Maritime Security Act of 1996
PL 104-239 (H.R.1350), enacted 10/08/1996

110 STAT. 3118 
PUBLIC LAW 104-239—OCT. 8, 1996 
Public Law 104-239 
104th Congress 
An Act 
Oct. 8, 1996 
To amend the Merchant Marine Act, 1936 to revitaUze the United States-flag 
[H.R. 1350] 
merchant marine, and for other purposes. 
Be it enacted by the Senate and House of Representatives of 
Maritime 
the United States of America in Congress assembled, 
19%"*^ ^* °^ 
SECTION 1. SHORT TITLE. 
^o\T^^®^®'^^®- 
This Act may be cited as the "Maritime Security Act of 1996". 
46 use app. 
"
^ 
-^ 
1245 note. 
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 
46 use app. 
" S E C 651. (a) IN GENERAL.—The Secretary of Transportation 
1187. 
shall establish a fleet of active, militarily useful, privately-owned 
vessels to meet national defense gmd 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 roU-on/roU-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 
PUBLIC LAW 104-239—OCT. 8, 1996 
110 STAT. 3119 
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 nationsd 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 witn 
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 
46USCapp. 
shall require, as a condition of including any vessel in the Fleet, 
Ii87a. 
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 
110 STAT. 3120 
PUBLIC LAW 104-239—OCT. 8, 1996 
by this subtitle shsdl 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 pa3nnent 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 pa5anent 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 pajrments 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 pajonent 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; 
PUBLIC LAW 104-239—OCT. 8, 1996 
110 STAT. 3121 
"(2) shall not make any pa3m(ient 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 (AXii), 
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 avEiilable after 
appljdng paragraph (1), any vessel that is owned £ind 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 
110 STAT. 3122 
PUBLIC LAW 104-239—OCT. 8, 1996 
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. 
"0") 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 pa3anents 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 
SecretEiry 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. 
"(1) 
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 shedl 
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 Grovemment, 
other than a charter under section 653, shall be the expiration 
or termination date of the contract under subtitle A or of 
the Grovemment 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 
PUBLIC LAW 104-239—OCT. 8, 1996 
110 STAT. 3123 
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 
110 STAT. 3124 
PUBLIC LAW 104-239—OCT. 8, 1996 
entering into a contract for construction of a vessel in a foreign 
shipyard, provide notice of the intent of the contractor to enter 
into such a contract to each shipyard in the United States that 
is capable of constructing the vessel. 
'^NATIONAL SECURITY REQUIREMENTS 
46 use app. 
"SEC. 653. (a) EMERGENCY PREPAREDNESS AGREEMENT.— 
1187b. 
"(1) REQUIREMENT TO ENTER AGREEMENT.—^The Secretary 
Establishment. 
^f Transportation shall establish an Emergency Prepsiredness 
Program under this section that is approved by the Secretary 
of Defense, Under the program, the Secretary of Transportation 
shall include in each operating agreement under this subtitle 
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 
practicable after the contractor has entered into an operating 
agreement under this subtitle. 
"(2) TERMS OF AGREEMENT.—^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 wnenever determined by the Secretary of Defense 
to be necessary for national security (including any natural 
disaster, international peace operation, or contingency oper-
ation (as that term is defined in section 101 of title 10, United 
States Code)), a contractor for a vessel covered by an operating 
agreement under this subtitle shall make available commercisu 
transportation resources (including services). The basic terms 
of the Emergency Preparedness Agreements shall be estab-
lished pursuant to consultations among the Secretary, the Sec-
retary of Defense, and Maritime Security Program contractors. 
In any Emergency Preparedness Agreement, tne Secretsiry and 
a contractor may agree to additional or modifying terms appro-
priate to the contractor's circumstances if those terms have 
been approved by the Secretary of Defense. 
"(3) 
PARTICIPATION AFTER 
EXPIRATION OF OPERATING 
AGREEMENT.—^Except as provided by section 652(m), the Sec-
retary may not require, through an Emergency Preparedness 
Agreement or operating agreement, that a contractor continue 
to participate in an Emergency Preparedness Agreement when 
the operating agreement with the contractor has expired accord-
ing to its terms or is otherwise no longer in effect. After expira-
tion of an Emergency Preparedness Agreement, a contractor 
may volunteer to continue to participate in such an agreement. 
"(b) 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 
may determine to be necessary, seeking to minimize disruption 
of the contractor's service to commercial shippers. 
"(c) COMPENSATION.— 
"(1) IN GENERAL.—^The Secretary of Transportation shall 
provide in each Emergency PrepEiredness Agreement for fair 
and reasonable compensation for all commercial transportation 
resources provided pursuant to this section. 
PUBLIC LAW 104-239—OCT. 8, 1996 
110 STAT. 3125 
"(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 include all the contractor's costs associated 
with provision and use of the contractor's commercial 
resources to meet emergency requirements; 
"(C) in the case of a charter of an entire vessel, shall 
be fair and reasonable; 
"(D) shall be in addition to and shall not in any way 
reflect amounts payable under section 652; £ind 
"(E) shall be provided from the time that a vessel 
or resource is diverted from commercial service until the 
time that it reenters commercial service. 
"(3) APPROVAL OF AMOUNT BY SECRETARY OF DEFENSE.— 
No compensation may be provided for a vessel under this 
subsection unless the gimount of the compensation is approved 
by the Secretary of Defense. 
"(d) TEMPORARY REPLACEMENT VESSELS.—^Notwithstanding any 
other provision of this subtitle or of other law to the contrary— 
"(1) a contractor may operate or employ in foreign 
commerce a foreign-flag vessel or foreign-flag vessel capacity, 
as a temporary replacement for a United States-documented 
vessel or United States-documented vessel capacity that is acti-
vated under an Emergency Preparedness Agreement; and 
"(2) such replacement vessel or vessel capacity shall be 
eligible during the replacement period to transport preference 
cargoes subject to section 2631 of title 10, United States Code, 
the Act of March 26, 1934 (46 U.S.C. App. 1241-1), and sections 
901(a), 901(b), and 901b of this Act to the same extent as 
the eligibility of the vessel or vessel capacity replaced. 
