The Merchant Marine Act, 1936, 46 U.S.C 1101-1295g

TITLE 46-SHIPPINO

Page 303

ADMINISTRATIVE DELEGATION OF FUNCTIONS BY
SECRETARY OF THE TREASURY

Administrative delegation of functions by Secretary
of the Treasury, see note set out under section 1 of
this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1014 of this
title.
§ 1013. Conveyances and other instruments and acts
validated

All conveyances and mortgages of any vessel
or any part thereof, and all documentations, recordations, indorsements, and indexing thereof,
and proceedings incidental thereto made or
done, prior to February 16, 1925, are declared
valid to the extent they would have been valid
if the port or ports at which said vessel has in
fact been documented from time to time had
been the port or ports at which it should have
been documented in accordance with law; and
this section is declared retroactive so as to accomplish such validations: Provided, That
nothing herein contained shall be construed to
deprive any person of any vested right.
(Feb. 16, 1925, ch. 235, § 3, 43 Stat. 948.)
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1014 of this
title.
§ 1014. Navigation laws and other legislation amended
All such provisions of the navigation laws of
the United States and of the Ship Mortgage
Act, 1920 [46 U.S.C. 911 et seq.], as are in conflict with sections 18, 1011, 1012, and 1013 of
this title, are amended to conform therewith.
(Feb. 16, 1925, ch. 235, § 5, 43 Stat. 948.)
REFERENCES IN TEXT

The navigation laws of the United States, referred to
in text, are classified generally to Title 33, Navigation
and Navigable Waters.
The Ship Mortgage Act, 1920, referred to in text, is
act June 5, 1920, ch. 250, 1 30, 41 Stat. 1000, as amended, which is classified generally to chapter 25 (§ 911 et
seq.) of this title. For complete classification of this
Act to the Code, see section 984 of this title and
Tables.
Section 18 of this title, referred to in text, was repealed by Pub. L. 96-594, title I, § 127, Dec. 24, 1980, 94
Stat. 3459.

CHAPTER 27-MERCIANT MARINE ACT, 1936
SUBCHAPTER I-DECLARATION OF POLICY
Sec.
1101.
Fostering development and maintenance of
merchant marine.
SUBCHAPTER II-CREATION AND FUNCTIONS
OF MARITIME AGENCIES
1111.
Powers and duties of agencies.
(a) Repealed.
(b) Restriction on appointments; other
employment forbidden; interest in
shipping as disqualifying member.

§ 1014

Sec.
(cl Records of meetings; seal: rules and
regulations.
(d) Expenditures.
(cl Officers and employees.
f) Traveling and subsistence expenses:
pay for military officer on assignment.
(g) Effective date of section.
llla.
Administrative expenses; limitations.
1l11b.
Repealed.
1112.
Operation of property by Secretary.
1113.
Omitted.
1114.
Transfer of powers; rules and orders.
(a) Transfer of functions, powers and
duties.
(b) Rules and regulations.
(c) Enforcement of orders: penalties for
violations.
1115.
Discrimination at ports by carriers by water
against other carriers.
1116.
Construction fund.
1116a.
Application to obligations against emergency
ship construction fund.
1117.
Power to contract; audit of accounts; reports
of Comptroller General.
1118.
Reports to Congress.
1119.
Authorization of appropriations.
ll19a, 1119b. Omitted.
1120.
Survey of existing merchant marine for creation of adequate American-owned fleet.
1121.
Investigations, studies, records, etc.
(a) Suitable ocean routes and lines to
foreign ports; vessels and costs of
operation.
(b)Bulk cargo carrying services.
(c) Vessels required in proposed routes.
(d) Cost of construction in United States
and abroad.
(e) Relative cost of operation under laws
of United States and foreign countries.
Cf) Foreign subsidies.
(g) Shipyards.
(h) Laws applicable to aircraft.
(i) Transportation to foreign ports of
cotton, coal, lumber, and cement.
CQ)New designs of vessels; intercoastal
and inland water transportation.
1121-1. Priority loading for vessels engaged in coastwise transportation of coal; exception,
report to Congress.
1122.
Maritime problems; cooperation with others;
discriminatory charges on exports; cargo
carriage; recommendations.
(a) Study of maritime problems.
(b) Inducing preferences for American
vessels; construction
of superliners.
(c) Collaboration with owners and builders.
(d) Liaison with other agencies and trade
organizations.
(e) Investigation
of
discriminatory
charges, etc., against exports.
Cf) Development and implementation of
new methods of cargo carriage;
preferences for cargo containers.
(g) Recommendations for further legislation.
1122a.
Vessel utilization and performance reports;
filing; civil penalty; lien upon vessel; remission or mitigation of penalty.
1122b.
Mobile trade fairs.
(a) Use of United States flag vessels and
aircraft insofar as practicable.
(b) Technical and financial assistance;
exceptions.

TITLE 46-SHIPPING
Sec.

Sec.
(c) Authorization of appropriations; use
of foreign currencies.
(d) Report to Congress.
Obsolete tonnage; tramp service; relative
1123.
costs at yards.
(a) Removal of obsolete tonnage.
(b) Tramp shipping; participation in by
Americans.
(c) Relative cost of construction at different yards; equalization.
Witnesses.
1124.
(a) Summoning; oaths; production of
books and papers; fees.
(b) Refusal to obey subpena; court
orders; contempt.
Acquisition of vessels.
1125.
Construction, repair, etc., of vessels for Gov1125a.
ernment agencies.
Repealed.
1126.
1126-1. Training of future naval officers under Naval
Reserve Officer Training Corps programs
at merchant marine academies for promotion of maximum integration of naval and
merchant marine seapower of the Nation.
1126a to 1127. Repealed.

1153.

1154.

SUBDI VISION-INSURANCE

1128 to 1128h. Repealed or Omitted.
SUBCHAPTER III-AMERICAN SEAMEN
Manning and wage scales; subsidy contracts.
1131.
(a) Investigation of wages and working
conditions; establishment of wage
and manning scales; incorporation
in subsidy contracts.
(b) Subsidy contracts; provisions relative
to officers and crew.
Citizenship of officers and crew.
1132.
(a) Vessels documented under laws of
United States.
(b) Passenger vessels granted subsidies.
(c) Aliens; conditions of employment.
(d) Filling vacancies while on foreign
voyage.
(e) Penalty for violations.
(f) Enforcement; effective date; repeal
of other laws.
(g) Membership of officers in United
States Naval Reserve.
(h) Suspension of section during emergency.

1155.

1155a.
1156.
1157.
1158.
1159.
1160.

SUBCHAPTER IV-OCEAN MAIL CONTRACTS
1141 to 1145. Omitted or Repealed.
SUBCHAPTER V-CONSTRUCTIONDIFFERENTIAL SUBSIDY
1151.

1152.

Subsidy authorized for vessels to be operated
in foreign trade.
(a) Application for subsidy for construction; conditions precedent to granting.
(b) Submission of plans to Navy Department; certification of approval.
(c) Application for subsidy for reconstruction or reconditioning; conditions precedent to granting; contracts.
Construction of vessels; bids; subsidies.
(a) Approval of bids; contract with
bidder; acceptance of negotiated
price; shipyard records, availability;
contract with applicant or qualified
citizen for purchase of vessel.

1161.

Page 304

(b) Basis for fixing subsidy; cost of construction in foreign yards; annual
recomputation and publication of
foreign cost; limitation on construction differential; report on American shipbuilding industry.
(c) Terms of sale of vessel to purchaser.
(d) Repealed.
(el Construction in navy yards; sales to
citizens; terms.
(f) Survey of shipbuilding capability;
correction of inadequacies; reimbursement of certain vessel construction and delivery expenses.
(g) Sale of vessels acquired by Secretary.
(h) Installation or removal of national
defense features; title to such features.
(I) Plans, specifications, and proposals
for national defense features; certification of approval.
Documentation of completed vessel under
laws of United States; delivery to purchaser; first mortgage to secure deferred payments.
Purchase of vessel constructed in accordance
with application for subsidy; bid or negotiated price basis for subsidy and payments
for cost of national defense features; documentation.
Eligible shipyards; materials; conditions of
contracts; limitation to American shipyards; American materials, waiver; ability
of bidders; filing bids and data.
Suspension of profit limiting provisions as to
certain subcontracts.
Operation of subsidy constructed vessel limited to foreign trade; repayments to Secretary for deviations.
Construction of new vessel to replace obsolete; purchase of old vessel by Secretary;
bond of seller against liens.
Disposition of vessels transferred to Maritime Administration of Department of
Transportation.
Vessels to be operated in domestic trade;
terms and conditions of construction aid
and sale to purchaser.
Acquisition of obsolete vessels.
(a) Definitions.
(b) Promotion of construction of new
vessels; allowance on obsolete vessels.
(c) Utility value of new vessel; gross tonnage.
(d) Amount of allowance on obsolete
vessel; determination of amount.
(e) Recognition of gain for income tax
purposes; basis for gain or loss.
(f) Report to Congress.
(g) Use of vessels 25 years old or more.
(h) Acquisition of tankers for national
defense reserve.
(Il Exchange of vessels; valuation; scrapping of traded out vessels.
(J) Placement in national defense reserve fleet of acquired vessels.
Reserve funds for construction or acquisition
of vessels; taxation.
(a) "New vessel" defined.
(b) Establishment of construction reserve funds.
(c Recognition of gain for taxation
where proceeds of sale or indemnity for loss deposited in fund.
(d) Basis for determining gain or loss
and for depreciation of new vessels.

TITLE 46-SHIPPING

Page 305

(e) Order, proportions, etc., of deposits
and withdrawals.
(f) Amounts in fund am,accumulation of
earnings or profits.
(g) Benefits of section conditioned upon
manner and time of expenditure of
deposits.
(h) Authorizations of extensions of time.
(I) Taxation of deposits upon failure of
conditions.
(j) Assessment and collection of deficiency tax.
(k) Taxable years governed by section.
(1) Vessels deemed constructed or acquired by taxpayers owning stock
in corporations constructing or acquiring vessels.
(m) Definitions.
(n) Definition of "contract for the construction" and "construction contract".
(o) Definition of "reconstruction and reconditioning".
SUBCHAPTER VI-OPERATING-DIFFERENTIAL
SUBSIDY
1171.

1172.
1173.

1174.
1175.

1176.
1177.

Subsidy authorized for operation of vessels
in foreign trade or in off-season cruises.
(a) Application for subsidy; conditions
precedent to granting.
(b) Statements as to financial interests
to accompany application; penalty
for false statements.
Determination of necessity of subsidy to
meet competition.
Contracts for payment of subsidy.
(a) Authorization of contracts.
(b) Amount of subsidy.
(c) Definitions of "collective bargaining
costs", "base period costs", "base
period", and 'subsidizable wage
costs of United States officers and
crews"; determination of collective
bargaining costs and establishment
of new base periods; wage change
index.
(d) Foreign wage computation; foreign
manning.
(e) Monthly payment of wage subsidy;
procedures for calculation and payment of subsidy on certain expenses.
(f) Monthly percentage payment of
other than wage subsidy; security
for refund of overpayments; payment of remainder after audit of
voyage accounts.
Additional subsidy; when authorized.
Vessels excluded from subsidy.
(a) Vessels engaged in coastwise or intercoastal trade; vessels on inland waterways.
(b) Vessels more than 25 years old.
(c) Vessels to be operated in an essential
service served by citizens of the
United States.
Readjustments; change in service; withdrawal from service; payment of excess profits;
wages, etc.; American materials.
Capital construction fund.
(a) Agreement rules: persons eligible; replacement, additional, or reconstructed vessels for prescribed
and fishery operations;
trade
amount of deposits, annual limitation: conditions and requirements
for deposits and withdrawals.
11-617 VOL. 18 0-84-22

1177-1.
1177a.
1178.

1179.
1180.
1181.

1182.
1183.

1183a.

1184.
1185.

(b) Ceiling on deposits: lessees; "agreement vessel" defined.
requirements; deposi(c) Investment
tories; fiduciary requirements interest-bearing securities; stock: percentage for domestic issues, listing
and registration, prudent acquisitions, value and percentage equilibrium, and treatment of preferred
issues.
(d) Nontaxability of deposits; eligible deposits.
(e) Accounts within fund: capital account, capital gain account, and ordinary Income account; limitation
on capital losses.
(f) Purposes of qualified withdrawals;
nonqualified withdrawal treatment
for nonfulfillment of substantial
obligations.
(g) Tax treatment of qualified withdrawals; basis: reduction.
(h) Tax treatment of nonqualifled withdrawals: FIFO and LIFO bases; interest rate.
(i) Corporate reorganizations and partnership changes.
(j) Treatment of existing funds; relation
of old to new fund.
(k) Definitions.
(1) Records; reports; rules and regulations; termination of agreement
upon changes in regulations with
substantial effect on rights or obligations.
Small ftshing vessel construction reserves.
Deposits in special reserve fund; excusal; tax
treatment.
Sale or assignment of contract; consent of
Secretary; purchaser subject to terms of
contract; rescinding contract on transfer
without consent.
Withholding payment to defaulting contractor.
Vessels eligible to subsidy.
Transfer of vessels to foreign registry on default of United States.
(a) Application; hearing; grant or denial.
(b) Appeal from denial of application.
(c) Effectiveness of transfer.
Subordination of Secretary's interest to Reconstruction Finance Corporation.
Off-season cruises by passenger vessels.
(a) Definition.
(b) Authorization for payment of subsidy.
(c) Authorization for payment of subsidy to passenger vessels providing
domestic service.
(d) Conditions for cruises or domestic
service while on voyages in an essential service in foreign commerce.
(e) Application for approval of cruise;
notice to other American flag operators.
Off-season cruises additional to right of operator to make voyages on regular service,
route, or line, including approved deviations.
Suspension of operating differential subsidy
contracts by operator recipients.
Construction, reconstruction, or acquisition
of vessels over five thousand deadweight
tons in foreign shipyards; preconditions.

TITLE 46-SHIPPING
SUBCHAPTER VII-PRIVATE CHARTER
OPERATION
Sec.
1191.
1192.
1193.

1194.
1195.

1196.
1197.

1198.
1199.
1200.
1201.
1202.
1203.
1204.

1205.

1206.

Additional powers of Secretary for completion of program.
Construction or reconditioning of vessels by
Secretary.
Competitive bidding.
(a) Construction, reconstruction, or reconditioning of vessels.
(b) Requirements.
(c) Opening of bids.
Charter or sale of vessels acquired by Department of Transportation.
Employment of vessels on foreign trade
routes; selection of routes; encouraging private operation by sale or charter; selling
price.
Advertising for bids for charters; rejection of
bids.
Awarding charter on bids.
(a) Highest bid.
(b) Rejection of highest bid.
(c) Next highest bid; rejection of all bids
and readvertisement.
Payment of subsidies to charterers.
Excess profit; payment to Secretary; formula
for determining profit.
Undertaking required of charterer.
Terms and conditions of charters.
Insurance requirements; repairs; inspection
by Secretary; termination of charter in national emergency.
Financial resources and other factors considered in awarding charters.
Construction and chartering of vessels for
unsuccessful routes; purchase of vessel by
charterer; purchase price; operation of
vessel in foreign trade.
Experimental operation and testing of
United States vessels; number; bareboat
charters; review of charters and agency
agreements;
provisions
applicable
to
charters and agreements.
Construction of nuclear-powered merchant
ship; appropriations; special services; cooperation with other Federal agencies.

SUBCHAPTER VIII-CONTRACT PROVISIONS
1211.
Provision for books and records; filing balance sheets; inspection and auditing by
Secretary; rescission of contract on failure
to comply with provisions.
1212.
Purchase or requisition of vessels by United
States; amount of payment.
1213.
Contracts designed equitably for all ports;
minimum allocation of funds; report to
Congress; preference to citizens of United
States; regional offices for Maritime Administration.
1214.
Omitted.
SUBCHAPTER VIII-A-OFFENSES AND
PENALTIES
1221.
Repealed.
1222.
Operating competing foreign-flag vessel forbidden.
(a) Operating-differential subsidy; competition with essential Americanflag service.
(b) Waiver; special circumstances.
(c) Exceptions.
(d) Statement to be filed with Secretary.
(e) Report to Congress.
1223.
Forbidden practices relating to coastwise
service, salaries, officers, and employees.
(a) Foreign trade subsidy contractor engaging in coastwise or intercoastal
trade.

