Shipping Act, 1916

SHIPPING ACT, 1916

SEC. 1. DEFINITIONS (46 App. U.S.C. 801 (2002)).
When used in this Act:
The term "common carrier by water in interstate commerce" means a common carrier
engaged in the transportation by water of passengers or property on the high seas or
the Great Lakes on regular routes from port to port between one State, Territory,
District, or possession of the United States and any other State, Territory, District, or
possession of the United States, or between places in the same Territory, District, or
possession.
The term "other person subject to this Act" means any person not included in the term
"common carrier by water in interstate commerce" carrying on the business of
forwarding or furnishing wharfage, dock, warehouse, or other terminal facilities in
connection with a common carrier by water in interstate commerce.
The term "person" includes corporations, partnerships, and associations, existing
under or authorized by the laws of the United States, or any State, Territory, District,
or possession thereof, or of any foreign country.
The term "vessel" includes all water craft and other artificial contrivances of whatever
description and at whatever stage of construction, whether on the stocks or launched,
which are used or are capable of being or are intended to be used as a means of
transportation on water.
The term "documented under the laws of the United States," means "registered,
enrolled, or licensed under the laws of the United States._
The term "carrying on the business of forwarding" means the dispatching of
shipments by any person on behalf of others, by oceangoing common carriers in
commerce between the United States and its Territories or possessions, or between
such Territories and possessions, and handling the formalities incident to such
shipments.
The term "maritime labor agreement" means any collective bargaining agreement
between an employer subject to this Act, or group of such employers and a labor
organization representing employees in the maritime or stevedoring industry, or any
agreement p

reparatory to such a collective bargaining agreement among members of a
multiemployer bargaining group, or any agreement specifically implementing
provisions of such a collective bargaining agreement or providing for the formation,
financing, or administration of a multiemployer bargaining group.
SEC. 2 (a)_(c). CORPORATION, PARTNERSHIP, OR ASSOCIATION AS
CITIZEN
1 (46 App. U.S.C. 802 (2002)).
(a) Ownership of Controlling Interest. Within the meaning of this Act no
corporation, partnership, or association shall be deemed a citizen of the United States
unless the controlling interest therein is owned by citizens of the United States, and, in
the case of a corporation, unless its chief executive officer, by whatever title, and the
chairman of its board of directors are citizens of the United States and unless no more
of its directors than a minority of the number necessary to constitute a quorum are
noncitizens and the corporation itself is organized under the laws of the United States
or of a State, Territory, District, or possession thereof, but in the case of a corporation,
association, or partnership operating any vessel in the coastwise trade the amount of
interest required to be owned by citizens of the United States shall be 75 per centum.
(b) Determination of Controlling Interest. The controlling interest in a corporation
shall not be deemed to be owned by citizens of the United States (a) if the title to a
majority of the stock thereof is not vested in such citizens free from any trust or
fiduciary obligation in favor of any p
erson not a citizen of the United States; or (b) if the majority of the voting power in
such corporation is not vested in citizens of the United States; or (c) if through any
contract or understanding it is so arranged that the majority of the voting power may
be exercised, directly or indirectly, in behalf of any person who is not a citizen of the
United States; or, (d) if by any other means whatsoever control of the corporation is
conferred upon or permitted to be exercised by any person who is not
a citizen of the United States.
(c) Determination of Seventy-five Per Centum of Interest. Seventy-five per centum
of the interest in a corporation shall not be deemed to be owned by citizens of the
United States (a) if the title to 75 per centum of its stock is not vested in such citizens
free from any trust or fiduciary obligation in favor of any person not a citizen of the
United States; or (b) if 75 per centum of the voting power in such corporation is not
vested in citizens of the United States; or (c) if, through any contract or understanding,
it is so arranged that more than 25 per centum of the voting power in such corporation
may be exercised, directly or indirectly, in behalf of any person who is not a citizen of
the United States; or (d) if by any other means whatsoever control of any interest in

the corporation in excess of 25 per centum is conferred upon or permitted to be
exercised by any person who is not a citizen of the United States.
SEC. 2 (d). APPLICABILITY TO RECEIVERS AND TRUSTEES (46 App.
U.S.C. 803 (2002)).
The provisions of this Act shall apply to receivers and trustees of all persons to whom
the Act applies, and to the successors or assignees of such persons.
*******
PROVISIONS THAT AFFECT SECTION 2 CITIZENSHIP REQUIREMENTS
Sections 1113(d) and 1136 of Public Law 104-324, approved October 19, 1996 (110
STAT. 3970, 3986), the Coast Guard Authorization Act of 1996, set forth provisions
that affect Section 2 of the Shipping Act, 1916. These provisions are set forth a page
197. infra.
*******

