219 
of 10 percent a year. However, any cumulative net voyage profit accounted 
for under this subsection is not to be included in the calculation of cumu-
lative net voyage profit in any subsequent year. 
‘‘(b) TERMS TO BE DEFINED AND USED.—The Secretary shall define the 
terms ‘net voyage profit’, ‘fair and reasonable overhead expenses’, and ‘cap-
ital necessarily employed’ for this section. Each advertisement for bids and 
each charter shall contain these definitions, stating the formula for deter-
mining each of these three amounts. 
‘‘§ 57518. Performance bond 
‘‘The Secretary of Transportation shall require a charterer of a vessel of 
the Secretary to deposit with the Secretary an undertaking, with approved 
sureties, in such amount as the Secretary may require as security for the 
faithful performance of the terms of the charter, including indemnity 
against liens on the chartered vessel. 
‘‘§ 57519. Insurance 
‘‘A charter under this chapter shall require the charterer to carry, at the 
charterer’s expense, insurance on the chartered vessel covering all marine 
and port risks, protection and indemnity risks, and all other hazards and 
liabilities, adequate to cover damages claimed against and losses sustained 
by the chartered vessel arising during the term of the charter. The insur-
ance shall be in such form, in such amount, and with such companies as 
the Secretary of Transportation may require. In accordance with law, any 
of the insurance risks may be underwritten by the Secretary. 
‘‘§ 57520. Vessel maintenance 
‘‘(a) IN GENERAL.—A charter under this chapter shall require the 
charterer, at the charterer’s expense, to— 
‘‘(1) keep the chartered vessel in good repair and efficient operating 
condition; and 
‘‘(2) make any repairs required by the Secretary of Transportation. 
‘‘(b) INSPECTION.—The charter shall provide that the Secretary has the 
right to inspect the vessel at any time to ascertain its condition. 
‘‘§ 57521. Termination of charter during national emergency 
‘‘A charter under this chapter shall provide that during a national emer-
gency proclaimed by the President or a period for which the President has 
proclaimed that the security of the national defense makes it advisable, the 
Secretary of Transportation may terminate the charter without cost to the 
United States Government on such notice to the charterer as the President 
determines. 
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‘‘SUBCHAPTER III—MISCELLANEOUS 
‘‘§ 57531. Construction and charter of vessels for unsuccess-
ful routes 
‘‘(a) IN GENERAL.—If the Secretary of Transportation finds that a trade 
route determined to be essential under section 50103 of this title cannot be 
successfully developed and maintained and the Secretary’s replacement pro-
gram cannot be achieved under private operation of the trade route by a 
citizen of the United States with vessels documented under chapter 121 of 
this title, without further aid by the United States Government in addition 
to the financial aid authorized under titles V and VI of the Merchant Ma-
rine Act, 1936, the Secretary, without advertisement or competition, may— 
‘‘(1) have constructed, in private shipyards or in navy yards, vessels 
of the types necessary for the trade route; and 
‘‘(2) demise charter those new vessels to the operator of vessels of 
the United States established on the trade route. 
‘‘(b) AMOUNT OF CHARTER HIRE.— 
‘‘(1) IN GENERAL.—The annual charter hire under subsection (a) 
shall be at least 4 percent of the price (referred to in this section as 
the ‘foreign cost’) at which the vessel would be sold if constructed 
under title V of the Merchant Marine Act, 1936, plus— 
‘‘(A) a percentage of the depreciated foreign cost computed an-
nually determined by the Secretary of the Treasury, taking into 
consideration the current average market yield on outstanding 
marketable obligations of the Government with remaining periods 
to maturity comparable to the term of the charter, adjusted to the 
nearest one-eighth percent; and 
‘‘(B) an allowance adequate in the judgment of the Secretary 
of Transportation to cover administrative costs. 
‘‘(2) DEPRECIATION.—Depreciation under paragraph (1)(A) shall be 
based on— 
‘‘(A) a 25-year life for dry-cargo and passenger vessels; and 
‘‘(B) a 20-year life for tankers and other bulk liquid carrier ves-
sels. 
