I
106TH CONGRESS
2D SESSION
H. R. 4682
To amend the Merchant Marine Act, 1936, to direct the Secretary of Trans-
portation to establish a simplified formula by which application may
be made for Smaller Ship Shared-Risk Financing Guarantees, and for
other purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 15, 2000
Mr. METCALF introduced the following bill; which was referred to the
Committee on Armed Services
A BILL
To amend the Merchant Marine Act, 1936, to direct the
Secretary of Transportation to establish a simplified for-
mula by which application may be made for Smaller
Ship Shared-Risk Financing Guarantees, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Title XI Mortgage Ac-
cess and National Shipbuilding Initiative Extension Act’’.
SEC. 2. FINDINGS AND LEGISLATIVE PURPOSE.
Congress finds that—
(1) the authority granted under sections
1103(a) and 1104A of the Merchant Marine Act,
1936 (46 U.S.C. App. 1273(a) and 1274), as sup-
plemented by the National Shipbuilding and Ship-
yard Conversion Act of 1993, should be exercised to
expand the access of smaller vessel owners to ship
mortgage financing under title XI of the Merchant
Marine Act, 1936; to reduce uncertainty and unnec-
essary burden on all applicants for financing or refi-
nancing guarantees under that title so that such fi-
nancing better fulfills the policy objectives of the
National Shipbuilding and Shipyard Conversion Act
of 1993; and to continue and strengthen the title XI
program and support United States national water-
borne transportation policy; and
(2) that initiatives established by the National
Shipbuilding and Shipyard Conversion Act of 1993
to promote United States shipbuilding and to protect
the national defense interests should be continued
and potentially expanded in the context of an articu-
lated and congressionally endorsed United States
merchant shipbuilding policy.
SEC. 3. SMALLER SHIP SHARED-RISK FINANCING GUARAN-
TEES.
Title XI of the Merchant Marine Act, 1936 (46
U.S.C. App. 1271 et seq.), is amended by adding at the
end the following:
‘‘SEC. 1113. (a) The Secretary shall establish, after
consultation with 1 or more Qualified Private Financial
Institutions that are United States marine-specialist lend-
ers, a simplified form by which application may be made
for Smaller Ship Shared-Risk Financing Guarantees.
‘‘(b)(1) The Secretary shall—
‘‘(A) promptly forward each application sub-
mitted for a Smaller Ship Shared-Risk Financing
Guarantee to the Qualified Private Financial Insti-
tution identified in the application;
‘‘(B) remit one-half of the application fee to
such institution; and
‘‘(C) in the case of an application for guarantee
of an obligation to finance an eligible export vessel,
make the notification required to the Secretary of
Defense.
‘‘(2) The Qualified Private Financial Institution shall
make a decision under its applicable underwriting guide-
lines to offer or decline to extend the proposed financing
at a proposed rate of interest, a proposed origination fee
not exceeding 1 percent of the amount of finance extended
inclusive of the one-half percent commitment fee payable
to the Secretary, a proposed repayment term not exceed-
ing 15 years on a basis which may but need not allow
repayment by equal payments on a fully-amortized basis,
with or without proposed guarantees, and with or without
collateral additional to a first preferred mortgage on the
vessel.
‘‘(3) If the applicant determines to accept financing
terms proposed by a Qualified Private Financial Institu-
tion, such institution shall notify the Secretary of the ap-
plicant’s determination and of such Institution’s proposed
terms and its analysis of the application under its applica-
ble underwriting guidelines (including information suffi-
cient for the Secretary to make the computations required
under the Federal Credit Reform Act). Such analysis shall
be exempt from disclosure under section 552 of title 5,
United States Code, popularly known as the Freedom of
Information Act.
‘‘(4) On receipt of such notification and analysis from
such Qualified Private Financial Institution, the Secretary
shall review and approve or disapprove the application
within 14 days after such receipt. The Secretary may with-
in 14 days notify such Institution in writing if the Sec-
retary determines the application does not satisfy the re-
quirement of economic soundness, or in the case of an eli-
gible export vessel if the Secretary of Defense has timely
notified the Secretary of the disapproval of the application
by the Secretary of Defense, or if for other lawful reasons
the Secretary determines not to approve the application,
in which event the application is deemed to be disapproved
under this title. Absent such written notification of dis-
approval within such 14-day period, the application is
deemed approved (except as provided in paragraph (6))
and the Secretary shall issue a commitment under this
title to guarantee unconditionally the repayment of prin-
cipal and interest for not more than half of the total fi-
nance proposed on the terms proposed by such Qualified
Private Financial Institution and accepted by the appli-
cant.
