194 
HR 1442 RFS 
verted to another port range to meet those requirements to the extent 
that the total tonnage of commodities to which paragraph (2) applies 
that is furnished and transported from the Great Lakes port range is 
less than 25 percent of the total annual tonnage of the commodities 
furnished. 
‘‘(4) AWARDING CONTRACTS.—In awarding a contract for the trans-
portation by vessel of commodities from the Great Lakes port range 
pursuant to an export activity referred to in subsection (b), an agen-
cy— 
‘‘(A) shall consider expressions of freight interest for any vessel 
from a vessel operator who meets reasonable requirements for fi-
nancial and operational integrity; and 
‘‘(B) may not deny award of the contract to a person based on 
the type of vessel on which the transportation would be provided 
(including on the basis that the transportation would not be pro-
vided on a liner vessel, as that term is used in the Shipping Act 
of 1984, as in effect on November 14, 1995), if the person other-
wise satisfies reasonable requirements for financial and operational 
integrity. 
‘‘(5) NONAVAILABILITY OF VESSELS.—A determination of nonavail-
ability of vessels of the United States resulting from the application of 
this subsection may not reduce the gross tonnage of commodities re-
quired by this section and section 55305 of this title to be transported 
on vessels of the United States. 
‘‘§ 55315. Minimum tonnage 
‘‘(a) DEFINITION.—In this section, the term ‘base period’ means the 5- 
year period running from the sixth through the second prior fiscal years. 
‘‘(b) REQUIREMENT.—For each fiscal year, the minimum quantity of ag-
ricultural commodities to be exported under programs subject to section 
55314 of this title is the average of the tonnage exported under those pro-
grams during the base period, discarding the high and low years. 
‘‘(c) WAIVERS.—The President may waive the minimum quantity for a 
fiscal year under this section if the President determines and reports to 
Congress, together with reasons, that the quantity cannot be used effectively 
for the purposes of those programs or, based on a certification by the Sec-
retary of Agriculture, that the commodities are not available for reasons 
that include the unavailability of funds.
195 
HR 1442 RFS 
‘‘§ 55316. Financing the transportation of agricultural com-
modities 
‘‘(a) FINANCING OF INCREASED CHARGES.—The Secretary of Transpor-
tation shall finance any increased ocean freight charges incurred in any fis-
cal year that result from the application of section 55314 of this title. 
‘‘(b) REIMBURSEMENT OF INCREASED CHARGES.— 
‘‘(1) IN GENERAL.—The Secretary of Transportation shall reimburse 
the Secretary of Agriculture and the Commodity Credit Corporation for 
the amount by which, in any fiscal year— 
‘‘(A) the total cost of ocean freight and ocean freight differen-
tial for which obligations are incurred by the Secretary of Agri-
culture and the Corporation on exports of agricultural commodities 
and their products under the agricultural export programs speci-
fied in section 55314(b) of this title; exceeds 
‘‘(B) 20 percent of the value of the commodities and their prod-
ucts and the cost of the ocean freight and ocean freight differen-
tial on which obligations are incurred by the Secretary of Agri-
culture and the Corporation during that fiscal year. 
‘‘(2) COMMODITIES SHIPPED FROM INVENTORY.—For purposes of 
this subsection, commodities shipped from the inventory of the Cor-
poration shall be valued as provided in section 412(d) of the Agricul-
tural Trade Development and Assistance Act of 1954 (7 U.S.C. 
1736f(d)). 
‘‘(c) ISSUANCE AND PURCHASE OF OBLIGATIONS.— 
‘‘(1) ISSUANCE.—To meet the expenses required to be assumed 
under subsections (a) and (b), the Secretary of Transportation shall 
issue obligations to the Secretary of the Treasury. The Secretary of 
Transportation, with the approval of the Secretary of the Treasury, 
shall prescribe the form, denomination, maturity, and other terms (ex-
cept the interest rate) of the obligations. The Secretary of the Treasury 
shall set the interest rate for the obligations, considering the average 
market yield on outstanding marketable obligations of the United 
States Government of comparable maturities during the month before 
the obligations are issued. 
‘‘(2) PURCHASE.—The Secretary of the Treasury shall purchase the 
obligations issued under this subsection. To purchase the obligations, 
the Secretary of the Treasury may use as a public debt transaction the 
proceeds from the sale of securities issued under chapter 31 of title 31. 
The purposes for which securities may be issued under that chapter are 
extended to include the purchase of obligations under this subsection.
196 
HR 1442 RFS 
A redemption or purchase of the obligations by the Secretary of the 
Treasury is a public debt transaction of the Government. 
‘‘(d) SOURCE OF FUNDS FOR REIMBURSEMENT.—Reimbursement of the 
Secretary of Transportation for costs incurred under this section shall be 
made with appropriated funds rather than through cancellation of notes. 
‘‘(e) APPROPRIATIONS.— 
‘‘(1) AUTHORIZATION.—Each fiscal year, there is authorized to be 
appropriated an amount sufficient to reimburse the Secretary of Trans-
portation for the costs incurred under this section, including adminis-
trative expenses and the principal and interest due on obligations 
issued to the Secretary of the Treasury. 
‘‘(2) APPROPRIATION FOR ADMINISTRATIVE EXPENSES.—Each fiscal 
year, such amounts as may be necessary are hereby appropriated to 
pay interest and to liquidate debt on obligations issued to the Secretary 
of the Treasury under this section. 
