II
Calendar No. 262
104TH CONGRESS
1ST SESSION
H. R. 1350
IN THE SENATE OF THE UNITED STATES
DECEMBER 7, 1995
Received; read twice and placed on the calendar
AN ACT
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
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,
‘‘(i) PRIORITY FOR AWARDING AGREEMENTS.—Sub-
ject to the availability of appropriations, the Secretary
shall enter into operating agreements according to the fol-
lowing priority:
‘‘(1) VESSELS OWNED BY CITIZENS.—
‘‘(A) PRIORITY.—First, for any vessel that
is—
‘‘(i) owned and operated by persons
who are citizens of the United States
under section 2 of the Shipping Act, 1916;
or
‘‘(ii) less than 10 years of age and
owned and operated by a corporation that
is—
‘‘(I) eligible to document a vessel
under chapter 121 of title 46, United
States Code; and
‘‘(II) affiliated with a corporation
operating or managing for the Sec-
retary of Defense other vessels docu-
mented under that chapter, or char-
tering other vessels to the Secretary
of Defense.
‘‘(B) LIMITATION ON NUMBER OF OPERAT-
ING AGREEMENTS.—The total number of oper-
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).
The basic terms of the Emergency Preparedness
Agreements shall be established pursuant to con-
sultations among the Secretary, the Secretary of De-
fense, and Maritime Security Program contractors.
In any Emergency Preparedness Agreement, the
Secretary and a contractor may agree to additional
or modifying terms appropriate to the contractor’s
circumstances if those terms have been approved by
the Secretary of Defense.
‘‘(3) PARTICIPATION
AFTER
EXPIRATION
OF
OPERATING
AGREEMENT.—Except as provided by
section 652(m), the Secretary may not require,
through an Emergency Preparedness Agreement or
operating agreement, that a contractor continue to
participate in an Emergency Preparedness Agree-
ment when the operating agreement with the con-
tractor has expired according to its terms or is oth-
erwise no longer in effect. After expiration of an
Emergency Preparedness Agreement, a contractor
may volunteer to continue to participate in such an
agreement.
‘‘(b) RESOURCES MADE AVAILABLE.—The commer-
cial transportation resources to be made available under
an Emergency Preparedness Agreement shall include ves-
sels or capacity in vessels, intermodal systems and equip-
ment, terminal facilities, intermodal and management
services, and other related services, or any agreed portion
of such nonvessel resources for activation as the Secretary
may determine to be necessary, seeking to minimize dis-
ruption of the contractor’s service to commercial shippers.
‘‘(c) COMPENSATION.—
‘‘(1) IN GENERAL.—The Secretary of Transpor-
tation shall provide in each Emergency Preparedness
Agreement for fair and reasonable compensation for
all commercial transportation resources provided
pursuant to this section.
‘‘(2) SPECIFIC REQUIREMENTS.—Compensation
under this subsection—
‘‘(A) shall not be less than the contractor’s
commercial market charges for like transpor-
tation resources;
‘‘(B) shall include all the contractor’s costs
associated with provision and use of the con-
tractor’s commercial resources to meet emer-
gency requirements;
‘‘(C) in the case of a charter of an entire
vessel, shall be fair and reasonable;
‘‘(D) shall be in addition to and shall not
in any way reflect amounts payable under sec-
tion 652; and
‘‘(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
the Secretary under the Maritime Security Program
established by subtitle B.
‘‘(d)(1) Notwithstanding any other provision of law,
a vessel may be transferred and registered under an effec-
tive United States-controlled foreign flag if—
‘‘(A) the operator of the vessel receives an oper-
ating-differential subsidy pursuant to a contract
under this subtitle which is in force on October 1,
1994, and the Secretary approves the replacement
of such vessel with a comparable vessel, or
‘‘(B) the vessel is covered by an operating
agreement under subtitle B, and the Secretary ap-
proves the replacement of such vessel with a com-
parable vessel for inclusion in the Maritime Security
Fleet established under subtitle B.
‘‘(2) Any such vessel may be requisitioned by the Sec-
retary of Transportation pursuant to section 902.’’.
SEC. 4. DOMESTIC OPERATIONS.
