
section (d). 
‘‘(d) DEPRECIATION.—Depreciation under subsections (b) and (c) shall be 
based on— 
‘‘(1) a 25-year life for dry-cargo and passenger vessels; and 
‘‘(2) a 20-year life for tankers and other bulk liquid carrier vessels. 
‘‘SUBCHAPTER II—CHARTERS 
‘‘§ 57511. Demise charters 
‘‘A charter by the Secretary of Transportation under this chapter shall de-
mise the vessel to the charterer subject to all usual conditions contained in 
a bareboat charter. The charter shall be for a term the Secretary considers 
to be in the best interest of the United States Government and the merchant 
marine. 
‘‘§ 57512. Competitive bidding 
‘‘(a) IN GENERAL.—The Secretary of Transportation may charter a vessel 
of the Department of Transportation to a private operator only on the basis 
of competitive sealed bidding. The bids must be submitted in strict compliance 
with the terms and conditions of a public advertisement soliciting the bids. 
‘‘(b) ADVERTISEMENT FOR BIDS.—An advertisement for bids shall state— 
‘‘(1) the number, type, and tonnage of the vessels being offered for 
bareboat charter for operation as a steamship line on a designated trade 
route; 
‘‘(2) the minimum number of sailings required; 
‘‘(3) the length of time of the charter; 
‘‘(4) the right of the Secretary to reject all bids; and 
‘‘(5) other information the Secretary considers necessary for the infor-
mation of prospective bidders. 
‘‘(c) OPENING OF BIDS.—Bids required under this section shall be opened 
at the time and place stated in the advertisement for bids. All interested per-
sons, including representatives of the press, shall be permitted to attend. The 
results of the bidding shall be publicly announced. 
‘‘§ 57513. Minimum bid 
‘‘The Secretary of Transportation shall reject any bid for the charter under 
this subchapter of a vessel constructed under this subtitle or the Merchant Ma-
rine Act, 1936, if the charter hire offered is lower than the minimum charter 
hire would be if the vessel were chartered under section 57531 of this title. 
‘‘§ 57514. Qualifications of bidders 
‘‘(a) CONSIDERATIONS.—In deciding whether to award a charter to a bid-
der, the Secretary of Transportation shall consider—
213 
‘‘(1) the bidder’s financial resources, credit standing, and practical ex-
perience in operating vessels; and 
‘‘(2) other factors a prudent business person would consider in enter-
ing into a transaction involving a large capital investment. 
‘‘(b) DISQUALIFICATIONS.—The Secretary may not charter a vessel to a 
person appearing to lack sufficient capital, credit, and experience to operate 
the vessel successfully over the period covered by the charter. 
‘‘§ 57515. Awarding of charters 
‘‘(a) IN GENERAL.—The Secretary of Transportation shall award the char-
ter to the bidder proposing to pay the highest monthly charter hire. However, 
the Secretary may reject the highest or most advantageous or any other bid 
if the Secretary considers the charter hire offered too low or determines that 
the bidder lacks the qualifications required by section 57514 of this title. 
‘‘(b) HIGHEST BID REJECTED.—If the Secretary rejects the highest bid, the 
Secretary may— 
‘‘(1) award the charter to the next highest bidder; or 
‘‘(2) reject all bids and either readvertise the line or operate the line 
until conditions appear more favorable to reoffer the line for private 
charter. 
‘‘(c) REASON FOR REJECTION.—On request of a bidder, the reason for rejec-
tion shall be stated in writing to the bidder. 
‘‘§ 57516. Operating-differential subsidies 
‘‘If the Secretary of Transportation considers it necessary, the Secretary 
may make a contract with a charterer of a vessel owned by the Secretary for 
payment of an operating-differential subsidy, on the same terms and condi-
tions, and subject to the same limitations and restrictions, as otherwise pro-
vided with respect to payment of operating-differential subsidies to operators 
of privately-owned vessels. 
‘‘§ 57517. Recovery of excess profits 
‘‘(a) IN GENERAL.—A charter under this chapter shall provide that if, at 
the end of a calendar year subsequent to the execution of the charter, the cu-
mulative net voyage profit (after payment of the charter hire reserved in the 
charter and payment of the charterer’s fair and reasonable overhead expenses 
applicable to operation of the chartered vessel) exceeds 10 percent a year of 
the charterer’s capital necessarily employed in the business of the chartered 
vessel, the charterer shall pay to the Secretary of Transportation, as addi-
tional charter hire, half the cumulative net voyage profit in excess of 10 per-
cent a year. However, any cumulative net voyage profit accounted for under 
this subsection is not to be included in the calculation of cumulative net voy-
age profit in any subsequent year.