‘‘(f) NOTIFICATION TO CONGRESS OF INSUFFICIENCY.—If the Secretary 
of Transportation is unable to obtain the funds necessary to finance the in-
creased ocean freight charges resulting from the requirements of subsections 
(a) and (b) and section 55314(a) of this title, the Secretary shall notify 
Congress within 10 working days of the discovery of the insufficiency. 
‘‘§ 55317. Termination of subchapter 
‘‘This subchapter terminates 90 days after the date on which a notifica-
tion is made under section 55316(f) of this title, except for shipments of 
agricultural commodities and their products subject to contracts made be-
fore the end of that 90-day period, unless within that 90-day period the Sec-
retary of Transportation proclaims that funds are available to finance in-
creased freight charges resulting from the requirements of sections 
55314(a) and 55316(a) and (b) of this title. On the termination of this sub-
chapter under this section— 
‘‘(1) this subchapter does not exempt export activities from, or sub-
ject export activities to, the cargo preference laws; and 
‘‘(2) the 50-percent requirement in section 55305 of this title re-
mains in effect. 
‘‘§ 55318. Effect on other law 
‘‘This subchapter does not affect chapter 5 of title 5. 
‘‘SUBCHAPTER III—AMERICAN GREAT LAKES VESSELS 
‘‘§ 55331. Definitions 
‘‘In this subchapter: 
‘‘(1) AMERICAN GREAT LAKES VESSEL.—The term ‘American Great 
Lakes vessel’ means a vessel so designated under section 55332 of this 
title, but only during the period the designation is in effect.
197 
HR 1442 RFS 
‘‘(2) GREAT LAKES.—The term ‘Great Lakes’ means Lake Superior, 
Lake Michigan, Lake Huron, Lake Erie, Lake Ontario, the Saint Law-
rence River west of Saint Regis, New York, and their connecting and 
tributary waters. 
‘‘(3) GREAT
LAKES
SHIPPING
SEASON.—The term ‘Great Lakes 
shipping season’ means the period each year during which the Saint 
Lawrence Seaway is open for navigation by vessels, as declared by the 
Saint Lawrence Seaway Development Corporation. 
‘‘§ 55332. Designating American Great Lakes vessels 
‘‘(a) DESIGNATIONS.—The Secretary of Transportation shall designate a 
vessel as an American Great Lakes vessel if— 
‘‘(1) an application for designation is submitted to the Secretary 
under regulations prescribed by the Secretary; 
‘‘(2) the vessel is documented under the laws of the United States; 
‘‘(3) the vessel, on the effective date of the designation, is— 
‘‘(A) at least 1, but not more than 6, years old; or 
‘‘(B) at least 1, but not more than 11, years old if the Secretary 
finds that suitable vessels are not available to provide the type of 
service for which the vessel will be used after the designation; 
‘‘(4) the vessel has not previously been designated as an American 
Great Lakes vessel; and 
‘‘(5) the owner makes an agreement as provided under subsection 
(b). 
‘‘(b) AGREEMENTS.—A vessel may be designated as an American Great 
Lakes vessel only if the person that will be the owner of the vessel at the 
time of the designation makes an agreement with the Secretary providing 
that if the Secretary determines that the vessel is necessary to the defense 
of the United States, the United States Government will have an exclusive 
right, during the 120-day period following the date of a revocation of the 
designation under section 55335 of this title, to purchase the vessel for a 
price equal to the greater of— 
‘‘(1) the approximate world market value of the vessel; or 
‘‘(2) the cost of the vessel to the owner less a reasonable amount 
for depreciation. 
‘‘(c) CERTAIN FOREIGN DOCUMENTATION
AND SALE NOT PROHIB-
ITED.—Notwithstanding any other law, if the Government does not exercise 
its right of purchase under an agreement under subsection (b), the owner 
of the vessel is not prohibited from— 
‘‘(1) documenting the vessel under the laws of a foreign country; or 
‘‘(2) selling the vessel to a person not a citizen of the United States.
198 
HR 1442 RFS 
‘‘(d) REGULATIONS.—The Secretary shall prescribe regulations estab-
lishing requirements for submitting applications under this section. 
‘‘§ 55333. Exemption from restriction on transporting cer-
tain cargo 
‘‘The 3-year documentation requirement of section 55305(a) of this title 
does not apply to a vessel designated as an American Great Lakes vessel 
during the period of its designation. 
‘‘§ 55334. Restrictions on operations 
‘‘(a) PROHIBITIONS.—Except as provided in subsection (b), an American 
Great Lakes vessel may not be used to— 
‘‘(1) engage in trade— 
‘‘(A) from a port in the United States that is not located on 
the Great Lakes; or 
‘‘(B) between ports in the United States; 
‘‘(2) transport bulk cargo (as defined in section 40102 of this title) 
that is subject to section 55305 or 55314 of this title or section 2631 
of title 10; or 
‘‘(3) provide a service (except ocean freight service) as— 
‘‘(A) a contract carrier; or 
‘‘(B) a common carrier on a fixed advertised schedule offering 
frequent sailings at regular intervals in the foreign trade of the 
United States. 
‘‘(b) OFF-SEASON EXCEPTION.—An American Great Lakes vessel may be 
used for not more than 90 days during any 12-month period to engage in 
trade prohibited by subsection (a)(1)(A), except during the Great Lakes 
shipping season. 
