[Senate Report 108-184]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 361

108th Congress                                                   Report
 1st Session                     SENATE                         108-184
_______________________________________________________________________

           MARITIME ADMINISTRATION AUTHORIZATION ACT OF 2003

                               __________

                              R E P O R T

                                 of the

           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                                   on

                                S. 1262




                                     


                November 3, 2003.--Ordered to be printed











       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
                      one hundred eighth congress
                             first session

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        RON WYDEN, Oregon
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
                                     FRANK LAUTENBERG, New Jersey
           Jeanne Bumpus, Staff Director and General Counsel
                   Ann Begeman, Deputy Staff Director
                  Robert W. Chamberlin, Chief Counsel
      Kevin D. Kayes, Democratic Staff Director and Chief Counsel
                Gregg Elias, Democratic General Counsel

                                  (ii)






                                                       Calendar No. 361
108th Congress                                                   Report
                                 SENATE
 1st Session                                                    108-184
======================================================================
 
           MARITIME ADMINISTRATION AUTHORIZATION ACT OF 2003

                                _______
                                

                November 3, 2003.--Ordered to be printed

                                _______
                                

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

                              R E P O R T

                         [To accompany S. 1262]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill (S. 1262) to authorize 
appropriations for fiscal years 2004, 2005, and 2006 for 
certain maritime programs of the Department of Transportation, 
and for other purposes, having considered the same, reports 
favorably thereon with amendments and an amendment to the title 
and recommends that the bill (as amended) do pass.

                          Purpose of the Bill

  The purpose of the bill is to authorize appropriations for 
Maritime Administration (MARAD) operations and training, 
administrative costs associated with the shipbuilding loan 
guarantee program authorized by title XI of the Merchant Marine 
Act of 1936, and for the disposal of vessels in the National 
Defense Reserve Fleet (NDRF) that have been identified by the 
Secretary of Transportation as obsolete. The bill includes 
provisions designed to reform how MARAD manages the Title XI 
Maritime Loan Guarantee Program.
  The bill also would authorize funding for the Maritime 
Security Program (MSP) through fiscal year (FY) 2015 and 
establish a National Defense Tank Vessel Construction 
Assistance program providing subsidies to domestic shipbuilders 
in order to build five tank vessels for inclusion into the 
Maritime Security Fleet. The bill would establish new cargo 
guidelines for vessels receiving MSP funds while participating 
in the Cargo Preference Program.

                          Background and Needs

  MARAD's mission is to promote the development and maintenance 
of an adequate, well-balanced United States merchant marine, 
sufficient to carry the Nation's domestic waterborne commerce 
and a substantial portion of its waterborne foreign commerce, 
and capable of serving as a naval and military auxiliary in 
times of war or national emergency. It also seeks to ensure 
that the United States has adequate shipbuilding and repair 
service, efficient ports, effective intermodal water and land 
transportation systems, and reserve shipping capacity in times 
of national emergency.
  To meet its mission, MARAD administers various United States 
merchant marine support programs within the Department of 
Transportation (DOT). These programs include MSP, the Title XI 
Maritime Loan Guarantee Program, various cargo preference 
programs, maintenance of the Ready Reserve Force (RRF) and 
NDRF, and operation of the United States Merchant Marine 
Academy (USMMA) at Kings Point, New York. MARAD has 
approximately 960 employees (including RRF and USMMA staff).
  The MSP is an element of the United States maritime 
transportation system providing funded operating agreements to 
privately-owned, United States-flag, and United States-crewed 
liner fleet in international trade. The MSP participant 
vessels, ship capacity, and intermodal assets are committed to 
Department of Defense contingency contracts to support national 
defense and other security requirements. The MSP is designed to 
support the labor base of skilled American seafarers who are 
available to crew the United States Government-owned and/or 
controlled strategic sealift ships as well as the United States 
commercial fleet, both during times of peace and war. 
Currently, the MSP is authorized through FY 2005 and subject to 
a separate annual appropriation.
  The purpose of the Title XI Maritime Loan Guarantee Program 
is to promote the growth and modernization of the United States 
merchant marine and United States shipyards. The program 
enables owners of eligible vessels and eligible shipyards to 
obtain long-term financing with attractive terms by using the 
credit of the United States government to guarantee commercial 
loans. Recently, both the DOT Inspector General and the United 
States General Accounting Office (GAO) have found that MARAD 
has failed to provide effective oversight in receiving and 
approving loan guarantees; has failed to closely monitor the 
financial condition of borrowers during the term of a loan; and 
has failed to adequately monitor the condition of projects 
subject to guarantees. They also found that MARAD was flagrant 
in its use of authority in granting waivers to its own 
regulations governing the program without taking steps to 
better secure the taxpayer against defaults. The bill includes 
reform provisions to address these findings.
  MARAD's operations and training account funds the 
administration and staffing of MARAD programs (other than the 
Title XI Maritime Loan Guarantee Program and RRF costs), the 
USMMA, State maritime school costs associated with Federal 
training ships, training courses for merchant mariners, various 
operating programs, and research and development. The USMMA 
educates young men and women to become officers in the American 
merchant marine.
  MARAD appropriations do not include funding for cargo 
preference or RRF/NDRF maintenance funding. RRF/NDRF 
maintenance is funded by the Department of Defense and 
administered by MARAD.

                         Summary of Provisions

  S. 1262 would authorize funding for MARAD activities for 
fiscal years 2004 through 2008 as follows: $104,400,000 for FY 
2004; $106,000,000 for FY 2005; $109,000,000 for FY 2006; 
$111,000,000 for FY 2007; and $113,000,000 for FY 2008. These 
funding levels cover multiple appropriated accounts: operations 
and training; the Maritime Loan Guarantee Program authorized by 
title XI of the Merchant Marine Act of 1936; administration of 
the MSP; the tank vessel construction program; and the disposal 
of vessels in the NDRF that have been identified by the 
Secretary of Transportation as obsolete.
  For administrative expenses under the Title XI Maritime Loan 
Guarantee Program, the bill would authorize $6,000,000 for each 
of fiscal years 2004 through 2008 and $50,000,000 for each of 
fiscal years 2004 through 2008 for loan guarantees. The bill 
also includes provisions designed to reform how MARAD manages 
the Title XI Maritime Loan Guarantee Program through increased 
oversight diligence and a variety of administrative and 
financial mechanisms proposed by the DOT IG and GAO.
  The bill would extend the authorization of the MSP from FY 
2005 through FY 2015. The Department of Defense (DOD) has 
expressed a desire to exercise more flexibility in determining 
the composition of the Fleet, and the bill establishes a 
prudent balance between the commercial interests of 
participating vessels and the DOD's military sealift needs. 
Further, the citizenship requirements of MSP participation have 
been modified to accommodate the realities of the international 
ocean carrier industry.
  The bill would establish a new program, the National Defense 
Tank Vessel Construction Assistance program, and would 
authorize $250,000,000 for the domestic construction of five 
new tank vessels. In Operation Iraqi Freedom, the Department of 
Defense Transportation Command found itself forced to charter 
foreign-owned vessels in order to satisfy the war's tank vessel 
needs. This provision is designed to encourage the development 
of a domestic tank vessel construction program in United States 
shipyards.
  Additionally, the bill would authorize $92,532,000 in ship 
disposal funding for fiscal years 2004 through 2008. As 
outlined in testimony during a July 7, 2003, Subcommittee on 
Surface Transportation and Merchant Marine Field Hearing, 
obsolete NDFR vessels pose environmental risks that require 
immediate attention. Further, the bill would amend the Merchant 
Marine Act to give the Secretary of Transportation the 
authority to convey obsolete NDRF vessels to nonprofit 
organizations, a State, Commonwealth, or possession of the 
United States or any municipal corporation or political 
subdivision thereof or the District of Columbia for their use 
and to United States territories and foreign governments for 
use as artificial reefs.
  The bill would amend requirements for enforcement of the 
commitment agreements for students at the USMMA and students at 
the State maritime academies who receive student incentive 
payments (SIP); allow MARAD to use funds received from an 
insurance settlement for legally authorized purposes, including 
completion of repairs to the Merchant Marine Academy Fitch 
Building; provide the Secretary with the authority to also 
exclude vessels from the carriage of government impelled 
cargoes that have been detained for violations of security 
standards contained within international agreements to which 
the United States is a party; allow MARAD to retain funds 
received as a result of final judgments and settlements in the 
Vessel Operations Revolving Fund; and clarify the decades-old 
authority of the Saint Lawrence Seaway Development Corporation 
(SLSDC) to carry out the provisions of the Ports and Waterways 
Safety Act (PWSA) in the case of the Saint Lawrence Seaway.

                          Legislative History

  S. 1262 was introduced by Senator McCain on June 13, 2003, 
and referred to the Committee on Commerce, Science, and 
Transportation. A hearing was held on Title XI Maritime Loan 
Guarantee Program reform on June 5, 2003.
  On June 19, 2003, the Committee on Commerce, Science, and 
Transportation met to consider S. 1262. The Committee approved 
an amendment offered by Senators McCain and Hollings to 
reauthorize appropriations for two additional years for MARAD 
training and operations, title XI administration, and ship 
scrapping, expiring at the end of FY 2008. The Committee also 
approved an amendment offered by Senator Hollings to make 
technical corrections regarding the use of foreign-built launch 
barges in the domestic trade and an amendment offered by 
Senator Lott to authorize funding for the Title XI Maritime 
Loan Guarantee Program and to provide direct construction 
subsides for tank vessel construction. S. 1262 was ordered 
reported as amended by voice vote.

                            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, July 31, 2003.
Hon. John McCain,
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. 1262, the Maritime 
Administration Authorization Act of 2003.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Deborah Reis.
            Sincerely,
                                         Robert A. Sunshine
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

S. 1262--Maritime Administration Authorization Act of 2003

    Summary: S. 1262 would provide a multiyear authorization 
for the Maritime Administration (MARAD). In addition to amounts 
authorized under current law, S. 1262 would authorize the 
appropriation of $1.4 billion over the 2004-2008 period and 
$1.3 billion over the 2009-2015 period. (Another $280 million 
is authorized for fiscal years 2004 through 2008 for maritime 
loan guarantees that are already authorized under existing 
law.)
    CBO estimates that implementing S. 1262 would cost $95 
million in fiscal year 2004 and $1.3 billion over the 2004-2008 
period. (About $1.4 billion would be spent after 2008, 
including the $1.3 billion that would be authorized for fiscal 
years 2009 through 2015.) Enacting S. 1262 would increase 
direct spending by $1 million in 2004 because it would allow 
MARAD to spend certain funds collected for damages. Under the 
bill, direct spending of other types of damage awards could 
increase in later years as well, but by less than $500,000 a 
year.
    The bill would authorize MARAD to insure more foreign flag 
vessels against war risks if those vessels are supporting 
United States alliances with other nations. CBO has no basis 
for estimating the net budget impact of this provision.
    S. 1262 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary effects of S. 1262 are summarized in the following 
table. The costs of this legislation fall within budget 
functions 050 (national defense) and 400 (transportation).

------------------------------------------------------------------------
                                By fiscal year, in millions of dollars--
                               -----------------------------------------
                                 2003   2004   2005   2006   2007   2008
------------------------------------------------------------------------
                    SPENDING SUBJECT TO APPROPRIATION
 MARAD spending for operations
 and operating subsidies under
 current law:
    Authorization level 1,2...    201    100    100      0      0      0
    Estimated outlays.........    195    119    105      8      0      0
Proposed changes:
    MARAD operations:
        Authorization level 2.      0    115    117    120    123    125
        Estimated outlays.....      0     95    112    119    123    125
    Maritime subsidies:
        Authorization level 2.      0      0      0    436    186    186
        Estimated outlays.....      0      0      0    234    248    248
MARAD spending for operations,
 operating and construction
 subsidies under S. 1262:
    Authorization level.......    201    215    217    556    309    311
    Estimated outlays.........    195    214    217    361    371    373
                        CHANGES IN DIRECT SPENDING
 Estimated budget authority....      0      1      *      *      *      *
Estimated outlays.............      0      1      *      *      *      *
------------------------------------------------------------------------
\1\ The 2003 level is the amount appropriated for that year for MARAD
  operations and maritime operating subsidies. In 2004 and 2005, $100
  million is authorized to be appropriated for maritime operating
  subsidies under existing law.
\2\ These figures exclude the bill's authorization of $56 million a year
  for maritime loan guarantees and associated administrative costs
  because those activities are already authorized (in an indefinite
  amount) under existing law and do not require annual authorization.
 Notes.--*=less than $500,000.

    Basis of estimate: For this estimate, CBO assumes that the 
amounts authorized will be appropriated for each year. 
Estimated outlays are based on historical spending patterns for 
existing or similar programs. Estimated outlays for tanker 
construction subsidies are based on information provided by 
MARAD.

Spending subject to appropriation

    The proposed changes in the table for title I include 
between $115 million and $125 million annually in 
authorizations for MARAD operations. Those amounts exclude $56 
million annually for maritime loan guarantees and 
administrative costs because appropriations for that program 
are already authorized under existing law.
    Beginning in 2006, the table shows new authorizations 
proposed for maritime subsidies under title II. These 
authorizations include $186 million annually through fiscal 
year 2015 for MARAD's maritime security program (MSP), which 
expires at the end of fiscal year 2005. The MSP provides 
operating subsidies to owners or operators of U.S. flag vessels 
that carry cargo between the United States and foreign ports. 
The bill would expand the MSP to subsidize 60 ships at a cost 
of $3.1 million a year per vessel. (The existing program 
subsidizes 47 vessels at a cost of $2.1 million a year per 
vessel.)
    Title II would also authorize MARAD to provide subsidies 
totaling $250 million for the construction of five commercial 
product tankers in a U.S. shipyard after fiscal year 2004. 
Shipping companies that enter into construction subsidy 
agreements also would be eligible for MSP payments starting in 
2006 for existing (but otherwise ineligible) tankers. Based on 
information provided by MARAD, CBO expects that all such 
agreements would be executed at one time--but not until the 
amended MSP eligibility requirements become effective after 
fiscal year 2005. Consequently, this estimate assumes 
appropriation of the $250 million for fiscal year 2006 and 
spending of those sums over the 2006-2009 period.

Direct spending

    S. 1262 would allow MARAD to spend nearly $1 million 
received from a settlement for damages from a fire at the 
Merchant Marine Academy. The bill also would allow the agency 
to spend damages recovered on accidents that may occur 
involving vessels of the National Defense Reserve Fleet. CBO 
estimates that enacting those changes would increase direct 
spending by $1 million in fiscal year 2004 and by less than 
$500,000 a year thereafter.
    The bill would expand the authority of MARAD, acting on 
behalf of the Department of Defense (DoD), to insure foreign 
vessels under the agency's war-risk insurance program. This 
provision would allow DoD to participate in international risk-
sharing arrangements that would cover vessels that support 
operations of alliances such as the North Atlantic Treaty 
Organization, regardless of the ships' registration or 
ownership.
    The effects of this provision are uncertain. On the one 
hand, entering such agreements could make the federal 
government liable for a share of any damages sustained by 
foreign vessels, some of which the federal government might not 
have been able to insure under existing authority. On the other 
hand, such agreements could allow the government to share its 
risk of damage on some vessels for which it would normally bear 
all such risk. In the 50-year history of the existing war-risk 
insurance program, MARAD has never paid any claim against the 
United States involving vessels damaged in hostile actions. 
Based on this experience, CBO expects that providing DoD with 
authority to share such risks with other countries in the 
future would not lead to significant savings. CBO has no 
information on the experience of war-risk insurance programs 
administered by other NATO members. In the absence of such 
information, CBO has no basis for determining the cost of 
absorbing some of the risks of those programs.
    The bill would allow MARAD to charge fees to applicants for 
maritime loan guarantees in order to recover the costs of 
hiring independent contractors to assess certain applications. 
The agency would be able to spend any amounts collected. Based 
on information provided by MARAD, CBO estimates that amounts 
collected and spent as a result of this provision would be less 
than $500,000 and would offset each other.
    Intergovernmental and private-sector impact: S. 1262 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Previous CBO estimate: On May 16, 2003, CBO transmitted a 
cost estimate for H.R. 1588, the National Defense Authorization 
Act for Fiscal Year 2004, as ordered reported by the House 
Committee on Armed Services on May 14, 2003. S. 1262 contains 
provisions very similar to those of title XXXV of H.R. 1588. 
H.R. 1588 and S. 1262 would authorize different funding levels 
for MARAD activities, and the CBO estimates reflect the higher 
authorization levels in S. 1262.
    Estimate prepared by: Federal Costs: Deborah Reis. Impact 
on State, Local, and Tribal Governments: Gregory Waring. Impact 
on the Private Sector: Cecil McPherson.
    Estimate approved by: Peter H. Fontaine, Deputy 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:
  The bill would create a new grant program, the National 
Defense Tank Vessel Construction Assistance program, designed 
to assist domestic vessel operators through competitively 
issued grants of up to $50 million for the construction of tank 
vessels in the United States. This program would not create new 
mandatory paperwork or reporting requirements, nor would it 
effect the number of people subject to regulation or impact 
privacy issues. The grants in the program are intended to have 
a positive economic impact on United States maritime interests 
by subsidizing the cost of construction in United States 
shipyards.
  The bill also would reform the Title XI Maritime Loan 
Guarantee Program, and could have an economic and regulatory 
impact, as MARAD is given authority to determine if an 
application needs the added oversight of a contractually 
retained third party expert to review technical and financial 
aspects of a loan guarantee application. There is a potential 
for some applicants to incur additional expenses as part of the 
application process.
  The bill would grant enhanced discretion to the Secretary of 
Transportation to enforce the terms of the commitment 
agreements signed between students that have received SIP, at 
either the USMMA or State maritime academies. The bill would 
give the Secretary the ability to require students that have 
attended either the USMMA or a State academy for two years or 
more and have received SIP to either serve on active duty or 
reimburse the government for education expenses. This policy 
could have an economic impact on students or former students of 
these academies.
    This legislation should have no further effect on the 
number or types of individuals and businesses regulated, the 
economic impact of such regulation, the personal privacy of 
affected individuals, or the paperwork required from such 
individuals or businesses.

                      Section-by-Section Analysis


Section 1. Short Title

  Section 1 states the short title of the legislation, the 
``Maritime Administration Authorization Act of 2003''.

TITLE I--MARAD REAUTHORIZATION

Sec. 101. Authorization of Appropriations for Fiscal Years 2004, 2005, 
        2006, 2007, and 2008

  This section would authorize $104,400,000 for FY 2004; 
$106,000,000 for FY 2005; $109,000,000 for FY 2006; 
$111,000,000 for FY 2007; and $113,000,000 for FY 2008 for 
expenses necessary for MARAD operations and training 
activities. These activities include the costs incurred by 
headquarters and regional staffs in the administration and 
direction of the various MARAD programs, which cut across the 
American maritime industries, including the following--
           emergency planning and operations, including 
        administration of the MSP agreements;
           negotiation of agreements, understandings, 
        and arrangements to reduce barriers that restrict 
        American access to foreign ports and markets;
           port, intermodal, and environmental 
        activities;
           labor, training, and safety activities;
           administration of the capital construction 
        fund/construction reserve fund; and
           monitoring compliance with cargo reservation 
        statutes.
  Operations and training funds also allow MARAD to continue to 
carry out its duties regarding citizenship verification of 
certain fishing vessels pursuant to the American Fisheries Act 
(P.L. 105-277). Among other things, the measure designates 
MARAD as the primary agency responsible for ensuring that the 
proper citizenship requirements are adhered to for ownership of 
vessels 100 feet or greater that have, or are seeking, a 
fisheries endorsement to their documentation. In enforcing 
citizenship standards, MARAD is required to scrutinize 
transfers of ownership or control rigorously, with particular 
attention to leases, charters, mortgages, and financing 
arrangements for fishing vessels. Further, MARAD approves 
qualified trustees to hold mortgages where vessel financing is 
procured through foreign lenders. MARAD also is required to 
determine, upon request, whether an individual or an entity has 
exceeded the statutory limitation on harvesting or processing 
of pollock in the pollock fishery.
  This section of the bill also would authorize $6,000,000 
annually to cover the administrative costs associated with the 
existing portfolio of loan guarantees under the Title XI 
Maritime Loan Guarantee Program. Title XI authorizes the 
Secretary of Transportation (delegated to the Maritime 
Administrator) to enter into commitments to guarantee private-
sector debt financing for the construction or reconstruction of 
United States-flag vessels and export vessels in United States 
shipyards, and for United States shipyard modernization and 
improvement projects. Additional funding of $50,000,000 for 
fiscal years 2004 through 2008 is authorized for the Title XI 
Maritime Loan Guarantees Program.
  This section also would authorize $11,422,000 annually for 
ship disposal for fiscal years 2004 through 2006, and 
$12,000,000 annually for fiscal years 2007 and 2008. This 
funding would enable MARAD to dispose of vessels in the NDRF 
that pose the highest risk to the environment. Included in 
these funds are staff and support costs associated with program 
implementation. MARAD will contract with dismantling facilities 
seeking best-value disposal consistent with P.L. 106-398, the 
Department of Defense Authorization Act for Fiscal Year 2001 
and P.L. 107-314, the Bob Stump National Defense Authorization 
Act for Fiscal Year 2003.

Sec. 102. Conveyance of Obsolete Vessels Under Title V, Merchant Marine 
        Act, 1936

  This section would amend the Merchant Marine Act to give the 
Secretary of Transportation the authority to convey obsolete 
NDRF vessels to nonprofit organizations, a State, Commonwealth, 
or possession of the United States or any municipal corporation 
or political subdivision thereof or the District of Columbia. 
This provision would end the need for special legislation each 
time a veteran's group, museum, historical association or other 
nonprofit organization, State, or municipality seeks to obtain 
an obsolete vessel from the NDRF. It also would provide the 
Secretary of Transportation with administrative authority to 
oversee the conveyance of such vessels to nonprofit groups.
  Under this section, vessel recipients must agree not to use 
the vessel for commercial transportation purposes; to make the 
vessel available to the government when needed; and, to hold 
the government harmless for exposure to hazardous substances. 
Prior to conveyance, the Secretary would approve conveyance and 
business plans of the recipient and ascertain that the 
recipient has sufficient resources to accomplish the transfer 
and commence with the intended use of the vessel. The Secretary 
also would be authorized to provide to the recipient additional 
equipment from other obsolete vessels to assist the recipient 
with maintenance, repairs or modifications. If at any time 
prior to delivery of the vessel the Secretary determines that a 
different use of the vessel would better serve the interests of 
the government, the Secretary may terminate the proposed 
transfer without liability.

Sec. 103. Cargo Preference

  This section would amend section 901(b)(c)(2) of the Merchant 
Marine Act, 1936, to make the cargo preference year coincide 
with the Federal government fiscal year for determining 
compliance with title IX. This would simplify record keeping 
and management of the program without an adverse effect on 
involved agencies or shippers and is supported by government 
and industry stakeholders.