"(e) 
REDELIVERY AND LIABILITY 
OF UNITED 
STATES FOR 
DAMAGES.— 
"(1) IN GENERAL.—All commercial transportation resources 
activated under an Emergency Preparedness Agreement shall, 
upon termination of the period of activation, be redelivered 
to the contractor in the same good order and condition as 
when received, less ordinary wear and tear, or the Government 
shall fully compensate the contractor for any necessary repair 
or replacement. 
"(2) LIMITATION ON LIABILITY OF UNITED STATES.—^Except 
as may be expressly agreed to in an Emergency Preparedness 
Agreement, or as otherwise provided by law, the Government 
shall not be liable for disruption of a contractor's commercial 
, business or other consequential damages to a contractor arising 
from activation of commercial transportation resources under 
an Emergency Preparedness Agreement. 
"(3) 
LIMITATION 
ON APPLICATION OF OTHER 
REQUIRE-
MENTS.—Sections 902 Eind 909 of this Act shall not apply to 
a vessel while it is covered by an Emergency Preparedness 
Agreement under this subtitle. Any Emergency Preparedness 
Agreement entered into by a contractor shall supersede any 
other agreement between that contractor and the Government 
for vessel availability in time of war or national emergency. 
110 STAT. 3126 
PUBLIC LAW 104-239—OCT. 8, 1996 
"DEFINITIONS 
46 use app. 
"SEC. 654. In this subtitle: 
1187c. 
"(1) BULK CARGO.—The term Tbulk 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 of Transportation under 
section 652. 
"(3) OCEAN COMMON CARRIER.—^The term 'ocean common 
carrier* means a person holding itself out to the general public 
to operate vessels to provide transportation by water of pas-
sengers or cargo between the United States and a foreign 
country for compensation, that— 
"(A) assumes responsibility for the transportation from 
the port or point of receipt to the port or point of destina-
tion, and 
"(B) utilizes, for all or part of that transportation, 
a vessel operating on the high seas or the Great Lsikes 
between a port in the United States and a port in a foreign 
country, except that the term does not include a common 
carrier engaged in ocean transportation by ferry boat, ocean 
tramp, or chemical parcel-tanker. As used in this para-
graph, 'chemical parcel-tanker' means a vessel whose cargo-
carrying capability consists of individual cargo tanks for 
bulk chemicals that are a permanent part of the vessel, 
that have segregation capability with piping systems to 
permit simultaneous carriage of several bulk chemical car-
goes with minimum risk of cross-contamination, and that 
has a valid certificate of fitness under the International 
Maritime Organization Code for the Construction and 
Equipment of Ships Carrying Dangerous Chemicals in 
Bulk. 
"(4) FLEET.—^The term 'Fleet' means the Maritime Security 
Fleet established pursuant to section 651(a). 
"(5) LASH VESSEL.—The term 'LASH vessel' means a 
lighter aboard ship vessel. 
"(6) 
UNITED 
STATES-DOCUMENTED 
VESSEL.—^The 
term 
'United States-documented vessel' means a vessel documented 
under chapter 121 of title 46, United States Code. 
"AUTHORIZATION OF APPROPRIATIONS 
46 use app. 
"SEC. 655. There are authorized to be appropriated for operating 
1187d. 
agreements under this subtitle, to remain available until expended, 
$100,000,000 for fiscal year 1996 and such sums as may be nec-
essary, not to exceed $100,000,000, for each fiscal year theresifter 
through fiscal year 2005.". 
SEC. 
3. 
TERMINATION 
OF 
OPERATING-DIFFERENTIAL SUBSIDY 
PROGRAM. 
(a) LIMITATION ON PAYMENTS FOR OLDER VESSELS.—Section 
605(b) of the Merchant Marine Act, 1936 (46 U.S.C. App. 1175(b)), 
is amended to read as follows: 
"(b) No operating-differential subsidy shall be paid for the oper-
ation of a vessel m e r the calendar year the vessel becomes 25 
years of age, unless the Secretary of Transportation has determined, 
before the date of enactment of the Maritime Security Act of 1996, 
PUBLIC LAW 104-239—OCT. 8, 1996 
110 STAT. 3127 
that it is in the pubHc interest to grant such financial aid for 
the operation of such vessel.". 
(b) WIND-UP OF PROGRAM.—Subtitle A of such Act (46 U.S.C. 
App. 1171 et seq.), as designated by the amendment made by 
section 2(1), is further amended by adding at the end the following 
new section: 
"SEC. 616. (a) After the date of enactment of the Maritime 
Security Act of 1996, the Secretary of Transportation shall not 
enter into £iny new contract for operating-differential subsidy under 
this subtitle. 
"(b) Notwithstanding £iny other provision of this Act, any operat-
ing-differential subsidy contract in effect under this title on the 
day before the date of enactment of the Maritime Security Act 
of 1996 shall continue in effect and terminate as set forth in 
the contract, unless voluntarily terminated at an earlier date by 
the parties (other than the United States Government) to the con-
tract. 
"(c) The essential service requirements of section 601(a) and 
603(b), and the provisions of sections 605(c) and 809(a), shall not 
apply to the operating-differential subsidy program under this sub-
title effective upon the earlier of— 
"(1) the date that a payment is made, under the Maritime 
Security Program established by subtitle B to a contractor 
under that subtitle who is not party to an operating-differential 
subsidy contract under this subtitle, with the Secretary to 
cause notice of the date of such pajment to be published in 
the Federal Register as soon as possible; or 
"(2) with respect to a particular contractor under the 
operating-differential subsidy program, the date that contractor 
enters into a contract with the Secretary under the Maritime 
Security Progrsim established by subtitle B. 