‘‘§ 55335. Revocations and terminations of designations 
‘‘(a) REVOCATIONS.—After notice and an opportunity for a hearing, the 
Secretary of Transportation may revoke a designation of a vessel as an 
American Great Lakes vessel if the Secretary finds that— 
‘‘(1) the vessel does not meet a requirement for the designation; 
‘‘(2) the vessel has been operated in violation of this subchapter; or 
‘‘(3) the owner or operator of the vessel has violated an agreement 
made under section 55332(b) of this title. 
‘‘(b) TERMINATIONS.—On petition and a showing of good cause by the 
owner of a vessel, the Secretary may terminate the designation of a vessel 
as an American Great Lakes vessel. The Secretary may impose conditions 
in a termination order to prevent significant adverse effects on other opera-
tors of vessels of the United States.
199 
HR 1442 RFS 
‘‘§ 55336. Civil penalty 
‘‘After notice and an opportunity for a hearing, the Secretary of Trans-
portation may impose a civil penalty of not more than $1,000,000 on the 
owner of an American Great Lakes vessel for any act for which the designa-
tion may be revoked under section 55335 of this title. 
‘‘CHAPTER 555—MISCELLANEOUS 
‘‘Sec. 
‘‘55501.
Mobile trade fairs. 
‘‘§ 55501. Mobile trade fairs 
‘‘(a) IN GENERAL.—The Secretary of Commerce shall encourage and pro-
mote the development and use of mobile trade fairs designed to show and 
sell the products of United States business and agriculture at foreign ports 
and at other commercial centers throughout the world where the operators 
of the fairs use, insofar as practicable, vessels and aircraft of the United 
States in transporting their exhibits. 
‘‘(b) TECHNICAL AND FINANCIAL ASSISTANCE.—When the Secretary de-
termines that a mobile trade fair provides an economical and effective 
means of promoting export sales, the Secretary may provide to the operator 
of the fair— 
‘‘(1) technical assistance and support; and 
‘‘(2) financial assistance to defray certain expenses incurred outside 
the United States, except the cost of transportation on foreign vessels 
and aircraft. 
‘‘(c) USE OF FOREIGN CURRENCIES.—To carry out this section, the 
President may use, in addition to amounts appropriated to carry out trade 
promotion activities, foreign currencies owned by or owed to the United 
States Government. 
‘‘PART E—CONTROL OF MERCHANT MARINE CAPABILITIES 
‘‘CHAPTER 561—RESTRICTIONS ON TRANSFERS 
‘‘Sec. 
‘‘56101.
Approval required to transfer vessel to noncitizen. 
‘‘56102.
Additional controls during war or national emergency. 
‘‘56103.
Conditional approvals. 
‘‘56104.
Penalty for false statements. 
‘‘56105.
Forfeiture procedure. 
‘‘§ 56101. Approval required to transfer vessel to noncitizen 
‘‘(a) RESTRICTIONS.— 
‘‘(1) IN GENERAL.—Except as otherwise provided in this section, 
section 12119 of this title, or section 611 of the Merchant Marine Act, 
1936, a person may not, without the approval of the Secretary of 
Transportation— 
‘‘(A) sell, lease, charter, deliver, or in any other manner trans-
fer, or agree to sell, lease, charter, deliver, or in any other manner
200 
HR 1442 RFS 
transfer, to a person not a citizen of the United States, an interest 
in or control of— 
‘‘(i) a documented vessel owned by a citizen of the United 
States; or 
‘‘(ii) a vessel last documented under the laws of the United 
States; or 
‘‘(B) place under foreign registry, or operate under the author-
ity of a foreign country, a documented vessel or a vessel last docu-
mented under the laws of the United States. 
‘‘(2) EXCEPTIONS.—Paragraph (1)(A) does not apply to a vessel 
that has been operated only for pleasure or only as a fishing vessel, 
fish processing vessel, or fish tender vessel (as defined in section 2101 
of this title). 
‘‘(b) APPROVAL BEFORE DOCUMENTATION.—To promote financing with 
respect to a vessel to be documented under chapter 121 of this title, the 
Secretary may grant approval under subsection (a) before the vessel is docu-
mented. 
‘‘(c) EXCEPTIONS.—Notwithstanding any other provision of this subtitle, 
the Merchant Marine Act, 1936, or any contract with the Secretary made 
under this subtitle or that Act, a person may place a vessel under foreign 
registry without the approval of the Secretary if— 
‘‘(1)(A) the Secretary, in conjunction with the Secretary of Defense, 
determines that at least one replacement vessel of equal or greater mili-
tary capability and of a capacity that is equivalent or greater, as meas-
ured by deadweight tons, gross tons, or container equivalent units, as 
appropriate, is documented under chapter 121 of this title by the owner 
of the vessel placed under foreign registry; and 
‘‘(B) the replacement vessel is not more than 10 years old on the 
date of that documentation; or 
‘‘(2) an operating agreement covering the vessel under chapter 531 
of this title has expired. 
‘‘(d) STATUS OF PROHIBITED TRANSACTION.—A charter, sale, or trans-
fer of a vessel, or of an interest in or control of a vessel, in violation of 
this section is void. 
‘‘(e) PENALTIES.— 
‘‘(1) CRIMINAL PENALTY.—A person that knowingly sells, charters, 
or transfers a vessel, or an interest in or control of a vessel, in violation 
of this section shall be fined under title 18, imprisoned for not more 
than 5 years, or both. 