Sec. 104. Equity Payments by Obligor for Disbursement Prior to 
        Termination of Escrow Agreement Under Title XI

  This section would amend the Merchant Marine Act and would 
require the Secretary of Transportation to establish a system 
of controls to ensure that no loan or portion of a loan is 
disbursed to a ship owner or shipyard owner before the obligor 
of a loan guarantee has met the cost-sharing obligation (25 
percent or 12\1/2\ percent depending of the type of vessel) to 
the actual total cost of the project. The section further would 
require the Secretary to establish by regulation a transparent, 
independent, and risk-based process for verifying and 
documenting the progress of projects under construction before 
disbursing guaranteed loan funds.
  This section also would amend the Merchant Marine Act to 
define ``total actual cost'' to include all amounts paid by or 
for the account of the obligor.

Sec. 105. Waivers of Program Requirements Under Title XI

  This section would amend the Merchant Marine Act to require 
the Secretary of Transportation to establish regulations 
governing the circumstances under which MARAD may waive 
regulatory requirements concerning the financial condition of 
the applicant. It specifically requires that a waiver of a 
regulatory requirement be made only with the documented 
concurrence of program offices; that the economic soundness 
requirements of the program be met after the waiver of the 
financial condition requirement; and that the wavier provide 
for the imposition of other requirements on the obligor 
designed to compensate for the increased risk associated with 
the obligor's failure to meet regulatory requirements regarding 
the obilgor's financial condition.

Sec. 106. Project Monitoring Under Title XI

  This section would amend the Merchant Marine Act to require 
the Secretary to monitor the financial condition and operation 
of the obligor on a regular basis during the term of the 
guarantee and to document the results of the monitoring on a 
quarterly or monthly basis depending upon the condition of the 
obligor. It also would require the Secretary to take 
appropriate action to limit potential losses in connection with 
a default, if the Secretary determines that the financial 
condition of the obligor warrants additional protections.
  This section also would amend the Merchant Marine Act to 
require the Secretary, prior to committing to a guarantee, to 
certify that a full and fair consideration of all the 
regulatory requirements, including economic soundness and 
financial requirements applicable to the potential obligor and 
related parties, has been made through a documented independent 
assessment conducted by offices with expertise in technical, 
economic, and financial aspects of the loan application 
process.
  This section further would amend the Merchant Marine Act to 
require the Secretary to include in loan guarantee agreements 
provisions that provide additional authority to the Secretary 
to take appropriate action to limit potential losses in 
connection with defaulted loans or loans that are in jeopardy 
due to the deteriorating financial condition of obligors.

Sec. 107. Defaults Under Title XI

  This section would amend the Merchant Marine Act to require 
the Secretary of Transportation, in the event of default on an 
obligation, to take actions to: maximize the net present value 
return from the sale or disposition of assets associated with 
the obligation; minimize the amount of any loss realized in the 
resolution of the guarantee; ensure adequate competition and 
minimize the amount of any loss realized in the resolution of 
the guarantee; ensure adequate competition and fair and 
consistent treatment of offerors; and require an appraisal of 
assets by an independent appraiser.

Sec. 108. Decision Period

  This section would require the Secretary of Transportation to 
approve or deny an application for a loan guarantee within 270 
days after the date on which the signed application is received 
by the Secretary. It also would grant authority to the 
Secretary of Transportation to extend the 270-day period for up 
to two years.

Sec. 109. Loan Guarantees Under Title XI

  This section would amend the Merchant Marine Act to give the 
Secretary of Transportation the authority to require an 
independent analysis to be conducted by third party experts if 
the Secretary determines that risk factors associated with 
markets, technology, financial structures, or other factors 
need such analysis prior to making a determination on a loan 
guarantee application. Any independent analysis conducted 
pursuant to this provision would be performed by a party chosen 
by the Secretary. The section also would give the Secretary the 
authority to make a determination that an application under 
this title requires additional equity prior to approval because 
of increased risk factors associated with markets, technology, 
financial structures, or other risk factors identified by the 
Secretary.
  The section also would provide the Secretary the authority to 
charge and collect fees to cover the costs of any independent 
analysis required under this section. Any fee collected under 
this section would be credited as an offsetting collection to 
the account that finances the administration of the loan 
guarantee program and would be available for expenditure only 
to pay the costs of the analysis.

Sec. 110. Annual Report on Title XI Program

  This section would require the Secretary of Transportation to 
report to Congress annually on the loan guarantee program under 
title XI of the Merchant Marine Act, including the size, in 
dollars, of the portfolio of loans guaranteed; the size, in 
dollars, of projects in the portfolio facing financial 
difficulty; the number and type of projects covered; a profile 
of pending loan applications; the amount of appropriations 
available for new guarantees; a profile of each project 
approved since the last report; and a profile of any defaults 
since the last report.

Sec. 111. Review of Title XI Loan Guarantee Program

  This section would require the Secretary of Transportation to 
conduct a comprehensive assessment of the personnel and other 
resource needs in connection with the Title XI Maritime Loan 
Guarantee Program under the Merchant Marine Act and to develop 
an organizational framework for the program offices that 
ensures that a clear separation of duties is established among 
the loan application, project monitoring, and default 
management functions.
  This section would amend the Merchant Marine Act to require 
that the loan guarantee program risk categories, and associated 
subsidy rates, be updated annually. It also would require the 
Secretary to use a risk category system that is based on 
historical analysis of program data and statistical evidence 
concerning the likely costs of defaults or other costs and to 
ensure that each risk category is comprised of loans that are 
relatively homogenous in cost and share characteristics 
predictive of defaults and other costs, given the facts known 
at the time of obligation or commitment. Finally, the section 
would amend the Merchant Marine Act to require the Secretary to 
consider the risk presented by an unduly large percentage of 
loans outstanding by any one borrower or group of affiliated 
borrowers prior to making an obligation or commitment.
  This section would require the Secretary to report by January 
2, 2004, to the Senate Committee on Commerce, Science, and 
Transportation and the House of Representatives Committee on 
Armed Services on the results of the development of an 
organizational framework under this section.

Sec. 112. War Risk Insurance

  This section would enable the DOT to support shared logistics 
operations with the North Atlantic Treaty Organization (NATO) 
or similar international organizations or alliances. The 
statutory ability to pay the United States' portion of a shared 
loss pursuant to an agreement with these organizations would 
allow the sharing of risk of loss between multiple countries. 
Such a provision could allow greater use of foreign vessels and 
distribute the risk of the loss of a ship during a contingency. 
Currently there is a disproportionate reliance on U.S.-flag 
carriers, and thus an increased risk of loss to the United 
States.
  The proposed changes also would allow the receipt of 
contributions from other countries within the NATO or other 
similar international organizations to offset losses sustained 
by U.S.-flag carriers participating in shared logistics 
operations that are insured under this program. These 
contributions would be deposited in the fund and would relieve 
the DOD or another United States 
department or agency, of the obligation to reimburse the fund 
to the extent of any contributions received.

Sec. 113. Maritime Education and Training

  This section would amend enforcement of the commitment 
agreements for students at the USMMA and students at the State 
maritime academies who receive SIP. Currently, students have an 
obligation to complete the course of instruction at USMMA or 
the State academy unless the individual is separated by the 
Academy. Students that leave USMMA voluntarily after spending 
two years at the Academy may be required to serve on active 
duty in the Navy. This section would amend current law such 
that USMMA students and SIP recipients who have attended an 
academy for two or more years may be required to serve on 
active duty or reimburse the government for educational 
expenses if the Secretary of Transportation determines that 
such individual has breached their service agreement. If for 
any reason the individual is not ordered to active duty, the 
Secretary may seek to recover the educational costs provided. 
This statutory change would bring the service obligation of 
maritime academy students more in line with the requirements of 
students at the other Federal service academies.
  This section also would amend current law with respect to the 
enforcement of the postgraduate service obligation for 
graduates of the USMMA and State academy graduates who received 
SIP payments. This section makes it clear that if a graduate 
fails to fulfill the service obligation agreed to, that 
individual may either be ordered to active duty in one of the 
armed services or may be required to reimburse MARAD for 
educational costs covered. Under this section, the Secretary of 
Transportation would have the option of either recovering 
educational costs or seeking to have the individual ordered to 
active duty, whichever better serves the interest of the United 
States. If for any reason the individual is not ordered to 
active duty, the Secretary may seek to recover the educational 
costs in an amount proportionate to the unfulfilled portion of 
the service agreement as determined by the Secretary. This 
amendment will bring the service obligation of maritime academy 
students more in line with the requirements of students at the 
other Federal service academies.
  Additionally, this section would expand the options available 
to the Secretary for recovery of the educational expenses 
provided to an individual that has breached a service 
agreement. Currently, the Secretary is authorized only to 
request the Attorney General to commence court proceedings to 
recover such costs. New language under this section would, in 
order to aid in the recovery of educational expenses, authorize 
the Secretary to seek the assistance of the Attorney General or 
use Federal debt collection procedures or other applicable 
administrative remedies.
  This section also would amend the postgraduate commitment for 
USMMA and State academy SIP recipient graduates to require them 
to maintain a valid license with appropriate endorsements and 
certification as required by the Coast Guard for service aboard 
vessels on domestic or international voyages. Currently, USMMA 
graduates and SIP recipients are required only to maintain a 
license as an officer in the merchant marine. The additional 
requirement imposed by this section has become necessary in 
light of the International Convention for the Standards of 
Training Certification and Watch-keeping (STCW). Under STCW, 
mariners must possess, in addition to their license, an STCW 
certificate for service aboard vessels on international 
voyages. Mandating this certification will ensure that Academy 
graduates possess the license and any additional certification 
necessary to meet the economic and national security sealift 
needs of the United States.
  This section also expands the options available to Merchant 
Marine Academy graduates and State academy SIP recipients to 
allow them to fulfill their service obligation by accepting, 
for a minimum of five years, Federal maritime related 
employment. The focus of such employment must be to serve the 
national security interests of the United States. Such 
employment would be considered equivalent to sea service or 
active service in the armed forces or National Oceanic and 
Atmospheric Administration (NOAA).
  This section would change the amount of SIP made to State 
maritime academy students from $3,000 to $4,000 annually. The 
increase would help to offset the increasing costs of higher 
education and serve as an additional incentive for students at 
State maritime academies to commit themselves to an obligation 
to serve the maritime and national security needs of the United 
States. This increase would have no effect on the Department's 
overall budget, however, because increased payments would be 
allocated to a fewer number of recipients.
  This section also would authorize the Superintendent of the 
USMMA to confer a masters degree upon any individual who has 
met the regulatory conditions for a particular masters program 
administered by the Academy. Any such program must be 
accredited by the appropriate accreditation entity.
  Finally, this section would authorize the Secretary to 
establish a medals and awards program as part of the existing 
United States Maritime Service. The awards program would 
supplement existing programs and allow the Secretary to 
recognize distinguished service and other commendable 
achievements by personnel of the United States Maritime 
Service.

Sec. 114. Prohibition Against Carrying Government Impelled Cargoes for 
        Vessels With Substandard Security Measures

  Current law prevents vessels that have been detained by the 
United States Coast Guard for violations of international 
safety agreements from being allowed to carry United States 
government impelled cargoes for up to one year after the 
detention. This section would provide the Secretary with the 
authority to also exclude vessels from the carriage of 
government-impelled cargoes that have been detained for 
violations of security standards contained within international 
agreements to which the United States is a party.

Sec. 115. Authority To Convey Obsolete Vessels to U.S. Territories and 
        Foreign Countries for Reefing

  The section would extend to the Secretary of Transportation 
the authority to convey to United States territories and 
foreign governments obsolete vessels for use as artificial 
reefs. Currently, this authority is limited to the individual 
States of the United States. MARAD has been contacted by 
several foreign countries interested in obtaining obsolete 
vessels for use as artificial reefs. Due to the existing 
statutory constraints, MARAD has been unable to explore the 
possibility of conveying obsolete vessels to other countries 
for this use. This section also sets forth the information that 
a State, Commonwealth, or foreign government would be required 
to provide when applying for the use of a vessel as an 
artificial reef, and the determinations that would need to be 
made prior to conveyance of a vessel. This section builds upon 
the existing framework for similar conveyances to States and 
presents broader opportunities for MARAD to dispose of its 
fleet of obsolete vessels at no cost to the government.
  The section also would direct the Administrator of the 
Environmental Protection Agency and the Secretary of 
Transportation, in consultation with other interested Federal 
and State agencies, to jointly develop guidance recommending 
environmental best management practices to be used in the 
preparation of vessels to be used as artificial reefs. The 
guidance developed would serve as national guidance for Federal 
agencies preparing vessels for use as artificial reefs. The 
Secretary of Transportation would report on the environmental 
best practices developed through the existing ship disposal 
reporting requirements.

Sec. 116. Maintenance of Current Saint Lawrence Seaway Development 
        Corporation Safety Responsibilities

  This section would clarify the decades-old authority of the 
SLSDC to carry out the provisions of the PWSA in the case of 
the Saint Lawrence Seaway. The PWSA specifies that certain 
authorities over vessel operations in the Seaway, which are 
vested with the Secretary of the Department in which the Coast 
Guard is operating, shall not be delegated ``to any agency 
other than the Saint Lawrence Seaway Development Corporation'' 
(33 U.S.C. 1229). This delegation underlies enforcement of the 
joint United States-Canadian Seaway regulations governing 
vessel operations in the Seaway, operations of the SLSDC Vessel 
Traffic Center, and the SLSDC civil and criminal penalty 
referral authority. This amendment would clarify the SLSDC's 
continuing authority under the delegation and statute to 
regulate vessel traffic in the Seaway, in conjunction with the 
1954 agreement between Canada and the United States governing 
vessel traffic in the Seaway, and subsequent agreements. The 
amendment would retain the current definition for most 
purposes, with the exception of those specific authorities for 
which only the SLSDC may be designated. The authority of the 
Coast Guard for security matters under the PWSA (33 U.S.C. 
1226) would not be affected by the proposed amendment, which is 
intended to maintain the status quo.

Sec. 117. Use of Insurance Proceeds for Repairs at the Merchant Marine 
        Academy

  This section would allow MARAD to use funds received from an 
insurance settlement for legally authorized purposes, including 
completion of repairs to the Merchant Marine Academy, Fitch 
Building which suffered fire damage on December 16, 1996. The 
damages were estimated to be in excess of $1,100,000 to the 
building and a loss of materials stored at the building. MARAD 
contended that a contractor working on the building was at 
fault. After unsuccessful negotiations and commencement of 
litigation, a settlement was reached for $708,100.
  To date, the USMMA has only been able to repair a portion of 
the damages through appropriated funds, preventing the Academy 
from financing other projects. If the contractor had repaired 
the damage to the Fitch Building without the need for 
litigation, there would be no need to return the funds received 
to the Treasury as a miscellaneous receipt. Allowing MARAD to 
use the settlement funds to repair the Fitch Building would 
allow for the repair of damage for which the funds were meant 
to compensate.

Sec. 118. Availability to the Vessel Operations Revolving Fund of Funds 
        from Lawsuits and Settlements

  The VORF was created in 1951 to carry out vessel operating 
functions of the Secretary of Transportation, including 
charter, operation, maintenance, repair, reconditioning, and 
betterment of merchant vessels under the jurisdiction of the 
Secretary of Transportation. This provision would allow MARAD 
to retain funds received as a result of final judgments and 
settlements in the VORF. It would thus provide a potential 
funding stream for the VORF to cover expenses that arise from 
time to time as a result of damage incurred to NDRF vessels at 
the hands of other parties.

Sec. 119. Eligibility of Tank Vessels for the Maritime Security Program

  This section would allow foreign-built tank vessels to be 
included in the Maritime Security Fleet if the owner enters 
into a binding contract that requires the owner to replace the 
tank vessel with a new tank vessel built in the United States 
within four years.

Sec. 120. Correction of 2002 Coastwise Trade Authorization Provision

  This section would make a technical correction to section 
213(b) of the Maritime Policy Improvement Act of 2002 in order 
to restrict coastwise trade authority of certain foreign-built 
launch barge operations.

TITLE II--MARITIME SECURITY FLEET PROGRAM

Sec. 201. Short Title

  This section would establish that this title may be referred 
to as the ``Maritime Security Fleet Program Reauthorization Act 
of 2003''.

Sec. 202. Amendment of Merchant Marine Act, 1936

  This section would establish that except when otherwise 
stated, this Act modifies only the Merchant Marine Act, 1936.

Sec. 203. Changes to Maritime Security Fleet Establishment Provisions

  This section would amend 46 U.S.C. App. 1187 to reestablish 
and enhance the MSP fleet. The Secretary of Transportation, in 
conjunction with the Secretary of Defense in a consultative 
role, is directed to establish an ``active, commercially 
viable, militarily useful'' fleet of privately-owned, United 
States-documented, oceangoing vessels, and to specifically 
include ``tank vessels'' as eligible for membership in the 
fleet.
  This section would set forth citizenship eligibility 
requirements for charters and owners in the following manner--
          (1) vessels owned and operated by section 2 citizens 
        (as defined by section 2 of the Shipping Act of 1916);
          (2) vessels owned by documentation citizen and 
        chartered to section 2 citizen;
                   if the vessel is demise chartered to 
                a section 2 citizen;
                   if the vessel is owned by a person 
                eligible to document the vessel under chapter 
                121 of title 46 U.S.C.;
          (3) vessels owned by section 2 citizen and chartered 
        to documentation citizen;
                   if the vessel is demise chartered to 
                a person who is eligible to document the vessel 
                under chapter 121 of title 46, U.S.C.;
                   if the management and ownership of 
                the documentation citizen organization are 
                appointed and removed only with approval by the 
                Secretary of Transportation;
                   the contractor certifies that there 
                are no legal restrictions or treaties that 
                would prevent the contractor from fulfilling 
                the terms of an operating agreement;
                   the Secretaries of Transportation 
                and Defense certify to the House of 
                Representatives Armed Services Committee and 
                the Senate Committee on Commerce, Science, and 
                Transportation that they concur with the 
                previous certification
                   if a vessel is chartered to a person 
                who is controlled by a non-section 2 citizen, 
                this person must enter into an agreement with 
                the secretary of transportation not to 
                influence the operation of the vessel in a 
                manner that would adversely affect the United 
                States.
  Deemed Ownership. If a vessel is owned by a trust and demise 
chartered to a person who meets the requirements of a 
documentation citizen, the vessel is deemed for eligibility 
purposes to be owned by a section 2 citizen, only if the trust 
meets the requirements of 12102(d) of title 46 U.S.C., as 
qualified by paragraph (3) of that section.
  The section would add vessel standards to the criteria for 
participation, allowing the Secretary of Transportation to 
determine if a non-documented vessel is eligible for a 
certificate of inspection. The standards under which the 
Secretary makes a determination are:
           the vessel is classed and designed in 
        accordance with the rule of the American Bureau of 
        Shipping, or another classification society accepted by 
        the Secretary;
           the vessel complies with international 
        guidelines as determined by the country in which the 
        vessel was immediately previously documented; and
           that country has not been identified by the 
        Secretary as inadequately enforcing international 
        vessel regulations.
  If the vessel fails to meet these standards, then the 
certification of inspection does not apply to the vessel. Also, 
the Secretary may accept the standards of a foreign 
classification society if the society maintains records and 
offices in the United States and provides reciprocal access to 
records with the American Bureau of Shipping.

Sec. 204. Changes to Operating Agreements Requirements

  This section would eliminate references to the expired 
Operating Differential Subsidy program, which were required to 
prevent subsidy overlaps with the ODS and the original MSP. 
Also, the term ``foreign trade'' is defined in reference to 
section 905(a) of the Merchant Marine Act which describes 
foreign trade and commerce as being between the United States 
and a foreign country. Participation in the ``coastwise trade'' 
is not allowed for MSP vessels.
  This section deems a vessel's communication equipment to meet 
Federal Communications Commission requirements as long as the 
equipment complies with applicable international agreements and 
guidelines, and was immediately previously documented in a 
country that has not been identified by the Secretary as 
inadequately enforcing international vessel regulations.
  This section also extends the authorization of the MSP until 
2015. It also eliminates specific reference to Lighter Abroad 
Ship (LASH) vessels.
  This section also would change the threshold for transporting 
civilian bulk or bagged preference cargos to 2,500 tons. If a 
MSP ship carries more than 2,500 tons of bagged or bulk 
preference cargo, it is ineligible for MSP payment. However, 
vessels that are owned and operated by section 2 citizens are 
exempt from these cargo restrictions to MSP payments.

Sec. 205. Participating Fleet Vessel Defined

  This section would amend section 654 (46 U.S.C. App. 1187c) 
by adding a definition of ``Participating Fleet Vessel''. The 
term would be defined to mean any vessel that on October 1, 
2005, will meet the citizenship eligibility requirements of 
this Act and will be less than 25 years of age or, if the 
vessel is a LASH vessel, will be less than 30 years of age. 
Further, on April 30, 2005, the vessel must be covered by an 
operating agreement under subtitle B of title VI of the 
Merchant Marine Act, 1936, and--
          -is a replacement vessel described in this Act;
          -is controlled by the person that controls such 
        replaced vessel;
          -is eligible to be included in the Fleet; and
          -is approved by the Secretaries of Transportation and 
        Defense.

Sec. 206. Authorization of Appropriations

  This section would authorize $100,000,000 for each of fiscal 
years 1997 through 2005 for the MSP, and such sums as may be 
necessary not to exceed $186,000,000 for each fiscal year 
thereafter through fiscal year 2015.

Sec. 207. Noncontiguous Domestic Trade

  Section 207 would prohibit Jones Act vessels that operate in 
the noncontiguous trade from receiving MSP payments while 
operating in that trade, yet provides for a hearing and written 
waiver from the Secretary for MSP vessels to participate in the 
noncontiguous domestic trade. Vessel operators that serve the 
noncontiguous domestic trade at the time of enactment of this 
Act would not be prohibited from receiving MSP payments.

Sec. 208. Regulations

  This section would amend subtitle B of title VI of the 
Merchant Marine Act by adding a new section 657, authorizing 
the Secretary of Transportation, in consultation with the 
Secretary of Defense, to prescribe interim rules and final 
rules as necessary. All interim rules expire no later than 270 
days after the enactment of this Act.

TITLE III--NATIONAL DEFENSE TANK VESSEL CONSTRUCTION ASSISTANCE

Sec. 301. National Defense

  This section would require the Secretary of Transportation to 
establish a program to provide financial assistance for the 
construction in the United States of a fleet of five privately-
owned tank vessels for enrollment in an emergency preparedness 
agreement.
  Further, the section would require the Secretary to establish 
procedures to obtain competitive proposals for the construction 
of new tank vessels to meet the commercial and national 
security needs of the United States. This section also would 
require the Secretary to give priority consideration to a 
proposal submitted by a person that is a citizen of the United 
States under section 2 of the Shipping Act, 1916 (46 App. 
U.S.C. 802).
  The section also would allow the Secretary to enter into a 
contract to provide assistance for the construction of a new 
tank vessel in the United States in an amount up to 75 percent 
of the actual construction cost of the vessel, but in no case 
more than $50 million per vessel. This section also provides 
that a vessel constructed under this section is not eligible 
for a certificate of documentation with a coastwise 
endorsement. A vessel constructed under this section also must 
enter into an emergency preparedness agreement under this 
title.
  Additionally, the section would require the Secretary of 
Transportation to give priority to guarantees and commitments 
for new product tank vessels that are otherwise eligible for a 
guarantee under this section 1103 of the Merchant Marine Act, 
1936 (46 App. U.S.C. 1273).
  Finally, the section would authorize a total of $250 million 
after fiscal year 2004 to carry out this subtitle.

