PLAW104-239 Maritime Security Act of 1996

PUBLIC LAW 104–239—OCT. 8, 1996

MARITIME SECURITY ACT OF 1996

110 STAT. 3118

PUBLIC LAW 104–239—OCT. 8, 1996

Public Law 104–239
104th Congress
An Act
Oct. 8, 1996
[H.R. 1350]

Maritime
Security Act of
1996.
National defense.
46 USC app.
1245 note.

To amend the Merchant Marine Act, 1936 to revitalize the United States-flag
merchant marine, and for other purposes.

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Maritime Security Act of 1996’’.
SEC. 2. MARITIME SECURITY PROGRAM.

Title VI of the Merchant Marine Act, 1936 (46 U.S.C. App.
1171 et seq.) is amended—
(1) by striking the title heading and inserting the following:
‘‘TITLE VI—VESSEL OPERATING ASSISTANCE PROGRAMS
‘‘Subtitle A—Operating-Differential Subsidy Program’’;
and
(2) by adding at the end the following new subtitle:
‘‘Subtitle B—Maritime Security Fleet Program
‘‘ESTABLISHMENT
46 USC app.
1187.

OF FLEET

‘‘SEC. 651. (a) IN GENERAL.—The Secretary of Transportation
shall establish a fleet of active, militarily useful, privately-owned
vessels to meet national defense and other security requirements
and maintain a United States presence in international commercial
shipping. The Fleet shall consist of privately owned, United Statesflag vessels for which there are in effect operating agreements
under this subtitle, and shall be known as the Maritime Security
Fleet.
‘‘(b) VESSEL ELIGIBILITY.—A vessel is eligible to be included
in the Fleet if the vessel is self-propelled and—
‘‘(1)(A) is operated by a person as an ocean common carrier;
‘‘(B) whether in commercial service, on charter to the
Department of Defense, or in other employment, is either—
‘‘(i) a roll-on/roll-off vessel with a carrying capacity
of at least 80,000 square feet or 500 twenty-foot equivalent
units; or
‘‘(ii) a lighter aboard ship vessel with a barge capacity
of at least 75 barges; or
‘‘(C) any other type of vessel that is determined by the
Secretary to be suitable for use by the United States for

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 national interest; or
‘‘(B) it is not a United States-documented vessel, but the
owner of the vessel has demonstrated an intent to have the
vessel documented under chapter 121 of title 46, United States
Code, if it is included in the Fleet, and the vessel will be
less than 10 years of age on the date of that documentation;
‘‘(3) the Secretary of Transportation determines that the
vessel is necessary to maintain a United States presence in
international commercial shipping or, after consultation with
the Secretary of Defense, determines that the vessel is militarily
useful for meeting the sealift needs of the United States with
respect to national emergencies; and
‘‘(4) at the time an operating agreement for the vessel
is entered into under this subtitle, the vessel will be eligible
for documentation under chapter 121 of title 46, United States
Code.
‘‘OPERATING

AGREEMENTS

‘‘SEC. 652. (a) IN GENERAL.—The Secretary of Transportation
shall require, as a condition of including any vessel in the Fleet,
that the owner or operator of the vessel enter into an operating
agreement with the Secretary under this section. Notwithstanding
subsection (g), the Secretary may enter into an operating agreement
for, among other vessels that are eligible to be included in the
Fleet, any vessel which continues to operate under an operatingdifferential 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 restriction, and shall not be subject to any requirement under section
801, 808, 809, or 810. Participation in the program established

Oct. 8, 1996
[H.R. 1350]

