H. R. 1588—411
‘‘(A) be credit as an offsetting collection to the account
that finances the administration of the loan guarantee program;
‘‘(B) shall be available for expenditure only to pay the
costs of activities and services for which the fee is imposed;
and
‘‘(C) shall remain available until expended.’’.
SEC. 3527. ANNUAL REPORT ON PROGRAM.
The Secretary of Transportation shall report to Congress
annually on the loan guarantee program under title XI of the
Merchant Marine Act, 1936 (46 U.S.C. App. 1271 et seq.). The
reports shall include—
(1) the size, in dollars, of the portfolio of loans guaranteed;
(2) the size, in dollars, of projects in the portfolio facing
financial difficulties;
(3) the number and type of projects covered;
(4) a profile of pending loan applications;
(5) the amount of appropriations available for new guaran-
tees;
(6) a profile of each project approved since the last report;
and
(7) a profile of any defaults since the last report.
SEC. 3528. REVIEW OF PROGRAM.
(a) IN GENERAL.—The Secretary of Transportation shall conduct
a comprehensive assessment of the human capital and other
resource needs in connection with the title XI loan guarantee pro-
gram under the Merchant Marine Act, 1936 (46 U.S.C. App. 1271
et seq.). In connection with this assessment, the Secretary shall
develop an organizational framework for the program offices that
insures that a clear separation of duties is established among
the loan application, project monitoring, and default management
functions.
(b) PROGRAM ENHANCEMENTS.—
(1) Section 1103(h)(1) of the Merchant Marine Act, 1936
(46 U.S.C. App. 1273(h)(1)) is amended—
(A) by striking ‘‘subsection’’ in subparagraph (A) and
inserting ‘‘subsection, and update annually,’’;
(B) by inserting ‘‘annually’’ before ‘‘determine’’ in
subparagraph (B);
(C) by striking ‘‘and’’ after the semicolon in subpara-
graph (A);
(D) by striking ‘‘category.’’ in subparagraph (B) and
inserting ‘‘category; and’’; and
(E) by adding at the end the following:
‘‘(C) ensure that each risk category is comprised of
loans that are relatively homogeneous in cost and share
characteristics predictive of defaults and other costs, given
the facts known at the time of obligation or commitment,
using a risk category system that is based on historical
analysis of program data and statistical evidence con-
cerning the likely costs of defaults or other costs that
expected to be associated with the loans in the category.’’.
(2) Section 1103(h)(2)(A) of that Act (46 U.S.C. App.
1273(h)(2)(A)) is amended by inserting ‘‘and annually for
projects subject to a guarantee,’’ after ‘‘obligation,’’.
(3) Section 1103(h)(3) of that Act (46 U.S.C. App. 1273(h)(3))
is amended by adding at the end the following:
H. R. 1588—412
‘‘(K) A risk factor for concentration risk reflecting the
risk presented by an unduly large percentage of loans
outstanding by any 1 borrower or group of affiliated bor-
rowers.’’.
(c) REPORT.—The Secretary shall report to the Committee on
Armed Services and the Committee on Commerce, Science, and
Transportation of the Senate and the Committee on Armed Services
of the House of Representatives on the results of the development
of an organizational framework under subsection (a) by January
2, 2004.
Subtitle C—Maritime Security Fleet
SEC. 3531. ESTABLISHMENT OF MARITIME SECURITY FLEET.
(a) IN GENERAL.—Title 46, United States Code, is amended
by inserting before subtitle VI the following new subtitle:
‘‘Subtitle V—Merchant Marine
‘‘Chap.
Sec.
‘‘531.
Maritime Security Fleet ........................................................................ 53101
‘‘CHAPTER 531—MARITIME SECURITY FLEET
‘‘Sec.
‘‘53101. Definitions.
‘‘53102. Establishment of Maritime Security Fleet.
‘‘53103. Award of operating agreements.
‘‘53104. Effectiveness of operating agreements.
‘‘53105. Obligations and rights under operating agreements.
‘‘53106. Payments.
‘‘53107. National security requirements.
‘‘53108. Regulatory relief.
‘‘53109. Special rule regarding age of participating fleet vessel.
‘‘53110. Regulations.
‘‘53111. Authorization of appropriations.
‘‘§ 53101. Definitions
‘‘In this chapter:
‘‘(1) BULK CARGO.—The term ‘bulk cargo’ means cargo that
is loaded and carried in bulk without 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 under section 53103.
‘‘(3) FLEET.—The term ‘Fleet’ means the Maritime Security
Fleet established under section 53102(a).