                      Rollcall Votes in Committee

  Senator Lott offered an amendment, to the amendment (in the 
nature of a substitute) offered by Senator McCain, to authorize 
funds for title XI of the Merchant Marine Act, 1936, to provide 
direct subsidies for ship construction and for other purposes. 
By rollcall vote of 18 yeas and 5 nays as follows, the 
amendment was adopted:
        YEAS--18                      NAYS--5
Mr. Stevens\1\                      Mr. Brownback\1\
Mr. Burns\1\                        Mr. Fitzgerald\1\
Mr. Lott                            Mr. Ensign\1\
Mrs. Hutchison                      Mr. Sununu\1\
Ms. Snowe\1\                        Mr. McCain
Mr. Smith\1\
Mr. Allen\1\
Mr. Hollings
Mr. Inouye\1\
Mr. Rockefeller\1\
Mr. Kerry\1\
Mr. Breaux\1\
Mr. Dorgan\1\
Mr. Wyden\1\
Mrs. Boxer\1\
Mr. Nelson\1\
Ms. Cantwell
Mr. Lautenberg\1\

    \1\ By proxy

                        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):

                           Public Law 92-402

                            [16 U.S.C. 1220]

  [Sec. 3. (a) Any State may apply to the Secretary of 
Transportation (hereafter referred to in this Act as the 
``Secretary'') for obsolete ships which, but for the operation 
of this Act, would be designated by the Secretary for scrapping 
if the State intends to sink such ships for use as an offshore 
artificial reef for the conservation of marine life.
  [(b) A State shall apply for obsolete ships under this Act in 
such manner and form as the Secretary shall prescribe, but such 
application shall include at least (1) the location at which 
the State proposes to sink the ships, (2) a certificate from 
the Administrator, Environmental Protection Agency, that the 
proposed use of the particular vessel or vessels requested by 
the State will be compatible with water quality standards and 
other appropriate environmental protection requirements, and 
(3) statements and estimates with respect to the conservation 
goals which are sought to be achieved by use of the ships.
  [(c) Before taking any action with respect to an application 
submitted under this Act, the Secretary shall provide copies of 
the application to the Secretary of the Interior, the Secretary 
of Defense, and any other appropriate Federal officer, and 
shall consider comments and views of such officers with respect 
to the application.]

SEC. 3. PREPARATION OF VESSELS FOR USE AS ARTIFICIAL REEFS.

  (a) Guidance.--
          (1) In general.--Not later than September 30, 2003, 
        the Administrator of the Environmental Protection 
        Agency and the Secretary of Transportation, acting 
        through the Maritime Administration, shall jointly 
        develop guidance recommending environmental best 
        management practices to be used in the preparation of 
        vessels for use as artificial reefs. Before issuing the 
        guidance, the Administrator and the Secretary shall 
        consult with interested Federal and State agencies.
          (2) Requirements.--The guidance shall--
                  (A) recommend environmental best management 
                practices for the preparation of vessels that 
                would ensure that the use of vessels so 
                prepared as artificial reefs would be 
                environmentally beneficial;
                  (B) promote the nationally consistent use of 
                such practices; and
                  (C) provide a basis for estimating the costs 
                associated with the preparation of vessels for 
                use as artificial reefs.
          (3) Use by federal agencies.--The guidance shall 
        serve as national guidance for Federal agencies 
        preparing vessels for use as artificial reefs.
          (4) Report.--The Secretary of Transportation shall 
        submit to Congress a report on the environmental best 
        management practices developed under paragraph (1) 
        through the existing ship disposal reporting 
        requirements in section 3502 of the Floyd D. Spence 
        National Defense Authorization Act for Fiscal Year 2001 
        (16 U.S.C. 5405 note). The report shall describe such 
        practices, and may include such other matters as the 
        Secretary considers appropriate.
  (b) Application Required.--
          (1) In general.--A State, commonwealth, possession of 
        the United States or foreign government may apply for 
        any vessel of the National Defense Reserve Fleet that 
        has been identified by the Secretary as an obsolete 
        vessel of insufficient value to warrant its further 
        preservation in such a manner and form as the Secretary 
        shall prescribe. At a minimum, the application shall 
        state--
                  (A) the location at which the applicant 
                proposes to sink the vessel or vessels;
                  (B) the environmental goals to be achieved by 
                the use of the vessel or vessels; and
                  (C) that the applicant agrees to hold the 
                Government harmless for any claims arising from 
                exposure to asbestos, polychlorinated 
                biphenyls, lead paint, or other hazardous 
                substances after conveyance of the vessel, 
                except for claims arising from use of the 
                vessel by the Government.
          (2) States.--
                  (A) Additional documentation required.--A 
                State, commonwealth, or possession of the 
                United States shall also provide to the 
                Secretary and the Administrator in its 
                application documentation that the proposed use 
                of the particular vessel or vessels requested 
                will comply with all applicable water quality 
                standards and will benefit the environment in 
                the vicinity of the proposed reef, taking into 
                account the guidance issued under subsection 
                (a) and other appropriate environmental 
                considerations.
                  (B) EPA certification.--Before any vessel may 
                be used as an artificial reef, the State, 
                commonwealth, or possession of the United 
                States shall demonstrate to the Environmental 
                Protection Agency, and that Agency shall 
                determine in writing, that the use of the 
                vessel as an artificial reef at the proposed 
                location will be environmentally beneficial.
          (3) Foreign governments.--A foreign government shall 
        also provide to the Secretary and the Administrator in 
        its application--
                  (A) documentation of--
                          (i) how the proposed use of the 
                        vessel or vessels will benefit the 
                        environment; and
                          (ii) remediation that the vessel will 
                        undergo prior to use as an artificial 
                        reef; and
                  (B) certification that such remediation shall 
                take into account the guidance issued under 
                subsection (a).
          (4) Determination of environmental benefit.--No 
        obsolete vessel shall be conveyed unless the Maritime 
        Administration and the Environmental Protection Agency 
        jointly determine, in writing, that the proposed 
        remediation measures will ensure that use of the vessel 
        as an artificial reef will be environmentally 
        beneficial. The contract conveying the vessel or 
        vessels from Maritime Administration to the foreign 
        government shall require the use of the remediation 
        measures determined by Maritime Administration and the 
        Environmental Protection Agency to ensure that use of 
        the vessel or vessels as an artificial reef will be 
        environmentally beneficial.
  (c) Application With Other Law.--Nothing in this section 
shall be construed as affecting in any manner the application 
of any other provision of law, including laws relating to the 
conveyance of obsolete vessels, their distribution in commerce, 
or their use as artificial reefs.

                     PORTS AND WATERWAYS SAFETY ACT

                            [33 U.S.C. 1222]

  Sec. 3. Definitions.--As used in this Act, unless the context 
otherwise requires--
          (1) ``Marine environment'' means the navigable waters 
        of the United States and the land and resources therein 
        and thereunder; the waters and fishery resources of any 
        area over which the United States asserts exclusive 
        fishery management authority; the seabed and subsoil of 
        the Outer Continental Shelf of the United States, the 
        resources thereof and the waters superadjacent thereto; 
        and the recreational, economic, and scenic values of 
        such waters and resources.
          (2) ``Secretary'' means the Secretary of the 
        department in which the Coast Guard is [operating.] 
        operating, except that ``Secretary'' means the 
        Secretary of Transportation with respect to the 
        applicability of this Act to the Saint Laurence Seaway.
          (3) ``State'' includes each of the several States of 
        the United States, the District of Columbia, the 
        Commonwealth of Puerto Rico, the Canal Zone, Guam, 
        American Samoa, the United States Virgin Islands, the 
        Trust Territories of the Pacific Islands, the 
        Commonwealth of the Northern Marianas, and any other 
        commonwealth, territory, or possession of the United 
        States.
          (4) ``United States'', when used in geographical 
        context, means all the States thereof.
          (5) ``Navigable waters of the United States'' 
        includes all waters of the territorial sea of the 
        United States as described in Presidential Proclamation 
        No. 5928 of December 27, 1988.

                           TITLE 46. SHIPPING

                    SUBTITLE II. VESSELS AND SEAMEN

                       PART A. GENERAL PROVISIONS

               CHAPTER 23. OPERATION OF VESSELS GENERALLY

Sec. 2302. Penalties for negligent operations and interfering with safe 
                    operation

  (a) A person operating a vessel in a negligent manner or 
interfering with the safe operation of a vessel, so as to 
endanger the life, limb, or property of a person is liable to 
the United States Government for a civil penalty of not more 
than $5,000 in the case of a recreational vessel, or $25,000 in 
the case of any other vessel.
  (b) A person operating a vessel in a grossly negligent manner 
that endangers the life, limb, or property of a person commits 
a class A misdemeanor.
  (c) An individual who is under the influence of alcohol, or a 
dangerous drug in violation of a law of the United States when 
operating a vessel, as determined under standards prescribed by 
the Secretary by regulation--
          (1) is liable to the United States Government for a 
        civil penalty of not more than $5,000; or
          (2) commits a class A misdemeanor.
  (d) For a penalty imposed under this section, the vessel also 
is liable in rem unless the vessel is--
          (1) owned by a State or a political subdivision of a 
        State;
          (2) operated principally for governmental purposes; 
        and
          (3) identified clearly as a vessel of that State or 
        subdivision.
  (e)(1) A vessel may not transport Government-impelled cargoes 
if--
          (A) the vessel has been detained and determined to be 
        substandard by the Secretary for violation of an 
        international safety convention to which the United 
        States is a party, including violations for substandard 
        security measures, and the Secretary has published 
        notice of that detention and determination in an 
        electronic form, including the name of the owner of the 
        vessel; or
          (B) the operator of the vessel has on more than one 
        occasion had a vessel detained and determined to be 
        substandard by the Secretary for violation of an 
        international safety convention to which the United 
        States is a party, including violations for substandard 
        security measures, and the Secretary has published 
        notice of that detention and determination in an 
        electronic form, including the name of the owner of the 
        vessel.
  (2) The prohibition in paragraph (1) expires for a vessel on 
the earlier of--
          (A) 1 year after the date of the publication in 
        electronic form on which the prohibition is based; or
          (B) any date on which the owner or operator of the 
        vessel prevails in an appeal of the violation of the 
        relevant international convention on which the 
        detention is based.
  (3) As used in this subsection, the term ``Government-
impelled cargo'' means cargo for which a Federal agency 
contracts directly for shipping by water or for which (or the 
freight of which) a Federal agency provides financing, 
including financing by grant, loan, or loan guarantee, 
resulting in shipment of the cargo by water.

                       MERCHANT MARINE ACT, 1936

               TITLE V--CONSTRUCTION-DIFFERENTIAL SUBSIDY

        SUBTITLE A--GENERAL SUBSIDY FOR NEW VESSEL CONSTRUCTION

SEC. 508. DISPOSITION OF VESSELS TRANSFERRED TO MARITIME ADMINISTRATION 
                    OF DEPARTMENT OF TRANSPORTATION.

                         [46 U.S.C. APP. 1158]

  (a) Authority To Scrap or Sell Obsolete Vessels._If the 
Secretary of Transportation shall determine that any vessel 
transferred to the Maritime Administration of the Department of 
Transportation by section 202 of this Act, or hereafter 
acquired, is of insufficient value for commercial or military 
operation to warrant its further preservation, the Secretary of 
Transportation is authorized (1) to scrap said vessel, or (2) 
to sell such vessel for cash, after appraisement and due 
advertisement, and upon competitive sealed bids, either to 
citizens of the United States or to aliens: Provided, That the 
purchaser thereof shall enter into an undertaking with sureties 
approved by the Secretary of Transportation that such vessel 
shall not be operated in the foreign commerce of the United 
States at any time within the period of ten years after the 
date of the sale, in competition with any other vessel owned by 
a citizen or citizens of the United States and registered under 
the laws thereof.
  (b) Authority To Convey Vessels.--
          (1) In general.--Notwithstanding section 510(j) of 
        this Act, the Secretary of Transportation may convey 
        the right, title, and interest of the United States 
        Government in any vessel of the National Defense 
        Reserve Fleet that has been identified by the Secretary 
        as an obsolete vessel of insufficient value to warrant 
        its further preservation, if--
                  (A) the recipient is a non-profit 
                organization, a State, Commonwealth, or 
                possession of the United States or any 
                municipal corporation or political subdivision 
                thereof, or the District of Columbia;
                  (B) the recipient agrees not to use, or allow 
                others to use, the vessel for commercial 
                transportation purposes;
                  (C) the recipient agrees to make the vessel 
                available to the Government whenever the 
                Secretary indicates that it is needed by the 
                Government;
                  (D) the recipient agrees to hold the 
                Government harmless for any claims arising from 
                exposure to asbestos, polychlorinated 
                biphenyls, lead paint, or other hazardous 
                substances after conveyance of the vessel, 
                except for claims arising from use of the 
                vessel by the Government;
                  (E) the recipient has a conveyance plan and a 
                business plan, each of which have been 
                submitted to and approved by the Secretary; and
                  (F) the recipient has provided proof, as 
                determined by the Secretary, of resources 
                sufficient to accomplish the transfer, 
                necessary repairs and modifications, and 
                initiation of the intended use of the vessel.
          (2) Other equipment.--At the Secretary's discretion, 
        additional equipment from other obsolete vessels of the 
        National Defense Reserve Fleet may be conveyed to 
        assist the recipient with maintenance, repairs, or 
        modifications.
          (3) Additional terms.--The Secretary may require any 
        additional terms the Secretary considers appropriate.
          (4) Delivery of vessel.--If conveyance is made under 
        this subsection the vessel shall be delivered to the 
        recipient at a time and place to be determined by the 
        Secretary. The vessel shall be conveyed in an `as is' 
        condition.
          (5) Limitations.--If at any time prior to delivery of 
        the vessel to the recipient, the Secretary determines 
        that a different disposition of a vessel would better 
        serve the interests of the Government, the Secretary 
        shall pursue the more favorable disposition of the 
        obsolete vessel and shall not be liable for any damages 
        that may result from an intended recipient's reliance 
        upon a proposed transfer.

           *       *       *       *       *       *       *


    SUBTITLE B--NATIONAL DEFENSE TANK VESSEL CONSTRUCTION ASSISTANCE

SEC. 521. NATIONAL DEFENSE TANK VESSEL CONSTRUCTION PROGRAM.

  The Secretary of Transportation shall establish a program for 
the provision of financial assistance for the construction in 
the United States of a fleet of up to 5 privately owned product 
tank vessels--
          (1) to be operated in commercial service in foreign 
        commerce; and
          (2) to be available for national defense purposes in 
        time of war or national emergency pursuant to an 
        Emergency Preparedness Plan approved by the Secretary 
        of Defense pursuant to section 523(e) of this subtitle.

SEC. 522. APPLICATION PROCEDURE.

  (a) Request for Proposals.--Within 90 days after the date of 
the enactment of this subtitle, and on an as-needed basis 
thereafter, the Secretary of Transportation, in consultation 
with the Secretary of Defense, shall publish in the Federal 
Register a request for competitive proposals for the 
construction of new product tank vessels necessary to meet the 
commercial and national security needs of the United States and 
to be built with assistance under this subtitle.
  (b) Qualification.--Any citizen of the United States or any 
shipyard in the United States may submit a proposal to the 
Secretary of Transportation for purposes of constructing a 
product tank vessel with assistance under this subtitle.
  (c) Requirement.--The Secretary of Transportation, with the 
concurrence of the Secretary of Defense, may enter into an 
agreement with the submitter of a proposal for assistance under 
this subtitle if the Secretary of Transportation determines 
that--
          (1) the plans and specifications call for 
        construction of a new product tank vessel of not less 
        than 35,000 deadweight tons and not greater than 60,000 
        deadweight tons, that--
                  (A) will meet the requirements of foreign 
                commerce;
                  (B) is capable of carrying militarily useful 
                petroleum products, and will be suitable for 
                national defense or military purposes in time 
                of war, national emergency, or other military 
                contingency; and
                  (C) will meet the construction standards 
                necessary to be documented under the laws of 
                the United States;
          (2) the shipyard in which the vessel will be 
        constructed has the necessary capacity and expertise to 
        successfully construct the proposed number and type of 
        product tank vessels in a reasonable period of time as 
        determined by the Secretary of Transportation, taking 
        into consideration the recent prior commercial 
        shipbuilding history of the proposed shipyard in 
        delivering a vessel or series of vessels on time and in 
        accordance with the contract price and specifications; 
        and
          (3) the person proposed to be the operator of the 
        proposed vessel possesses the ability, experience, 
        financial resources, and any other qualifications 
        determined to be necessary by the Secretary for the 
        operation and maintenance of the vessel.
  (d) Priority.--The Secretary of Transportation--
          (1) subject to paragraph (2), shall give priority 
        consideration to a proposal submitted by a person that 
        is a citizen of the United States under section 2 of 
        the Shipping Act, 1916 (46 App. U.S.C. 802); and
          (2) may give priority to consideration of proposals 
        that provide the best value to the Government, taking 
        into consideration--
                  (A) the costs of vessel construction; and
                  (B) the commercial and national security 
                needs of the United States.

SEC. 523. AWARD OF ASSISTANCE.

  (a) In General.--If after review of a proposal, the Secretary 
of Transportation determines that the proposal fulfills the 
requirements under this subtitle, the Secretary may enter into 
a contract with the proposed purchaser and the proposed 
shipyard for the construction of a product tank vessel with 
assistance under this subtitle.
  (b) Amount of Assistance.--The contract shall provide that 
the Secretary of Transportation shall pay, subject to the 
availability of appropriations, up to 75 percent of the actual 
construction cost of the vessel, but in no case more than 
$50,000,000 per vessel.
  (c) Construction in United States.--A contract under this 
section shall require that construction of a vessel with 
assistance under this subtitle shall be performed in a shipyard 
in the United States.
  (d) Documentation of Vessel.--
          (1) Contract requirement.--A contract under this 
        section shall require that, upon delivery of a vessel 
        constructed with assistance under the contract, the 
        vessel shall be documented under chapter 121 of title 
        46, United States Code, with a registry endorsement 
        only.
          (2) Restriction on coastwise endorsement.--A vessel 
        constructed with assistance under this subtitle shall 
        not be eligible for a certificate of documentation with 
        a coastwise endorsement.
          (3) Authority to reflag not applicable.--Section 9(g) 
        of the Shipping Act, 1916, (46 App. U.S.C. 808(g)) 
        shall not apply to a vessel constructed with assistance 
        under this subtitle.
  (e) Emergency Preparedness Agreement.--
          (1) In general.--A contract under this section shall 
        require that the person who will be the operator of a 
        vessel constructed with assistance under the contract 
        shall enter into an Emergency Preparedness Agreement 
        for the vessel under section 653.
          (2) Treatment as contractor.--For purposes of the 
        application, under paragraph (1), of section 653 to a 
        vessel constructed with assistance under this subtitle, 
        the term `contractor' as used in section 653 means the 
        person who will be the operator of a vessel constructed 
        with assistance under this subtitle.
  (f) Additional Terms.--The Secretary of Transportation shall 
incorporate in the contract the requirements set forth in this 
subtitle, and may incorporate in the contract any additional 
terms the Secretary considers necessary.

           *       *       *       *       *       *       *


             TITLE VI--VESSEL OPERATING ASSISTANCE PROGRAM

              SUBTITLE B--MARITIME SECURITY FLEET PROGRAM

SEC. 651. ESTABLISHMENT OF FLEET.