110 STAT. 3120

PUBLIC LAW 104–239—OCT. 8, 1996

by this subtitle shall not subject a contractor to section 805 or
to any provision of subtitle A.
‘‘(d) EFFECTIVENESS AND ANNUAL PAYMENT REQUIREMENTS OF
OPERATING AGREEMENTS.—
‘‘(1) EFFECTIVENESS.—The Secretary of Transportation may
enter into an operating agreement under this subtitle for fiscal
year 1996. The agreement shall be effective only for 1 fiscal
year, but shall be renewable, subject to the availability of
appropriations, for each subsequent fiscal year through the
end of fiscal year 2005.
‘‘(2) ANNUAL PAYMENT.—An operating agreement under this
subtitle shall require, subject to the availability of appropriations and the other provisions of this section, that the Secretary
of Transportation pay each fiscal year to the contractor, for
each vessel that is covered by the operating agreement, an
amount equal to $2,300,000 for fiscal year 1996 and $2,100,000
for each fiscal year thereafter in which the agreement is in
effect. The amount shall be paid in equal monthly installments
at the end of each month. The amount shall not be reduced
except as provided by this section.
‘‘(e) CERTIFICATION REQUIRED FOR PAYMENT.—As a condition
of receiving payment under this section for a fiscal year for a
vessel, the contractor for the vessel shall certify, in accordance
with regulations issued by the Secretary of Transportation, that
the vessel has been and will be operated in accordance with subsection (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 constitutes a contractual obligation of the United States Government
to pay the amounts provided for in the agreement to the extent
of actual appropriations.
‘‘(g) LIMITATIONS.—The Secretary of Transportation shall not
make any payment under this subtitle for a vessel with respect
to any days for which the vessel is—
‘‘(1) subject to an operating-differential subsidy contract
under subtitle A or under a charter to the United States
Government, other than a charter pursuant to section 653;
‘‘(2) not operated or maintained in accordance with an
operating agreement under this subtitle; or
‘‘(3) more than 25 years of age, except that the Secretary
may make such payments for a LASH vessel for any day
for which the vessel is more than 25 years of age if that
vessel—
‘‘(A) is modernized after January 1, 1994,
‘‘(B) is modernized before it is 25 years of age, and
‘‘(C) is not more than 30 years of age.
‘‘(h) PAYMENTS.—With respect to payments under this subtitle
for a vessel covered by an operating agreement, the Secretary
of Transportation—
‘‘(1) except as provided in paragraph (2), shall not reduce
any payment for the operation of a vessel to carry military
or other preference cargoes under section 2631 of title 10,
United States Code, the Act of March 26, 1934 (46 U.S.C.
App. 1241–1), section 901(a), 901(b), or 901b of this Act, or
any other cargo preference law of the United States;

PUBLIC LAW 104–239—OCT. 8, 1996

110 STAT. 3121

‘‘(2) shall not make any payment for any day that a vessel
is engaged in transporting more than 7,500 tons of civilian
bulk preference cargoes pursuant to section 901(a), 901(b), or
901b that is bulk cargo; and
‘‘(3) shall make a pro rata reduction in payment for each
day less than 320 in a fiscal year that a vessel covered by
an operating agreement is not operated in accordance with
subsection (b)(1), with days during which the vessel is
drydocked or undergoing survey, inspection, or repair considered 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 operating 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 vessels documented under that chapter, or chartering
other vessels to the Secretary of Defense.
‘‘(B) LIMITATION ON NUMBER OF OPERATING AGREEMENTS.—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 commerce of the United States (except mixed coastwise
and foreign commerce) on May 17, 1995; and
‘‘(II) the number of United States-documented
vessels the person chartered to the Secretary of
Defense on that date; and
‘‘(ii) for vessels described in subparagraph (A)(ii),
may not exceed 5 vessels.
‘‘(C) TREATMENT OF RELATED PARTIES.—For purposes
of subparagraph (B), a related party with respect to a
person shall be treated as the person.
‘‘(2) OTHER VESSELS OWNED BY CITIZENS AND GOVERNMENT
CONTRACTORS.—To the extent that amounts are available after
applying paragraph (1), any vessel that is owned and operated
by a person who is—
‘‘(A) a citizen of the United States under section 2
of the Shipping Act, 1916, that has not been awarded
an operating agreement under the priority established
under paragraph (1); or
‘‘(B)(i) eligible to document a vessel under chapter 121
of title 46, United States Code; and
‘‘(ii) affiliated with a corporation operating or managing
other United States-documented vessels for the Secretary