‘‘(4) FOREIGN COMMERCE.—The term ‘foreign commerce’—
‘‘(A) subject to subparagraph (B), means—
‘‘(i) commerce or trade between the United States,
its territories or possessions, or the District of
Columbia, and a foreign country; and
‘‘(ii) commerce or trade between foreign countries;
and
‘‘(B) includes, in the case of liquid and dry bulk cargo
carrying services, trading between foreign ports in accord-
ance with normal commercial bulk shipping practices in
such manner as will permit United States-documented ves-
sels freely to compete with foreign-flag bulk carrying ves-
sels in their operation or in competing for charters, subject
to rules and regulations promulgated by the Secretary of
H. R. 1588—413
Transportation pursuant to this chapter or subtitle D of
the Maritime Security Act of 2003.
‘‘(5) LASH VESSEL.—The term ‘LASH vessel’ means a
lighter aboard ship vessel.
‘‘(6) PARTICIPATING FLEET VESSEL.—The term ‘participating
fleet vessel’ means any vessel that—
‘‘(A) on October 1, 2005—
‘‘(i) meets the requirements of paragraph (1), (2),
(3), or (4) of section 53102(c); and
‘‘(ii) is less than 25 years of age, or less than
30 years of age in the case of a LASH vessel; and
‘‘(B) on December 31, 2004, is covered by an operating
agreement under subtitle B of title VI of the Merchant
Marine Act, 1936 (46 U.S.C. App. 1187 et seq.).
‘‘(7) PERSON.—The term ‘person’ includes corporations, part-
nerships, and associations existing under or authorized by the
laws of the United States, or any State, Territory, District,
or possession thereof, or of any foreign country.
‘‘(8) PRODUCT TANK VESSEL.—The term ‘product tank vessel’
means a double hulled tank vessel capable of carrying simulta-
neously more than 2 separated grades of refined petroleum
products.
‘‘(9) SECRETARY.—The term ‘Secretary’ means the Secretary
of Transportation.
‘‘(10) TANK
VESSEL.—The term ‘tank vessel’ has the
meaning that term has under section 2101 of this title.
‘‘(11) UNITED STATES.—The term ‘United States’ includes
the District of Columbia, the Commonwealth of Puerto Rico,
the Northern Mariana Islands, Guam, American Samoa, the
Virgin Islands.
‘‘(12) UNITED
STATES
CITIZEN
TRUST.—(A) Subject to
subparagraph (C), the term ‘United States citizen trust’ means
a trust that is qualified under this paragraph.
‘‘(B) A trust is qualified under this paragraph with respect
to a vessel only if—
‘‘(i) each of the trustees is a citizen of the United
States; and
‘‘(ii) the application for documentation of the vessel
under chapter 121 of this title includes the affidavit of
each trustee stating that the trustee is not aware of any
reason involving a beneficiary of the trust that is not
a citizen of the United States, or involving any other person
that is not a citizen of the United States, as a result
of which the beneficiary or other person would hold more
than 25 percent of the aggregate power to influence or
limit the exercise of the authority of the trustee with
respect to matters involving any ownership or operation
of the vessel that may adversely affect the interests of
the United States.
‘‘(C) If any person that is not a citizen of the United
States has authority to direct or participate in directing a
trustee for a trust in matters involving any ownership or oper-
ation of the vessel that may adversely affect the interests
of the United States or in removing a trustee for a trust
without cause, either directly or indirectly through the control
of another person, the trust is not qualified under this para-
graph unless the trust instrument provides that persons who
H. R. 1588—414
are not citizens of the United States may not hold more than
25 percent of the aggregate authority to so direct or remove
a trustee.
‘‘(D) This paragraph shall not be considered to prohibit
a person who is not a citizen of the United States from holding
more than 25 percent of the beneficial interest in a trust.
‘‘(13) UNITED
STATES-DOCUMENTED
VESSEL.—The term
‘United States-documented vessel’ means a vessel documented
under chapter 121 of this title.
‘‘§ 53102. Establishment of Maritime Security Fleet
‘‘(a) IN GENERAL.—The Secretary of Transportation, in consulta-
tion with the Secretary of Defense, shall establish a fleet of active,
commercially viable, militarily useful, privately owned vessels to
meet national defense and other security requirements and main-
tain a United States presence in international commercial shipping.
The Fleet shall consist of privately owned, United States-docu-
mented vessels for which there are in effect operating agreements
under this chapter, and shall be known as the Maritime Security
Fleet.