‘‘(2) CIVIL PENALTY.—A person that sells, charters, or transfers a 
vessel, or an interest in or control of a vessel, in violation of this sec-
201 
HR 1442 RFS 
tion is liable to the United States Government for a civil penalty of 
not more than $10,000 for each violation. 
‘‘(3) FORFEITURE.—A documented vessel may be seized by and for-
feited to the Government if, in violation of this section, a person— 
‘‘(A) knowingly sells, charters, or transfers the vessel or an in-
terest in or control of the vessel; or 
‘‘(B) places the vessel under foreign registry or operates the 
vessel under the authority of a foreign country. 
‘‘§ 56102. Additional controls during war or national emer-
gency 
‘‘(a) IN GENERAL.—During war, or a national emergency declared by 
Presidential proclamation, a person may not, without the approval of the 
Secretary of Transportation— 
‘‘(1) place under foreign registry a vessel owned in whole or in part 
by a citizen of the United States or a corporation incorporated under 
the laws of the United States or of a State; 
‘‘(2) sell, mortgage, lease, charter, deliver, or in any other manner 
transfer, or agree to sell, mortgage, lease, charter, deliver, or in any 
other manner transfer, to a person not a citizen of the United States— 
‘‘(A) a vessel owned as described in paragraph (1), or an inter-
est therein; 
‘‘(B) a vessel documented under the laws of the United States, 
or an interest therein; or 
‘‘(C) a facility for building or repairing vessels, or an interest 
therein; 
‘‘(3) issue, assign, or transfer to a person not a citizen of the United 
States an instrument of indebtedness secured by a mortgage of a vessel 
to a trustee, by an assignment of an owner’s interest in a vessel under 
construction to a trustee, or by a mortgage of a facility for building 
or repairing vessels to a trustee, unless the trustee or a substitute 
trustee is approved by the Secretary under subsection (b); 
‘‘(4) enter into an agreement or understanding to construct a vessel 
in the United States for, or to be delivered to, a person not a citizen 
of the United States without expressly stipulating that construction will 
not begin until after the war or national emergency has ended; 
‘‘(5) enter into an agreement or understanding whereby there is vest-
ed in, or for the benefit of, a person not a citizen of the United States 
the controlling interest in a corporation that is incorporated under the 
laws of the United States or a State and that owns a vessel or facility 
for building or repairing vessels; or
202 
HR 1442 RFS 
‘‘(6) cause or procure a vessel, constructed in whole or in part in 
the United States and never cleared for a foreign port, to depart from 
a port of the United States before it has been documented under the 
laws of the United States. 
‘‘(b) TRUSTEES.— 
‘‘(1) APPROVAL.—The Secretary shall approve a trustee or sub-
stitute trustee under subsection (a)(3) if and only if the trustee is a 
bank or trust company that— 
‘‘(A) is organized as a corporation, and is doing business, under 
the laws of the United States or a State; 
‘‘(B) is authorized under those laws to exercise corporate trust 
powers; 
‘‘(C) is a citizen of the United States; 
‘‘(D) is subject to supervision or examination by Federal or 
State authority; and 
‘‘(E) has a combined capital and surplus (as set forth in its 
most recent published report of condition) of at least $3,000,000. 
‘‘(2) DISAPPROVAL.—If a trustee or substitute trustee ceases to meet 
the conditions in paragraph (1), the Secretary shall disapprove the 
trustee or substitute trustee. After the disapproval, the restrictions on 
transfer or assignment without the Secretary’s approval in subsection 
(a)(3) apply. 
‘‘(3) OPERATION OF VESSEL.—During a period when subsection (a) 
applies, a trustee referred to in subsection (a)(3), even though ap-
proved as a trustee by the Secretary, may not operate the vessel under 
the mortgage or assignment without the Secretary’s approval. 
‘‘(c) STATUS OF PROHIBITED TRANSACTION.—A transaction in violation 
of this section is void. 
‘‘(d) RECOVERY OF CONSIDERATION.— 
‘‘(1) IN GENERAL.—A person that deposited or paid consideration in 
connection with a transaction prohibited by this section may recover 
the consideration after tender of the vessel, facility, stock, or other se-
curity, or interest therein, to the person entitled to it, or the forfeiture 
thereof to the United States Government. 
‘‘(2) EXCEPTION.—Paragraph (1) does not apply if the person in 
whose interest the consideration was deposited, or to whom it was paid, 
entered into the transaction in the belief that the person depositing or 
paying the consideration was a citizen of the United States. 
‘‘(e) PENALTIES.—
203 
HR 1442 RFS 
‘‘(1) CRIMINAL PENALTY.—A person that violates, or attempts or 
conspires to violate, this section shall be fined under title 18, impris-
oned for not more than 5 years, or both. 
‘‘(2) FORFEITURE.—The following shall be forfeited to the Govern-
ment: 
‘‘(A) A vessel, a facility for building or repairing vessels, or an 
interest in a vessel or such a facility, that is sold, mortgaged, 
leased, chartered, delivered, transferred, or documented, or agreed 
to be sold, mortgaged, leased, chartered, delivered, transferred, or 
documented, in violation of this section. 
‘‘(B) Stock and other securities sold or transferred, or agreed 
to be sold or transferred, in violation of this section. 
‘‘(C) A vessel departing in violation of subsection (a)(6). 
‘‘§ 56103. Conditional approvals 
‘‘(a) IN GENERAL.—In approving an act or transaction under section 
56101 or 56102 of this title, the Secretary of Transportation may do so 
absolutely or upon conditions the Secretary considers advisable. The Sec-
retary shall state the conditions in the notice of approval. 
