[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3262 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 3262

 To revitalize the international competitiveness of the United States-
flag maritime industry through international tax parity, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            November 8, 2001

   Mr. Oberstar (for himself and Mr. Young of Alaska) introduced the 
following bill; which was referred to the Committee on Ways and Means, 
and in addition to the Committee on Transportation and Infrastructure, 
for a period to be subsequently determined by the Speaker, in each case 
for consideration of such provisions as fall within the jurisdiction of 
                        the committee concerned

_______________________________________________________________________

                                 A BILL


 
 To revitalize the international competitiveness of the United States-
flag maritime industry through international tax parity, 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 ``Merchant Marine Cost Parity Act of 
2001''.

                   TITLE I--INTERNATIONAL TAX PARITY

SEC. 101. ELECTION TO DETERMINE TAXABLE INCOME FROM CERTAIN 
              INTERNATIONAL SHIPPING ACTIVITIES USING PER TON RATE.

    (a) In General.--Chapter 1 of the Internal Revenue Code of 1986 is 
amended by inserting after subchapter Q the following new subchapter:

   ``Subchapter R--Election To Determine Taxable Income From Certain 
          International Shipping Activities Using per Ton Rate

                              ``Sec. 1352. Alternative tax on 
                                        qualifying shipping activities.
                              ``Sec. 1353. Taxable income from 
                                        qualifying shipping activities.
                              ``Sec. 1354. Qualifying shipping tax 
                                        election; revocation; 
                                        termination.
                              ``Sec. 1355. Definitions and special 
                                        rules.
                              ``Sec. 1356. Qualifying shipping 
                                        activities.
                              ``Sec. 1357. Items not subject to regular 
                                        tax; depreciation; interest.
                              ``Sec. 1358. Allocation of credits, 
                                        income, and deductions.
                              ``Sec. 1359. Disposition of qualifying 
                                        shipping assets.

``SEC. 1352. ALTERNATIVE TAX ON QUALIFYING SHIPPING ACTIVITIES.

    ``(a) In General.--The taxable income of an electing corporation 
from qualifying shipping activities shall be the amount determined 
under this subchapter, and the corporate percentages of the items of 
income, gain, loss, deduction, or credit of an electing corporation and 
of other members of the electing group of such corporation which would 
otherwise be taken into account by reason of its qualifying shipping 
activities shall be taken into account to the extent provided in 
section 1357.
    ``(b) Alternative Tax.--The taxable income of an electing 
corporation from qualifying shipping activities, if otherwise taxable 
under section 11, 882, or 887, shall be subject to tax only under this 
section at the maximum rate specified in section 11(b).
    ``(c) Transfers to Federal Vessel Financing Fund.--The Secretary of 
the Treasury shall transfer to the Federal Vessel Financing Fund 
created under title XI of the Merchant Marine Act, 1936, the taxes 
collected under subsection (b).

``SEC. 1353. TAXABLE INCOME FROM QUALIFYING SHIPPING ACTIVITIES.

    ``(a) In General.--For purposes of this subchapter, the taxable 
income of an electing corporation from qualifying shipping activities 
shall be its corporate income percentage of the sum of the amounts 
determined under subsection (b) for each qualifying vessel operated by 
such electing corporation or other electing entity.
    ``(b) Amounts.--For purposes of subsection (a), the amount of 
taxable income of an electing entity for each qualifying vessel shall 
equal the product of--
            ``(1) the daily notional taxable income from the operation 
        of the qualifying vessel in United States foreign trade, and
            ``(2) the number of days during the taxable year that the 
        electing entity operated such vessel as a qualifying vessel in 
        United States foreign trade.
    ``(c) Daily Notional Taxable Income.--For purposes of subsection 
(b), the daily notional taxable income from the operation of a 
qualifying vessel is 40 cents for each 100 tons of the net tonnage of 
the vessel, up to 25,000 net tons, and 20 cents for each 100 tons of 
the net tonnage of the vessel, in excess of 25,000 net tons.
    ``(d) Multiple Operators of Vessel.--If 2 or more persons have a 
joint interest in a qualifying vessel and are considered as operators 
of that vessel, the taxable income from the operation of such vessel 
for that time (as determined under this section) shall be allocated 
among such persons on the basis of their ownership and charter 
interests in such vessel or on such other basis as the Secretary may 
prescribe by regulations.
    ``(e) Noncorporate Percentage.--Notwithstanding any contrary 
provision of this subchapter, the noncorporate percentage of any item 
of income, gain, loss, deduction, or credit of any member of an 
electing group shall be taken into account for all purposes of this 
subtitle as if this subchapter were not in effect.