‘‘(b) VESSEL ELIGIBILITY.—A vessel is eligible to be included
in the Fleet if—
‘‘(1) the vessel meets the requirements of paragraph (1),
(2), (3), or (4) of subsection (c);
‘‘(2) the vessel is operated (or in the case of a vessel
to be constructed, will be operated) in providing transportation
in foreign commerce;
‘‘(3) the vessel is self-propelled and is—
‘‘(A) a roll-on/roll-off vessel with a carrying capacity
of at least 80,000 square feet or 500 twenty-foot equivalent
units and that is 15 years of age or less on the date
the vessel is included in the Fleet;
‘‘(B) a tank vessel that is constructed in the United
States after the date of the enactment of this chapter;
‘‘(C) a tank vessel that is 10 years of age or less
on the date the vessel is included in the Fleet;
‘‘(D) a LASH vessel that is 25 years of age or less
on the date the vessel is included in the Fleet; or
‘‘(E) any other type of vessel that is 15 years of age
or less on the date the vessel is included in the Fleet;
‘‘(4) the vessel is—
‘‘(A) determined by the Secretary of Defense to be
suitable for use by the United States for national defense
or military purposes in time of war or national emergency;
and
‘‘(B) determined by the Secretary to be commercially
viable; and
‘‘(5) the vessel—
‘‘(A) is a United States-documented vessel; or
‘‘(B) is not a United States-documented vessel, but—
‘‘(i) the owner of the vessel has demonstrated an
intent to have the vessel documented under chapter
121 of this title if it is included in the Fleet; and
‘‘(ii) at the time an operating agreement for the
vessel is entered into under this chapter, the vessel
is eligible for documentation under chapter 121 of this
title.
H. R. 1588—415
‘‘(c) REQUIREMENTS
REGARDING
CITIZENSHIP
OF
OWNERS,
CHARTERERS, AND OPERATORS.—
‘‘(1) VESSEL OWNED AND OPERATED BY SECTION 2 CITIZENS.—
A vessel meets the requirements of this paragraph if, during
the period of an operating agreement under this chapter that
applies to the vessel, the vessel will be owned and operated
by one or more persons that are citizens of the United States
under section 2 of the Shipping Act, 1916 (46 U.S.C. App.
802).
‘‘(2) VESSEL OWNED BY SECTION 2 CITIZEN OR UNITED STATES
CITIZEN TRUST, AND CHARTERED TO DOCUMENTATION CITIZEN.—
A vessel meets the requirements of this paragraph if—
‘‘(A) during the period of an operating agreement under
this chapter that applies to the vessel, the vessel will
be—
‘‘(i) owned by a person that is a citizen of the
United States under section 2 of the Shipping Act,
1916 (46 U.S.C. App. 802) or that is a United States
citizen trust; and
‘‘(ii) demise chartered to a person—
‘‘(I) that is eligible to document the vessel
under chapter 121 of this title;
‘‘(II) the chairman of the board of directors,
chief executive officer, and a majority of the mem-
bers of the board of directors of which are citizens
of the United States under section 2 of the Ship-
ping Act, 1916 (46 U.S.C. App. 802), and are
appointed and subjected to removal only upon
approval by the Secretary; and
‘‘(III) that certifies to the Secretary that there
are no treaties, statutes, regulations, or other laws
that would prohibit the contractor for the vessel
from performing its obligations under an operating
agreement under this chapter;
‘‘(B) in the case of a vessel that will be demise chartered
to a person that is owned or controlled by another person
that is not a citizen of the United States under section
2 of the Shipping Act, 1916 (46 U.S.C. App. 802), the
other person enters into an agreement with the Secretary
not to influence the operation of the vessel in a manner
that will adversely affect the interests of the United States;
and
‘‘(C) the Secretary and the Secretary of Defense notify
the Committee on Armed Services and the Committee on
Commerce, Science, and Transportation of the Senate and
the Committee on Armed Services of the House of Rep-
resentatives that they concur with the certification required
under subparagraph (A)(ii)(III), and have reviewed and
agree that there are no other legal, operational, or other
impediments that would prohibit the contractor for the
vessel from performing its obligations under an operating
agreement under this chapter.
‘‘(3) VESSEL
OWNED
AND
OPERATED
BY
DEFENSE
CON-
TRACTOR.—A vessel meets the requirements of this paragraph
if—
H. R. 1588—416
‘‘(A) during the period of an operating agreement under
this chapter that applies to the vessel, the vessel will
be owned and operated by a person that—
‘‘(i) is eligible to document a vessel under chapter
121 of this title;
‘‘(ii) operates or manages other United States-docu-
mented vessels for the Secretary of Defense, or charters
other vessels to the Secretary of Defense;
‘‘(iii) has entered into a special security agreement
for purposes of this paragraph with the Secretary of
Defense;
‘‘(iv) makes the certification described in paragraph
(2)(A)(ii)(III); and
‘‘(v) in the case of a vessel described in paragraph
(2)(B), enters into an agreement referred to in that
paragraph; and
‘‘(B) the Secretary and the Secretary of Defense notify
the Committee on Armed Services and the Committee on
Commerce, Science, and Transportation of the Senate and
the Committee on Armed Services of the House of Rep-
resentatives that they concur with the certification required
under subparagraph (A)(iv), and have reviewed and agree
that there are no other legal, operational, or other impedi-
ments that would prohibit the contractor for the vessel
from performing its obligations under an operating agree-
ment under this chapter.