                         [46 U.S.C. APP. 1187]

  (a) In General.--The Secretary of [Transportation] 
Transportation, in consultation with the Secretary of Defense, 
shall establish a fleet of active, commercially viable, 
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 (including a tank vessel) 
is eligible to be included in the Fleet if the vessel is self-
propelled and--
          (1)(A) is operated by a person [as an ocean common 
        carrier;] in oceangoing transportation;
          [(B) whether in commercial service, on charter to the 
        Department of Defense, or in other employment, is 
        either--
                  [(i) a roll-on/roll-off vessel with a 
                carrying capacity of at least 80,000 square 
                feet or 500 twenty-foot equivalent units; or
                  [(ii) a lighter aboard ship vessel with a 
                barge capacity of at least 75 barges; or]
          (B) is in commercial service, on charter to the 
        Department of Defense, or in other employment;
          (C) any other type of vessel that [is determined by 
        the Secretary to be] the Secretary, in conjunction with 
        the Secretary of Defense, has determined to be 
        commercially viable and 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 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]
          (2)(A)(i) is a United States-documented vessel; and
          (ii) on the date an operating agreement covering the 
        vessel is entered into under this subtitle is 15 years 
        of age or less;
        except that the Secretary of Transportation may waive 
        the application of clause (ii) if the Secretary, in 
        conjunction with the Secretary of Defense, determines 
        that the waiver--
                  (I) is in the national interest;
                  (II) is appropriate to allow the maintenance 
                of the economic viability of the vessel and any 
                associated operating network;
                  (III) is necessary due to the availability of 
                appropriate vessels that meet the operations 
                and commercial requirements; and
                  (IV) is consistent with such other factors as 
                the Secretaries consider appropriate; or
          (B) it is not a United States-documented vessel, but 
        the owner of the vessel has demonstrated an intent to 
        have the vessel documented under chapter 121 of title 
        46, United States Code, if it is included in the Fleet, 
        and the vessel will be less than 10 years of age on the 
        date of that documentation;
          (3) the Secretary of Transportation determines that 
        the vessel is necessary to maintain a United States 
        presence in international commercial shipping [or, 
        after consultation] and, in conjunction with the 
        Secretary of Defense, determines that the vessel is 
        militarily useful for meeting the sealift needs of the 
        United States with respect to national emergencies; 
        [and]
          (4) at the time an operating agreement for the vessel 
        is entered into under this subtitle, the vessel will be 
        eligible for documentation under chapter 121 of title 
        46, United States [Code.] Code; and
          (5) meets the requirements of paragraph (1), (2), 
        (3), or (4) of subsection (c).
  (c) Requirements Regarding Citizenship of Owners and 
Charterers.--
          (1) Vessel owned and operated by section 2 
        citizens.--A vessel meets the requirements of this 
        paragraph if, during the period of an operating 
        agreement under this subtitle that applies to the 
        vessel, the vessel will be owned and operated by a 
        person that is a citizen of the United States under 
        section 2 of the Shipping Act, 1916 (46 U.S.C. App. 
        802).
          (2) Vessel owned by documentation citizen and 
        chartered to section 2 citizen.--A vessel meets the 
        requirements of this paragraph if, during the period of 
        an operating agreement under this subtitle that applies 
        to the vessel, the vessel will be--
                  (A) owned by a person that is eligible to 
                document a vessel under chapter 121 of title 
                46, United States Code; and
                  (B) demise chartered to a person that is a 
                citizen of the United States under section 2 of 
                the Shipping Act, 1916 (46 U.S.C. App. 802).
          (3) Vessel owned and operated by defense 
        contractor.--A vessel meets the requirements of this 
        paragraph if--
                  (A) during the period of an operating 
                agreement under this subtitle that applies to 
                the vessel, the vessel will be owned and 
                operated by a person that--
                          (i) is eligible to document a vessel 
                        under chapter 121 of title 46, United 
                        States Code;
                          (ii) operates or manages other United 
                        States-documented vessels for the 
                        Secretary of Defense, or charters other 
                        vessels to the Secretary of Defense;
                          (iii) has entered into a special 
                        security agreement for purposes of this 
                        paragraph with the Secretary of 
                        Defense;
                          (iv) makes the certification 
                        described in paragraph (4)(A)(ii)(III); 
                        and
                          (v) in the case of a vessel described 
                        in paragraph (2)(B), enters into an 
                        agreement referred to in that 
                        paragraph; and
                  (B) the Secretary and the Secretary of 
                Defense certify to the House Armed Services 
                Committee and the Senate Commerce, Science and 
                Transportation Committee that they concur with 
                the certification, and have reviewed and agree 
                that there are no other legal, operational, or 
                other impediments that would prohibit the 
                contractor for the vessel from performing its 
                obligations under an operating agreement under 
                this subtitle.
          (4) Vessel owned by section 2 citizen and chartered 
        to documentation citizen.--A vessel meets the 
        requirements of this paragraph if--
                  (A) during the period of an operating 
                agreement under this subtitle that applies to 
                the vessel, the vessel will be--
                          (i) owned by a person that is a 
                        citizen of the United States under 
                        section 2 of the Shipping Act, 1916 (46 
                        U.S.C. App. 802); and
                          (ii) demise chartered to a person--
                                  (I) that is eligible to 
                                document the vessel under 
                                chapter 121 of title 46, United 
                                States Code;
                                  (II) the chairman of the 
                                board of directors, chief 
                                executive officer, and a 
                                majority of the members of the 
                                board of directors of which are 
                                United States citizens, are 
                                appointed and subjected to 
                                removal only upon approval by 
                                the Secretary;
                                  (III) that certifies that 
                                there are no treaties, 
                                statutes, regulations, or other 
                                laws that would prohibit the 
                                contractor for the vessel from 
                                performing its obligations 
                                under an operating agreement 
                                under this subtitle; and
                                  (IV) the Secretary and the 
                                Secretary of Defense certify to 
                                the House Armed Services 
                                Committee and the Senate 
                                Commerce, Science, and 
                                Transportation Committee that 
                                they concur with the 
                                certification, and have 
                                reviewed and agree that there 
                                are no other legal, 
                                operational, or other 
                                impediments that would prohibit 
                                the contractor for the vessel 
                                from performing its obligations 
                                under an operating agreement 
                                under this subtitle; and
                  (B) in the case of a vessel that will be 
                chartered to a person that is owned or 
                controlled by another person that is not a 
                citizen of the United States under section 2 of 
                the Shipping Act, 1916 (46 U.S.C. App. 802), 
                the other person enters into an agreement with 
                the Secretary not to influence the operation of 
                the vessel in a manner that will adversely 
                affect the interests of the United States.
  (d) Deemed Ownership.--Notwithstanding section 12102(d)(4) of 
title 46, United States Code, in the case of a vessel that is 
owned by a trust and that is demise chartered to a person 
meeting the requirements of subsection (c)(4), the vessel is 
deemed, for purposes of the eligibility requirements of this 
section, to be owned and operated by a person that is a citizen 
of the United States under section 2 of the Shipping Act, 1916 
(46 U.S.C. App. 802) if the trust meets the requirements of 
paragraph (2) of section 12102(d) of title 46, United States 
Code, as qualified by paragraph (4) of that section.
  (e) Vessel Standards.--
          (1) Certificate of inspection.--A vessel used to 
        provide oceangoing transportation which the Secretary 
        of the department in which the Coast Guard is operating 
        determines meets the criteria of subsection (b) of this 
        section but which, on the date of enactment of the 
        Maritime Security Fleet Program Reauthorization Act of 
        2003, is not a documented vessel (as that term is 
        defined in section 12101 of title 46, United States 
        Code) shall be eligible for a certificate of inspection 
        if the Secretary determines that--
                  (A) the vessel is classed by and designed in 
                accordance with the rules of the American 
                Bureau of Shipping, or another classification 
                society accepted by the Secretary;
                  (B) the vessel complies with applicable 
                international agreements and associated 
                guidelines, as determined by the country in 
                which the vessel was documented immediately 
                before becoming a documented vessel (as defined 
                in that section); and
                  (C) that country has not been identified by 
                the Secretary as inadequately enforcing 
                international vessel regulations as to that 
                vessel.
          (2) Continued eligibility for certificate.--Paragraph 
        (1) does not apply to a vessel after any date on which 
        the vessel fails to comply with the applicable 
        international agreements and associated guidelines 
        referred to in paragraph (1)(B).
          (3) Reliance on classification society.--
                  (A) In general.--The Secretary may rely on a 
                certification from the American Bureau of 
                Shipping or, subject to subparagraph (B), 
                another classification society accepted by the 
                Secretary to establish that a vessel is in 
                compliance with the requirements of paragraphs 
                (1) and (2).
                  (B) Foreign classification society.--The 
                Secretary may accept certification from a 
                foreign classification society under 
                subparagraph (A) only--
                          (i) to the extent that the government 
                        of the foreign country in which the 
                        society is headquartered provides 
                        access on a reciprocal basis to the 
                        American Bureau of Shipping; and
                          (ii) if the foreign classification 
                        society has offices and maintains 
                        records in the United States.

SEC. 652. OPERATING AGREEMENTS.

                         [46 U.S.C. APP. 1187A]

  (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 
operating under the agreement--
          (1) the vessel--
                  (A) shall be operated exclusively in the 
                foreign [trade] trade, as that term is defined 
                in section 905(a) of this Act (without regard 
                to ``in the context of section 607 of this Act 
                concerning capital construction funds and 
                except that in the context of title V of this 
                Act concerning construction-differential 
                subsidy,''), 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.--
          (1) In general._A contractor of a vessel included in 
        an operating agreement under this subtitle may operate 
        the vessel in the foreign commerce of the United States 
        without restriction, and shall not be subject to any 
        requirement under section 801, 808, 809, or 810. 
        Participation in the program established by this 
        subtitle shall not subject a contractor to section 805 
        or to any provision of subtitle A. The restrictions of 
        section 901(b)(1) of this Act concerning the building, 
        rebuilding, or documentation of a vessel in a foreign 
        country shall not apply to a vessel for any day the 
        operator of that vessel is receiving payments under an 
        operating agreement under this subtitle.
          (2) Telecommunications equipment.--The 
        telecommunications and other electronic equipment on an 
        existing vessel that is redocumented under the laws of 
        the United States for operation under an operating 
        agreement under this subtitle shall be deemed to 
        satisfy all Federal Communications Commission equipment 
        certification requirements, if--
                  (A) such equipment complies with all 
                applicable international agreements and 
                associated guidelines as determined by the 
                country in which the vessel was documented 
                immediately before becoming documented under 
                the laws of the United States;
                  (B) that country has not been identified by 
                the Secretary as inadequately enforcing 
                international regulations as to that vessel; 
                and
                  (C) at the end of its useful life, such 
                equipment will be replaced with equipment that 
                meets Federal Communications Commission 
                equipment certification standards.
  (d) Effectiveness and Annual Payment Requirements of 
Operating Agreements.--
          (1) Effectiveness.--The Secretary of Transportation 
        may enter into an operating agreement under this 
        subtitle for fiscal year 1996. The agreement shall be 
        effective only for 1 fiscal year, but shall be 
        renewable, subject to the availability of 
        appropriations, for each subsequent fiscal year through 
        the end of fiscal year [2005.] 2015.
          (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] 1996, 
        $2,100,000 for each of fiscal years 1997 through 2005, 
        and $3,100,000 for each fiscal year thereafter in which 
        the agreement is in effect. The amount shall be paid in 
        equal monthly installments at the end of each month. 
        The amount shall not be reduced except as provided by 
        this section.
  (e) Certification Required for Payment.--As a condition of 
receiving payment under this section for a fiscal year for a 
vessel, the contractor for the vessel shall certify, in 
accordance with regulations issued by the Secretary of 
Transportation, that the vessel has been and will be operated 
in accordance with subsection (b)(1) for at least 320 days in 
the fiscal year. Days during which the vessel is drydocked, 
surveyed, inspected, or repaired shall be considered days of 
operation for purposes of this subsection.
  (f) Operating Agreement Is Obligation of United States 
Government.--An operating agreement under this subtitle 
constitutes a contractual obligation of the United States 
Government to pay the amounts provided for in the agreement to 
the extent of actual appropriations.
  (g) Limitations.--The Secretary of Transportation shall not 
make any payment under this subtitle for a vessel with respect 
to any days for which the vessel is--
          (1) [subject to an operating-differential subsidy 
        contract under subtitle A or] under a charter to the 
        United States Government, other than a charter pursuant 
        to section 653;
          (2) not operated or maintained in accordance with an 
        operating agreement under this subtitle; or
          [(3) more than 25 years of age, except that the 
        Secretary may make such payments for a LASH vessel for 
        any day for which the vessel is more than 25 years of 
        age if that vessel--
                  [(A) is modernized after January 1, 1994,
                  [(B) is modernized before it is 25 years of 
                age, and
                  [(C) is not more than 30 years of age.]
          (3) beyond its economic life, as determined by the 
        Secretary.
  (h) Payments.--With respect to payments under this subtitle 
for a vessel covered by an operating agreement, the Secretary 
of Transportation--
          (1) except as provided in paragraph (2), shall not 
        reduce any payment for the operation of a vessel to 
        carry military or other preference cargoes under 
        section 2631 of title 10, United States Code, the Act 
        of March 26, 1934 (46 U.S.C. App. 1241-1), section 
        901(a), 901(b), or 901b of this Act, or any other cargo 
        preference law of the United States;
          (2) shall not make any payment for any day that a 
        vessel is engaged in transporting more than [7,500] 
        2,500 tons of civilian bulk or bagged preference 
        cargoes pursuant to section 901(a), 901(b), or 901b 
        that is bulk or bagged [cargo; and] cargo unless the 
        vessel is owned and operated by persons that are 
        citizens of the United States under section 2 of the 
        Shipping Act, 1916 (46 U.S.C. App. 802); and
          (3) shall make a pro rata reduction in payment for 
        each day less than 320 in a fiscal year that a vessel 
        covered by an operating agreement is not operated in 
        accordance with subsection (b)(1), with days during 
        which the vessel is drydocked or undergoing survey, 
        inspection, or repair considered to be days on which 
        the vessel is operated.
  (i) Priority for Awarding Agreements.--Subject to the 
availability of appropriations, the Secretary shall enter into 
operating agreements according to the following priority:
          (1) Vessels owned by citizens.--
                  (A) Priority.--First, for any vessel that 
                is--
                          (i) owned and operated by persons who 
                        are citizens of the United States under 
                        section 2 of the Shipping Act, 1916; or
                          (ii) less than 10 years of age and 
                        owned and operated by a corporation 
                        that is--
                                  (I) eligible to document a 
                                vessel under chapter 121 of 
                                title 46, United States Code; 
                                and
                                  (II) affiliated with a 
                                corporation operating or 
                                managing for the Secretary of 
                                Defense other vessels 
                                documented under that chapter, 
                                or chartering other vessels to 
                                the Secretary of Defense.
                  (B) Limitation on number of operating 
                agreements.--The total number of operating 
                agreements that may be entered into by a person 
                under the priority in subparagraph (A)--
                          (i) for vessels described in 
                        subparagraph (A)(i), may not exceed the 
                        sum of--
                                  (I) the number of United 
                                States-documented vessels the 
                                person operated in the foreign 
                                commerce of the United States 
                                (except mixed coastwise and 
                                foreign commerce) on May 17, 
                                1995; and
                                  (II) the number of United 
                                States-documented vessels the 
                                person chartered to the 
                                Secretary of Defense on that 
                                date; and
                          (ii) for vessels described in 
                        subparagraph (A)(ii), may not exceed 5 
                        vessels.
                  (C) Treatment of related parties.--For 
                purposes of subparagraph (B), a related party 
                with respect to a person shall be treated as 
                the person.
          (2) Other vessels owned by citizens and government 
        contractors.--To the extent that amounts are available 
        after applying paragraph (1), any vessel that is owned 
        and operated by a person who is--
                  (A) a citizen of the United States under 
                section 2 of the Shipping Act, 1916, that has 
                not been awarded an operating agreement under 
                the priority established under paragraph (1); 
                or
                  (B)(i) eligible to document a vessel under 
                chapter 121 of title 46, United States Code; 
                and
                  (ii) affiliated with a corporation operating 
                or managing other United States-documented 
                vessels for the Secretary 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) Awarding New Agreements.--Subject to the availability of 
appropriations and without regard to subsection (i), the 
Secretary of Transportation shall enter into operating 
agreements according to a priority determined by the 
applicant's record of owning and operating vessels in 
accordance with section 2 of the Shipping Act, 1916 (46 U.S.C. 
App. 802) under the United States flag and its capability to 
provide a sufficient level of military utility to the United 
States, as determined jointly by the Secretary of 
Transportation and the Secretary of Defense, based on the type 
and number of vessels, and non-vessel assets the applicant 
offers to the program.
  (k) Reissuance of Operating Agreements.--Subject to the 
availability of appropriations the Secretary of Transportation, 
in conjunction with the Secretary of Defense, may reissue 
operating agreements for participating fleet vessels. If the 
Secretary fails to reissue an operating agreement, or if the 
Secretary does not receive an application for reissuance of an 
operating agreement for a participating fleet vessel, the 
operating agreement will be awarded subject to subsection (j).
  [(j)] (l) Transfer of Operating Agreements.--A contractor 
under an operating agreement may transfer the agreement 
(including all rights and obligations under the agreement) to 
any person eligible to enter into that operating agreement 
under this subtitle after notification of the Secretary in 
accordance with regulations prescribed by the Secretary, unless 
the transfer is disapproved by the [Secretary within] Secretary 
and the Secretary of Defense within 90 days after the date of 
that notification. A person to whom an operating agreement is 
transferred may receive payments from the Secretary under the 
agreement only if each vessel to be covered by the agreement 
after the transfer is an eligible vessel under section 651(b).
  [(k)] (m) Reversion of Unused Authority.--(1) 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)] (A) 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)] (B) within 30 months after the effective date 
        of the operating agreement, in the case of a vessel to 
        be constructed after that effective date.
  (2) If the Secretary of Transportation makes a determination 
that the requirements set forth in this section are not 
fulfilled while an operating agreement is in effect, the 
Secretary may terminate the agreement and the Secretary shall 
be free to enter into an operating agreement with another party 
capable of fulfilling the requirements for an operating 
agreement under this subtitle.
  (n) Replacement Vessel.--The Secretary shall require the 
replacement of any participating fleet vessel that does not 
meet the requirements of section 651(b), and the Secretary, in 
conjunction with the Secretary of Defense, may approve the 
replacement of any participating vessel if the replacement 
vessel is eligible under section 651(b).
  [(l)] (o) Procedure for Considering Application; Effective 
Date for Certain Vessels.--
          (1) Procedures.--No later than 30 days after the date 
        of the enactment of the Maritime Security Act of 1996, 
        the Secretary shall accept applications for enrollment 
        of vessels in the Fleet, and within 90 days after 
        receipt of an application for enrollment of a vessel in 
        the Fleet, the Secretary shall enter into an operating 
        agreement with the applicant or provide in writing the 
        reason for denial of that application.
          (2) Effective date.--Unless an earlier date is 
        requested by the applicant, the effective date for an 
        operating agreement with respect to a vessel which is, 
        on the date of entry into an operating agreement, 
        either subject to a contract under subtitle A or on 
        charter to the United States Government, other than a 
        charter under section 653, shall be the expiration or 
        termination date of the contract under subtitle A or of 
        the Government charter covering the vessel, 
        respectively, or any earlier date the vessel is 
        withdrawn from that contract or charter.
          (3) Procedures for new awards.--No later than 60 days 
        after the date of issuance of interim final rules (or, 
        if earlier, 60 days after the date of issuance of the 
        final rule under section 657), the Secretary shall 
        accept applications for enrollment of 13 additional 
        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.
          (4) Procedures for reissuance of operating 
        agreements.--Not later than 60 days after the date of 
        issuance of interim final rules (or, if earlier, 60 
        days after the date of issuance of the final rule under 
        section 657), the Secretary shall accept applications, 
        from any person that is eligible to enter into an 
        operating agreement for a participating fleet vessel as 
        of October 1, 2005, for the reissuance of an operating 
        agreement for a participating fleet vessel. Within 90 
        days after receipt of an application for such a 
        reissuance, the Secretary shall enter into an agreement 
        with the applicant, or provide in writing a reason for 
        the denial.
          (5) Limitation.--The Secretary may not award 
        operating agreements under this subtitle that require 
        payments under this section for more than 60 vessels in 
        any fiscal year.
          (6) Effective date.--The effective date for an 
        operating agreement under paragraph (3) or (4) shall be 
        October 1, 2005, except for a vessel which is, on the 
        date of entry into an operating agreement, on charter 
        to the United States Government, other than a charter 
        under section 653, the effective date shall be the 
        expiration or termination date of the Government 
        charter covering the vessel, or any earlier date the 
        vessel is withdrawn from that contract or charter.
  [(m)] (p) Early Termination.--An operating agreement under 
this subtitle shall terminate on a date specified by the 
contractor if the contractor notifies the Secretary, by not 
later than 60 days before the effective date of the 
termination, that the contractor intends to terminate the 
agreement. Vessels covered by an operating agreement terminated 
under this subsection shall remain documented under chapter 121 
of title 46, United States Code, until the date the operating 
agreement would have terminated according to its terms. A 
contractor who terminates an operating agreement pursuant to 
this subsection shall continue to be bound by the provisions of 
section 653 until the date the operating agreement would have 
terminated according to its terms. All terms and conditions of 
an Emergency Preparedness Agreement entered into under section 
653 shall remain in effect until the date the operating 
agreement would have terminated according to its terms, except 
that the terms of such Emergency Preparedness Agreement may be 
modified by the mutual consent of the contractor and the 
Secretary of Transportation and the Secretary of Defense.
  [(n)] (q) Nonrenewal for Lack of Funds.--If, by the first day 
of a fiscal year, sufficient funds have not been appropriated 
under the authority provided by section 655 for that fiscal 
year, the Secretary of Transportation shall notify the Congress 
that operating agreements authorized under this subtitle for 
which sufficient funds are not available will not be renewed 
for that fiscal year if sufficient funds are not appropriated 
by the 60th day of that fiscal year. If funds are not 
appropriated under the authority provided by section 655 for 
any fiscal year by the 60th day of that fiscal year, then each 
vessel covered by an operating agreement under this subtitle 
for which funds are not available is thereby released from any 
further obligation under the operating agreement, and the 
vessel owner or operator may transfer and register such vessel 
under a foreign registry deemed acceptable by the Secretary of 
Transportation, notwithstanding any other provision of law. If 
section 902 is applicable to such vessel after registration of 
the vessel under such a registry, the vessel is available to be 
requisitioned by the Secretary of Transportation pursuant to 
section 902.
  [(o)] (r) Award of Operating Agreements.--
          (1) In general.--The Secretary of Transportation, 
        subject to paragraph (4), shall award operating 
        agreements within each priority under subsection 
        (i)(1), (2), and (3) under regulations prescribed by 
        the Secretary.
          (2) Number of agreements awarded.--Regulations under 
        paragraph (1) shall provide that if appropriated 
        amounts are not sufficient for operating agreements for 
        all vessels within a priority under subsection (i)(1), 
        (2), or (3), the Secretary shall award to each person 
        submitting a request a number of operating agreements 
        that bears approximately the same ratio to the total 
        number of vessels in the priority, as the amount of 
        appropriations available for operating agreements for 
        vessels in the priority bears to the amount of 
        appropriations necessary for operating agreements for 
        all vessels in the priority.
          (3) Treatment of related parties.--For purposes of 
        paragraph (2), a related party with respect to a person 
        shall be treated as the person.
          (4) Preference for united states-built vessels.--In 
        awarding operating agreements for vessels within a 
        priority under subsection (i)(1), (2), or (3), the 
        Secretary shall give preference to a vessel that was 
        constructed in the United States, to the extent such 
        preference is consistent with establishment of a fleet 
        described in the first sentence of section 651(a) 
        (taking into account the age of the vessel, the nature 
        of service provided by the vessel, and the commercial 
        viability of the vessel).
          (5) Limitations.--With respect to the eligibility of 
        a tank vessel that was not built in the United States--
                  (A) the Secretary may award an operating 
                agreement for such vessel if--
                          (i) a binding contract for 
                        construction in the United States of a 
                        replacement vessel to be operated under 
                        the operating agreement is executed 
                        prior to the award of such operating 
                        agreement; and
                          (ii) the replacement vessel is 
                        eligible to be included in the fleet 
                        under this section; and
                  (B) no payment under this subtitle may be 
                made for an existing tank vessel for which an 
                operating agreement is awarded under this 
                paragraph after the earlier of--
                          (i) the date that is 4 years after 
                        the award of the operating agreement 
                        for such tank vessel; or
                          (ii) the date of delivery of the 
                        replacement tank vessel.
  [(p)] (s) Notice to United States Shipbuilders Required.--The 
Secretary shall include in any operating agreement under this 
subtitle a requirement that the contractor under the agreement 
shall, by not later than 30 days after soliciting any bid or 
offer for the construction of any vessel in a foreign shipyard 
and before entering into a contract for construction of a 
vessel in a foreign shipyard, provide notice of the intent of 
the contractor to enter into such a contract to each shipyard 
in the United States that is capable of constructing the 
vessel.

SEC. 653. NATIONAL SECURITY REQUIREMENTS.