‘‘(5) No applicant for a Smaller Ship Shared-Risk Fi-
nancing Guarantee shall be required by the Secretary—
‘‘(A) to enter into a Title XI Reserve Fund and
Financial Agreement under this title;
‘‘(B) to restrict or impound the payment of
dividends and earnings beyond any extent required
by applicable State law;
‘‘(C) to prepare or submit audited or reviewed
financial statements if financial statements of the
applicant have not previously been reviewed or au-
dited; or
‘‘(D) to build or maintain a proposed United
States-flag vessel in class as a condition of accept-
ance of terms or as a condition of the Secretary’s
approval.
‘‘(6) In no event shall an application for a Smaller
Ship Shared-Risk Financing Guarantee be considered ap-
proved until the applicant has paid the commitment fee
for the element of the finance under this title and unless
there remains available unexpended appropriated funds
for the Secretary to make the payment required under the
Federal Credit Reform Act upon the commitment to guar-
antee relating to such application.
‘‘(c) In the event of an uncured material default on
an issued Smaller Ship Shared-Risk Financing Guarantee
and demand for payment made to the Secretary—
‘‘(1) the Secretary promptly shall pay according
to the terms of the Secretary’s guarantee;
‘‘(2) notwithstanding such payment, the Quali-
fied Private Financial Institution concerned—
‘‘(A) shall be entitled and responsible to
enforce the entire indebtedness unpaid by the
shipowner against all collateral, all guarantees,
and the shipowner; and
‘‘(B) shall do so for the joint benefit of the
Secretary and such institution;
‘‘(3) the United States district courts shall have
subject matter jurisdiction over any action to recover
in the event of any such default; and
‘‘(4) funds recovered following any such default
shall, after first being applied to pay or repay the
costs of collection thereof, be equally apportioned be-
tween the Secretary and the Qualified Private Fi-
nancial Institution.
‘‘(d) The Secretary may not require an applicant, as
a condition to a commitment to guarantee pursuant to this
section, to enter into loan or closing documentation sup-
plemental to the usual and customary documentation of
the Qualified Private Financial Institution concerned, but
the Secretary may require an applicant to execute a short-
form indemnity relating to the guarantee and the Sec-
retary may enter into a simple form of intercreditor agree-
ment with the Qualified Private Financial Institution if
no terms thereof are inconsistent with the provisions of
this section and the provisions of this section and the pro-
visions of this Act.
‘‘(e) In this section:
‘‘(1) The term ‘Qualified Private Financial In-
stitution’ means—
‘‘(A) any of the United States maritime-
specialist lenders Caterpillar Financial Services,
Inc., Case Credit Financial Services, Inc., or
Safeco Credit, Inc.; and
‘‘(B) any other State or federally chartered
bank or savings and loan association or other
financial lending institution, that the Secretary
finds to have reasonable maritime lending expe-
rience and underwriting standards that are no
less prudent than the standards of the United
States maritime-specialist lenders referred to in
subparagraph (A).
‘‘(2) The term ‘Smaller Ship Shared-Risk Fi-
nancing Guarantees’ means a guarantee under this
title of an obligation for which—
‘‘(A) the proposed repayment term does
not exceed 15 years;
‘‘(B) the amount of financing for new
building, conversion, or refinance for any 1 ves-
sel does not exceed $5,000,000;
‘‘(C) the percentage of total actual cost to
be financed does not exceed 85 percent; and
‘‘(D) an amount at least equal to the
amount of the obligation proposed to be guar-
anteed would be financed by 1 or more Quali-
fied Private Financial Institutions without a
guarantee under this title.’’.
SEC.
4.
ELIGIBILITY
FOR
SMALLER
SHIP
SHARED-RISK
FINANCING GUARANTEES.