"(d)(1) Notwithstanding any other provision of law, a vessel 
may be transferred and registered under an effective United States-
controlled foreign flag if— 
"(A) the operator of the vessel receives an operating-
differential subsidy pursuant to a contract under this subtitle 
which is in force on October 1, 1994, and the Secretary approves 
the replacement of such vessel with a comparable vessel, or 
"(B) the vessel is covered by an operating agreement under 
subtitle B, and the Secretary approves the replacement of such 
vessel with a comparable vessel for inclusion in the Maritime 
Security Fleet established under subtitle B. 
"(2) Any such vessel may be requisitioned by the Secretary 
of Transportation pursuant to section 902.". 
SEC. 4. DOMESTIC OPERATIONS. 
(a) IN GENERAL.—Subtitle B of title VI of the Merchant Marine 
Act, 1936, as amended by section 102 of this title, is further 
amended by adding at the end the following new section: 
"NONCONTIGUOUS DOMESTIC TRADES 
"SEC. 656. (a)(1) Except as otherwise provided in this section, 
no contractor or related party shall receive payments pursuant 
to this subtitle during a period when it participates in a noncontig-
uous domestic trade, except upon written permission of the 
Secretary of Transportation. Such written permission shall also 
be required for any material change in the number or frequency 
46 u s e app. 
1185a. 
Federal Register, 
publication. 
46 u s e app. 
11876. 
110 STAT. 3128 
PUBLIC LAW 104-239—OCT. 8, 1996 
Federal Register, 
publication. 
Hearings. 
Federal Register, 
publication. 
of sailings, the capacity offered, or the domestic ports called by 
a contractor or related party in a noncontiguous domestic trade. 
The Secretary may grant such written permission pursuant to writ-
ten application of such contractor or related party unless the Sec-
retary finds that— 
"(A) existing service in that trade is adequate; or 
"(B) the service sought to be provided by the contractor 
or related party— 
"(i) would result in unfair competition to any other 
person operating vessels in such noncontiguous domestic 
trade, or 
"(ii) would be contrary to the objects and policy of 
this Act. 
"(2) For purposes of this subsection, 'written permission of 
the Secretary* means permission which states the capacity offered, 
the number and frequency of sailings, and the domestic ports called, 
and which is granted following— 
"(A) written 
application 
containing 
the 
information 
required by paragrapn (e)(1) by a person seeking such written 
permission, notice of which application shall be published in 
the Federal Register within 15 days of filing of such application 
with the Secretary; 
"(B) holding of a hearing on the application under section 
554 of title 5, United States Code, in which every person, 
firm or corporation having any interest in the application shall 
be permitted to intervene and be heard; £ind 
"(C) final decision on the application by the Secretary 
within 120 days following conclusion of such hearing. 
"(b) Subsection (a) shall not apply in any way to provision 
by a contractor of service within the level of service provided by 
that contractor as of the date established by subsection (c) or 
to provision of service permitted by subsection (d). 
"(c) The date referred to in subsection (b) shall be August 
9, 1995: Provided however. That with respect to tug and barge 
service to Alaska the date referred to in subsection (b) shall be 
July 1,1992. 
"(d) A contractor may provide service in a trade in addition 
to the level of service provided as of the applicable date established 
by subsection (c) in proportion to the annual increase in real gross 
product of the noncontiguous State or Commonwealth served since 
the applicable date established by subsection (c). 
"(e)(1) A person appljdng for award of an agreement imder 
this subtitle shall include with the application a description of 
the level of service provided by that person in each noncontiguous 
domestic trade served as of the date applicable under subsection 
(c). The application also shall include, for each such noncontiguous 
domestic trade: a list of vessels operated by that person in such 
trade, their container carrying capacity expressed in twenty-foot 
equivalent units (TEUs) or other carrying capacity, the itinerary 
for each such vessel, and such other information as the Secretary 
may require by regulation. Such description and information shall 
be made available to the public. Within 15 days of the date of 
an application for an agreement by a person seeking to provide 
service pursuant to subsections (b) and (c) of this section, the 
Secretary shall cause to be published in the Federal Register notice 
of such description, along with a request for public comment 
thereon. Comments on such description shall be submitted to the 
PUBLIC LAW 104-239—OCT. 8, 1996 
110 STAT. 3129 
Secretary within 30 days of publication in the Federal Register. 
Within 15 days after receipt of comments, the Secretary shall issue 
a determination in writing either accepting, in whole or part, or 
rejecting use of the applicant's description to establish the level 
of service provided as of the date applicable under subsection (c): 
Provided, That notwithstanding the provisions of this subsection, 
processing of the application for an award of an agreement shall 
not be suspended or delayed during the time in which comments 
may be submitted with respect to the determination or during 
the time prior to issuance by the Secretary of the required 
determination: Provided further. That if the Secretary does not 
make the determination required by this paragraph within the 
time provided by this paragraph, the description of the level of 
service provided by the applicant shall be deemed to be the level 
of service provided as of the applicable date until such time as 
the SecretEiry makes the determination. 
"(2) No contractor shall implement the authority granted in 
subsection (d) of this section except as follows: 
"(A) An application shall be filed with the Secretary which 
shall state the increase in capacity sought to be offered, a 
description of the means by which such additional capacity 
would be provided, the basis for applicant's position that such 
increase in capacity would be in proportion to or less than 
the increase in real gross product of the relevant noncontiguous 
State or Commonwealth since the applicable date established 
by subsection (c), and such information as the Secretary may 
require so that the Secretary may accurately determine such 
increase in real gross product of the relevant noncontiguous 
State or Commonwealth. 
"(B) Such increase in capacity sought by applic£int and 
such information shall be made available to the public. 
"(C) Within 15 days of the date of an application pursuant 
Federal Register, 
to this paragraph the Secretary shall cause to be published publication, 
in the Federal Register notice of such application, along with 
a request for public comment thereon. 
