An Act to amend section 510 of the Merchant Marine Act, 1936, to provide for the trade-in of obsolete vessels in connection with the construction of new vessels, either at the time of executing the construction contract or at the time of delivery of the new vessel
PL 87-401 (S.1728), enacted 10/05/1961

76 
S T A T . ] 
PUBLIC LAW 87-401-OCT. 6, 1961 
833 
October 5, 1961 
[S. 1728] 
Merchant Marine 
Act, 1936, amend-
ment. 
Ob 8 o l e te ves-
sels, trade-in. 
53 Stat. 1183. 
Public Law 87-401 
AN ACT 
To amend section 510 of the Merchant Marine Act, 1936, to provide for the 
trade-in of obsolete vessels in connection with the construction of new vessels, 
either at the time of executing the construction contract or at the time of 
delivery of the new vessel. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress assembled^ That section 510 of 
the Merchant Marine Act, 1936 (46 U.S.C. 1160), is amended by: 
(1) Striking the present subsection (b) and inserting in lieu thereof 
the following: 
"(b) In order to promote the construction of new, safe, and efficient 
vessels to carry the domestic and foreign waterborne commerce of the 
United States, the Commission is authorized, subject to the provisions 
of this section, to acquire any obsolete vessel in exchange for an 
allowance of credit. 
The obsolete vessel shall be acquired by the 
Commission, if the owner so requests, either at the time the owner 
contracts for the construction or purchase of a new vessel or within 
five days of the actual date of delivery of the new vessel to the owner. 
The amount of the allowance shall be determined at the time of the 
acquisition of the obsolete vessel by the Commission. 
In the event 
the obsolete vessel is acquired by the Commission at the time the 
owner contracts for the construction or purchase of the new vessel, 
the allowance shall not be paid to the owner of the obsolete vessel, 
but shall be applied upon the purchase price of a new vessel. In the 
.case of a new vessel constructed under the provisions of this Act, 
such allowance may, under such terms and conditions as the Com-
mission may prescribe, be applied upon the cash payments required 
under this Act. 
In case the new vessel is not constructed under the 
provisions of this Act, the allowance shall, upon acquisition of the 
obsolete vessel by the Commission, be paid, for the account of the 
owner, to the shipbuilder constructing such new vessel. In the event 
that title to the obsolete vessel is acquired by the Commission at the 
time of delivery of the new vessel, the allowance shall be deposited in 
the owner's capital reserve fund. 
This subsection shall apply to 
obsolete vessels exchanged for new vessels hereafter contracted to be 
built, or eligible for such exchange but not exchanged in connection 
with a contract for new vessels executed prior to October 1,1960." 
(2) Striking the present subsection (d) and inserting in lieu thereof 
the following: 
"(d) The allowance for an obsolete vessel shall be the fair and 
re9.sonable value of such vessel as determined by the Commission. a
n
T
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T
i
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In making such determination the Commission shall consider: (1) the 
*^ "^^ ^^^° 
scrap value of the obsolete vessel both in American and foreign mar-
kets, (2) the depreciated value based on a twenty or twenty-five year 
life, whichever is applicable to the obsolete vessel, and (3) the market 
value thereof for operation in the world trade or in the foreign or 
domestic trade of the United States. In the event the obsolete vessel 
is acquired by the Commission at the time the owner contracts for the 
construction of the new vessel, and the owner uses such vessel during 
the period of construction of the new vessel, the allowance shall be 
reduced by an amount representing the fair value of such use. The 
/ate for the use of the obsolete vessel shall be fixed by the Commission 
for the entire period of such use at the time of execution of the con-
tract for the construction of the new vessel." 
Approved October 5, 1961. 
Allowance. 
Determination of