‘‘(4) VESSEL OWNED BY DOCUMENTATION CITIZEN AND CHAR-
TERED TO SECTION 2 CITIZEN.—A vessel meets the requirements
of this paragraph if, during the period of an operating agree-
ment under this chapter that applies to the vessel, the vessel
will be—
‘‘(A) owned by a person that is eligible to document
a vessel under chapter 121 of this title; and
‘‘(B) demise chartered to a person that is a citizen
of the United States under section 2 of the Shipping Act,
1916 (46 U.S.C. App. 802).
‘‘(d) REQUEST BY SECRETARY OF DEFENSE.—The Secretary of
Defense shall request the Secretary of Homeland Security to issue
any waiver under the first section of Public Law 81–891 (64 Stat.
1120; 46 U.S.C. App. note prec. 3) that is necessary for purposes
of this chapter.
‘‘(e) VESSEL STANDARDS.—
‘‘(1) CERTIFICATE OF INSPECTION.—A vessel used to provide
oceangoing transportation which the Secretary of the depart-
ment in which the Coast Guard is operating determines meets
the criteria of subsection (b) of this section but which, on
the date of enactment of the Maritime Security Act of 2003,
is not a documented vessel (as that term is defined in section
12101 of this title) shall be eligible for a certificate of inspection
if the Secretary determines that—
‘‘(A) the vessel is classed by and designed in accordance
with the rules of the American Bureau of Shipping, or
another classification society accepted by the Secretary;
‘‘(B) the vessel complies with applicable international
agreements and associated guidelines, as determined by
H. R. 1588—417
the country in which the vessel was documented imme-
diately before becoming a documented vessel (as defined
in that section); and
‘‘(C) that country has not been identified by the Sec-
retary as inadequately enforcing international vessel regu-
lations as to that vessel.
‘‘(2) CONTINUED ELIGIBILITY FOR CERTIFICATE.—Paragraph
(1) does not apply to a vessel after any date on which the
vessel fails to comply with the applicable international agree-
ments and associated guidelines referred to in paragraph (1)(B).
‘‘(3) RELIANCE ON CLASSIFICATION SOCIETY.—
‘‘(A) IN GENERAL.—The Secretary may rely on a certifi-
cation from the American Bureau of Shipping or, subject
to subparagraph (B), another classification society accepted
by the Secretary to establish that a vessel is in compliance
with the requirements of paragraphs (1) and (2).
‘‘(B) FOREIGN CLASSIFICATION SOCIETY.—The Secretary
may accept certification from a foreign classification society
under subparagraph (A) only—
‘‘(i) to the extent that the government of the foreign
country in which the society is headquartered provides
access on a reciprocal basis to the American Bureau
of Shipping; and
‘‘(ii) if the foreign classification society has offices
and maintains records in the United States.
‘‘(f) WAIVER OF AGE RESTRICTION.—The Secretary of Defense,
in conjunction with the Secretary of Transportation, may waive
the application of an age restriction under subsection (b)(3) if the
Secretaries jointly determine that the waiver—
‘‘(1) is in the national interest;
‘‘(2) is appropriate to allow the maintenance of the economic
viability of the vessel and any associated operating network;
and
‘‘(3) is necessary due to the lack of availability of other
vessels and operators that comply with the requirements of
this chapter.
‘‘§ 53103. Award of operating agreements
‘‘(a) IN GENERAL.—The Secretary shall require, as a condition
of including any vessel in the Fleet, that the person that is the
owner or operator of the vessel for purposes of section 53102(c)
enter into an operating agreement with the Secretary under this
section.
‘‘(b) PROCEDURE FOR APPLICATIONS.—
‘‘(1) ACCEPTANCE
OF
APPLICATIONS.—Beginning no later
than 30 days after the effective date of this chapter, the Sec-
retary shall accept applications for enrollment of vessels in
the Fleet.
‘‘(2) ACTION ON APPLICATIONS.—Within 90 days after receipt
of an application for enrollment of a vessel in the Fleet, the
Secretary shall approve the application in conjunction with
the Secretary of Defense, and shall enter into an operating
agreement with the applicant, or provide in writing the reason
for denial of that application.