"(D) Comments on such application shall be submitted 
to the Secretary within 30 days of publication in the Federal 
Register. 
"(E) Within 15 days after receipt of comments, the 
Secretary shall issue a determination in writing either accept-
ing, in whole or part, or rejecting, the increase in capacity 
sought by the applicant as being in proportion to or less than 
the increase in real gross product of the relevant noncontiguous 
State or Commonwealth since the applicable date established 
by subsection (c): Provided, That, notwithstanding the provi-
sions of this section, if the Secretary does not make the deter-
mination required by this paragraph within the time provided 
by this paragraph, the increase in capacity sought by applicant 
shall be permitted as being in proportion to or less than such 
increase in real gross product until such time as the Secretary 
makes the determination. 
"(f) With respect to provision by a contractor of service in 
a noncontiguous domestic trade not authorized by this section, 
the Secretary shall deny payments under the operating agreement 
with respect to the period of provision of such service but shall 
deny payments only in part if the extent of provision of such 
unauthorized service was de minimis or not material. 
110 STAT. 3130 
PUBLIC LAW 104-239—OCT. 8, 1996 
"(g) Notwithstanding any other provision of this subtitle, the 
Secretary may issue temporary permission for any United States 
citizen, as that term is defined in section 2 of the Shipping Act, 
1916, to provide service to a noncontiguous State or Commonwealth 
upon the request of the Governor of such noncontiguous State 
or Commonwealth, in circumstances where an Act of Grod, a declara-
tion of war or national emergency, or any other condition occurs 
that prevents ocean transportation service to such noncontiguous 
State or Commonwealth from being provided by persons currently 
providing such service. Such temporary permission shall expire 
90 days from date of grant, unless extended by the Secretary 
upon written request of the Grovemor of such State or Common-
wealth. 
"(h) As used in this section: 
"(1) The term 'level of service provided by a contractor' 
in a trade as of a date means— 
"(A) with respect to service other than service described 
in (B), the total annual capacity provided by the contractor 
in that trade for the 12 calendar months preceding that 
date: Provided, That, with respect to unscheduled, contract 
carrier tug and barge service between points in Alaska 
south of the Arctic Circle and points in the contiguous 
48 States, the level of service provided by a contractor 
shall include 100 percent of the capacity of the equipment 
dedicated to such service on the date specified in subsection 
(c) and actually utilized in that service in the two-year 
period preceding that date, excluding service to points 
between Anchorage, Alaska and Whittier, Alaska, served 
by common carrier service unless such unscheduled service 
is only for carriage of oil or pursuant to a contract with 
the United States military: Provided further. That, with 
respect to scheduled barge service between the contiguous 
48 States and Puerto Rico, such total annual capacity shall 
be deemed as such total annual capacity plus the annual 
capacity of two additional barges, each capable of canying 
185 trailers and 100 automobiles; and 
"(B) with respect to service provided by container 
vessels, the overall capacity equal to the sum of— 
"(i) 100 percent of the capacity of vessels operated 
by or for the contractor on that date, with the vessels' 
configuration and frequency of sailing in effect on that 
date, and which participate solely in that noncontig-
uous domestic trade; and 
"(ii) 75 percent of the capacity of vessels operated 
by or for the contractor on that date, with the vessels' 
configuration and frequency of sailing in effect on that 
date, and which participate in that noncontiguous 
domestic trade and in another trade, provided that 
the term does not include any restriction on frequency, 
or number of sailings, or on ports called within such 
overall capacity. 
"(2) The level of service set forth in paragraph (1) shall 
be described with the specificity required by subsection (eXl) 
and shall be the level of service in a trade with respect to 
the applicable date established by subsection (c) only if the 
service is not abandoned thereafter, except for interruptions 
PUBLIC LAW 104-239—OCT. 8, 1996 
110 STAT. 3131 
due to military contingency or other events beyond the contrac-
tor's control. 
"(3) The term 'participates in a noncontiguous 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. 
"(4) The term 'related pEirty* means— 
"(A) a holding company, subsidiary, affiliate, or associ-
ate of a contractor who is a party t<5 an operating agreement 
under this subtitle; £ind 
"(B) an officer, director, agent, or other executive of 
a contractor or of a person referred to in subparagraph 
(A).", 
(b) CONFORMING AMENDMENT.—Section 805 of the Merchant 
Marine Act, 1936 (46 U.S.C. App. 1223) is amended— 
(1) by striking "title VI of this Act" each place it appesirs 
and inserting "subtitle A of title VI of this Act"; £ind 
(2) by striking "under title VI" each place it appears and 
inserting "under subtitle A of title VI". 
SEC. 5. USE OF FOREIGN-FLAG VESSELS. 
(a) IN GENERAL.—Section 804 of the Merchant Marine Act, 
1936 (46 U.S.C. App. 1222) is amended by adding at the end 
the following new subsection: 
"(f) The provisions of subsection (a) shall not preclude a contrac-
tor receiving assistance under subtitle A or B of title VI, or any 
holding company, subsidiary, or affiliate of the contractor, or any 
officer, director, agent, or executive thereof, from— 
"(1) owning, chartering, or operating any foreign-flag vessel 
on a voyage or a segment of a voyage that does not call 
at a port in the United States; 
"(2) owning, chartering, or operating any foreign-flag vessel 
in line haul service between the United States and foreign 
ports if— 
"(A) the foreign-flag vessel was owned, chartered, or 
operated by, or is a replacement for a foreign-flag vessel 
owned, chartered, or operated by, such owner or operator, 
or any holding company, subsidiary, affiliate, or associate 
of such owner or operator, on the date of enactment of 
the Maritime Security Act of 1996; 
"(B) the owner or operator, with respect to each addi-
tional foreign-flag vessel, other than a time chartered ves-
sel, has first applied to have that vessel covered by an 
operating agreement under subtitle B of title VI, and the 
Secretary has not awarded an operating agreement with 
respect to that vessel within 90 days after the filing of 
the application; or 
"(C) the vessel has been placed under foreign docu-
mentation pursuant to section 9 of the Shipping Act, 1916 
(46 U.S.C. App. 808), except that any foreign-flag vessel, 
other than a time chartered vessel, a replacement vessel 
under section 653(d), or a vessel operated by the owner 
or operator on the date of enactment of the Maritime 
Security Act of 1996, in line haul service between the 
United States and foreign ports is registered under the 
110 STAT. 3132 
PUBLIC LAW 104-239—OCT. 8, 1996 
flag of an effective United States-controlled foreign flag, 
and available to be requisitioned by the Secretary of 
Transportation pursuant to section 902 of this Act; 
"(3) owning, chartering, or operating foreign-flag bulk cargo 
vessels that are operated in foreign-to-foreign service or the 
foreign commerce of the United States; 
"(4) chartering or operating foreign-flag vessels that are 
operated solely as replacement vessels for United States-flag 
vessels or vessel capacity that sire made available to the 
Secretary of Defense pursuant to section 653 of this Act; or 
"(5) entering into time or space charter or other cooperative 
agreements with respect to foreign-flag vessels or acting as 
agent or broker for a foreign-flag vessel or vessels.". 