(a) IN GENERAL.—Subtitle B of title VI of the Mer-
chant Marine Act, 1936, as amended by section 102 of
this title, is further amended by adding at the end the
following new section:
‘‘NONCONTIGUOUS DOMESTIC TRADES
‘‘SEC. 656. (a)(1) Except as otherwise provided in
this section, no contractor or related party shall receive
payments pursuant to this subtitle during a period when
it participates in a noncontiguous domestic trade, except
upon written permission of the Secretary of Transpor-
tation. Such written permission shall also be required for
any material change in the number or frequency of
sailings, the capacity offered, or the domestic ports called
by a contractor or related party in a noncontiguous domes-
tic trade. The Secretary may grant such written permis-
sion pursuant to written application of such contractor or
related party unless the Secretary finds that—
‘‘(A) existing service in that trade is adequate;
or
‘‘(B) the service sought to be provided by the
contractor or related party—
‘‘(i) would result in unfair competition to
any other person operating vessels in such non-
contiguous domestic trade, or
‘‘(ii) would be contrary to the objects and
policy of this Act.
‘‘(2) For purposes of this subsection, ‘‘written per-
mission of the Secretary’’ means permission which states
the capacity offered, the number and frequency of sailings,
and the domestic ports called, and which is granted follow-
ing—
‘‘(A) written application containing the infor-
mation required by paragraph (e)(1) by a person
seeking such written permission, notice of which ap-
plication shall be published in the Federal Register
within 15 days of filing of such application with the
Secretary;
‘‘(B) holding of a hearing on the application
under section 554 of title 5, United States Code, in
which every person, firm or corporation having any
interest in the application shall be permitted to in-
tervene and be heard; and
‘‘(C) final decision on the application by the
Secretary within 120 days following conclusion of
such hearing.
‘‘(b) Subsection (a) shall not apply in any way to pro-
vision by a contractor of service within the level of service
provided by that contractor as of the date established by
subsection (c) or to provision of service permitted by sub-
section (d).
‘‘(c) The date referred to in subsection (b) shall be
August 9, 1995: Provided, however, That with respect to
tug and barge service to Alaska the date referred to in
subsection (b) shall be July 1, 1992.
‘‘(d) A contractor may provide service in a trade in
addition to the level of service provided as of the applicable
date established by subsection (c) in proportion to the an-
nual increase in real gross product of the noncontiguous
State or Commonwealth served since the applicable date
established by subsection (c).
‘‘(e)(1) A person applying for award of an agreement
under this subtitle shall include with the application a de-
scription of the level of service provided by that person
in each noncontiguous domestic trade served as of the date
applicable under subsection (c). The application also shall
include, for each such noncontiguous domestic trade: a list
of vessels operated by that person in such trade, their con-
tainer carrying capacity expressed in twenty-foot equiva-
lent units (TEUs) or other carrying capacity, the itinerary
for each such vessel, and such other information as the
Secretary may require by regulation. Such description and
information shall be made available to the public. Within
15 days of the date of an application for an agreement
by a person seeking to provide service pursuant to sub-
sections (b) and (c) of this section, the Secretary shall
cause to be published in the Federal Register notice of
such description, along with a request for public comment
thereon. Comments on such description shall be submitted
to the Secretary within 30 days of publication in the Fed-
eral Register. Within 15 days after receipt of comments,
the Secretary shall issue a determination in writing either
accepting, in whole or part, or rejecting use of the appli-
cant’s description to establish the level of service provided
as of the date applicable under subsection (c): Provided,
That notwithstanding the provisions of this subsection,
processing of the application for an award of an agreement
shall not be suspended or delayed during the time in which
comments may be submitted with respect to the deter-
mination or during the time prior to issuance by the Sec-
retary of the required determination: Provided further,
That if the Secretary does not make the determination re-
quired by this paragraph within the time provided by this
paragraph, the description of the level of service provided
by the applicant shall be deemed to be the level of service
provided as of the applicable date until such time as the
Secretary makes the determination.
‘‘(2) No contractor shall implement the authority
granted in subsection (d) of this section except as follows:
‘‘(A) An application shall be filed with the Sec-
retary which shall state the increase in capacity
sought to be offered, a description of the means by
which such additional capacity would be provided,
the basis for applicant’s position that such increase
in capacity would be in proportion to or less than
the increase in real gross product of the relevant
noncontiguous State or Commonwealth since the ap-
plicable date established by subsection (c), and such
information as the Secretary may require so that the
Secretary may accurately determine such increase in
real gross product of the relevant noncontiguous
State or Commonwealth.
‘‘(B) Such increase in capacity sought by appli-
cant and such information shall be made available to
the public.
‘‘(C) Within 15 days of the date of an applica-
tion pursuant to this paragraph the Secretary shall
cause to be published in the Federal Register notice
of such application, along with a request for public
comment thereon.