‘‘(3) PARTICIPATING FLEET VESSELS.—
‘‘(A) IN
GENERAL.—The Secretary shall accept an
application for an operating agreement for a participating
H. R. 1588—418
fleet vessel under the priority under subsection (c)(1)(B)
only from a person that has authority to enter into an
operating agreement for the vessel with respect to the
full term of the operating agreement.
‘‘(B) VESSEL UNDER DEMISE CHARTER.—For purposes
of subparagraph (A), in the case of a vessel that is subject
to a demise charter that terminates by its terms on Sep-
tember 30, 2005 (without giving effect to any extension
provided therein for completion of a voyage or to effect
the actual redelivery of the vessel), or that is terminable
at will by the owner of the vessel after such date, only
the owner of the vessel shall be treated as having the
authority referred to in paragraph (1).
‘‘(C) VESSEL OWNED BY UNITED STATES CITIZEN TRUST.—
For purposes of subparagraph (B), in the case of a vessel
owned by a United States citizen trust, the term ‘owner
of the vessel’ includes a beneficial owner of the vessel
with respect to such trust.
‘‘(c) PRIORITY FOR AWARDING AGREEMENTS.—
‘‘(1) IN GENERAL.—Subject to the availability of appropria-
tions, the Secretary shall enter into operating agreements
according to the following priority:
‘‘(A) NEW TANK VESSELS.—First, for any tank vessel
that—
‘‘(i) is constructed in the United States after the
effective date of this chapter;
‘‘(ii) is eligible to be included in the Fleet under
section 53102(b); and
‘‘(iii) during the period of an operating agreement
under this chapter that applies to the vessel, will be
owned and operated by one or more persons that are
citizens of the United States under section 2 of the
Shipping Act, 1916 (46 U.S.C. App. 802),
except that the Secretary shall not enter into operating
agreements under this subparagraph for more than 5 such
vessels.
‘‘(B) PARTICIPATING
FLEET
VESSELS.—Second, to the
extent amounts are available after applying subparagraphs
(A), for any participating fleet vessel, except that the Sec-
retary shall not enter into operating agreements under
this subparagraph for more than 47 vessels.
‘‘(C) CERTAIN VESSELS OPERATED BY SECTION 2 CITI-
ZENS.—Third, to the extent amounts are available after
applying subparagraphs (A) and (B), for any other vessel
that is eligible to be included in the Fleet under section
53102(b), and that, during the period of an operating agree-
ment under this chapter that applies to the vessel, will
be—
‘‘(i) owned and operated by one or more persons
that are citizens of the United States under section
2 of the Shipping Act, 1916 (46 U.S.C. App. 802);
or
‘‘(ii) owned by a person that is eligible to document
the vessel under chapter 121 of this title, and operated
by a person that is a citizen of the United States
under section 2 of the Shipping Act, 1916 (46 U.S.C.
App. 802).
H. R. 1588—419
‘‘(D) OTHER ELIGIBLE VESSELS.—Fourth, to the extent
amounts are available after applying subparagraphs (A),
(B), and (C), for any other vessel that is eligible to be
included in the Fleet under section 53102(b).
‘‘(2) REDUCTION IN NUMBER OF SLOTS FOR PARTICIPATING
FLEET
VESSELS.—The number in paragraph (1)(B) shall be
reduced by 1—
‘‘(A) for each participating fleet vessel for which an
application for enrollment in the Fleet is not received by
the Secretary within the 90-day period beginning on the
effective date of this chapter; and
‘‘(B) for each participating fleet vessel for which an
application for enrollment in the Fleet received by the
Secretary is not approved by the Secretary and the Sec-
retary of Defense within the 90-day period beginning on
the date of such receipt.
‘‘(3) DISCRETION WITHIN PRIORITY.—The Secretary—
‘‘(A) subject to subparagraph (B), may award operating
agreements within each priority under paragraph (1) as
the Secretary considers appropriate; and
‘‘(B) shall award operating agreement within a
priority—
‘‘(i) in accordance with operational requirements
specified by the Secretary of Defense;
‘‘(ii) in the case of operating agreements awarded
under subparagraph (C) or (D) of paragraph (1),
according to applicants’ records of owning and oper-
ating vessels; and
‘‘(iii) subject to the approval of the Secretary of
Defense.