                         [46 U.S.C. APP. 1187B]

  (a) Emergency Preparedness Agreement.--
          (1) Requirement to enter agreement.--The Secretary of 
        Transportation shall establish an Emergency 
        Preparedness Program under this section that is 
        approved by the Secretary of Defense. Under the 
        program, the Secretary of Transportation shall include 
        in each operating agreement under this subtitle a 
        requirement that the contractor enter into an Emergency 
        Preparedness Agreement under this section with the 
        Secretary. The Secretary shall negotiate and enter into 
        an Emergency Preparedness Agreement with each 
        contractor as promptly as practicable after the 
        contractor has entered into an operating agreement 
        under this subtitle.
          (2) Terms of agreement.--An Emergency Preparedness 
        Agreement under this section shall require that upon a 
        request by the Secretary of Defense during time of war 
        or national emergency, or whenever determined by the 
        Secretary of Defense to be necessary for national 
        security (including any natural disaster, international 
        peace operation, or contingency operation (as that term 
        is defined in section 101 of title 10, United States 
        Code)), a contractor for a vessel covered by an 
        operating agreement under this subtitle shall make 
        available commercial transportation resources 
        (including services). The basic terms of the Emergency 
        Preparedness Agreements shall be established pursuant 
        to consultations among the Secretary, the Secretary of 
        Defense, and Maritime Security Program contractors. In 
        any Emergency Preparedness Agreement, the Secretary and 
        a contractor may agree to additional or modifying terms 
        appropriate to the contractor's circumstances if those 
        terms have been approved by the Secretary of Defense.
          (3) Participation after expiration of operating 
        agreement.--Except as provided by section 652(m), the 
        Secretary may not require, through an Emergency 
        Preparedness Agreement or operating agreement, that a 
        contractor continue to participate in an Emergency 
        Preparedness Agreement when the operating agreement 
        with the contractor has expired according to its terms 
        or is otherwise no longer in effect. After expiration 
        of an Emergency Preparedness Agreement, a contractor 
        may volunteer to continue to participate in such an 
        agreement.
  (b) Resources Made Available.--The commercial transportation 
resources to be made available under an Emergency Preparedness 
Agreement shall include vessels or capacity in vessels, 
intermodal systems and equipment, terminal facilities, 
intermodal and management services, and other related services, 
or any agreed portion of such nonvessel resources for 
activation as the [Secretary] Secretary, in conjunction with 
the Secretary of Defense, 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] 
        Transportation, in conjunction with the Secretary of 
        Defense, shall provide in each Emergency Preparedness 
        Agreement for fair and reasonable compensation for all 
        commercial transportation resources 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;
                  (B) shall include all the contractor's costs 
                associated with provision and use of the 
                contractor's commercial resources to meet 
                emergency requirements;
                  (C) in the case of a charter of an entire 
                vessel, shall be fair and reasonable;
                  (D) shall be in addition to and shall not in 
                any way reflect amounts payable under section 
                652; and
                  (E) shall be provided from the time that a 
                vessel or resource is diverted from commercial 
                service until the time that it reenters 
                commercial service.
          (3) Approval of amount by secretary of defense.--No 
        compensation may be provided for a vessel under this 
        subsection unless the amount of the compensation is 
        approved by the Secretary of Defense.
  (d) Temporary Replacement Vessels.--Notwithstanding any other 
provision of this subtitle or of other law to the contrary--
          (1) a contractor or other person that commits to make 
        available a vessel or vessel capacity under the 
        Emergency Preparedness Program or another primary 
        sealift readiness program approved by the Secretary of 
        Defense may, during the activation of that vessel or 
        capacity under that program, operate or employ in 
        foreign commerce a foreign-flag vessel or foreign-flag 
        vessel capacity as a temporary replacement for the 
        activated vessel or capacity; and
          (2) such replacement vessel or vessel capacity shall 
        be eligible during the replacement period to transport 
        preference cargoes subject to section 2631 of title 10, 
        United States Code, the Act of March 26, 1934 (46 
        U.S.C. App. 1241-1), and sections 901(a), 901(b), and 
        901b of this Act to the same extent as the eligibility 
        of the vessel or vessel capacity replaced.
  (e) Redelivery and Liability of United States for Damages.--
          (1) In general.--All commercial transportation 
        resources activated under an Emergency Preparedness 
        Agreement shall, upon termination of the period of 
        activation, be redelivered to the contractor in the 
        same good order and condition as when received, less 
        ordinary wear and tear, or the Government shall fully 
        compensate the contractor for any necessary repair or 
        replacement.
          (2) Limitation on liability of united states.--Except 
        as may be expressly agreed to in an Emergency 
        Preparedness Agreement, or as otherwise provided by 
        law, the Government shall not be liable for disruption 
        of a contractor's commercial business or other 
        consequential damages to a contractor arising from 
        activation of commercial transportation resources under 
        an Emergency Preparedness Agreement.
          (3) Limitation on application of other 
        requirements.--Sections 902 and 909 of this Act shall 
        not apply to a vessel while it is covered by an 
        Emergency Preparedness Agreement under this subtitle. 
        Any Emergency Preparedness Agreement entered into by a 
        contractor shall supersede any other agreement between 
        that contractor and the Government for vessel 
        availability in time of war or national emergency.

SEC. 654. DEFINITIONS.

                         [46 U.S.C. APP. 1187C]

  In this subtitle:
          (1) Bulk cargo.--The term ``bulk cargo'' means cargo 
        that is loaded and carried in bulk without mark or 
        count.
          (2) Contractor.--The term ``contractor'' means an 
        owner or operator of a vessel that enters into an 
        operating agreement for the vessel with the Secretary 
        of Transportation under section 652.
          (3) Ocean common carrier.--The term ``ocean common 
        carrier'' means a person holding itself out to the 
        general public to operate vessels to provide 
        transportation by water of passengers or cargo between 
        the United States and a foreign country for 
        compensation, that--
                  (A) assumes responsibility for the 
                transportation from the port or point of 
                receipt to the port or point of destination, 
                and
                  (B) utilizes, for all or part of that 
                transportation, a vessel operating on the high 
                seas or the Great Lakes between a port in the 
                United States and a port in a foreign country, 
                except that the term does not include a common 
                carrier engaged in ocean transportation by 
                ferry boat, ocean tramp, or chemical parcel-
                tanker. As used in this paragraph, ``chemical 
                parcel-tanker'' means a vessel whose cargo-
                carrying capability consists of individual 
                cargo tanks for bulk chemicals that are a 
                permanent part of the vessel, that have 
                segregation capability with piping systems to 
                permit simultaneous carriage of several bulk 
                chemical cargoes with minimum risk of cross-
                contamination, and that has a valid certificate 
                of fitness under the International Maritime 
                Organization Code for the Construction and 
                Equipment of Ships Carrying Dangerous Chemicals 
                in Bulk.
          (4) Fleet.--The term ``Fleet'' means the Maritime 
        Security Fleet established pursuant to section 651(a).
          (5) LASH vessel.--The term ``LASH vessel'' means a 
        lighter aboard ship vessel.
          (6) United states-documented vessel.--The term 
        ``United States-documented vessel'' means a vessel 
        documented under chapter 121 of title 46, United States 
        Code.
          [(7) Participating fleet vessel.--The term 
        ``participating fleet vessel'' means--
                  [(A) any vessel that--
                          [(i) on October 1, 2005
                                  [(I) will meet the 
                                requirements of paragraph (1), 
                                (2), (3) of section 1187(c); 
                                and
                                  [(II) will be less than 25 
                                years of age, or less than 30 
                                years of age in the case of a 
                                LASH vessel; and
                          [(ii) on December 31, 2003, is 
                        covered by an operating agreement under 
                        subtitle B of title VI of the Merchant 
                        Marine Act, 1936 (46 App. U.S.C. 1187 
                        et seq.); and
                  [(B) any vessel that--
                          [(i) is a replacement for a vessel 
                        described in subparagraph (A);
                          [(ii) is controlled by the person 
                        that controls such replaced vessel;
                          [(iii) is eligible to be included in 
                        the Fleet under section 1187(b);
                          [(iv) is approved by the Secretary 
                        and the Secretary of Defense; and
                          [(v) begins operation under an 
                        operating agreement under subtitle B by 
                        not later than the end of the 30-month 
                        period beginning on the date the 
                        operating agreement is entered into by 
                        the Secretary.]
          (7) Participating fleet vessel.--The term 
        ``participating fleet vessel'' means--
                  (A) any vessel that is owned or demise 
                chartered and that--
                          (i) on October 1, 2005--
                                  (I) will meet the 
                                requirements of paragraph (1), 
                                (2), (3), or (4) of section 
                                651(c); and
                                  (II) will be less than 25 
                                years of age, or less than 30 
                                years of age in the case of a 
                                LASH vessel; and
                          (ii) on April 30, 2005, is covered by 
                        an operating agreement under subtitle B 
                        of title VI of the Merchant Marine Act, 
                        1936 (46 U.S.C. App. 1187 et seq.); or
                  (B) any vessel that--
                          (i) is a replacement for a vessel 
                        described in subparagraph (A);
                          (ii) is controlled by the person that 
                        controls such replaced vessel;
                          (iii) is eligible to be included in 
                        the Fleet under section 651(b); and
                          (iv) is approved by the Secretary and 
                        the Secretary of Defense.''.

SEC. 655. AUTHORIZATION OF APPROPRIATIONS.

                         [46 U.S.C. APP. 1187D]

  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] 1996, such 
sums as may be necessary, not to exceed [$100,000,000, for each 
fiscal year thereafter through fiscal year 2005.] $100,000,000 
for each of fiscal years 1997 through 2005, and such sums as 
may be necessary, not to exceed $186,000,000, for each fiscal 
year thereafter through fiscal year 2015.

[SEC. 656. NONCONTIGUOUS DOMESTIC TRADES.

                         [46 U.S.C. APP. 1187E]

  [(a)(1) Except as otherwise provided in this section, no 
contractor or related party shall receive payments pursuant to 
this subtitle during a period when it participates in a 
noncontiguous domestic trade, except upon written permission of 
the Secretary of Transportation. Such written permission shall 
also be required for any material change in the number or 
frequency of sailings, the capacity offered, or the domestic 
ports called by a contractor or related party in a 
noncontiguous domestic trade. The Secretary may grant such 
written permission pursuant to written application of such 
contractor or related party unless the Secretary finds that--
          [(A) existing service in that trade is adequate; or
          [(B) the service sought to be provided by the 
        contractor or related party--
                  [(i) would result in unfair competition to 
                any other person operating vessels in such 
                noncontiguous domestic trade, or
                  [(ii) would be contrary to the objects and 
                policy of this Act.
  [(2) For purposes of this subsection, ``written permission of 
the Secretary'' means permission which states the capacity 
offered, the number and frequency of sailings, and the domestic 
ports called, and which is granted following--
          [(A) written application containing the information 
        required by paragraph (e)(1) by a person seeking such 
        written permission, notice of which application shall 
        be published in the Federal Register within 15 days of 
        filing of such application with the Secretary;
          [(B) holding of a hearing on the application under 
        section 554 of title 5, United States Code, in which 
        every person, firm or corporation having any interest 
        in the application shall be permitted to intervene and 
        be heard; and
          [(C) final decision on the application by the 
        Secretary within 120 days following conclusion of such 
        hearing.
  [(b)(1) Subsection (a) shall not apply in any way to 
provision by a contractor of service within the level of 
service provided by that contractor as of the date established 
by subsection (c) or to provision of service permitted by 
subsection (d).
  [(2) Subsection (a) shall not apply to operation by a 
contractor of a self-propelled tank vessel in a noncontiguous 
domestic trade, or to ownership by a contractor of an interest 
in a self-propelled tank vessel that operates in a 
noncontiguous domestic trade.
  [(c) The date referred to in subsection (b) shall be August 
9, 1995: Provided however, That with respect to tug and barge 
service to Alaska the date referred to in subsection (b) shall 
be July 1, 1992.
  [(d) A contractor may provide service in a trade in addition 
to the level of service provided as of the applicable date 
established by subsection (c) in proportion to the annual 
increase in real gross product of the noncontiguous State or 
Commonwealth served since the applicable date established by 
subsection (c).
  [(e)(1) A person applying for award of an agreement under 
this subtitle shall include with the application a description 
of the level of service provided by that person in each 
noncontiguous domestic trade served as of the date applicable 
under subsection (c). The application also shall include, for 
each such noncontiguous domestic trade: a list of vessels 
operated by that person in such trade, their container carrying 
capacity expressed in twenty-foot equivalent units (TEUs) or 
other carrying capacity, the itinerary for each such vessel, 
and such other information as the Secretary may require by 
regulation. Such description and information shall be made 
available to the public. Within 15 days of the date of an 
application for an agreement by a person seeking to provide 
service pursuant to subsections (b) and (c) of this section, 
the Secretary shall cause to be published in the Federal 
Register notice of such description, along with a request for 
public comment thereon. Comments on such description shall be 
submitted to the Secretary within 30 days of publication in the 
Federal Register. Within 15 days after receipt of comments, the 
Secretary shall issue a determination in writing either 
accepting, in whole or part, or rejecting use of the 
applicant's description to establish the level of service 
provided as of the date applicable under subsection (c): 
Provided, That notwithstanding the provisions of this 
subsection, processing of the application for an award of an 
agreement shall not be suspended or delayed during the time in 
which comments may be submitted with respect to the 
determination or during the time prior to issuance by the 
Secretary of the required determination: Provided further, That 
if the Secretary does not make the determination required by 
this paragraph within the time provided by this paragraph, the 
description of the level of service provided by the applicant 
shall be deemed to be the level of service provided as of the 
applicable date until such time as the Secretary makes the 
determination.
  [(2) No contractor shall implement the authority granted in 
subsection (d) of this section except as follows:
          [(A) An application shall be filed with the Secretary 
        which shall state the increase in capacity sought to be 
        offered, a description of the means by which such 
        additional capacity would be provided, the basis for 
        applicant's position that such increase in capacity 
        would be in proportion to or less than the increase in 
        real gross product of the relevant noncontiguous State 
        or Commonwealth since the applicable date established 
        by subsection (c), and such information as the 
        Secretary may require so that the Secretary may 
        accurately determine such increase in real gross 
        product of the relevant noncontiguous State or 
        Commonwealth.
          [(B) Such increase in capacity sought by applicant 
        and such information shall be made available to the 
        public.
          [(C) Within 15 days of the date of an application 
        pursuant to this paragraph the Secretary shall cause to 
        be published in the Federal Register notice of such 
        application, along with a request for public comment 
        thereon.
          [(D) Comments on such application shall be submitted 
        to the Secretary within 30 days of publication in the 
        Federal Register.
          [(E) Within 15 days after receipt of comments, the 
        Secretary shall issue a determination in writing either 
        accepting, in whole or part, or rejecting, the increase 
        in capacity sought by the applicant as being in 
        proportion to or less than the increase in real gross 
        product of the relevant noncontiguous State or 
        Commonwealth since the applicable date established by 
        subsection (c): Provided, That, notwithstanding the 
        provisions of this section, if the Secretary does not 
        make the determination required by this paragraph 
        within the time provided by this paragraph, the 
        increase in capacity sought by applicant shall be 
        permitted as being in proportion to or less than such 
        increase in real gross product until such time as the 
        Secretary makes the determination.
  [(f) With respect to provision by a contractor of service in 
a noncontiguous domestic trade not authorized by this section, 
the Secretary shall deny payments under the operating agreement 
with respect to the period of provision of such service but 
shall deny payments only in part if the extent of provision of 
such unauthorized service was de minimis or not material.
  [(g) Notwithstanding any other provision of this subtitle, 
the Secretary may issue temporary permission for any United 
States citizen, as that term is defined in section 2 of the 
Shipping Act, 1916, to provide service to a noncontiguous State 
or Commonwealth upon the request of the Governor of such 
noncontiguous State or Commonwealth, in circumstances where an 
Act of God, a declaration of war or national emergency, or any 
other condition occurs that prevents ocean transportation 
service to such noncontiguous State or Commonwealth from being 
provided by persons currently providing such service. Such 
temporary permission shall expire 90 days from date of grant, 
unless extended by the Secretary upon written request of the 
Governor of such State or Commonwealth.
  [(h) As used in this section:
          [(1) The term ``level of service provided by a 
        contractor'' in a trade as of a date means--
                  [(A) with respect to service other than 
                service described in (B), the total annual 
                capacity provided by the contractor in that 
                trade for the 12 calendar months preceding that 
                date: Provided, That, with respect to 
                unscheduled, contract carrier tug and barge 
                service between points in Alaska south of the 
                Arctic Circle and points in the contiguous 48 
                States, the level of service provided by a 
                contractor shall include 100 percent of the 
                capacity of the equipment dedicated to such 
                service on the date specified in subsection (c) 
                and actually utilized in that service in the 
                two-year period preceding that date, excluding 
                service to points between Anchorage, Alaska and 
                Whittier, Alaska, served by common carrier 
                service unless such unscheduled service is only 
                for carriage of oil or pursuant to a contract 
                with the United States military: Provided 
                further, That, with respect to scheduled barge 
                service between the contiguous 48 States and 
                Puerto Rico, such total annual capacity shall 
                be deemed as such total annual capacity plus 
                the annual capacity of two additional barges, 
                each capable of carrying 185 trailers and 100 
                automobiles; and
                  [(B) with respect to service provided by 
                container vessels, the overall capacity equal 
                to the sum of--
                          [(i) 100 percent of the capacity of 
                        vessels operated by or for the 
                        contractor on that date, with the 
                        vessels' configuration and frequency of 
                        sailing in effect on that date, and 
                        which participate solely in that 
                        noncontiguous domestic trade; and
                          [(ii) 75 percent of the capacity of 
                        vessels operated by or for the 
                        contractor on that date, with the 
                        vessels' configuration and frequency of 
                        sailing in effect on that date, and 
                        which participate in that noncontiguous 
                        domestic trade and in another trade, 
                        provided that the term does not include 
                        any restriction on frequency, or number 
                        of sailings, or on ports called within 
                        such overall capacity.
          [(2) The level of service set forth in paragraph (1) 
        shall be described with the specificity required by 
        subsection (e)(1) and shall be the level of service in 
        a trade with respect to the applicable date established 
        by subsection (c) only if the service is not abandoned 
        thereafter, except for interruptions due to military 
        contingency or other events beyond the contractor's 
        control.
          [(3) The term ``participates in a noncontiguous 
        domestic trade'' means directly or indirectly owns, 
        charters, or operates a vessel engaged in 
        transportation of cargo between a point in the 
        contiguous 48 states and a point in Alaska, Hawaii, or 
        Puerto Rico, other than a point in Alaska north of the 
        Arctic Circle.
          [(4) The term ``related party'' means--
                  [(A) a holding company, subsidiary, 
                affiliate, or associate of a contractor who is 
                a party to an operating agreement under this 
                subtitle; and
                  [(B) an officer, director, agent, or other 
                executive of a contractor or of a person 
                referred to in subparagraph (A).]

SEC. 656. NONCONTIGUOUS DOMESTIC TRADES.

  (a) In General.--Except as otherwise provided in this 
section, no contractor or related party shall receive payments 
pursuant to this part during a period when it participates in a 
noncontiguous domestic trade, except upon written permission of 
the Secretary of Transportation that is granted after a hearing 
on the record under section 554 of title 5, United States Code, 
and that states the capacity that may be offered in that trade. 
The Secretary may grant such written permission pursuant to 
written application of such contractor or related party unless 
the Secretary finds that--
          (1) existing service in that trade is adequate; or
          (2) the service sought to be provided by the 
        contractor or related party--
                  (A) would result in unfair competition to any 
                other person operating vessels in such 
                noncontiguous domestic trade, or
                  (B) would be contrary to the objects and 
                policy of this Act.
  (b) Grandfather.--
          (1) Subsection (a) shall not apply to provision by a 
        contractor of service within the level of service 
        provided by that contractor as of the date of enactment 
        of the Maritime Security Fleet Program Reauthorization 
        Act of 2003, adjusted for increases in the real gross 
        product of the State or Commonwealth served since that 
        date.
          (2) Subsection (a) shall not apply to operation by a 
        contractor of a self-propelled tank vessel in a 
        noncontiguous domestic trade, or to ownership by a 
        contractor of an interest in a self-propelled tank 
        vessel that operates in a noncontiguous domestic trade.
  (c) Definitions.--In this section:
          (1) Participates in a noncontiguous domestic trade.--
        The term ``participates in a noncontiguous domestic 
        trade'' means directly or indirectly owns, charters, or 
        operates a vessel engaged in transportation of cargo 
        between a point in the contiguous 48 states and a point 
        in Alaska, Hawaii, or Puerto Rico.
          (2) Related party.--The term ``related party'' 
        means--
                  (A) a holding company, subsidiary, affiliate, 
                or associate of a contractor who is a party to 
                an operating agreement under this part; and
                  (B) an officer, director, agent, or other 
                executive of a contractor or of a person 
                referred to in subparagraph (A).

SEC. 657. REGULATIONS.

  (a) In General.--The Secretary of Transportation, in 
consultation with the Secretary of Defense, may prescribe rules 
as necessary to carry out this subtitle and the amendments made 
by this subtitle.
  (b) Interim Rules.--The Secretary of Transportation, in 
consultation with the Secretary of Defense, may prescribe 
interim rules necessary to carry out this subtitle. For this 
purpose the Secretary is excepted from compliance with the 
notice and comment requirements of section 553 of title 5, 
United States Code. All interim rules prescribed under the 
authority of this subsection that are not superseded by final 
rules shall expire no later than 270 days after the date of 
enactment of the Maritime Security Fleet Program 
Reauthorization Act of 2003.

           *       *       *       *       *       *       *


SEC. 901B. SHIPMENT REQUIREMENTS FOR CERTAIN EXPORTS SPONSORED BY 
                    DEPARTMENT OF AGRICULTURE.