‘‘(b) VIOLATIONS.—A violation of a condition of approval is subject to the 
same penalties as a violation resulting from an act done without the re-
quired approval. The violation occurs at the time the condition is violated. 
‘‘§ 56104. Penalty for false statements 
‘‘A person that knowingly makes a false statement of a material fact to 
the Secretary of Transportation or another officer, employee, or agent of the 
Department of Transportation, to obtain the Secretary’s approval under sec-
tion 56101 or 56102 of this title, shall be fined under title 18, imprisoned 
for not more than 5 years, or both. 
‘‘§ 56105. Forfeiture procedure 
‘‘(a) IN GENERAL.—A forfeiture under this chapter may be enforced in 
the same way as a forfeiture under the laws on the collection of duties. 
However, such a forfeiture may be remitted without seizure of the vessel. 
‘‘(b) PRIOR CONVICTIONS.—In a proceeding under this chapter to enforce 
a forfeiture, a prior criminal conviction of a person for a violation of this 
chapter with respect to the subject matter of the forfeiture is prima facie 
evidence of the violation against the person convicted. 
‘‘CHAPTER 563—EMERGENCY ACQUISITION OF VESSELS 
‘‘Sec. 
‘‘56301.
General authority. 
‘‘56302.
Charter terms. 
‘‘56303.
Compensation. 
‘‘56304.
Disputed compensation. 
‘‘56305.
Vessel encumbrances. 
‘‘56306.
Use and transfer of vessels. 
‘‘56307.
Return of vessels.
204 
HR 1442 RFS 
‘‘§ 56301. General authority 
‘‘During a national emergency declared by Presidential proclamation, or 
a period for which the President has proclaimed that the security of the na-
tional defense makes it advisable, the Secretary of Transportation may req-
uisition or purchase, or requisition or charter the use of, a vessel owned by 
citizens of the United States, a documented vessel, or a vessel under con-
struction in the United States. 
‘‘§ 56302. Charter terms 
‘‘(a) IN GENERAL.—If a vessel is requisitioned for use but not ownership 
under this chapter, the Secretary of Transportation, at the time of requisi-
tion or as soon thereafter as the situation allows, shall offer the person enti-
tled to possession of the vessel a charter containing— 
‘‘(1) the terms the Secretary believes should govern the relationship 
between the United States Government and the person; and 
‘‘(2) the rate of hire the Secretary considers just compensation for 
the use of the vessel and the services required under the charter. 
‘‘(b) REFUSAL TO ACCEPT.—If the person does not accept the charter 
and rate of hire, the parties shall proceed as provided in section 56304 of 
this title. 
‘‘§ 56303. Compensation 
‘‘(a) IN GENERAL.—As soon as practicable, the Secretary of Transpor-
tation shall determine and pay just compensation for a vessel requisitioned 
under this chapter. 
‘‘(b) FACTORS NOT AFFECTING VALUE.—The value of a vessel may not 
be considered enhanced by the circumstances requiring its requisition. Con-
sequential damages arising from the requisition may not be paid. 
‘‘(c) EFFECT OF CONSTRUCTION-DIFFERENTIAL SUBSIDY.— 
‘‘(1) IF PAID.—If a construction-differential subsidy has been paid 
for the vessel, the value of the vessel at the time of requisition shall 
be determined under section 802 of the Merchant Marine Act, 1936. 
‘‘(2) IF NOT PAID.—If a construction-differential subsidy has not 
been paid for the vessel, the value of any national defense features pre-
viously paid for by the United States Government shall be excluded. 
‘‘(d) LOSS OR DAMAGE DURING CHARTER.—If a vessel is lost or dam-
aged by a risk assumed by the Government under the charter, but a valu-
ation for the vessel or a means of compensation has not been agreed to, 
the Secretary shall pay just compensation for the loss or damage, to the 
extent the person is not reimbursed through insurance. 
‘‘§ 56304. Disputed compensation 
‘‘If the person entitled to compensation disputes the amount of just com-
pensation determined by the Secretary of Transportation under this chapter,
205 
HR 1442 RFS 
the Secretary shall pay the person, as a tentative advance, 75 percent of 
the amount determined. The person may bring a civil action against the 
United States to recover just compensation. If the tentative advance paid 
under this section is greater than the amount of the court’s judgment, the 
person shall refund the difference. 
‘‘§ 56305. Vessel encumbrances 
‘‘(a) IN GENERAL.—The existence of an encumbrance on a vessel does 
not prevent the requisition of the vessel under this chapter. 
‘‘(b) DEPOSIT IN TREASURY.— 
‘‘(1) IN
GENERAL.—If an encumbrance exists, the Secretary of 
Transportation may deposit part of the compensation or advance of 
compensation to be paid under this chapter (but not more than the 
total amount of all encumbrances) in a fund in the Treasury. The Sec-
retary shall publish notice of the creation of the fund in the Federal 
Register. 
‘‘(2) AVAILABILITY OF AMOUNTS DEPOSITED.—Amounts deposited in 
the fund shall be available to pay the compensation or any of the en-
cumbrances (including encumbrances stipulated to in a court of the 
United States or a State) existing at the time the vessel was requi-
sitioned. 
‘‘(c) CIVIL ACTION.— 
‘‘(1) IN GENERAL.—Within 6 months after publication of notice 
under subsection (b), the holder of an encumbrance may bring a civil 
action in admiralty, according to the principles of libels in rem, against 
the fund. 