46 use app. 
(b) EFFECTIVE DATE.—^The amendment made by subsection (a) 
1222 note. 
shall apply to a contractor under subtitle B of title VI of the 
Merchant Marine Act, 1936, as amended by this Act, upon enact-
ment of this Act, and shall apply to a contractor under subtitle 
A of title VI of that Act, upon the earlier of— 
Federal Register, 
(1) the date that a pa3rment is made, under the Maritime 
publication. 
Security Program under subtitle B of that title to a contractor 
under subtitle B of that title who is not party to an operating-
differential subsidy contract under subtitle A of that title, with 
the Secretary of Transportation to cause notice of the date 
of such payment to be published in the Federal Register as 
soon as possible; or 
(2) with respect to a particular contractor under the operat-
ing-differential subsidy program under subtitle A of that title, 
the date that contractor enters into a contract with the 
Secretary under the Maritime Security Program established 
by subtitle B of that title. 
SEC. 6. AMENDMENT TO SfflPPING ACT, 1916. 
Section 9 of the Shipping Act, 1916 (46 U.S.C. App. 808) is 
amended by adding at the end the following: 
"(e) Notwithstanding subsection (c)(2), the Merchant Marine 
Act, 1936, or any contract entered into with the Secretary of 
Transportation under that Act, a vessel may be placed under a 
foreign registry, without approval of the Secretary, if— 
"(1)(A) the Secretary determines that at least one replace-
ment vessel of a capacity that is equivalent or greater, as 
measured by deadweight tons, gross tons, or container equiva-
lent units, as appropriate, is documented under chapter 121 
of title 46, United States Code, by the owner of the vessel 
placed under the foreign registry; and 
"(B) the replacement vessel is not more than 10 years 
of age on the date of that documentation; 
"(2)(A) £in application for an operating agreement under 
subtitle B of title VI of the Merchant Marine Act, 1936 has 
been filed with respect to a vessel which is eligible to be 
included in the Maritime Security Fleet under section 651(bXl) 
of that Act; and 
"(B) the Secretary has not awarded an operating agreement 
with respect to that vessel within 90 days after the date of 
that application; 
"(3) a contract covering the vessel under subtitle A of 
title VI of the Merchant Marine Act, 1936 has expired, and 
PUBLIC LAW 104-239—OCT. 8, 1996 
110 STAT. 3133 
that vessel is more than 15 years of age on the date the 
contract expires; or 
"(4) an operating agreement covering the vessel under sub-
title B of title VI of the Merchant Marine Act, 1936 has 
expired.". 
SEC. 7. CONSTRUCTION DIFFERENTIAL SUBSIDY RESTRICTIONS. 
Title V of the Merchant Marine Act, 1936 (46 U.S.C. App. 
1151 et seq.) is amended by adding at the end the following new 
section: 
"SEC. 512. LIMITATION ON RESTRICTIONS. 
46 USC app. 
1162 
"Notwithstanding any other provision of law or contract, all 
restrictions and requirements under sections 503, 506, and 802 
applicable to a 
liner 
vessel 
constructed, 
reconstructed, or 
reconditioned with the aid of construction-differential subsidy shadl 
terminate upon the expiration of the 25-year period beginning on 
the date of the original delivery of the vessel from the shipyard.". 
SEC. 8. REGULATIONS. 
46 USC app. 
1 1 QfJ ——Art 
(a) IN GENERAL.—^The Secretary of Transportation may pre-
scribe rules as necessary to carry out this Act and the amendments 
made by this Act. 
(b) INTERIM 
RULES.—^The Secretary of Transportation may 
prescribe interim rules necessary to carry out this Act and the 
amendments made by this Act. For this purpose, the Secretary 
of Transportation is excepted from compliance with the notice and 
comment requirements of section 553 of title 5, United States 
Code. All rules prescribed under the authority of this subsection 
that are not earlier superseded by final rules shall expire no later 
than 270 days after the date of enactment of this Act. 
SEC. 9. MERCHANT SfflP SALES ACT OF 1946 AMENDMENT. 
Section 11 of the Merchant Ship Sales Act of 1946 (50 U.S.C. 
App. 1744) is amended as follows: 
(1) In subsection (b)(2) by striking "Secretary of the Navy," 
and inserting "Secretary of Defense,". 
(2) By striking subsection (c) and redesignating subsection 
(d) as subsection (c). 
SEC. 10. REEMPLOYMENT RIGHTS FOR CERTAIN MERCHANT SEAMEN. 