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 available after applying paragraphs (1) and (2), any other eligible
vessel.
‘‘(j) TRANSFER OF OPERATING AGREEMENTS.—A contractor under
an operating agreement may transfer the agreement (including
all rights and obligations under the agreement) to any person
eligible to enter into that operating agreement under this subtitle
after notification of the Secretary in accordance with regulations
prescribed by the Secretary, unless the transfer is disapproved
by the Secretary within 90 days after the date of that notification.
A person to whom an operating agreement is transferred may
receive payments from the Secretary under the agreement only
if each vessel to be covered by the agreement after the transfer
is an eligible vessel under section 651(b).
‘‘(k) REVERSION OF UNUSED AUTHORITY.—The obligation of the
Secretary to make payments under an operating agreement under
this subtitle shall terminate with respect to a vessel if the contractor
fails to engage in operation of the vessel for which such payment
is required—
‘‘(1) within one year after the effective date of the operating
agreement, in the case of a vessel in existence on the effective
date of the agreement, or
‘‘(2) within 30 months after the effective date of the operating agreement, in the case of a vessel to be constructed after
that effective date.
‘‘(l) PROCEDURE FOR CONSIDERING APPLICATION; EFFECTIVE
DATE FOR CERTAIN VESSELS.—
‘‘(1) PROCEDURES.—No later than 30 days after the date
of the enactment of the Maritime Security Act of 1996, the
Secretary shall accept applications for enrollment of vessels
in the Fleet, and within 90 days after receipt of an application
for enrollment of a vessel in the Fleet, the Secretary shall
enter into an operating agreement with the applicant or provide
in writing the reason for denial of that application.
‘‘(2) EFFECTIVE DATE.—Unless an earlier date is requested
by the applicant, the effective date for an operating agreement
with respect to a vessel which is, on the date of entry into
an operating agreement, either subject to a contract under
subtitle A or on charter to the United States Government,
other than a charter under section 653, shall be the expiration
or termination date of the contract under subtitle A or of
the Government charter covering the vessel, respectively, or
any earlier date the vessel is withdrawn from that contract
or charter.
‘‘(m) EARLY TERMINATION.—An operating agreement under this
subtitle shall terminate on a date specified by the contractor if
the contractor notifies the Secretary, by not later than 60 days
before the effective date of the termination, that the contractor
intends to terminate the agreement. Vessels covered by an operating
agreement terminated under this subsection shall remain documented 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 conditions 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 Secretary 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 section 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 regulations 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
46 USC app.
1187b.
Establishment.

SECURITY REQUIREMENTS

‘‘SEC. 653. (a) EMERGENCY PREPAREDNESS AGREEMENT.—
‘‘(1) REQUIREMENT TO ENTER AGREEMENT.—The Secretary
of Transportation shall establish an Emergency Preparedness
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 whenever determined by the Secretary of Defense
to be necessary for national security (including any natural
disaster, international peace operation, or contingency operation (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 commercial
transportation resources (including services). The basic terms
of the Emergency Preparedness Agreements shall be established pursuant to consultations among the Secretary, the Secretary of Defense, and Maritime Security Program contractors.
In any Emergency Preparedness Agreement, the Secretary and
a contractor may agree to additional or modifying terms appropriate 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 Secretary 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 according to its terms or is otherwise no longer in effect. After expiration of an Emergency Preparedness Agreement, a contractor
may volunteer to continue to participate in such an agreement.
‘‘(b) RESOURCES MADE AVAILABLE.—The commercial transportation 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 Preparedness Agreement for fair
and reasonable compensation for all commercial transportation
resources provided pursuant to this section.