‘‘(2) VENUE.—The action must be brought in the district court of 
the United States— 
‘‘(A) from whose custody the vessel was or may be requisitioned; 
or 
‘‘(B) in whose district the vessel was located when it was requi-
sitioned. 
‘‘(3) SERVICE OF PROCESS.—Service of process shall be made on the 
appropriate United States Attorney, the Attorney General, and the Sec-
retary, in the manner provided by the Federal Rules of Civil Procedure 
(28 App. U.S.C.). Notice of the action shall be given to all interested 
persons as ordered by the court. 
‘‘(4) AS BETWEEN PRIVATE PARTIES.—The action shall proceed and 
be determined according to the principles of law and the rules of prac-
tice applicable in like cases between private parties.
206 
HR 1442 RFS 
‘‘§ 56306. Use and transfer of vessels 
‘‘(a) IN GENERAL.—The Secretary of Transportation may repair, recon-
dition, reconstruct, operate, or charter for operation, a vessel acquired under 
this chapter. 
‘‘(b) TRANSFER TO OTHER AGENCIES.—The Secretary may transfer the 
possession or control of a vessel acquired under this chapter to another de-
partment or agency of the United States Government on terms and condi-
tions approved by the President. The department or agency shall promptly 
reimburse the Secretary for expenditures for just compensation, purchase 
price, charter hire, repairs, reconditioning, or reconstruction. 
‘‘§ 56307. Return of vessels 
‘‘When a vessel requisitioned for use but not ownership is returned to the 
owner, the Secretary of Transportation shall— 
‘‘(1) return the vessel in a condition at least as good as when taken, 
less ordinary wear and tear; or 
‘‘(2) pay the owner an amount sufficient to recondition the vessel to 
that condition, less ordinary wear and tear. 
‘‘CHAPTER 565—ESSENTIAL VESSELS AFFECTED BY 
NEUTRALITY ACT 
‘‘Sec. 
‘‘56501.
Definition. 
‘‘56502.
Adjusting obligations and arranging maintenance. 
‘‘56503.
Types of adjustments and arrangements. 
‘‘56504.
Changes in adjustments and arrangements. 
‘‘§ 56501. Definition 
‘‘In this chapter, the term ‘essential vessel’ means a vessel that is— 
‘‘(1)(A) security for a mortgage indebtedness to the United States 
Government; or 
‘‘(B) constructed under this subtitle or required by a contract under 
this subtitle to be operated on a certain essential foreign trade route; 
and 
‘‘(2) necessary in the interests of commerce and national defense to 
be maintained in condition for prompt use. 
‘‘§ 56502. Adjusting obligations and arranging maintenance 
‘‘(a) GENERAL AUTHORITY.—On written application, the Secretary of 
Transportation may adjust obligations and arrange for maintenance of an 
essential vessel as provided in this chapter if the Secretary determines, after 
any investigation or proceeding the Secretary considers desirable, that— 
‘‘(1) the operation of the vessel in the service, route, or line to which 
it is assigned under this subtitle, or in which it otherwise would be op-
erated, is not— 
‘‘(A) lawful under the Neutrality Act of 1939 (22 U.S.C. 441 
et seq.) or a proclamation issued under that Act; or
207 
HR 1442 RFS 
‘‘(B) compatible with maintaining the availability of the vessel 
for national defense and commerce; 
‘‘(2) it is not feasible under existing law to employ the vessel in any 
other service or operation in foreign or domestic trade (except tem-
porary or emergency operation under section 56503(b)(5) of this title); 
and 
‘‘(3) the applicant, because of the restrictions of the Neutrality Act 
of 1939 (22 U.S.C. 441 et seq.) or the withdrawal of vessels for na-
tional defense under paragraph (1), is not earning or will not earn a 
reasonable return on the capital necessarily employed in its business. 
‘‘(b) EFFECTIVE PERIOD.—Adjustments and arrangements under sub-
section (a) shall continue in effect only as long as the circumstances de-
scribed in subsection (a) continue to exist. 
‘‘§ 56503. Types of adjustments and arrangements 
‘‘(a) SUSPENSION
REQUIREMENTS.—An adjustment or arrangement 
under this chapter shall include suspension of— 
‘‘(1) the requirement to operate the vessel in foreign trade under the 
applicable operating-differential or construction-differential subsidy 
contract or mortgage or other agreement; and 
‘‘(2) the right to operating-differential subsidy for the vessel. 
‘‘(b) DISCRETIONARY ADJUSTMENTS AND ARRANGEMENTS.—To the ex-
tent the Secretary of Transportation considers appropriate to carry out the 
purposes of this subtitle, an adjustment or arrangement under this chapter 
may include any of the following: 
‘‘(1) Lay-up of the vessel by the owner or in the custody of the Sec-
retary, with payment or reimbursement by the Secretary of necessary 
and proper expenses (including reasonable overhead and insurance) or 
a fixed periodic allowance instead of payment or reimbursement. 
‘‘(2) Postponement, for not more than the total period of the lay- 
up, of the maturity date of each installment of the principal of obliga-
tions to the United States Government for the vessel (regardless of 
whether the maturity date is during a lay-up period), or rearrangement 
of those maturities. 
‘‘(3) Postponement or cancellation of interest accruing on the obliga-
tions during a lay-up period. 
‘‘(4) Extension, for not more than the total period of the lay-up, of 
the 20-year life limitation for the vessel and other limitations and pro-
visions of this subtitle based on a 20-year life. 