Continuation of the Shipping Act, 1916.
SEC. 9. REGISTRATION, ENROLLMENT, AND LICENSING OF VESSELS
PURCHASED, CHARTERED, OR LEASED; REGULATIONS; COASTWISE
TRADE. (46 App. U.S.C. 808 (2002)).
(b) Every vessel purchased, chartered, or leased from the Secretary of Transportation
shall, unless otherwise authorized by the Secretary of Transportation, be operated
only under such registry or enrollment and license. Such vessels while employed
solely as merchant vessels shall be subject to all laws, regulations, and liabilities
governing merchant vessels, whether the United States be interested therein as owner,
in whole or in part, or hold any mortgage, lien, or other interest therein.
(c) Except as provided in section 611 of the Merchant Marine Act, 1936 (46 App.
U.S.C. 1181), and in section 12106(e) of title 46, United States Code, a person may
not, without the approval of the Secretary of Transportation_
(1) sell, lease, charter, deliver, or in any manner transfer, or agree to sell, lease,
charter, deliver, or in any manner transfer, to a person not a citizen of the United
States, any interest in or control of a documented vessel (except in a vessel th
at has been operated only as a fishing vessel, fish processing vessel, or fish tender
vessel (as defined in section 2101 of title 46, United States Code) or in a vessel that
has been operated only for pleasure) owned by a citizen of the United States o
r the last documentation of which was under the laws of the United States; or

(2) place a documented vessel, or a vessel the last documentation of which was under
the laws of the United States, under foreign registry or operate that vessel under the
authority of a foreign country.
(d)(1) Any charter, sale, or transfer of a vessel, or interest in or control of that vessel,
contrary to this section is void.
(2) A person that knowingly charters, sells, or transfers a vessel, or interest in or
control of that vessel, contrary to this section shall be fined under title 18, United
States Code, imprisoned for not more than 5 years, or both.
(3) A documented vessel may be seized by, and forfeited to, the United States
Government if_
(A) the vessel is placed under foreign registry or operated under the authority of a
foreign country contrary to this section; or
(B) a person knowingly charters, sells, or transfers a vessel, or interest or control in
that vessel, contrary to this section.
(4) A person that charters, sells, or transfers a vessel, or an interest in or control of a
vessel, in violation of this section is liable to the United States Government for a civil
penalty of not more than $ 10,000 for each violation.
*******
(e)2 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 replacement vessel of a capacity that
is equivalent or greater, as measured by deadweight tons, gross tons, or container
equivalent 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) an 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(b)(1) 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 that vessel is more than 15 years of age on the date the
contract expires; or
(4) an operating agreement covering the vessel under subtitle B of title VI of the
Merchant Marine Act, 1936 has expired.
(e)3 To promote financing with respect to a vessel to be documented under chapter
121 of title 46, United States Code, the Secretary may grant approval under
subsection (c) before the date the vessel is documented.
*******
SEC. 12. INVESTIGATIONS AS TO COST OF MERCHANT VESSELS (46
App. U.S.C. 811 (2002)). The Secretary of Transportation shall investigate the
relative cost of building merchant vessels in the United States and in foreign maritime
countries, and the relative cost, advantages, and disadvantages of operating in the
foreign trade vessels under United States registry and under foreign registry. The
Secretary shall examine the rules under which vessels are constructed abroad and in
the United States, and the methods of classifying and rating same, and the Secretary
shall examine into the subject of marine insurance, the number of companies in the
United States, domestic and foreign, engaging in marine insurance, the extent of the
insurance on hulls and cargoes placed or written in the United States, and the extent of
reinsurance of American maritime risks in foreign companies, and ascertain what
steps may be necessary to develop an ample marine insurance system as an aid in the
development of an American merchant marine. The Secretary shall examine the
navigation laws of the United States and the rules and regulations thereunder, and
make such recommendations to the Congress as the Secretary deems proper for the
amendment, improvement, and revision of such laws, and for the development of the
American merchant marine. The Secretary shall investigate the legal status of
mortgage loans on vessel property, with a view to means of improving the security of
such loans and of encouraging investment in American shipping.
The Secretary shall, on or before the first day of December in each year, make a
report to the Congress, which shall include his recommendations and the results of his
investigations, a summary of his transactions, and a statement of all expenditures and
receipts under this Act, and of the operations of any corporation in which the United
States is a stockholder, and the names and compensation of all persons employed by
the Secretary of Transportation.
SEC. 34. PARTIAL INVALIDITY NOT AFFECTING REMAINDER. (46 App.
U.S.C. 833 (2002)). If any provisions of this Act, or the application of such provision
to certain circumstances, is held unconstitutional, the remainder of the Act, and the
application of such provision to circumstances other than those as to which it is held
unconstitutional, shall not be affected thereby.