``SEC. 1354. QUALIFYING SHIPPING TAX ELECTION; REVOCATION; TERMINATION.

    ``(a) In General.--Except as provided in subsections (b) and (f), a 
qualifying shipping tax election may be made in respect of any 
qualifying entity.
    ``(b) Condition of Election.--An election may be made by a member 
of a controlled group under this subsection for any taxable year only 
if all qualifying entities that are members of the controlled group 
join in the election.
    ``(c) When Made.--An election under subsection (a) may be made by a 
qualifying entity in such form as prescribed by the Secretary. Such 
election shall be filed with the qualifying entity's return for the 
first taxable year to which the election shall apply, by the due date 
for such return (including any applicable extensions).
    ``(d) Years for Which Effective.--An election under subsection (a) 
shall be effective for the taxable year of the qualifying entity for 
which it is made and for all succeeding taxable years of the entity, 
until such election is terminated under subsection (e).
    ``(e) Termination.--
            ``(1) By revocation.--
                    ``(A) In general.--An election under subsection (a) 
                may be terminated by revocation.
                    ``(B) When effective.--Except as provided in 
                subparagraph (C)--
                            ``(i) a revocation made during the taxable 
                        year and on or before the 15th day of the 3d 
                        month thereof shall be effective on the 1st day 
                        of such taxable year, and
                            ``(ii) a revocation made during the taxable 
                        year but after such 15th day shall be effective 
                        on the 1st day of the following taxable year.
                    ``(C) Revocation may specify prospective date.--If 
                the revocation specifies a date for revocation which is 
                on or after the day on which the revocation is made, 
                the revocation shall be effective on and after the date 
                so specified.
            ``(2) By entity ceasing to be qualifying entity.--
                    ``(A) In general.--An election under subsection (a) 
                shall be terminated whenever (at any time on or after 
                the 1st day of the 1st taxable year for which the 
                entity is an electing entity) such entity ceases to be 
                a qualifying entity.
                    ``(B) When effective.--Any termination under this 
                paragraph shall be effective on and after the date of 
                cessation.
    ``(f) Election After Termination.--If a qualifying entity has made 
an election under subsection (a) and if such election has been 
terminated under subsection (e), such entity (and any successor entity) 
shall not be eligible to make an election under subsection (a) for any 
taxable year before its 5th taxable year which begins after the 1st 
taxable year for which such termination is effective, unless the 
Secretary consents to such election.

``SEC. 1355. DEFINITIONS AND SPECIAL RULES.

