[Senate Report 104-167]
[From the U.S. Government Publishing Office]




   104th Congress 1st            SENATE                 Report
         Session
                                                       104-167
_______________________________________________________________________


                                                       Calendar No. 223


 
                MARITIME REFORM AND SECURITY ACT OF 1995

                               __________

                              R E P O R T

                                 of the

           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                                   on

                                S. 1139




                November 2, 1995.--Ordered to be printed
       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
                      one hundred fourth congress
                             first session

  LARRY PRESSLER, South Dakota, 
             Chairman
ERNEST F. HOLLINGS, South Carolina   BOB PACKWOOD, Oregon
DANIEL K. INOUYE, Hawaii             TED STEVENS, Alaska
WENDELL H. FORD, Kentucky            JOHN McCAIN, Arizona
J. JAMES EXON, Nebraska              CONRAD BURNS, Montana
JOHN D. ROCKEFELLER IV, West VirginiaSLADE GORTON, Washington
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
JOHN B. BREAUX, Louisiana            KAY BAILEY HUTCHISON, Texas
RICHARD H. BRYAN, Nevada             OLYMPIA SNOWE, Maine
BYRON L. DORGAN, North Dakota        JOHN ASHCROFT, Missouri
  Patric G. Link, Chief of Staff
Kevin G. Curtin, Democratic Chief 
    Counsel and Staff Director
                                                       Calendar No. 223
104th Congress                                                   Report
                                 SENATE

 1st Session                                                    104-167
_______________________________________________________________________


                MARITIME REFORM AND SECURITY ACT OF 1995
                                _______


                November 2, 1995.--Ordered to be printed

_______________________________________________________________________


      Mr. Pressler, from the Committee on Commerce, Science, and 
                Transportation, submitted the following

                              R E P O R T

                         [To accompany S. 1139]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill joint resolution deg. (S. 
1139) to amend the Merchant Marine Act, 1936, and for other 
purposes, having considered the same, reports favorably thereon 
without amendment and recommends that the bill do pass.

                          Purpose of the Bill

  The purpose of S. 1139 is to establish a program, known as 
the Maritime Security Fleet Program (MSFP), that would assure 
the continued presence of an active, privately owned, U.S.-flag 
and U.S.-crewed merchant shipping fleet to meet national and 
foreign commerce needs and to provide sustainment sealift 
capability in time of war or national emergency.
  To accomplish the goals of ensuring the availability of a 
U.S. merchant fleet for wartime or national emergencies and in 
order to retain a pool of qualified mariners to serve on these 
vessels, the Committee recommends a bill, S. 1139, that would 
establish the MSFP. The bill, as reported, would phase out the 
existing operating-differential subsidy (ODS) program, would 
remove operating restrictions on participants in the MSFP and 
would provide reduced payments to vessel operators who agree to 
make their vessels and associated intermodal assets available 
to the Secretary of Defense upon request. Funding in the amount 
of $100 million per year for payments to vessel operators would 
be authorized. Each ship which participates in the program 
would receive $2.3 million per year for the first year and $2.1 
million per year for the remaining nine years of the program. 
When fully operational, the program would result in the 
retention of up to 50 U.S.-flag vessels. Absent this program, 
U.S.-flag vessel owners would be forced to shift their 
operations to foreign flags of convenience with foreign crews 
in order to be internationally competitive.
  The current ODS program makes a payment based on the 
differential between U.S. crew and vessel costs and the costs 
of operating a vessel under a foreign flag. This payment scheme 
provides little incentive for U.S.-flag vessel operators to 
reduce costs or to seek operational efficiencies. The Maritime 
Security Fleet Program (MSFP) under S. 1139 would pay a flat 
amount per year per vessel. These payments would be up to 50 
percent less per vessel than those under the existing program 
and would therefore create incentives for operators to 
constrain their operating costs. The bill, as reported, also 
recognizes the operating restrictions that have accompanied the 
ODS program have restricted ODS participants from utilizing 
their fleets in the most efficient and internationally 
responsive manner, contributing to the increased costs of 
operating vessels in the ODS program. The bill, as reported, 
eliminates numerous operating restrictions on MSFP contractors 
in an effort to increase the competitiveness of U.S.-flag 
vessels in the international trade.
  S. 1139, as reported, also would expand the existing 
obligation of vessel owners to provide sealift assistance to 
the Department of Defense (DOD) in time of national need. Upon 
a request by the DOD, vessel owners would be required to make 
their vessels, their vessels' capacity, and their intermodal 
equipment, terminal facilities and management services 
available for sealift operations. Requiring U.S.-flag vessel 
operators to supply intermodal assets will ensure that defense 
mobilization plans provide a coordinated approach to our 
nation's transportation logistics needs.

                          Background and Needs

  Following World War II, the United States had the largest 
commercial, privately owned merchant shipping fleet in the 
world. Almost half of the world's commercial fleet sailed under 
the American flag. This, in part, was reflective of the need 
for the United States to build up a merchant fleet to respond 
to heightened sealift requirements. Today, the U.S. merchant 
marine is in a state of crisis. While the United States remains 
the world's largest trading nation, our commercial fleet now 
ranks sixteenth in size in the world. Other foreign nations, 
such as Great Britain, Germany, and Japan, have also seen major 
declines in merchant fleet size. This is reflective of the 
trend away from regulation under national law and toward 
regulation under a flag of convenience. For instance, a vessel 
operating under the registry of Liberia, the Marshall Islands, 
or Vanuatu operates with minimal to non-existent tax liability 
and lesser insurance cost, has to comply with less stringent 
interpretation of international safety standards, and may 
operate with low cost seamen from countries such as Bangladesh, 
Pakistan, or the Philippines. As the number of ships in the 
U.S.-flag fleet declines, so does the number of civilian 
seafarers. Without remedial action, there simply will be no 
U.S. fleet to conduct foreign commerce, and the United States 
may have difficulty manning our Ready Reserve Fleet (RRF) and 
will have to rely on foreign-flag shipping for all imports and 
exports and for the sustainment of future military operations.
  During Operations Desert Shield and Desert Storm in the 
Persian Gulf War, the privately owned U.S.-flag fleet played a 
significant role in sealift operations. Approximately 32 
percent of the cargo for those operations was shipped on 
container and chartered U.S.-flag ships, and 47 percent was 
shipped on government-controlled U.S.-flag ships. All of the 
U.S.-flag ships used during sealift operations were crewed by 
trained American merchant mariners. The Persian Gulf War thus 
demonstrated the continuing, modern day importance of 
maintaining the merchant fleet to meet our national security 
sealift needs. Since the Persian Gulf War, the Department of 
Transportation has mobilized RRF vessels manned by U.S. 
mariners for operations in Somalia, Haiti, and Bosnia.
  Military sealift has two components: surge and sustainment. 
Surge sealift involves the mobilization of ships for the 
initial 30-day rapid deployment of unit equipment and military 
personnel for an overseas operation. Sustainment sealift refers 
to the requirements imposed on the merchant fleet to ship cargo 
in order to supply and resupply our forces beyond the first 30 
days of an overseas military operation.
  Surge sealift requirements are usually met through the use of 
Government owned prepositioned and fast sealift vessels and 
through the activation of specific vessels in the RRF. 
Government owned vessels available for immediate deployment 
provide assured transportation of surge equipment. Fast sealift 
vessels are fully manned by civilian mariners, 365 days a year, 
and are strategically deployed in order to respond rapidly to a 
variety of crises. High priority RRF vessels are outported in 
the United States near deployment load centers and have, at 
most, 10 assigned crew members during periods when such ships 
are not activated in order to maintain the vessel for 
activation. In order to activate the RRF, a substantial number 
of mariners must be employed from the existing U.S.-flag 
vessels. Labor practices on merchant vessels are somewhat 
different from those in other industries, mandating continuous 
seven days a week employment for lengthy periods of six to 
eight months, but permitting the balance of the year to be 
spent ashore. This labor pattern, common to seagoing labor 
activities, ensures that the United States has a labor pool of 
trained mariners that may be utilized to man the RRF. For 
example, over 3,000 civilian mariners were required to meet 
mobilization requirements during Operations Desert Shield and 
Desert Storm.
  Since 1965, the number of jobs on privately-owned, oceangoing 
U.S.-flag ships of 1,000 gross tons and over has dropped from 
50,986 to 8,603, as of January 1, 1995. Of these, 3,163 were 
licensed officers and 5,440 were unlicensed seamen. In large 
part, the reductions in personnel can be traced to vessel 
efficiencies and modernization. U.S.-flag vessels of the 1950's 
were smaller vessels, crewed by complements of well over 40 
merchant mariners; but modern vessels are much larger and 
crewed by complements of just over 20 merchant mariners. A 
recent analysis by the U.S. Transportation Command concluded 
that in the absence of a MSFP, the U.S. mariner job base would 
be barely adequate to crew surge sealift vessels, with the RRF 
being at the highest risk.
  Sustainment sealift requirements can be met more efficiently 
and less expensively through the use of available civilian 
merchant vessels. It would cost the Department of Defense (DOD) 
several times the cost of the MSFP to build and maintain a laid 
up sustainment sealift fleet. For instance, the DOD currently 
is building large cargo ships to supplement our nation's surge 
sealift capacity. Five of these vessels would cost more than 
the 50-ship Maritime Security Fleet. Even then, without an 
active U.S. commercial fleet, there would be an insufficient 
pool of U.S. mariners to operate such a fleet when it was 
needed. Relying on foreign-flag commercial vessels to meet the 
United States' sustainment sealift needs would leave the 
nation's ability to support significant military operations in 
the hands of foreign interests. Therefore, the most effective 
and efficient means of meeting the nation's sustainment sealift 
requirements is through an active U.S.-flag commercial fleet 
manned by U.S. citizen mariners.
  While mariner shortages are most problematic for a successful 
surge sealift effort, the success of the sustainment sealift 
effort is most dependent on the efficient movement of goods 
including ammunition, food, and medical supplies in containers, 
a technology pioneered by U.S.-flag shipping companies. The 
intermodal nature of U.S. carriers makes this type of 
logistical support readily achievable through the use of their 
commercial land/water transportation systems. A key feature of 
S. 1139 is that vessel operators would be required to make 
land-based as well as water transportation systems available to 
the DOD.
  In addition to the manning and operational considerations 
that underlie the need for the MSFP, there are concerns related 
to the size and financial soundness of the merchant fleet. In 
1948, there were 716 vessels under the U.S. flag. Less than 150 
privately owned vessels are currently in U.S.-foreign commerce 
and in the foreign-to-foreign trades. While the number of 
vessels under the U.S. flag and the number of jobs on those 
vessels have decreased, U.S.-flag carriers have become more 
efficient over time and now move more cargo than ever before. 
For example, in 1950, it took 681 ships to move 21.5 million 
tons of cargo. In 1992, it took only 189 ships to move 24.6 
million tons of cargo. Regardless of how efficient U.S.-flag 
carriers become, in order to compete internationally U.S. 
shipowners must have capital costs, operating costs, and tax 
liabilities that compare favorably with, or are at least equal 
to, those of their foreign-flag competitors.
  Unfortunately, complying with federal laws results in higher 
operating costs for U.S.-flag carriers. For instance, federal 
law requires that all licensed and unlicensed seamen on U.S.-
flag vessels must be U.S. citizens or permanent resident 
aliens. Ships registered in Liberia, Panama, or the Marshall 
Islands have no such requirement and employ seamen from 
countries such as Bangladesh or the Philippines, who make as 
little as $350 per month and are subject to virtually no 
restrictions on working hours. In addition, tax laws and U.S. 
Coast Guard requirements are substantially more onerous for 
U.S.-flag vessels than for those operated under foreign flags 
and registration.
  To offset the higher cost of operating under the U.S. flag, 
the Merchant Marine Act, 1936 (1936 Act) created the ODS 
program, through which payments are made to U.S. carriers on 
specified trade routes. These ODS contracts begin to expire in 
1995, and over 90 percent will have expired by 1998. Without 
the continued availability of a program to offset the higher 
costs of doing business under U.S. law, it is expected there 
will be little or no U.S.-flag container fleet by the year 
2000. The potential absence of a U.S.-flag fleet also would 
jeopardize our trading interests, as U.S. importers and 
exporters would be completely dependent on foreign shipping 
interests.
  The Committee therefore believes it is in the best interests 
of the United States to retain a fleet of vessels under the 
U.S. flag and to provide, as do many nations, adequate 
financial incentives to register vessels in their home country.

                          Legislative History

  Support for reform of the ODS program in order to provide 
such incentives has been ongoing for several years. Presidents 
Bush and Clinton both proposed maritime reform legislation to 
Congress, and bills passed the House of Representatives in each 
session of the 103rd Congress.
  The Surface Transportation and Merchant Marine Subcommittee 
held a hearing on the proposed MSFP and the Title XI vessel 
loan guarantee program on July 26, 1995. At the hearing, the 
Subcommittee heard testimony supporting the MSFP from 
Administration representatives Vice Admiral Albert J. 
Herberger, U.S. Maritime Administrator, and General Robert L. 
Rutherford, Commander in Chief, U.S. Transportation Command; 
U.S.-flag vessel operator representatives Mr. John Clancey, 
Sea-Land Service, Inc., Mr. Timothy Rhein, American President 
Companies, and Mr. Erik Johnson, Waterman Steamship Corp. and 
Central Gulf Lines, Inc.; U.S. maritime labor representatives 
Mr. Michael Sacco, Seafarers International Union of North 
America, Mr. Michael McKay, American Maritime Officers, Captain 
Timothy Brown, International Organization of Masters, Mates and 
Pilots, and Mr. Joel Bem, Marine Engineers' Beneficial 
Association. All testified in favor of the MSFP. Additionally, 
the Subcommittee heard testimony from U.S. shipyard 
representatives Mr. Thomas P. Jones, Shipbuilders Council of 
America, and Mr. Thomas Bowler, American Shipbuilding 
Association, supporting Title XI vessel loan guarantee program 
reforms proposed by the House National Security Committee.
  On August 9, 1995, S. 1139 was introduced by Senator Lott, 
with Senators Stevens, Hutchison, Snowe, Hollings, Inouye, 
Breaux, and Mikulski as cosponsors. On August 10, 1995, in open 
executive session, the Committee, without objection, ordered S. 
1139 reported.
  The bill modifies and incorporates provisions from several 
legislative proposals, including S. 1945, the Maritime Security 
and Trade Act, which was introduced at the Administration's 
request during the 103rd Congress; H.R. 4003, the Maritime 
Security and Competitiveness Act of 1994, which passed the 
House during the 103rd Congress; and two bills ordered reported 
by the House National Security Committee this year: H.R. 1347, 
the Maritime Administration Authorization Act of 1995, and H.R. 
1350, the Maritime Security Act of 1995.

                      Summary of Major Provisions

  S. 1139, as reported, would authorize the MSFP and would 
authorize the Secretary of Transportation (the Secretary) to 
enter into operating agreements for fiscal year 1996. These 
operating agreements would be effective only for a one-year 
period but would be renewable, subject to annual 
appropriations, through the end of 2005. The program would be 
authorized at $100 million per year. Annual payments under the 
bill would be $2.3 million per ship per year for the first year 
and $2.1 million per ship per year for the following nine years 
of the program. The Committee recognized the value in providing 
longer term contract authority between the U.S. government and 
the U.S. flag operators, but fiscal constraints precluded the 
enactment of multi-year contract authority as the 
Administration had originally proposed. S. 1139, as reported, 
also would expand the obligations of vessel operators who 
participate in the program by requiring them to make available 
a broad range of intermodal assets and not simply vessels. The 
bill, as reported, would allow vessel operators to reflag if 
Congress fails to appropriate the funds necessary to operate 
the program.
  S. 1139, as reported, would terminate the ODS program and 
addresses concerns of nonsubsidized operators in the 
noncontiguous domestic trade about the participation of MSFP 
subsidized operators in that trade. The bill, as reported, 
would remove certain construction and operating restrictions on 
U.S. flag vessels to improve the competitiveness of these 
vessels in the international trade market. S. 1139, as 
reported, would reform the title XI vessel loan guarantee 
program to improve its effectiveness and establish a repair and 
maintenance pilot program to improve the readiness of the Ready 
Reserve Fleet. The bill, as reported, also would authorize 
minimal veterans benefits for certain merchant seamen who 
served around the end of World War II; grant certain 
reemployment rights for certain merchant seamen participating 
in certain national defense sealift programs; extend the war 
risk insurance program until June 30, 2000; make a minor 
amendment to the Merchant Ship Sales Act of 1946; and reduce 
the frequency of a required report.

