H. R. 1350
One Hundred Fourth Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Wednesday,
the third day of January, one thousand nine hundred and ninety-six
An Act
To amend the Merchant Marine Act, 1936 to revitalize the United States-flag
merchant marine, and for other purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Maritime Security Act of 1996’’.
SEC. 2. MARITIME SECURITY PROGRAM.
Title VI of the Merchant Marine Act, 1936 (46 U.S.C. App.
1171 et seq.) is amended—
(1) by striking the title heading and inserting the following:
‘‘TITLE VI—VESSEL OPERATING ASSISTANCE PROGRAMS
‘‘Subtitle A—Operating-Differential Subsidy Program’’;
and
(2) by adding at the end the following new subtitle:
‘‘Subtitle B—Maritime Security Fleet Program
‘‘ESTABLISHMENT OF FLEET
‘‘SEC. 651. (a) IN GENERAL.—The Secretary of Transportation
shall establish a fleet of active, militarily useful, privately-owned
vessels to meet national defense and other security requirements
and maintain a United States presence in international commercial
shipping. The Fleet shall consist of privately owned, United States-
flag vessels for which there are in effect operating agreements
under this subtitle, and shall be known as the Maritime Security
Fleet.
‘‘(b) VESSEL ELIGIBILITY.—A vessel is eligible to be included
in the Fleet if the vessel is self-propelled and—
‘‘(1)(A) is operated by a person as an ocean common carrier;
‘‘(B) whether in commercial service, on charter to the
Department of Defense, or in other employment, is either—
‘‘(i) a roll-on/roll-off vessel with a carrying capacity
of at least 80,000 square feet or 500 twenty-foot equivalent
units; or
‘‘(ii) a lighter aboard ship vessel with a barge capacity
of at least 75 barges; or
‘‘(C) any other type of vessel that is determined by the
Secretary to be suitable for use by the United States for
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national defense or military purposes in time of war or national
emergency;
‘‘(2)(A)(i) is a United States-documented vessel; and
‘‘(ii) on the date an operating agreement covering the vessel
is entered into under this subtitle, is—
‘‘(I) a LASH vessel that is 25 years of age or
less; or
‘‘(II) any other type of vessel that is 15 years of age
or less;
except that the Secretary of Transportation may waive the
application of clause (ii) if the Secretary, in consultation with
the Secretary of Defense, determines that the waiver is in
the national interest; or
‘‘(B) it is not a United States-documented vessel, but the
owner of the vessel has demonstrated an intent to have the
vessel documented under chapter 121 of title 46, United States
Code, if it is included in the Fleet, and the vessel will be
less than 10 years of age on the date of that documentation;
‘‘(3) the Secretary of Transportation determines that the
vessel is necessary to maintain a United States presence in
international commercial shipping or, after consultation with
the Secretary of Defense, determines that the vessel is militarily
useful for meeting the sealift needs of the United States with
respect to national emergencies; and
‘‘(4) at the time an operating agreement for the vessel
is entered into under this subtitle, the vessel will be eligible
for documentation under chapter 121 of title 46, United States
Code.
‘‘OPERATING AGREEMENTS
‘‘SEC. 652. (a) IN GENERAL.—The Secretary of Transportation
shall require, as a condition of including any vessel in the Fleet,
that the owner or operator of the vessel enter into an operating
agreement with the Secretary under this section. Notwithstanding
subsection (g), the Secretary may enter into an operating agreement
for, among other vessels that are eligible to be included in the
Fleet, any vessel which continues to operate under an operating-
differential subsidy contract under subtitle A or which is under
charter to the Department of Defense.
‘‘(b) REQUIREMENTS FOR OPERATION.—An operating agreement
under this section shall require that, during the period a vessel
is operating under the agreement—
‘‘(1) the vessel—
‘‘(A) shall be operated exclusively in the foreign trade
or in mixed foreign and domestic trade allowed under a
registry endorsement issued under section 12105 of title
46, United States Code, and
‘‘(B) shall not otherwise be operated in the coastwise
trade; and
‘‘(2) the vessel shall be documented under chapter 121
of title 46, United States Code.
‘‘(c) REGULATORY RELIEF.—A contractor of a vessel included
in an operating agreement under this subtitle may operate the
vessel in the foreign commerce of the United States without restric-
tion, and shall not be subject to any requirement under section
801, 808, 809, or 810. Participation in the program established
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by this subtitle shall not subject a contractor to section 805 or
to any provision of subtitle A.
‘‘(d) EFFECTIVENESS AND ANNUAL PAYMENT REQUIREMENTS OF
OPERATING AGREEMENTS.—
‘‘(1) EFFECTIVENESS.—The Secretary of Transportation may
enter into an operating agreement under this subtitle for fiscal
year 1996. 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 2005.