Page 306

Sec.

1224.
1225.
1226.
1227.
1228.

1241.

1241-1.
1241a.
1241b.

1241c.
1242.

1242-1.
1242a,

1243.
1244.
1245.
1246.
1247.

1248.

(b) Contractor in default paying more
than specified salary.
(c) Repealed.
(d) Employing other persons or concerns
as managing or operating agent.
(c) Employing Member of Congress.
(f) Penalty.
Collusion with respect to bidding.
Employment of persons to appear before
Congress or governmental agency; filing
statement of employment.
Discrimination in respect to cargo.
Agreements with other carriers forbidden;
withholding subsidies; actions by injured
persons for damages.
Fines and penalties; conviction as rendering
persons ineligible to receive benefits of law.
SUBCHAPTER IX-MISCELLANEOUS
PROVISIONS
Transportation in American vessels of Government personnel and certain cargoes.
(a) Requirement that officers and employees travel on American ships.
(b) Cargoes procured, furnished or financed by United States; waiver in
emergencies; exceptions; definition.
(c) Motor vehicle owned by Government
personnel.
Shipment of exports financed by Government in United States vessels.
Vessel operations revolving fund; establishment; uses; limitation.
Availability of vessel operations revolving
fund; vessels involved in mortgage-foreclosure or forfeiture proceedings; redelivery
and layup of chartered ships; custody and
husbanding of Government-owned ships.
Expenses for activation, repair and deactivation of merchant ships; receipts.
Requisition or purchase of vessels in time of
emergency.
(a) Compensation; restoration; consequential damages.
(b) Determination of value of vessel.
(c) Charter of vessels; compensation; reimbursement for loss or damage.
(d) Determination of amount of compensation.
(e) Use of vessels by Secretary; transfer
to other departments or agencies;
reimbursement of Secretary.
Omitted.
Maintenance of and adjustment of obligations with respect to essential vessels affected by Neutrality Act.
(a) Definition of "essential vessel".
(b) Adjustment of obligations and arrangements for maintenance of essential vessels.
(c) Provisions included within adjustments and arrangements
(d) Readjustment or modification of adjustments and arrangements.
(e) Expenses incurred in adjustments
and arrangements.
Omitted.
Definitions.
Separability of provisions; short title of
chapter.
Effective date of chapter.
Appointment of Secretary as trustee or receiver; operation of vessels under court
orders; payment of operating costs; claims
against corporation.
Enrollment in a sealift readiness program.

TITLE 46-SHIPPING

Page 307

SUBCHAPTER X-MARITIME LABOR
RELATIONS

Sec.
1289.

Sec.
1251 to 1262. Omitted or Repealed.
SUBCHAPTER XI-FEDERAL SHIP MORTGAGE
INSURANCE
Definitions.
Federal Ship Financing Fund.
Authorization of Secretary to guarantee obligations.
(a) Principal and interest.
(b) Security interest.
(c) Amount of guarantee; percentage
limitation; determination of actual
cost of vessel.
(d) Pledge of United States.
(e) Proof of obligations.
(f) Limitation on outstanding amount.
Eligibility for guarantee.
1274.
(a) Purpose of obligations.
(b) Contents of obligations.
(c) Security.
(d) Restrictions.
(e) Guarantee fees.
(f) Investigation of applications.
(g) Disposition of moneys.
(h) Additional requirements.
Defaults.
1275.
(a) Rights of obligee.
(b) Notice of default.
(c) Secretary to complete, sell or oper.te
property.
(d) Cash payments; issuance of notes or
obligations.
(e) Actions against obligor.
Offenses and penalties.
1276.
1276a to 1278. Repealed.
Authorization of appropriations.
1279.
Escrow fund.
1279a.
(a) Creation.
(b) Disbursement prior to termination of
escrow agreement.
(c) Disbursement upon termination of
escrow agreement.
(d) Investment of fund.
(e) Payment of income.
(f) Terms of escrow agreement.
Rules and regulations.
1279b.
Ocean thermal energy conversion demon1279c.
stration facilities and plantships.
(a) Financing of construction, reconstruction, or reconditioning.
(b) Certification of reasonableness of
risk.
(c) OTEC Demonstration Fund.
(d) Notes and obligations.
(e) Taxability of interest.
Advances to fund.
1280.

1271.
1272.
1273.

1290.
1291.
1292.
1293.
1294.

SUBCHAPTER XIII-MARITIME EDUCATION
AND TRAINING
1295.
1295a.
1295b.

1295c.

1295d.
1295e.

1295f.
SUBCHAPTER XII-WAR RISK INSURANCE
1281.
1282.
1283.
1284.
1285.
1286.
1287.
1288.
1288a.

Definitions.
Authority to provide insurance; consideration of risk.
Persons, property, and interests insurable,
Risks other than war risks.
Insurance of property of Government departments and agencies.
Liability insurance for persons performing
services or providing facilities for vessels.
Reinsurance; rates; allowances to insurance
carriers.
Insurance fund; investments; appropriations.
Transfer of funds from Vessel Operations
Revolving Fund.

Administrative provisions.
(a) Issuance of policies, rules, and regu.
lations; settlement of claims; valuation; rejection and review of valuation.
(b) Forms and policies; rates; fees.
(c) Commercial practice controlling; limitation on fees.
(d) Underwriting agents.
(e) Employment of marine insurance experts.
(f) Utilization of services of other Government agencies.
Seamen's rights unaffected.
Reports to Congress.
Actions on claims for losses; jurisdiction of
courts; limitation of actions.
Additional insurance with other underwriters.
Expiration of authority to provide insurance.

1295g.

Congressional declaration of policy.
Definitions.
Maintenance of Academy.
(a)Duty of Secretary.
(b) Nomination and appointment of
cadets; designation and licensing of
individuhls from the Trust Territory of the Pacific Islands, Western
Hemisphere nations and nations
other than the United States.
(c) Appointment of cadet as midshipman
in the United States Naval Reserve.
(d) Uniforms, textbooks, and transportation allowances.
(e) Commitment agreements.
(f)Places of training.
(g) Bachelor of science degrees awarded.
(h) Board of Visitors.
(i) Advisory Boad.
State maritime academies.
(a) Cooperation and assistance.
(b) Regional maritime academies.
(c)Training vessels.
(d) Annual payments.
(e) Detailing of personnel.
(f) Conditions to receiving payments or
use of vessels.
(g) Student incentive payment agreements.
(h) Appointment of cadet as midshipman
in United States Naval Reserve.
Additional training.
United States Maritime Service.
(a) Establishment and maintenance.
(b) Enrollment; compensation: course of
study and periods of training; uniforms.
(c) Ranks, grades, and ratings same as
for United States Coast Guard.
Civilian nautical school.
(a) Definition.
of
and inspection
(b) Examination
school; rating and certification.
(c) Inspection of vessels.
(d) Fines and penalties.
Powers and duties of Secretary.
(a)Rules and regulations.
(b) Excess vessels and equipment.
(c) Securing of information, facilities, or
equipment: detailing of personnel.
(d) Employment of personnel.
(e) Inspection of vessels.

CRoss REFERENCEs
Emergency foreign vessel acquisition, see sections
196 to 198 of Title 50, War and National Defense.

§1101

TITLE 46-SHIPPING
CHAPTER

REFERRED TO IN OTHER SECTIONS

This chapter Is referred to in sections 817b, 841b,
865a of this title; title 11 sections 1101, 1102; title 26

section 49; title 40 sections 270f, 484; title 42 sections
9101, 9141; title 50 App. section 1744.

SUBCHAPTER I-DECLARATION OF
POLICY
SURCIIA'TER REFERRED TO IN OTHER SECTIONS

This subehapter is referred to in section 1122 of this
title.
1101. Fostering development and maintenance of
merchant marine
It is necessary for the national defense and
development of its foreign and domestic commerce that the United States shall have a merchant marine (a) sufficient to carry its domestic
water-borne commerce and a substantial portion of the water-borne export and import foreign commerce of the United States and to provide shipping service essential for maintaining
the flow of such domestic and foreign waterborne commerce at all times, (b) capable of
serving as a naval and military auxiliary in time
of war or national emergency, (c) owned and
operated under the United States flag by citizens of the United States, insofar as may be
practicable, (d) composed of the best-equipped,
safest, and most suitable types of vessels, constructed in the United States and manned with
a trained and efficient citizen personnel, and
(e) supplemented by efficient facilities for shipbuilding and ship repair. It is declared to be the
policy of the United States to foster the development and encourage the maintenance of such
a merchant marine.
(June 29, 1936, ch. 858, title I, § 101, 49 Stat.
1985; Oct. 21, 1970, Pub. L. 91-469, § 1, 84 Stat.
1018.)
AMENDMENTS

1970-Pub. L. 91-469 struck out from cl. (a) "on all
routes" following "shipping service" and inserted cl.
(c).
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1119, 1120,

1161, 1191, 1222 of this title.
SUBCHAPTER II-CREATION AND
FUNCTIONS OF MARITIME AGENCIES
§ 11 11. Powers and duties of agencies
(a) Repealed. Pub. L. 97-31, § 12(58)(A), Aug. 6, 1981,
95 Stat. 158
(b) Restriction on appointments; other employment
forbidden; interest in shipping as disqualifying
member
No person shall hold office as a member of
the Commission who, within three years prior
to his appointment, shall have been employed
by, or have had any pecuniary interest, in any
carrier by water or substantial pecuniary interest in any other person who derives a substantial portion of his revenues from any business
associated with ships or shipping. Each member
shall devote his full time to the duties of his
office. It shall be unlawful for any member, of-

Page 308

ficer, or employee of the Federal Maritime
Commission to be in the employ of any other
person, firm, or corporation, or to have any pecuniary interest in, or hold any official relationship with, any carrier by water, shipbuilder,
contractor, or other person, firm, association,
or corporation with whom the Federal Maritime Commission may have business relations.
(c) Records of meetings; seal; rules and regulations
The Commission shall, through its secretary,
keep a true record of all its meetings and the
yea-and-nay votes taken therein, on every
action, order, contract, or financial transaction
approved or disapproved by the Commission. It
shall have an official seal which shall be judicially noticed, and shall adopt rules and regulations in regard to its procedure and the conduct
of its business.
(d) Expenditures
The Commission and the Secretary of Transportation may make such expenditures as are
necessary in the performance of their functions
from funds made available to them by this
chapter or appropriated after June 29, 1936,
which further appropriations are authorized.
(e) Officers and employees
The Commission and the Secretary of Transportation may appoint and prescribe the duties
and fix the salaries of a secretary, a director for
each of not to exceed five divisions, a general
counsel, a clerk to each member of the Commission and not more than three assistants, a clerk
to the general counsel, not more than a total of
twenty naval architects or marine engineers,
twenty special experts, twenty-two examiners,
twelve attorneys, and two inspectors for each
vessel at each shipyard at which vessels are
being constructed by it or under its supervision.
The Commission and the Secretary of Transportation may, subject to the provisions of the
civil-service laws and chapter 51 and subchapter
III of chapter 53 of title 5, appoint such other
officers, engineers, inspectors, attorneys, examiners, and other employees as are necessary in
the execution of their functions.
(f) Traveling and subsistence expenses; pay for military officer on assignment
Each member, any employee of the Commission or the Secretary of Transportation, and
any person detailed to it or the Secretary of
Transportation from any other agency of the
Government shall receive necessary traveling
and subsistence expenses, or per diem allowance in lieu thereof, within the limitations prescribed by law, while away from his official station upon official business of the Commission
or the Secretary of Transportation. Whenever
any officer (not exceeding five in number at
any time) of the Army, Navy, Marine Corps, or
Coast Guard is detailed to the Commission or
the Secretary of Transportation, he shall receive from the Commission or the Secretary of
Transportation, for the period during which he
is so detailed, such compensation as added to
his pay and allowances as an officer in such
service will make his aggregate compensation
equal to the pay and allowances he would re-

TITLE 46-SHIPPING

Page 309

ceive if he were the incumbent of an office or
position in such service (or in the corresponding executive department), which, in the opinion of the Commission or the Secretary of
Transportation, involves the performance of
work similar in importance, difficulty, and responsibility to that performed by him while detailed to the Commission or the Secretary of
Transportation. Expenditures by the CommisLion or the Secretary of Transportation shall be
allowed and paid on the presentation of itemized vouchers therefor approved by the Commission or the Secretary of Transporation or a
designated employee thereof.
(g) Effective date of section
This section shall take effect on June 29,
1936.
(June 29, 1936, ch. 858, title II, § 201, 49 Stat.
1985; Aug. 4, 1939, ch. 417, §§ 3, 4, 53 Stat. 1182;
Oct. 28, 1949, ch. 782, title XI, § 1106(a), 63
Stat. 972; July 7, 1958, Pub. L. 85-507,
§ 21(b)(4), 72 Stat. 337; Oct. 21, 1970, Pub. L.
91-469, § 36, 84 Stat. 1036; Aug. 6, 1981, Pub. L.
97-31, § 12(58), 95 Stat. 158.)
REFERENCES IN TEXT

The civil service laws, referred to in subsec. (e), are
set out in Title 5, Government Organization and Employees. See, particularly, section 3301 et seq. of that
Title.
CODIFICATION

Provisions of the first sentence of subsec. (e)that
authorized the appointment and fixing of the salaries
of a secretary, etc., "without regard to the civil-service
laws or the Classification Act of 1923, as amended",
and provisions that prohibited such employees from
receiving an annual salary at a rate in excess of that
provided under the Classification Act of 1923, as
amended, were omitted as obsolete and superseded.
Such appointments are now subject to the civil service laws unless specifically excepted by such laws or by
laws enacted subsequent to Executive Order 8743, Apr.
23, 1941, issued by the President pursuant to the Act
of Nov. 26, 1940, ch. 919, title I, 1 1, 54 Stat. 1211,
which covered most excepted positions into the classified (competitive) civil service. The Order is set out as
a note under section 3301 of Title 5, Government Organization and Employees.
As to the salaries r.f such personnel, sections 1202
and 1204 of the Classification Act of 1949, 63 Stat. 972,
973, repealed the Classification Act of 1923 and all
other laws or parts of laws Inconsistent with the 1949
Act. The Classification Act of 1949 was repealed by
Pub. L. 89-554, Sept. 6, 1966, §8(a), 80 Stat. 632, and
reenacted as chapter 51 and subchapter III of chapter
53 of Title 5. Section 5102 of Title 5 contains the applicability provisions of the 1949 Act, and section 5103 of
Title 5 authorizes the Office of Personnel Management to determine the applicability to specific positions and employees.
In the last sentence of subsec. (e), "chapter 51 and
subchapter III of chapter 53 of title 5" was substituted
for "the Classification Act of 1949, as amended" on authority of Pub. L. 89-554, § 7(b), Sept. 6, 1966, 80 Stat.
631, the first section of which enacted Title 5, Government Organization and Employees.
AMENDMENTS

1981-Subsec. (a). Pub. L. 97-31, § 12(58)(A), struck
out subsec. (a), which related to establishment, etc., of
the United States Maritime Commission. For prior
transfers of functions, see Transfer of Functions note
below.