‘‘(5) Provision for temporary or emergency employment of the vessel 
(instead of lay-up) as may be practicable, with such arrangements for 
management of the vessel, payment of expenses, and application of the
208 
HR 1442 RFS 
proceeds of the employment, as the Secretary may approve, with any 
period of operation being included as part of the lay-up period. 
‘‘(6) Payment to the Secretary, on termination of the arrangements 
with the applicant, of the applicant’s net profits (earned while the ar-
rangements were in effect) in excess of 10 percent a year on the capital 
necessarily employed in the applicant’s business, as reimbursement for 
obligations postponed or canceled and expenses incurred or paid by the 
Secretary under this section. 
‘‘(c) LAID-UP VESSELS.—Under subsection (b)(6), capital of the appli-
cant represented by a vessel of the applicant laid-up or operated under this 
section shall be included in capital necessarily employed in the applicant’s 
business. The Secretary may require a vessel laid-up or operated under this 
section to be security for reimbursement. 
‘‘§ 56504. Changes in adjustments and arrangements 
‘‘The Secretary of Transportation may change an adjustment or arrange-
ment made under this chapter as the Secretary considers necessary to carry 
out this chapter. 
‘‘PART F—GOVERNMENT-OWNED MERCHANT VESSELS 
‘‘CHAPTER 571—GENERAL AUTHORITY 
‘‘Sec. 
‘‘57101.
Placement of vessels in National Defense Reserve Fleet. 
‘‘57102.
Disposition of vessels not worth preserving. 
‘‘57103.
Sale of obsolete vessels in National Defense Reserve Fleet. 
‘‘57104.
Acquisition of vessels from sale of obsolete vessels. 
‘‘57105.
Acquisition of vessels for essential services, routes, or lines. 
‘‘57106.
Maintenance, improvement, and operation of vessels. 
‘‘57107.
Vessels for other agencies. 
‘‘57108.
Consideration of ballast and equipment in determining selling price. 
‘‘57109.
Operation of vessels purchased, chartered, or leased from Secretary of Transpor-
tation. 
‘‘§ 57101. Placement of vessels in National Defense Reserve 
Fleet 
‘‘(a) IN GENERAL.—Any vessel acquired by the Maritime Administration 
shall be placed in the National Defense Reserve Fleet maintained under sec-
tion 11 of the Merchant Ship Sales Act of 1946 (50 App. U.S.C. 1744). 
‘‘(b) REMOVAL FROM FLEET.—A vessel placed in the Fleet under sub-
section (a) may not be traded out or sold from the Fleet, except as provided 
in section 57102, 57103, or 57104 or chapter 533, 537, 573, or 575 of this 
title. 
‘‘§ 57102. Disposition of vessels not worth preserving 
‘‘(a) IN GENERAL.—If the Secretary of Transportation determines that 
a vessel owned by the Maritime Administration is of insufficient value for 
commercial or military operation to warrant its further preservation, the 
Secretary may scrap the vessel or sell the vessel for cash.
209 
HR 1442 RFS 
‘‘(b) SELLING PROCEDURE.—The sale of a vessel under subsection (a) 
shall be made on the basis of competitive sealed bids, after an appraisal and 
due advertisement. The purchaser does not have to be a citizen of the 
United States. The purchaser shall provide a surety bond, with a surety ap-
proved by the Secretary, to ensure that the vessel will not be operated in 
the foreign trade of the United States at any time within 10 years after 
the sale, in competition with a vessel owned by a citizen of the United 
States and documented under the laws of the United States. 
‘‘§ 57103. Sale of obsolete vessels in National Defense Re-
serve Fleet 
‘‘(a) IN GENERAL.—The Secretary of Transportation may convey the 
right, title, and interest of the United States Government in any vessel of 
the National Defense Reserve Fleet that has been identified by the Sec-
retary as an obsolete vessel of insufficient value to warrant its further pres-
ervation, if the recipient— 
‘‘(1) is a non-profit organization, a State, or a municipal corporation 
or political subdivision of a State; 
‘‘(2) agrees not to use, or allow others to use, the vessel for commer-
cial transportation purposes; 
‘‘(3) agrees to make the vessel available to the Government whenever 
the Secretary indicates that it is needed by the Government; 
‘‘(4) agrees to hold the Government harmless for any claims arising 
from exposure to asbestos, polychlorinated biphenyls, lead paint, or 
other hazardous substances after conveyance of the vessel, except for 
claims arising from use of the vessel by the Government; 
‘‘(5) has a conveyance plan and a business plan that describes the 
intended use of the vessel, each of which has been submitted to and 
approved by the Secretary; 
‘‘(6) has provided proof, as determined by the Secretary, of resources 
sufficient to accomplish the transfer, necessary repairs and modifica-
tions, and initiation of the intended use of the vessel; and 
‘‘(7) agrees that when the recipient no longer requires the vessel for 
use as described in the business plan required under paragraph (5)— 
‘‘(A) the recipient will, at the discretion of the Secretary, re-
convey the vessel to the Government in good condition except for 
ordinary wear and tear; or 
‘‘(B) if the Board of Trustees of the recipient has decided to 
dissolve 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
210 
HR 1442 RFS 
from taxation under section 501(c)(3) of the Internal Rev-
enue Code of 1986 (26 U.S.C. 501(c)(3)), or to the Federal 
Government or a State or local government for a public pur-
pose; 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 de-
termine, or to such organizations as the court shall determine 
are organized exclusively for public purposes. 