                         [46 U.S.C. APP. 1241F]

  (a) Minimum Requirement Respecting Gross Tonnage Transported 
in United States-Flag Commercial Vessels; Implementation.--
          (1) In addition to the requirement for United States-
        flag carriage of a percentage of gross tonnage imposed 
        by section 901(b)(1) of this Act, 25 percent of the 
        gross tonnage of agricultural commodities or the 
        products thereof specified in subsection (b) shall be 
        transported on United States-flag commercial vessels.
          (2) In order to achieve an orderly and efficient 
        implementation of the requirement of paragraph (1)--
                  (A) an additional quantity equal to 10 
                percent of the gross tonnage referred to in 
                paragraph (1) shall be transported in United 
                States-flag vessels in calendar year 1986;
                  (B) an additional quantity equal to 20 
                percent of the gross tonnage shall be 
                transported in such vessels in calendar year 
                1987; and
                  (C) an additional quantity equal to 25 
                percent of the gross tonnage shall be 
                transported in such vessels in calendar year 
                1988 and in each calendar year thereafter.
  (b) Covered Export Activity.--This section shall apply to any 
export activity of the Commodity Credit Corporation or the 
Secretary of Agriculture--
          (1) carried out under the Agricultural Trade 
        Development and Assistance Act of 1954 (7 U.S.C. 1691 
        et seq.);
          (2) carried out under section 416 of the Agricultural 
        Act of 1949 (7 U.S.C. 1431);
          (3) carried out under the Bill Emerson Humanitarian 
        Trust Act (7 U.S.C. 1736f-1 et seq.);
          (4) under which agricultural commodities or the 
        products thereof are--
                  (A) donated through foreign governments or 
                agencies, private or public, including 
                intergovernmental organizations; or
                  (B) sold for foreign currencies or for 
                dollars on credit terms of more than ten years;
          (5) under which agricultural commodities or the 
        products thereof are made available for emergency food 
        relief at less than prevailing world market prices;
          (6) under which a cash grant is made directly or 
        through an intermediary to a foreign purchaser for the 
        purpose of enabling the purchaser to obtain United 
        States agricultural commodities or the products thereof 
        in an amount greater than the difference between the 
        prevailing world market price and the United States 
        market price, free along side vessel at United States 
        port; or
          (7) under which agricultural commodities owned or 
        controlled by or under loan from the Commodity Credit 
        Corporation are exchanged or bartered for materials, 
        goods, equipment, or services produced in foreign 
        countries, other than export activities described in 
        section 901a(5).
  (c) Terms and Conditions.--
          (1) The requirement for United States-flag 
        transportation imposed by subsection (a) shall be 
        subject to the same terms and conditions as provided in 
        section 901(b) of this Act.
          (2) In order to provide for effective and equitable 
        administration of the cargo preference laws the 
        calendar year for the purpose of compliance with 
        minimum percentage requirements shall be for 12 month 
        periods commencing April 1, [1986.] 1986, the 18-month 
        period beginning April 1, 2002, and the 12-month period 
        beginning October 1, 2003, and each year thereafter.
          (3)(A) Subject to subparagraph (B), in administering 
        sections 901(b) and 901b (46 U.S.C. App. 1241(b) and 
        1241f), and, subject to subparagraph (B) of this 
        paragraph, consistent with those sections, the 
        Commodity Credit Corporation shall take such steps as 
        may be necessary and practicable without detriment to 
        any port range to allocate, on the principle of lowest 
        landed cost without regard to the country of 
        documentation of the vessel, 25 percent of the bagged, 
        processed, or fortified commodities furnished pursuant 
        to title II of the Agricultural Trade Development and 
        Assistance Act of 1954 (7 U.S.C. 1751 et seq.).
          (B) In carrying out this paragraph, there shall first 
        be calculated the allocation of 100 percent of the 
        quantity to be procured on an overall lowest landed 
        cost basis without regard to the country of 
        documentation of the vessel and there shall be 
        allocated to the Great Lakes port range any cargoes for 
        which it has the lowest landed cost under that 
        calculation. The requirements for United States-flag 
        transportation under section 901(b) and this section 
        shall not apply to commodities allocated under 
        subparagraph (A) to the Great Lakes port range, and 
        commodities allocated under subparagraph (A) to that 
        port range may not be reallocated or diverted to 
        another port range to meet those requirements to the 
        extent that the total tonnage of commodities to which 
        subparagraph (A) applies that is furnished and 
        transported from the Great Lakes port range is less 
        than 25 percent of the total annual tonnage of such 
        commodities furnished.
          (C) In awarding any contract for the transportation 
        by vessel of commodities from the Great Lakes port 
        range pursuant to an export activity referred to in 
        subsection (b), each agency or instrumentality--
                  (i) shall consider expressions of freight 
                interest for any vessel from a vessel operator 
                who meets reasonable requirements for financial 
                and operational integrity; and
                  (ii) may not deny award of the contract to a 
                person based on the type of vessel on which the 
                transportation would be provided (including on 
                the basis that the transportation would not be 
                provided on a liner vessel (as that term is 
                used in the Shipping Act of 1984, as in effect 
                on November 14, 1995)), if the person otherwise 
                satisfies reasonable requirements for financial 
                and operational integrity.
          (4) Any determination of nonavailability of United 
        States-flag vessels resulting from the application of 
        this subsection shall not reduce the gross tonnage of 
        commodities required by sections 901(b) and 901b to be 
        transported on United States-flag vessels.
  (d) ``Export Activity'' Defined.--As used in subsection (b), 
the term ``export activity'' does not include inspection or 
weighing activities, other activities carried out for health or 
safety purposes, or technical assistance provided in the 
handling of commercial transactions.
  (e) Prevailing World Market Price.--
          (1) The prevailing world market price as to 
        agricultural commodities or the products thereof shall 
        be determined under sections 901a through 901d in 
        accordance with procedures established by the Secretary 
        of Agriculture. The Secretary shall prescribe such 
        procedures by regulation, with notice and opportunity 
        for public comment, pursuant to section 553 of title 5, 
        United States Code.
          (2) In the event that a determination of the 
        prevailing world market price of any other type of 
        materials, goods, equipment, or service is required in 
        order to determine whether a barter or exchange 
        transaction is subject to subsection (b)(6) or (b)(7), 
        such determination shall be made by the Secretary of 
        Agriculture in consultation with the heads of other 
        appropriate Federal agencies.

           *       *       *       *       *       *       *


           TITLE XI--FEDERAL SHIP FINANCING GUARANTEE PROGRAM

SEC. 1101. DEFINITIONS.

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

  As used in this title--
  (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.
  (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, 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;
  (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 and obligations 
eligible for investment of funds under section 1102 and 
subsection (d) of section 1108 of this title), issued for one 
of the purposes specified in subsection (a) of section 1104 of 
this title;
  (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;
  (f) Actual Cost Defined.--The term ``actual cost'' means the 
sum of--
          (1) all amounts paid by or for the account of the 
        obligor as of the date on which a determination is made 
        under section 1108(g)(1); and
          (2) all amounts that the Secretary reasonably 
        estimates that the obligor will become obligated to pay 
        from time to time thereafter, for the construction, 
        reconstruction, or reconditioning of the vessel, 
        including guarantee fees that will become payable under 
        section 1104A(e) in connection with all obligations 
        issued for construction, reconstruction, or 
        reconditioning of the vessel or equipment to be 
        delivered, and all obligations issued for the delivered 
        vessel or equipment.
  (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);
  (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), and for purposes of applying such section 
                2 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 Magnuson-Stevens Fishery 
Conservation and Management Act of 1976 (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, and the Secretary of Transportation 
with respect to all other vessels and general shipyard 
facilities (as defined in section 1112(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.

           *       *       *       *       *       *       *


SEC. 1103. AUTHORIZATION OF SECRETARY TO GUARANTEE OBLIGATIONS.

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

  (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. A guarantee, or commitment to guarantee, made 
by the Secretary under this title 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 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, 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, 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, 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 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 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, the validity of the 
guarantee of an obligation made by the Secretary under this 
title 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, 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)] Risk Factor Determinations._
          (1) The Secretary shall--
                  (A) establish in accordance with this 
                [subsection] subsection, and update annually, 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) annually determine for each of the risk 
                categories a subsidy rate equivalent to the 
                cost of obligations in the category, expressed 
                as a percentage of the amount guaranteed under 
                this title for obligations in the [category.] 
                category; and
                  (C) ensure that each risk category is 
                comprised of loans that are relatively 
                homogenous in cost and share characteristics 
                predictive of defaults and other costs, given 
                the facts known at the time of obligation or 
                committment, using a risk category system that 
                is based on historical analysis of program data 
                and statistical evidence concerning the likely 
                costs of defaults or other costs that expected 
                to be associated with the loans in the 
                category.
          (2)(A) Before making a guarantee under this section 
        for an obligation, and annually for projects subject to 
        a guarantee, the Secretary shall apply the risk factors 
        set forth in paragraph (3) to place the obligation in a 
        risk category established under paragraph (1)(A).
          (B) The Secretary shall consider the aggregate amount 
        available to the Secretary for making guarantees under 
        this title to be reduced by the amount determined by 
        multiplying--
                  (i) the amount guaranteed under this title 
                for an obligation, by
                  (ii) the subsidy rate for the category in 
                which the obligation is placed under 
                subparagraph (A) of this paragraph.
          (C) The estimated cost to the Government of a 
        guarantee made by the Secretary under this title for an 
        obligation is deemed to be the amount determined under 
        subparagraph (B) for the obligation.
          (D) The Secretary may not guarantee obligations under 
        this title after the aggregate amount available to the 
        Secretary under appropriations Acts for the cost of 
        loan guarantees is required by subparagraph (B) to be 
        considered reduced to zero.
          (3) The risk factors referred to in paragraphs (1) 
        and (2) are the following:
                  (A) If applicable, the country risk for each 
                eligible export vessel financed or to be 
                financed by an obligation.
                  (B) The period for which an obligation is 
                guaranteed or to be guaranteed.
                  (C) The amount of an obligation, which is 
                guaranteed or to be guaranteed, in relation to 
                the total cost of the project financed or to be 
                financed by the obligation.
                  (D) The financial condition of an obligor or 
                applicant for a guarantee.
                  (E) If applicable, any guarantee related to 
                the project, other than the guarantee under 
                this title for which the risk factor is 
                applied.
                  (F) If applicable, the projected employment 
                of each vessel or equipment to be financed with 
                an obligation.
                  (G) If applicable, the projected market that 
                will be served by each vessel or equipment to 
                be financed with an obligation.
                  (H) The collateral provided for a guarantee 
                for an obligation.
                  (I) The management and operating experience 
                of an obligor or applicant for a guarantee.
                  (J) Whether a guarantee under this title is 
                or will be in effect during the construction 
                period of the project.
                  (K) A risk factor for concentration risk 
                reflecting the risk presented by an unduly 
                large percentage of loans outstanding by any 1 
                borrower or group of affiliated borrowers.
          (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).
  (i) Priority.--In guaranteeing and entering commitments to 
guarantee under this section, the Secretary shall give priority 
to guarantees and commitments for vessels that are otherwise 
eligible for a guarantee under this section and that are 
constructed with assistance under subtitle B of title V of this 
Act.

SEC. 1104A. ELIGIBILITY FOR GUARANTEE.

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

  (a) Purpose of Obligations.--Pursuant to the authority 
granted under section 1103(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 
        that, under the provisions of section 1105:
                  (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, 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, 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;
          (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; or
          (7) financing or refinancing, including, but not 
        limited to, the reimbursement of obligors for 
        expenditures previously made, for the purchase of 
        individual fishing quotas in accordance with section 
        303(d)(4) of the Magnuson-Stevens Fishery Conservation 
        and Management Act (16 U.S.C. 1853(d)(4)).
Any obligation guaranteed under paragraphs (6) and (7) shall be 
treated, for purposes of this title, in the same manner and to 
the same extent as an obligation guaranteed under this title 
which aids in the construction, reconstruction, reconditioning, 
or purchase of a vessel; except with respect to provisions of 
this title that by their nature can only be applied to vessels.
  (b) Contents of Obligations.--Obligations guaranteed under 
this title--
          (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 (or would 
        have been eligible for mortgage aid under section 509 
        of this Act 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 not to exceed 
        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\ 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, 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, (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, a minimum 
        principal amount for an obligation covering the 
        reconstruction or reconditioning of a fishing vessel or 
        fishery facility. For purposes of this title, 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 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 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 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 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.
          (C) The Secretary may make a determination that 
        aspects of an application under this title require 
        independent analysis to be conducted by third party 
        experts due to risk factors associated with markets, 
        technology, financial structures, or other risk factors 
        identified by the Secretary. Any independent analysis 
        conducted pursuant to this provision shall be performed 
        by a party chosen by the Secretary.
          (D) Notwithstanding any other provision of this 
        title, the Secretary may make a determination that an 
        application under this title requires additional equity 
        because of increased risk factors associated with 
        markets, technology, financial structures, or other 
        risk factors identified by the Secretary.
          (E) The Secretary may charge and collect fees to 
        cover the costs of independent analysis under 
        subparagraph (C). Notwithstanding section 3302 of title 
        31, United States Code, any fee collected under this 
        subparagraph shall--
                  (i) be credit as an offsetting collection to 
                the account that finances the administration of 
                the loan guarantee program;
                  (ii) shall be available for expenditure only 
                to pay the costs of activities and services for 
                which the fee is imposed; and
                  (iii) shall remain available until expended.
          (2) No commitment to guarantee, or guarantee of an 
        obligation may be made by the Secretary under this 
        title 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) 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.
          (4) The Secretary shall promulgate regulations 
        concerning circumstances under which waivers of or 
        exceptions to otherwise applicable regulatory 
        requirements concerning financial condition can be 
        made. The regulations shall require that--
                  (A) the economic soundness requirements set 
                forth in paragraph (1)(A) of this subsection 
                are met after the waiver of the financial 
                condition requirement; and
                  (B) the wavier shall provide for the 
                imposition of other requirements on the obligor 
                designed to compensate for the increased risk 
                associated with the obligor's failure to meet 
                regulatory requirements applicable to financial 
                condition.
          [(4)] (5) The Secretary may obtain independent 
        analysis of an application for a guarantee or 
        commitment to guarantee under this title.
  (e) Guarantee Fees.--
          (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 paid under an obligation with respect to which 
        the fee is assessed.
          (4) A fee paid under this subsection is not 
        refundable. However, an obligor shall receive credit 
        for the amount paid for the remaining term of the 
        guaranteed obligation if the obligation is refinanced 
        and guaranteed under this title after such refinancing.
          (5) A fee paid under subsection (e) shall be included 
        in the amount of the actual cost of the obligation 
        guaranteed under this title and is eligible to be 
        financed under this title.
  (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 [(including for obtaining independent analysis 
under subsection (d)(4)),] for the issuance of commitments, for 
services in connection with the escrow fund authorized by 
section 1108 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 shall be deposited in the Fund.
  (h) Additional Requirements.--Obligations guaranteed under 
this title 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); 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).
  (k) Monitoring.--The Secretary shall monitor the financial 
conditions and operations of the obligor on a regular basis 
during the term of the guarantee. The Secretary shall document 
the results of the monitoring on an annual or quarterly basis 
depending upon the condition of the obligor. If the Secretary 
determines that the financial condition of the obligor warrants 
additional protections to the Secretary, then the Secretary 
shall take appropriate action under subsection (m) of this 
section. If the Secretary determines that the financial 
condition of the obligor jeopardizes its continued ability to 
perform its responsibilities in connection with the guarantee 
of obligations by the Secretary, the Secretary shall make an 
immediate determination whether default should take place and 
whether further measures described in subsection (m) should be 
taken to protect the interests of the Secretary while insuring 
that program objectives are met.
  (l) Review of Applications.--No commitment to guarantee, or 
guarantee of, an obligation shall be made by the Secretary 
unless the Secretary certifies that a full and fair 
consideration of all the regulatory requirements, including 
economic soundness and financial requirements applicable to 
obligors and related parties, and a thorough assessment of the 
technical, economic, and financial aspects of the loan 
application has been made.
  (m) Agreement With Obligor.--The Secretary shall include 
provisions in loan agreements with obligors that provide 
additional authority to the Secretary to take action to limit 
potential losses in connection with defaulted loans or loans 
that are in jeopardy due to the deteriorating financial 
condition of obligors. Provisions that the Secretary shall 
include in loan agreements include requirements for additional 
collateral or greater equity contributions that are effective 
upon the occurrence of verifiable conditions relating to the 
obligors financial condition or the status of the vessel or 
shipyard project.
  (n) Decision Period.--
          (1) In general.--The Secretary of Transportation 
        shall approve or deny an application for a loan 
        guarantee under this title within 270 days after the 
        date on which the signed application is received by the 
        Secretary.
          (2) Extension.--Upon request by an applicant, the 
        Secretary may extend the 270-day period in paragraph 
        (1) to a date not later than 2 years after the date on 
        which the signed application for the loan guarantee was 
        received by the Secretary.

SEC. 1105. DEFAULTS.

                         [46 U.S.C. APP. 1275]

  (a) Rights of Obligee.--In the event of a default, which has 
continued for thirty days, in any payment by the obligor of 
principal or interest due under an obligation guaranteed under 
this title, the obligee or his agent shall have the right to 
demand (unless the Secretary shall, upon such terms as may be 
provided in the obligation or related agreements, prior to that 
demand, have assumed the obligor's rights and duties under the 
obligation and agreements and shall have made any payments in 
default) at or before the expiration of such period as may be 
specified in the guarantee or related agreements, but not later 
than ninety days from the date of such default, payment by the 
Secretary of the unpaid principal amount of said obligation and 
of the unpaid interest thereon to the date of payment. Within 
such period as may be specified in the guarantee or related 
agreements, but not later than thirty days from the date of 
such demand, the Secretary shall promptly pay to the obligee or 
his agent the unpaid principal amount of said obligation and 
unpaid interest thereon to the date of payment: Provided, That 
the Secretary shall not be required to make such payment if 
prior to the expiration of said period he shall find that there 
was no default by the obligor in the payment of principal or 
interest or that such default has been remedied prior to any 
such demand.
  (b) Notice of Default.--In the event of a default under a 
mortgage, loan agreement, or other security agreement between 
the obligor and the Secretary, the Secretary may upon such 
terms as may be provided in the obligation or related 
agreement, either:
          (1) assume the obligor's rights and duties under the 
        agreement, make any payment in default, and notify the 
        obligee or the obligee's agent of the default and the 
        assumption by the Secretary; or
          (2) notify the obligee or the obligee's agent of the 
        default, and the obligee or the obligee's agent shall 
        have the right to demand at or before the expiration of 
        such period as may be specified in the guarantee or 
        related agreements, but not later than 60 days from the 
        date of such notice, payment by the Secretary of the 
        unpaid principal amount of said obligation and of the 
        unpaid interest thereon. Within such period as may be 
        specified in the guarantee or related agreements, but 
        not later than 30 days from the date of such demand, 
        the Secretary shall promptly pay to the obligee or the 
        obligee's agent the unpaid principal amount of said 
        obligation and unpaid interest thereon to the date of 
        payment.
  (c) Secretary To Complete, Sell or Operate Property.--In the 
event of any payment or assumption by the Secretary under 
subsection (a) or (b) of this section, the Secretary shall have 
all rights in any security held by him relating to his 
guarantee of such obligations as are conferred upon him under 
any security agreement with the obligor. Notwithstanding any 
other provision of law relating to the acquisition, handling, 
or disposal of property by the United States, the Secretary 
shall have the right, in his discretion, to complete, 
recondition, reconstruct, renovate, repair, maintain, operate, 
charter, or sell any property acquired by him pursuant to a 
security agreement with the obligor or may place a vessel in 
the national defense reserve. The terms of the sale shall be as 
approved by the Secretary.
  (d) Cash Payments; Issuance of Notes of Obligations.--Any 
amount required to be paid by the Secretary pursuant to 
subsection (a) or (b) of this section, shall be paid in cash. 
If at any time the moneys in the Fund authorized by section 
1102 of this Act are not sufficient to pay any amount the 
Secretary is required to pay by subsection (a) or (b) of this 
section, the Secretary is authorized to issue to the Secretary 
of the Treasury notes or other obligations in such forms and 
denominations, bearing such maturities, and subject to such 
terms and conditions as may be prescribed by the Secretary, 
with the approval of the Secretary of the Treasury. Such notes 
or other obligations shall bear interest at a rate determined 
by the Secretary of the Treasury, taking into consideration the 
current average market yield on outstanding marketable 
obligations of the United States of comparable maturities 
during the month preceding the issuance of such notes or other 
obligations. The Secretary of the Treasury is authorized and 
directed to purchase any notes and other obligations to be 
issued hereunder and for such purpose he is authorized to use 
as a public debt transaction the proceeds from the sale of any 
securities issued under the Second Liberty Bond Act, as 
amended, and the purposes for which securities may be issued 
under such Act, as amended, are extended to include any 
purchases of such notes and obligations. The Secretary of the 
Treasury may at any time sell any of the notes or other 
obligations acquired by him under this section. All 
redemptions, purchases, and sales by the Secretary of the 
Treasury of such notes or other obligations shall be treated as 
public debt transactions of the United States. Funds borrowed 
under this section shall be deposited in the Fund and 
redemptions of such notes and obligations shall be made by the 
Secretary from such Fund.
  (e) Actions Against Obligor.--In the event of a default under 
any guaranteed obligation or any related agreement, the 
Secretary shall take such action against the obligor or any 
other parties liable thereunder that, in his discretion, may be 
required to protect the interests of the United States. Any 
suit may be brought in the name of the United States or in the 
name of the obligee and the obligee shall make available to the 
United States all records and evidence necessary to prosecute 
any such suit. The Secretary shall have the right, in his 
discretion, to accept a conveyance of title to and possession 
of property from the obligor or other parties liable to the 
Secretary, and may purchase the property for an amount not 
greater than the unpaid principal amount of such obligation and 
interest thereon. In the event that the Secretary shall receive 
through the sale of property an amount of cash in excess of the 
unpaid principal amount of the obligation and unpaid interest 
on the obligation and the expenses of collection of those 
amounts, the Secretary shall pay the excess to the obligor.
  (f) Default Response.--In the event of default on a 
obligation, the Secretary shall conduct operations under this 
title in a manner which--
          (1) maximizes the net present value return from the 
        sale or disposition of assets associated with the 
        obligation;
          (2) minimizes the amount of any loss realized in the 
        resolution of the guarantee;
          (3) ensures adequate competition and fair and 
        consistent treatment of offerors; and
          (4) requires appraisal of assets by an independent 
        appraiser.

           *       *       *       *       *       *       *


SEC. 1108. ESCROW FUND.

                         [46 U.S.C. APP. 1279A]

  (a) Creation.--If the proceeds of an obligation guaranteed 
under this title are to be used to finance the construction, 
reconstruction, or reconditioning of a vessel or vessels which 
will serve as security for the guarantee of the Secretary, the 
Secretary is authorized to accept and hold, in escrow under an 
escrow agreement with the obligor, a portion of the proceeds of 
all obligations guaranteed under this title whose proceeds are 
to be so used which is equal to: (i) the excess of the 
principal amount of all obligations whose proceeds are to be so 
used over 75 per centum, or 87\1/2\ per centum, whichever is 
applicable under section 1104 of this title, paid by or for the 
account of the obligor for the construction, reconstruction, or 
reconditioning of the vessel or vessels; (ii) with such 
interest thereon, if any, as the Secretary may require: 
Provided, That in the event the security for the guarantee of 
an obligation by the Secretary relates both to a vessel or 
vessels to be constructed, reconstructed or reconditioned and 
to a delivered vessel or vessels, the principal amount of such 
obligation shall be prorated for purposes of this subsection 
(a) under regulations prescribed by the Secretary.
  (b) Disbursement Prior to Termination of Escrow Agreement.--
The Secretary shall, as specified in the escrow agreement, 
disburse the escrow fund to pay amounts the obligor is 
obligated to pay as interest on such obligations or for the 
construction, reconstruction, or reconditioning of the vessel 
or vessels used as security for the guarantee of the Secretary 
under this title, to redeem such obligations in connection with 
a refinancing under paragraph (4) of subsection (a) of section 
1104 or to pay to the obligor at such times as may be provided 
for in the escrow agreement any excess interest deposits, 
except that if payments become due under the guarantee prior to 
the termination of the escrow agreement, all amounts in the 
escrow fund at the time such payments become due (including 
realized income which has not yet been paid to the obligor) 
shall be paid into the Fund and (i) be credited against any 
amounts due or to become due to the Secretary from the obligor 
with respect to the guaranteed obligations and (ii) to the 
extent not so required, be paid to the obligor.
  (c) Disbursement Upon Termination of Escrow Agreement.--If 
payments under the guarantee have not become due prior to the 
termination of the escrow agreement, any balance of the escrow 
fund at the time of such termination shall be disbursed to 
prepay the excess of the principal of all obligations whose 
proceeds are to be used to finance the construction, 
reconstruction, or reconditioning of the vessel or vessels 
which serve or will serve as security for such guarantee over 
75 per centum or 87\1/2\ per centum, whichever is applicable 
under section 1104 of this title, of the actual cost of such 
vessel or vessels to the extent paid, and to pay interest on 
such prepaid amount of principal, and the remainder of such 
balance of the escrow fund shall be paid to the obligor.
  (d) Investment of Fund.--The Secretary may invest and 
reinvest all or any part of the escrow fund in obligations of 
the United States with such maturities that the escrow fund 
will be available as required for purposes of the escrow 
agreement.
  (e) Payment of Income.--Any income realized on the escrow 
fund shall, upon receipt, be paid to the obligor.
  (f) Terms of Escrow Agreement.--The escrow agreement shall 
contain such other terms as the Secretary may consider 
necessary to protect fully the interests of the United States.
  (g) Payments Required Before Disbursement.--
          (1) In general.--No disbursement shall be made under 
        subsection (b) to any person until the total amount 
        paid by or for the account of the obligor from sources 
        other than the proceeds of the obligation equals at 
        least 25 per centum or 12\1/2\ per centum, whichever is 
        applicable under section 1104A, of the actual cost of 
        the vessel. The Secretary shall establish a system of 
        controls, including automated controls, to ensure that 
        no loan funds are disbursed to a shipowner or shipyard 
        owner before the shipowner or shipyard owner meets the 
        requirement of the preceding sentence.
          (2) Documented proof of progress requirement.--The 
        Secretary shall, by regulation, establish a 
        transparent, independent, and risk-based process for 
        verifying and documenting the progress of projects 
        under construction before disbursing guaranteed loan 
        funds. At a minimum, the process shall require 
        documented proof of progress in connection with the 
        construction, reconstruction, or reconditioning of a 
        vessel or vessels before disbursements are made from 
        the escrow fund. The Secretary may require that the 
        obligor provide a certificate from an independent party 
        certifying that the requisite progress in construction, 
        reconstruction, or reconditioning has taken place.