§1111

Subsec. d). Pub. L. 97-31, 1 12(58)(B), substituted
"their" for "its" and "them" for "it" and inserted reference to Secretary of Transportation.
Subsec. (e). Pub. L. 97-31, § 12(58)(C), substituted
"their" for "it", inserted reference to Secretary of
Transportation, and struck out proviso which related
to the transfer of employees from the United States
Shipping Board Bureau or United States Shipping
Board Merchant Fleet Corporation to the United
States Maritime Commission and to the Acquisition of
United States Civil Service status.
Subsec. (f). Pub. L. 97-31. § 12(58)(D), inserted references to Secretary of Transportation.
1970-Subsec. (b). Pub. L. 91-469 substituted in last
sentence "Federal Maritime Commission" for "Commission" in two instances.
1958-Subsec. (e). Pub. L. 85-507 eliminated provisions which authorized detail of certain personnel for
training at institutions for scientific education and research.
1949-Subsec. (e). Act Oct. 28, 1949, substituted
"Classification Act of 1949" for "Classification Act of
1923, as amended,".
1939-Subsec. (e). Act Aug. 4, 1939, § 3. authorized
the appointment of a clerk to the general counsel, increased the number of naval architects and special experts from 12 to 20 each, and the number of examiners
from 12 to 22, and permitted not more than 5 members to be detailed annually for engineering, technical,
or other scientific education and training.
Subsec. (f). Act Aug. 4, 1939, §4, provided for the
payment of compensation to officers of the Army,
Navy, Marine Corps, or Coast Guard.
EFFECTIVE DATE OF

1958

AMENDMENT

For effective date of amendment by Pub. L. 85-507,
see section 21(a) of Pub. L. 85-507.
REPEALS

Act Oct. 28, 1949, ch. 782, title XI, § 1106(a), 63 Stat.
972, cited as a credit to this section, was repealed (subJect to a savings clause) by Pub. L. 89-554, Sept. 6,
1966, § 8, 80 Stat. 632, 655.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out below.
The Coast Guard was transferred to the Department
of Transportation, and all functions, powers, and
duties relating to the Coast Guard of the Secretary of
the Treasury and of other officers and offices of the
Department of the Treasury were transferred to the
Secretary of Transportation by Pub. L. 89-670,
§ 6(b)(1), Oct. 15, 1966, 80 Stat. 938. Section 6(b)(2) of
Pub. L. 89-670, however, provided that notwithstanding such transfer of functions, the Coast Guard shall
operate as part of the Navy in time of war or when the
President directs as provided in section 3 of Titte 14,
Coast Guard. See section 1655(b) of Title 49, 'Ira-iportation.
For transfer of functions of other officers, employees, and agencies of the Department of the Treasury,
with certain exceptions, to the Secretary of the Treasury with power to delegate, see Reorg. Plan No. 26 of
1950. §§ 1, 2, eff. July 31, 1950, 15 F.R. 4935, 64 Stat.
1280, 1281, set out in the Appendix to Title 5. Government Organization and Employees. Functions of the
Coast Guard, and the Commandant of the Coast
Guard, were excepted from transfer when the Coast
Guard is operating as part of the Navy under sections
1 and 3 of Title 14.
COMPENSATION OF FEDERAL MARITIME COMMISSIONERS
AND MARITIME ADMINISTRATOR
Annual

basic compensation

of Chairman of

the

Commission, members of the Commission, and Admin-

TITLE 46-SHIPPING

Jill1

istrator, Maritime Administration. see sections 5314
and 5315 of Title 5, Government Organization and
Employees.
Ex. ORD. No. 11156. MARITIME ADvisoRY COMMITTEE
Ex. Ord. No. 11156, eff. June 17, 1964, 29 F.R. 7855,
which established the Maritime Advisory Committee,
was revoked by Ex. Ord. No. 11427, eff. Sept. 4, 1968,
33 F.R. 12617.
I()ORWANIZATION PLAN NO. 7 OF 1961
Eff. Aug. 12, 1901, 26 F.R. 7315. 75 Stat. 840, as amended Pub. L. 88-426, title 11I, J 305(19), Aug. 14, 1964,
78 Stat. 425; Pub. L. 91-469, J 38, Oct. 21, 1970, 84
Stat. 1036
Prepared by the President and transmitted to the
Senate and the House of Representatives In Congress assembled, June 12, 1961, pursuant to the provisions of the Reorganization Act of 1949, 63 Stat.
203, as amended [see 5 U.S.C. 901 et seq.].
MARITIME FUNCTIONS
PART I. FEDERAL MARITIME COMMISSION
SECTION 101. CREATION OF FEDERAL MARITIME
COMMISSION

(a) There is hereby established a Federal Maritime
Commission, hereinafter referred to as the Commission.
(b) The Commission shall not be a part of any executive department or under the authority of the head
of any executive department.
SEC. t02. COMPOSITION OF THE COMMISSION

(a) The Commission shall be composed of five Commissioners, who shall be appointed by the President
by and with the advice and consent of the Senate.
Each Commissioner shall be removable by the President for Inefficiency, neglect of duty, or malfeasance
in office.
(b) The President shall from time to time designate
one of the Commissioners to be the Chairman of the
Commission.
(c) Of the first five Commissioners appointed hereunder, one shall be appointed for a term expiring on
June 30, 1962, one for a term expiring on June 30,
1963, one for a term expiring on June 30, 1964, and
two for terms expiring on June 30, 1965. Their successors shall be appointed for terms of four years, except
that any person chosen to fill a vacancy shall be appointed only for the unexpired term of the Commissioner whom he succeeds. Not more than three of the
Commissioners shall be appointed from the same political party. A vacancy in the office of any such Commissioner shall be filled in the same manner as the
original appointment.
(d) A vacancy In the Commission, so long as there
shall be three Commissioners in office, shall not
impair the power of the Commission to execute its
functions. Any three of the Commissioners in office
shall constitute a quorum for the transaction of the
business of the Commission and the affirmative votes
of any three Commissioners shall be sufficient for the
disposition of any matter which may come before the
Commission. [As amended Pub. L. 88-426, title III,
§ 305(19), Aug. 14, 1964, 78 Stat. 425.]
SEC. 103. TRANSFER OF FUNCTIONS TO COMMISSION

The following functions, which are now vested in
the Federal Maritime Board under the provisions of
Reorganization Plan No. 21 of 1950 (64 Stat. 1273), are
hereby transferred from that Board to the Commission:
(a) All functions under the provisions of sections
14-20, inclusive, and sections 22-33, inclusive, of the
Shipping Act, 1916, as amended (46 U.S.C. 812-819 and
821-832), including such functions with respect to the
regulation and control of rates, services, practices, and

Page 310

agreements of common carriers by water and of other
persons.
(b) All functions with respect to the regulation and
control of rates, fares, charges, classifications, tariffs,
regulations, and practices of common carriers by water
under the provisions of the Intercoastal Shipping Act,
1933, as amended (46 U.S.C. 843-848).
(c) The functions with respect to the making of rules
and regulations affecting shipping in the foreign trade
to adjust or meet conditions unfavorable to such shipping, and with respect to the approval, suspension,
modification, or annulment of rules or regulations of
other Federal agencies affecting shipping in the foreign trade, under the provisions of section 19 of the
Merchant Marine Act. 1920, as amended (46 U.S.C.
876), exclusive of subsection (1)(a) thereof,
(d) The functions with respect to investigating discriminatory rates, charges, classifications, and practices in the foreign trade, and with respect to recommending legislation to correct such discrimination,
under the provisions of section 212(e) of the Merchant
Marine Act, 1936, as amended (46 U.S.C. 1122(f)).
(e) To the extent that they relate to functions transferred to the Commission by the foregoing provisions
of this section:
(1) The functions with respect to requiring the filing
of reports, accounts, records, rates, charges, and
memoranda, under the provisions of section 21 of the
Shipping Act, 1916, as amended (46 U.S.C. 820).
(2) The functions with respect to adopting rules and
regulations, making reports and recommendations to
Congress, subpoenaing witnesses, administering oaths,
taking evidence, and requiring the production of
books, papers, and documents, under the provisions of
sections 204, 208, and 214 of the Merchant Marine Act,
1936, as amended (46 U.S.C. 1114, 1118, and 1124).
SEC.

104.

TRANSFER OF FUNCTIONS TO CHAIRMAN

There are hereby transferred to the Chairman of
the Commission:
(a) The functions of the Chairman of the Federal
Maritime Board, including his functions derived from
the provisions of Reorganization Plan No. 6 of 1949, to
the extent that they relate to the functions transferred to the Commission by the provisions of section
103 of this reorganization plan.
(b) The functions of the Secretary of Commerce to
the extent that they are necessary for, or incidental
to, the administration of the functions transferred to
the Commission by the provisions of section 103 of
this reorganization plan.
SEC. 105. AUTHORITY To DELEGATE

(a) The Commission shall have the authority to delegate, by published order or rule, any of its functions
to a division of the Commission, an individual Commissioner, a hearing examiner, or an employee or employee board, including functions with respect to hearing, determining, ordering, certifying, reporting or
otherwise acting as to any work, business, or matter:
Provided, however, That nothing herein contained
shall be deemed to supersede the provisions of section
7(a) of the Administrative Procedure Act (60 Stat.
241), as amended [see 5 U.S.C. 556].
(b) With respect to the delegation of any of its functions, as provided in subsection (a) of this section, the
Commission shall retain a discretionary right to
review the action of any such division of the Commission, individual Commissioner, hearing examiner, employee or employee board, upon its own initiative or
upon petition of a party to or an intervenor in such
action, within such time and in such manner as the
Commission shall by rule prescribe: Provided, however, That the vote of a majority of the Commission less
one member thereof shall be sufficient to bring any
such action before the Commission for review.
(c) Should the right to exercise such discretionary
review be declined, or should no such review be sought

Page 311

TITLE 46-SHIPPING

within the time stated in the rules promulgated by the
Commission, then the action of any such division of
the Commission, individual Commissioner, hearing examiner. employee or employee board, shall, for all purposes, including appeal or review thereof, be deemed
to be the action of the Commission.
(d) There are hereby transferred to the Chairman of
the Commission the functions with respect to the assignment of Commission personnel, including Commissioners, to perform such functions as may have been
delegated by the Commission to Commission personnel, including Commissioners, pursuant to the foregoing subsections of this section.
PART

II.

DEPARTMENT OF COMMERCE

SECTION 201. MARITIME ADMINISTRATOR

There shall be at the head of the Maritime Administration (established by the provisions of Part II of Reorganization Plan No. 21 of 1950) a Maritime Administrator, hereinafter referred to as the Administrator.
The Assistant Secretary of Commerce for Maritime
Affairs shall, ex officio, be the Administrator. The Administrator shall perform such duties as the Secretary
of Commerce shall prescribe. [As amended Pub. L.
88-426, title III, 305(19)(B), Aug. 14, 1964, 78 Stat.
425; Pub. L. 91-469, 1 38(a), Oct. 21, 1970, 84 Stat.
1036.]
SEC. 202. FUNCTIONS OF SECRETARY OF COMMERCE
(a) Except to the extent inconsistent with the provisions of sections 101(b) or 104(b) of this reorganization
plan, there shall remain vested in the Secretary of
Commerce all the functions conferred upon the Secretary by the provisions of Reorganization Plan No. 21
of 1950.
(b) There are hereby transferred to the Secretary of
Commerce:
(1) All functions of the Federal Maritime Board
under the provisions of section 105(1) to 105(3), inclusive, of Reorganization Plan No. 21 of 1950.
(2) Except to the extent transferred to the Commission by the provisions of section 103(e) of this reorganization plan, the functions described in the said section 103(e).
(3) Any other functions of the Federal Maritime
Board not otherwise transferred by the provisions of
part I of this reorganization plan.
(4) Except to the extent transferred to the Chairman of the Commission by the provisions of Part I of
this reorganization plan, the functions of the Chairman of the Federal Maritime Board.

SEC. 203.

DELEGATION OF FUNCTIONS

The provisions of sections 2 and 4 of Reorganization
Plan No. 5 of 1950 (64 Stat. 1263) shall be applicable to
all functions transferred to the Secretary of Commerce by, or remaining vested in him under, the provisions of this reorganization plan.
PART

III.

GENERAL PROVISIONS

SECTION 301. CONFLICT OF INTEREST
The provisions of the last sentence of section 201(b)
of the Merchant Marine Act, 1936, as affected by the
provisions of Reorganization Plan No. 21 of 1950 (46
U.S.C. I 1111(b)) (prohibiting the members of the Federal Maritime Board and all officers and employees of
that Board or of the Maritime Administration from
being in the employ of any other person, firm, or corporation, or from having any pecuniary interest in or
holding any official relationship with any carrier by
water, shipbuilder, contractor, or other person, firm,
association, or corporation with whom the Federal
Maritime Board or the Maritime Administration may
have business relations) shall hereafter be applicable
to the Commissioners composing the Commission and
all officers and employees of the Commission. [As
amended Pub. L. 91-469, § 38(b), Oct. 21, 1970, 84 Stat.
1036.]

§1111

SEC. 302. INTERIM APPOINTMENTS
Pending the initial appointment hereunder of the
Commissioners composing the Commission and of the
Maritime Administrator, but not for a period exceeding 90 days. such officers of the executive branch of
the Government (including any person who is a
member of the Federal Maritime Board or Deputy
Maritime Administrator immediately prior to the
taking effect of the provisions of this reorganization
plan) as the President shall designate under the provisions of this section shall be Acting Commissioners of
the Federal Maritime Commission or Acting Maritime
Administrator. The President may designate one of
such Acting Commissioners as Acting Chairman of the
Commission. Any person who is not while serving
under an interim appointment pursuant to the forego.
ing provisions of this section receiving compensation
attached to another Federal office shall receive the
compensation herein provided for the office wherein
he serves in an interim capacity.
SEC. 303. INCIDENTAL TRANSFERS

(a) So much of the personnel, property, records, and
unexpended balances of appropriations, allocations,
and other funds employed, used, held, available, or to
be made available in connection with the functions
transferred to the Commission or to the Chairman of
the Commission by the provisions of Part I of this reorganization plan as the Director of the Bureau of the
Budget shall determine shall be transferred to the
Commission at such time or times as the Director
shall direct.
(b) Such further measures and dispositions as the
Director of the Bureau of the Budget shall deem to be
necessary in order to effectuate the transfers provided
for in subsection (a) of this section shall be carried out
in such manner as he shall direct and by such agencies
as he shall designate.
(c) Subject to the foregoing provisions of this section, the Secretary of Commerce may transfer within
the Department of Commerce personnel, property,
records, and unexpended balances of appropriations,
allocations, and other funds employed, used, held,
available, or to be made available in connection with
functions which were transferred to the Department
of Commerce (including the Federal Maritime Board
and the Chairman thereof) by the provisions of Reorganization Plan No. 21 of 1950.
SEC. 304. ABOLITION OF FEDERAL MARITIME BOARD
The Federal Maritime Board, including the offices
of the members of the Board, is hereby abolished, and
the Secretary of Commerce shall provide for the termination of any outstanding affairs of the said Board
not otherwise provided for in this reorganization plan.