    ``(a) Definitions.--For purposes of this subchapter:
            ``(1) The term `controlled group' means any group of trusts 
        and business entities whose members would be treated as a 
        single employer under the rules of section 52(a) (without 
        regard to paragraphs (1) and (2) thereof) and section 52(b)(1).
            ``(2) The term `corporate income percentage' means the 
        least aggregate share, expressed as a percentage, of any item 
        of income or gain of an electing corporation or electing group 
        of which such corporation is a member from qualifying shipping 
        activities that would, but for an election in effect under this 
        subchapter, be required to be reported on the Federal income 
        tax return of an electing corporation during any taxable 
        period. In the case of an electing group which includes two or 
        more electing corporations, the corporate income percentage of 
        each such corporation shall be determined on the basis of such 
        corporations' direct and indirect ownership and charter 
        interests in qualifying vessels of the electing group or on 
        such other basis as the Secretary may prescribe by regulations.
            ``(3) The term `corporate loss percentage' means the 
        greatest aggregate share, expressed as a percentage, of any 
        item of loss, deduction or credit of an electing corporation or 
        electing group of which such corporation is a member from 
        qualifying shipping activities that would, but for an election 
        in effect under this subchapter, be required to be reported on 
        the Federal income tax return of an electing corporation during 
        any taxable period.
            ``(4) The term `corporate percentages' means the corporate 
        income percentage and the corporate loss percentage.
            ``(5) The term `electing corporation' means any C 
        corporation that is an electing entity or that would, but for 
        an election in effect under this subchapter, be required to 
        report any item of income, gain, loss, deduction, or credit of 
        an electing entity on its Federal income tax return.
            ``(6) The term `electing entity' means any qualifying 
        entity for which an election is in effect under this 
        subchapter.
            ``(7) The term `electing group' means a controlled group of 
        which one or more members is an electing entity.
            ``(8) The term `noncorporate percentage' means the 
        difference between one hundred percent and the corporate income 
        percentage or corporate loss percentage, as applicable.
            ``(9) The term `qualifying entity' means a trust or 
        business entity that--
                    ``(A) operates one or more qualifying vessels, and
                    ``(B) meets the shipping activity requirement in 
                subsection (c).
            ``(10) The term `qualifying shipping assets' means any 
        qualifying vessel and other assets which are used in core 
        qualifying activities as described in section 1356(b).
            ``(11) The term `qualifying vessel' means a self-propelled 
        (or a combination self-propelled and non-self-propelled) United 
        States flag vessel of not less than 10,000 deadweight tons used 
        in the United States foreign trade.
            ``(12) The term `United States domestic trade' means the 
        transportation of goods or passengers between places in the 
        United States.
            ``(13) The term `United States flag vessel' means any 
        vessel documented under the laws of the United States.
            ``(14) The term `United States foreign trade' means the 
        transportation of goods or passengers between a place in the 
        United States and a foreign place or between foreign places.
    ``(b) Operating a Vessel.--For purposes of this subchapter:
            ``(1) Except as provided in paragraph (2), an entity is 
        treated as operating any vessel owned by, or chartered 
        (including a time charter) to, the entity.
            ``(2) An entity is treated as operating a vessel that it 
        has chartered out on bareboat charter terms only if the vessel 
is temporarily surplus to the entity's requirements and the term of the 
charter does not exceed three years.
    ``(c) Shipping Activity Requirement.--For purposes of this section, 
the shipping activity requirement is met for a taxable year only by an 
entity described in paragraph (1), (2), or (3).
            ``(1) An entity in the first taxable year of its qualifying 
        shipping tax election if, for the preceding taxable year, the 
        test in paragraph (4) is met.
            ``(2) An entity in the second or any subsequent taxable 
        year of its qualifying shipping tax election if, for each of 
        the two preceding taxable years, the test in paragraph (4) is 
        met.
            ``(3) An entity that would be described in paragraph (1) or 
        (2) if the test in paragraph (4) were applied on an aggregate 
        basis to the controlled group of which such entity is a member, 
        and vessel charters between members of the controlled group 
        were disregarded.
            ``(4) The test in this paragraph is met if on average at 
        least 10 percent of the aggregate tonnage of qualifying vessels 
        operated by the entity were owned by the entity or chartered to 
        the entity on bareboat charter terms. For purposes of the 
        preceding sentence, vessels chartered to an entity by a member 
        of a controlled group which includes the entity shall be 
        treated as chartered to the entity on bareboat charter terms.
    ``(d) Effect of Temporarily Ceasing To Operate a Qualifying 
Vessel.--
            ``(1) A temporary cessation by an electing entity in 
        operation of a qualifying vessel shall be disregarded for 
        purposes of subsections (b) and (c) until an occurrence 
        described in paragraph (3) if the electing entity gives timely 
        notice to the Secretary stating--
                    ``(A) that it has temporarily ceased to operate the 
                qualifying vessel, and
                    ``(B) its intention to resume operating the 
                qualifying vessel.
            ``(2) Notice shall be deemed timely if given not later than 
        the due date (including extensions) for the electing entity's 
        tax return (as set forth in section 6072(b)) for the taxable 
        year in which the temporary cessation begins.
            ``(3) The disregard provided by paragraph (1) continues 
        until the earlier to occur of--
                    ``(A) the electing entity abandoning its intention 
                to resume operation of the qualifying vessel, or
                    ``(B) the electing entity resuming operation of the 
                qualifying vessel.
    ``(e) Effect of Temporarily Operating a Qualifying Vessel in the 
United States Domestic Trade.--
            ``(1) The temporary operation in the United States domestic 
        trade of any qualifying vessel which had been used in the 
        United States foreign trade shall be disregarded for purposes 
        of this subchapter until an occurrence described in paragraph 
        (3) if the electing entity gives timely notice to the Secretary 
        stating--
                    ``(A) that it temporarily operates or has operated 
                in the United States domestic trade a qualifying vessel 
                which had been used in the United States foreign trade, 
                and
                    ``(B) its intention to resume operation of the 
                vessel in the United States foreign trade.
            ``(2) Notice shall be deemed timely if given not later than 
        the due date (including extensions) for the electing entity's 
        tax return (as set forth in section 6072(b)) for the taxable 
        year in which the temporary cessation begins.
            ``(3) The disregard provided by paragraph (1) continues 
        until the earlier to occur of--
                    ``(A) the electing entity abandoning its intention 
                to resume operations of the vessel in the United States 
                foreign trade, or
                    ``(B) the electing entity resuming operation of the 
                vessel in the United States foreign trade.
    ``(f) Effect of Change in Use.--
            ``(1) Except as provided in subsection (e), a vessel that 
        is used other than for operations in the United States foreign 
        trade on other than a temporary basis ceases to be a qualifying 
        vessel when such use begins.
            ``(2) For purposes of this subsection, a change in use of a 
        vessel, other than a commencement of operation in the United 
        States domestic trade, is taken to be permanent unless there 
        are circumstances indicating that it is temporary.
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.