           *       *       *       *       *       *       *


                     TITLE XII--WAR RISK INSURANCE

[SEC. 1205. INSURANCE ON PROPERTY OF GOVERNMENT DEPARTMENTS AND 
                    AGENCIES.]

                         [46 U.S.C. APP. 1285]

SEC. 1205. INSURANCE ON PROPERTY OF GOVERNMENT DEPARTMENTS, AGENCIES 
                    AND INTERNATIONAL ORGANIZATIONS.

  (a) Any department or agency of the United States may, with 
the approval of the President, procure from the Secretary any 
of the insurance as provided for in this title, except as 
provided in sections 1 and 2 of the Act of July 8, 1937 (50 
Stat. 479).
  (b) The Secretary is authorized with such approval to provide 
such insurance at the request of the Secretary of Defense, and 
such other agencies as the President may prescribe, without 
premium in consideration of the agreement of the Secretary of 
Defense or such agency to indemnify the Secretary against all 
losses covered by such insurance, and the Secretary of Defense 
and such other agencies are authorized to execute such 
indemnity agreement with the Secretary. The signature of the 
President (or of an official designated by the President) on 
the agreement shall be treated as an expression of the approval 
required under section 1202(a) to provide the insurance.
  (c) Insuring International Operations.--The Secretary of 
Transportation is authorized, upon the request of the Secretary 
of Defense or any other agency, with the approval of the 
President, to make payments on behalf of the United States with 
regard to an international sharing of risk agreement or any 
lesser obligation on the part of the United States for vessels 
supporting operations of the North Atlantic Treaty Organization 
or similar international organization or alliance in which the 
United States is involved, regardless of registration or 
ownership, and without regard to whether the vessels are under 
contract with a department or agency of the United States. In 
order to segregate moneys received and disbursed in connection 
with an agreement authorized under this subsection, the 
Secretary of Transportation shall establish a subaccount within 
the insurance fund established under section 1208 of this Act.
  (d) Receipt of Contributions.--
          (1) In general.--Notwithstanding the provisions of 
        section 3302(b) of title 31, United States Code, if the 
        international agreements referenced in subsection (c) 
        of this section provide for the sharing of risks 
        involved in mutual or joint operations, contributions 
        for losses incurred by the fund subaccount or financed 
        pursuant to section 1208 that are received from foreign 
        entities, may be deposited in the fund subaccount.
          (2) Indemnity agreement.--Such risk sharing 
        agreements shall not affect the requirement that the 
        Secretary of Defense or a head of a department, agency, 
        or instrumentality designated by the President make an 
        indemnity agreement with the Secretary of 
        Transportation under subsection (b) for a waiver of 
        premium on insurance obtained by a department, agency 
        or instrumentality of the United States Government.
          (3) Crediting of contributory payments.--If the 
        Secretary of Defense, or a designated head of a 
        department, agency or instrumentality, has made a 
        payment to the Secretary of Transportation on account 
        of a loss, pursuant to an indemnification agreement 
        under subsection (b), and the Secretary of 
        Transportation subsequently receives from an entity a 
        contributory payment on account of the same loss, 
        pursuant to a risk sharing agreement referred to in 
        paragraph (1), the amount of the contribution shall be 
        deemed to be a credit in favor of the indemnifying 
        department, agency, or instrumentality against any 
        amount that such department, agency, or instrumentality 
        owes or may owe to the Secretary of Transportation 
        under a subsequent indemnification agreement.

           *       *       *       *       *       *       *


SEC. 1208. INSURANCE FUND; INVESTMENTS; APPROPRIATIONS.

                         [46 U.S.C. APP. 1288]

  (a) The Secretary shall create an insurance fund in the 
Treasury to enable him to carry out the provisions of this 
title. Moneys appropriated by Congress to carry out the 
provisions of this title and all moneys received from premiums, 
salvage, or other recoveries and all receipts in connection 
with this title shall be deposited in the Treasury to the 
credit of such fund. Payments of return premiums, losses, 
settlements, judgments, and all liabilities incurred by the 
United States under this title shall be made from such fund 
through the Division of Disbursement, Treasury Department. Upon 
the request of the Secretary of Transportation, the Secretary 
of the Treasury may invest or reinvest all or any part of the 
fund in securities of the United States or in securities 
guaranteed as to principal and interest by the United States. 
The interest and benefits accruing from such securities shall 
be deposited to the credit of the fund.
  (b) Such sums as shall be necessary to carry out the 
provisions of this title are authorized to be appropriated to 
such fund.
  (c) Authorization of Appropriations.--To the extent that the 
fund balance is insufficient to fund current obligations 
arising under this chapter, there are authorized to be 
appropriated to the Secretary of Transportation such sums as 
may be necessary to pay such obligations.

           *       *       *       *       *       *       *


              TITLE XIII--MARITIME EDUCATION AND TRAINING

SEC. 1302. DEFINITIONS.

                         [46 U.S.C. APP. 1295A]

  For purposes of this title--
          (1) the term ``Secretary'' means the Secretary of 
        Transportation;
          (2) the term ``Academy'' means the United States 
        Merchant Marine Academy located at Kings Point, New 
        York which is maintained under section 1303;
          (3) the term ``State maritime academy'' means any 
        maritime academy or college which is assisted under 
        section 1304 and which is sponsored by any State or 
        territory of the United States or, in the case of a 
        regional maritime academy or college, sponsored by any 
        group of States or territories of the United States, or 
        both; [and]
          (4) the term ``merchant marine officer'' means any 
        person who holds a license issued by the United States 
        Coast Guard which authorizes service--
                  (A) as a master, mate, or pilot on board any 
                vessel of 1,000 gross tons or more as measured 
                under section 14502 of title 46, United States 
                Code, or an alternate tonnage measured under 
                section 14302 of that title as prescribed by 
                the Secretary under section 14104 of that title 
                which is documented under the laws of the 
                United States and which operates on the oceans 
                or on the Great Lakes; or
                  (B) as an engineer officer on board any 
                vessel propelled by machinery of 4,000 
                horsepower or more which is documented under 
                the laws of the United [States.] States; and
          (5) the term ``cost of education provided'' means the 
        financial costs incurred by the Federal Government for 
        providing training or financial assistance to students 
        at the United States Merchant Marine Academy and the 
        State maritime academies, including direct financial 
        assistance, room, board, classroom academics, and other 
        training activities.

SEC. 1303. MAINTENANCE OF ACADEMY.

                         [46 U.S.C. APP. 1295B]

  (a) Duty of Secretary.--The Secretary shall maintain the 
Academy for providing instruction to individuals to prepare 
them for service in the merchant marine of the United States.
  (b) Nomination and Appointment of Cadets; Designation and 
Licensing of Individuals From the Trust Territory of the 
Pacific Islands, Western Hemisphere Nations and Nations Other 
Than the United States.--
          (1) Each Senator and Member of the House of 
        Representatives, the Panama Canal Commission, the 
        Governor of the Northern Mariana Islands, and the 
        Delegate from American Samoa may nominate for 
        appointment as a cadet at the Academy any individual 
        who is--
                  (A) a citizen of the United States or a 
                national of the United States; and
                  (B) a resident of the State represented by 
                such Senator if the individual is nominated by 
                a Senator, a resident of the State in which the 
                congressional district represented by such 
                Member of the House of Representatives is 
                located if the individual is nominated by a 
                Member of the House of Representatives (or a 
                resident of Guam, the Virgin Islands, the 
                District of Columbia, the Commonwealth of 
                Puerto Rico, or American Samoa if the 
                individual is nominated by a Member of the 
                House of Representatives representing such 
                area), a resident of the area or installation 
                described in paragraph (3)(A)(ii), or a son or 
                daughter of the personnel described in such 
                paragraph, if the individual is nominated by 
                the Panama Canal Commission, or a resident of 
                the Northern Mariana Islands if the individual 
                is nominated by the Governor of the Northern 
                Mariana Islands.
          (2)(A) The Secretary shall establish minimum 
        requirements for the individuals nominated pursuant to 
        paragraph (1) and shall establish a system of 
        competition for the selection of individuals qualified 
        for appointment as cadets at the Academy.
          (B) Such system of competition shall determine the 
        relative merit of appointing each such individual to 
        the Academy through the use of competitive 
        examinations, an assessment of the academic background 
        of the individual, and such other factors as are 
        considered effective indicators of motivation and the 
        probability of successful completion of training at the 
        Academy.
          (3)(A) Qualified individuals nominated pursuant to 
        paragraph (1) shall be selected each year for 
        appointment as cadets at the Academy to fill positions 
        allocated as follows:
                  (i) Positions shall be allocated each year 
                for individuals who are residents of each State 
                and are nominated by the Members of the 
                Congress from such State in proportion to the 
                representation in Congress from that State.
                  (ii) Two positions shall be allocated each 
                year for individuals nominated by the Panama 
                Canal Commission who are sons or daughters of 
                residents of any area or installation located 
                in the Republic of Panama which is made 
                available to the United States pursuant to the 
                Panama Canal Treaty of 1977, the agreements 
                relating to and implementing that Treaty, 
                signed September 7, 1977, and the Agreement 
                Between the United States of America and the 
                Republic of Panama Concerning Air Traffic 
                Control and Related Services, concluded January 
                8, 1979, and sons or daughters of personnel of 
                the United States Government and the Panama 
                Canal Commission residing in the Republic of 
                Panama, nominated by the Panama Canal 
                Commission.
                  (iii) One position shall be allocated each 
                year for an individual who is a resident of 
                Guam and is nominated by the Delegate to the 
                House of Representatives from Guam.
                  (iv) One position shall be allocated each 
                year for an individual who is a resident of the 
                Virgin Islands and is nominated by the Delegate 
                to the House of Representatives from the Virgin 
                Islands.
                  (v) One position shall be allocated each year 
                for an individual who is a resident of the 
                Northern Mariana Islands and is nominated by 
                the Governor of the Northern Mariana Islands.
                  (vi) One position shall be allocated each 
                year for an individual who is a resident of 
                American Samoa and is nominated by the Delegate 
                to the House of Representatives from American 
                Samoa.
                  (vii) Four positions shall be allocated each 
                year for individuals who are residents of the 
                District of Columbia and are nominated by the 
                Delegate to the House of Representatives from 
                the District of Columbia.
                  (viii) One position shall be allocated each 
                year for an individual who is a resident of the 
                Commonwealth of Puerto Rico and is nominated by 
                the Resident Commissioner to the United States 
                from Puerto Rico.
          (B) The Secretary shall make appointments of 
        qualified individuals to fill the positions allocated 
        pursuant to subparagraph (A) (from among the 
        individuals nominated pursuant to paragraph (1)) in the 
        order of merit determined pursuant to paragraph (2)(B) 
        among residents of each State, Guam, the Virgin 
        Islands, the Northern Mariana Islands, American Samoa, 
        the District of Columbia, and the Commonwealth of 
        Puerto Rico and among individuals nominated by the 
        Panama Canal Commission.
          (C) If positions are not filled after the 
        appointments are made pursuant to subparagraph (B), the 
        Secretary shall make appointments of qualified 
        individuals to fill such positions from among all 
        individuals nominated pursuant to paragraph (1) in the 
        order of merit determined pursuant to paragraph (2)(B) 
        among all such individuals.
          (D) In addition, the Secretary may each year appoint 
        without competition as cadets at the Academy not more 
        than 40 qualified individuals possessing qualities 
        deemed to be of special value to the Academy. In making 
        such appointments the Secretary shall attempt to 
        achieve a national demographic balance at the Academy.
          (E) No preference shall be granted in selecting 
        individuals for appointment as cadets at the Academy 
        because one or more members of the immediate family of 
        any such individual are alumni of the Academy.
          (F) Any citizen of the United States selected for 
        appointment pursuant to this paragraph must agree to 
        apply for midshipman status in the United States Naval 
        Reserve (including the Merchant Marine Reserve, United 
        States Naval Reserve) before being appointed as a cadet 
        at the Academy.
          (G) For purposes of this paragraph, the term 
        ``State'' means the several States.
          (4)(A) In addition to paragraph (3), the Secretary 
        may permit, upon designation by the Secretary of the 
        Interior, individuals from the Trust Territory of the 
        Pacific Islands to receive instruction at the Academy.
          (B) Not more than 4 individuals may receive 
        instruction under this paragraph at any one time.
          (C) Any individual receiving instruction under the 
        authority of this paragraph shall receive the same 
        allowances and shall be subject to the same rules and 
        regulations governing admission, attendance, 
        discipline, resignation, discharge, dismissal, and 
        graduation as cadets at the Academy appointed from the 
        United States, subject to such exceptions as shall be 
        jointly agreed upon by the Secretary and the Secretary 
        of the Interior.
          (5)(A) In addition to paragraphs (3) and (4), the 
        President may designate individuals from nations 
        located in the Western Hemisphere other than the United 
        States to receive instruction at the Academy.
          (B) Not more than 12 individuals may receive 
        instruction under this paragraph at any one time, and 
        not more than 2 individuals receiving instruction under 
        this paragraph at any one time may be from the same 
        nation.
          (C) Any individual receiving instruction under this 
        subparagraph is entitled to the same allowances and 
        shall be subject to the same rules and regulations 
        governing admission, attendance, discipline, 
        resignation, discharge, dismissal, and graduation as 
        cadets at the Academy appointed from the United States.
          (6)(A) In addition to paragraphs (3), (4), and (5), 
        the Secretary may permit, upon approval of the 
        Secretary of State, individuals from nations other than 
        the United States to receive instruction at the 
        Academy.
          (B) Not more than 30 individuals may receive 
        instruction under this paragraph at any one time.
          (C) The Secretary shall insure that each nation from 
        which an individual comes to receive instruction under 
        this paragraph shall reimburse the Secretary for the 
        cost of such instruction (including the same allowances 
        as received by cadets at the Academy appointed from the 
        United States) as determined by the Secretary.
          (D) Any individual receiving instruction at the 
        Academy under this paragraph shall be subject to the 
        same rules and regulations governing admission, 
        attendance, discipline, resignation, discharge, 
        dismissal, and graduation as cadets at the Academy 
        appointed from the United States.
          (7)(A) The Secretary may permit, upon approval of the 
        Secretary of State, additional individuals from the 
        Republic of Panama to receive instruction at the 
        Academy, in addition to those individuals appointed 
        under paragraphs (3), (4), (5), and (6) of this 
        subsection.
          (B) The Secretary shall be reimbursed for the cost of 
        that instruction (including the same allowances as 
        received by cadets at the Academy appointed from the 
        United States) as determined by the Secretary.
          (C) An individual receiving instructions at the 
        Academy under this paragraph shall be subject to the 
        same rules and regulations governing admission, 
        attendance, discipline, resignation, discharge, 
        dismissal, and graduation as cadets at the Academy 
        appointed from the United States.
          (8) An individual appointed as a cadet under 
        paragraph (3), or receiving instruction under paragraph 
        (4), (5), (6), or (7) of this subsection is not 
        entitled to hold a license authorizing service on a 
        merchant marine vessel of the United States solely by 
        reason of graduation from the Academy.
  (c) Appointment of Cadet as Midshipman in the United States 
Naval Reserve.--
          (1) Any citizen of the United States who is appointed 
        as a cadet at the Academy shall be appointed by the 
        Secretary of the Navy as a midshipman in the United 
        States Naval Reserve (including the Merchant Marine 
        Reserve, United States Naval Reserve).
          (2) The Secretary of the Navy shall provide for 
        cadets of the Academy who are midshipmen in the United 
        States Naval Reserve to be issued an identification 
        card (referred to as a ``military ID card'') and to be 
        entitled to all rights and privileges in accordance 
        with the same eligibility criteria as apply to other 
        members of the Ready Reserve of the reserve components 
        of the Armed Forces.
          (3) The Secretary of the Navy shall carry out 
        paragraphs (1) and (2) in coordination with the 
        Secretary.
  (d) Uniforms, Textbooks, and Transportation Allowances.--The 
Secretary shall provide to any cadet at the Academy all 
required uniforms and textbooks and allowances for 
transportation (including reimbursement of traveling expenses) 
while traveling under orders as a cadet of the Academy.
  (e) Commitment Agreements.--
          (1) Each individual appointed as a cadet at the 
        Academy after the date occurring 6 months after the 
        effective date of the Maritime Education and Training 
        Act of 1980, who is a citizen of the United States, 
        shall as a condition of appointment to the Academy sign 
        an agreement committing such individual--
                  (A) to complete the course of instruction at 
                the [Academy, unless the individual is 
                separated by the] Academy;
                  (B) to fulfill the requirements for a license 
                as an officer in the merchant marine of the 
                United States on or before the date of 
                graduation from the Academy of such individual;
                  [(C) to maintain a license as an officer in 
                the merchant marine of the United States for at 
                least 6 years following the date of graduation 
                from the Academy of such individual;]
                  (C) to maintain a valid license as an officer 
                in the merchant marine of the United States for 
                at least 6 years following the date of 
                graduation from the Academy of such individual, 
                accompanied by the appropriate national and 
                international endorsements and certification as 
                required by the United States Coast Guard for 
                service aboard vessels on domestic and 
                international voyages;
                  (D) to apply for an appointment as, to accept 
                if tendered an appointment as, and to serve as 
                a commissioned officer in the United States 
                Naval Reserve (including the Merchant Marine 
                Reserve, United States Naval Reserve), the 
                United States Coast Guard Reserve, or any other 
                Reserve unit of an armed force of the United 
                States, for at least 6 years following the date 
                of graduation from the Academy of such 
                individual;
                  (E) to serve the foreign and domestic 
                commerce and the national defense of the United 
                States for at least 5 years following the date 
                of graduation from the Academy--
                          (i) as a merchant marine officer 
                        serving on vessels documented under the 
                        laws of the United States or on vessels 
                        owned and operated by the United States 
                        or by any State or territory of the 
                        United States;
                          (ii) as an employee in a United 
                        States maritime-related industry, 
                        profession, or marine science (as 
                        determined by the Secretary), if the 
                        Secretary determines that service under 
                        clause (i) is not available to such 
                        individual;
                          [(iii) as a commissioned officer on 
                        active duty in an armed force of the 
                        United States or in the National 
                        Oceanic and Atmospheric Administration; 
                        or]
                          (iii) as a commissioned officer on 
                        active duty in an armed force of the 
                        United States, as a commissioned 
                        officer in the National Oceanic and 
                        Atmospheric Administration, or other 
                        maritime-related employment with the 
                        Federal Government which serves the 
                        national security interests of the 
                        United States, as determined by the 
                        Secretary; or
                          (iv) by combining the services 
                        specified in clauses (i), (ii), and 
                        (iii); and
                  (F) to report to the Secretary on the 
                compliance by the individual to this paragraph.
          [(2) If the Secretary determines that any individual 
        who has attended the Academy for not less than 2 years 
        has failed to fulfill the part of the agreement 
        (required by paragraph (1)) described in paragraph 
        (1)(A), such individual may be ordered by the Secretary 
        of the Navy to active duty in the United States Navy to 
        serve for a period of time not to exceed 2 years. In 
        cases of hardship as determined by the Secretary, the 
        Secretary may waive this paragraph.
          [(3)(A) If the Secretary determines that any 
        individual has failed to fulfill any part of the 
        agreement (required by paragraph (1)) described in 
        subparagraphs (B), (C), (D), (E), or (F) of paragraph 
        (1), such individual may be ordered to active duty to 
        serve a period of time not less than 3 years and not 
        more than the unexpired portion (as determined by the 
        Secretary) of the service required by subparagraph (E) 
        of such paragraph. The Secretary, in consultation with 
        the Secretary of Defense, shall determine in which 
        service the individual shall be ordered to active duty 
        to serve such period of time. In cases of hardship as 
        determined by the Secretary, the Secretary may waive 
        this paragraph.
          [(B) If the Secretary of Defense is unable or 
        unwilling to order an individual to active duty under 
        subparagraph (A), the Secretary of Transportation--
                  [(i) may recover from the individual the cost 
                of education provided by the Federal 
                Government; and
                  [(ii) shall request the Attorney General to 
                begin court proceedings to recover the costs of 
                education if the Secretary decides to seek 
                recovery under clause (i).]
          (2)(A) If the Secretary determines that any 
        individual who has attended the Academy for not less 
        than 2 years has failed to fulfill the part of the 
        agreement required by paragraph (1)(A), such individual 
        may be ordered by the Secretary of Defense to active 
        duty in one of the armed forces of the United States to 
        serve for a period of time not to exceed 2 years. In 
        cases of hardship as determined by the Secretary, the 
        Secretary may waive this provision in whole or in part.
          (B) If the Secretary of the Navy is unable or 
        unwilling to order an individual to active duty under 
        subparagraph (A), or if the Secretary of Transportation 
        determines that reimbursement of the cost of education 
        provided would better serve the interests of the United 
        States, the Secretary may recover from the individual 
        the cost of education provided by the Federal 
        Government.
          (3)(A) If the Secretary determines that an individual 
        has failed to fulfill any part of the agreement 
        required by paragraph (1), as described in 
        subparagraphs (1)(B), (C), (D), (E), or (F), such 
        individual may be ordered to active duty to serve a 
        period of time not less than 3 years and not more than 
        the unexpired portion, as determined by the Secretary, 
        of the service required by paragraph (1)(E). The 
        Secretary, in consultation with the Secretary of 
        Defense, shall determine in which service the 
        individual shall be ordered to active duty to serve 
        such period of time. In cases of hardship, as 
        determined by the Secretary, the Secretary may waive 
        this provision in whole or in part.
          (B) If the Secretary of Defense is unable or 
        unwilling to order an individual to active duty under 
        subparagraph (A), or if the Secretary of Transportation 
        determines that reimbursement of the cost of education 
        provided would better serve the interests of the United 
        States, the Secretary may recover from the individual 
        the cost of education provided in an amount 
        proportionate to the unfulfilled portion of the service 
        obligation as determined by the Secretary. In cases of 
        hardship the Secretary may waive this provision in 
        whole or in part.
          (4) To aid in the recovery of the cost of education 
        provided by the Federal Government pursuant to a 
        commitment agreement under this section, the Secretary 
        may request the Attorney General to begin court 
        proceedings, or the Secretary may make use of the 
        Federal debt collection procedures in chapter 176 of 
        title 28, United States Code, or other applicable 
        administrative remedies.
          [(4)] (5) The Secretary may defer the service 
        commitment of any individual pursuant to subparagraph 
        (E) of paragraph (1) (as specified in the agreement 
        required by such paragraph) for a period of not more 
        than 2 years if such individual is engaged in a 
        graduate course of study approved by the Secretary, 
        except that any deferment of service as a commissioned 
        officer pursuant to paragraph (1)(E) must be approved 
        by the Secretary of the military department (including 
        the Secretary of Commerce with respect to the National 
        Oceanic and Atmospheric Administration) which has 
        jurisdiction over such service.
  (f) Places of Training.--The Secretary may provide for the 
training of cadets at the Academy--
          (1) on vessels owned or subsidized by the United 
        States;
          (2) on other vessels documented under the laws of the 
        United States if the owner of any such vessel 
        cooperates in such use; and
          (3) in shipyards or plants and with any industrial or 
        educational organizations.
  [(g) Bachelor of Science Degrees Awarded.--The Superintendent 
of the Academy may confer the degree of bachelor of science 
upon any individual who has met the conditions prescribed by 
the Secretary and who, if a citizen of the United States, has 
passed the examination for a merchant marine officer's license. 
No individual may be denied a degree under this subsection 
because the individual is not permitted to take such 
examination solely because of physical disqualification.]
  (g) Degrees Awarded.--
          (1) Bachelor's degree.--The Superintendent of the 
        Academy may confer the degree of bachelor of science 
        upon any individual who has met the conditions 
        prescribed by the Secretary and who, if a citizen of 
        the United States, has passed the examination for a 
        merchant marine officer's license. No individual may be 
        denied a degree under this subsection because the 
        individual is not permitted to take such examination 
        solely because of physical disqualification.
          (2) Master's degree.--The Superintendent of the 
        Academy may confer a master's degree upon any 
        individual who has met the conditions prescribed by the 
        Secretary. Any master's degree program may be funded 
        through non-appropriated funds. In order to maintain 
        the appropriate academic standards, the program shall 
        be accredited by the appropriate accreditation body. 
        The Secretary may make regulations necessary to 
        administer such a program.
  (h) Board of Visitors.--
          (1) A Board of Visitors to the Academy shall be 
        established, for a term of two years commencing at the 
        beginning of each Congress, to visit the Academy 
        annually on a date determined by the Secretary and to 
        make recommendations on the operation of the Academy.
          (2) The Board shall be composed of--
                  (A) 2 Senators appointed by the chairman of 
                the Commerce, Science, and Transportation 
                Committee of the Senate;
                  (B) 3 Members of the House of Representatives 
                appointed by the chairman of the Merchant 
                Marine and Fisheries Committee of the House of 
                Representatives;
                  (C) 1 Senator appointed by the Vice 
                President;
                  (D) 2 Members of the House of Representatives 
                appointed by the Speaker of the House of 
                Representatives; and
                  (E) the chairman of the Commerce, Science, 
                and Transportation Committee of the Senate and 
                the chairman of the Merchant Marine and 
                Fisheries Committee of the House of 
                Representatives, as ex officio members.
          (3) Whenever a member of the Board is unable to 
        attend the annual meeting provided in paragraph (1), 
        another individual may be appointed in the manner 
        provided by paragraph (2) as a substitute for such 
        member.
          (4) The chairmen of the Commerce, Science, and 
        Transportation Committee of the Senate and the Merchant 
        Marine and Fisheries Committee of the House of 
        Representatives may designate staff members of such 
        committees to serve without reimbursement as staff for 
        the Board.
          (5) While away from their homes or regular places of 
        business in the performance of services for the Board, 
        members of the Board and any staff members designated 
        under paragraph (4) shall be allowed travel expenses, 
        including per diem in lieu of subsistence, in the same 
        manner as persons employed intermittently in the 
        Government service are allowed expenses under section 
        5703 of title 5, United States Code.
  (i) Advisory Board.--
          (1) An Advisory Board to the Academy shall be 
        established to visit the Academy at least once during 
        each academic year, for the purpose of examining the 
        course of instruction and management of the Academy and 
        advising the Maritime Administrator and the 
        Superintendent of the Academy.
          (2) The Advisory Board shall be composed of not more 
        than 7 persons of distinction in education and other 
        fields relating to the Academy who shall be appointed 
        by the Secretary for terms not to exceed 3 years and 
        may be reappointed.
          (3) The Secretary shall appoint a chairman from among 
        the members of the Advisory Board.
          (4) While away from their homes or regular places of 
        business in the performance of service for the Advisory 
        Board, members of the Advisory Board shall be allowed 
        travel expenses, including per diem in lieu of 
        subsistence, in the same manner as persons employed 
        intermittently in the Government service are allowed 
        expenses under section 5703 of title 5, United States 
        Code.
          (5) The Federal Advisory Committee Act (5 U.S.C. App. 
        1 et seq.) shall not apply to the Advisory Board 
        established pursuant to this subsection.