SEC. 305. STATUS OF PRIOR PLAN
The following provisions of Reorganization Plan No.
21 of 1950 are hereby superseded:
(1) Part I.
(2) Section 202.
(3) Sections 302 to 307, inclusive.
FEDERAL MARITIME COMMISSION; TERM OF OFFICE;
VACANCIES; CONTINUITY OF S.RVICE

Pub. L. 89-56, June 30, 1965, 79 Stat. 195, provided;
"That Commissioners of the Federal Maritime Commission, provided for by section 102 of Reorganization
Plan Numbered 7 of 1961 (75 Stat. 849), shall herafter
be appointed for a t.,m of five years except that one
of the two terms which commence July 1, 1965, shall
initially be for four years and thereafter shall be for
five years: Provided, however, That a person chosen to
fill a vacancy shall be appointed only for the unexpired term of the Commissioner whom he succeeds:
Provideed, further, That upon the expiration of his
term of office a Commissioner shall continue to serve

TITLE 46-SHIPPING

gill]

until his successor shall have been appointed and shall
have qualified."
MESSAGE O

THE PRESIDENT

To the Congress of the United States:
I transmit herewith Reorganization Plan No. 7 of
1961, prepared in accordance with the Reorganization
Act of 1949, as amended, and providing for the reorganization of maritime functions.
The basic objective of the plan Is to strengthen and
revitalize the administration of our Federal programs
concerned with the promotion and development of the
U.S. merchant marine by concentrating responsibility
In separate agencies for the performance of regulatory
and promotional functions. The plan provides, therefore, for the creation of a separate Federal Maritime
Commission, composed of five Commissioners, which
would be charged with the regulatory functions of the
present Federal Maritime Board. There would be
transferred from the Federal Maritime Board to the
Secretary of Commerce the award of subsidies and related promotional functions. The Secretary of Commerce would retain the functions transferred to him
by Reorganization Plan No. 21 of 1950 which reorganized the U.S. Maritime Commission into a Federal
Maritime Board and a Maritime Administration in the
Department of Commerce. The plan retains the present Maritime Administration, provides for an Administrator as head thereof, retains a Deputy Maritime Administrator, and effects no change in the Office of the
Under Secretary of Commerce for Transportation.
The Federal Maritime Board is abolished.
Existing organizational arrangements have not
proved to be satisfactory. The development and maintenance of a sound maritime industry require that the
Federal Government carry out its dual responsibilities
for regulation and promotion with equal vigor and effectiveness. Intermingling of regulatory and promotional functions has tended in this instance to dilute
responsibility and has led to serious Inadequacies, particularly in the administration of regulatory functions.
Recent findings by committees of the Congress disclose serious violations of maritime laws and point to
the urgent need for a reorganization to vest In completely separate agencies a responsibility for (1) regulatory functions and (2) promotional and operating
functions.
The plan would provide the most appropriate organizational framework for each of the functions concerned. Regulation would be made the exclusive responsibility of a separate commission organized along
the general lines of other regulatory agencies. On the
other hand, nonregulatory functions, including the determination and award of subsidies and other promotional and operating activities, would be concentrated
in the head of the Department of Commerce. The Secretary of Commerce is best qualified to coordinate
these activities with other transportation and related
economic programs.
The vesting of all subsidy functions in the Secretary
of Commerce will make it possible for the Congress
and the President to hold a single official responsible
and accountable for the effective conduct of all aspects of this program, including the size and character
of the fleet under the U.S. flag, the need for Government assistance, and requirements for appropriations
to support subsidy programs. Furthermore, the placing of these functions in the Secretary of Commerce
will assure essential supervision and review of subsidy
awards.
The taking effect of the reorganizations included in
the accompanying reorganization plan will result in a
modest increase in expenditures. The Improved organizational alinements provided by the plan will, however, make possible a more effective and expeditious administration of the statutory objectives to foster and
promote a U.S. merchant marine capable of meeting
the Nation's needs in peace and war. Failure to meet
these objectives would be far more costly than the anticipated increase in expenditures under the plan.

Page 312

After Investigation, I have found and hereby declare
that each reorganization included in Reorganization
Plan No. 7 of 1961 is necessary to accomplish one or
more of the purposes set forth in section 2(a) of the
Reorganization Act of 1949, as amended.
I have also found and hereby declare that it is necessary to include in the accompanying reorganization
plan, by reason of reorganizations made thereby, provisions for the appointment and compensation of new
officers specified in sections 102 and 201 of the plan.
The rates of compensation fixed for these officers are,
respectively, those which I have found to prevail in respect of comparable officers In the executive branch
of the Government.
I recommend that the Congress allow the reorganization plan to become effective.
JOHN F. KENNEDY.

THE WHITE HOUSE, June 12, 1961.
REORGANIZATION PLAN NO. 21 OF 1950
Eff. May 24, 1950, 15 F.R. 3178, 64 Stat. 1273, as
amemded Reorg. Plan No. 7 of 1961, § 305, eff.
Aug. 12, 1961, 26 P.R. 7315, 75 Stat. 840
Prepared by the President and transmitted to the
Senate and the House of Representatives in Congress assembled, March 13, 1950, pursuant to the
provisions of the Reorganization Act of 1949, approved June 20, 1949 [see 5 U.S.C. 901 et seq.].
PART I. FEDERAL MARITIME BOARD

§§ 101-106. [Superseded. Reorg. Plan No. 7 of 1961,
§ 305, eff. Aug. 12, 1961, 26 P.R. 7315, 75 Stat. 840. Section 101 established the Federal Maritime Board. Section 102 provided for the composition of the Federal
Maritime Board. Section 103 transferred certain functions from the Chairman of the United States Maritime Commission to the Chairman of the Federal
Maritime Board. Section 104 transferred regulatory
functions of the United States Maritime Commission
to the Federal Maritime Board. Section 105 transferred subsidy award and other functions of the
United States Maritime Commission to the Federal
Maritime Board. Section 106 provided that the Board
was to be an agency within the Department of Commerce, but would be independent of the Secretary of
Commerce with respect to functions transferred to it
under section 104.]
PART II. MARITIME ADMINISTRATION

§ 201. CREATION OF MARITIME ADMINISTRATION
There is hereby established in the Department of
Commerce a Maritime Administration.
§ 202 (Superseded. Reorg. Plan No. 7 of 1961, 1 305,
eff. Aug. 12, 1961, 26 F.R. 7315, 75 Stat. 840. Section
provided for a Maritime Administrator to be at the
head of the Maritime Administration, and that the
Chairman of the Federal Maritime Board would be
such Administrator and would perform duties prescribed by the Secretary of Commerce.]
J

203.

DEPUTY MARITIME ADMINISTRATOR

There shall be in the Maritime Administration a
Deputy Maritime Administrator, who shall be appointed by the Secretary of Commerce, after consultation
with the Administrator, under the classified civil service, and who shall perform such duties as the Administrator shall prescribe. The Deputy Maritime Administrator shall be Acting Maritime Administrator during
the absence or disability of the Administrator and,
unless the Secretary of Commerce shall designate another person, during a vacancy in the office of Administrator: Provided, That such Deputy Administrator
shall at no time sit as a member or acting member of
the Federal Maritime Board.

Page 313

TITLE 46-SHIPPING

1 204. TRANSFER OF FUNCTIONS
Except as otherwise provided in part I of this reorgaization plan, all functions of the United States Maritime Commission and of the Chairman of said Commission are hereby transferred to the Secretary of
Commerce. The Secretary of Commerce may from
time to time make such provisions as he shall deem
appropriate authorizing the performance by the Maritime Administrator of any function transferred to
such Secretary by the provisions of this reorganization
plan.
PART III. GENERAL PROVISIONS

§ 301.

UNDER SECRETARY OF COMMERCE FOR
TRANSPORTATION

There shall be in the Department of Commerce an
additional office of Under Secretary with the title
"Under Secretary of Commerce for Transportation."
The Under Secretary of Commerce for Transportation
shall be appointed by the President, by and with the
advice and consent of the Senate, shall receive compensation at the rate prescribed by law for Under Secretaries of Executive departments, and shall perform
such duties as the Secretary of Commerce shall prescribe.
JI 302-307. (Superseded. Reorg. Plan No. 7 of 1961,
§ 305, eff. Aug. 12, 1961, 26 F.R. 7315, 75 Stat. 840. Section 302 provided that person who was both Administrator and Chairman was to make joint use of the personnel under his supervision. Section 303 made conflict of interest provisions of the Merchant Marine
Act, 1936, applicable to members of the Federal Maritime Board and officers and employees of the Board
or of the Maritime Administration. Section 304 allowed the President to make interim appointments to
the Federal Maritime Board from officers of the Executive Branch. Section 305 transferred to the Department of Commerce all property, personnel, records,
and funds of the United States Maritime Commission.
Section 306 abolished the United States Maritime
Commission. Section 307 provided that the functions
transferred by this reorganization plan would not be
subject to Reorg. Plan No. 5 of 1950.]
MESSAGE OF THE PRESIDENT

To the Congress of the United States:
I transmit herewith Reorganization Plan No. 21 of
1950, prepared in accordance with the provisions of
the Reorganization Act of 1949. This plan effects a
basic reorganization of the functions of the United
States Maritime Commission along the lines recommended by the Commission on Organization of the
Executive Branch of the Government.
Within the last 3 years three different bodies have
studied the administration of the Maritime Commission. All have concluded that the operating deficiencies of the agency arise from inappropriate and unsound organization and that a fundamental reorganization is essential. The first of these bodies, the President's Advisory Committee on the Merchant Marine,
in 1947, stated:
It appears to the Committee that the organization structure of the Maritime Commission as set
up in the Merchant Marine Act of 1936 is wholly
inadequate for the efficient conduct of the multitude of diverse activities for which the Maritime
Commission is now responsible. The deficiencies of
the statutory organization for administrative
action are regarded by the Committee to be the
most serious obstacle standing in the way of the
development of the Merchant Marine of this country.
Similarly, the survey of the Maritime Commission in
1948 for the Senate Committee on Expenditures in the
Executive Departments concluded thatThe fundamental weakness of the Maritime
Commission, as it is now constituted, lies in its proscribed organization.

plIII

On the basis of investigations of the Maritime Com.
mission by two of its task forces, the Commission on
Organization of the Executive Branch stated:
It is an anomaly that a regulatory commission
should also conduct the executive function of managing a huge business: that executive functions
should be carried on by an agency that is not subject to Presidential directions' that executive functions should be carried on by a full-time
board * *.
While the recommendations of the various studies
differ in some details, they agree on principles and on
the main features of reorganization.
Basically. the administrative difficulties of the Maritime Commission have arisen, as all these studies
agree, from the fact that the Commission is responsible for performing two fundamentally different types
of functions which call for different types of organization. These two classes of functions are (a) regulatory
and (b) operating and promotional. Under various acts
the Commission regulates rates and services of water
carriers; passes on agreements among carriers; and
protects shippers against unfair and discriminatory
practices. This type of activity requires the deliberation and independence of judgment which a board or
commission Is especially well designed to provide. But
at the same time the Commission is charged with the
conduct of a variety of large and costly promotional
and business-type programs demanding the prompt
and vigorous administration for which experience
both in Government and in private enterprise has
demonstrated that a single executive is essential.
The Maritime Commission has charge of the construction of merchant vessels for subsidized operators
and for Government account. It owns and maintains
the largest merchant fleet in the world, consisting of
2,200 vessels aggregating more than 22,000,000 deadweight tons. It charters and sells ships and, in time of
war or national emergency, requisitions and operates
vessels for the Government. It grants construction and
operating differential subsidies to private shipping
companies to maintain an active privately operated
American merchant marine. It makes loans and insures mortgages to assist carriers in acquiring new vessels, and it conducts programs for training officers and
seamen for the merchant marine. For the present
fiscal year the performance of these functions will involve the expenditure of approximately $162,000,000
and the direction of an organization of 5,500 employees. In short, the administration of the Maritime Commission is a vast business undertaking. Moreover, the
work of the Commission affects significantly the interests of both business and labor in the maintenance of
a sound maritime industry.
Further than this, many of the activities of the
Maritime Commission are closely related to other programs of the Government and have to be coordinated
with them. In the construction of a subsidized ship the
Commission must cooperate with the Coast Guard on
those features of design, materials, and equipment
which affect the safety of the vessel and with the
Navy on those which especially affect the use of the
ship for national defense. Furthermore, the whole
program of subsidized ship construction needs to be
adjusted to the plans and requirements for national
defense. At the same time the Commission's programs
for the development of the merchant marine must be
coordinated with our foreign policy and with Federal
programs with respect to other branches of transportation.
While an independent commission is an appropriate
instrument for the performance of the regulatory
functions of the Maritime Commission, such an
agency obviously is not the type required to provide
strong and efficient administration of the large operating programs now entrusted to the Commission or to
obtain the needed coordination with other activities of
the executive branch. This fact is amply demonstrated
by the administrative difficulties and the complicated

SIIII

TITLE 46-SHIPPING

problems of coordination encountered In the operation
of the Commission since the war and by the necessity
of transferring a large part of its functions to the War
Shipping Administration, headed by a single executive, during the war.
Briefly, this reorganization plan provides for a small
Federal Maritime Board and a Maritime Administration in the Department of Commerce to perform the
functions of the Maritime Commission, and abolishes
tie existing Commission. It transfers to the Board the
regulatory functions of the Commission and definitely
guarantees tile independence of the Board In the performance of these functions. In addition, it vests directly in tile Board the determination and award of
construction and operating differential subsidies. In
tile performance of its subsidy functions the Board
will be subject to general policy guidance by the Secretary of Commerce. The Board, however, and it alone,
will determine to whom subsidies shall be granted and
will make and award the subsidy contracts. Its actions
therein will be conclusive and will not be subject to
modification by any other agency or officer of the Department of Commerce. The other functions of the
Maritime Commission, including carrying out the subsidy agreements made by tile Board and administering
the various operating programs, are transferred to the
Secretary of Commerce for administration through
the Maritime Administration. Thus, the plan provides
for each of the two types of functions now vested in
the Maritime Commission the type of organization
best suited to its performance. At the same time, the
plan will facilitate coordination of maritime policies
and programs with other related policies and programs.
The division of functions under this plan conforms
directly to tie recommendations of the Commission
on Organization of the Executive Branch of the Government. While the award of subsidies is a promotional rather than a regulatory function and might logically be assigned to the Maritime Administration instead
of the Board, its impact on the shipping industry and
on individual carriers is such as to make desirable the
deliberation and combined judgment of a board. Accordingly, I have adhered to the recommendation of
the Commission on Organization that this function be
vested in a multiple body rather than a single official.
Likewise, in line with the recommendations of the
Commission, the plan assigns the determination of the
over-all route pattern to the Secretary of Commerce.
Tile Maritime Board will consist of three members
appointed by the President with the consent of the
Senate for overlapping terms of 4 years. Not more
than two of the members can be of the same political
party. The Board, therefore, will be a smaller and
more wieldy body which can function with greater expedition and efficiency than the existing five-member
Commission. The Chairman will be designated by the
President from the members of the Board and will be,
ex officio, the Maritime Administrator and as such the
head of the Maritime Administration. The plan also
provides for a Deputy Maritime Administrator appointed by the Secretary of Commerce under the classified civil service. After investigation I have found,
and hereby declare, that by reason of the reorganiza.
tions made by this plan, it is necessary to include in
the plan provisions for the appointment and compensation of the members of the Federal Maritime Board
and for the appointment of the Deputy Maritime Administrator.
In making the Chairman of the Federal Maritime
Board the Maritime Administrator, the plan adopts an
arrangement substantially similar to that which prevailed during the war, when the same Individual
served as Chairman of the Maritime Commission and
head of the War Shipping Administration. This arrangement will have important advantages. It will facilitate cooperation between the Board and the Administration on matters of concern to both. Also, it
will avoid dividing the personnel of the Maritime Commission, since the Chairman of the Board will super-