``SEC. 1356. QUALIFYING SHIPPING ACTIVITIES.

    ``(a) Qualifying Shipping Activities.--For purposes of this 
subchapter the `qualifying shipping activities' of an electing entity 
consist of--
            ``(1) its core qualifying activities,
            ``(2) its qualifying secondary activities, and
            ``(3) its qualifying incidental activities.
    ``(b) Core Qualifying Activities.--
            ``(1) The `core qualifying activities' of an electing 
        entity are its--
                    ``(A) activities in operating qualifying vessels in 
                United States foreign trade, and
                    ``(B) other vessel-related activities of the 
                electing entity and other members of its electing group 
                that are a necessary and integral part of its business 
                of operating qualifying vessels in United States 
                foreign trade, including ownership and operation of 
                barges and containers that are the complement of a 
                qualifying vessel and terminal facilities.
            ``(2) `Core qualifying activities' do not include the 
        provision by an entity of facilities or services to any person 
        other than another member of such entity's electing group.
    ``(c) Qualifying Secondary Activities.--For purposes of this 
subsection--
            ``(1) the term `secondary activities' means the active 
        management or operation of vessels in the United States foreign 
        trade and such other activities as may be prescribed by the 
        Secretary pursuant to regulations, and
            ``(2) the term `qualified secondary activities' means the 
        secondary activities of an electing entity, but only to the 
        extent that, without regard to this subchapter, the gross 
        income derived by such entity from such activities does not 
        exceed 20 percent of the gross income derived by such entity 
        from its core qualifying activities.
    ``(d) Qualifying Incidental Activities.--Shipping-related 
activities carried on by an electing entity are qualified incidental 
activities if--
            ``(1) they are incidental to its core qualifying 
        activities,
            ``(2) they are not qualifying secondary activities, and
            ``(3) without regard to this subchapter, the gross income 
        derived by such entity from such activities does not exceed 0.1 
        percent of the entity's gross income from its core qualifying 
        activities.

``SEC. 1357. ITEMS NOT SUBJECT TO REGULAR TAX; DEPRECIATION; INTEREST.