SEC. 1304. STATE MARITIME ACADEMIES.

                         [46 U.S.C. APP. 1295C]

  (a) Cooperation and Assistance.--The Secretary shall 
cooperate with and assist any State maritime academy in 
providing instruction to individuals to prepare them for 
service in the merchant marine of the United States.
  (b) Regional Maritime Academies.--The Governors of all States 
or territories of the United States, or both, cooperating to 
sponsor a regional maritime academy shall designate in writing 
one State or territory of the United States, from among the 
sponsoring States or territories, or both, to conduct the 
affairs of such regional maritime academy. Any regional 
maritime academy shall be eligible for assistance from the 
Federal Government on the same basis as any State maritime 
academy sponsored by a single State or territory of the United 
States.
  (c) Training Vessels.--
          (1)(A) The Secretary may furnish for training 
        purposes any suitable vessel under the control of the 
        Secretary or provided under subparagraph (B), or 
        construct and furnish a suitable vessel if such a 
        vessel is not available, to any State maritime academy 
        meeting the requirements of subsection (f)(1). Any such 
        vessel--
                  (i) shall be repaired, reconditioned, and 
                equipped (including supplying all apparel, 
                charts, books, and instruments of navigation) 
                as necessary for use as a training ship;
                  (ii) shall be furnished to such State 
                maritime academy only after application for 
                such vessel is made in writing by the Governor 
                of the State or territory sponsoring such State 
                maritime academy or, with respect to a regional 
                maritime academy the Governor of the State or 
                territory designated pursuant to subsection 
                (b);
                  (iii) shall be furnished to such State 
                maritime academy only if a suitable port for 
                the safe mooring of such vessel is available 
                while it is being used by such academy;
                  (iv) shall be maintained in good repair by 
                the Secretary; and
                  (v) shall remain the property of the United 
                States.
          (B) Any department or agency of the United States may 
        provide to the Secretary to be furnished to any State 
        maritime academy any vessel (including equipment) which 
        is suitable for the purposes of this paragraph and 
        which can be provided without detriment to the service 
        to which such vessel is assigned.
          (2) The Secretary may pay to any State maritime 
        academy the amount of the costs of all fuel consumed by 
        any vessel furnished under paragraph (1) while such 
        vessel is being used for training purposes by such 
        academy.
          (3)(A) The Secretary may provide for the training of 
        individuals attending a State maritime academy--
                  (i) on vessels owned or subsidized by the 
                United States;
                  (ii) on other vessels documented under the 
                laws of the United States if the owner of any 
                such vessel cooperates in such use; and
                  (iii) in shipyards or plants and with any 
                industrial or educational organizations.
          (B) While traveling under orders for purposes of 
        receiving training under this paragraph, any individual 
        who is attending a State maritime academy shall receive 
        from the Secretary allowances for transportation 
        (including reimbursement of traveling expenses) in 
        accordance with any regulations promulgated by the 
        Secretary.
  (d) Annual Payments.--
          (1)(A) The Secretary may enter into an agreement, 
        which shall be effective for not more than 4 years, 
        with one State maritime academy (not including regional 
        maritime academies) located in each State or territory 
        of the United States which meets the requirements of 
        subsection (f)(1), and with each regional maritime 
        academy which meets the requirements of subsection 
        (f)(1), to make annual payments to each such academy 
        for the maintenance and support of such academy.
          (B) Subject to subparagraph (C), the annual payment 
        to such State maritime academy shall be at least equal 
        to the amount given to the academy for its maintenance 
        and support by the State in which it is located, and to 
        such regional maritime academy shall be at least equal 
        to the amount given the academy by all States and 
        territories cooperating to sponsor the academy.
          (C) The amount under subparagraph (B) may not be more 
        than $25,000, except that the amount shall be--
                  (i) $100,000 to such State maritime academy 
                if the academy meets the condition set forth in 
                subsection (f)(2); or
                  (ii) $200,000 to such regional maritime 
                academy if the academy meets the condition set 
                forth in subsection (f)(2).
          (2) The Secretary shall provide to each State 
        maritime academy guidance and assistance in developing 
        courses on the operation and maintenance of new 
        vessels, on equipment, and on innovations being 
        introduced to the merchant marine of the United States.
  (e) Detailing of Personnel.--Upon the request of the Governor 
of any State or territory, the President may detail, without 
reimbursement, any of the personnel of the United States Navy, 
the United States Coast Guard, or the United States Maritime 
Service to any State maritime academy to serve as 
superintendents, professors, lecturers, or instructors at such 
academy.
  (f) Conditions To Receiving Payments or Use of Vessels.--
          (1) As a condition to receiving any payment or the 
        use of any vessel under this section, any State 
        maritime academy shall--
                  (A) provide courses of instruction on 
                navigation, marine engineering (including steam 
                and diesel propulsion), the operation and 
                maintenance of new vessels and equipment, and 
                innovations being introduced to the merchant 
                marine of the United States;
                  (B) agree in writing to conform to such 
                standards for courses, training facilities, 
                admissions, and instruction as are established 
                by the Secretary after consultation with the 
                superintendents of the State maritime 
                academies; and
                  (C) agree in writing to require, as a 
                condition for graduation, that each individual 
                who is a citizen of the United States and who 
                is attending the academy in a merchant marine 
                officer preparation program shall pass the 
                examination administered by the Coast Guard 
                required for issuance of a license under 
                section 7101 of title 46, United States Code.
          (2) As a condition to receiving an annual payment of 
        any amount in excess of $25,000 under subsection (d), a 
        State maritime academy shall agree to admit to such 
        academy each year a number of individuals who meet the 
        admission requirements of such academy and who are 
        citizens of the United States residing in States and 
        territories of the United States other than the States 
        or territories, or both, supporting such academy. The 
        Secretary shall determine the number of individuals 
        under this paragraph for each State maritime academy so 
        that such number does not exceed one-third of the total 
        number of individuals attending such academy at any 
        time.
  (g) Student Incentive Payment Agreements.--
          (1) The Secretary may enter into an agreement, which 
        shall be effective for not more than 4 academic years, 
        with any individual, who is a citizen of the United 
        States and is attending a State maritime academy which 
        entered into an agreement with the Secretary under 
        subsection (d)(1), to make student incentive payments 
        to such individual, which payments shall be in amounts 
        equaling [$3,000] $4,000 for each academic year and 
        which payments shall be--
                  (A) allocated among the various State 
                maritime academies in a fair and equitable 
                manner;
                  (B) used to assist the individual in paying 
                the cost of uniforms, books, and subsistence; 
                and
                  (C) paid by the Secretary as the Secretary 
                shall prescribe while the individual is 
                attending the academy.
          (2) Each agreement entered into under paragraph (1) 
        shall require the individual to accept midshipman and 
        enlisted reserve status in the United States Naval 
        Reserve (including the Merchant Marine Reserve, United 
        States Naval Reserve) before receiving any student 
        incentive payments under this subsection.
          (3) Each agreement entered into under paragraph (1) 
        shall obligate the individual receiving student 
        incentive payments under the agreement--
                  (A) to complete the course of instruction at 
                the State maritime academy which the individual 
                is [attending, unless the individual is 
                separated by such academy;] attending;
                  (B) to take the examination for a license as 
                an officer in the merchant marine of the United 
                States on or before the date of graduation from 
                such State maritime academy of such individual 
                and to fulfill the requirements for such 
                license not later than 3 months after such 
                graduation date;
                  [(C) to maintain a license as an officer in 
                the merchant marine of the United States for at 
                least 6 years following the date of graduation 
                from such State maritime academy of such 
                individual;]
                  (C) to maintain a valid license as an officer 
                in the merchant marine of the United States for 
                at least 6 years following the date of 
                graduation from such State maritime academy of 
                such individual, accompanied by the appropriate 
                national and international endorsements and 
                certification as required by the United States 
                Coast Guard for service aboard vessels on 
                domestic and international voyages;
                  (D) to accept if tendered an appointment as, 
                and to serve as a commissioned officer in the 
                United States Naval Reserve (including the 
                Merchant Marine Reserve, United States Naval 
                Reserve), the United States Coast Guard 
                Reserve, or any other reserve unit of an armed 
                force of the United States, for at least 6 
                years following the date of graduation from 
                such State maritime academy of such individual;
                  (E) to serve the foreign and domestic 
                commerce and the national defense of the United 
                States for at least 3 years following the date 
                of graduation from the Academy--
                          (i) as a merchant marine officer 
                        serving on vessels documented under the 
                        laws of the United States or on vessels 
                        owned and operated by the United States 
                        or by any State or territory of the 
                        United States;
                          (ii) as an employee in a United 
                        States maritime-related industry, 
                        profession, or marine science (as 
                        determined by the Secretary), if the 
                        Secretary determines that service under 
                        clause (i) is not available to such 
                        individual;
                          [(iii) as a commissioned officer on 
                        active duty in an armed force of the 
                        United States or in the National 
                        Oceanic and Atmospheric Administration; 
                        or]
                          (iii) as a commissioned officer on 
                        active duty in an armed force of the 
                        United States, as a commissioned 
                        officer in the National Oceanic and 
                        Atmospheric Administration, or in other 
                        maritime-related employment with the 
                        Federal Government which serves the 
                        national security interests of the 
                        United States, as determined by the 
                        Secretary; or
                          (iv) by combining the services 
                        specified in clauses (i), (ii), and 
                        (iii); and
                  (F) to report to the Secretary on the 
                compliance by the individual to this paragraph.
          [(4) If the Secretary determines that any individual 
        who has accepted the payment described in paragraph (1) 
        has failed to fulfill the part of the agreement 
        (required by paragraph (1)) described in paragraph 
        (3)(A), such individual may be ordered by the Secretary 
        of the Navy to active duty in the United States Navy to 
        serve for a period of time not to exceed 2 years. In 
        cases of hardship as determined by the Secretary, the 
        Secretary may waive this paragraph.
          [(5) If the Secretary determines that any individual 
        has failed to fulfill any part of the agreement 
        (required by paragraph (1)) described in subparagraphs 
        (B), (C), (D), (E), or (F) of paragraph (3), such 
        individual may be ordered to active duty to serve a 
        period of time not less than 2 years and not more than 
        the unexpired portion (as determined by the Secretary) 
        of the service required by subparagraph (E) of such 
        paragraph. The Secretary, in consultation with the 
        Secretary of Defense, shall determine in which service 
        the individual shall be ordered to active duty to serve 
        such period of time. In cases of hardship as determined 
        by the Secretary, the Secretary may waive this 
        paragraph.]
          (4)(A) If the Secretary determines that an individual 
        who has accepted the payment described in paragraph (1) 
        for a minimum of 2 academic years has failed to fulfill 
        the part of the agreement required by paragraph (1) and 
        described in paragraph (3)(A), such individual may be 
        ordered by the Secretary of the Navy to active duty in 
        the United States Navy to serve for a period of time 
        not to exceed 2 years. In cases of hardship, as 
        determined by the Secretary, the Secretary may waive 
        this provision in whole or in part.
          (B) If the Secretary of the Navy is unable or 
        unwilling to order an individual to active duty under 
        subparagraph (A), or if the Secretary of Transportation 
        determines that reimbursement of the cost of education 
        provided would better serve the interests of the United 
        States, the Secretary may recover from the individual 
        the cost of education provided by the Federal 
        Government.
          (5)(A) If the Secretary determines that an individual 
        has failed to fulfill any part of the agreement 
        required by paragraph (1), as described in paragraphs 
        (3)(B), (C), (D), (E), or (F), such individual may be 
        ordered to active duty to serve a period of time not 
        less than 2 years and not more than the unexpired 
        portion, as determined by the Secretary, of the service 
        required by paragraph (3)(E). The Secretary, in 
        consultation with the Secretary of Defense, shall 
        determine in which service the individual shall be 
        ordered to active duty to serve such period of time. In 
        cases of hardship, as determined by the Secretary, the 
        Secretary may waive this provision in whole or in part.
          (B) If the Secretary of Defense is unable or 
        unwilling to order an individual to active duty under 
        subparagraph (A), or if the Secretary of Transportation 
        determines that reimbursement of the cost of education 
        provided would better serve the interests of the United 
        States, the Secretary may recover from the individual 
        the cost of education provided in an amount 
        proportionate to the unfulfilled portion of the service 
        obligation as determined by the Secretary. In cases of 
        hardship the Secretary may waive this provision in 
        whole or in part.
          (6) To aid in the recovery of the cost of education 
        provided by the Federal Government pursuant to a 
        commitment agreement under this section, the Secretary 
        may request the Attorney General to begin court 
        proceedings, or the Secretary may make use of the 
        Federal debt collection procedures in chapter 176 of 
        title 28, United States Code, or other applicable 
        administrative remedies.
          [(6)] (7) The Secretary may defer the service 
        commitment of any individual pursuant to subparagraph 
        (E) of paragraph (3) (as specified in the agreement 
        required by such paragraph) for a period of not more 
        than 2 years if such individual is engaged in a 
        graduate course of study approved by the Secretary, 
        except that any deferment of service as a commissioned 
        officer pursuant to subparagraph (E) of such paragraph 
        must be approved by the Secretary of the military 
        department (including the Secretary of Commerce with 
        respect to the National Oceanic and Atmospheric 
        Administration) which has jurisdiction over such 
        service.
          [(7)] (8) This subsection shall apply only to 
        individuals first entering a State maritime academy 
        after the date occurring 6 months after the effective 
        date of the Maritime Education and Training Act of 
        1980.
  (h) Appointment of Cadet as Midshipman in United States Naval 
Reserve.--Any citizen of the United States attending a State 
maritime academy may be appointed by the Secretary of the Navy 
as a midshipman in the United States Naval Reserve (including 
the Merchant Marine Reserve, United States Naval Reserve).

           *       *       *       *       *       *       *


SEC. 1306. UNITED STATES MARITIME SERVICE.

                         [46 U.S.C. APP. 1295E]

  (a) Establishment and Maintenance.--The Secretary may 
establish and maintain a voluntary organization for the 
training of citizens of the United States to serve on merchant 
marine vessels of the United States to be known as the United 
States Maritime Service.
  (b) Enrollment; Compensation; Course of Study and Periods of 
Training; Uniforms.--The Secretary may determine the number of 
individuals to be enrolled for training and reserve purposes in 
such service, to fix the rates of pay and allowances of such 
individuals without regard to the provisions of chapter 51 and 
subchapter III of chapter 53 of title 5, United States Code 
(relating to classification and General Schedule pay rates), to 
prescribe the course of study and the periods of training in 
such service, and to prescribe the uniform of such service and 
the rules governing the wearing and furnishing of such uniform.
  (c) Ranks, Grades, and Ratings Same as for United States 
Coast Guard.--The ranks, grades, and ratings for personnel of 
the United States Maritime Service shall be the same as are 
then prescribed for the personnel of the United States Coast 
Guard.
  (d) Awards and Medals.--The Secretary may establish and 
maintain a medals and awards program to recognize distinguished 
service, superior achievement, professional performance, and 
other commendable achievement by personnel of the United States 
Maritime Service.

                Maritime Policy Improvement Act of 2002

                  [PUBLIC LAW 107-295; 116 STAT. 2099]

SEC. 213. COASTWISE TRADE AUTHORIZATION.

  (a) In General.--Notwithstanding section 207 of the Merchant 
Marine Act, 1920 (46 App. U.S.C. 883), or any other provision 
of law restricting the operation of a foreign-built vessel in 
the coastwise trade of the United States, the following vessels 
may, subject to subsection (b), engage in the coastwise trade 
of the United States to transport platform jackets from ports 
in the Gulf of Mexico to sites on the Outer Continental Shelf 
for completion of certain offshore projects as follows:
          (1) The H-114, H-627, and H-851 for the projects 
        known as Atlantis, Thunderhorse, Holstein, and Mad Dog.
          (2) The I-600 for the projects known as Murphy 
        Medusa, Dominion Devil's Tower, and Murphy Front 
        Runner.
  (b) Priority for U.S.-Built Vessels.--Subsection (a) shall 
not apply in instances where a United States-built, United 
States-documented vessel with the capacity to [transport and 
launch] transport or launch the platform jacket involved or its 
components is available to transport that jacket or its 
components. In this section, the term ``platform jacket'' has 
the meaning given that term under the thirteenth proviso of 
section 27 of the Merchant Marine Act, 1920 (46 App. U.S.C. 
883), as amended by subsection (c) of this section.
  (c) Definition.--The thirteenth proviso (pertaining to 
transportation by launch barge) of section 27 of the Merchant 
Marine Act, 1920 (46 App. U.S.C. 883), is amended by striking 
the period at the end and inserting the following: ``; and for 
the purposes of this proviso, the term `platform jacket' 
includes any type of offshore drilling or production structure 
or components, including platform jackets, tension leg or SPAR 
platform superstructures (including the deck, drilling rig and 
support utilities, and supporting structure) hull (including 
vertical legs and connecting pontoons or vertical cylinder), 
tower and base sections of a platform jacket, jacket 
structures, and deck modules (known as `topsides') of a 
hydrocarbon development and production platform.''.

                                
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