SEC. 36. REFUSAL OF CLEARANCE TO VESSEL REFUSING TO ACCEPT
FREIGHT (46 App. U.S.C. 834 (2002)). The Secretary of the Treasury is authorized
to refuse a clearance to any vessel or other vehicle laden with merchandise destined
for a foreign or domestic port whenever he shall have satisfactory reason to believe
that the master, owner, or other officer of such vessel or other vehicle refuses or
declines to accept or receive freight or cargo in good condition tendered for such port
of destination or for some intermediate port of call, together with the proper freight or
transportation charges therefor, by any citizen of the United States, unless the same is
fully laden and has no space accommodations for the freight or cargo so tendered, due
regard being had for the proper loading of such vessel or vehicle, or unless such
freight or cargo consists of merchandise for which such vessel or vehicle is not
adaptable.
SEC. 37. RESTRICTIONS ON TRANSFERS OF SHIPPING FACILITIES
DURING WAR OR NATIONAL EMERGENCY. (46 App. U.S.C. 835 (2002)).
When the United States is at war or during any national emergency, the existence of
which is declared by proclamation of the President, it shall be unlawful, without first
obtaining the approval of the Secretary of Transportation:
(a) To transfer to or place under any foreign registry or flag any vessel owned in
whole or in part by any person a citizen of the United States or by a corporation
organized under the laws of the United States, or of any State, Territory, District, or
possession thereof; or
(b) To sell, mortgage, lease, charter, deliver, or in any manner transfer, or agree to sell,
mortgage, lease, charter, deliver, or in any manner transfer, to any person not a citizen
of the United States, (1) any such vessel or any interest therein, or (2) any vessel
documented under the laws of the United States, or any interest therein, or (3) any
shipyard, dry dock, ship-building or ship-repairing plant or facilities, or any interest
therein; or
(c) To issue, transfer, or assign a bond, note, or other evidence of indebtedness which
is secured by a mortgage of a vessel to a trustee or by an assignment to a trustee of the
owner’s right, title, or interest in a vessel under construction, or by a mortgage to a
trustee on a shipyard, drydock, or ship-building or ship-repairing plant or facilities, to
a person not a citizen of the United States, unless the trustee or a substitute trustee of
such mortgage or assignment is approved by the Secretary of Transportation:
Provided, however, That the Secretary of Transportation shall grant his approval if
such trustee or a substitute trustee is a bank or trust company which (1) is organized
as a corporation, and is doing business, under the laws of the United States or any
State thereof, (2) is authorized under such laws to exercise corporate trust powers, (3)
is a citizen of the United States, (4) is subject to supervision or examination by
Federal or State authority, and (5) has a combined capital and surplus (as set forth in
its most recent published report of condition) of at least $3,000,000; or for the trustee
or substitute trustee approved by the Secretary of Transportation to operate said vessel