‘‘(4) TREATMENT OF TANK VESSEL TO BE REPLACED.—(A)
For purposes of the application of paragraph (1)(A) with respect
to the award of an operating agreement, the Secretary may
treat an existing tank vessel that is eligible to be included
in the Fleet under section 53102(b) as a vessel that is con-
structed in the United States after the effective date of this
chapter, if—
‘‘(i) a binding contract for construction in the United
States of a replacement vessel to be operated under the
operating agreement is executed by not later than 9 months
after the first date amounts are available to carry out
this chapter; and
‘‘(ii) the replacement vessel is eligible to be included
in the Fleet under section 53102(b).
‘‘(B) No payment under this chapter may be made for
an existing tank vessel for which an operating agreement is
awarded under this paragraph after the earlier of—
‘‘(i) 4 years after the first date amounts are available
to carry out this chapter; or
‘‘(ii) the date of delivery of the replacement tank vessel.
‘‘(d) LIMITATION.—The Secretary may not award operating
agreements under this chapter that require payments under section
53106 for a fiscal year for more than 60 vessels.
‘‘§ 53104. Effectiveness of operating agreements
‘‘(a) EFFECTIVENESS, GENERALLY.—The Secretary may enter
into an operating agreement under this chapter for fiscal year
H. R. 1588—420
2006. Except as provided in subsection (b), 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 2015.
‘‘(b) VESSELS UNDER CHARTER TO UNITED STATES.—Unless an
earlier date is requested by the applicant, the effective date for
an operating agreement with respect to a vessel that is, on the
date of entry into an operating agreement, on charter to the United
States Government, other than a charter pursuant to an Emergency
Preparedness Agreement under section 53107, shall be the expira-
tion or termination date of the Government charter covering the
vessel, or any earlier date the vessel is withdrawn from that charter.
‘‘(c) TERMINATION.—
‘‘(1) TERMINATION BY SECRETARY.—If the contractor with
respect to an operating agreement materially fails to comply
with the terms of the agreement—
‘‘(A) the Secretary shall notify the contractor and pro-
vide a reasonable opportunity to comply with the operating
agreement;
‘‘(B) the Secretary shall terminate the operating agree-
ment if the contractor fails to achieve such compliance;
and
‘‘(C) upon such termination, any funds obligated by
the agreement shall be available to the Secretary to carry
out this chapter.
‘‘(2) EARLY
TERMINATION
BY
CONTRACTOR, GENERALLY.—
An operating agreement under this chapter shall terminate
on a date specified by the contractor if the contractor notifies
the Secretary, by not later than 60 days before the effective
date of the termination, that the contractor intends to terminate
the agreement.
‘‘(3) EARLY TERMINATION BY CONTRACTOR, WITH AVAILABLE
REPLACEMENT.—An operating agreement under this chapter
shall terminate upon the expiration of the 3-year period begin-
ning on the date a vessel begins operating under the agreement,
if—
‘‘(A) the contractor notifies the Secretary, by not later
than 2 years after the date the vessel begins operating
under the agreement, that the contractor intends to termi-
nate the agreement under this paragraph; and
‘‘(B) the Secretary, in conjunction with the Secretary
of Defense, determines that—
‘‘(i) an application for an operating agreement
under this chapter has been received for a replacement
vessel that is acceptable to the Secretaries; and
‘‘(ii) during the period of an operating agreement
under this chapter that applies to the replacement
vessel, the replacement vessel will be—
‘‘(I) owned and operated by one or more per-
sons that are citizens of the United States under
section 2 of the Shipping Act, 1916 (46 U.S.C.
App. 802); or
‘‘(II) owned by a person that is eligible to
document the vessel under chapter 121 of this
title, and operated by a person that is a citizen
of the United States under section 2 of the Ship-
ping Act, 1916 (46 U.S.C. App. 802).
H. R. 1588—421
‘‘(d) 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 this chapter for that fiscal year, then
the Secretary shall notify the Committee on Armed Services and
the Committee on Commerce, Science, and Transportation of the
Senate and the Committee on Armed Services of the House of
Representatives that operating agreements authorized under this
chapter 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.
‘‘(e) RELEASE OF VESSELS FROM OBLIGATIONS.—If an operating
agreement under this chapter is terminated under subsection (c)(3),
or if funds are not appropriated for payments under an operating
agreement under this chapter for any fiscal year by the 60th day
of that fiscal year, then—
‘‘(1) each vessel covered by the operating agreement is
thereby released from any further obligation under the oper-
ating agreement;
‘‘(2) the owner or operator of the vessel may transfer and
register such vessel under a foreign registry that is acceptable
to the Secretary of Transportation and the Secretary of Defense,
notwithstanding section 9 of the Shipping Act, 1916 (46 U.S.C.
App. 808); and
‘‘(3) if section 902 of the Merchant Marine Act, 1936 (46
U.S.C. App. 1242) is applicable to such vessel after registration
of the vessel under such a registry, then the vessel is available
to be requisitioned by the Secretary of Transportation pursuant
to section 902 of such Act.