                            Estimated Costs

  In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, October 31, 1995.
Hon. Larry Pressler,
Chairman, Committee on Commerce, Science, and Transportation, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1139, the Maritime 
Reform and Security Act of 1995.
    Enacting S. 1139 would affect direct spending. Therefore, 
pay-as-you-go procedures would apply to the bill.
    If you wish further details on this estimate, we will be 
pleased to provide them.
            Sincerely,
                                         June E. O'Neill, Director.

               congressional budget office cost estimate

    1. Bill number: S. 1139.
    2. Bill title: Maritime Reform and Security Act of 1995.
    3. Bill status: As ordered reported by the Senate Committee 
on Commerce, Science, and Transportation on August 10, 1995.
    4. Bill purpose: S. 1139 would amend Title VI of the 
Merchant Marine Act, 1936, which authorizes federal operating 
subsidies for U.S.-flag shipping companies. Section 101 of the 
bill would replace the existing operating differential subsidy 
(ODS) program currently administered by the Maritime 
Administration (MARAD) with a new program. Specifically, the 
section would establish the Maritime Security Fleet (MSF) 
within the Department of Transportation. Owners or operators of 
ships enrolled in the MSF would enter into annual operating 
agreements with MARAD making their vessels available to the 
government when needed for national security. In exchange, the 
agency would pay the ship owners or operators $2.1 million 
($2.3 million for 1996) per ship, subject to appropriation of 
the necessary amounts. The bill would authorize the Secretary 
of Transportation to enter into one-year agreements in 1996; 
the contracts could then be renewed each year through 2005 
subject to the availability of appropriations. All eligible 
carriers would be able to sign the one-year agreements during 
1996 but would not receive the monthly payments for vessels 
covered by ODS contracts or Military Sealift Command (MSC) 
charters until these other payments ended. The bill would 
authorize the appropriation of $100 million for fiscal year 
1996, and such sums as necessary up to $100 million per year 
for fiscal years 1997 through 2005.
    Section 102 of the bill would prohibit the Secretary of 
Transportation from renewing or executing new ODS contracts 
once the legislation is enacted. Carriers with active contracts 
would continue to receive subsidy payments until those 
agreements expire, unless the carriers choose to terminate them 
at an earlier date.
    Title III of S. 1139 would establish a system for 
determining risk categories and guarantee fees to be assigned 
by the Secretary when guaranteeing loans under Title XI of the 
1936 act. This title also would direct the Secretary to conduct 
a pilot program to procure maintenance and repair services for 
nine Ready Reserve Force (RRF) vessels through long-term 
contracts.
    Section 401 of the bill would extend the qualifying period 
for determining the active military status of certain merchant 
mariners and would entitle qualifying seamen to receive burial 
rights and benefits from the Department of Veterans Affairs 
(VA). This section would direct the Secretary of Transportation 
to reimburse the VA for the additional benefit costs. Finally, 
the Secretary of Transportation would collect a $30 processing 
fee from each mariner applying for benefits.
    S. 1139 also would make technical amendments to various 
statutes that govern MARAD activities and extend the 
Secretary's authority to provide war risk insurance.
    5. Estimated cost to the Federal Government: Under current 
MARAD policies, operating subsidies to U.S. shipping companies 
will terminate in fiscal year 2001, when the last existing ODS 
contract expires. No new contracts have been executed since 
1981, and MARAD no longer extends existing agreements. CBO 
projects that ODS outlays will fall from $167 million in 1996 
to less than $7 million by 2000. CBO estimates that, as a 
result of Title I of S. 1139, annual subsidy payments to 
shipping companies would total $209 million in each of fiscal 
years 1996 and 1997. Total subsidies would fall to $146 million 
in 1998, the first full year of payments under the new program, 
as more ODS contracts expire. From 2001 (when all ODS contracts 
will have expired) through 2005, annual subsidies would equal 
$100 million, the amount authorized for MSF payments.
    In addition to the changes made by Title I, two other 
provisions of the bill would affect the federal budget: (1) The 
pilot program on RRF maintenance required by Title III, which 
would increase the 1996 authorization level by $30 million and 
discretionary outlays by $10 million in each of fiscal years 
1996 through 1998, and (2) the changes in eligibility for 
merchant mariner benefits in Title IV, which would result in 
small changes in mandatory spending. The budgetary impacts of 
the legislation are summarized in the following table:

----------------------------------------------------------------------------------------------------------------
                                                              1995     1996     1997     1998     1999     2000 
----------------------------------------------------------------------------------------------------------------
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                       1SPENDING SUBJECT TO APPROPRIATIONS                                      
                                                                                                                
Spending under current law:                                                                                     
    Budget authority \1\..................................  .......  .......  .......  .......  .......  .......
    Estimated outlays.....................................      211      167      128       46       11        7
Proposed changes:                                                                                               
    Estimated authorization level.........................  .......       76       84      100      100      100
    Estimated outlays.....................................  .......       52       91      110      100      100
Spending under S. 1139:                                                                                         
    Estimated authorization level.........................  .......       76       84      100      100      100
    Estimated outlays.....................................      211      219      219      156      111      107
                                                                                                                
                                           CHANGES IN DIRECT SPENDING                                           
                                                                                                                
Estimated budget authority................................  .......    (\2\)    (\2\)    (\2\)    (\2\)    (\2\)
    Estimated outlays.....................................  .......      (b)      (b)    (\2\)    (\2\)    (\2\)
----------------------------------------------------------------------------------------------------------------
\1\ Spending under current law is equal to CBO baseline estimates of outlays that will occur under existing     
  contracts. Budget authority was provided for this purpose in the years that the contracts were signed; no new 
  authority is shown under current law because CBO does not expect any new ODS agreements to be executed.       
\2\ Less than $500,000.                                                                                         

    The costs of this bill fall within budget function 400.
    6. Basis of estimate: Spending Subject to Appropriations.--
For purposes of this estimate, CBO assumed that S. 1139 would 
be enacted in the first quarter of fiscal year 1996. The table 
shows the amounts that CBO estimates would be obligated each 
year for MSF subsidy payments, up to the $100 million annual 
cap specified by section 101. For fiscal year 1996, this amount 
is $46 million--considerably below the annual cap--because we 
expect that no MSF operating agreements would become effective 
until late in the year, based on the requirements of the 
legislation. Appropriations and outlays would rise to $100 
million annually by 1998, once all agreements have been signed 
and all enrolled vessels have begun receiving payments. (We 
estimate that fewer than 10 ships currently under other federal 
contracts will enter the MSF; most of these will begin 
receiving payments by 1998.) At that time, MSF appropriations 
will be sufficient to subsidize about 47 ships.
    The fiscal year 1996 authorization level shown in the table 
also includes $30 million for the RRF program mandated by 
section 303. The estimated authorization for RRF maintenance 
contracts is based on information provided by MARAD maintenance 
contracts is based on information provided by MARAD, which 
manages the RRF through an agreement with the U.S. Navy. We 
estimate that this amount would be spent over three years, 
under maintenance agreements with nine U.S. shipyards, each 
covering one vessel. Some or all of this amount may be 
reimbursed by the Department of Defense from amounts 
appropriated to the National Defense Sealift Fund for RRF 
operation and maintenance. The $30 million estimated cost of 
the RRF maintenance pilot program is about the same as MARAD 
currently spends for these purposes (a little over $1 million 
per ship per year), but funding for this purpose is currently 
provided on an annual basis. MARAD has no existing authority to 
enter into multiyear maintenance contracts.
    Direct Spending.--Title IV would result in small changes in 
direct spending. This title would require the federal 
government to pay certain mariners veterans benefits of less 
than $300 each. Offsetting this cost would be collections of 
$30 from each mariner who applies to the Coast Guard for the 
certification needed to obtain such benefits. Because the 
number of mariners and the average cost of providing benefits 
to eligible candidates are both so small, CBO estimates that 
the net impact of this title would be less than $500,000 per 
year, beginning in 1996.
    7. Pay-as-you-go considerations: Section 252 of the 
Balanced Budget and Emergency Deficit Control Act of 1985 sets 
up pay-as-you-go procedures for legislation affecting direct 
spending or receipts through 1998. CBO estimates that enacting 
S. 1139 would affect spending, and therefore, pay-as-you-go 
procedures would apply to the bill. We estimate, however, that 
new direct spending would be less than $500,000 per year.

------------------------------------------------------------------------
                                            1996       1997       1998  
------------------------------------------------------------------------
Change in outlays......................          0          0          0
Change in receipts.....................      (\1\)      (\1\)      (\1\)
------------------------------------------------------------------------
\1\ Not applicable.                                                     

    8. Estimated cost to State and local governments: None.
    9. Estimate comparison: None.
    10. Previous CBO estimate: CBO has prepared cost estimates 
for two bills ordered reported by the House Committee on 
National Security with provisions similar to those in S. 1139. 
On July 19, 1995, CBO prepared an estimate for H.R. 1350, the 
Maritime Security Act of 1995, as ordered reported on May 24, 
1995. The estimate for Titles I and II of S. 1139 is identical 
to the estimate for H.R. 1350. On September 7, 1995, CBO 
prepared an estimate for H.R. 1347, the Maritime Administration 
Authorization Act for Fiscal Year 1996, as ordered reported on 
May 2, 1995. Our estimates for similar provisions contained in 
S. 1139 are identical to the estimates contained in our earlier 
submissions.
    11. Estimate prepared by: Deborah Reis
    12. Estimate approved by: Robert A. Sunshine for Paul N. 
Van de Water, Assistant Director for Budget Analysis.

                      Regulatory Impact Statement

  In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following evaluation of the regulatory impact of the 
legislation, as reported.
  S. 1139, as reported, would authorize appropriations for the 
MSFP and would make several changes to current law. While many 
sections of the reported bill would have minimal regulatory 
impact, the provisions of titles I and II, and sections 301 and 
302, will affect substantially certain Department of 
Transportation regulatory programs, as noted below.
  Title I would authorize the MSFP, a new maritime subsidy 
program to be administered by the Secretary; terminate the ODS 
program; and establish a mechanism for preserving competition 
in the noncontiguous domestic trade of the United States 
between subsidized and nonsubsidized U.S.-flag vessel 
operators. Title II would remove certain vessel construction 
and operating restrictions currently placed on subsidized U.S.-
flag vessel operators.
  The title I and title II provisions would affect 
approximately 20 U.S.-flag vessel operators employing 
approximately 15,000 workers, including merchant mariners and 
support personnel. The primary economic impact of these 
provisions would be the retention of up to 50 U.S.-flag vessels 
that would otherwise transfer to foreign flag and the continued 
direct employment of approximately 3,000 U.S. merchant mariners 
and indirect and induced employment of several thousand other 
U.S. workers through the MSFP. This economic impact would be 
manifested by retention of hundreds of millions of dollars in 
U.S. household earnings and foreign exchange. A January 1995 
study by Nathan Associates, Inc. concluded that the benefit-
cost ratio of federal support for the U.S. merchant marine is 
at least 1.15. The title I and title II provisions would result 
in a small increase in paperwork associated with the MSFP 
operating agreements that would be somewhat offset by a 
reduction in the requirements for the Secretary's approval of 
certain business actions by ODS contractors. The title I and 
title II provisions would have no impact on personal privacy.
  Sections 301 and 302 would reform the Title XI vessel loan 
guarantee program to improve its effectiveness. These 
provisions would affect approximately 25 U.S. shipyards 
employing approximately 100,000 workers. The primary economic 
impact of these provisions would be the effective doubling of 
the amount of Title XI vessel loan guarantees which could be 
approved for a given level of appropriations. The 
Administration requested $48 million for FY 1996 for Title XI 
vessel loan guarantees, which under current law would guarantee 
up to $500 million in vessel loans. Sections 301 and 302 would 
increase this amount to $1 billion in vessel loan guarantees, a 
$500 million increase. Since each Title XI loan guarantee is 
limited to 87.5% of the total vessel loan, the net increase in 
economic activity, as measured by total vessel loan values, 
resulting from these provisions would be approximately $570 
million. The section 301 and 302 provisions would result in no 
increase in paperwork and would have no impact on personal 
privacy.
  Section 402 would require the Secretary to prescribe 
regulations implementing, for merchant seamen who are employed 
in the activation and operation of a vessel used by the United 
States for a war, armed conflict, national emergency, or 
maritime mobilization need, reemployment rights which are 
substantially equivalent to those granted returning military 
reservists. The number of businesses and U.S. merchant mariners 
affected by this provision would depend upon the extent of 
future vessel mobilizations. For example, over 3,000 civilian 
mariners were required to meet mobilization requirements during 
Operations Desert Shield and Desert Storm. This provision would 
result in a minimal increase in paperwork and would have no 
impact on personal privacy.

                      Section-by-Section Analysis

Section 1. Short title

  Section 1 cites the short title for the reported bill as the 
``Maritime Reform and Security Act of 1995''.