Page 314

vise the personnel assisting it in the performance of
its functions, as is now the case in the Maritime Commission, and in his capacity as Administrator he will
have charge of the personnel carrying on the work of
the Maritime Administration. The plan provides for
the joint operation of the officers and employees
under the Administrator and Chairman as a single
body of personnel. The maintenance of a unified staff
is essential for efficient and economical administration
because many of the technical and professional personnel, such as ship designers and attorneys, now
assist the Maritime Commission on problems of subsidy determination and also participate in the subsequent administration of subsidy agreements and in
performing nonsubsidy functions.
The inclusion of the new Board in the Department
of Commerce will permit the use of the administrative
services of the Department. More important, it will
eliminate the necessity of splitting the personnel of
the Maritime Commission between the Department
and an outside agency. In addition, it will relieve the
President of having to handle relations with a separate maritime agency.
In establishing the Department of Commerce the
Congress provided in the organic act of the Department thatIt shall be the province and duty of said Department to foster, promote, and develop the foreign
and domestic commerce, * 0 $ shipping,* $ $ and
the transportation facilities of the United States.
Over the years, however, transportation functions
have become widely scattered throughout the executive branch. As a result, Intelligent planning and budgeting of Federal transportation activities and the necessary coordination of transportation programs have
become extremely difficult or impossible. The transfer
of the functions of the Maritime Commission to the
Department of Commerce will constitute a major step
in correcting this condition.
Without question the Department of Commerce is
now the appropriate center for transportation programs. It contains the Civil Aeronautics Administration-the major operating and promotional agency of
the Government in the field of air transportationand the Weather Bureau, and the Coast and Geodetic
Survey, which provide vital services to transportation.
As a result of Reorganization Plan No. 7 of 1949, it
now also includes the Bureau of Public Roads, the
leading promotional agency dealing with land transportation. Also, it has the Inland Waterways Corporation in the field of water transportation. The transfer
of the functions of the Maritime Commission will
bring into the Department the principal water-transportation agency of the Government. These actions
will go a long way toward the establishment of a
sound and effective organization for the operating and
promotional programs of the Government relating to
transportation.
It is my purpose to look to the Secretary of Commerce for leadership with respect to transportation
problems and for the development of over-all transportation policy within the executive branch. Because
of the magnitude and importance of the transportation functions transferred to the Department of Commerce by this reorganization plan, I have found and
hereby declare that it is necessary to strengthen the
top administrative structure of the Department by
providing for the appointment and compensation of a
new Under Secretary of Commerce for Transportation. This will make available an officer of the highest
rank to assist the Secretary in supervising the varied
and complex transportation programs of the Department and providing central leadership in transportation matters. With the many responsibilities of the
Secretary of Commerce in other areas, the creation of
this office is essential to enable him properly to fulfill
his obligations with respect to transportation,
After careful investigation I have found and I
hereby declare that each of the reorganizations con-

Page 315

TITLE 46-SHIPPING

talned in this reorganization plan is necessary to accomplish one or more of the purposes set forth in section 2(a) of the Reorganization Act of 1949. The rates
of compensation fixed by the provisions of the reorganization plan for the Under Secretary of Commerce
for Transportation, the Chairman, and the other two
members of the Federal Maritime Board are, respectively, those which I have found to prevail in respect
of comparable officers in the executive branch of the
Government.
In summary, the reorganizations provided by this
plan will have the following principal advantages:
They will provide an efficient organization headed by
a single responsible official to administer the large operating and business-type programs of the Maritime
Commission. At the same time, they will preserve the
benefits of a bipartisan board for the performance of
the regulatory functions of the Commission and the
determination of subsidies. They will reduce the
number of agencies reporting directly to the President
and simplify the over-all management of the executive
branch. In doing so, they will provide more adequate
machinery for supervising the administration of the
maritime programs and will facilitate their coordination with related policies and programs of the executive branch. Flzually, they will accomplish a major advance in the development of an effective organization
of Federal transportation programs in accord with the
recommendations of the Commission on Organization
of the Executive Branch of the Government. While it
is impossible to estimate in advance the savings which
will be brought about by this plan, the improvements
in administrative efficiency resulting from it should
produce substantial reductions in expenditures for the
programs transferred by the plan.
HARRY S. TRUMAN.
THE WHITE HOUSE, March 13, 1950.
REORGANIZATION PLAN NO. 6 OF 1949
Eff. Aug. 20, 1949, 14 F.R. 5228, 63 Stat. 1069
Prepared by the President and transmitted to the
Senate and the House of Representatives in Congress
assembled, June 20, 1949, pursuant to the provisions of
the Reorganization Act of 1949, approved June 20,
1949 [see 5 U.S.C. 901 et seq.].
§ 1. ADMINISTRATION OF FUNCTIONS OF COMMISSION
The Chairman of the United States Maritime Commission shall be the chief executive and administrative
officer of the United States Maritime Commission. In
executing and administering on behalf of the Commission its functions (exclusive of functions transferred
by the provisions of section 2 of this reorganization
plan) the Chairman shall be governed by the policies,
regulatory decisions, findings, and determinations of
the Commission.

§ 2. TRANSFER OF FUNCTIONS
There are hereby transferred from the United
States Maritime Commission to the Chairman of the
Commission the functions of the Commission with respect to (1) the appointment and supervision of all
personnel employed under the Commission, (2) the
distribution of business among such personnel and
among organizational units of the Commission, and (3)
the use and expenditure of funds for administrative
purposes: Provided,That the provisions of this section
do not extend to personnel employed regularly and
full time in the offices of members of the Commission
other than the Chairman: Provided further, That the
heads of the major administrative units shall be appointed by the Chairman only after consultation with
the other members of the Commission.
1 3. PERFORMANCE OF TRANSFERRED FUNCTIONS
The functions of the Chairman under the provisions
of this reorganization plan shall be performed by him

§ !!11

or, subject to his supervision and direction, by such of.
ficers and employees under his jurisdiction as he shall
designate.
MESSAGE OF THE PRESIDENT

To the Congress of the United States:
I transmit herewith Reorganization Plan No. 6 of
1949, prepared in accordance with tile Reorganization
Act of 1949. This plan Is designed to strengthen the
administration of the United States Maritime Commission by making the Chairman and the chief executive and administrative officer of tile Commission and
vesting In him responsibility for the appointment of
its personnel and the supervision and direction of
their activities. After investigation, I have found and
hereby declare that each reorganization included in
this plan is necessary to accomplish one or more of the
purposes set forth in section 2(a) of the Reorganization Act of 1949.
Unlike other major regulatory commissions, the
Maritime Commission is responsible not only for the
performance of important regulatory functions but
also for the administration of large and complex operating and promotional programs. Whereas the budgets
of most regulatory agencies amount to only a few million dollars annually, the expenditures of the Maritime Commission exceed $130,000,000 a year. As a
result of the war the Commission is the owner of a
fleet of over 2,300 ships, aggregating more than
23,000,000 dead-weight tons.
While It is the policy of the Government, as set
forth by the Merchant Marine Act of 1936 and tile
Merchant Ship Sales Act of 1946, to develop and maintain an adequate and effective merchant marine under
private ownership, the Commission is still confronted
with the necessity of carrying on substantial programs
for the charter and sale o1 Government-owned vessels
and with the continuing task of maintaining the reserve merchant fleet.
Apart from Its functions with respect to the warbuilt fleet, the accomplishment of the Government's
permanent objective with respect to the development
of the American merchant marine Inevitably involves
the Commission to a wide variety of activities. Among
these are the regulation of rates and competitive practices of water carriers, the determination of essential
trade routes and services, the award of subsidies to
offset differences between American and foreign costs,
the design and construction of ships, the inspection of
subsidized vessels, and the training of seamen.
In the last 2 years the operation of the Maritime
Commission has been subjected to independent examination by three bodies-the President's Advisory Committee on the Merchant Marine, the Senate Committee on Expenditures in the Executive Departments,
and the Commission on Organization of the Executive
Branch of the Government. All of these studies have
pointed to difficulties In the conduct of the Commission's business and the necessity of improved organization to strengthen the administration of the agencies.
The remedies proposed have differed in some respects,
but all the studies have emphasized the need of concentrating in a single official the management of a
large part of the agency's work.
During the war such a concentration was temporarily accomplished by Executive order under the authority of the First War Powers Act. In effect, the Chairman of the Commission, as War Shipping Administrator, was made directly responsible for the administration of several major operating programs of the Commission. This arrangement proved its value under the
stress of war. About a year after the end of the fighting, however, it was terminated and the organization
reverted to the prewar pattern.
As a result of postwar experience, the Commission
appointed a general manager in 1948. While this has
brought considerable improvement, It has not extricated the Commission from administration to the degree
which Is desirable.

IIII1

TITLE 46-SHIPPING

After careful consideration of the problems involved
in Improving the operation of the Maritime Commission, I have concluded that tile proper action at this
time is to concentrate in the Chairman the responsibility for the Internal administration of the agency.
rhis is achieved by the proposed reorganization plan
by transferring to the Chairman the appointment of
tile personnel of tile agency, except for the immediate
assistants of the Commissioners, and the supervision
and direction of their work. This is substantially the
arrangement recommended for regulatory commissions by tile Commission on Organization of the Executive Branch of the Government.
Such a plan of organization has many advantages. It
leaves in tie Commission as a body the performance
of regulatory functions, the determination of subsidies, and tile determination of major policies. Thus, it
utilizes the Commission for the type of work for which
such a body is best adapted. At the same time the plan
places under a single official the day-to-day direction
of the work of the staff within the policies and determinations adopted by the Commission in the exercise
of Its functions. This will provide more businesslike
administration and help to overcome the delays, backlogs, and operating difficulties which have hampered
the agency. At the same time by freeing the members
of the Commission of much detail, the plan will enable
them to concentrate on major questions of policy and
program and thereby will obtain earlier and better
considered resolution of the basic problems of the
agency.
Though the taking effect of this plan in itself may
not result in substantial immediate economies, it is
probable that the improved organizational arrangements will bring about, over a period of time, impioved operations and substantially reduced expenditures. An itemization of these reductions, however, in
advance if actual experience under the plan Is not
practicable.
I am convinced that this reorganization plan will
contribute Importantly to the more businesslike and
efficient administration of the programs of the Maritime Commission.
HARRY S. TRUMAN.
THE WHITE HOUSE. June 20, 1949.
FEDERAL MARITIME BOARD AND MARITIME
ADMINISTRATION

The following is a statement, in part, of the Department of Commerce, relating to the organization and
functions of the Federal Maritime Board, and the
Maritime Administration, created by Reorg. Plan No.
21 of 1950, set out above, as such statement appeared
in 16 F.R. 44 to 46, Jan. 3, 1951:
The statement of organization and functions of the
Maritime Administration issued in 15 F.R. 4454-4457 is
hereby revoked and the following substituted therefor:
1. Establishment. The Federal Maritime Board and
the Maritime Administration were established in the
Department of Commerce by Reorganization Plan No.
21 of 1950, effective May 24, 1950 [set out above]. In
performance of their functions the Federal Maritime
Board and the Maritime Administration are guided by
the broad declaration of policy stated in Title I of the
Merchant Marine Act, 1936 (49 Stat. 1985) [section
1101 of this title], reaffirmed in section 2 of the Merchant Ship Sales Act, 1946 (60 Stat. 41) [section 1735
of Appendix to Title 50, War and National Defense]
2. Organization of the Federal Maritime Board. The
Federal Maritime Board is composed of three members appointed by the President by and with the
advice and consent of the Senate. The President designates one of the members to serve as Chairman of the
Federal Maritime Board. The Chairman serves as
chief executive and administrative officer of the Federal Maritime Board. Any two members in office constitute a quorum for the transaction of the business of

Page 316

the Federal Maritime Board, and the affirmative votes
of any two members are sufficient for the disposition
of any matter which may come before the Federal
Maritime Board.
The Federal Maritime Board has the following organizational components: (a) Office of the Chairman of
the Federal Maritime Board; (b) Offices of the Members of the Federal Maritime Board; (c) Secretary's
Office; (d) Regulation Office; and (e) Hearing Examiners' Office.
Insofar as he deems desirable, the Chairman of the
Federal Maritime Board makes use of the officers and
employees of the Maritime Administration to perform
activities for the Federal Maritime Board.
3. Functions of the Federal Maritime Board-(a)Regulatory functions. Under Reorganization Plan No. 21
of 1950 the Federal Maritime Board is independent of
the Secretary of Commerce in the performance of the
following functions: (1) All functions under the provisions of sections 14 to 20, inclusive, and sections 22 to
33, inclusive, of the Shipping Act, 1916, as amended
[sections 812 to 817, 818, 819 and 821 to 832 of this
title], including such functions with respect to the regulation and control of rates, services, practices, and
agreements of common carriers by water and of other
persons;
(2) All functions with respect to the regulation and
control of rates, fares, charges, clb.6sifications, tariffs,
regulations, and practices of common carriers by water
under the provisions of the Intercoastal Shipping Act,
1933, as amended [sections 843 to 848 of this title];
(3) The functions with respect to the making of
rules and regulations affecting shipping in the foreign
trade to adjust or meet conditions unfavorable to such
shipping, and with respect to the approval, suspension,
modification, or annulment of rules or regulations of
other Federal agencies affecting shipping in the foreign trade, under the provisions of section 19 of the
Merchant Marine Act, 1920, as amended [section 876
of this title], exclusive of subsection (1)(a) thereof:
(4) The functions with respect to investigating discriminatory rates, charges, classifications, and practices in the foreign trade, and with respect to recommending legislation to correct such discrimination,
under the provisions of section 212(e) of the Merchant
Marine Act, 1936 (section 1122(e) of this title]; and
(5) So much of the functions with respect to requiring the filing of reports, accounts, records, rates,
charges, and memoranda, under the provisions of section 21 of the Shipping Act, 1916, as amended [section
820 of this title], as relates to its functions under
items (1) through (4), above.
(b) Subsidy contracts. Under Reorganization Plan
No. 21 of 1950 the Federal Maritime Board is guided
by the general policies of the Secretary of Commerce
in performing the following functions: (1) The functions with respect to making, amending, and terminating construction (reconstruction or reconditioning)
differential subsidy contracts, including contracts for
the construction, reconstruction, or reconditioning of
vessels and contracts for the sale of vessels to subsidy
applicants or contracts to pay a differential subsidy
and the cost of national defense features. In the exercise of this function the Federal Maritime Board investigates and determines the relative cost of construction of comparable vessels in the United States and
foreign countries and the extent and character of aids
and subsidies granted by foreign governments to their
merchant marines;
(2) The functions with respect to making, amending,
and terminating operating differential subsidy contracts and, subsequent to entering into an operating
differential subsidy contract, making determinations
with respect to employment and wage conditions, and
taking action on readjustment of operating cost differentials and the sale, assignment, or transfer of the
contract. In the exercise of this function the Federal
Maritime Board investigates and determines the relative cost of operating vessels under the registry of the

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TITLE 46-SHIPPING

United States and under foreign registry, and the
extent and character of aids and subsidies granted by
foreign governments to their merchant marines;
(3) The functions with respect to investigating and
reporting on relative construction and operating costs
in the United States and foreign maritime countries,
and the relative advantages of operating under United
States or foreign registry, and on marine insurance,
navigation laws, and vessel mortgages as authorized
under section 12 of the Shipping Act, 1916 [section 811
of this title]; and
(4) The functions with respect to requiring the filing
of reports, accounts, records, rates, charges, and
memoranda as relates to its functions as set forth in
items (1), (2), and (3), above.
(c) Chartersunder the Merchant Ship Sales Act, 1946.
The Federal Maritime Board makes determinations,
after public hearings, as to whether the bareboat
charter of warbuilt dry cargo vessels owned by the
United States is required In the public interest in any
service then not adequately served and for which privately owned American-flag vessels are not available
for charter by private operators on reasonable conditions and rates, and certifies its findings to the Secretary of Commerce together with any restrictions and
conditions which it determInes to be necessary or appropriate to protect the public interest In respect to
such charters and to protect privately owned vessels
against competition from Government vessels chartered by the Secretary of Commerce. All such charters
are reviewed annually by the Federal Maritime Board
for the purpose of making recommendations to the
Secretary of Commerce as to whether conditions exist
justifying the continuance of the charters. The functions of the Secretary of Commerce with respect to
the chartering of vessels has been delegated to the
Maritime Administrator.
(d) War risk insurance.Pursuant to Public Law 763,
81st Congress [sections 1281 to 1294 of this title], the
Federal Maritime Board makes determinations of the
fair and reasonable value of vessels insured under the
provisions of Title XII of the Merchant Marine Act,
1936, as amended [sections 1281 to 1294 of this title].
The Secretary of Commerce may not settle an insurance claim with respect to a vessel In an amount in
excess of the vessel's fair and reasonable value as determined by the Federal Maritime Board.
(e) In carrying out its functions under paragraphs
(a), (b), (c) and (d), above, the Federal Maritime Board
adopts rules and regulations; makes reports and recommendations to Congress; subpoenas witnesses; administers oaths; takes evidence; requires the production of books, papers and documents as necessary;
issues opinions; promulgates orders; engages in enforcement and other legal proceedings; and performs
all functions formerly performable by the Maritime
Commission, which have been transferred to the Federal Maritime Board pursuant to Reorganization Plan
No. 21 of 1950.
4. Organizationof the Maritime Administration-(a)
Maritime Administrator.The Chairman of the Federal Maritime Board Is ex officio the Maritime Administrator. When serving as Maritime Administrator, he
reports and is responsible to the Secretary of Commerce.
(b) Deputy Maritime Administrator. The Maritime
Administrator Is assisted in his duties by a Deputy
Maritime Administrator, who is the Acting Maritime
Administrator during the absence or disability of the
Maritime Administrator and, unless the Secretary of
Commerce designates another person, during a vacancy in the Office of Maritime Administrator. The
Deputy Maritime Administrator is appointed by the
Secretary of Commerce, after consultation with the
Maritime Administrator. The Deputy Maritime Administrator at no time sits as a member of the Federal
Maritime Board.
(c) Organizational components. The Maritime Administration has the following organizational components: (1) Office of the Maritime Administrator; (2)