‘‘(2) ANNUAL PAYMENT.—An operating agreement under this
subtitle shall require, subject to the availability of appropria-
tions and the other provisions of this section, that the Secretary
of Transportation pay each fiscal year to the contractor, for
each vessel that is covered by the operating agreement, an
amount equal to $2,300,000 for fiscal year 1996 and $2,100,000
for each fiscal year thereafter in which the agreement is in
effect. 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.
‘‘(e) 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 of Transportation, that
the vessel has been and will be operated in accordance with sub-
section (b)(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.
‘‘(f) OPERATING AGREEMENT IS OBLIGATION OF UNITED STATES
GOVERNMENT.—An operating agreement under this subtitle con-
stitutes a contractual obligation of the United States Government
to pay the amounts provided for in the agreement to the extent
of actual appropriations.
‘‘(g) LIMITATIONS.—The Secretary of Transportation shall not
make any payment under this subtitle for a vessel with respect
to any days for which the vessel is—
‘‘(1) subject to an operating-differential subsidy contract
under subtitle A or under a charter to the United States
Government, other than a charter pursuant to section 653;
‘‘(2) not operated or maintained in accordance with an
operating agreement under this subtitle; or
‘‘(3) more than 25 years of age, except that the Secretary
may make such payments for a LASH vessel for any day
for which the vessel is more than 25 years of age if that
vessel—
‘‘(A) is modernized after January 1, 1994,
‘‘(B) is modernized before it is 25 years of age, and
‘‘(C) is not more than 30 years of age.
‘‘(h) PAYMENTS.—With respect to payments under this subtitle
for a vessel covered by an operating agreement, the Secretary
of Transportation—
‘‘(1) except as provided in paragraph (2), shall not reduce
any payment for the operation of a 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 this Act, or
any other cargo preference law of the United States;
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‘‘(2) shall not make any payment for any day that a vessel
is engaged in transporting more than 7,500 tons of civilian
bulk preference cargoes pursuant to section 901(a), 901(b), or
901b 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 a vessel covered by
an operating agreement is not operated in accordance with
subsection (b)(1), with days during which the vessel is
drydocked or undergoing survey, inspection, or repair consid-
ered to be days on which the vessel is operated.
‘‘(i) PRIORITY
FOR AWARDING AGREEMENTS.—Subject to the
availability of appropriations, the Secretary shall enter into operat-
ing agreements according to the following priority:
‘‘(1) VESSELS OWNED BY CITIZENS.—
‘‘(A) PRIORITY.—First, for any vessel that is—
‘‘(i) owned and operated by persons who are
citizens of the United States under section 2 of the
Shipping Act, 1916; or
‘‘(ii) less than 10 years of age and owned and
operated by a corporation that is—
‘‘(I) eligible to document a vessel under chapter
121 of title 46, United States Code; and
‘‘(II) affiliated with a corporation operating or
managing for the Secretary of Defense other ves-
sels documented under that chapter, or chartering
other vessels to the Secretary of Defense.
‘‘(B) LIMITATION
ON
NUMBER
OF
OPERATING
AGREE-
MENTS.—The total number of operating agreements that
may be entered into by a person under the priority in
subparagraph (A)—
‘‘(i) for vessels described in subparagraph (A)(i),
may not exceed the sum of—
‘‘(I) the number of United States-documented
vessels the person operated in the foreign com-
merce of the United States (except mixed coastwise
and foreign commerce) on May 17, 1995; and
‘‘(II) the number of United States-documented
vessels the person chartered to the Secretary of
Defense on that date; and
‘‘(ii) for vessels described in subparagraph (A)(ii),
may not exceed 5 vessels.
‘‘(C) TREATMENT OF RELATED PARTIES.—For purposes
of subparagraph (B), a related party with respect to a
person shall be treated as the person.
‘‘(2) OTHER VESSELS OWNED BY CITIZENS AND GOVERNMENT
CONTRACTORS.—To the extent that amounts are available after
applying paragraph (1), any vessel that is owned and operated
by a person who is—
‘‘(A) a citizen of the United States under section 2
of the Shipping Act, 1916, that has not been awarded
an operating agreement under the priority established
under paragraph (1); or
‘‘(B)(i) eligible to document a vessel under chapter 121
of title 46, United States Code; and
‘‘(ii) affiliated with a corporation operating or managing
other United States-documented vessels for the Secretary
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of Defense or chartering other vessels to the Secretary
of Defense.
‘‘(3) OTHER VESSELS.—To the extent that amounts are avail-
able after applying paragraphs (1) and (2), any other eligible
vessel.
‘‘(j) 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
eligible to enter into that operating agreement under this subtitle
after notification of the Secretary in accordance with regulations
prescribed by the Secretary, unless the transfer is disapproved
by the Secretary within 90 days after the date of that notification.