                       TITLE I--MARITIME SECURITY

Section 101. Maritime security program

  This section would add a new subtitle B to title VI of the 
1936 Act, consisting of new sections 651 through 655. The 
program established under new subtitle B would be entitled the 
``Maritime Security Fleet Program''. Under this subtitle, the 
Secretary would be required to establish a fleet of active, 
militarily useful, privately-owned vessels to meet national 
defense and other security requirements and for the purpose of 
maintaining a United States presence in international 
commercial shipping. The vessels in this fleet would be those 
which are covered by an operating agreement.
  New section 651(b) would establish the criteria that vessels 
must meet to be eligible to be covered by an operating 
agreement. To be eligible, the vessel must currently be 
operating in ocean common carriage within the meaning of the 
Shipping Act of 1984 (46 U.S. Code App. 1701 et seq.), must be 
a roll-on/roll-off vessel with a carrying capacity of at least 
80,000 square feet or 500 twenty-foot equivalent units, or must 
be a lighter aboard ship (LASH) vessel with a barge capacity of 
at least 75 barges. In addition to these specific categories, 
the Secretary would be authorized to select additional vessel 
types that may be needed to meet specific national defense or 
military requirements.
  New section 651(b) would also set certain vessel age 
limitations for participation in the new program. To be 
eligible, vessels must meet specified age requirements as of 
the date an operating agreement is first entered into, unless 
the Secretary, after consultation with the Secretary of 
Defense, determines that it is in the national interest to 
waive the age requirement. The age requirement is that a 
vessel, other than a LASH vessel, must be 15 years of age or 
less on the date an agreement is first entered into; LASH 
vessels must be 25 years of age or less on the date of first 
entry into an agreement. Vessels that are not currently under 
the U.S.-flag would be eligible to be covered if they are less 
than 10 years of age when placed under the U.S. flag. An MSFP 
application can be filed with respect to a foreign-flag vessel, 
or a vessel still under construction, so that the applicant can 
know whether or not the vessel will receive an MSFP operating 
agreement for the vessel before documenting the vessel under 
U.S. flag.
  New section 652 would establish the terms, payment levels, 
and limitations on MSFP operating agreements.
  New section 652(a) would require participants in the MSFP to 
sign an operating agreement with the Secretary. Subject to the 
payment restrictions described in new section 652(g), the 
Secretary would be allowed to enter into operating agreements 
for vessels which continue to operate under an ODS contract or 
which are under charter to the DOD. However, the payment 
restrictions of new section 652(g) would prohibit contractors 
from receiving double payments as a result of ODS contracts or 
DOD charters.
  New section 652(b) would require all participating vessels to 
be documented under U.S. law and operated in the foreign 
commerce of the United States. Participating vessels may not be 
operated exclusively in the domestic trade, but may be operated 
in the mixed foreign trade and domestic trade allowed under 
registry endorsement for the vessel issued under 46 U.S. Code 
12105.
  New section 652(c) would establish that operation of a vessel 
in the foreign commerce of the United States under an MSFP 
operating agreement is ``without restriction.'' This phrase is 
intended to establish the inapplicability, under the MSFP, of 
restrictions which were imposed on vessels by the ODS program. 
Thus, under the new program, there is no regulation of foreign 
``trade routes'' served by vessels participating in the MSFP. 
New section 652(c) would also establish that a contractor of a 
vessel included in an MSFP operating agreement shall not be 
subject to any requirement of sections 801, 808, 809, or 810 of 
the 1936 Act. Finally, new section 652(c) would also expressly 
establish that participation in the MSFP does not establish a 
basis for regulating a contractor pursuant to section 805 of 
the 1936 Act or any provision of Subtitle A of title VI of that 
Act.
  New sections 652(d), (e), and (f) would establish payment 
rates and criteria for vessels participating in the MSFP. The 
basic rates of payment would be $2.3 million per ship per year 
for fiscal year 1996, and $2.1 million per ship per year for 
fiscal years 1997 through 2005. Because of budget limitations, 
the operating agreements would be one-year contracts, with a 
provision authorizing annual renewals for up to nine years. 
Each renewal would be subject to the availability of 
appropriations. The Secretary would be required to renew an 
operating agreement if sufficient funds were appropriated or 
otherwise made available to fund that operating agreement. The 
Secretary may not reduce those amounts except as provided for 
by section 652.
  New section 652(e) would require an MSFP contractor to 
certify annually to the Secretary that the vessel was operated 
in the foreign trade, or in a mixed foreign and domestic trade 
as allowed under a registry endorsement, for at least 320 days 
during the previous year (including time spent being surveyed, 
inspected, drydocked, or repaired).
  Under new section 652(g), an MSFP vessel would not be 
eligible to receive a payment under this program for any days 
which it is: (1) under charter, other than a charter allowed 
under section 653, to the United States Government or is 
subject to an existing ODS contract; (2) not operated in 
accordance with the operating agreement; or (3) more than 25 
years of age, except that a LASH vessel more than 25 years of 
age may be eligible for MSFP payments if it: (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.
  New section 652(h) would establish a general rule that MSFP 
payments are not to be reduced due to carriage of military or 
civilian preference cargoes. New section 652(h) would 
establish, however, that no MSFP payments are to be made 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 of the 1936 Act, and would 
require a pro rata reduction in payment for any day that the 
vessel operates below the 320-day limitation that is set forth 
in new section 652(e). Under new section 654 ``bulk cargo'' is 
defined as cargo carried in bulk without mark or count, the 
same definition as used in the Shipping Act of 1984. The 
Committee intends that, as under the Shipping Act, 
containerized cargo is not bulk cargo.
  New section 652(i) would establish the order in which the 
Secretary shall award contracts for vessels based on 3 
priorities. The first priority set forth in new section 
652(i)(1) includes two types of vessels: (1) those that are 
owned by persons who are citizens of the United States under 
section 2 of the Shipping Act, 1916 (46 U.S. Code App. 
802)(section 2 citizens); and (2) those that are less than 10 
years old and owned by persons who are eligible to own a U.S.-
flag vessel (documentation citizens) if the person also 
operates or manages other U.S.-flag vessels for the Secretary 
of Defense or charters vessels to the Secretary of Defense. The 
number of vessels for which a person who is a section 2 citizen 
may be awarded an operating agreement under the first priority 
would be capped at the number of U.S.-flag vessels that the 
person operated in the foreign commerce of the United States 
(including allowed mixed domestic and foreign commerce) on May 
17, 1995, plus the number of U.S.-flag vessels that the person 
had under charter to the Secretary of Defense on that date. The 
number of vessels for which a person who is a documentation 
citizen may be awarded an operating agreement would be limited 
to not more than five. For the purposes of these first priority 
limitations, a related party with respect to a person would be 
treated as the person.
  Under this provision, if appropriated funds are available 
after awarding contracts for all eligible vessels covered under 
the first priority, then the Secretary would be able to award 
contracts under the second priority. The second priority would 
include the same two types of persons who are eligible under 
the first priority, but only with respect to vessels in excess 
of the cap for that person in the first priority. Under new 
section 652(i)(3), to the extent that appropriated funds would 
be available after awarding operating agreements for all 
eligible vessels covered under the first and second priorities, 
the Secretary would be required to award operating agreements 
for vessels that are otherwise eligible.
  New section 652(j) would describe the authority to transfer 
MSFP operating agreements to other eligible persons.
  New section 652(k) would describe the termination of the 
Secretary's obligation to make payments to an MSFP contractor 
if the contractor fails to meet certain obligations.
  New section 652(l) would describe the procedures for the 
consideration by the Secretary of an MSFP application and the 
effective date of MSFP operating agreements.
  New section 652(m) would describe the procedure for the early 
termination of an MSFP operating agreement.
  New section 652(n) would provide that if an operating 
agreement is not renewed within the first 60 days of the fiscal 
year, then each vessel covered by an operating agreement under 
this subtitle is released from any further obligation under the 
agreement, and the operator may transfer and register that 
vessel under a foreign registry deemed acceptable by the 
Secretary.
  New section 652(o) would describe the process for the 
awarding of MSFP operating agreements. Provisions included in 
section 652(o) would require the Secretary, starting with the 
lowest priority, to make a proportional reduction in the number 
of operating agreements offered to each person who has 
submitted applications for operating agreements within a 
priority in the event that appropriated amounts are not 
sufficient for all eligible vessels within that priority. The 
new section 652(o) would also give a preference to U.S.-built 
vessels in the award of operating agreements.
  New section 652(p) would require MSFP contractors to inform 
the Secretary of certain new vessel construction actions so 
that U.S. shipyards capable of constructing those vessels are 
notified of these actions.
  New section 653 would describe the national security 
requirements placed on MSFP contractors. New section 653(a) 
would establish requirements for the Emergency Preparedness 
Agreement (EPA). The EPA would be entered into pursuant to the 
Emergency Preparedness Program established by the Secretary and 
approved by the Secretary of Defense. Upon a request by the 
Secretary of Defense during time of war or national emergency, 
an owner or operator of a vessel covered by an operating 
agreement would be required to make available commercial 
transportation resources. The Secretary of Transportation (in 
consultation with the Secretary of Defense) and a contractor 
may agree to additional or modifying terms appropriate to a 
particular contractor's circumstances. Thus, the bill, as 
reported, recognizes that, beyond a given common framework, 
agreements could vary somewhat among contractors.
  The Secretary would be expected to negotiate and enter into 
an EPA with each contractor as promptly as practicable after 
that contractor has entered into an operating agreement.
  New section 653(b) would define commercial transportation 
resources which must be made available upon a request by the 
Secretary of Defense to include vessels or capacity in vessels, 
intermodal systems and equipment, terminal facilities, and 
intermodal and management services, or any portion of the above 
categories that the Secretary may deem necessary.
  A contractor would be required to make available vessels 
which are in the new program or an equivalent vessel capacity 
from the contractor's vessels, whether or not in the program. 
The contractor would also be required to make available certain 
land side assets and systems, such as terminals and management 
expertise. The Committee envisions that the actual EPA would 
not require a contractor to offer non-vessel resources which 
are disproportionately large when compared to the contractor's 
vessel commitment. A contractor could agree voluntarily, in an 
EPA, to make a disproportionately larger portion of its non-
vessel assets available. However, the Committee notes that, if 
the government were to seek to include in the EPA provisions 
requiring contractors to pledge resources which are out of 
proportion to the number of vessels the government is prepared 
to support with payments, contractors may be discouraged from 
participating in the new MSFP.
  The Committee also notes that the government's emerging 
``VISA'' program (a program being developed under present law) 
does not ask for a disproportionate commitment of land side 
resources and the bill has been drafted in anticipation of 
reasonable program demands by the government of contractors. In 
addition, the bill specifies that the Secretary is, in 
administering the Emergency Preparedness Program, to seek to 
``minimize disruption of the contractor's service to commercial 
shippers'' in determining how and when to actually activate an 
EPA.
  Under the provision, a contractor's obligations under an EPA 
would be triggered by a request by the Secretary of Defense 
during time of war or national emergency. The Committee expects 
that the government will develop a procedure, through an 
identified process, to ensure that the decision to request 
resources is not made lightly but, instead, represents a 
considered and carefully coordinated decision.
  New section 653(c) would specify that compensation to be 
provided to a contractor under an EPA shall be fair and 
reasonable, not less than the contractor's commercial market 
charges for like transportation (charges can be greater for 
additional and different services, as they are not ``like'', 
and shall include all the costs associated with provision and 
use of the contractor's commercial resources to meet emergency 
requirements (i.e., activation costs).
  This section would also specify that the fair and reasonable 
compensation shall not reflect in any way payments under new 
section 652. Section 652 payments are made to compensate MSFP 
contractors for the higher costs of complying with U.S. law. 
Thus, the government would not be able to set low compensation 
for services rendered under new section 653 on the grounds 
that, combined with new section 652 payments, it is fair and 
reasonable. Thus, payment of fair and reasonable compensation 
under new section 653 would be in addition to new section 652 
payments and determined independently, in accordance with the 
compensation criteria set forth in new section 653.
  Under new section 653(d), an owner or operator who makes a 
vessel available to the Secretary of Defense under this section 
would be allowed to employ a foreign-flag vessel in the foreign 
commerce of the United States, including the carriage of 
preference cargo, as a replacement vessel for a vessel covered 
by an operating agreement under this subtitle, in order to 
minimize disruption to commercial services.
  New section 653(e) would require the Secretary to redeliver 
the vessel or other resources which were used during a war or 
national emergency in the same condition as when made 
available, less ordinary wear and tear. The Government would be 
required to compensate the contractor for necessary repairs or 
replacements. Except as provided in an EPA or otherwise 
provided by law, the government would not be liable for certain 
consequential damages arising from activation of commercial 
transportation resources and services.
  New section 653(e) would further establish that when a vessel 
is covered by an agreement under this section, it is not 
subject to section 902 or 909 of the 1936 Act. The provision 
would also establish that an EPA supersedes any other 
agreements between the government and the contractor for vessel 
availability in time of war or national emergency. Thus, while 
a contractor is subject to an EPA, that agreement governs how 
and what the government may require of a contractor in terms of 
response to emergencies.
  New section 654 would contain definitions applicable to 
Subtitle B.
  New section 655 would authorize to be appropriated for 
operating agreements under this subtitle $100 million for 
fiscal year 1996 and such sums as may be necessary, but not to 
exceed $100 million, for each fiscal year thereafter through 
fiscal year 2005.

Section 102. Termination of operating-differential subsidy program

  This section would amend the 1936 Act to generally provide 
for the phasing out of the current ODS program. Section 102(a) 
of the reported bill would amend section 605(b) of the 1936 Act 
to prohibit the payment of an ODS for the operation of a vessel 
that is more than 25 years of age, unless the Secretary 
determines, before enactment of this bill that it is in the 
public interest to grant such financial aid for the operation 
of such vessel.
  Section 102(b) of the reported bill would create a new 
section 616 of the 1936 Act. The new section would prohibit any 
new ODS contracts after the new program is enacted and would 
remove the trade route and essential service restrictions on 
vessels that are subject to existing contracts once the new 
program is operating, and would allow for the voluntary 
termination of ODS contracts. An operator of a vessel included 
in an ODS operating agreement would be allowed to place that 
vessel under a foreign registry deemed acceptable by the 
Secretary if a comparable vessel is included in the agreement 
as a replacement.

Section 103. Noncontiguous domestic trades

  In general, section 103 of the reported bill would impose 
certain limitations with respect to the ability of a contractor 
to receive MSFP payments while participating in the 
noncontiguous domestic trades. By definition, those trades 
consist solely of trade between a point in the 48 contiguous 
states and a point in Hawaii, Puerto Rico, or Alaska (other 
than points in Alaska north of the Arctic Circle).
  This would be a new provision, governing the new MSFP. 
Section 805(a) of the 1936 Act (46 U.S. Code App. 1223) would 
not apply to an MSFP contractor unless that contractor is also 
receiving payments under the ODS program.
  Section 103 of the reported bill would establish two 
different bases for participation in noncontiguous domestic 
trades by a contractor receiving MSFP payments. The rule set 
forth in subsection (a) would establish that an MSFP contractor 
or related party may not receive MSFP payments when 
participating in a noncontiguous domestic trade without first 
obtaining written permission of the Secretary, after specified 
findings are made by the Secretary, and after a specified type 
of hearing.
  The other basis for an MSFP contractor's participation in 
noncontiguous domestic trades while receiving MSFP payments 
would not in any way be subject to such written permission, 
findings or hearing. Section 103 of the reported bill would 
authorize an MSFP contractor (receiving MSFP payments) to serve 
the noncontiguous domestic trades within the parameters 
established by sections 103(c) and (d) of the reported bill. 
Sections 103(c) and (d), respectively, of the reported bill 
would: (1) grandfather the level of service (as defined in 
section 103(h)(1)) of the reported bill provided by an MSFP 
contractor as of specified dates (allowing a contractor to 
continue to deploy that level of service), and (2) allow an 
MSFP contractor to increase its grandfathered service in 
proportion to growth in the economy of the applicable state or 
commonwealth. Section 103(e) of the reported bill would set 
forth procedures for the Secretary to promptly establish the 
precise extent of noncontiguous domestic trade service 
authorized by sections 103(c) and (d) of the reported bill. 
This prompt procedure would be appropriate, so that all 
concerned could know the precise level of statutorily 
authorized service by MSFP contractors in those trades under 
the relevant facts.
  With respect to written permission authority, under section 
103(a)(1) of the reported bill, no contractor or related party 
would receive MSFP payments while participating in a 
noncontiguous domestic trade except upon ``written permission 
of the Secretary.'' Such written permission also would be 
required before an MSFP contractor may implement a material 
change in the number or frequency of sailings, the capacity 
offered, or the domestic ports called in such a trade. The 
Secretary would be authorized to grant such written permission 
unless the Secretary finds that: (A) existing service in the 
relevant 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 bill.
  Section 103(a)(1) would differ from corresponding aspects of 
section 805(a) of the 1936 Act in that this provision would 
establish as a factor in the determination whether existing 
service in the trade is adequate and it would make the unfair 
competition issue relevant to all operators in the relevant 
trade, not only to those operating ``exclusively'' in domestic 
trades. Also, with respect to service or material changes in 
service subject to this paragraph, the Secretary would be 
authorized to grant the application for such service in the 
absence of an affirmative finding by the Secretary that the 
proposed service would result in unfair competition under 
section 103(a)(1)(B)(i) of the reported bill, or be contrary to 
the objects and policy of the 1936 Act under 103(a)(1)(B)(ii) 
of the reported bill, or that existing service in the relevant 
trade is adequate. If the Secretary makes an affirmative 
finding with respect to any of those three tests, however, the 
Secretary would not be authorized to grant an application for a 
service subject to section 103(a)(1) of the reported bill. 
Section 103(a)(2) of the reported bill would establish 
procedures applicable to section 103(a)(1) of the reported 
bill.
  With respect to grandfathered authority, section 103(b) of 
the reported bill would establish that section 103(a) of the 
reported bill shall not apply ``in any way'' to a contractor's 
provision of service in a noncontiguous domestic trade within 
the ``level of service'' provided by that contractor as of the 
date established by section 103(c) of the reported bill 
(grandfathered service) or to provision of service permitted by 
section 103(d) of the reported bill (growth in trade service). 
Section 103(c) of the reported bill would establish August 9, 
1995, the date of the introduction of this legislation, as the 
grandfather date, except that with respect to tug and barge 
service to Alaska the date would be July 1, 1992.
  The term ``level of service'' provided as of the grandfather 
date would have the meaning set forth in section 103(h)(1) of 
the reported bill.
  For containership service, section 103(h)(1)(B) of the 
reported bill would establish that the level of service 
provided by a contractor in a noncontiguous domestic trade as 
of a date is the sum of two figures: 100 percent of the 
capacity of the vessels operated by or for the contractor and 
participating solely in that trade; and 75 percent of the 
capacity of the vessels operated by or for the contractor and 
participating in both that trade and another trade. In each 
case capacity would be determined by taking the relevant 
vessels' container capacity and sailing frequency as of the 
grandfather date. Also, capacity would be the service's 
physical capacity not the extent to which it is utilized. In 
addition, vessels which are currently deployed in a given 
trade, but which happened to be in dry dock on the grandfather 
date, would be included in the computation of service offered 
as of the grandfather date, although any substitute vessels for 
the vessels in dry dock would not be included, so that there 
would be no ``double counting.'' Thus, if on a given date in a 
trade, a contractor is offering two ships, each of 1000 TEU 
capacity, each sailing every other week, and solely in that 
trade, the carrier's level of service as of the date in the 
trade would be 1000 TEU weekly, or 52,142 TEU annually. This 
would be the grandfather level even if the service offered as 
of the grandfather date by that contractor is, on an annualized 
basis, greater than the service the carrier offered over the 
preceding 12 calendar months.
  Section 103(h)(1)(B) of the reported bill also would 
specifically provide that the grandfather level does not 
include any restriction on frequency or number of sailings or 
on ports called within the overall capacity grandfathered. 
Thus, within the relevant trade, the contractor could, for 
example, offer more or less frequent sailings, on different 
vessels, and to or from different ports, so long as the 
capacity offered in that trade was within the grandfathered 
level for that trade. However, once the contractor offers the 
grandfathered level of service within a given year, additional 
service in that trade within that year would not be authorized 
as a grandfathered level of service. Such additional service 
would have to have a basis other than grandfathered level of 
service (i.e., written permission under subsection (a) or 
authorization as growth in trade service) to be offered in 
accordance with this section.
  With respect to service other than containership service 
(section 103(h)(1)(A) of the reported bill), the rules would be 
similar to those for containership service. However, total 
annual capacity would be measured not by taking the relevant 
vessels' configuration and sailing frequency as of the 
grandfather date, but (subject to exceptions) by adding up 
service over the twelve calendar months preceding the 
grandfather date. Thus, for service subject to section 
103(h)(1)(A) of the reported bill, the level of service would 
be calculated as follows (unless an exception within section 
103(h)(1)(A) of the reported bill applied). If, for example, in 
the 12 calendar month period the contractor provided service 
with two vessels, one with 500 TEU capacity which made 12 
voyages in the trade and one with 200 TEU capacity which made 
20 voyages in the trade, the grandfathered level of service of 
that contractor in that trade would be 500  12 plus 
200  20, or 10,000 TEUs (though the contractor would 
not be bound to the same service patterns, frequency, or 
vessels in offering such 10,000 TEUs annually).
  Subsection (h)(2) would establish that the level of capacity 
which is grandfathered in a trade as of a date is that level so 
long as the service in the trade is not ``abandoned'' after 
that date. Section 103(h)(2) of the reported bill also would 
provide that the level of capacity ``shall be described with 
the specificity required by subsection (e)(1).'' This phrase 
would confirm that, to offer grandfathered service, a 
contractor must follow the procedures set forth in section 
103(e)(1) of the reported bill, which requires submission of 
information to the Secretary. The confirmation in section 
103(h)(2) of the reported bill that a contractor shall comply 
with section 103(e)(1) of the reported bill, however, would not 
mean that specific information provided pursuant to section 
103(e)(1) of the reported bill, such as vessels and itinerary, 
limit the way (port calls, vessel size, frequency) in which a 
contractor provides service within a grandfathered level of 
service as defined in section 103(h)(1) of the reported bill. 
As set forth in section 103(h)(1) of the reported bill, once 
the overall capacity which is the grandfathered level of 
service is determined, the contractor would have operational 
flexibility within it.
  With respect to growth in trade, sections 103(b) and (d) of 
the reported bill would establish that, in addition to any 
grandfathered capacity, section 103(a) would not apply to a 
contractor's providing an increase over that grandfathered 
capacity in proportion to the annual increase in real gross 
product of the relevant noncontiguous State or Commonwealth 
since the grandfather date. Thus, for example, if one year 
after the grandfather date the relevant real gross product is 3 
percent larger, the contractor can then offer a level of 
capacity 3 percent higher than the grandfather level. This 
growth in trade feature would not be applicable to non-
grandfathered service. Increases in non-grandfathered service 
would be fully subject to section 103(a) of the reported bill. 
Detailed issues such as how to determine the ``annual'' 
increase in a real gross product since a grandfather date with 
respect to a fractional portion of a year would be within the 
discretion of the Secretary.
  The following describes procedures for determining 
grandfathered and growth in trade service. Sections 103(e)(1) 
and (e)(2) of the reported bill would establish procedures to 
be followed regarding implementation of grandfathered and 
growth in trade service, respectively, in a relevant trade. In 
each case, an application would be required to set forth what 
the applicant believes it is entitled to offer under the 
applicable subsection. In addition, these sections would 
require the submission of specified additional information. The 
additional information is not the level of service itself or 
the increase in real gross product itself, but additional 
information to assist the Secretary in determining the 
grandfathered level of service or the increase in real gross 
product in the relevant State or Commonwealth since the 
grandfather date.
  Upon receipt of the application, the Secretary would be 
required to cause notice of the application to be published in 
the Federal Register, allowing 30 days from such publication 
for comments. Within 15 days after the close of the comment 
period, the Secretary would be required to issue a written 
determination on the applicable issue. While the Committee 
fully expects the Secretary will issue timely decisions, the 
provisions underscore that the right to offer grandfathered and 
growth in trade service would be established by statute, not by 
the Secretary. The Secretary would be responsible, however, for 
making a determination as to the precise levels of such 
statutorily authorized service. Thus, section 103(e) of the 
reported bill would provide that, in case the Secretary does 
not issue a timely determination, the contractor would be fully 
permitted to implement the level of service set forth in the 
application until such time as the Secretary issues the 
determination. Because section 103 of the reported bill would 
expressly permit the contractor to proceed to implement the 
level of service sought in a case where the Secretary does not 
issue a timely decision, if, in such a case, the Secretary's 
subsequent determination would establish a lower level than the 
contractor sought, the contractor would not have subjected 
itself to loss of payments under section 103(f) of the reported 
bill by offering that higher level of service between the time 
when the Secretary should have issued the determination and the 
time when the determination was issued. It is intended that any 
such higher level of service, offered by the contractor after 
the date when the decision was due but prior to the Secretary's 
decision, be counted, however, in measuring the level of 
service offered by the contractor during the longer overall 
period which is the subject of the Secretary's determination 
(with respect to grandfather or growth in trade authority). 
Again, however, it is the Committee's firm intent that the 
Secretary make section 103(e) of the reported bill 
determinations within the statutory deadline.
  Section 103(f) of the reported bill would provide for denial 
of payments for any time period when service is offered in a 
noncontiguous domestic trade, by an MSFP contractor, beyond the 
level authorized by or pursuant to this section. The Secretary 
would deny payments only in part, however, with respect to 
provision of service beyond such level which is de minimis or 
not material, with the part to be denied to be determined by 
the Secretary.
  Section 103(g) of the reported bill would provide a specific 
mechanism allowing an MSFP contractor to temporarily provide 
additional service in a noncontiguous domestic trade in 
emergency circumstances and, even then, only pursuant to 
temporary permission granted by the Secretary.

