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‘‘(A) any privately owned United States-flag
commercial vessel constructed in the United States,
and if rebuilt, rebuilt in the United States or in a
Shipbuilding Agreement Party on or after the date
on which the Shipbuilding Trade Agreement Act
takes effect, and
‘‘(B) any privately owned vessel constructed in
a Shipbuilding Agreement Party on or after the date
on which the Shipbuilding Trade Agreement Act
takes effect, and if rebuilt, rebuilt in a Shipbuilding
Agreement Party or in the United States, that is
documented pursuant to chapter 121 of title 46,
United States Code.
The term ‘privately owned United States-flag commercial
vessels’ shall also be deemed to include any cargo vessel
that so qualified pursuant to section 615 of this Act or
this paragraph before the date on which the Shipbuilding
Trade Agreement Act takes effect. The term ‘privately
owned United States-flag commercial vessels’ shall not be
deemed to include any liquid bulk cargo vessel that does
not meet the requirements of section 3703a of title 46,
United States Code.’’.
(7) Section 905 (46 App. U.S.C. 1244) is
amended by adding at the end the following:
139
‘‘(h) The term ‘Shipbuilding Agreement’ means the
Agreement Respecting Normal Competitive Conditions in
the Commercial Shipbuilding and Repair Industry, which
resulted from negotiations under the auspices of the Orga-
nization for Economic Cooperation and Development, and
was entered into on December 21, 1994.
‘‘(i) The term ‘Shipbuilding Agreement Party’ means
a state or separate customs territory that is a Party to
the Shipbuilding Agreement, and with respect to which the
United States applies the Shipbuilding Agreement.
‘‘(j) The term ‘Shipbuilding Agreement vessel’ means
a vessel to which the Secretary determines Article 2.1 of
the Shipbuilding Agreement applies.
‘‘(k) The term ‘Export Credit Understanding’ means
the Understanding on Export Credits for Ships which re-
sulted from negotiations under the auspices of the Organi-
zation for Economic Cooperation and Development and
was entered into on December 21, 1994.
‘‘(l) The term ‘Export Credit Understanding vessel’
means a vessel to which the Secretary determines the Ex-
port Credit Understanding applies.’’.
(8) Section 1104A (46 App. U.S.C. 1274) is
amended as follows:
(A) Paragraph (5) of subsection (b) is
amended to read as follows:
140
‘‘(5) shall bear interest (exclusive of charges for
the guarantee and service charges, if any) at rates
not to exceed such percent per annum on the unpaid
principal as the Secretary determines to be reason-
able, taking into account the range of interest rates
prevailing in the private market for similar loans
and the risks assumed by the Secretary, except that,
with respect to Export Credit Understanding vessels,
and Shipbuilding Agreement vessels, the obligations
shall bear interest at a rate the Secretary determines
to be consistent with obligations of the United
States under the Export Credit Understanding or
the Shipbuilding Agreement, as the case may be;’’.
(B) Subsection (i) is amended to read as
follows:
‘‘(i)(1) Except as provided in paragraph (2), the Sec-
retary may not, with respect to—
‘‘(A) the general 75 percent or less limitation
contained in subsection (b)(2),
‘‘(B) the 871⁄2 percent or less limitation con-
tained in the 1st, 2nd, 4th, or 5th proviso to sub-
section (b)(2) or in section 1112(b), or
‘‘(C) the 80 percent or less limitation in the 3rd
proviso to such subsection,
141
establish by rule, regulation, or procedure any percentage
within any such limitation that is, or is intended to be,
applied uniformly to all guarantees or commitments to
guarantee made under this section that are subject to the
limitation.
‘‘(2) With respect to Export Credit Understanding
vessels and Shipbuilding Agreement vessels, the Secretary
may establish by rule, regulation, or procedure a uniform
percentage that the Secretary determines to be consistent
with obligations of the United States under the Export
Credit Understanding or the Shipbuilding Agreement, as
the case may be.’’.
(C) Section 1104B(b) (46 App. U.S.C.