I11

Staff Offices including the Office of the General
Counsel, the Program Planning Office, the Budget
Office, and the Personnel Office; (3) Division of
Claims; (4) Office of Subsidy and Government Aid; (5)
Office of Maritime Operations; (6) Office of Ship Construction: (7) Office of the Comptroller; and (8) Offices of the Coast Directors.
(d) Use of officers and employees of the Federal Maritime Board. Insofar as he deems desirable, the Maritime Administrator makes use of officers and employees of the Federal Maritime Board under his supervision as Chairman to perform activities for the Maritime Administration.
(5) Functions of the Maritime Administrator. The
Maritime Administrator is responsible for the performance of all functions transferred to the Secretary
of Commerce under Reorganization Plan No. 21 of
1950, subject to the limitations set forth in Department Order No. 116, as amended, with power of redelegation, and for the performance of activities for the
Federal Maritime Board as determined desirable by
the Chairman of the Federal Maritime Board.
(a) The Office of the Maritime Administrator directs
the activities of the Maritime Administration and includes personnel who render staff services to the Maritime Administrator.
(b) The Office of the General Counsel serves as the
law office of the Maritime Administration and Federal
Maritime Board, renders legal advice and opinions to
them, and represents them in any litigation in which
either Is interested. The Office of the General Counsel
has the following divisions: Division of Contracts, Division of Legislation, and Division of Litigation.
(c) The Program Planning Office develops and recommends long-range merchant marine policy and programs, reviews existing policies and programs in the
light of adopted long-range policy, and conducts economic studies connected with policy formulation for
the Maritime Administrator and the Federal Maritime
Board.
(d) The Budget Office develops and presents budgetary requests and Justifications and allots and maintains budgetary control of appropriated funds for the
Maritime Administration and the Federal Maritime
Board.
(e) The Personnel Office administers the personnel
functions of the Maritime Administration and the
Federal Maritime Board related to employment and
position classification, including recruitment, placement, separations, disciplinary actions, counseling and
grievance appeal services, training and safety programs, and wage rate studies.
(f) The Division of Claims is responsible for analyzing and recommending the basis of settlement of
claims in favor of or against the Maritime A iministration arising out of the war-time operations of the
former Maritime Commission and War Shipping Administration and other claims referred to it for processing prior to August 22, 1949.
(g) The Office of Subsidy and Government Aid is responsible for the processing of applications to the Federal Maritime Board and the Maritime Administration
for subsidy or other government aid and the administration of government aid contracts after their execution, for the coordination of the work of other organizational components in connection therewith, and for
the making of recommendations with respect to the
policy relating to vessel chartering. The Office of Subsidy and Government Aid has the following divisions:
Division of Construction Cost Comparison, Division of
Contract Evaluation and Administration, Division of
Operating Cost Comparison, and Division of Shipping
Data.
(h) The Office of Maritime Operations is responsible
for the conduct of activities relating to the charter,
operation, repair, reconversion, betterment, reconditioning, and disposal of government-owned merchant
vessels; the maintenance of reserve fleets; the training
of seagoing personnel; the procurement and disposal

IlIl

Page 318

TITLE 46-SHIPPING

of real and personal property; the maintenance or operation of warehouses, marine terminals and reserve
shipyards port development; and the rendering of
office services. The Office of Maritime, Operations has
the following divisions: Division of General Services,
Division of Maintenance and Repair, Division of Maritime Training, Division of Vessel Custody, and Division of Vessel Operations.
(i) The Office of Ship Construction is responsible for
the conduct of activities of the Maritime Administration and the Federal Maritime Board relating to ship
design and construction, and the rendering of technical direction to the Office of Maritime Operations
with respect to the reconversion, betterment and reconditioning of Maritime Administration-owned vessels. The Office of Ship Construction has the following divisions: Division of Estimates, Division of Preliminary Design, Division of Production, and Division
of Technical Development; and contains the Vessel
Trial and Guarantee Survey Boards.
(J) The Office of the Comptroller is responsible for
the accounting, auditing, and insurance activities of
the Maritime Administration and the Federal Maritime Board. The Office of the Comptroller has the following divisions: Division of Accounts, Division of
Audits, Division of Credits and Collections, and Division of Insurance.
(k) The Offices of the Atlantic, Gulf, and Pacific
Coast Directors are responsible for maintaining general surveillance over the management of field offices of
the various organizational components located on
their respective coasts.
6. Filing of applications and other formal documents. All applications and other formal documents
required to be filed with either the Federal Maritime
Board or the Maritime Administration shall be filed
with the Secretary's Office, Federal Maritime Board.
NATIONAL SHIPPING AUTHORITY AND ADDITIONAL
FUNCTIONS OF MARITIME ADMINISTRATOR
The following is a statement of the Department of
Commerce, 16 F.R. 2642, 2643, Mar. 23, 1951, amending the statement of such Department set out in 16
P.R. 44 to 46, Jan. 3. 1951 (set out as a note above):
The statement of organization and functions of the
Federal Maritime Board and the Maritime Administration issued in 16 F.R. 44 [set out as a note above] is
amended by the addition of the following:
Establishment of the National Shipping Authority.
There is established in the Maritime Administration a
National Shipping Authority, headed by a Director responsible to the Maritime Administrator.
The National Shipping Authority shall perform
such functions in connection with the formulation and
execution of plans and programs for the operation, acquisition, and allocation of merchant vessels and such
other duties as the Maritime Administrator, within
the scope of his authority, may from time to time
direct.
Functions of the Maritime Administrator. In addition to the functions contained in paragraph 5 of 16
P.R. 44, the Maritime Administrator shall perform the
following functions:
(a) The functions conferred upon the Secretary of
Commerce by Public Law 591, 81st Congress, 2d Session [note preceding section 1, and note under section
883, of this title; and sections 1735 note, 1738 and 1744
of Appendix to Title 50, War and National Defense];
(b) The functions conferred upon the Secretary of
Commerce by Public Law 763, 81st Congress, 2d Session (sections 1281 to 1294 of this title], except that
the authority "to find that insurance adequate to the
needs of the waterborne commerce of the United
States cannot be obtained on reasonable terms and
conditions in companies authorized to do an insurance
business in a State of the United States" is reserved to
the Secretary;
(c) The functions conferred upon the Secretary by
Public Law 911, 81st Congress, 2d Session [act Jan. 6,
1951, ch. 1213, 64 Stat. 1224];

(d) The functions conferred upon the Secretary by
Reorganization Plan No. 21 of 1950 [set out above] to
take action with respect to the determination of essential trade routes and services or subsequent modifications;
(e) The functions conferred upon the Secretary by
Reorganization Plan No. 21 of 1950 to establish policies of general application for the purchase, acquisition, construction, charter, and sale of vessels and for
the administration of programs concerning operating
subsidies, reserve funds and transfers to foreign ownership or registry, and charters to foreigners.
The Maritime Administrator may redelegate to officers and employees of the Maritime Administration
the performance of particular functions herein assigned to the Maritime Administrator.
Effect on other notices. All orders, regulations, rulings, certificates, directives, and other actions heretofore issued or taken under the notices appearing at 15
F.R. 8739 and 16 F.R. 1130 and in effect immediately
prior to the effective date of this notice shall remain
in full force and effect until hereafter suspended,
amended, or revoked under appropriate authority.
This notice amends the notice issued in 15 F.R. 3195,
"Temporary Delegations of Authority under Reorganization Plan No. 21 of 1950."
Effective date. This notice is effective March 13,
1951.
APPOINTMENT OF PERSONNEL
The following is a legal opinion, in part, dated
August 29, 1950, and prepared by the General Counsel
of the Maritime Administration, with respect to the
authority of the chairman of the Federal Maritime
Board to make appointments of personnel under the
Board and the extent of the authority of the Secretary of Commerce under Reorg. Plan No. 21 of 1950,
set out above, as to such personnel:
Sec. 103 of Reorganization Plan 21 of 1950 [set out
above] transferred to the Chairman of the Federal
Maritime Board "all functions of the Chairman of the
United States Maritime Commission (including his
functions under the provisions of Reorganization Plan
No. 6 of 1949 [set out above]) with respect to the functions transferred to the Board by the provisions of
Sections 104 and 105" of Plan 21. Section 104 transferred to the Board the regulatory functions of the
Maritime Commission and Section 105 transferred certain of the subsidy functions of the Commission, not
including, however, the function of administering subsidy contracts.
Sec. 106 of Plan 21 provides for the status of the
Board and of the Chairman and their relationship to
the Secretary of Commerce. * 0.
In order to fully understand the intent of Plan 21, it
is necessary to examine the status of the appointing
authority of the Chairman of the Maritime Commission immediately prior to the transfer of functions
under Plan 21. As set forth above, Section 103 of Plan
21 makes specific reference to the authority of the
Chairman of the Commission under Plan 6 of 1949 as
being transferred to the Chairman of the Board.
Reorganization Plan 6 was transmitted by the President to Congress on June 20, 1949. Its purpose as
stated in the message of transmittal [set out in Appendix to Title 5, Government Organization and Employees] was "to strengthen the administration of the
United States Maritime Commission by making the
Chairman the chief executive and administrative officer of the Commission and vesting in him responsibility for the appointment of its personnel and the supervision and direction of their activities." (Emphasis
supplied.)
Section 2 of Plan 6 transferred from the Commission
to the Chairman certain functions including the appointment of personnel (exclusive of "personnel employed regularly and full time" in the offices of other
members) with the proviso that the Chairman would
consult with other members before appointing the

Page 319

TITLE 46-SHIPPING

heads of major administration units. Section 1 of Plan
6 provided that in exercising certain functions the
Chairman should be guided by policies of the Commis.
sion. This section significantly excepted from such requirement the authority transferred to the Chairman
under Section 2 including the appointive authority.
Thus the appointive authority (excluding only personnel in offices of Commission members) was exclusively
and, except for the proviso relating to heads of major
units, unconditionally vested in the Chairman of the
Commission until Plan 21 took effect.
Plan 21 transferred all the functions of the Commission and of the Chairman of the Commission. As
stated above, some of these functions went to the Federal Maritime Board (Secs. 104, 105). Others were
transferred to the Chairman of the Board (See. 103).
Functions not otherwise transferred went to the Secretary of Commerce (Sec. 204).
The functions transferred to the Board and to the
Chairman relate to regulatory authority (to be exercised independently) and subsidy functions (to be exercised subject to the guidance of general policies established by the Secretary of Commerce). As Section
103 transferring functions to the Chairman relating to
these subjects makes specific reference to the authority of the Chairman of the Commission under Plan 6,
which included the appointment of personnel, it appears evident that so much of the appointive power as
relates to personnel performing these functions passed
to the Chairman of the Board to be exercised by him
independently as to personnel performing regulatory
functions and subject to the injunction of Sec. 106 (to
be guided by the policies of the Secretary of Commerce) as to personnel performing services in connection with the subsidy functions performed by the
Board.
This conclusion is reinforced by reference to a decision of the Attorney General to the Secretary of Commerce, dated May 13, 1940, construing somewhat similar provisions in a reorganization plan transferring to
the Department certain functions of the Civil Aeronautics Authority [Reorg. Plan No. IV of 1940, § 7, eff.
June 30, 1940, 5 F.R. 2421, 54 Stat. 1234, set out in the
Appendix to Title 5, Government Organization and
Employees] ° * *.Despite the specific mention of the
personnel functions the Attorney General held that
the appointive authority was in the Board. This decision was based upon reasoning recognizing the practical fact that independence in the exercise of the functions of the Board could not be achieved if the control
of personnel and finances of the Board were in the
Secretary of Commerce.
I have reached the conclusion that the appointive
authority as to personnel engaged in regulatory and
certain of the subsidy functions is vested In the Chairman, notwithstanding certain facts which might tend
to indicate a different result.
Chief among these is the statement contained in the
President's message transmitting Plan 21, as follows:
"In making the Chairman of the Federal Maritime
Board the Maritime Administrator, the plan adopts an
arrangement substantially similar to that which prevailed during the war, when the same individual
served as Chairman of the Maritime Commission and
head of the War Shipping Administration. This arrangement will have Important advantages. It will facilitate cooperation between the Board and the Administration on matters of concern to both. Also, it
will avoid dividing the personnel of the Maritime Commission, since the Chairman of the Board will supervise the personnel assisting it in the performance of
its functions, as is now the case in the Maritime Commission, and in his capacity as Administrator he will
have charge of the personnel carrying on the work of
the Maritime Administration. The plan provides for
the joint operation of the officers and employees
under the Administrator and Chairman as a single
body of personnel. The maintenance of a unified staff
is essential for efficient and economical administration
because many of the technical and professional per-

§ Illln

sonnel, such as ship designers and attorneys, now
assist the Maritime Commission on problems of subsidy determination and also participate In the subsequent administraticn of subsidy agreements and in
performing nonsubsidy functions.
"The inclusion of the new Board In the Department
of Commerce will permit the use of the administrative
services of the Department. More important, it will
eliminate the necessity of splitting the personnel of
the Maritime Commission between the Department
and an outside agency.
A literal reading of portions of this statement might
be used as a basis for argument that a single appoint.
ive authority was intended. This meaning cannot be
given the statement, however, in view of the specific
language of the Plan as previously discussed. It Is
more likely that the President had in mind the fact
that the Plan seems to contemplate a delegation of authority from the Secretary to the Chairman-Administrator by providing in See. 204 that "The Secretary of
Commerce may from time to time make such provisions as he shall deem appropriate authorizing the
performance by the Maritime Administrator of any
function transferred to such Secretary by the provisions of this reorganization plan." Sec. 302 provides
that the Chairman-Administrator shall make Joint use
of personnel.
Another argument against the conclusion stated
could be based upon the fact that Plan 21 makes specific reference in transferring functions to the Board
of certain titles and portions of the Merchant Marine
Act, 1936, as amended [this chapter], without making
any reference to Sec. 201(e) of that Act [subsec. (e) of
this section] which is the source of the appointive authority formerly vested In the Commission. This argument fails, however, when consideration is given to the
fact that immediately prior to Plan 21 this authority
was vested not in the Commission but in the Chairman of the Commission under Plan 6 and is included
in the specific reference to Plan 6.
It is clear that both Plan 21 and the President's
transmittal message contemplate the use of personnel
to perform dual functions for the Board and for the
Administrator. It Is equally clear that the Plan itself
does not contain provisions vesting in a single appointive authority the power to establish such a group of
personnel. It is evident, therefore, that the President
contemplated that this objective be achieved by the
Chairman's voluntarily utilizing the services of employees appointed under the authority of the Secretary to perform services in connection with Board
functions and, in his capacity as Administrator, utilizing the services of employees employed by him under
the direct grant of authority in the Plan to perform
duties assigned to him by the Secretary. Thus the
Plan, although directing the joint use of personnel, intends that result to be accomplished through the use
of the administrative discretion granted the Chairman-Administrator by Section 302 of the Plan to be
exercised in the interest of economy and efficiency,
and does not vest exclusive appointing authority
either in the Secretary or the Chairman-Administrator.
CROSS REFERENCES
Advertisements for proposals for purchases and contracts for supplies or services, see section 5 of Title 41,
Public Contracts.
SECTION REFERRED TO IN OTHER SECTIONS
This section Is referred to in title 50 App. section
1745.
§ Illa. Administrative expenses; limitations
After June 30, 1939, the Federal Maritime
Commission and the Secretary of Transportation shall not incur any obligations for adminis-

TITLE 46-SHIPPING

11llll1

trative expenses except pursuant to an annual
appropriation specifically therefor or to au-

Page 320

1937-Act Aug. 26, 1937, permitted the operation or
leasing of lands, docks, wharves, piers or real property.

thority to use appropriations or other funds
otherwise available therefor.