         TITLE II--OPERATING FLEXIBILITY AND REGULATORY RELIEF

Section 201. Operational flexibility

  This section would amend section 804 of the 1936 Act (46 U.S. 
Code App. 1222) to permit contractors under the MSFP and ODS 
programs to operate, under specified conditions, foreign-flag 
vessels and to enter into space chartering arrangements.
  Section 201(a) of the reported bill, by creating new section 
804(f) of the 1936 Act, would specify that an MSFP or ODS 
contractor could conduct certain foreign-flag operations 
without preapproval of the Secretary or delay. The creation of 
new section 804(f) would not diminish the right of a contractor 
to apply, under existing section 804(b), for permission to 
operate foreign-flag vessels when operation of such vessels is 
not established by right by new section 804(f). Similarly, the 
addition of new subsection 804(f) would not establish any 
restriction on the ability of a U.S-flag vessel or vessel space 
to be chartered out to a foreign citizen or carrier. The 
restrictions of section 804 pertain only to a contractor's use 
of foreign-flag vessels, not to selling U.S.-flag space to 
others.
  The Committee notes that new section 804(f) would authorize 
foreign-flag vessel operation, by an ODS or MSFP contractor, in 
line haul service between U.S. and foreign ports, if the vessel 
was owned, chartered, or operated by the contractor, or an 
affiliate of the contractor, on the date of enactment of the 
reported bill, or if the vessel is a replacement for such a 
vessel. The term replacement in new section 804(f) is intended 
in its commercially practical meaning; a replacement vessel can 
differ in size or deployment from the vessel being replaced. 
Foreign-flag vessels in line haul service would be required to 
be under a foreign registry deemed acceptable by the Secretary.
    Under section 201(b) of the reported bill the reforms made 
by this provision would not take effect for an ODS contractor 
until one of two specified conditions occurs.

Section 202. Registration reform

  This section would amend section 9 of the Shipping Act, 1916 
(46 U.S. Code App. 808) by adding a new section 9(e), which 
would allow the owner of a U.S.-flag vessel to place a vessel 
under foreign registry if any one of four conditions described 
in new section 9(e) is met. These conditions generally relate 
to the expiration of existing contracts, admittance of 
replacement vessels, or the nonavailability of new contracts. 
The addition of new section 9(e) would not restrict the 
Secretary's authority with respect to consideration of 
applications under existing section 9(c) of that Act.

Section 203. Restriction removal

  This section would add a new section 512 to the 1936 Act, 
which would reaffirm a longstanding executive branch 
interpretation of applicable statutes that all restrictions and 
requirements under existing sections 503, 506, and 802 of the 
1936 Act applicable to a liner vessel built using a 
construction-differential subsidy terminate beginning on the 
date that is 25 years from the date of original delivery of the 
vessel from the shipyard.

Section 204. Vessel standards

  This section would authorize a liner vessel documented under 
foreign flag on the date of enactment of this bill to be 
documented as a U.S. flag vessel after the Secretary 
determines: (1) the vessel is classed by an acceptable 
classification society; and (2) the vessel complies with 
applicable international agreements and the associated 
guidelines for vessel construction and equipment of the country 
of registry, if the Secretary has not identified that country 
as inadequately enforcing such international agreements. 
Additionally, the Secretary may rely upon an accepted 
classification society's certification that the vessel meets 
those international standards.
  This provision is intended to ensure that liner vessels which 
meet internationally accepted construction and equipment 
standards and are reflagged as vessels of the United States 
under the reported bill are not required to retrofit material 
and equipment solely for the purpose of complying with U.S. law 
and regulations, where such law or regulations establish a 
standard exceeding the internationally accepted standard which 
applied to the vessel before it was reflagged. This section of 
the reported bill would also provide that certification 
provided by the American Bureau of Shipping or other 
classification society accepted by the Secretary may be relied 
upon with regard to ensuring compliance with the International 
standards.

               TITLE III--LOAN GUARANTEES AND SHIP REPAIR

Section 301. Title XI loan guarantees

  This section would amend title 46, U.S. Code, to correct an 
unintended interpretation of a provision of the loan guarantee 
program authorized by title XI of the 1936 Act (46 U.S. Code 
App. 1271 et seq.) (Title XI) that discourages the 
documentation of Title XI guarantee financed vessels under the 
U.S. flag.

Section 302. Vessel loan guarantee program

  This section would amend title 46, U.S. Code, to increase the 
effectiveness of the Title XI program by clarifying the 
methodology to be used to determine the risk factor for the 
vessel loan guarantee program. This section would shift the 
program from the current fixed risk factor system to a loan-by-
loan risk factor system. This change should expand the total 
dollar amount of loan guarantees that may be made for a given 
appropriation amount by encouraging the acceptance of low-risk 
Title XI applications. This section would also reform the 
system under which Title XI application fees are to be paid and 
financed. Additionally, this section would expand the scope of 
the Secretary's Title XI authority to include fishing vessel 
loan guarantees.

Section 303. Vessel repair and maintenance pilot program

  This section would establish a vessel repair and maintenance 
pilot program intended to determine whether ``phased 
maintenance'' contracts with full service shipyards for repair 
and maintenance of RRF vessels are more effective than 
repeatedly soliciting bids for one-time repairs. This program 
would respond to the numerous problems experienced in 
activating RRF vessels during Desert Storm.

                        TITLE IV--MISCELLANEOUS

Section 401. Merchant mariner benefits

  This section would amend title 46, U.S. Code, by adding a new 
chapter 112 which would authorize minimal veterans' benefits 
for certain merchant seamen who served during the period August 
16, 1945 to December 31, 1946.

Section 402. Reemployment rights for certain merchant seamen

  This section would amend the 1936 Act by adding a new section 
302 which would grant, for certain merchant seamen who are 
employed in the activation and operation of a vessel used by 
the 
United States for a war, armed conflict, national emergency, or 
maritime mobilization need, reemployment rights which are 
substantially equivalent to those granted returning military 
reservists.

Section 403. Extension of war risk insurance authority

  This section would amend title 46, U.S. Code, to extend the 
Secretary's authority to provide insurance against loss or 
damage caused by marine war risks from June 30, 1995, to June 
30, 2000.

Section 404. Amendment to the Merchant Ship Sales Act

  This section would amend section 11(b)(2) the Merchant Ship 
Sales Act of 1946 (50 U.S. Code App. 1744(b)(2)) to specify 
that the Secretary of Defense, instead of the Secretary of the 
Navy, is the Government official who, in accordance with the 
memorandum of agreement between the Secretary and the Secretary 
of Defense, requests the use of a vessel in the National 
Defense Reserve Fleet.

Section 405. Reporting requirement reduction

  This section would amend section 308(c) of title 49, U.S. 
Code, to reduce the frequency of a report on U.S. ports from 
annually to every even numbered year.

                        Changes in Existing Law

  In compliance with paragraph 12 of rule XXVI of the Standing 
Rules of the Senate, changes in existing law made by the bill, 
as reported, are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new material is printed 
in italic, existing law in which no change is proposed is shown 
in roman):

                      TITLE 46--UNITED STATES CODE

                    Subtitle II--Vessels and Seamen

             PART G--MERCHANT SEAMEN PROTECTION AND RELIEF

                 Chapter 112--Merchant Mariner Benefits

    Sec.
    11201. Qualified service.
    11202. Documentation of qualified service.
    11203. Eligibility for certain veterans' benefits.
    11204. Processing fees.

Sec.  11201. Qualified service

  For purposes of this chapter, a person engaged in qualified 
service if, between August 16, 1945, and December 31, 1946, the 
person--
          (1) was a member of the United States merchant marine 
        (including the Army Transport Service and the Naval 
        Transportation Service) serving as a crewmember of a 
        vessel that was--
                   (A) operated by the War Shipping 
                Administration or the Office of Defense 
                Transportation (or an agent of the 
                Administration or Office);
                   (B) operated in waters other than inland 
                waters, the Great Lakes, other lakes, bays, and 
                harbors of the United States;
                   (C) under contract or charter to, or 
                property of, the Government of the United 
                States; and
                   (D) serving the Armed Forces; and
                   (2) while so serving, was licensed or 
                otherwise documented for service as a 
                crewmember of such a vessel by an officer or 
                employee of the United States authorized to 
                license or document the person for such 
                service.

Sec.  11202. Documentation of qualified service

  (a) The Secretary shall, upon application--
           (1) issue a certificate of honorable discharge to a 
        person who, as determined by the Secretary, engaged in 
        qualified service of a nature and duration that 
        warrants issuance of the certificate; and
           (2) correct, or request the appropriate official of 
        the Federal Government to correct, the service records 
        of the person to the extent necessary to reflect the 
        qualified service and the issuance of the certificate 
        of honorable discharge.
  (b) The Secretary shall take action on an application under 
subsection (a) not later than one year after the Secretary 
receives the application.
  (c) In making a determination under subsection (a)(1), the 
Secretary shall apply the same standards relating to the nature 
and duration of service that apply to the issuance of honorable 
discharges under section 401(a)(1)(B) of the GI Bill 
Improvement Act of 1977 (38 U.S.C. 106 note).
  (d) An official of the Federal Government who is requested to 
correct service records under subsection (a)(2) shall do so.

Sec. 11203. Eligibility for certain veterans' benefits

  (a) The qualified service of an individual who--
           (1) receives an honorable discharge certificate 
        under section 11202 of this title, and
           (2) is not eligible under any other provision of law 
        for benefits under laws administered by the Secretary 
        of Veterans Affairs, is deemed to be active duty in the 
        Armed Forces during a period of war for purposes of 
        eligibility for benefits under chapters 23 and 24 of 
        title 38.
  (b) The Secretary shall reimburse the Secretary of Veterans 
Affairs for the value of benefits that the Secretary of 
Veterans Affairs provides for an individual by reason of 
eligibility under this section.
  (c) An individual is not entitled to receive, and may not 
receive, benefits under this chapter for any period before the 
date on which this chapter takes effect.

Sec. 11204. Processing fees

  (a) The Secretary shall collect a fee of $30 from each 
applicant for processing an application submitted under section 
11202(a) of this title.
  (b) Amounts received by the Secretary under this section 
shall be credited to appropriations available to the Secretary 
for carrying out this chapter.
                              ----------                              


                           SHIPPING ACT, 1916

                          [46 U.S.C. App. 808]

SEC. 9. REGISTRATION, ENROLLMENT AND LICENSING OF VESSELS PURCHASED, 
                    CHARTERED, OR LEASED; REGULATIONS; COASTWISE TRADE.

  (a) [Repealed]
  (b) Every vessel purchased, chartered, or leased from the 
Secretary of Transportation shall, unless otherwise authorized 
by the Secretary of Transportation, be operated only under such 
registry or enrollment and license. Such vessels while employed 
solely as merchant vessels shall be subject to all laws, 
regulations, and liabilities governing merchant vessels, 
whether the United States be interested therein as owner, in 
whole or in part, or hold any mortgage, lien, or other interest 
therein.
  (c) Except as provided in section 611 of the Merchant Marine 
Act, 1936 (46 App. U.S.C. 1181), and sections 31322(a)(1)(D) 
and 31328 of title 46, United States Code, a person may not, 
without the approval of the Secretary of Transportation--
          (1) sell, mortgage, lease, charter, deliver, or in 
        any manner transfer, or agree to sell, mortgage, lease, 
        charter, deliver, or in any manner transfer, to a 
        person not a citizen of the United States, any interest 
        in or control of a documented vessel (except in a 
        vessel that has been operated only as a fishing vessel, 
        fish processing vessel, or fish tender vessel (as 
        defined in section 2101 of title 46, United States 
        Code) or in a vessel that has been operated only for 
        pleasure) owned by a citizen of the 
        United States or the last documentation of which was 
        under the laws of the United States; or
          (2) place a documented vessel, or a vessel the last 
        documentation of which was under the laws of the United 
        States, under foreign registry or operate that vessel 
        under the authority of a foreign country.
  (d)(1) Any charter, sale, transfer, or mortgage of a vessel, 
or interest in or control of that vessel, contrary to this 
section is void.
  (2) A person that knowingly charters, sells, transfers, or 
mortgages a vessel, or interest in or control of that vessel, 
contrary to this section shall be fined under title 18, United 
States Code, imprisoned for not more than 5 years, or both.
  (3) A documented vessel may be seized by, and forfeited to, 
the United States Government if--
          (A) the vessel is placed under foreign registry or 
        operated under the authority of a foreign country 
        contrary to this section; or
          (B) a person knowingly charters, sells, transfers, or 
        mortgages a vessel, or interest or control in that 
        vessel, contrary to this section.
  (4) A person that charters, sells, transfers, or mortgages a 
vessel, or an interest in or control of a vessel, in violation 
of this section is liable to the United States Government for a 
civil penalty of not more than $ 10,000 for each violation.
  (e) 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, with approval of the Secretary, if--
          (1)(A) the Secretary determines that at least one 
        replacement vessel of a capacity that is equivalent or 
        greater, as measured by deadweight tons, gross tons, or 
        container equivalent units, as appropriate, is 
        documented under chapter 121 of title 46, United States 
        Code, by the owner of the vessel placed under the 
        foreign registry; and
          (B) the replacement vessel is not more than 10 years 
        of age on the date of that documentation;
          (2)(A) an application for an operating agreement 
        under subtitle B of title VI of the Merchant Marine 
        Act, 1936 has been filed with respect to a vessel which 
        is eligible to be included in the Maritime Security 
        Fleet under section 651(b)(1) of that Act; and
          (B) the Secretary has not awarded an operating 
        agreement with respect to that vessel within 90 days 
        after the date of that application;
          (3) a contract covering the vessel under subtitle A 
        of title VI of the Merchant Marine Act, 1936 has 
        expired, and that vessel is more than 15 years of age 
        on the date the contract expires; or
          (4) an operating agreement covering the vessel under 
        subpart B of title VI of the Merchant Marine Act, 1936 
        has not been renewed.
                              ----------                              


                       MERCHANT MARINE ACT, 1936

                         [46 U.S.C. App. 1131]

SEC. 301. MANNING AND WAGE SCALES; SUBSIDY CONTRACTS.