1274a(b)) is amended by striking the period at
the end and inserting the following:
‘‘, except that, with respect to Export Credit Understand-
ing vessels and Shipbuilding Agreement vessels, the Sec-
retary may establish by rule, regulation, or procedure a
uniform percentage that the Secretary determines to be
consistent with obligations of the United States under the
Export Credit Understanding or the Shipbuilding Agree-
ment, as the case may be.’’.
SEC. 205. WITHDRAWAL FROM THE AGREEMENT.
(a) WITHDRAWAL.—
142
(1) NOTICE.—The President shall give notice,
under Article 14 of the Shipbuilding Agreement, of
intent of the United States to withdraw from the
Shipbuilding Agreement, as soon as is practicable
after one or more Shipbuilding Agreement Parties
give notice, under such article, of intent to withdraw
from the Shipbuilding Agreement, if paragraph (2)
applies.
(2) TONNAGE OF NEW CONSTRUCTION IN WITH-
DRAWING PARTIES.—This paragraph applies if the
combined gross tonnage of new Shipbuilding Agree-
ment vessels constructed in all Shipbuilding Agree-
ment Parties who have given notice to withdraw
from the Shipbuilding Agreement, which were deliv-
ered in the calendar year preceding the calendar
year in which the notice is given, is 15 percent or
more of the gross tonnage of new Shipbuilding
Agreement vessels that were constructed in all Ship-
building Agreement Parties and were delivered in
the calendar year preceding the calendar year in
which the notice is given.
(3) TERMINATION
OF
WITHDRAWAL.—If a
Shipbuilding Agreement Party described in para-
graph (2) takes action to terminate its withdrawal
from the Shipbuilding Agreement, so that paragraph
143
(2) would not apply if that Party had not given the
notice to withdraw, the President may take the nec-
essary steps to terminate the notice of withdrawal of
the United States from the Shipbuilding Agreement.
(b) REINSTATEMENT
OF
LAWS.—If the United
States withdraws from the Shipbuilding Agreement, on
the date on which such withdrawal becomes effective, the
amendments made by section 204 shall be deemed not to
have been made, and the provisions of law amended by
section 204 shall, on and after such date, be effective as
if this Act had not been enacted.
SEC. 206. APPLICABILITY OF TITLE XI AMENDMENTS.
(a) EFFECTIVE DATE.—
(1) IN GENERAL.—Notwithstanding any provi-
sion of the Shipbuilding Agreement or the Export
Credit Understanding, the amendments made by
paragraph (8) of section 204 shall not apply with re-
spect to any commitment to guarantee made under
title XI of the Merchant Marine Act, 1936, before
January 1, 1999, with respect to a vessel deliv-
ered—
(A) before January 1, 2002, or
(B) in the case of unusual circumstances
to which paragraph (2) applies, as soon after
January 1, 2002, as is practicable.
144
(2) UNUSUAL
CIRCUMSTANCES.—This para-
graph applies in a case in which unusual cir-
cumstances beyond the control of the parties con-
cerned prevent the delivery of a vessel by January
1, 2002. As used in this paragraph, the term ‘‘un-
usual circumstances’’ means acts of God (other than
ordinary storms or inclement weather conditions),
labor strikes, acts of sabotage, explosions, fires, or
vandalism, and similar circumstances.
SEC. 207. OTHER LAWS NOT AFFECTED.
The Shipbuilding Agreement shall not affect, directly
or indirectly, the Merchant Marine Act, 1920, the Act of
June 19, 1886 (46 U.S.C. App. 289), or any other provi-
sion of law set forth in Accompanying Note 2 to Annex
II to the Shipbuilding Agreement, and shall not provide
any mechanism to subject any producer of vessels in the
United States to financial penalties, duties, bid restric-
tions, unfavorable bid preferences, or withdrawal of con-
cessions under the GATT 1994 or other Uruguay Round
Agreements, in the competition for international commer-
cial vessel construction or reconstruction orders because
of construction of vessels by United States shipbuilders
for operation in the coastwise trade of the United States.
145
SEC. 208. PROTECTION OF UNITED STATES INTERESTS.