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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; and
‘‘(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 amount 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 activated 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 REQUIREMENTS.—Sections 902 and 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
‘‘SEC. 654. In this subtitle:
‘‘(1) BULK CARGO.—The term ‘bulk 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 passengers 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 destination, and
‘‘(B) utilizes, for all or part of that transportation,
a vessel operating on the high seas or the Great Lakes
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 paragraph, ‘chemical parcel-tanker’ means a vessel whose cargocarrying 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 cargoes 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.

46 USC app.
1187c.

‘‘AUTHORIZATION
46 USC app.
1187d.

OF APPROPRIATIONS

‘‘SEC. 655. There are authorized to be appropriated for operating
agreements under this subtitle, to remain available until expended,
$100,000,000 for fiscal year 1996 and such sums as may be necessary, not to exceed $100,000,000, for each fiscal year thereafter
through fiscal year 2005.’’.
SEC.

3.

TERMINATION
PROGRAM.

OF

OPERATING-DIFFERENTIAL

SUBSIDY

(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 operation of a vessel after 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,

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110 STAT. 3127

that it is in the public 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 any new contract for operating-differential subsidy under
this subtitle.
‘‘(b) Notwithstanding any other provision of this Act, any operating-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 contract.
‘‘(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 subtitle 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 payment 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 Program established by subtitle B.
‘‘(d)(1) Notwithstanding any other provision of law, a vessel
may be transferred and registered under an effective United Statescontrolled foreign flag if—
‘‘(A) the operator of the vessel receives an operatingdifferential 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.’’.

46 USC app.
1185a.

Federal Register,
publication.

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 noncontiguous 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 USC app.
1187e.

110 STAT. 3128

Federal Register,
publication.

Hearings.

Federal Register,
publication.

PUBLIC LAW 104–239—OCT. 8, 1996

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 written application of such contractor or related party unless the Secretary 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 paragraph (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; and
‘‘(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 applying for award of an agreement under
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

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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 Secretary 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 applicant and
such information shall be made available to the public.
‘‘(C) Within 15 days of the date of an application pursuant
to this paragraph the Secretary shall cause to be published
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 accepting, 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 provisions of this section, if the Secretary does not make the determination 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.

Federal Register,
publication.

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 God, a declaration 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 Governor of such State or Commonwealth.
‘‘(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 carrying
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 noncontiguous 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 (e)(1)
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 contractor’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 party’ means—
‘‘(A) a holding company, subsidiary, affiliate, or associate of a contractor who is a party to an operating agreement
under this subtitle; and
‘‘(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 appears
and inserting ‘‘subtitle A of title VI of this Act’’; and
(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 contractor 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 additional foreign-flag vessel, other than a time chartered vessel, 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 documentation 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

46 USC app.
1222 note.

Federal Register,
publication.

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 are 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.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to a contractor under subtitle B of title VI of the
Merchant Marine Act, 1936, as amended by this Act, upon enactment of this Act, and shall apply to a contractor under subtitle
A of title VI of that Act, upon the earlier of—
(1) the date that a payment is made, under the Maritime
Security Program under subtitle B of that title to a contractor
under subtitle B of that title who is not party to an operatingdifferential 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 operating-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 SHIPPING 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 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

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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 subtitle 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.

‘‘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 shall
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.

(a) IN GENERAL.—The Secretary of Transportation may prescribe 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.

46 USC app.
1162.

46 USC app.
1187 note.

SEC. 9. MERCHANT SHIP 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
of Transportation under subsection (c) shall be entitled to reemployment 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 employment described in subsection (c)(1)(A) with respect to
which the application is submitted.
‘‘(c) Not later than 20 days after the date the Secretary of
Transportation receives from an individual an application for certification under this subsection, the Secretary shall—

46 USC app.
1132.

110 STAT. 3134

46 USC app.
1132 note.

46 USC app.
1132 note.

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 maintained 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 war, armed conflict, national emergency, or maritime
mobilization need (including for training purposes or
testing for readiness and 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 considered to be the equivalent of a certificate referred to in paragraph
(1) of section 4301(a) of title 38, United States Code.’’.
(b) APPLICATION.—The amendment made by subsection (a) shall
apply to employment 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.
(c) REGULATION.—Not later than 120 days after the date of
the enactment of this Act, the Secretary of Transportation shall
issue regulations implementing this section.
SEC. 11. TITLE XI LOAN GUARANTEES.