  (a) Investigation of wages and working conditions; 
establishment of wage and manning scales; incorporation in 
subsidy contracts.--The Secretary of Transportation is 
authorized and directed to investigate the employment and wage 
conditions in ocean-going shipping and, after making such 
investigation and after appropriate hearings, to incorporate in 
the contracts authorized under Titles VI and VII of this Act 
[46 U.S.C. App. 1171 et seq. and 46 U.S.C. App. 1191 et seq.] 
minimum manning scales and minimum wage scales, and minimum 
working conditions for all officers and crews employed on all 
types of vessels receiving an operating-differential subsidy. 
After such minimum manning and wage scales, and working 
conditions shall have been adopted by the Secretary of 
Transportation, no change shall be made therein by the 
Secretary of Transportation except upon public notice of the 
hearing to be had, and a hearing by the Secretary of 
Transportation of all interested parties, under such rules as 
the Secretary of Transportation shall prescribe. The duly 
elected representatives of the organizations certified as the 
proper collective bargaining agencies shall have the right to 
represent the employees who are members of their organizations 
at any such hearings. Every contractor receiving an operating-
differential subsidy shall post and keep posted in a 
conspicuous place on each such vessel operated by such 
contractor a printed copy of the minimum manning and wage 
scales, and working conditions prescribed by his contract and 
applicable to such vessel: Provided, however, That any increase 
in the operating expenses of the subsidized vessel occasioned 
by any change in the wage or manning scales or working 
conditions as provided in this section shall be added to the 
operating-differential subsidy previously authorized for the 
vessel.
  (b) Subsidy contracts; provisions relative to officers and 
crew.--Every contract executed under authority of Titles VI and 
VII of this Act [46 U.S.C. App. 1171 et seq. and 46 U.S.C. App. 
1191 et seq.] shall require--
          (1) Insofar as is practicable, officers' living 
        quarters shall be kept separate and apart from those 
        furnished for members of the crew;
          (2) Licensed officers and unlicensed members of the 
        crew shall be entitled to make complaints or 
        recommendations to the Secretary of Transportation 
        providing they file such complaint or recommendation 
        directly with the Secretary of Transportation, or with 
        their immediate superior officer who shall be required 
        to forward such complaint or recommendation with his 
        remarks to the Secretary of Transportation, or with the 
        authorized representatives of the respective collective 
        bargaining agencies;
          (3) Licensed officers who are members of the United 
        States Naval Reserve shall wear on their uniforms such 
        special distinguishing insignia as may be approved by 
        the Secretary of the Navy; officers being those men 
        serving under licenses issued by the Bureau of Marine 
        Inspection and Navigation;
          (4) The uniform stripes, decoration, or other 
        insignia shall be of gold braid or woven gold or silver 
        material, to be worn by officers, and no member of the 
        ship's crew other than licensed officers shall be 
        allowed to wear any uniform with such officer's 
        identifying insignia;
          (5) No discrimination shall be practiced against 
        licensed officers, who are otherwise qualified, because 
        of their failure to qualify as members of the United 
        States Naval Reserve.
  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--
          (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.
          * * * * * * *

               TITLE V--CONSTRUCTION-DIFFERENTIAL SUBSIDY

          * * * * * * *

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.

              [TITLE VI--OPERATING--DIFFERENTIAL SUBSIDY]

             TITLE VI--VESSEL OPERATING ASSISTANCE PROGRAMS

           Subtitle A--Operating-Differential Subsidy Program

                         [46 U.S.C. App. 1171]

SEC. 601. SUBSIDY AUTHORIZED FOR OPERATION OF VESSELS IN FOREIGN TRADE 
                    OR IN OFF-SEASON CRUISES.

  (a) Application for subsidy; conditions precedent to 
granting.--The Secretary of Transportation is authorized and 
directed to consider the application of any citizen of the 
United States for financial aid in the operation of a vessel or 
vessels, which are to be used in an essential service in the 
foreign commerce of the United States or in such service and in 
cruises authorized under section 613 of this title [46 U.S.C. 
App. 1183]. In this title VI [46 U.S.C. App. 171 et seq.] the 
term ``essential service'' means the operation of a vessel on a 
service, route, or line described in section 211(a) [46 U.S.C. 
App. 1121(a)] or in bulk cargo carrying service described in 
section 211(b) [46 U.S.C. App. 1121(b)]. No such application 
shall be approved by the Secretary of Transportation unless he 
determines that (1) the operation of such vessel or vessels in 
an essential service is required to meet foreign-flag 
competition and to promote the foreign commerce of the United 
States except to the extent such vessels are to be operated on 
cruises authorized under section 613 of this title [46 U.S.C. 
App. 1183], and that such vessel or vessels were built in the 
United States, or have been documented under the laws of the 
United States not later than February 1, 1928, or actually 
ordered and under construction for the account of citizens of 
the United States prior to such date; (2) the applicant owns or 
leases, or can and will build or purchase or lease, a vessel or 
vessels of the size, type, speed, and number, and with the 
proper equipment required to enable him to operate in an 
essential service, in such manner as may be necessary to meet 
competitive conditions, and to promote foreign commerce; (3) 
the applicant possesses the ability, experience, financial 
resources, and other qualifications necessary to enable him to 
conduct the proposed operations of the vessel or vessels as to 
meet competitive conditions and promote foreign commerce; (4) 
the granting of the aid applied for is necessary to place the 
proposed operations of the vessel or vessels on a parity with 
those of foreign competitors, and is reasonably calculated to 
carry out effectively the purposes and policy of this Act. To 
the extent the application covers cruises, as authorized under 
section 613 of this title [46 U.S.C. App. 1183], the Secretary 
of Transportation may make the portion of this last 
determination relating to parity on the basis that any foreign 
flag cruise from the United States competes with any American 
flag cruise from the United States.
  (b) Statements as to Financial Interests to Accompany 
Application; Penalty for False Statements.--Every application 
for an operating-differential subsidy under the provisions of 
this title [46 U.S.C. App. 1171 et seq.] shall be accompanied 
by statements disclosing the names of all persons having any 
pecuniary interest, direct or indirect, in such application, or 
in the ownership or use of the vessel or vessels, routes, or 
lines covered thereby, and the nature and extent of any such 
interest, together with such financial and other statements as 
may be required by the Secretary of Transportation. All such 
statements shall be under oath or affirmation and in such form 
as the Secretary of Transportation shall prescribe. Any person 
who, in an application for financial aid under this title [46 
U.S.C. App. 1171 et seq.] or in any statement required to be 
filed therewith, willfully makes any untrue statement of a 
material fact, shall be guilty of misdemeanor.
          * * * * * * *

                         [46 U.S.C. App. 1175]

SEC. 605. VESSELS EXCLUDED FROM SUBSIDY.

  (a) Vessels Engaged in Coastwise or Intercoastal Trade; 
Vessels on Inland Waterways.--No operating-differential subsidy 
shall be paid for the operation of any vessel on a voyage on 
which it engages in coastwise or intercoastal trade: Provided, 
however, That such subsidy may be paid on a round-the-world 
voyage or a round voyage from the west coast of the United 
States to a European port or ports or a round voyage from the 
Atlantic coast to the Orient which includes intercoastal ports 
of the United States or a voyage in foreign trade on which the 
vessel may stop at the State of Hawaii, or an island possession 
or island territory of the United States, and if the subsidized 
vessel earns any gross revenue on the carriage of mail, 
passengers, or cargo by reason of such coastal or intercoastal 
trade the subsidy payment for the entire voyage shall be 
reduced by an amount which bears the same ratio to the subsidy 
otherwise payable as such gross revenue bears to the gross 
revenue derived from the entire voyage. No vessel operating on 
the inland waterways of the United States shall be considered 
for the purposes of this Act to be operating in foreign trade.
  [(b) Vessels More Than 25 Years Old.--No operating-
differential subsidy shall be paid for the operation of a 
vessel that is more than twenty-five years of age unless the 
Secretary of Transportation finds that it is to the public 
interest to grant such financial aid for the operation of such 
vessel and enters a formal order thereon.]
  (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 
Reform and Security Act of 1995, that it is in the public 
interest to grant such financial aid for the operation of such 
vessel.
  (c) Vessels to be Operated in an Essential Service Served by 
Citizens of the United States.--No contract shall be made under 
this title [46 U.S.C. App. 1171 et seq.] with respect to a 
vessel to be operated in an essential service served by 
citizens of the United States which would be in addition to the 
existing service, or services, unless the Secretary of 
Transportation shall determine after proper hearing of all 
parties that the service already provided by vessels of United 
States registry is inadequate, and that in the accomplishment 
of the purposes and policy of this Act additional vessels 
should be operated thereon; and no contract shall be made with 
respect to a vessel operated or to be operated in an essential 
service served by two or more citizens of the United States 
with vessels of United States registry, if the Secretary of 
Transportation shall determine the effect of such a contract 
would be to give undue advantage or be unduly prejudicial, as 
between citizens of the United States, in the operation of 
vessels in such essential service, unless following public 
hearing, due notice of which shall be given to each operator 
serving such essential service, the Secretary of Transportation 
shall find that it is necessary to enter into such contract in 
order to provide adequate service by vessels of United States 
registry. The Secretary of Transportation, in determining for 
the purposes of this section whether services are competitive, 
shall take into consideration the type, size, and speed of the 
vessels employed, whether passenger or cargo, or combination 
passenger and cargo, vessels, the ports or ranges between which 
they run, the character of cargo carried, and such other facts 
as he may deem proper.
          * * * * * * *
  Sec. 616. (a) After the date of enactment of the Maritime 
Reform and Security Act of 1995, 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 
Reform and Security Act of 1995 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 a foreign registry 
deemed acceptable by the Secretary of Transportation if--
          (A) the operator of the vessel receives an operating-
        differential subsidy pursuant to a contract under this 
        subtitle which is in force on October 1, 1994, and the 
        Secretary approves the replacement of such vessel with 
        a comparable vessel, or
          (B) the vessel is included in 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.

              Subtitle B--Maritime Security Fleet Program


                         establishment 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 States-flag vessels for which there are 
in effect operating agreements under this subtitle, and shall 
be known as the Maritime Security Fleet.
  (b) Vessel Eligibility.--A vessel is eligible to be included 
in the Fleet if the vessel is self-propelled and--
          (1)(A) is operated by a person in that person's 
        capacity as an ocean common carrier (as that term is 
        used in the Shipping Act of 1984 (46 U.S.C. App. 1701 
        et seq.));
          (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 LASH 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 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 first 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; and
          (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.


                          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 operating-differential subsidy contract under 
subtitle A or which is under charter to the Department of 
Defense.
  (b) Requirements for Operation.--An operating agreement under 
this section shall require that, during the period a vessel is 
included in 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 of this Act. Participation in the 
program established by this subtitle shall not subject a 
contractor to section 805 or to any provision of subtitle A of 
title VI of this Act.
  (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 or amounts otherwise made available, for 
        each subsequent fiscal year through the end of fiscal 
        year 2005. The Secretary shall renew an operating 
        agreement under this subtitle if sufficient amounts are 
        appropriated or otherwise made available to fund that 
        agreement.
          (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 owner or operator of 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 included in 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;
          (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 number of vessels for which 
                operating agreements may be entered into by the 
                Secretary under the priority in subparagraph 
                (A)--
                          (i) for vessels described in 
                        subparagraph (A)(i), may not, for a 
                        person, exceed the sum of--
                                  (I) the number of United 
                                States-documented vessels the 
                                person operated in the trade 
                                described by subsection 
                                (b)(1)(A) of this section 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 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, 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 
included in 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 enactment of the Maritime Reform and Security Act of 
        1995, 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 included 
in 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 would have terminated according to 
its terms. All terms and conditions of an Emergency 
Preparedness Agreement entered into under to 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, in consultation with the Secretary of Defense.
  (n) Termination for Lack of Funds.--If, by the first day of a 
fiscal year, insufficient funds have 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 
insufficient funds are available will be terminated on the 60th 
day of that fiscal year if sufficient funds are not 
appropriated or otherwise made available by that date. If funds 
are not appropriated under the authority provided by section 
655 or otherwise made available for any fiscal year by the 60th 
day of that fiscal year, then each vessel included in an 
operating agreement under this subtitle for which funds are not 
available is thereby released from any further obligation under 
the operating agreement, the operating agreement shall 
terminate, 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 registry 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 such regulations as may be 
        prescribed by the Secretary, but the failure to 
        promulgate such regulations shall not provide a basis 
        for denial of an application for enrollment of a vessel 
        in the Fleet.
          (2) Number of agreements awarded.--Regulations under 
        paragraph (1) shall provide that if appropriated 
        amounts are not sufficient for operating agreements for 
        eligible vessels within a priority under subsection 
        (i)(1), (2), or (3), the Secretary shall award to each 
        person, with respect to eligible vessels within such 
        priority for which such person has submitted an 
        application for an operating agreement, a number of 
        operating agreements that bears approximately the same 
        ratio to the total number of eligible vessels in the 
        priority for which timely applications have been made 
        as the amount of appropriations available for operating 
        agreements for eligible vessels in the priority bears 
        to the amount of appropriations necessary for operating 
        agreements for all eligible 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 u.s.-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 U.S. 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 
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 the Secretary of 
Transportation. The Secretary shall, by appropriate means, 
inform shipyards in the United States capable of constructing 
the vessel of such notice.


                     national 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, an owner or operator of a vessel 
        included in an operating agreement under this subtitle 
        shall make available commercial transportation 
        resources (including services). The basic terms of the 
        Emergency Preparedness Agreement 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 of Transportation, in consultation with 
        the Secretary of Defense, and a contractor may agree to 
        additional or modifying terms appropriate to the 
        contractor's circumstances.
  (b) Resources Made Available.--The commercial transportation 
resources, including services, 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, in 
        consultation with the Secretary of Defense, shall 
        provide in each Emergency Preparedness Agreement for 
        fair and reasonable compensation for all commercial 
        transportation resources, including services, provided 
        pursuant to this section.
          (2) Specific requirements.--Compensation under this 
        subsection--
                  (A) shall not be less than the contractor's 
                commercial market charges for like 
                transportation resources, including services;
                  (B) shall include all the contractor's costs 
                associated with provision and use of the 
                contractor's commercial resources, including 
                services, 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.
  (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 U.S. 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, 
        including services, 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 included in 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.


                              definitions


  Sec. 654. In this subtitle:
          (1) Fleet.--The term ``Fleet'' means the Maritime 
        Security Fleet established pursuant to section 651(a).
          (2) LASH vessel.--The term ``LASH vessel'' means a 
        lighter aboard ship vessel.
          (3) United states-documented vessel.--The term 
        ``United States-documented vessel'' means a vessel 
        documented under chapter 121 of title 46, United States 
        Code.
          (4) Bulk cargo.--The term ``bulk cargo'' means cargo 
        that is loaded and carried in bulk without mark or 
        count.
          (5) 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.


                    authorization 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.
                              ----------                              


                 CHAPTER 27. MERCHANT MARINE ACT, 1936

                         [46 U.S.C. App. 1222]

SEC. 804. OPERATING COMPETING FOREIGN-FLAG VESSEL FORBIDDEN.