(a) IN GENERAL.—^Title III of the Merchant Marine Act, 1936 
(46 U.S.C. App. 1131) is amended by inserting after section 301 
the following new section: 
"SEC. 302. (a) An individual who is certified by the Secretary 
46 USC app. 
of Transportation under subsection (c) shall be entitled to reemploy- 1132. 
ment rights and other benefits substantially equivalent to the rights 
and benefits provided for by chapter 43 of title 38, United States 
Code, for any member of a Reserve component of the Armed Forces 
of the United States who is ordered to active duty. 
"(b) An individual may submit an application for certification 
under subsection (c) to the Secretary of Transportation not later 
than 45 days after the date the individual completes a period 
of emplo5anent described in subsection (c)(1)(A) with respect to 
which the application is submitted. 
"(c) Not later than 20 days sifter the date the Secretary of 
Transportation receives from an individual an application for certifi-
cation under this subsection, the Secretary shall— 
110 STAT. 3134 
PUBLIC LAW 104-239—OCT. 8, 1996 
"(1) determine whether or not the individual— 
"(A) was employed in the activation or operation of 
a vessel— 
"(i) in the National Defense Reserve Fleet main-
tained under section 11 of the Merchant Ship Sales 
Act of 1946, in a period in which that vessel was 
in use or being activated for use under subsection 
(b) of that section; 
"(ii) that is requisitioned or purchased under 
section 902 of this Act; or 
"(iii) that is owned, chartered, or controlled by 
the United States and used by the United States for 
a w£ir, armed conflict, national emergency, or maritime 
mobilization need (including for training purposes or 
testing for readiness £uid suitability for mission 
performance); and 
"(B) during the period of that employment, possessed 
a valid license, certificate of registry, or merchant mariner's 
document issued under chapter 71 or chapter 73 (as 
applicable) of title 46, United States Code; and 
"(2) if the Secretary makes affirmative determinations 
under paragraph (1) (A) and (B), certify that individual under 
this subsection. 
"(d) For purposes of reemployment rights and benefits provided 
by this section, a certification under subsection (c) shall be consid-
ered to be the equivalent of a certificate referred to in paragraph 
(1) of section 4301(a) of title 38, United States Code.". 
46 use app. 
(b) APPLICATION.—^The amendment made by subsection (a) shall 
1132 note. 
apply to emplo3anent described in section 302(c)(1)(A) of the 
Merchant Marine Act, 1936, as amended by subsection (a), occurring 
after the date of enactment of this Act. 
46 use app. 
(c) REGULATION.—^Not later than 120 days after the date of 
1132 note. 
the enactment of this Act, the Secretary of Transportation shall 
issue regulations implementing this section. 
SEC. 11. TITLE XI LOAN GUARANTEES. 
Title XI of the Merchant Marine Act, 1936 (46 U.S.C. App. 
1271 et seq.) is amended— 
46 use app. 
(1) in section 1101(b), by striking "owned by citizens of 
1271. 
the United States"; 
46 use app. 
(2) in section 1104B(a), in the material preceding paragraph 
1274a. 
(1)^ by striking "owned by citizens of the United States"; and 
46 use app. 
(3) in section 1110(a), by striking "owned by citizens of 
1279c. 
the United States". 
SEC. 12. EXTENSION OF WAR RISK INSURANCE AUTHORITY. 
Section 1214 of the Merchant Marine Act, 1936 (46 U.S.C. 
App. 1294) is amended by striking "June 30, 1995" and inserting 
"June 30, 2000". 
SEC. 13. VESSEL LOAN GUARANTEE PROGRAM. 
(a) 
RISK 
FACTOR 
DETERMINATIONS.—Section 
1103 
of 
the 
Merchant Marine Act, 1936 (46 U.S.C. App. 1273) is amended 
by adding at the end the following new subsection: 
"(h)(1) The Secretary shall— 
"(A) establish in accordsmce with this subsection a system 
of risk categories for obligations guaranteed under this title, 
that categorizes the relative risk of guarsmtees made under 
PUBLIC LAW 104-239—OCT. 8, 1996 
110 STAT. 3135 
this title with respect to the risk factors set forth in paragraph 
(3); and 
"(B) determine for each of the risk categories a subsidy 
rate equivalent to the cost of obligations in the category, 
expressed as a percentage of the amount guaranteed under 
this title for obligations in the category. 
"(2)(A) Before making a guarantee under this section for an 
obligation, the Secretary shall apply the risk factors set forth in 
paragraph (3) to place the obligation in a risk category established 
under paragraph (1)(A). 
"(B) The Secretary shall consider the aggregate amount avail-
able to the Secretary for making guarantees under this title to 
be reduced by the amount determined by multipl3dng— 
"(i) the amount guaranteed under this title for an 
obligation, by 
"(ii) the subsidy rate for the category in which the 
obligation is placed under subparagraph (A) of this paragraph. 
"(C) The estimated cost to the Government of a guarantee 
made by the Secretary under this title for an obligation is deemed 
to be the amount determined under subparagraph (B) for the 
obligation. 
"(D) The Secretary may not guarantee obligations under this 
title after the aggregate amount available to the Secretary under 
appropriations Acts for the cost of loan guarantees is required 
by subparagraph (B) to be considered reduced to zero. 
"(3) The risk factors referred to in paragraphs (1) and (2) 
are the following: 
"(A) If applicable, the country risk for each eligible export 
vessel financed or to be financed by an obligation. 
"(B) The period for which an obligation is guaranteed or 
to be guaranteed. 
"(C) The amount of an obligation, which is guaranteed 
or to be guaranteed, in relation to the total cost of the project 
financed or to be financed by the obligation. 
"(D) The financial condition of an obligor or applicant for 
a guarantee. 
"(E) If applicable, any guarantee related to the project, 
other than the guargmtee under this title for which the risk 
factor is applied. 
"(F) If applicable, the projected employment of each vessel 
or equipment to be financed with an obligation. 
"(G) If applicable, the projected market that will be served 
by each vessel or equipment to be financed with an obligation. 
"(H) The collateral provided for a guarantee for an 
obligation. 