‘‘(D) Comments on such application shall be
submitted to the Secretary within 30 days of publi-
cation in the Federal Register.
‘‘(E) Within 15 days after receipt of comments,
the Secretary shall issue a determination in writing
either accepting, in whole or part, or rejecting, the
increase in capacity sought by the applicant as being
in proportion to or less than the increase in real
gross product of the relevant noncontiguous State or
Commonwealth since the applicable date established
by subsection (c): Provided That, notwithstanding
the provisions of this section, if the Secretary does
not make the determination required by this para-
graph within the time provided by this paragraph,
the increase in capacity sought by applicant shall be
permitted as being in proportion to or less than such
increase in real gross product until such time as the
Secretary makes the determination.
‘‘(f) With respect to provision by a contractor of serv-
ice in a noncontiguous domestic trade not authorized by
this section, the Secretary shall deny payments under the
operating agreement with respect to the period of provi-
sion of such service but shall deny payments only in part
if the extent of provision of such unauthorized service was
de minimis or not material.
‘‘(g) Notwithstanding any other provision of this sub-
title, the Secretary may issue temporary permission for
any United States citizen, as that term is defined in sec-
tion 2 of the Shipping Act, 1916, to provide service to
a noncontiguous State or Commonwealth upon the request
of the Governor of such noncontiguous State or Common-
wealth, in circumstances where an Act of God, a declara-
tion of war or national emergency, or any other condition
occurs that prevents ocean transportation service to such
noncontiguous State or Commonwealth from being pro-
vided by persons currently providing such service. Such
temporary permission shall expire 90 days from date of
grant, unless extended by the Secretary upon written re-
quest of the Governor of such State or Commonwealth.
‘‘(h) As used in this section:
‘‘(1) The term ‘level of service provided by a
contractor’ in a trade as of a date means—
‘‘(A) with respect to service other than
service described in (B), the total annual capac-
ity provided by the contractor in that trade for
the 12 calendar months preceding that date:
Provided, That, with respect to unscheduled,
contract carrier tug and barge service between
points in Alaska south of the Arctic Circle and
points in the contiguous 48 States, the level of
service provided by a contractor shall include
100 percent of the capacity of the equipment
dedicated to such service on the date specified
in subsection (c) and actually utilized in that
service in the two-year period preceding that
date, excluding service to points between An-
chorage, Alaska and Whittier, Alaska, served by
common carrier service unless such unscheduled
service is only for carriage of oil or pursuant to
a contract with the United States military: Pro-
vided further, That, with respect to scheduled
barge service between the contiguous 48 States
and Puerto Rico, such total annual capacity
shall be deemed as such total annual capacity
plus the annual capacity of two additional
barges, each capable of carrying 185 trailers
and 100 automobiles; and
‘‘(B) with respect to service provided by
container vessels, the overall capacity equal to
the sum of—
‘‘(i) 100 percent of the capacity of
vessels operated by or for the contractor on
that date, with the vessels’ configuration
and frequency of sailing in effect on that
date, and which participate solely in that
noncontiguous domestic trade; and
‘‘(ii) 75 percent of the capacity of ves-
sels operated by or for the contractor on
that date, with the vessels’ configuration
and frequency of sailing in effect on that
date, and which participate in that non-
contiguous domestic trade and in another
trade, provided that the term does not in-
clude any restriction on frequency, or num-
ber of sailings, or on ports called within
such overall capacity.
‘‘(2) The level of service set forth in paragraph
(1) shall be described with the specificity required by
subsection (e)(1) and shall be the level of service in
a trade with respect to the applicable date estab-
lished by subsection (c) only if the service is not
abandoned thereafter, except for interruptions due
to military contingency or other events beyond the
contractor’s control.
‘‘(3) The term ‘participates in a noncontiguous
domestic trade’ means directly or indirectly owns,
charters, or operates a vessel engaged in transpor-
tation of cargo between a point in the contiguous 48
states and a point in Alaska, Hawaii, or Puerto
Rico, other than a point in Alaska north of the Arc-
tic Circle.
‘‘(4) The term ‘related party’ means—
‘‘(A) a holding company, subsidiary, affili-
ate, or associate of a contractor who is a party
to an operating agreement under this subtitle;
and
‘‘(B) an officer, director, agent, or other
executive of a contractor or of a person referred
to in subparagraph (A).’’.
(b) CONFORMING AMENDMENT.—Section 805 of the
Merchant Marine Act, 1936 (46 App. U.S.C. 1223) is
amended—