under the mortgage or assignment: Provided further, That if such trustee or a
substitute trustee at any time ceases to meet the foregoing qualifications, the Secretary
of Transportation shall disapprove such trustee or substitute trustee, and after such
disapproval the transfer or assignment of such bond, note, or other evidence of
indebtedness to a person not a citizen of the United States, without the approval of the
Secretary of Transportation, shall be unlawful; or
(d) To enter into any contract, agreement, or understanding to construct a vessel
within the United States for or to be delivered to any person not a citizen of the
United States, without expressly stipulating that such construction shall not begin
until after the war or emergency proclaimed by the President has ended; or
(e) To make any agreement or effect any understanding whereby there is vested in or
for the benefit of any person not a citizen of the United States, the controlling interest
or a majority of the voting power in a corporation which is organized under the laws
of the United States, or of any State, Territory, District, or possession thereof, and
which owns any vessel, shipyard, dry dock, or ship-building or ship-repairing plant or
facilities; or
(f) To cause or procure any vessel constructed in whole or in part within the United
States, which has never cleared for any foreign port, to depart from a port of the
United States before it has been documented under the laws of the United States.
Whoever violates, or attempts or conspires to violate, any of the provisions of this
section shall be guilty of a misdemeanor, punishable by a fine of not more than
$5,000 or by imprisonment for not more than five years, or both.
If a bond, note, or other evidence of indebtedness which is secured by a mortgage of a
vessel to a trustee or by an assignment to a trustee of the owner’s right, title, or
interest in a vessel under construction, or by a mortgage to a trustee on a shipyard,
drydock or ship-building or ship-repairing plant or facilities, is issued, transferred, or
assigned to a person not a citizen of the United States in violation of subsection (c) of
this section, the issuance, transfer or assignment shall be void.
Any vessel, shipyard, dry dock, ship-building or ship-repairing plant or facilities, or
interest therein, sold, mortgaged, leased, chartered, delivered, transferred, or
documented, or agreed to be sold, mortgaged, leased, chartered, delivered, transferred,
or documented, in violation of any of the provisions of this section, and any stocks,
bonds, or other securities sold or transferred, or agreed to be sold or transferred, in
violation of any of such provisions, or any vessel departing in violation of the
provisions of subdivision (e) [f], shall be forfeited to the United States.
Any such sale, mortgage, lease, charter, delivery, transfer, documentation, or
agreement therefor shall be void, whether made within or without the United States,
and any consideration paid therefor or deposited in connection therewith shall be

recoverable at the suit of the person who has paid or deposited the same, or of his
successors or assigns, after the tender of such vessel, shipyard, dry dock, shipbuilding
or ship-repairing plant or facilities, or interest therein, or of such stocks, bonds, or
other securities, to the person entitled thereto, or after forfeiture thereof to the United
States, unless the person to whom the consideration was paid, or in whose interest it
was deposited, entered into the transaction in the honest belief that the person who
paid or deposited such consideration was a citizen of the United States.
SEC. 38. FORFEITURE (46 App. U.S.C. 836 (2002)). All forfeitures incurred
under the provisions of this Act may be prosecuted in the same court, and may be
disposed of in the same manner, as forfeitures incurred for offenses against the law
relating to the collection of duties, except that forfeitures may be remitted without
seizure of the vessel.
SEC. 39. PRIMA FACIE EVIDENCE (46 App. U.S.C. 837 (2002)). In any action
or proceeding under the provisions of this Act to enforce a forfeiture the conviction in
a court of criminal jurisdiction of any person for a violation thereof with respect to the
subject of the forfeiture shall constitute prima facie evidence of such violation against
the person so convicted.
SEC. 41. APPROVALS BY SECRETARY (46 App. U.S.C. 839 (2002)).
Whenever by said section nine or thirty-seven the approval of the Secretary of
Transportation is required to render any act or transaction lawful, such approval may
be accorded either absolutely or upon such conditions as the Secretary of
Transportation prescribes. Whenever the approval of the Secretary of Transportation
is accorded upon any condition a statement of such condition shall be entered upon
his records and incorporated in the same document or paper which notifies the
applicant of such approval. A violation of such condition so incorporated shall
constitute a misdemeanor and shall be punishable by fine and imprisonment in the
same manner, and shall subject the vessel, stocks, bonds, or other subject matter of the
application conditionally approved to forfeiture in the same manner, as though the act
conditionally approved had been done without the approval of the Secretary of
Transportation, but the offense shall be deemed to have been committed at the time of
the violation of the condition.
Whenever by this Act the approval of the Secretary of Transportation is required to
render any act or transaction lawful, whoever knowingly makes any false statement of
a material fact to the Secretary of Transportation, [or to any member thereof,] or to
any officer, attorney, or agent [of the Department of Transportation] [thereof], for the
purpose of securing such approval, shall be guilty of a misdemeanor and subject to a
fine of not more than $ 5,000 or to imprisonment for not more than five years, or both.
SEC. 46. SHORT TITLE (46 App. U.S.C. 842 (2002)). This Act may be cited as
"Shipping Act, 1916."