"(I) The management and operating experience of an obligor 
or applicant for a guarantee. 
"(J) Whether a guarantee under this title is or will be 
in effect during the construction period of the project. 
"(4) In this subsection, the term 'cost' has the meaning given 
that term in section 502 of the Federal Credit Reform Act of 
1990 (2 U.S.C. 661a).". 
(b) APPLICATION.—Subsection (h)(2) of section 1103 of the 46USCapp. 
Merchant Marine Act, 1936 (46 U.S.C. App. 1273), as amended 
1273 note. 
by subsection (a) of this section, shall apply to guarantees that 
the Secretary of Transportation makes or commits to make with 
110 STAT. 3136 
PUBLIC LAW 104-239—OCT. 8, 1996 
any amounts that are unobligated on or after the date of enactment 
of this Act. 
(c) GUARANTEE FEES.—Section 1104A(e) of title XI of the 
Merchant Marine Act, 1936 (46 U.S.C. App. 1274(e)) is amended 
to read as follows: 
"(e)(1) Except as otherwise provided in this subsection, the 
Secretary shall prescribe regulations to assess in accordance with 
this subsection a fee for the guarantee of an obligation under 
this title. 
"(2)(A) The amount of a fee under this subsection for a 
guarantee is equal to the sum determined by adding the amounts 
determined under subparagraph (B) for the years in which the 
guarantee is in effect. 
"(B) The amount referred to in subparagraph (A) for a year 
is the present value (determined by applying the discount rate 
determined under subparagraph (F)) of the amount determined 
by multipl3dng— 
"(i) the estimated average unpaid principal amount of the 
obligation that will be outstanding during the year (determined 
in accordance with subparagraph (E)), by 
"(ii) the fee rate established under subparsigraph (C) for 
the obligation for each year. 
"(C) The fee rate referred to in subparagraph (BXii) for an 
obligation shall be— 
"(i) in the case of an obligation for a delivered vessel 
or equipment, not less than one-half of 1 percent and not 
more than 1 percent, determined by the Secretary for the 
obligation under the formula established under subparagraph 
(D);or 
"(ii) in the case of an obligation for a vessel to be con-
structed, reconstructed, or reconditioned, or of equipment to 
be delivered, not less than one-quarter of 1 percent and not 
more than one-half of 1 percent, determined by the Secretary 
for the obligation under the formula established under subpara-
graph (D). 
"(D) The Secretary shall establish a formula for determining 
the fee rate for an ooligation for purposes of subparagraph (C), 
that— 
"(i) is a sliding scale based on the creditworthiness of 
the obligor; 
"(ii) takes into account the security provided for a guarantee 
under this title for the obligation; and 
"(iii) uses— 
"(I) in the case of the most creditworthy obligors, the 
lowest rate authorized under subparagraph (C) (i) or (ii), 
as applicable; and 
"(II) in the case of the least creditworthy obligors, 
the highest rate authorized under subparagraph (C) (i) 
or (ii), as applicable. 
"(E) For purposes of subparagraph (B)(i), the estimated average 
unpaid principal amount does not include the average amount 
(except interest) on deposit in a year in the escrow fund under 
section 1108. 
"(F) For purposes of determining present value under subpara-
graph (B) for an obligation, the Secretary shall apply a discount 
rate determined by the Secretary of the Treasury taking into consid-
eration current market yields on outstanding obligations of the 
PUBLIC LAW 104-239—OCT. 8, 1996 
110 STAT. 3137 
United States having periods to maturity comparable to the period 
to maturity for the obhgation with respect to which the determina-
tion of present value is made. 
"(3) A fee under this subsection shall be assessed and collected 
not later than the date on which amounts are first paid under 
an obligation with respect to which the fee is assessed. 
"(4) A fee paid under this subsection is not refundable. However, 
an obligor shall receive credit for the amount paid for the remaining 
term of the guaranteed obligation if the obligation is refinanced 
and guaranteed under this title after such refinancing. 
"(5) A fee paid under subsection (e) shall be included in the 
amount of the actual cost of the obligation guarsmteed under this 
title and is eligible to be financed under this title.". 
SEC. 14. MARTTIME POUCY REPORT. 
(a) REPORT.—^The Secretary of Transportation shall transmit 
to the Confess a report setting forth the Department of Transpor-
tation's policies for the 5-year period beginning October 1, 1995, 
with respect to— 
(1) fostering and maintaining a United States merchant 
marine capable of meeting economic and national security 
requirements; 
(2) improving the vitality and competitiveness of the United 
States merchsint marine and the maritime industrial base, 
including ship repairers, shipbuilders, ship manning, ship 
operators, and ship suppliers; 
(3) reversing the precipitous decrease in the number of 
ships in the United States-flag fleet and the Nation's shipyard 
and repair capability; 
(4) stabilizing £ind eventually increasing the number of 
mariners available to crew United States merchant vessels; 
(5) achieving adequate manning of merchant vessels for 
national security needs during a mobilization; 
(6) ensuring that sufficient civil maritime resources will 
be available to meet defense deployment and essential economic 
requirements in support of our national security strategy; 
(7) ensuring that the United States msdntains the capabil-
ity to respond unilaterally to security threats in geographic 
areas not covered by alliance commitments and otherwise meets 
sealift requirements in the event of crisis or war; 
(8) ensuring that international agreements and practices 
do not place United States maritime industries at an unfair 
competitive disadvantage in world markets; 
(9) ensuring that Federal agencies promote, through effi-
cient application of laws and regulations, the readiness of the 
United States merchant marine and supporting industries; and 
(10) any other relevant maritime policies. 
(b) DATE OF TRANSMITTAL.—^The report required under sub-
section (a) shall be transmitted along with the President's budget 
submission, under section 1105 of title 31, United States Code, 
for fiscal year 1997. 
SEC. 15. RELIEF FROM UNITED STATES DOCUMENTATION REQUIRE-
MENT FOR 3 VESSELS. 