  (a) Operating-Differential Subsidy; Competition With 
Essential American-Flag Service.--Except as provided in 
subsections (b) and (c) of this section, it shall be unlawful 
for any contractor receiving an operating-differential subsidy 
under title VI [46 U.S.C. App. 1171 et seq.] or for any 
charterer of vessels under title VII of this Act [46 U.S.C. 
App. 1191 et seq.], or any holding company, subsidiary, 
affiliate, or associate of such contractor or such charterer, 
or any officer, director, agent, or executive thereof, directly 
or indirectly to own, charter, act as an agent or broker for, 
or operate any foreign-flag vessel which competes with any 
American-flag service determined by the Secretary of 
Transportation to be essential as provided in section 211 of 
this Act [46 U.S.C. App. 1121].
  (b) Waiver; Special Circumstances.--Under special 
circumstances and for good cause shown, the Secretary of 
Transportation may, in his discretion, waive the provisions of 
subsection (a) of this section as to any contractor, for a 
specific period of time.
  (c) Exceptions.--Upon application to the Secretary of 
Transportation the provisions of subsection (a) of this section 
shall not apply to the following specified activities of any 
contractor under title VI [46 U.S.C. App. 1171 et seq.], or 
those in the foregoing specified relationship to him, who was 
not such a contractor on April 15, 1970, and who shall have 
complied with the requirement set forth in subsection (d) of 
this section:
          (1) Until April 15, 1990--
                  (A) the continued ownership, charter, or 
                operation of a foreign-flag vessel engaged in 
                the carriage of dry or liquid cargoes in bulk 
                which was owned, chartered, or operated by such 
                contractor, or those in the foregoing specified 
                relationship to him, on April 15, 1970;
                  (B) the continued acting as agent or broker 
                for a vessel described in subsection (c)(1)(A) 
                of this section which is owned, chartered, or 
                operated by such contractor, or those in the 
                foregoing specified relationship to him, and 
                for which such contractor, or those in 
                foregoing special relationship to him, were 
                acting as agent or broker on April 15, 1970:
          (2) [Repealed]
  (d) Statement To Be Filed With Secretary.--No contractor 
under title VI [46 U.S.C. App. 1171 et seq.], whether he shall 
have become such a contractor before or after the date of 
enactment of this section [enacted Oct. 21, 1970], shall avail 
himself of the provisions of subsection (c) of this section 
unless not later than ninety days after the enactment of this 
section [enacted Oct. 21, 1970] there shall have been filed 
with the Secretary of Transportation a full and complete 
statement, satisfactory in form and substance to the Secretary, 
of all foreign-flag vessels which he, or those in the foregoing 
specified relationship to him, directly or indirectly owned, 
chartered, acted as agent or broker for, or operated on April 
15, 1970.
  (e) Report to Congress.--During the period of time provided 
for in subsection (c) of this section, the Secretary of 
Transportation shall include in the annual report pursuant to 
section 208 of this Act [46 U.S.C. App. 1118], a report on the 
activities of contractors under such subsection, including but 
not limited to, the nature and extent of such activities; its 
effect, if any, upon carrying forward the national policy 
declared in section 101 of this Act [46 U.S.C. App. 1101]; and 
the Secretary's recommendations for legislation, if such is 
deemed to be necessary.
  (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 Reform and 
                Security Act of 1995;
                  (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 included in 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) or 
                section 616(d) or 652(n) of this Act, except 
                that any foreign-flag vessel, other than a time 
                chartered vessel, a replacement vessel under 
                section 653(d), or a vessel owned, chartered, 
                or operated by the owner or operator on the 
                date of enactment of the Maritime Reform and 
                Security Act of 1995, in line haul service 
                between the United States and foreign ports is 
                registered under the flag of a foreign registry 
                deemed appropriate by the Secretary of 
                Transportation, 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.
                              ----------                              


                       MERCHANT MARINE ACT, 1936

                         [46 U.S.C. App. 1271]

SEC. 1101. DEFINITIONS.

  As used in this title [46 U.S.C. App. 1271 et seq.]--
          (a) The term ``mortgage'' includes--
                  (1) a preferred mortgage as defined in 
                section 31301 of title 46, United States Code; 
                and
                  (2) a mortgage on a vessel that will become a 
                preferred mortgage when filed or recorded under 
                chapter 313 of title 46, United States Code [46 
                U.S.C. 31301 et seq.].
          (b) The term ``vessel'' includes all types, whether 
        in existence or under construction, of passenger cargo 
        and combination passenger cargo carrying vessels, 
        tankers, tugs, towboats, barges, dredges and ocean 
        thermal energy conversion facilities or plantships 
        which are or will be documented under the laws of the 
        United States, fishing vessels whose ownership will 
        meet the citizenship requirements for documenting 
        vessels in the coastwise trade within the meaning of 
        section 2 of the Shipping Act, 1916, as amended [46 
        U.S.C. App. 802], floating drydocks which have a 
        capacity of thirty-five thousand or more lifting tons 
        and a beam of one hundred and twenty-five feet or more 
        between the wing walls and oceanographic research or 
        instruction or pollution treatment, abatement or 
        control vessels [owned by citizens of the United 
        States];
          (c) The term ``obligation'' shall mean any note, 
        bond, debenture, or other evidence of indebtedness 
        (exclusive of notes or other obligations issued by the 
        Secretary pursuant to subsection (d) of section 1105 of 
        this title [46 U.S.C. App. 1275(d)] and obligations 
        eligible for investment of funds under section 1102 [46 
        U.S.C. App. 1272] and subsection (d) of section 1108 of 
        this title [46 U.S.C. App. 1279a(d)]), issued for one 
        of the purposes specified in subsection (a) of section 
        1104 of this title [46 U.S.C. App. 1274(a)];
          (d) The term ``obligor'' shall mean any party 
        primarily liable for payment of the principal of or 
        interest on any obligation;
          (e) The term ``obligee'' shall mean the holder of an 
        obligation;
          (f) The term ``actual cost'' of a vessel as of any 
        specified date means the aggregate, as determined by 
        the Secretary, of (i) all amounts paid by or for the 
        account of the obligor on or before that date, and (ii) 
        all amounts which the obligor is then obligated to pay 
        from time to time thereafter, for the construction, 
        reconstruction or reconditioning of such vessel;
          (g) The term ``depreciated actual cost'' of a vessel 
        means the actual cost of the vessel depreciated on a 
        straightline basis over the useful life of the vessel 
        as determined by the Secretary, not to exceed twenty-
        five years from the date the vessel was delivered by 
        the shipbuilder, or, if the vessel has been 
        reconstructed or reconditioned, the actual cost of the 
        vessel depreciated on a straightline basis from the 
        date the vessel was delivered by the shipbuilder to the 
        date of such reconstruction or reconditioning on the 
        basis of the original useful life of the vessel and 
        from the date of such reconstruction or reconditioning 
        on a straightline basis and on the basis of a useful 
        life of the vessel determined by the Secretary, plus 
        all amounts paid or obligated to be paid for the 
        reconstruction or reconditioning depreciated on a 
        straightline basis on the basis of a useful life of the 
        vessel determined by the Secretary;
          (h) The terms ``construction'', ``reconstruction'', 
        or ``reconditioning'' shall include, but shall not be 
        limited to, designing, inspecting, outfitting, and 
        equipping;
          (i) The term ``ocean thermal energy conversion 
        facility or plantship'' means any at-sea facility or 
        vessel, whether mobile, floating unmoored, moored, or 
        standing on the seabed, which uses temperature 
        differences in ocean water to produce electricity or 
        another form of energy capable of being used directly 
        to perform work, and includes any equipment installed 
        on such facility or vessel to use such electricity or 
        other form of energy to produce, process, refine, or 
        manufacture a product, and any cable or pipeline used 
        to deliver such electricity, freshwater, or product to 
        shore, and all other associated equipment and 
        appurtenances of such facility or vessel, to the extent 
        they are located seaward of the highwater mark;
          (j) The term ``citizen of the Northern Mariana 
        Islands'' means--
                  (1) an individual who qualifies as such under 
                section 8 of the Schedule on Transitional 
                Matters attached to the Constitution of the 
                Northern Mariana Islands; or
                  (2) a corporation, partnership, association, 
                or other entity formed under the laws of the 
                Northern Mariana Islands, not less than 75 
                percent of the interest in which is owned by 
                individuals referred to in paragraph (1) or 
                citizens or nationals of the United States, in 
                cases in which ``owned'' is used in the same 
                sense as in section 2 of the Shipping Act, 1916 
                (46 U.S.C. 802) [46 U.S.C. App. 802];
          (k) The term ``fishery facility'' means--
                  (1) for operations on land--
                          (A) any structure or appurtenance 
                        thereto designed for the unloading and 
                        receiving from vessels, the processing, 
                        the holding pending processing, the 
                        distribution after processing, or the 
                        holding pending distribution, of fish 
                        from one or more fisheries,
                          (B) the land necessary for any such 
                        structure or appurtenance described in 
                        subparagraph (A), and
                          (C) equipment which is for use in 
                        connection with any such structure or 
                        appurtenance and which is necessary for 
                        the performance of any function 
                        referred to in subparagraph (A);
                  (2) for operations other than on land, any 
                vessel built in the United States used for, 
                equipped to be used for, or of a type which is 
                normally used for, the processing of fish; or
                  (3) for aquaculture, including operations on 
                land or elsewhere--
                          (A) any structure or appurtenance 
                        thereto designed for aquaculture;
                          (B) the land necessary for any such 
                        structure or appurtenance described in 
                        subparagraph (A);
                          (C) equipment which is for use in 
                        connection with any such structure or 
                        appurtenance and which is necessary for 
                        the performance of any function 
                        referred to in subparagraph (A); and
                          (D) any vessel built in the United 
                        States used for, equipped to be used 
                        for, or of a type which is normally 
                        used for aquaculture;
                but only if such structure, appurtenance, land, 
                equipment, or vessel is owned by an individual 
                who is a citizen or national of the United 
                States or a citizen of the Northern Mariana 
                Islands or by a corporation, partnership, 
                association, or other entity that is a citizen 
                of the United States within the meaning of 
                section 2 of the Shipping Act, 1916 (46 U.S.C. 
                802) [46 U.S.C. App. 802], and for purposes of 
                applying such section 2 [46 U.S.C. App. 802] 
                with respect to this section--
                                  (i) the term ``State'' as 
                                used therein includes any 
                                State, the District of 
                                Columbia, the Commonwealth of 
                                Puerto Rico, American Samoa, 
                                the Virgin Islands of the 
                                United States, Guam, the 
                                Northern Mariana Islands, or 
                                any other Commonwealth, 
                                territory, or possession of the 
                                United States; and
                                  (ii) citizens of the United 
                                States must own not less than 
                                75 percent of the interest in 
                                the entity and nationals of the 
                                United States or citizens of 
                                the Northern Mariana Islands 
                                shall be treated as citizens of 
                                the United States in meeting 
                                such ownership requirement;
          (l) The term ``fishing vessel'' has the meaning given 
        such term by section 3(11) of the Fishery Conservation 
        and Management Act of 1976 (16 U.S.C. 1802(11)) [16 
        U.S.C. 1802(11)]; and any reference in this title to a 
        vessel designed principally for commercial use in the 
        fishing trade or industry shall be treated as a 
        reference to a fishing vessel;
          (m) The term ``United States'' when used in a 
        geographical context with respect to fishing vessels or 
        fishery facilities includes all States referred to in 
        subsection (k)(i).
          (n) The term ``Secretary'' means the Secretary of 
        Commerce with respect to fishing vessels and fishing 
        facilities as provided by this title [46 U.S.C. App. 
        1271 et seq.], and the Secretary of Transportation with 
        respect to all other vessels and general shipyard 
        facilities (as defined in section 1112(d)(3) [46 U.S.C. 
        App. 1279e(d)(3)]).
          (o) The term ``eligible export vessel'' means a 
        vessel constructed, reconstructed, or reconditioned in 
        the United States for use in world-wide trade which 
        will, upon delivery or redelivery, be placed under or 
        continued to be documented under the laws of a country 
        other than the United States.

                         [46 U.S.C. App. 1273]

SEC. 1103. AUTHORIZATION OF SECRETARY TO GUARANTEE OBLIGATIONS.

  (a) Principal and Interest.--The Secretary is authorized to 
guarantee, and to enter into commitments to guarantee, the 
payment of the interest on, and the unpaid balance of the 
principal of, any obligation which is eligible to be guaranteed 
under this title [46 U.S.C. App. 1271 et seq.]. A guarantee, or 
commitment to guarantee, made by the Secretary under this title 
[46 U.S.C. App. 1271 et seq.] shall cover 100 percent of the 
amount of the principal and interest of the obligation.
  (b) Security Interest.--No obligation shall be guaranteed 
under this title [46 U.S.C. App. 1271 et seq.] unless the 
obligor conveys or agrees to convey to the Secretary such 
security interest, which may include a mortgage or mortgages on 
a vessel or vessels, as the Secretary may reasonably require to 
protect the interests of the United States.
  (c) Amount of Guarantee; Percentage Limitation; Determination 
of Actual Cost of Vessel.--The Secretary shall not guarantee 
the principal of obligations in an amount in excess of 75 per 
centum, or 87\1/2\ per centum, whichever is applicable under 
section 1104 of this title [46 U.S.C. App. 1274], of the 
amount, as determined by the Secretary which determination 
shall be conclusive, paid by or for the account of the obligor 
for the construction, reconstruction, or reconditioning of a 
vessel or vessels with respect to which a security interest has 
been conveyed to the Secretary, unless the obligor creates an 
escrow fund as authorized by section 1108 of this title [46 
U.S.C. App. 1279a], in which case the Secretary may guarantee 
75 per centum or 87\1/2\ per centum, whichever is applicable 
under section 1104 of this title [46 U.S.C. App. 1274], of the 
actual cost of such vessel or vessels.
  (d) Pledge of United States.--The full faith and credit of 
the United States is pledged to the payment of all guarantees 
made under this title [46 U.S.C. App. 1271 et seq.] with 
respect to both principal and interest, including interest, as 
may be provided for in the guarantee, accruing between the date 
of default under a guaranteed obligation and the payment in 
full of the guarantee.
  (e) Proof of Obligations.--Any guarantee, or commitment to 
guarantee, made by the Secretary under this title [46 U.S.C. 
App. 1271 et seq.] shall be conclusive evidence of the 
eligibility of the obligations for such guarantee, and the 
validity of any guarantee, or commitment to guarantee, so made 
shall be incontestable. Notwithstanding an assumption of an 
obligation by the Secretary under section 1105 (a) or (b) of 
this Act [46 U.S.C. App. 1275(a), (b)], the validity of the 
guarantee of an obligation made by the Secretary under this 
title [46 U.S.C. App. 1271 et seq.] is unaffected and the 
guarantee remains in full force and effect.
  (f) Limitation on Outstanding Amount.--The aggregate unpaid 
principal amount of the obligations guaranteed under this 
section and outstanding at any one time shall not exceed 
$12,000,000,000, of which (1) $850,000,000 shall be limited to 
obligations pertaining to guarantees of obligations for fishing 
vessels and fishery facilities made under this title [46 U.S.C. 
App. 1271 et seq.], and (2) $3,000,000,000 shall be limited to 
obligations pertaining to guarantees of obligations for 
eligible export vessels. No additional limitations may be 
imposed on new commitments to guarantee loans for any fiscal 
year, except in such amounts as established in advance in 
annual authorization Acts. No vessel eligible for guarantees 
under this title shall be denied eligibility because of its 
type.
  (g) Loan Guarantees for Export Vessels; Finding Required; 
Termination of Authority.--
          (1) The Secretary may not issue a commitment to 
        guarantee obligations for an eligible export vessel 
        unless, after considering--
                  (A) the status of pending applications for 
                commitments to guarantee obligations for 
                vessels documented under the laws of the United 
                States and operating or to be operated in the 
                domestic or foreign commerce of the United 
                States,
                  (B) the economic soundness of the 
                applications referred to in subparagraph (A), 
                and
                  (C) the amount of guarantee authority 
                available, the Secretary determines, in the 
                sole discretion of the Secretary, that the 
                issuance of a commitment to guarantee 
                obligations for an eligible export vessel will 
                not result in the denial of an economically 
                sound application to issue a commitment to 
                guarantee obligations for vessels documented 
                under the laws of the United States operating 
                in the domestic or foreign commerce of the 
                United States.
          (2) The Secretary may not issue commitments to 
        guarantee obligations for eligible export vessels under 
        this section after the later of--
                  (A) the 5th anniversary of the date on which 
                the Secretary publishes final regulations 
                setting forth the application procedures for 
                the issuance of commitments to guarantee 
                obligations for eligible export vessels,
                  (B) the last day of any 5-year period in 
                which funding and guarantee authority for 
                obligations for eligible export vessels have 
                been continuously available, or
                  (C) the last date on which those commitments 
                may be issued under any treaty or convention 
                entered into after the date of the enactment of 
                the National Shipbuilding and Shipyard 
                Conversion Act of 1993 that prohibits guarantee 
                of those obligations.
  (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 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 average annual cost of 
        obligations in the category, expressed as a percentage 
        of the average annual aggregate 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 long-term 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 portion 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 under this title for 
        an associated project.
          (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 is or will be in effect 
        during the construction period of the project financed 
        with the proceeds of a guaranteed obligation.
  (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).

                         [46 U.S.C. App. 1274]

SEC. 1104A. ELIGIBILITY FOR GUARANTEE.