Title XI of the Merchant Marine Act, 1936, is further
amended by adding at the end the following:
‘‘SEC. 1114. (a) Any United States-flag vessel or
each eligible export vessel, including any eligible facilities
and equipment related to marine operations of such a ves-
sel, shall be eligible for a Smaller Ship Shared-Risk Fi-
nancing Guarantee if the vessel is—
‘‘(1) self-propelled and primarily engaged in the
carriage of or afloat supply of goods or services to
passengers for remuneration (with or without freight
or vehicles, or both), irrespective of minimum service
speed or installed horsepower; and
‘‘(2) primarily engaged in commercial trade, ex-
cept a fishing and fisheries vessel, whether self-pro-
pelled (irrespective of minimum service speed or in-
stalled horsepower) or nonself-propelled, and wheth-
er manned or unmanned and whether surface or
subsurface.
‘‘(b) There shall be no minimum total actual cost for
the vessel eligibility established by this Act. The eligibility
established by this Act is additional to eligibilities for obli-
gation guarantees under laws.’’.
SEC. 5. RESTRICTIONS ON CONDITIONS FOR GUARANTEES.
(a) IN GENERAL.—Title XI of the Merchant Marine
Act, 1936, is further amended by adding at the end the
following:
‘‘SEC. 1115. The Secretary may not—
‘‘(1) require the payment of an application
fee—
‘‘(A) greater than $2,500 on an application
for a financing or refinancing guarantee under
this title not exceeding $5,000,000;
‘‘(B) greater than $5,000 on an applica-
tion for a guarantee not exceeding $10,000,000;
or
‘‘(C) greater than $10,000 on an applica-
tion for a guarantee under this title exceeding
$10,000,000;
‘‘(2) require any applicant seeking a financing
or refinancing guarantee under this title for a vessel
the design and engineering of which will be subject
to approval before documentation by the United
States Coast Guard or, in the case of an eligible ex-
port vessel, by a member society of the International
Association of Classification Societies acting for or
in addition to a foreign Administration, to submit
vessel plans, drawings, and engineering data for
independent review by the Secretary, except that the
Secretary—
‘‘(A) may condition the commitment to
guarantee any such obligation on receipt of
proof of having obtained such other regulatory
or society approvals; and
‘‘(B) may require—
‘‘(i) submission of such data and
drawings as are reasonably necessary to
establish a vessel’s capacities for and per-
formance in her intended trade insofar as
the same affect the determination of eco-
nomic soundness in addition to general
vessel data and information to the extent
necessary to assess collateral and potential
collateral resale values; and
‘‘(ii) submission of all such data for
any proposed vessel that involves tech-
nology performance issues that should be
assessed independently to determine the
presence or absence of unacceptable ship
technology risk;
‘‘(3) require, except in the unusual case of an
applicant for which coastwise trade eligibility is un-
certain and for which such eligibility is germane to
economic soundness, any applicant for financing or
refinancing guarantees of a vessel to be documented
under the laws of the United States to submit as
part of their application any proof of United States
citizenship for independent review by the Secretary
as to eligibility, except that the Secretary may condi-
tion the commitment to guarantee any such obliga-
tion on receipt of proof of having qualified for docu-
mentation under the laws of the United States to
the satisfaction of the United States Coast Guard;
‘‘(4) require any applicant to affirmatively
make a claim of exemption from section 552 of title
5, United States Code, popularly known as the Free-
dom of Information Act, for so much of the applica-
tion as exceeds the application’s summary of infor-
mation in part 1 of the application, and such bal-
ance of application information is exempt from dis-
closure under that section;
‘‘(5) exclude foreign content from inclusion in
actual cost, if at least 51 percent of total cost is not
foreign content and the hull and superstructure are
assembled entirely in the United States, or exclude
domestic sales tax or foreign import duties or value-
added tax from inclusion in actual cost if the same
normally would be required to be capitalized under
accepted accounting principles;
‘‘(6) collect or provide by rule for the payment
of guarantee fees at the inception of the term for re-
payment, and the Secretary shall instead require the
payment annually of an amount equal to one-half of
1 percent of the then-unpaid principal obligation or
portion thereof to which the title XI guarantee ap-
plies; or
‘‘(7) during the term for repayment of an obli-
gation guarantee of $10,000,000 or less for the fi-
nancing or refinancing of a vessel that is docu-
mented under the laws of the United States, impose
on a shipowner any requirements for survey or in-
spection in excess of the requirements then imposed
by the United States Coast Guard under title 46 of
the Code of Federal Regulations.’’.
(b) REPEAL
OF REQUIREMENT
OF FINDING
FOR
GUARANTEE
FOR ELIGIBLE EXPORT VESSEL.—Para-
graph (1) of section 1103(g) of the Merchant Marine Act,
1936 (46 U.S.C. App. 1273(g)), is repealed.