    ``(a) Exclusion From Gross Income.--Gross income of an electing 
entity shall not include the corporate income percentage of--
            ``(1) its income from qualifying shipping activities in the 
        United States foreign trade,
            ``(2) its income from money, bank deposits and other 
        temporary investments which are reasonably necessary to meet 
        the working capital requirements of its qualifying shipping 
        activities, and
            ``(3) its income from money or other intangible assets 
        accumulated pursuant to a plan to purchase qualifying shipping 
        assets.
    ``(b) Electing Group Member.--Gross income of a member of an 
electing group that is not an electing entity shall not include the 
corporate income percentage of its income from qualifying shipping 
activities that are taken into account under this subchapter as 
qualifying shipping activities of an electing entity.
    ``(c) Denial of Losses, Deductions, and Credits.--
            ``(1) General rule.--Subject to paragraph (2), the 
        corporate loss percentage of each item of loss, deduction 
        (other than for interest expense), or credit of any taxpayer 
        with respect to any activity the income from which is excluded 
        from gross income under this section shall be disallowed.
            ``(2) Depreciation.--Notwithstanding paragraph (1), an 
        owner but not operator of qualifying shipping assets shall be 
        allowed the deduction for depreciation.
                    ``(A) Except as provided in subparagraph (B), the 
                straight line method of depreciation shall apply to the 
                corporate income percentage of qualifying shipping 
                assets the income from operation of which is excluded 
                from gross income under this section.
                    ``(B) Subparagraph (A) shall not apply to any 
                qualifying shipping asset which is subject to a charter 
                entered into prior to the effective date of this 
                subchapter.
            ``(3) Interest.--The corporate loss percentage of an 
        electing entity's interest expense shall be disallowed in the 
        ratio that the fair market value of its qualifying vessel 
        assets bears to the fair market value of its total assets.

``SEC. 1358. ALLOCATION OF CREDITS, INCOME, AND DEDUCTIONS.

    ``(a) Qualifying Shipping Activities.--For purposes of this chapter 
the qualifying shipping activities of an electing entity shall be 
treated as a separate trade or business activity distinct from all 
other activities conducted by the entity.
    ``(b) Exclusion of Credits or Deductions.--
            ``(1) No deduction shall be allowed against the taxable 
        income of an electing corporation from qualifying shipping 
        activities, and no credit shall be allowed against the tax 
        imposed by section 1352(b).
            ``(2) No deduction shall be allowed for any net operating 
        loss attributable to the qualifying shipping activities of a 
        corporation to the extent that such loss is carried forward by 
        the corporation from a taxable year preceding the first taxable 
        year for which such corporation was an electing corporation.
    ``(c) Transactions Not at Arm's Length.--Section 482 applies in 
accordance with this subsection to a transaction or series of 
transactions--
            ``(1) as between an electing entity and another person, or
            ``(2) as between an entity's qualifying shipping activities 
        and other activities carried on by it.

``SEC. 1359. DISPOSITION OF QUALIFYING SHIPPING ASSETS.

    ``(a) In General.--If an electing entity sells or disposes of 
qualifying shipping assets (as defined in subsection (c)) in an 
otherwise taxable transaction, at the election of the entity no gain 
shall be recognized if replacement qualifying shipping assets are 
acquired during the period specified in subsection (b), except to the 
extent that the amount realized upon such sale or disposition exceeds 
the cost of the replacement qualifying shipping assets.
    ``(b) Period Within Which Property Must Be Replaced.--The period 
referred to in subsection (a) shall be the period beginning one year 
prior to the disposition of the qualifying shipping assets and ending--
            ``(1) 3 years after the close of the first taxable year in 
        which the gain is realized, or
            ``(2) subject to such terms and conditions as may be 
        specified by the Secretary, on such later date as the Secretary 
        may designate on application by the taxpayer. Such application 
        shall be made at such time and in such manner as the Secretary 
        may by regulations prescribe.
    ``(c) Time for Assessment of Deficiency Attributable to Gain.--If 
an electing entity has made the election provided in subsection (a), 
then--
            ``(1) the statutory period for the assessment of any 
        deficiency, for any taxable year in which any part of the gain 
        is realized, attributable to such gain shall not expire prior 
        to the expiration of 3 years from the date the Secretary is 
        notified by the entity (in such manner as the Secretary may by 
        regulations prescribe) of the replacement tonnage tax property 
        or of an intention not to replace, and
            ``(2) such deficiency may be assessed before the expiration 
        of such 3-year period notwithstanding the provisions of section 
        6212(c) or the provisions of any other law or rule of law which 
        would otherwise prevent such assessment.
    ``(d) Basis of Replacement Qualifying Shipping Assets.--In the case 
of replacement qualifying shipping assets purchased by an electing 
entity which resulted in the nonrecognition of any part of the gain 
realized as the result of a sale or other disposition of qualifying 
shipping assets, the basis shall be the cost of such property decreased 
in the amount of the gain not so recognized; and if the property 
purchased consists of more than one piece of property, the basis 
determined under this sentence shall be allocated to the purchased 
properties in proportion to their respective costs.
    ``(e) Replacement Qualifying Shipping Assets Must Be Acquired From 
Unrelated Person in Certain Cases.--
            ``(1) In general.--Subsection (a) shall not apply if the 
        replacement qualifying shipping assets are acquired from a 
        related person except to the extent that the related person 
        acquired the replacement qualifying shipping assets from an 
        unrelated person during the period applicable under subsection 
        (b).
            ``(2) Related person.--For purposes of this subsection, a 
        person is related to another person if the person bears a 
        relationship to the other person described in section 267(b) or 
        707(b)(1).''
    (b) Technical and Conforming Amendment.--The second sentence of 
section 56(g)(4)(B)(i) is amended by striking ``or under section 114.'' 
and inserting ``, under section 114 or under section 1357.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 102. INCOME OF MERCHANT SEAMAN EXCLUDABLE FROM GROSS INCOME AS 
              FOREIGN EARNED INCOME.