  (a) Purpose of Obligations.--Pursuant to the authority 
granted under section 1103(a) [46 U.S.C. App. 1273(a)], the 
Secretary upon such terms as he shall prescribe, may guarantee 
or make a commitment to guarantee, payment of the principal of 
and interest on an obligation which aids in--
          (1) financing, including reimbursement of an obligor 
        for expenditures previously made for, construction, 
        reconstruction, or reconditioning of a vessel 
        (including an eligible export vessel), which is 
        designed principally for research, or for commercial 
        use (A) in the coastwise or intercoastal trade; (B) on 
        the Great Lakes, or on bays, sounds, rivers, harbors, 
        or inland lakes of the United States; (C) in foreign 
        trade as defined in section 905 of this Act for 
        purposes of title V of this Act; or (D) as an ocean 
        thermal energy conversion facility or plantship; (E) 
        with respect to floating drydocks in the construction, 
        reconstruction, reconditioning, or repair of vessels; 
        or (F) with respect to an eligible export vessel, in 
        world-wide trade; Provided, however, That no guarantee 
        shall be entered into pursuant to this paragraph (a)(1) 
        later than one year after delivery, or redelivery in 
        the case of reconstruction or reconditioning of any 
        such vessel unless the proceeds of the obligation are 
        used to finance the construction, reconstruction, or 
        reconditioning of a vessel or vessels, or facilities or 
        equipment pertaining to marine operations;
          (2) financing, including reimbursement of an obligor 
        for expenditures previously made for, construction, 
        reconstruction, reconditioning, or purchase of a vessel 
        or vessels owned by citizens or nationals of the United 
        States or citizens of the Northern Mariana Islands 
        which are designed principally for research, or for 
        commercial use in the fishing trade or industry;
          (3) financing the purchase, reconstruction, or 
        reconditioning of vessels or fishery facilities for 
        which obligations were guaranteed under this title [46 
        U.S.C. App. 1271 et seq.] that, under the provisions of 
        section 1105 [46 U.S.C. App. 1275]:
                  (A) are vessels or fishery facilities for 
                which obligations were accelerated and paid;
                  (B) were acquired by the Fund; or
                  (C) were sold at foreclosure instituted by 
                the Secretary;
          (4) financing, in whole or in part, the repayment to 
        the United States of any amount of construction-
        differential subsidy paid with respect to a vessel 
        pursuant to title V of this Act [46 U.S.C. App. 1151 et 
        seq.], as amended;
          (5) refinancing existing obligations issued for one 
        of the purposes specified in (1), (2), (3), or (4) 
        whether or not guaranteed under this title [46 U.S.C. 
        App. 1271 et seq.], including, but not limited to, 
        short-term obligations incurred for the purpose of 
        obtaining temporary funds with the view to refinancing 
        from time to time; or
          (6) financing or refinancing, including, but not 
        limited to, the reimbursement of obligors for 
        expenditures previously made for, the construction, 
        reconstruction, reconditioning, or purchase of fishery 
        facilities.
Any obligation guaranteed under paragraph (6) shall be treated, 
for purposes of this title [46 U.S.C. App. 1271 et seq.], in 
the same manner and to the same extent as an obligation 
guaranteed under this title [46 U.S.C. App. 1271 et seq.] which 
aids in the construction, reconstruction, reconditioning, or 
purchase of a vessel; except with respect to provisions of this 
title [46 U.S.C. App. 1271 et seq.] that by their nature can 
only be applied to vessels.
  (b) Contents of Obligations. Obligations Guaranteed Under 
This Title [46 U.S.C. App. 1271 et seq.].--
          (1) shall have an obligor approved by the Secretary 
        as responsible and possessing the ability, experience, 
        financial resources, and other qualifications necessary 
        to the adequate operation and maintenance of the vessel 
        or vessels which serve as security for the guarantee of 
        the Secretary;
          (2) subject to the provisions of subsection (c)(1) 
        and subsection (i), shall be in an aggregate principal 
        amount which does not exceed 75 per centum of the 
        actual cost or depreciated actual cost, as determined 
        by the Secretary, of the vessel which is used as 
        security for the guarantee of the Secretary: Provided, 
        however, That in the case of a vessel, the size and 
        speed of which are approved by the Secretary, and which 
        is or would have been eligible for mortgage aid for 
        construction under section 509 of this Act [46 U.S.C. 
        App. 1159] (or would have been eligible for mortgage 
        aid under section 509 of this Act [46 U.S.C. App. 1159] 
        except that the vessel was built with the aid of 
        construction-differential subsidy and said subsidy has 
        been repaid) and in respect of which the minimum 
        downpayment by the mortgagor required by that section 
        would be or would have been 12\1/2\ per centum of the 
        cost of such vessel, such obligations may be in an 
        amount which does not exceed 87\1/2\ per centum of such 
        actual cost or depreciated actual cost: Provided, 
        further, That the obligations which relate to a barge 
        which is constructed without the aid of construction-
        differential subsidy, or, if so subsidized, on which 
        said subsidy has been repaid, may be in an aggregate 
        principal amount which does not exceed 87\1/2\ per 
        centum of the actual cost or depreciated actual cost 
        thereof: Provided further, That in the case of a 
        fishing vessel or fishery facility, the obligation 
        shall be in an aggregate principal amount equal to 80 
        percent of the actual cost or depreciated actual cost 
        of the fishing vessel or fishery facility, except that 
        no debt may be placed under this proviso through the 
        Federal Financing Bank: Provided further, That in the 
        case of an ocean thermal energy conversion facility or 
        plantship which is constructed without the aid of 
        construction-differential subsidy, such obligations may 
        be in an aggregate principal amount which does not 
        exceed 87\1/2\ percent of the actual cost or 
        depreciated actual cost of the facility or plantship: 
        Provided further, That in the case of an eligible 
        export vessel, such obligations may be in an aggregate 
        principal amount which does not exceed 87\1/2\ 
        [percent] of the actual cost or depreciated actual cost 
        of the eligible export vessel;
          (3) shall have maturity dates satisfactory to the 
        Secretary but, subject to the provisions of paragraph 
        (2) of subsection (c) of this section, not to exceed 
        twenty-five years from the date of the delivery of the 
        vessel which serves as security for the guarantee of 
        the Secretary or, if the vessel has been reconstructed 
        or reconditioned, not to exceed the later of (i) 
        twenty-five years from the date of delivery of the 
        vessel and (ii) the remaining years of the useful life 
        of the vessel as determined by the Secretary;
          (4) shall provide for payments by the obligor 
        satisfactory to the Secretary;
          (5) shall bear interest (exclusive of charges for the 
        guarantee and service charges, if any) at rates not to 
        exceed such per centum per annum on the unpaid 
        principal as the Secretary determines to be reasonable, 
        taking into account the range of interest rates 
        prevailing in the private market for similar loans and 
        the risks assumed by the Secretary;
          (6) shall provide, or a related agreement shall 
        provide, that if the vessel used as security for the 
        guarantee of the Secretary is a delivered vessel, the 
        vessel shall be in class A-1, American Bureau of 
        Shipping, or shall meet such other standards as may be 
        acceptable to the Secretary, with all required 
        certificates, including but not limited to, marine 
        inspection certificates of the United States Coast 
        Guard or, in the case of an eligible export vessel, of 
        the appropriate national flag authorities under a 
        treaty, convention, or other international agreement to 
        which the United States is a party, with all 
        outstanding requirements and recommendations necessary 
        for retention of class accomplished, unless the 
        Secretary permits a deferment of such repairs, and 
        shall be tight, stanch, strong, and well and 
        sufficiently tackled, appareled, furnished, and 
        equipped, and in every respect seaworthy and in good 
        running condition and repair, and in all respects fit 
        for service; and
          (7) may provide, or a related agreement may provide, 
        if the vessel used as security for the guarantee of the 
        Secretary is a passenger vessel having the tonnage, 
        speed, passenger accommodations and other 
        characteristics set forth in title V of this Act [46 
        U.S.C. App. 1151 et seq.], as amended, and if the 
        Secretary approves, that the sole recourse against the 
        obligor by the United States for any payments under the 
        guarantee shall be limited to repossession of the 
        vessel and the assignment of insurance claims and that 
        the liability of the obligor for any payments of 
        principal and interest under the guarantee shall be 
        satisfied and discharged by the surrender of the vessel 
        and all right, title, and interest therein to the 
        United States: Provided, That the vessel upon surrender 
        shall be (i) free and clear of all liens and 
        encumbrances whatsoever except the security interest 
        conveyed to the Secretary under this title [46 U.S.C. 
        App. 1271 et seq.], (ii) in class, and (iii) in as good 
        order and condition, ordinary wear and tear excepted, 
        as when acquired by the obligor, except that any 
        deficiencies with respect to freedom from encumbrances, 
        condition and class may, to the extent covered by valid 
        policies of insurance, be satisfied by the assignment 
        to the Secretary of claims of the obligor under such 
        policies.
The Secretary may not establish, as a condition of eligibility 
for guarantee under this title [46 U.S.C. App. 1271 et seq.], a 
minimum principal amount for an obligation covering the 
reconstruction or reconditioning of a fishing vessel or fishery 
facility. For purposes of this title [46 U.S.C. App. 1271 et 
seq.], the reconstruction or reconditioning of a fishing vessel 
or fishery facility does not include the routine minor repair 
or maintenance of the vessel or facility.
  (c) Security.--
          (1) The security for the guarantee of an obligation 
        by the Secretary under this title [46 U.S.C. App. 1271 
        et seq.] may relate to more than one vessel and may 
        consist of any combination of types of security. The 
        aggregate principal amount of obligations which have 
        more than one vessel as security for the guarantee of 
        the Secretary under this title [46 U.S.C. App. 1271 et 
        seq.] may equal, but not exceed, the sum of the 
        principal amount of obligations permissible with 
        respect to each vessel.
          (2) If the security for the guarantee of an 
        obligation by the Secretary under this title [46 U.S.C. 
        App. 1271 et seq.] relates to more than one vessel, 
        such obligation may have the latest maturity date 
        permissible under subsection (b) of this section with 
        respect to any of such vessels: Provided, That the 
        Secretary may require such payments of principal, prior 
        to maturity, with respect to all related obligations as 
        he deems necessary in order to maintain adequate 
        security for his guarantee.
  (d) Restrictions.--
          (1) (A) No commitment to guarantee, or guarantee of, 
        an obligation shall be made by the Secretary of 
        Transportation unless the Secretary finds that the 
        property or project with respect to which the 
        obligation will be executed will be economically sound. 
        In making that determination, the Secretary shall 
        consider--
                  (i) the need in the particular segment of the 
                maritime industry for new or additional 
                capacity, including any impact on existing 
                equipment for which a guarantee under this 
                title [46 U.S.C. App. 1271 et seq.] is in 
                effect;
                  (ii) the market potential for the employment 
                of the vessel over the life of the guarantee;
                  (iii) projected revenues and expenses 
                associated with employment of the vessel;
                  (iv) any charters, contracts of 
                affreightment, transportation agreements, or 
                similar agreements or undertakings relevant to 
                the employment of the vessel;
                  (v) other relevant criteria; and
                  (vi) for inland waterways, the need for 
                technical improvements, including but not 
                limited to increased fuel efficiency, or 
                improved safety.
          (B) No commitment to guarantee, or guarantee of, and 
        obligation shall be made by the Secretary of Commerce 
        unless the Secretary finds, at or prior to the time 
        such commitment is made or guarantee becomes effective, 
        that the property or project with respect to which the 
        obligation will be executed will be, in the Secretary's 
        opinion, economically sound and in the case of fishing 
        vessels, that the purpose of the financing or 
        refinancing is consistent with the wise use of the 
        fisheries resources and with the development, 
        advancement, management, conservation, and protection 
        of the fisheries resources, or with the need for 
        technical improvements including but not limited to 
        increased fuel efficiency or improved safety.
          (2) No commitment to guarantee, or guarantee of an 
        obligation may be made by the Secretary under this 
        title [46 U.S.C. App. 1271 et seq.] for the purchase of 
        a used fishing vessel or used fishery facility unless--
                  (A) the vessel or facility will be 
                reconstructed or reconditioned in the United 
                States and will contribute to the development 
                of the United States fishing industry; or
                  (B) the vessel or facility will be used in 
                the harvesting of fish from, or for a purpose 
                described in section 1101(k) [46 U.S.C. App. 
                1271(k)] with respect to, an underutilized 
                fishery.
          (3) No commitment to guarantee, or guarantee of an 
        obligation may be made by the Secretary under this 
        title for the construction, reconstruction, or 
        reconditioning of an eligible export vessel unless--
                  (A) the Secretary finds that the 
                construction, reconstruction, or reconditioning 
                of that vessel will aid in the transition of 
                United States shipyards to commercial 
                activities or will preserve shipbuilding assets 
                that would be essential in time of war or 
                national emergency, and
                  (B) the owner of the vessel agrees with the 
                Secretary of Transportation that the vessel 
                shall not be transferred to any country 
                designated by the Secretary of Defense as a 
                country whose interests are hostile to the 
                interests of the United States.
  [(e) Guarantee Fees.--The Secretary is authorized to fix a 
fee for the guarantee of an obligation under this title [46 
U.S.C. App. 1271 et seq.]. If the security for the guarantee of 
an obligation under this title [46 U.S.C. App. 1271 et seq.] 
relates to a delivered vessel, such fee shall not be less than 
one-half of 1 per centum per annum nor more than 1 per centum 
per annum of the average principal amount of such obligation 
outstanding, excluding the average amount (except interest) on 
deposit in an escrow fund created under section 1108 of this 
Act [46 U.S.C. App. 1279a]. If the security for the guarantee 
of an obligation under this title [46 U.S.C. App. 1271 et seq.] 
relates to a vessel to be constructed, reconstructed, or 
reconditioned, such fee shall not be less than one-quarter of 1 
per centum per annum nor more than one-half of 1 per centum per 
annum of the average principal amount of such obligation 
outstanding, excluding the average amount (except interest) on 
deposit in an escrow fund created under section 1108 of this 
Act [46 U.S.C. App. 1279a]. For purposes of this subsection 
(e), if the security for the guarantee of an obligation under 
this title [46 U.S.C. App. 1271 et seq.] relates both to a 
delivered vessel or vessels and to a vessel or vessels to be 
constructed, reconstructed, or reconditioned, the principal 
amount of such obligation shall be prorated in accordance with 
regulations prescribed by the Secretary. Fee payments shall be 
made by the obligor to the Secretary when moneys are first 
advanced under a guaranteed obligation and at least sixty days 
prior to each anniversary date thereafter. All fees shall be 
computed and shall be payable to the Secretary under such 
regulations as the Secretary may prescribe. Such regulations 
shall provide a formula for determining the creditworthiness of 
obligors under which the most creditworthy obligors pay a fee 
computed on the lowest allowable percentage and the least 
creditworthy obligors pay a fee which may be computed on the 
highest allowable percentage (the range of creditworthiness to 
be based on obligors which have actually issued guaranteed 
obligations).]
  (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 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 
advanced 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) The amount guaranteed by the Secretary under this title 
shall include the amount of the fee paid under this subsection.
  (f) Investigation of Applications.--The Secretary shall 
charge and collect from the obligor such amounts as he may deem 
reasonable for the investigation of applications for a 
guarantee, for the appraisal of properties offered as security 
for a guarantee, for the issuance of commitments, for services 
in connection with the escrow fund authorized by section 1108 
[46 U.S.C. App. 1279a] and for the inspection of such 
properties during construction, reconstruction, or 
reconditioning: Provided, That such charges shall not aggregate 
more than one-half of 1 per centum of the original principal 
amount of the obligations to be guaranteed.
  (g) Disposition of Moneys.--All moneys received by the 
Secretary under the provisions of sections 1101-1107 of this 
title [46 U.S.C. App. 1271-1276, 1279] shall be deposited in 
the Fund.
  (h) Additional Requirements.--Obligations guaranteed under 
this title [46 U.S.C. App. 1271 et seq.] and agreements 
relating thereto shall contain such other provisions with 
respect to the protection of the security interests of the 
United States (including acceleration, assumptions, and 
subrogation provisions and the issuance of notes by the obligor 
to the Secretary), liens and releases of liens, payments of 
taxes, and such other matters as the Secretary may, in his 
discretion, prescribe.
  (i) Limitation on Establishment of Percentage.--The Secretary 
may not, with respect to--
          (1) the general 75 percent or less limitation in 
        subsection (b)(2);
          (2) the 87\1/2\ percent or less limitation in the 
        1st, 2nd, 4th, or 5th proviso to subsection (b)(2) or 
        section 1112(b) [46 U.S.C. App. 1279e(b)]; or
          (3) the 80 percent or less limitation in the 3rd 
        proviso to such subsection;
establish by rule, regulation, or procedure any percentage 
within any such limitation that is, or is intended to be, 
applied uniformly to all guarantees or commitments to guarantee 
made under this section that are subject to the limitation.
  (j) Procedure Upon Receiving Loan Guarantee Application.--
          (1) Upon receiving an application for a loan 
        guarantee for an eligible export vessel, the Secretary 
        shall promptly provide to the Secretary of Defense 
        notice of the receipt of the application. During the 
        30-day period beginning on the date on which the 
        Secretary of Defense receives such notice, the 
        Secretary of Defense may disapprove the loan guarantee 
        based on the assessment of the Secretary of the 
        potential use of the vessel in a manner that may cause 
        harm to United States national security interests. The 
        Secretary of Defense may not disapprove a loan 
        guarantee under this section solely on the basis of the 
        type of vessel to be constructed with the loan 
        guarantee. The authority of the Secretary to disapprove 
        a loan guarantee under this section may not be 
        delegated to any official other than a civilian officer 
        of the Department of Defense appointed by the 
        President, by and with the advice and consent of the 
        Senate.
          (2) The Secretary of Transportation may not make a 
        loan guarantee disapproved by the Secretary of Defense 
        under paragraph (1).

                           [46 U.S.C. 1274a]

SEC. 1104B. FINANCING CONTRACT FOR CONSTRUCTION OR RECONSTRUCTION OF 
                    COMMERCIAL VESSEL; VESSEL REPLACEMENT GUARANTEE 
                    FUND.