‘‘(b) OTHER EQUIPMENT.—At the Secretary’s discretion, additional 
equipment from other obsolete vessels of the Fleet may be conveyed to assist 
the recipient 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 deter-
mined 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 
recipient, the Secretary determines that a different disposition of the vessel 
would better serve the interests of the Government, the Secretary shall pur-
sue 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 subsection (a)(5). 
‘‘§ 57104. Acquisition of vessels from sale of obsolete vessels 
‘‘(a) IN GENERAL.—The Secretary of Transportation may acquire suit-
able documented vessels with amounts in the Vessel Operations Revolving 
Fund derived from the sale of obsolete vessels in the National Defense Re-
serve 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 acqui-
sition for or sale from the Fleet. However, the value assigned to those ves-
sels 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. 
‘‘(c) COSTS INCIDENT TO LAY-UP.—Costs incident to the lay-up of the 
vessel acquired under this section may be paid from amounts in the Fund.
211 
HR 1442 RFS 
‘‘(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 ves-
sel, by purchase or otherwise, if— 
‘‘(1) the Secretary considers the vessel necessary to establish, main-
tain, improve, or serve as a replacement on an essential service, route, 
or line in the foreign commerce of the United States, as determined 
under section 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 
Transportation 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 emer-
gency. 
‘‘(b) PRICE.—The price paid for the vessel shall be based on a fair and 
reasonable valuation. However, the price may not exceed by more than 5 
percent the cost of the vessel to the owner (excluding any construction-dif-
ferential subsidy and the cost of national defense features paid by the Sec-
retary of Transportation) plus the actual cost previously expended for recon-
ditioning, less depreciation based on a 25-year life for a dry-cargo or pas-
senger 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 re-
conditioned, remodeled, or improved under subsection (a) shall be docu-
mented under the laws of the United States and remain so documented for
212 
HR 1442 RFS 
at least 5 years after completion of the reconditioning, remodeling, or im-
provement. 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, re-
construct, repair, equip, and outfit, by contract or otherwise, vessels or 
parts thereof, for any other department or agency of the United States Gov-
ernment 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 
contract 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 endorse-
ment. 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
213 
HR 1442 RFS 
‘‘(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 
interest; 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 provided 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 
vessel 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. How-
ever, 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 
vessel. 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;
214 
HR 1442 RFS 
‘‘(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 
commerce or in the domestic or foreign commerce of the United States. 
‘‘(b) USE OF OBSOLETE VESSELS.—If acquisition of the obsolete vessel 
occurs 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 vessel, the Secretary shall reduce the trade-in allowance by an amount 
representing 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 construc-
tion 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 sub-
title, the Secretary 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 
Transportation 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 obsolete 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
215 
HR 1442 RFS 
‘‘(2) except as otherwise provided in this subtitle, on trade routes 
serving 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 Mer-
chant Marine Act, 1936, and the President approves the determination, the 
Secretary, in accordance with this chapter, shall complete the long-range 
program described in section 50102 of this title. 
‘‘§ 57502. Construction, reconditioning, and remodeling of 
vessels 
‘‘(a) IN GENERAL.—The Secretary of Transportation may have new ves-
sels 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 provi-
sions of title V of the Merchant Marine Act, 1936, applicable to a contract
216 
HR 1442 RFS 
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 inter-
ested persons, 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 
Transportation in any manner may be chartered or sold by the Secretary 
of Transportation 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 maintenance of the commerce of the United States and the national de-
fense. However, the Secretary shall first determine that those routes are not 
being adequately served by existing steamship lines privately owned and op-
erated 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 pro-
vided in this chapter. 
‘‘§ 57506. Minimum selling price of vessels 
‘‘(a) IN GENERAL.—A vessel constructed under this subtitle or the Mer-
chant Marine Act, 1936, may not be sold by the Secretary of Transpor-
tation for less than the price specified in this section. 
‘‘(b) OPERATION IN FOREIGN TRADE.—If the vessel is to be operated in 
foreign trade, the minimum price is the estimated foreign construction cost 
(exclusive of national defense features) determined as of the date the con-
struction contract is executed, less depreciation under subsection (d).
217 
HR 1442 RFS 
‘‘(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 subsection (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 
demise the vessel to the charterer subject to all usual conditions contained 
in a bareboat charter. The charter shall be for a term the Secretary con-
siders 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 ves-
sel 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 solic-
iting 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 in-
formation 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 inter-
ested persons, 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 Mer-
chant Marine Act, 1936, if the charter hire offered is lower than the min-
imum charter hire would be if the vessel were chartered under section 
57531 of this title.
218 
HR 1442 RFS 
‘‘§ 57514. Qualifications of bidders 
‘‘(a) CONSIDERATIONS.—In deciding whether to award a charter to a bid-
der, the Secretary of Transportation shall consider— 
‘‘(1) the bidder’s financial resources, credit standing, and practical 
experience 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 
charter 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 deter-
mines 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 
rejection 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 
conditions, and subject to the same limitations and restrictions, as otherwise 
provided with respect to payment of operating-differential subsidies to oper-
ators 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 cumulative 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 additional charter hire, half the cumulative net voyage profit in excess
219 
HR 1442 RFS 
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.
220 
HR 1442 RFS 
‘‘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);
221 
HR 1442 RFS 
‘‘(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
222 
HR 1442 RFS 
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-