    (a) Section 911 Exclusion.--Section 911(d) of the Internal Revenue 
Code of 1986 (relating to citizens or residents of the United States 
living abroad) is amended by redesignating paragraph (9) as paragraph 
(10) and by inserting after paragraph (8) the following:
            ``(9) Application to certain merchant marine crews.--In 
        applying this section to an individual who is a citizen or 
        resident of the United States and who is employed for a minimum 
        of 90 days during a taxable year as a regular member of the 
        crew of a qualified vessel (as defined in section 1355)--
                    ``(A) the individual shall be treated as a 
                qualified individual without regard to the requirements 
                of paragraph (1), and
                    ``(B) any earned income attributable to services 
                performed by that individual so employed on such a 
                vessel while it is engaged in transportation between 
                the United States and a foreign country or possession 
                of the United States shall be treated (except as 
                provided by subsection (b)(1)(B)) as foreign earned 
                income regardless of where payments of such income are 
                made.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

               TITLE II--INSPECTION AND INSURANCE PARITY

SEC. 201. CERTIFICATE OF INSPECTION.

    Section 3309 of title 46, United States Code, is amended by adding 
at the end the following:
    ``(d) Certificate of Inspection.--
            ``(1) In general.--A qualified vessel (as defined in 
        section 1355 of the Internal Revenue Code of 1986) shall be 
        eligible for a certificate of inspection if the Secretary 
        determines that--
            ``(A) the vessel is classed by and designed in accordance 
        with the rules of the American Bureau of Shipping or another 
        classification society accepted by the Secretary;
            ``(B) the vessel complies with applicable international 
        agreements and associated guidelines, as determined by the 
        country in which the vessel was documented immediately before 
        becoming a documented vessel (as defined in that section); and
            ``(C) that country has not been identified by the Secretary 
        as inadequately enforcing international vessel regulations as 
        to that vessel.
            ``(2) Continued eligibility for certificate.--Paragraph (1) 
        does not apply to a vessel after any date on which the vessel 
        fails to comply with the applicable international agreements 
        and associated guidelines referred to in paragraph (1)(B).''

SEC. 202. AGREEMENTS REGARDING INJURY OR DEATH OF CREW.

    (a) Agreements.--Notwithstanding the Death on the High Seas Act (46 
U.S.C. App. 761 et seq.) or any other provision of law (other than 
subsection (b)), including general maritime law--
            (1) the operator of a qualified vessel (as defined in 
        section 1355 of the Internal Revenue Code of 1986) and the 
        operating crew of such a vessel may agree to any mutually-
        acceptable system limiting or otherwise controlling liability 
        and damages from death or injury of a crew member; and
            (2) the terms of any such agreement shall take precedence 
        over, and apply in lieu of, any otherwise applicable provision 
        of any law of the United States with respect to the liability 
        of the owner, employer, and operator, and damages, for such 
        injury or death.
    (b) Evidence of Financial Responsibility Required.--Subsection 
(a)(2) shall not apply to an agreement under subsection (a)(1) unless 
the owner or operation of the vessel to which the agreement relates has 
insurance or other evidence of financial responsibility that has been 
approved by the Secretary of Transportation to provide for compensation 
in accordance with the agreement for death or injury of seamen engaged 
on the vessel.
                                 <all>