‘‘§ 53105. Obligations and rights under operating agreements
‘‘(a) OPERATION OF VESSEL.—An operating agreement under
this chapter shall require that, during the period a vessel is oper-
ating under the agreement—
‘‘(1) the vessel—
‘‘(A) shall be operated exclusively in the foreign com-
merce or in mixed foreign commerce and domestic trade
allowed under a registry endorsement issued under section
12105 of this title; and
‘‘(B) shall not otherwise be operated in the coastwise
trade; and
‘‘(2) the vessel shall be documented under chapter 121
of this title.
‘‘(b) ANNUAL PAYMENTS BY SECRETARY.—
‘‘(1) IN
GENERAL.—An operating agreement under this
chapter shall require, subject to the availability of appropria-
tions, that the Secretary make a payment each fiscal year
to the contractor in accordance with section 53106.
‘‘(2) OPERATING
AGREEMENT
IS
OBLIGATION
OF
UNITED
STATES
GOVERNMENT.—An operating agreement under this
chapter constitutes a contractual obligation of the United States
Government to pay the amounts provided for in the agreement
to the extent of actual appropriations.
‘‘(c) DOCUMENTATION REQUIREMENT.—Each vessel covered by
an operating agreement (including an agreement terminated under
section 53104(c)(2)) shall remain documented under chapter 121
of this title, until the date the operating agreement would terminate
according to its terms.
H. R. 1588—422
‘‘(d) NATIONAL SECURITY REQUIREMENTS.—
‘‘(1) IN GENERAL.—A contractor with respect to an operating
agreement (including an agreement terminated under section
53104(c)(2)) shall continue to be bound by the provisions of
section 53107 until the date the operating agreement would
terminate according to its terms.
‘‘(2) EMERGENCY
PREPAREDNESS
AGREEMENT.—All terms
and conditions of an Emergency Preparedness Agreement
entered into under section 53107 shall remain in effect until
the date the operating agreement would terminate according
to its terms, except that the terms of such Emergency Prepared-
ness Agreement may be modified by the mutual consent of
the contractor, the Secretary of Transportation, and the Sec-
retary of Defense.
‘‘(e) 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
that is eligible to enter into that operating agreement under this
chapter, if the transfer is approved by the Secretary and the Sec-
retary of Defense.
‘‘(f) REPLACEMENT VESSEL.—A contractor may replace a vessel
under an operating agreement with another vessel that is eligible
to be included in the Fleet under section 53102(b), if the Secretary,
in conjunction with the Secretary of Defense, approve replacement
of the vessel.
‘‘§ 53106. Payments
‘‘(a) ANNUAL PAYMENT.—
‘‘(1) IN GENERAL.—The Secretary, subject to the availability
of appropriations and the other provisions of this section, shall
pay to the contractor for an operating agreement, for each
vessel that is covered by the operating agreement, an amount
equal to—
‘‘(A) $2,600,000 for each of fiscal years 2006, 2007,
and 2008;
‘‘(B) $2,900,000, for each of fiscal years 2009, 2010,
and 2011; and
‘‘(C) $3,100,000 for each fiscal years 2012, 2013, 2014,
and 2015.
‘‘(2) TIMING.—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.
‘‘(b) 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 Secretary, that the vessel has been
and will be operated in accordance with section 53105(a)(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 subsection.
‘‘(c) GENERAL LIMITATIONS.—The Secretary of Transportation
shall not make any payment under this chapter for a vessel with
respect to any days for which the vessel is—
‘‘(1) under a charter to the United States Government,
other than a charter pursuant to an Emergency Preparedness
Agreement under section 53107;
H. R. 1588—423
‘‘(2) not operated or maintained in accordance with an
operating agreement under this chapter; or
‘‘(3) more than—
‘‘(A) 25 years of age, except as provided in subpara-
graph (B) or (C);
‘‘(B) 20 years of age, in the case of a tank vessel;
or
‘‘(C) 30 years of age, in the case of a LASH vessel.
‘‘(d) REDUCTIONS
IN PAYMENTS.—With respect to payments
under this chapter for a vessel covered by an operating agreement,
the Secretary—
‘‘(1) except as provided in paragraph (2), shall not reduce
any payment for the operation of the vessel to carry military
or other preference cargoes under section 2631 of title 10,
United States Code, the Act of March 26, 1934 (46 U.S.C.