SEC. 6. AUTHORITY.
Title XI of the Merchant Marine Act, 1936, is further
amended by adding at the end the following:
‘‘SEC. 1116. The Secretary of Transportation, sub-
ject to the availability of appropriations—
‘‘(1) may contract with disinterested and quali-
fied private sector specialists in ship technology and
market sectors to advice the Secretary on any appli-
cation for a financing or refinancing guarantee
under this title for which the Secretary lacks ship
technology or market sector specialist expertise,
other than for an application for a Smaller Ship
Shared-Risk Financing Guarantee under section
1113, select disinterested and qualified persons to
provide the same advise on an unadvertised basis
and reimburse such selected specialists at a fair and
reasonable rate; and shall collect from the applicant
so much of the investigation and application fees
payable in connection with such application as is
necessary to pay the cost of such specialists; and
‘‘(2) may authorize travel by persons employed
or engaged by the Secretary to review an application
for any financing or refinancing guarantee, to visit
the situs of the applicant.’’.
SEC. 7. REPORTS TO CONGRESS.
(a) REPORT BY SECRETARY OF DEFENSE.—The Sec-
retary of Defense shall, in consultation with the Secretary
of Transportation, before June 30, 2001, submit to the
Congress a written report on—
(1) the extent to which projects approved within
the Maritech and Maritech ASE programs under the
National Shipbuilding and Shipyard Conversion Act
of 1993 have created technologies and capabilities
among both larger and smaller United States ship-
builders that support national defense preparedness
interests; and
(2) how such program may be continued to sup-
port national defense interests, including the rec-
ommended level of resources to continue such pro-
gram.
(b) REPORT BY SECRETARY OF TRANSPORTATION.—
The Secretary of Transportation shall, before June 30,
2001, submit to Congress a written report that—
(1) proposes an articulated United States mer-
chant shipbuilding policy, identifies the extent to
which United States shipyards are competitive with
measures to aid or retain competitiveness, identifies
the permanent levels of staffing and resources nec-
essary to administer title XI of the Merchant Marine
Act, 1936, and discusses the advisability of retaining
the program under that title under the United
States Maritime Administration or transferring its
administration to a Government-owned corporation
subject to recommended extent of continued congres-
sional budgetary and other oversights and whether
existing safeguards on title XI credit extension deci-
sions are adequate;
(2) recommends informational or other meas-
ures and the associated level and cost of resources,
that may be taken by the Secretary, alone or in co-
operation with the Overseas Private Investment Cor-
poration, to reduce basis-point-spread market addi-
tions on title XI bonds by expanding the pool of
bond purchasers;
(3) reports whether payments have been made
into title XI Reserve Funds to which the Govern-
ment made effective resort as collateral following de-
fault and that discusses any justification, as against
shipowner burden, of retaining the title XI Reserve
Fund and Financial Agreement loan feature; and
(4) recommends any other measures, including
extending title XI obligation authority, that will
strengthen the United States merchant marine in-
frastructure and promote national policy objectives.
SEC. 8. UNITED STATES PASSENGER VESSEL RESEARCH
SUPPORT.
The Secretary of Transportation, acting through the
Coast Guard and subject to appropriations, may provide
financial assistance for research projects proposed to and
selected by the United States Passenger Vessel Associa-
tion that—
(1) foster business process or design tech-
nologies to avoid or mitigate adverse environmental
impacts from domestic passenger vessel operations;
(2) promote cost-effective solutions to passenger
and crew safety issues arising from operations and
changing technologies;
(3) propose, promote, or assess the feasibility of
waterborne passenger transport (including effective
intermodal connections where applicable) in United
States locales with existing or foreseeable nonwater-
borne transport congestion of people or goods (or
both); or
(4) any combination of paragraphs (1) through
(3).
SEC. 9. INITIATIVE AUTHORITY CONTINUED.
The authority created under the National Ship-
building and Shipyard Conversion Act of 1993 to extend
the availability of title XI obligation guarantees to eligible
export vessels and for United States shipyard moderniza-
tion shall continue until terminated or otherwise modified
by the Congress. Annual appropriations for program re-
sources and Federal Credit Reform Act payments for the
program under title XI of the Merchant Marine Act, 1936,
shall be under the jurisdiction of the respective House of
Representatives and Senate transportation appropriations
subcommittees.
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