TRANSFER OF FUNCTIONS

(June 25, 1938, ch. 681, title I, 52 Stat. 1119;
Aug. 6, 1981, Pub. L. 97-31, § 12(59), 95 Stat.
158.)

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.

CODIFICATION

Section was not enacted as part of the Merchant
Marine Act, 1936, which comprises this chapter.

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1158 of this
title.

AMENDMENTS

1981-Pub. L. 97-31 substituted reference to the Federal Maritime Commission and the Secretary of Transportation for reference to the United States Maritime
Commission. For prior transfers of functions of United
States Maritime Commission, see Transfer of Functions note below.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
§lli1b. Repealed. Sept. 1, 1954, eh. 1208, title III,
§ 305(g), 68 Stat. 1114
Section, act Mar. 13, 1944, ch. 91, 58 Stat. 115, related to awards. See section 4501 et seq. of Title 5, Government Organization and Employees.
EFFECTIVE DATE OF REPEAL

Repeal effective 90 days after Sept. 1, 1954, see section 307 of act Sept. 1, 1954.
§ 1112. Operation of property by Secretary

Notwithstanding any other provision of law,
the Secretary of Transportation may, in accordance with good business methods and on such
terms and conditions as he determines to effectuate the policy of this chapter, operate or

lease any lands, docks, wharves, piers, or real
property under his control, and all money received from such operation or lease shall be
available for expenditure by the Secretary of
Transportation as provided in this chapter. The

Secretary of Transportation may, upon such
terms and conditions as he may prescribe in accordance with sound business practice, make
such extensions and accept such renewals of
the notes and other evidences of indebtedness

hereby transferred, and of the mortgages and
other contracts securing the same, as he may
deem necessary to carry out the objects of this
chapter.
(June 29, 1936, ch. 858, title II, § 202, 49 Stat.
1986; Aug. 26, 1937, ch. 822, § 1, 50 Stat. 839;
June 23, 1938, ch. 600, § 1, 52 Stat. 953; Aug. 6,
1981, Pub. L. 97-31, § 12(60), 95 Stat. 158.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Trans.
portation" for "Commission", wherever appearing,
"he" for "it", and "his" for "its", and struck out provision relating to transfer of money, etc., to the United
States Maritime Commission. For prior transfers of
functions of the Commission, meaning the United
States Maritime Commission, see Transfer of Functions note below.
1938-Act June 23, 1938, permitted extensions and
renewals of notes, other evidences of indebtedness,
and mortgages.

§ 1113. Omitted
CODIFICATION

Section, acts June 29, 1936, ch. 858, title II, § 203, 49
Stat. 1987: May 18, 1938, ch. 253, 52 Stat. 408, provided
for dissolution and transfer of property of the United
States Shipping Board Merchant Fleet Corporation,
the disposition of pending suits and ratification of
payments to employees.
§ 1114. Transfer of powers; rules and orders
(a) Transfer of functions, powers and duties
All the functions, powers, and duties vested in
the former United States Shipping Board by
the Shipping Act, 1916 [46 U.S.C. 801 et seq.],
the Merchant Marine Act, 1920 [46 U.S.C. 861
et seq. and 911 et ser .], the Merchant Marine
Act, 1928 [46 U.S.C. 81 et seq.], the Intercoastal Shipping Act, 1933 [46 U.S.C. 843 et seq.],
and amendments to those Acts, and now vested
in the Department of Commerce pursuant to
section 12 of the President's Executive Order
[No. 6166] of June 10, 1933, are hereby transferred to the Federal Maritime Commission and
the Secretary of Transportation: Provided,
however, That after June 29, 1936, no further
construction loans shall be made under the provisions of section 11 of the Merchant Marine
Act, 1920, as amended [46 U.S.C. 870).
(b) Rules and regulations
The Commission and the Secretary of Trans-

portation are authorized to adopt all necessary
rules and regulations to carry out the powers,
duties, and functions vested in them by this

chapter.
(c) Enforcement of orders; penalties for violations
The orders issued by the Federal Maritime

Commission and the Secretary of Transportation in the exercise of the powers transferred to
them by this subchapter shall be enforced in
the same manner as heretofore provided by law
for enforcement of the orders issued by the
former United States Shipping Board, and violation of such orders shall subject the person or

corporation guilty of such violation to the same
penalties or punishment as heretofore provided
for violation of the orders of said Board.
(June 29, 1936, ch. 858, § 204, 49 Stat. 1987;
June 23, 1938, ch. 600, § 41, 52 Stat. 964; Aug. 6,
1981, Pub. L. 97-31, § 12(61), 95 Stat. 158.)
REFERENCES IN TEXT

The Shipping Act, 1916, referred to in subsec. (a), Is
act Sept. 7, 1916, ch. 451, 39 Stat. 728, as amended,
which is classified principally to chapter 23 (§ 801 et
seq.) of this title. For complete classification of this

Page 321

TITLE 46-SHIPPING

Act to the Code, see section 842 of this title and
Tables.
The Merchant Marine Act, 1920, referred to in
subsec. (a), is act June 5, 1920, ch. 250, 41 Stat. 988, as
amended, which is classified generally to chapters 24
and 25 (if 861 et seq. and 911 et seq.) of this title. Section 11 of the Act was repealed by act June 29, 1936,
ch. 858, title IX, J 903(b), 49 Stat. 2016. For complete
classification of this Act to the Code, see References
in Text note set out under section 889 of this title and
Tables.
The Merchant Marine Act, 1928, referred to in
subsec. (a), is act May 22, 1928, ch. 675, 45 Stat. 689, as
amended, which is classified principally to chapter
24A (§ 891 et seq.) of this title. For complete classification of this Act to the Code, see References in Text
note set out under section 891x of this title and
Tables.
The Intercoastal Shipping Act, 1933, referred to in
subsec. (a), is act Mar. 3, 1933, ch. 199, 47 Stat. 1425, as
amended, which is classified generally to chapter 23A
(Q843 et seq.) of this title. For complete classification
of this Act to the Code, see section 848 of this title and
Tables.
Executive Order No. 6166 of June 10, 1933, referred
to in subsec. (a), is set out under section 901 of Title 5,
Government Organization and Employees.
AMENDMENTS

1981-Subsec. (a). Pub. L. 97-31, § 12(61)(A), substituted "Federal Maritime Commission and the Secretary of Transportation" for "United States Maritime
Commission". For prior transfers of functions of
United States Maritime Comwlssion, see Transfer of
Functions note below.
Subsec. (b). Pub. L. 97-31, 1 12(61)(B)-(D), inserted
"and the Secretary of Transportation" following
"Commission" and substituted "Ere authorized" for "is
authorized" and "vested in them" for "vested in it".
For prior transfers of functions of the Commission,
meaning the United States Maritime Commission, see
Transfer of Functions note below.
Subsec. (c). Pub. L. 97-31, § 12(61)(A), (D), substituted "Federal Maritime Commission and the Secretary
of Transportation" for "United States Maritime Commission" and "transferred to them" for "transferred
to it". For prior transfers of functions of United States
Maritime Commission, see Transfer of Functions note
below.
1938-Subsec. (b). Act June 23, 1938, eliminated provisions which authorized the President to transfer to
the Interstate Commerce Commission any or all regulatory powers, duties and functions of the United
States Maritime Commission.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 21 of 1950 and
Reorg. Plan No. 7 of 1961, set out under section 1111
of this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1151, 1244 of
this title; title 50 App. section 1745.
§ 1115. Discrimination at ports by carriers by water
against other carriers
Without limiting the power and authority
otherwise vested in the Federal Maritime Com-

mission and the Secretary of Transportation, it
shall be unlawful for any common carrier by
water, either directly or indirectly, through the

medium of an agreement, conference, association, understanding, or otherwise, to prevent
or attempt to prevent any other such carrier
from serving any port designed for the accommodation of ocean-going vessels located on any
11-617 VOL. 18 0-84-23

§ 1116

improvement project authorized by the Congress or through it by any other agency of the
Federal Government, lying within the continental limits of the United States, at the same
rates which it charges at the nearest port already regularly served by it.
(June 29, 1936, ch. 858, title II, § 205, 49 Stat.
1987; Aug. 6, 1981, Pub. L. 97-31, § 12(62), 95
Stat. 159.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Federal Maritime
Commission and the Secretary of Transportation" for
"Commission". For prior transfers of functions of the
Commission, meaning the United States Maritime
Commission, see Transfer of Functions note below.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
§ 1116. Construction fund
All sums of money now in the construction
loan fund created by section 870 of this title, together with the proceeds of all debts, accounts,
choses in action, and the proceeds of all notes,
mortgages, and other evidences of indebtedness, hereby transferred to the Department of
Transportation, and all of the proceeds of sales
of ships and surplus property heretofore or
hereafter made, including proceeds of notes or
other evidences of debt taken therefor and the
interest thereon, and, notwithstanding any
other provision of law, all money representing
amounts of unclaimed wages, salvage awards
and miscellaneous unclaimed items carried as liabilities on the books of the former United
States Shipping Board Merchant Fleet Corporation and all money heretofore or hereafter
received from the operation or leasing of lands,
docks, wharves, piers, or real property shall be
deposited in the Treasury of the United States
and there maintained as a revolving fund,
herein designated as the construction fund, and
shall be available for expenditure by the Secretary of Transportation in carrying out the provisions of this chapter. All moneys received by
the Department of Transportation under the
provisions of this chapter shall be deposited in
its construction fund, and all disbursements

made by the Secretary of Transportation under
authority of this chapter shall be paid out of
said fund, and, notwithstanding any other provision of law, all disbursements applicable to
the money referred to in this section may be
made by the Secretary of Transportation out of
said fund. Further appropriations by Congress
to replenish said fund are authorized.
(June 29, 1936, ch. 858, title II, § 206, 49 Stat.
1987; Aug. 26, 1937, ch. 822, § 2, 50 Stat. 839;
Aug. 6, 1981, Pub. L. 97-31, § 12(63), 95 Stat.
159.)
REFERENCES IN TEXT

Section 870 of this title, referred to in the text, was
repealed by act June 29, 1936, ch. 858, title IX,
§ 903(b), 49 Stat. 2016.

111 l6a

TITLE 46-SHIPPING
AMFNDMENTS

1981-P b. L. 97-31 substituted "Department of
Transportation" for "Commission" in two instances
and "Secretary of Transportation" for "Commission"
in th:"e !astances. For prior transfers of functions of
the Commission, meaning the United States Maritime
Commission, see Transfer of Functions note below.
1937-Act Aug. 26, 1937, amended section generally.
EFFECTIVE DATE OF 1937 AMENDMENT
Amendment effective as of June 29, 1936, see section
4 of act Aug. 26, 1937.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
LIMITATIONS ON CONSTRUCTION FUND

Acts July 30, 1947, ch. 359, title I, § 101, 61 Stat. 603,
and June 30, 1948, ch. 775, § 101, 62 Stat. 1199, which
were the Independent Offices Appropriation Act, 1948,
and The Supplemental Independent Offices Appropriation Act, 1949, respectively, placed limitations on obligations from the construction fund established by
this section.
REDUCTION OF CONTRACT AUTHORIZATIONS

Act May 29, 1945, ch. 136, 59 Stat. 226, authorized
the transfer out of the unexpended balance of appropriations made to the Maritime Commission under the
head "Construction fund, United States Maritime
Commission Act, June 24, 1936, revolving fund" up
until May 29, 1945, of the sum of $3,100,000,000 to be
carried to the surplus fund and be covered into the
Treasury and reduced the contract authorization for
ship construction
and
facilities
incident by
$4,265,000,000.

Page 322

§ 1117. Power to contract; audit of accounts; reports
of Comptroller General
The Federal Maritime Commission and the

Secretary of Transportation may enter into
such contracts, upon behalf of the United
States, and may make such d sbursements as
may, in its or his discretion, be necessary to
carry on the activities authorized by this chapter, or to protect, preserve, or improve the collateral held by the Commission or Secretary to

secure indebtedness, in the same manner that a
private corporation may contract within the
scope of the authority conferred by its charter.
All the Commission's and Secretary's financial
transactions shall be audited in the General Accounting Office according to approved commercial practice as provided in the Act of March 20,
1922 (42 Stat. 444): Provided, That it shall be
recognized that, because of the business activities authorized by this chapter, the accounting
officers shall allow credit for all expenditures
shown to be necessary because of the nature of
such authorized activities, notwithstanding any
existing statutory provision to the contrary.
The Comptroller General shall report annually
or oftener to Congress any departure by the
Commission or Secretary from the provisions of
this chapter.
(June 29, 1936, ch. 858, title II, § 207, 49 Stat.
1988; June 23, 1938, ch. 600, § 2, 52 Stat. 954;
Aug. 6, 1981, Pub. L. 97-31, § 12(64), 95 Stat.
159.)
REFERENCES IN TEXT

Act of March 20, 1922, ch. 104, 42 Stat. 444, referred
to in text, is not classified to the Code.

ADDITIONAL APPROPRIATIONS

AMENDMENTS

Act Aug. 25, 1941, ch, 409, title III, 55 Stat. 682, appropriated an amount not to exceed $1,296,650,000 to
enable the Commission to enter into further contracts
for the construction of vessels, production and procurement of parts, equipment, plants, etc.

1981-Pub. L. 97-31 substituted "Federal Maritime
Commission and the Secretary of Transportation" for
"Commission" the first time it appears, and inserted
"or his" after "its", "or Secretary" after "Commission" and "and Secretary's" after "Commission's". For
prior transfers of functions of the Commission, meaning the United States Maritime Commission, see
Transfer of Functions note below.
1938-Act June 23, 1938, authorized disbursements,
and provided for the protection, preservation, or improvement of collateral held to secure indebtedness.

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1116a, 1242 of
this title,
§ 1116a. Application to obligations against emergency
ship construction fund

TRANSFER OF FUNCTIONS

On and after March 22, 1947, the construction fund established by section 1116 of this
title shall be available for the payment of obligations previously incurred against the emergency ship construction fund.

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.

(Mar. 22, 1947, ch. 20, title II, § 201, 61 Stat. 17;
1950 Reorg. Plan No. 21, § 306, eff. May 24,
1950, 15 F.R. 3178, 64 Stat. 1277.)

Advertisements for proposals for purchases and contracts for supplies or services, see section 5 of Title 41,
Public Contracts.

CROSS REFERENCES

CODIFICATION

SECTION REFERRED TO IN OTHER SECTIONS

Words "United States Maritime Commission" preceding "construction fund" were deleted and words
"established by section 1116 of this title" were inserted following "construction fund" on authority of
Reorg. Plan No. 21 of 1950, set out under section 1111
of this title.
Section was enacted as part of act Mar. 22, 1947,
popularly known as the Urgent Deficiency Appropriation Act, 1947, and not as part of the Merchant
Marine Act, 1936. which comprises this chapter.