App. 1241–1), section 901(a), 901(b), or 901b of the Merchant
Marine Act, 1936 (46 U.S.C. App. 1241(a), 1241(b), or 1241f),
or any other cargo preference law of the United States;
‘‘(2) shall not make any payment for any day that the
vessel is engaged in transporting more than 7,500 tons of
civilian bulk preference cargoes pursuant to section 901(a),
901(b), or 901b of the Merchant Marine Act, 1936 (46 U.S.C.
App. 1241(a), 1241(b), or 1241f), that is bulk cargo; and
‘‘(3) shall make a pro rata reduction in payment for each
day less than 320 in a fiscal year that the vessel is not operated
in accordance with section 53105(a)(1), with days during which
the vessel is drydocked or undergoing survey, inspection, or
repair considered to be days on which the vessel is operated.
‘‘(e) 
LIMITATION
REGARDING
NONCONTIGUOUS
DOMESTIC
TRADE.—
‘‘(1) IN GENERAL.—No contractor shall receive payments
pursuant to this chapter during a period in which it participates
in noncontiguous domestic trade.
‘‘(2) LIMITATION ON APPLICATION.—Paragraph (1) shall not
apply to any person that is a citizen of the United States
within the meaning of section 2(c) of the Shipping Act, 1916
(46 U.S.C. App. 802(c)).
‘‘(3) PARTICIPATES IN A NONCONTIGUOUS DOMESTIC TRADE
DEFINED.—In this subsection the term ‘participates in a non-
contiguous domestic trade’ means directly or indirectly owns,
charters, or operates a vessel engaged in transportation 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 Arctic Circle.
‘‘§ 53107. National security requirements
‘‘(a) EMERGENCY PREPAREDNESS AGREEMENT REQUIRED.—The
Secretary shall establish an Emergency Preparedness Program
under this section that is approved by the Secretary of Defense.
Under the program, the Secretary, in conjunction with the Secretary
of Defense, shall include in each operating agreement under this
chapter a requirement that the contractor enter into an Emergency
Preparedness Agreement under this section with the Secretary.
The Secretary shall negotiate and enter into an Emergency
Preparedness Agreement with each contractor as promptly as prac-
ticable after the contractor has entered into an operating agreement
under this chapter.
H. R. 1588—424
‘‘(b) TERMS OF AGREEMENT.—
‘‘(1) IN GENERAL.—An Emergency Preparedness Agreement
under this section shall require that upon a request by the
Secretary of Defense during time of war or national emergency,
or whenever determined by the Secretary of Defense to be
necessary for national security or contingency operation (as
that term is defined in section 101 of title 10, United States
Code), a contractor for a vessel covered by an operating agree-
ment under this chapter shall make available commercial
transportation resources (including services).
‘‘(2) BASIC TERMS.—(A) The basic terms of the Emergency
Preparedness Agreement shall be established (subject to
subparagraph (B)) by the Secretary and the Secretary of
Defense.
‘‘(B) In any Emergency Preparedness Agreement, the Sec-
retary 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.
‘‘(c) PARTICIPATION AFTER EXPIRATION OF OPERATING AGREE-
MENT.—Except as provided by section 53105(d), the Secretary may
not require, through an Emergency Preparedness Agreement or
operating agreement, that a contractor continue to participate in
an Emergency Preparedness Agreement after the operating agree-
ment with the contractor has expired according to its terms or
is otherwise no longer in effect. After expiration of an Emergency
Preparedness Agreement, a contractor may volunteer to continue
to participate in such an agreement.
‘‘(d) RESOURCES MADE AVAILABLE.—The commercial transpor-
tation resources to be made available under an Emergency
Preparedness Agreement shall include vessels or capacity in vessels,
intermodal systems and equipment, terminal facilities, intermodal
and management services, and other related services, or any agreed
portion of such nonvessel resources for activation as the Secretary
of Defense may determine to be necessary, seeking to minimize
disruption of the contractor’s service to commercial shippers.
‘‘(e) COMPENSATION.—
‘‘(1) IN
GENERAL.—The Secretary shall include in each
Emergency Preparedness Agreement provisions approved by
the Secretary of Defense under which the Secretary of Defense
shall pay 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 transportation resources;
‘‘(B) shall be fair and reasonable considering all cir-
cumstances;
‘‘(C) shall be provided from the time that a vessel
or resource is required by the Secretary of Defense until
the time that it is redelivered to the contractor and is
available to reenter commercial service; and
‘‘(D) shall be in addition to and shall not in any way
reflect amounts payable under section 53106.
‘‘(f) TEMPORARY REPLACEMENT VESSELS.—Notwithstanding sec-
tion 2631 of title 10, United States Code, the Act of March 26,
1934 (46 U.S.C. App. 1241–1), section 901(a), 901(b), or 901b of