Nothing in the Shipbuilding Agreement shall be con-
strued to prevent the United States from taking any ac-
tion which it considers necessary for the protection of es-
sential security interests or from invoking its sovereign au-
thority to define, for purposes of exclusion from coverage
under the Shipbuilding Agreement and from any dispute
or challenge based on Annex I to the Shipbuilding Agree-
ment, ‘‘military vessel’’, ‘‘military reserve vessel’’, or ‘‘es-
sential security interest’’ on a case by case basis, as deter-
mined by the Secretary of Defense.
SEC. 209. DEFINITIONS.
As used in this title—
(1) 
the 
terms 
‘‘Shipbuilding 
Agreement’’,
‘‘Shipbuilding Agreement Party’’, ‘‘Shipbuilding
Agreement vessel’’, and ‘‘Export Credit Understand-
ing’’ have the meanings given those terms in sub-
sections (h), (i), (j), and (k), respectively, of section
905 of the Merchant Marine Act, 1936, as added by
section 204(7) of this Act; and
(2) the terms ‘‘GATT 1994’’ and ‘‘Uruguay
Round Agreements’’ have the meanings given those
terms in section 2 of the Uruguay Round Agree-
ments Act.
146
TITLE III—REVENUE OFFSET
SEC. 301. PENALTIES FOR FAILURE TO DISCLOSE POSITION
THAT CERTAIN INTERNATIONAL SHIPPING
INCOME IS NOT INCLUDIBLE IN GROSS IN-
COME.
(a) IN GENERAL.—Section 883 of the Internal Reve-
nue Code of 1986 is amended by adding at the end the
following new subsection:
‘‘(d) PENALTIES FOR FAILURE TO DISCLOSE POSI-
TION THAT CERTAIN INTERNATIONAL SHIPPING INCOME
IS NOT INCLUDIBLE IN GROSS INCOME.—
‘‘(1) IN GENERAL.—A taxpayer who, with re-
spect to any tax imposed by this title, takes the posi-
tion that any of its gross income derived from the
international operation of a ship or ships is not in-
cludible in gross income by reason of subsection
(a)(1) or section 872(b)(1) shall be entitled to such
treatment only if such position is disclosed (in such
manner as the Secretary may prescribe) on the re-
turn of tax for such tax (or any statement attached
to such return).
‘‘(2) ADDITIONAL PENALTIES FOR FAILING TO
DISCLOSE POSITION.—If a taxpayer fails to meet the
requirement of paragraph (1) with respect to any
taxable year—
147
‘‘(A) the amount of the income from the
international operation of a ship or ships—
‘‘(i) which is from sources without the
United States, and
‘‘(ii) which is attributable to a fixed
place of business in the United States,
shall be treated for purposes of this title as ef-
fectively connected with the conduct of a trade
or business within the United States, and
‘‘(B) no deductions or credits shall be al-
lowed which are attributable to income from the
international operation of a ship or ships.
‘‘(3) REASONABLE
CAUSE
EXCEPTION.—This
subsection shall not apply to a failure to disclose a
position if it is shown that such failure is due to rea-
sonable cause and not due to willful neglect.’’
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 872(b) of such
Code is amended by striking ‘‘Gross income’’ and in-
serting ‘‘Except as provided in section 883(d), gross
income’’.
(2) Paragraph (1) of section 883(a) of such
Code is amended by striking ‘‘Gross income’’ and in-
serting ‘‘Except as provided in subsection (d), gross
income’’.
148
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Notwithstanding section 3,
the amendments made by this section shall apply to
taxable years beginning after the later of—
(A) December 31, 1996, or
(B) the date that the Shipbuilding Agree-
ment enters into force with respect to the Unit-
ed States.
(2) 
COORDINATION
WITH
TREATIES.—The
amendments made by this section shall not apply in
any case where their application would be contrary
to any treaty obligation of the United States.
(d) INFORMATION TO BE PROVIDED BY CUSTOMS
SERVICE.—The United States Custom Service shall pro-
vide the Secretary of the Treasury or his delegate with
such information as may be specified by such Secretary
in order to enable such Secretary to determine whether
ships which are not registered in the United States are
engaged in transportation to or from the United States.
Passed the House of Representatives June 13, 1996.
Attest:
Clerk.