A person to whom an operating agreement is transferred may
receive payments from the Secretary under the agreement only
if each vessel to be covered by the agreement after the transfer
is an eligible vessel under section 651(b).
‘‘(k) REVERSION OF UNUSED AUTHORITY.—The obligation of the
Secretary to make payments under an operating agreement under
this subtitle shall terminate with respect to a vessel if the contractor
fails to engage in operation of the vessel for which such payment
is required—
‘‘(1) within one year after the effective date of the operating
agreement, in the case of a vessel in existence on the effective
date of the agreement, or
‘‘(2) within 30 months after the effective date of the operat-
ing agreement, in the case of a vessel to be constructed after
that effective date.
‘‘(l) PROCEDURE
FOR CONSIDERING APPLICATION; EFFECTIVE
DATE FOR CERTAIN VESSELS.—
‘‘(1) PROCEDURES.—No later than 30 days after the date
of the enactment of the Maritime Security Act of 1996, the
Secretary shall accept applications for enrollment of vessels
in the Fleet, and within 90 days after receipt of an application
for enrollment of a vessel in the Fleet, the Secretary shall
enter into an operating agreement with the applicant or provide
in writing the reason for denial of that application.
‘‘(2) EFFECTIVE DATE.—Unless an earlier date is requested
by the applicant, the effective date for an operating agreement
with respect to a vessel which is, on the date of entry into
an operating agreement, either subject to a contract under
subtitle A or on charter to the United States Government,
other than a charter under section 653, shall be the expiration
or termination date of the contract under subtitle A or of
the Government charter covering the vessel, respectively, or
any earlier date the vessel is withdrawn from that contract
or charter.
‘‘(m) EARLY TERMINATION.—An operating agreement under this
subtitle 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. Vessels covered by an operating
agreement terminated under this subsection shall remain docu-
mented under chapter 121 of title 46, United States Code, until
the date the operating agreement would have terminated according
to its terms. A contractor who terminates an operating agreement
pursuant to this subsection shall continue to be bound by the
provisions of section 653 until the date the operating agreement
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would have terminated according to its terms. All terms and condi-
tions of an Emergency Preparedness Agreement entered into under
section 653 shall remain in effect until the date the operating
agreement would have terminated according to its terms, except
that the terms of such Emergency Preparedness Agreement may
be modified by the mutual consent of the contractor and the Sec-
retary of Transportation and the Secretary of Defense.
‘‘(n) 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 section 655 for that fiscal year, the
Secretary of Transportation shall notify the Congress that operating
agreements authorized under this subtitle 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.
If funds are not appropriated under the authority provided by
section 655 for any fiscal year by the 60th day of that fiscal
year, then each vessel covered by an operating agreement under
this subtitle for which funds are not available is thereby released
from any further obligation under the operating agreement, and
the vessel owner or operator may transfer and register such vessel
under a foreign registry deemed acceptable by the Secretary of
Transportation, notwithstanding any other provision of law. If sec-
tion 902 is applicable to such vessel after registration of the vessel
under such a registry, the vessel is available to be requisitioned
by the Secretary of Transportation pursuant to section 902.
‘‘(o) AWARD OF OPERATING AGREEMENTS.—
‘‘(1) IN GENERAL.—The Secretary of Transportation, subject
to paragraph (4), shall award operating agreements within
each priority under subsection (i) (1), (2), and (3) under regula-
tions prescribed by the Secretary.
‘‘(2) NUMBER
OF
AGREEMENTS
AWARDED.—Regulations
under paragraph (1) shall provide that if appropriated amounts
are not sufficient for operating agreements for all vessels within
a priority under subsection (i) (1), (2), or (3), the Secretary
shall award to each person submitting a request a number
of operating agreements that bears approximately the same
ratio to the total number of vessels in the priority, as the
amount of appropriations available for operating agreements
for vessels in the priority bears to the amount of appropriations
necessary for operating agreements for all vessels in the
priority.
‘‘(3) TREATMENT
OF
RELATED
PARTIES.—For purposes of
paragraph (2), a related party with respect to a person shall
be treated as the person.
‘‘(4) PREFERENCE FOR UNITED STATES-BUILT VESSELS.—In
awarding operating agreements for vessels within a priority
under subsection (i) (1), (2), or (3), the Secretary shall give
preference to a vessel that was constructed in the United States,
to the extent such preference is consistent with establishment
of a fleet described in the first sentence of section 651(a) (taking
into account the age of the vessel, the nature of service provided
by the vessel, and the commercial viability of the vessel).
‘‘(p) NOTICE TO UNITED STATES SHIPBUILDERS REQUIRED.—The
Secretary shall include in any operating agreement under this
subtitle a requirement that the contractor under the agreement
shall, by not later than 30 days after soliciting any bid or offer
for the construction of any vessel in a foreign shipyard and before