‘‘(c) OPTION TO PURCHASE.—The charter may contain an option to the 
charterer to purchase the vessels from the Secretary of Transportation with-
in 5 years after delivery under the charter, on the same terms and condi-
tions as provided in title V of the Merchant Marine Act, 1936, for the pur-
chase of new vessels from the Secretary. However— 
‘‘(1) the purchase price shall be the foreign cost less depreciation to 
the date of purchase based on the useful life specified in subsection 
(b)(2); 
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‘‘(2) the required cash payment payable at the time of the purchase 
shall be 25 percent of the purchase price; 
‘‘(3) the charter may provide that any part of the charter hire paid 
in excess of the minimum charter hire provided for in this section may 
be credited against the cash payment payable at the time of the pur-
chase; 
‘‘(4) the balance of the purchase price shall be paid within the re-
maining years of useful life (as specified in subsection (b)(2)) after the 
date of delivery of the vessel under the charter and in approximately 
equal annual installments, except that the first installment, which shall 
be payable on the next ensuing anniversary date of the delivery under 
the charter, shall be a proportionate part of the annual installment; 
and 
‘‘(5) interest shall be payable on the unpaid balances from the date 
of purchase, at a rate not less than— 
‘‘(A) a rate determined by the Secretary of the Treasury, taking 
into consideration the current average market yield on outstanding 
marketable obligations of the Government with remaining periods 
to maturity comparable to the average maturities of the loans, ad-
justed to the nearest one-eighth percent; plus 
‘‘(B) an allowance adequate in the judgment of the Secretary 
of Transportation to cover administrative costs. 
‘‘(d) OPERATION OF VESSEL.— 
‘‘(1) PERMISSIBLE VOYAGES.—The charter shall provide for oper-
ation of the vessel exclusively— 
‘‘(A) in foreign trade; 
‘‘(B) on a round-the-world voyage; 
‘‘(C) on a round voyage from the west coast of the United 
States to a European port that includes an intercoastal port of the 
United States; 
‘‘(D) on a round voyage from the Atlantic coast of the United 
States to the Orient that includes an intercoastal port of the 
United States; or 
‘‘(E) on a voyage in foreign trade on which the vessel may stop 
at Hawaii or an island territory or possession of the United 
States. 
‘‘(2) DOMESTIC TRADE.—The charter shall provide if the vessel is 
operated in domestic trade on any of the services specified in para-
graph (1), the charterer will pay annually to the Secretary of Transpor-
tation that proportion of 1⁄25 of the difference between the domestic 
and foreign cost of the vessel as the gross revenue derived from the 
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domestic trade bears to the gross revenue derived from the entire voy-
ages completed during the preceding year. 
‘‘§ 57532. Operation of experimental vessels 
‘‘(a) DEFINITION.—In this section, the term ‘experimental vessel’ means 
a vessel owned by the United States Government (including a vessel in the 
National Defense Reserve Fleet) that has been constructed, reconditioned, 
or remodeled for experimental or testing purposes. 
‘‘(b) AUTHORITY TO OPERATE.—The Secretary of Transportation, for 
the purpose of practical development, trial, and testing, may operate an ex-
perimental vessel under a bareboat charter or general agency agreement in 
the foreign or domestic trade of the United States or for use for the account 
of a department or agency of the Government, without regard to other pro-
visions of this subtitle and other laws related to chartering and general 
agency operations. Not more than 10 vessels may be operated and tested 
under this section in any one year. 
‘‘(c) TERMS OF OPERATION.—Operation of a vessel under this section 
shall be on terms the Secretary considers appropriate to carry out the pur-
poses of this subtitle. A bareboat charter under this section shall be at rea-
sonable rates and include restrictions the Secretary considers appropriate to 
protect the public interest, including provisions for recapture of profits 
under section 57517 of this title. A charter or general agency agreement 
under this section shall be reviewed annually to determine whether condi-
tions exist to justify continuance of the charter or agreement. 
‘‘(d) RIGHTS OF SEAMEN.—A seaman engaged in vessel operations of the 
Secretary under this section and employed through a general agent in con-
nection with a charter or agreement under this section is entitled to all the 
rights and remedies provided in sections 1(a) and (c), 3(c), and 4 of the 
Act of March 24, 1943 (50 App. U.S.C. 1291(a), (c), 1293(c), 1294). 
‘‘PART G—RESTRICTIONS AND PENALTIES 
‘‘CHAPTER 581—RESTRICTIONS AND PENALTIES 
‘‘Sec. 
‘‘58101.
Operating in domestic intercoastal or coastwise service. 
‘‘58102.
Default on payment or maintenance of reserves. 
‘‘58103.
Employing another person as managing or operating agent. 
‘‘58104.
Willful violation constitutes breach of contract or charter. 
‘‘58105.
Preferences for cargo in which charterer has interest. 
‘‘58106.
Concerted discriminatory activities. 
‘‘58107.
Discrimination at ports by water common carriers. 
‘‘58108.
Charges for transportation subject to subtitle IV of title 49. 
‘‘58109.
Penalties. 
‘‘§ 58101. Operating in domestic intercoastal or coastwise 
service 
‘‘(a) PROHIBITION.—A subsidy may not be awarded or paid to a con-
tractor under the operating-differential subsidy program, and a vessel may 
not be chartered to a person under chapter 575 of this title, if the con-
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