(a) IN GENERAL.—^Notwithstanding any other law or any agree-
ment with the United States Government, a vessel described in 
subsection (b) may be sold to a person that is not a citizen of 
110 STAT. 3138 
PUBLIC LAW 104-239—OCT. 8, 1996 
the United States and transferred to or placed under a foreign 
registry. 
(b) VESSELS DESCRIBED.—The vessels referred to in subsection 
(a) are the following: 
(1) RAINBOW HOPE (United States official number 
622178). 
(2) IOWA TRADER (United States official number 642934). 
(3) KANSAS TRADER (United States official nimiber 
634621). 
46 use app. 
SEC. 16. VESSEL REPAIR AND MAINTENANCE PILOT PROGRAM. 
1744 not6 
(a) IN GENERAL.—^The Secretary of Transportation shall conduct 
a pilot program to evaluate the feasibihty of using renewable con-
tracts for tiie maintenance and repsdr of outported vessels in the 
Ready Reserve Force to enhance the readiness of those vessels. 
Under the pilot program, the Secretary, subject to the availability 
of appropriations and within 6 months after the date of the enact-
ment of this Act, shall award 9 contracts for this purpose. 
(b) 
USE 
OP 
VARIOUS 
CONTRACTING 
ARRANGEMENTS.—In 
conducting a pilot program under this section, the Secretary of 
Transportation shall use contracting arrangements simileir to those 
used by the Department of Defense for procuring maintenance 
and repair of its vessels. 
(c) CONTRACT REQUIREMENTS.—Each contract with a shipyard 
under this section shall— 
(1) subiect to subsection (d), provide for the procurement 
fi-om the shipyard of all repair and maintenance (including 
activation, deactivation, and drydocking) for 1 vessel in the 
Ready Reserve Force that is outported in the geographical 
vicinitv of the shipyard; 
(2) be effective for 1 
fiscal 
year; and 
(3) be renewable, subject to the availability of appropria-
tions, for each subsequent fiscal year through fiscal year 1998. 
(d) LIMITATION OF WORK UNDER CONTRACTS.—A contract under 
this section may not provide for the procurement of operation or 
manning for a vessel that may be procured under another contract 
for the vessel to which section ll(aX2) of the Merchant Ship Sales 
Act of 1946 (50 U.S.C. App. 1774(dX2)) appUes. 
(e) GEOGRAPHIC DISTRIBUTION.—The Secretary shall seek to 
distribute contract awards under this section to shipyards located 
throughout the United States. 
W REPORTS.—The Secretary shall submit to the Congress— 
(1) an interim report on the effectiveness of each contract 
under this section in providing for economic and efficient repair 
and maintenance of the vessel included in the contract, no 
later than 20 months after the date of the enactment of this 
Act; and 
(2) a fiinal report on that effectiveness no later than 6 
months after the termination of all contracts awarded piirsuant 
to tills section. 
SEC. 17. STREAMLINING OF CARGO ALLOCATION PROCEDURES. 
(a) AMENDMENTS.—Section 901b(c)(3) of the Merchant Marine 
Act, 1936 (46 U.S.C. App. 1241fl[c)(3)) is amended— 
(1) in subparagraph (A)— 
(A) by striking "and consistent with those sections," 
and inserting "and, subject to subparagraph (B) of this 
paragraph, consistent with those sections, ; and 
PUBLIC LAW 104-239—OCT. 8, 1996 
110 STAT. 3139 
(B) by striking "50 percent" and inserting "25 percent"; 
and 
(2) by striking subparagraph (B) and inserting the following 
new subparagraphs: 
"(B) In canying out this paragraph, there shall first be 
calculated the allocation of 100 percent of the quantity to be pro-
cured on an oversdl lowest landed cost basis without regard to 
the country of documentation of the vessel and there shall be 
allocated to the Great Lakes port range any cargoes for which 
it has the lowest landed cost under that cedculation. The require-
ments for United States-flag transportation under section 901(b) 
and this section shall not apply to commodities allocated under 
subparagraph (A) to the Great Lakes port range, and commodities 
allocated under subparagraph (A) to that port range may not be 
reallocated or diverted to another port range to meet those require-
ments to the extent that the total tonnage of commodities to which 
subparagraph (A) applies that is furnished and transported from 
the Great Lakes port range is less than 25 percent of the total 
annual tonnage of such commodities furnished. 
"(C) In awarding any contract for the transportation by vessel 
of commodities from the Great Lakes port range pursuant to an 
export activity referred to in subsection (b), each agency or 
instrumentality— 
"(i) shall consider expressions of freight interest for any 
vessel from a vessel operator who meets reasonable require-
ments for financial and operational integrity; and 
"(ii) may not deny award of the contract to a person based 
on the type of vessel on which the transportation would be 
provided (including on the basis that the trsmsportation would 
not be provided on a Hner vessel (as that term is used in 
the Shipping Act of 1984, as in effect on November 14, 1995)), 
if the person otherwise satisfies reasonable requirements for 
financial and operational integrity.". 
(b) CONFORMING AMENDMENTS.—(1) Paragraph (4) of section 46USCapp. 
90 lb(c) of that Act is repealed. 
I24lf. 
(2) 
Paragraph 
(5) of that 
section 
is 
redesignated 
as 
paragraph (4). 
Approved October 8, 1996. 
LEGISLATIVE HISTORY—H.R. 1350 (S. 1139): 
HOUSE REPORTS: No. 104-229 (Comm. on National Security). 
SENATE REPORTS: No. 104-167 accompanying S. 1139 (Comm. on Commerce, 
Science, and Transportation). 
CONGRESSIONAL RECORD: 
Vol. 141 (1995): Dec. 6, considered and passed House. 
Vol. 142 (1996): Sept. 19, 20, 24, considered and passed Senate. 
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 32 (1996): 
Oct. 8, Presidential statement. 
29-194 O - 96 - 3 : QL 3 Part 6