  (a) Notwithstanding the provisions of this title [46 U.S.C. 
App. 1271 et seq.], except as provided in subsection (d) of 
this section, the Secretary, upon the terms the Secretary may 
prescribe, may guarantee or make a commitment to guarantee, 
payment of the principal of and interest on an obligation which 
aids in financing and refinancing, including reimbursement to 
an obligor for expenditures previously made, of a contract for 
construction or reconstruction of a vessel or vessels [owned by 
citizens of the United States] which are designed and to be 
employed for commercial use in the coastwise or intercoastal 
trade or in foreign trade as defined in section 905 of this Act 
[46 U.S.C. App. 1244] if--
          (1) the construction or reconstruction by an 
        applicant is made necessary to replace vessels the 
        continued operation of which is denied by virtue of the 
        imposition of a statutorily mandated change in 
        standards for the operation of vessels, and where, as a 
        matter of law, the applicant would otherwise be denied 
        the right to continue operating vessels in the trades 
        in which the applicant operated prior to the taking 
        effect of the statutory or regulatory change;
          (2) the applicant is presently engaged in 
        transporting cargoes in vessels of the type and class 
        that will be constructed or reconstructed under this 
        section, and agrees to employ vessels constructed or 
        reconstructed under this section as replacements only 
        for vessels made obsolete by changes in operating 
        standards imposed by statute;
          (3) the capacity of the vessels to be constructed or 
        reconstructed under this title will not increase the 
        cargo carrying capacity of the vessels being replaced;
          (4) the Secretary has not made a determination that 
        the market demand for the vessel over its useful life 
        will diminish so as to make the granting of the 
        guarantee fiduciarily imprudent; and
          (5) the Secretary has considered the provisions of 
        section 1104A(d)(1)(A)(iii), (iv), and (v) of this 
        title [46 U.S.C. App. 1274(d)(1)(A)(iii)-(v)].
  (b) For the purposes of this section--
          (1) the maximum term for obligations guaranteed under 
        this program may not exceed 25 years;
          (2) obligations guaranteed may not exceed 87\1/2\ 
        percent of the actual cost or depreciated actual cost 
        to the applicant for the construction or reconstruction 
        of the vessel; and
          (3) reconstruction cost obligations may not be 
        guaranteed unless the vessel after reconstruction will 
        have a useful life of at least 15 years.
The Secretary may not by rule, regulation, or procedure 
establish any percentage within the 87\1/2\ percent or less 
limitation in paragraph (2) that is, or is intended to be, 
applied uniformly to all guarantees or commitments to guarantee 
made under this section.
  (c)(1) The Secretary shall by rule require that the applicant 
provide adequate security against default. The Secretary may, 
in addition to any fees assessed under section 1104A(e) [46 
U.S.C. App. 1274(e)], establish a Vessel Replacement Guarantee 
Fund into which shall be paid by obligors under this section--
          (A) annual fees which may be an additional amount on 
        the loan guarantee fee in section 1104A(e) [46 U.S.C. 
        App. 1274(e)] not to exceed an additional 1 percent; or
          (B) fees based on the amount of the obligation versus 
        the percentage of the obligor's fleet being replaced by 
        vessels constructed or reconstructed under this 
        section.
  (2) The Vessel Replacement Guarantee Fund shall be a 
subaccount in the Federal Ship Financing Fund, and shall--
          (A) be the depository for all moneys received by the 
        Secretary under sections 1101 through 1107 of this 
        title with respect to guarantee or commitments to 
        guarantee made under this section;
          (B) not include investigation fees payable under 
        section 1104A(f) [46 U.S.C. App. 1274(f)] which shall 
        be paid to the Federal Ship Financing Fund; and
          (C) be the depository, whenever there shall be 
        outstanding any notes or obligations issued by the 
        Secretary under section 1105(d) [46 U.S.C. App. 
        1275(d)] with respect to the Vessel Replacement 
        Guarantee Fund, for all moneys received by the 
        Secretary under sections 1101 through 1107 from 
        applicants under this section.
  (d) The program created by this section shall, in addition to 
the requirements of this section, be subject to the provisions 
of sections 1101 through 1103; 1104A(b)(1), (4), (5), (6); 
1104A(e); 1104A(f); 1104A(h); and 1105 through 1107 [46 U.S.C. 
App. 1271-1273, 1274(b)(1), (4)-(6), (e), (f), (h), 1275]; 
except that the Federal Ship Financing Fund is not liable for 
any guarantees or commitments to guarantee issued under this 
section.
          * * * * * * *

                         [46 U.S.C. App. 1279C]

SEC. 1110. OCEAN THERMAL ENERGY CONVERSION DEMONSTRATION FACILITIES AND 
                    PLANTSHIPS.

  (a) Financing of Construction, Reconstruction, or 
Reconditioning.--Pursuant to the authority granted under 
section 1103(a) of this title [46 U.S.C. App. 1273], the 
Secretary, upon such terms as he shall prescribe, may guarantee 
or make a commitment to guarantee, payment of the principal of 
and interest on an obligation which aids in financing, 
including reimbursement of an obligor for expenditures 
previously made for, construction, reconstruction, or 
reconditioning of a commercial demonstration ocean thermal 
energy conversion facility or plantship [owned by citizens of 
the United States]. Guarantees or commitments to guarantee 
under this subsection shall be subject to all the provisos, 
requirements, regulations, and procedures which apply to 
guarantees or commitments to guarantee made pursuant to section 
1104(a)(1) of this title, [46 U.S.C. App. 1274(a)(1)], except 
that--
          (1) no guarantees or commitments to guarantee may be 
        made by the Secretary under this subsection before 
        October 1, 1981;
          (2) the provisions of subsection (d) of section 1104 
        of this title [46 U.S.C. App. 1274(d)]shall apply to 
        guarantees or commitments to guarantee for that portion 
        of a commercial demonstration ocean thermal energy 
        conversion facility or plantship not to be supported 
        with appropriated Federal funds;
          (3) guarantees or commitments to guarantee made 
        pursuant to this section may be in an aggregate 
        principal amount which does not exceed 87\1/2\ percent 
        of the actual cost or depreciated actual cost of the 
        commercial demonstration ocean thermal energy 
        conversion facility or plantship: Provided, That, if 
        the commercial demonstration ocean thermal energy 
        conversion facility or plantship is supported with 
        appropriated Federal funds, such guarantees or 
        commitments to guarantee may not exceed 87\1/2\ percent 
        of the aggregate principal amount of that portion of 
        the actual cost or depreciated actual cost for which 
        the obligor has an obligation to secure financing in 
        accordance with the terms of the agreement between the 
        obligor and the Department of Energy or other Federal 
        agency; and
          (4) the provisions of this section may be used to 
        guarantee obligations for a total of not more than 5 
        separate commercial demonstration ocean thermal energy 
        conversion facilities and plantships or a demonstrated 
        400 megawatt capacity, whichever comes first.
  (b) Certification of Reasonableness of Risk.--A guarantee or 
commitment to guarantee shall not be made under this section 
unless the Secretary of Energy, in consultation with the 
Secretary, certifies to the Secretary that, for the ocean 
thermal energy conversion facility or plantship for which the 
guarantee or commitment to guarantee is sought, there is 
sufficient guarantee of performance and payment to lower the 
risk to the Federal Government to a level which is reasonable. 
The Secretary of Energy must base his considerations on the 
following: (1) the successful demonstration of the technology 
to be used in such facility at a scale sufficient to establish 
the likelihood of technical and economic viability in the 
proposed market; and (2) the need of the United States to 
develop new and renewable sources of energy and the benefits to 
be realized from the construction and successful operation of 
such facility or plantship.
  (c) OTEC Demonstration Fund.--A special subaccount in the 
Federal Ship Financing Fund, to be known as the OTEC 
Demonstration Fund, shall be established on October 1, 1981. 
The OTEC Demonstration Fund shall be used for obligation 
guarantees authorized under this section which do not qualify 
under other sections of this title [46 U.S.C. App. 1271 et 
seq.]. Except as specified otherwise in this section, the 
operation of the OTEC Demonstration Fund shall be identical 
with that of the parent Federal Ship Financing Fund: except 
that, notwithstanding the provisions of section 1104(g) [46 
U.S.C. App. 1274(g)], (1) all moneys received by the Secretary 
pursuant to sections 1101 through 1107 of this title [46 U.S.C. 
App. 1271-1279] with respect to guarantees or commitments to 
guarantee made pursuant to this section shall be deposited only 
in the OTEC Demonstration Fund, and (2) whenever there shall be 
outstanding any notes or other obligations issued by the 
Secretary pursuant to section 1105(d) of this title [46 U.S.C. 
App. 1275(d)] with respect to the OTEC Demonstration Fund, all 
moneys received by the Secretary pursuant to sections 1101 
through 1107 of this title [46 U.S.C. App. 1271-1279] with 
respect to ocean thermal energy conversional facilities or 
plantships shall be deposited in the OTEC Demonstration Fund. 
Assets in the OTEC Demonstration Fund may at any time be 
transferred to the parent fund whenever and to the extent that 
the balance thereof exceeds the total guarantees or commitments 
to guarantee made pursuant to this section then outstanding, 
plus any notes or other obligations issued by the Secretary 
pursuant to section 1105(d) of this title [46 U.S.C. App. 
1275(d)] with respect to the OTEC Demonstration Fund. The 
Federal Ship Financing Fund shall not be liable for any 
guarantees or commitments to guarantee issued pursuant to this 
section. The aggregate unpaid principal amount of the 
obligations guaranteed with the backing of the OTEC 
Demonstration Fund and outstanding at any one time shall not 
exceed $1,650,000,000.
  (d) Notes and Obligations.--The provisions of section 1105(d) 
of this title [46 U.S.C. App. 1275(d)] shall apply specifically 
to the OTEC Demonstration Fund as well as to the Fund: 
Provided, however, That any notes or obligations issued by the 
Secretary pursuant to section 1105(d) of this title [46 U.S.C. 
App. 1275(d)] with respect to the OTEC Demonstration Fund shall 
be payable solely from proceeds realized by the OTEC 
Demonstration Fund.
  (e) Taxability of Interest.--The interest on any obligation 
guaranteed under this section shall be included in gross income 
for purposes of chapter 1 of the Internal Revenue Code of 1954 
[26 U.S.C. 1 et seq.].
          * * * * * * *

                         [46 U.S.C. App. 1294]

SEC. 1214. EXPIRATION OF AUTHORITY TO PROVIDE INSURANCE.

  The authority of the Secretary to provide insurance and 
reinsurance under this title shall expire [June 30, 1995] June 
30, 2000.
                              ----------                              


                        TITLE 49, TRANSPORTATION

                Subtitle I--Department of Transportation

                  CHAPTER 3. GENERAL DUTIES AND POWERS

        Subchapter I--Duties of the Secretary of Transportation

Sec.  308. Reports

  (a) As soon as practicable after the end of each fiscal year, 
the Secretary of Transportation shall report to the President, 
for submission to Congress, on the activities of the Department 
of Transportation during the prior fiscal year.
  (b) The Secretary shall submit to the President and Congress 
each year a report on the aviation activities of the 
Department. The report shall include--
          (1) collected information the Secretary considers 
        valuable in deciding questions about--
                  (A) the development and regulation of civil 
                aeronautics;
                  (B) the use of airspace of the United States; 
                and
                  (C) the improvement of the air navigation and 
                traffic control system; and
          (2) recommendations for additional legislation and 
        other action the Secretary considers necessary.
  (c) The Secretary shall submit to Congress each even-numbered 
year a report on the conditions of the public ports of the 
United States, including the--
          (1) economic and technological development of the 
        ports;
          (2) extent to which the ports contribute to the 
        national welfare and security; and
          (3) factors that may impede the continued development 
        of the ports.
  (d) By the 90th day after the end of each fiscal year, the 
Secretary shall submit to Congress a report listing the 
specific assistance provided by the United States Government to 
the railroad industry during that fiscal year. The report shall 
include--
          (1) the reasons for each Government loan or grant and 
        explain the way in which the loan or grant contributed 
        to the overall goal of providing a safe and efficient 
        transportation system;
          (2) information on the financial condition of each 
        railroad having a loan guaranteed under the Emergency 
        Rail Services Act of 1970 (45 U.S.C. 661 et seq.) 
        throughout the duration of the loan; and
          (3) information on the past and anticipated financial 
        condition and operations during the fiscal year of the 
        Railroad Rehabilitation and Improvement Fund 
        established under section 502(a) of the Railroad 
        Revitalization and Regulatory Reform Act of 1976 (45 
        U.S.C. 822(a)) and of the Obligation Guarantee Fund 
        established under section 511(b) of that Act (45 U.S.C. 
        831(b)).
  (e)(1) The Secretary shall submit a report to Congress in 
January of each even-numbered year of estimates by the 
Secretary on the current performance and condition of public 
mass transportation systems with recommendations for necessary 
administrative or legislative changes.
  (2) In reporting to Congress under this subsection, the 
Secretary shall prepare a complete assessment of public 
transportation facilities in the United States. The Secretary 
also shall assess future needs for those facilities and 
estimate future capital requirements and operation and 
maintenance requirements for one-year, 5-year, and 10-year 
periods at specified levels of service.
                              ----------                              


                    MERCHANT SHIP SALES ACT Of 1946

                         [50 U.S.C. App. 1744]

SEC. 11. NATIONAL DEFENSE RESERVE FLEET.

  (a) The Secretary of Transportation shall maintain a National 
Defense Reserve Fleet, including any vessel assigned by the 
Secretary to the Ready Reserve Force component of the fleet, 
consisting of those vessels owned or acquired by the United 
States Government that the Secretary of Transportation, after 
consultation with the Secretary of the Navy, determines are of 
value for national defense purposes and that the Secretary of 
Transportation decides to place and maintain in the fleet.
  (b) Except as otherwise provided by law, a vessel in the 
fleet may be used--
          (1) for an account of an agency of the United States 
        Government in a period during which vessels may be 
        requisitioned under section 902 of the Merchant Marine 
        Act, 1936 (46 App. U.S.C. 1242); or
          (2) on the request of the [Secretary of the Navy] 
        Secretary of Defense, and in accordance with memoranda 
        of agreement between the Secretary of Transportation 
        and the Secretary of Defense, for--
                  (A) testing for readiness and suitability for 
                mission performance;
                  (B) defense sealift functions for which other 
                sealift assets are not reasonably available; 
                and
                  (C) support of the deployment of the United 
                States armed forces in a military contingency, 
                for military contingency operations, or for 
                civil contingency operations upon orders from 
                the National Command Authority;
          (3) for otherwise lawfully permitted storage or 
        transportation of non-defense-related cargo as directed 
        by the Secretary of Transportation with the concurrence 
        of the Secretary of Defense; or
          (4) for training purposes to the extent authorized by 
        the Secretary of Transportation with the concurrence of 
        the Secretary of Defense.
  (c) The Secretary of Transportation shall not require bid, 
payment, performance, payment and performance, or completion 
bonds from contractors for repair, alteration, or maintenance 
of vessels of the National Defense Reserve Fleet unless--
          (1) required by law; or
          (2) the Secretary determines, after investigation, 
        that the imposition of such bonding requirements would 
        not preclude any responsible potential bidder or 
        offeror from competing for award of the contract.
  (d) Ready Reserve Force Management.--
          (1) Minimum requirements.--To ensure the readiness of 
        vessels in the Ready Reserve Force component of the 
        National Defense Reserve Fleet, the Secretary of 
        Transportation shall, at a minimum--
                  (A) maintain all of the vessels in a manner 
                that will enable each vessel to be activated 
                within a period specified in plans for 
                mobilization of the vessels;
                  (B) activate and conduct sea trials on each 
                vessel at least once every twenty-four months;
                  (C) maintain in an enhanced activation status 
                those vessels that are scheduled to be 
                activated within 5 days;
                  (D) locate those vessels that are scheduled 
                to be activated within 5 days near embarkation 
                ports specified for those vessels; and
                  (E) notwithstanding section 2109 of title 46, 
                United States Code, have each vessel inspected 
                by the Secretary of the department in which the 
                Coast Guard is operating to determine if the 
                vessel meets the safety standards that would 
                apply under part B of subtitle II of that title 
                [46 U.S.C. 3101 et seq.] if the vessel were not 
                a public vessel.
          (2) Vessel managers.--
                  (A) Eligibility for contract.--A person, 
                including a shipyard, is eligible for a 
                contract for the management of a vessel in the 
                Ready Reserve Force if the Secretary 
                determines, at a minimum, that the person has--
                          (i) experience in the operation of 
                        commercial-type vessels or public 
                        vessels owned by the United States 
                        Government; and
                          (ii) the management capability 
                        necessary to operate, maintain, and 
                        activate the vessel at a reasonable 
                        price.
                  (B) Contract requirement.--The Secretary of 
                Transportation shall include in each contract 
                for the management of a vessel in the Ready 
                Reserve Force a requirement that each seaman 
                who performs services on any vessel covered by 
                the contract hold the license or merchant 
                mariner's document that would be required under 
                chapter 71 or chapter 73 of title 46, United 
                States Code [46 U.S.C. 7101 et seq. or 7301 et 
                seq.], for a seaman performing that service 
                while operating the vessel if the vessel were 
                not a public vessel.

                                
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