46 USC app.
1271.
46 USC app.
1274a.
46 USC app.
1279c.

Title XI of the Merchant Marine Act, 1936 (46 U.S.C. App.
1271 et seq.) is amended—
(1) in section 1101(b), by striking ‘‘owned by citizens of
the United States’’;
(2) in section 1104B(a), in the material preceding paragraph
(1), by striking ‘‘owned by citizens of the United States’’; and
(3) in section 1110(a), by striking ‘‘owned by citizens of
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 accordance with this subsection a system
of risk categories for obligations guaranteed under this title,
that categorizes the relative risk of guarantees made under

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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 available to the Secretary for making guarantees under this title to
be reduced by the amount determined by multiplying—
‘‘(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 guarantee 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
Merchant Marine Act, 1936 (46 U.S.C. App. 1273), as amended
by subsection (a) of this section, shall apply to guarantees that
the Secretary of Transportation makes or commits to make with

46 USC app.
1273 note.

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 multiplying—
‘‘(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 subparagraph (C) for
the obligation for each year.
‘‘(C) The fee rate referred to in subparagraph (B)(ii) 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 constructed, 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 subparagraph (D).
‘‘(D) The Secretary shall establish a formula for determining
the fee rate for an obligation 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 subparagraph (B) for an obligation, the Secretary shall apply a discount
rate determined by the Secretary of the Treasury taking into consideration current market yields on outstanding obligations of the

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110 STAT. 3137

United States having periods to maturity comparable to the period
to maturity for the obligation with respect to which the determination 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 guaranteed under this
title and is eligible to be financed under this title.’’.
SEC. 14. MARITIME POLICY REPORT.

(a) REPORT.—The Secretary of Transportation shall transmit
to the Congress a report setting forth the Department of Transportation’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 merchant 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 and 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 maintains the capability 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 efficient 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 subsection (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 REQUIREMENT FOR 3 VESSELS.

(a) IN GENERAL.—Notwithstanding any other law or any agreement 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 number
634621).
46 USC app.
1744 note.

SEC. 16. VESSEL REPAIR AND MAINTENANCE PILOT PROGRAM.

(a) IN GENERAL.—The Secretary of Transportation shall conduct
a pilot program to evaluate the feasibility of using renewable contracts for the maintenance and repair 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 enactment of this Act, shall award 9 contracts for this purpose.
(b) USE OF VARIOUS CONTRACTING ARRANGEMENTS.—In
conducting a pilot program under this section, the Secretary of
Transportation shall use contracting arrangements similar 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) subject to subsection (d), provide for the procurement
from 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
vicinity of the shipyard;
(2) be effective for 1 fiscal year; and
(3) be renewable, subject to the availability of appropriations, 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 11(d)(2) of the Merchant Ship Sales
Act of 1946 (50 U.S.C. App. 1774(d)(2)) applies.
(e) GEOGRAPHIC DISTRIBUTION.—The Secretary shall seek to
distribute contract awards under this section to shipyards located
throughout the United States.
(f) 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 final report on that effectiveness no later than 6
months after the termination of all contracts awarded pursuant
to this 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. 1241f(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 carrying out this paragraph, there shall first be
calculated the allocation of 100 percent of the quantity to be procured on an overall 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 calculation. The requirements 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 requirements 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 requirements 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 transportation would
not be provided on a liner 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
901b(c) of that Act is repealed.
(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.

Æ

46 USC app.
1241f.