This section is referred to in title 50 App. section
1745.
§ 1118. Reports to Congreas
The Federal Maritime Commission and the
Secretary of Transportation shall, by April 1
each year, make a report to Congress, which
shall include the results of its or his investigations, a summary of its or his transactions, its

Page 323

§ 1119

TITLE 46-SHIPPING

or his recommendations for legislation, a statement of all receipts under this chapter, and the
purposes for which all expenditures were made.
(June 29, 1936, ch. 858, title II, § 208, 49 Stat.
1988; Apr. 21, 1976, Pub. L. 94-273, § 36, 90 Stat.
380; Aug. 6, 1981, Pub. L. 97-31, § 12(65), 95

Stat. 159.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Federal Maritime
Commission and the Secretary of Transportation" for
"Commission" and inserted "or his" following "its" in
three instances. For prior transfers of functions of the
Commission, meaning the United States Maritime
Commission, see Transfer of Functions note below.
1976-Pub. L. 94-273 substituted "by April 1 each
year" for "at the beginning of each regular session".
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949. Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1213, 1222 of
this title.
§ 1119. Authorization of appropriations
(a) Except as provided in subsection (b) of
this section, there are authorized to be appropriated such sums as may be necessary to carry
out the provisions of this chapter.
(b) Notwithstanding any other provision of
this chapter or any other law, there are authorized to be appropriated after December 31,
1967, for the use of the Maritime Administration for(1) acquisition, construction, or reconstruction of vessels;
(2) construction-differential subsidy incident to the construction, reconstruction, or
reconditioning of ships;

(3) cost of national defense features;
(4) payment of obligations incurred for operating-differential subsidy;
(5) expenses necessary for research and development activities (including reimbursement of the Vessel Operations Revolving
Fund for losses resulting from expenses of experimental ship operations);

(6) reserve fleet expenses;
(7) maritime training at the Merchant
Marine Academy at Kings Point, New York;
(8) financial assistance to State maritime
academies under section 1295c of this title;
(9) the Vessel Operations Revolving Fund;
(10) expenses necessary for additional training provided under section 1295d of this title;
(10) 1 expenses necessary to carry out subchapter XIII of this chapter; and
(11) other operations and training expenses
related to the development of waterborne
transportation systems, the use of waterborne

transportation systems, or general administration;

only such sums as the Congress may specifically authorize by law: Provided, however, That
the Congress finds and declares that the naISo in original Pub. L. 96-453 added the second par. (10).

tional policy set forth in section 1101 of this
title requires that there should be authorized
and appropriated for fiscal years 1971 through
1980 such sums as may be necessary to construct 300 ships of such sizes, types and designs
as the Secretary of Transportation may consider best suited to carry out the purposes and
policy of this chapter.
(June 29, 1936, ch. 858, title II, § 209, 49 Stat.
1988; Aug. 26, 1937, ch. 822, § 3, 50 Stat. 839;
Sept. 5, 1967, Pub. L. 90-81, 81 Stat. 193; Oct.
21, 1970, Pub. L. 91-469, § 2, 84 Stat. 1018; Nov.
12, 1977, Pub. L. 95-173, § 6(a), 91 Stat. 1360;
Oct. 7, 1980, Pub. L. 96-387, § 4, 94 Stat. 1546;
Oct. 15, 1980, Pub. L. 96-453, § 3(a), 94 Stat.
2008; Aug. 6, 1981, Pub. L. 97-31, § 12(66), 95

Stat. 150.)
CODIFICATION

Subsec. (c) of this section, which related to availability, for all objects of expenditure under this chapter,
of all appropriations and unexpended balances of appropriations in connection with then existing oceanmail contracts entered into under former sections 891e
to 891r of this title, in connection with which the
powers and duties with respect thereto had been
transferred from the Postmaster General to the
United States Maritime Commission by section 1144 of
this title, was omitted.
Subsec. (d) of this section, which made funds available under former subsection (b) available for expenditures authorized by former United States Maritime
Commission under former provisions in section 1111 of
this title, as soon as a majority of the members of the
United States Maritime Commission had taken the
oath of office, notwithstanding section 1246 of this
title, was omitted.
AMENDMENTS

1981-Subsec. (b). Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce".
1980-Subsec. (b). Pub. L. 96-453, which directed
that pars. (7) and (9) be amended, that par. (10), relating to other operations and training expenses, be redesignated as (11), and that a par. (10), relating to expenses necessary to carry out subchapter XIII of this
chapter, be added, was executed by amending pars. (8)
and (10), set out first, and adding a par. (10), set out
second, as the probable intent of Congress, in view of
the prior redesignation of par. (7) as (8), par. (9) as
(10), set out first and tIO) as (11) by Pub. L. 96-387.
The amendment substituted in par. (8) "State maritime academies under section 1295c of this title" for
"State Marine Schools" and in par. (10) "for additional training provided under section 1295d of this title"
for "for extension and correspondence courses authorized under section 1126(c) of this title" and added a
par. (10), relating to expenses necessary to carry out
subchapter XIII of this chapter.
Pub. L. 96-387 struck out in par. (2) "and cost of national defense features" following "subsidy", added
par. (3), and redesignated former pars. (3) to (10) as
(4) to (11), respectively.
1977-Subsec. (b). Pub. L. 95-173 added pars. (9) and
(10).
1970-Subsec. (b). Pub. L. 91-469 authorized appropriations for construction of 300 ships for fiscal years
1971 through 1980.
1967-Subsec. (a). Pub. L. 90-91 inserted "Except as
provided in subsection (b) of this section" at the beginning of the subsec.
Subsec. (b). Pub. L. 90-81 added subsec. (b). A prior
subsec. (b), making available to the United States
Maritime Commission all appropriations and unexpended balances of the United States Shipping Board
Bureau and the United States Shipping Board Mer-

11

Page 324

TITLE 46-SHIPPING

1l9a

chant Fleet Corporation, had been eliminated as executed and obsolete.
EFFECTIVE DATE or

1980

AMENDMENT

Amendment by Pub. L. 96-453 effective Oct. 1, 1981,
see section 4 of Pub. L. 96-453, set out as an Effective
Date note under section 1295 of this title.
EFFECTIVE DATE OF

1977

AMENDMENT

Section 6(b) of Pub. L. 95-173 provided that: "The
amendment made by subsection (a) of this section
[amending this section] shall be effective for fiscal
years beginning after September 30, 1978."
CROSS REFERENCES

Application of construction fund to obligations
against the emergency ship construction fund, see section II16a of this title.
SECTION REFERRED TO IN

OTHER SECTIONS

This section is referred to in title 50 App. section
1745.
li 1119a, ll19b. Omitted
CODIFICATION

Section 1119a, act Feb. 6, 1941, ch. 5, § 1, 55 Stat. 5,
204, 305, 306, eff. May 24,
1950 Reorg. Plan No. 21, §1§
1950, 15 F.R. 3178, 64 Stat. 1276, 1277, appropriated
$313,500,000 to provide cargo ships, added such sum to
$500,000 and $36,000,000 previously allocated to create
the "Emergency Ship Construction Fund, Department
of Commerce" for: (1) the construction in the United
States of ocean-going cargo vessels, (2) the production
of parts for such ships, (3) the acquisition and management of facilities for such construction or production and for maintenance of the ships, and (4) the administrative expenses of the program, prohibited payment of salary and wages to persons advocating the
violent overthrow of the Government, provided that
an affidavit denying such advocacy be deemed prima
facie evidence, made acceptance of salary or wages by
a person advocating such overthrow a felony punishable by a fine up to $1,000 or imprisonment for not
more than one year, or both, and provided that such
penalty be additional to, and not in lieu of, existing
law.
Section 1119b, acts Feb. 6, 1941, ch. 5, § 2, 55 Stat. 6;
1950 Reorg. Plan No. 21, J§ 204, 306, eff. May 24, 1950,
15 F.R. 3178, 64 Stat. 1276, 1277; Oct. 31, 1951, ch. 654,
1 3(12), 65 Stat. 708, which made section 1117 of this
title and the act of Oct. 10, 1940, ch. 838, 54 Stat. 1092
applicable to all functions of the Secretary of Commerce under section 1119a of this title, authorized the
Secretary to perform his functions under such section
1119a without regard to section 733 of Title 33, Navigation and Navigable waters, section 529 of former
Title 31, Money and Finance, section 5 of Title 41,
Public Contracts, section 7 of Act May 27, 1930, ch.
340, 46 Stat. 391, sections 270a to 270d and 303b of
Title 40, Public Buildings, Property, and Works, was
omitted in view of the omission of section 1119a of this
title.
ADDITIONAL APPROPRIATIONS

Act Aug. 25, 1941, ch. 409, title III, 55 Stat. 682, appropriated an amount not to exceed $1,296,650,000 to
enable the Commission to enter into further contracts
for the construction of vessels, production and procurement of parts, equipment, plants, etc.
§ 1120. Survey of existing merchant marine for creation of adequate American-owned fleet
It shall be the duty of the Secretary of Transportation to make a survey of the American

merchant marine, as it now exists, to determine
what additions and replacements are required

to carry forward the national policy declared in
section 1101 of this title, and the Secretary of
Transportation is directed to study, perfect,
and adopt a long-raiage program for replacements and additions to the American merchant
marine so that as soon as practicable the following objectives may be accomplished:
First, the creation of an adequate and wellbalanced merchant fleet, including vessels of all
types, to provide shipping service essential for
maintaining the flow of the foreign commerce
of the United States, the vessels in such fleet to
be so designed as to be readily and quickly convertible into transport and supply vessels in a
time of national emergency. In planning the development of such a fleet the Secretary of
Transportation is directed to cooperate closely
with the Navy Department as to national-defense needs and the possible speedy adaptation
of the merchant fleet to national-defense requirements.
Second, the ownership and the operation of
such a merchant fleet by citizens of the United
States insofar as may be practicable.
Third, the planning of vessels designed to
afford the best and most complete protection
for passengers and crew against fire and all
marine perils.
Fourth, the creation and maintenance of efficient shipbuilding and repair capacity in the
United States with adequate numbers of skilled
personnel to provide an adequate mobilization
base.
(June 29, 1936, ch. 858, title II, § 210, 49 Stat.
1989; Oct. 21, 1970, Pub. L. 91-469, §§ 3, 35(a),
84 Stat. 1018, 1035; Aug. 6, 1981, Pub. L. 97-31,
§ 12(67), 95 Stat. 159.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce" wherever appearing.
1970-Pub. L. 91-469, § 35(a), substituted "Secretary
of Commerce" for "Commission", twice in introductory par. and once in par. reading "First".
Par. First. Pub. L. 91-469. § 3(1), struck out from par.
reading "First" the words "on all routes" following
"shipping service".
Par. Fourth. Pub. L. 91-469. § 3(2), added par. reading "Fourth".
SECTION REFERRED TO IN

OTHER SECTIONS

This section is referred to in section 1191 of this
title.
§ 1121. Investigations, studies, records, etc.

The Secretary of Transportation is authorized and directed to investigate, determine, and
keep current records of(a) Suitable ocean routes and lines to foreign ports;
vessels and costs of operation
The ocean services, routes, and lines from
ports in the United States, or in a Territory,
district, or possession thereof, to foreign markets, which are, or may be, determined by the
Secretary of Transportation to be essential for
the promotion, development, expansion, and
maintenance of the foreign commerce of the
United States, and in reaching his determination the Secretary of Transportation shall con-

Page 325

TITLE 46-SHIPPING

sider and give due weight to the cost of maintaining each of such steamship lines, the probability that any such line cannot be maintained
except at a heavy loss disproportionate to the
benefit accruing to foreign trade, the number
of sailings and types of vessels that should be
employed in such lines, and any other facts and
conditions that a prudent business man would
consider when dealing with his own business,
with the added consideration, however, of the
intangible benefit the maintenance of any such
line may afford to the foreign commerce of the
United States, to the national defense, and to
other national requirements;
(b) Bulk cargo carrying services
The bulk cargo carrying services that should,
for the promotion, development, expansion,
and maintenance of the foreign commerce of
the United States and for the national defense
or other national requirements be provided by
United States-flag vessels whether or not operating on particular services, routes, or lines;
(c) Vessels required in proposed routes
The type, size, speed, method of propulsion,
and other requirements of the vessels, including express-liner or super-liner vessels, which
should be employed in such services or on such
routes or lines, and the frequency and regularity of the sailings of such vessels, with a view to
furnishing adequate, regular, certain, and permanent service, or which should be employed
to provide the bulk cargo carrying services necessary to the promotion, maintenance, and expansion of the foreign commerce of the United
States and its national defense or other national requirements whether or not such vessels operate on a particular service, route, or line;
(d) Cost of construction in United States and abroad
The relative cost of construction of comparable vessels in the United States and in foreign
countries;
(e) Relative cost of operation under laws of United
States and foreign countries
The relative cost of marine insurance, maintenance, repairs, wages and subsistence of officers
and crews, and all other items of expense, in
the operation of comparable vessels under the
laws, rules, and regulations of the United
States and under those of the foreign countries
whose vessels are substantial competitors of
any such American vessel;
(f) Foreign subsidies
The extent and character of the governmental aid and subsidies granted by foreign governments to their merchant marine;
(g) Shipyards
The number, location, and efficiency of the
shipyards existing on June 29, 1936, or thereafter built in the United States;
(h) Laws applicable to aircraft
To investigate and determine what provisions
of this chapter and other Acts relating to shipping should be made applicable to aircraft engaged in foreign commerce in order to further
the policy expressed in this chapter, and to recommend appropriate legislation to this end;

§ 1121

(I) Transportation to foreign ports of cotton, coal,
lumber, and cement
The advisability of enactment of suitable leg.
islation authorizing the Secretary of Transportation In an economic or commercial emergency, to aid the farmers and cotton, coal, lumber,
and cement producers in any section of the
United States in the transportation and landing
of their products in any foreign port, which
products can be carried in dry-cargo vessels by
reducing rates, by supplying additional tonnage
to any American operator, or by operation of
vessels directly by the Secretary of Transportation, until such time as the Secretary of Transportation shall deem such special rate reduction and operation unnecessary for the benefit
of the American farmers and such producers;
and
(Q) New designs of vessels; intercoastal and inland
water transportation
New designs, new methods of construction,
and new types of equipment for vessels; the
possibilities of promoting the carrying of
American foreign trade in American vessels;
and intercoastal and inland water transportation, including their relation to transportation
by land and air.
(June 29, 1936, ch. 858, title II, § 211, 49 Stat.
1989; Oct. 21, 1970, Pub. L. 91-469, §§ 4, 5, 35(a),
(b), 84 Stat. 1018, 1035; Aug. 6, 1981, Pub. L.
97-31, § 12(67), 95 Stat. 159.)
AMENDMENTS

1981-Pub. L. 97-31 in introductory material and
subsecs. (a) and (1)substituted "Secretary of Transportation" for "Secretary of Commerce" wherever appearing.
1970-Pub. L. 91-469, § 35(a), substituted "Secretary
of Commerce" for "Commission", once in introductory
par., twice in subsec. (a), and thrice in subsec. (i).
Subsec. (a). Pub. L. 91-469, §§ 4(1), 35(b), required
consideration of the benefit the maintenance of any
steamship line may afford to other national requirements and submitted "his" for "its" preceding "determination", respectively.
Subsec. (b). Pub. L. 91-469, § 4(3), added subsec. (b).
Former subsec. (b) redesignated (c).
Subsec. (c). Pub. L. 91-649, § 4(2), (4), (5), redesignated former subsec. (b) as (c), inserted "method of propulsion" following "speed", and required that the various requirements of the vessels should be employed
to provide bulk cargo carrying services, necessary to
the promotion, maintenance, and expansion of the foreign commerce of the United States and its national
defense or other national requirements whether or not
such vessels operate on a particular service, route, or
line, respectively. Former subsec. (c) redesignated (d).
Subsec. (d). Pub. L. 91-469, § 4(2), redesignated
former subsec. (c) as (d). Former subsec. (d) redesignated (e).
Subsec. (e). Pub. L. 91-469, §§ 4(2), 5, redesignated
former subsec. (d) as (e) and struck out "in particular
services, routes, and lines" following "comparable vessels" and substituted "American vessel" for "American
service route, or line", respectively. Former subsec. (e)
redesignated ().
Subsecs. (f) to (j). Pub. L. 91-469, § 4(2), redesignated
former subsecs. (e) to (i) as (f) to (j), respectively.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1125, 1171,
1173, 1204, 1213, 1222 of this title.

§1121-1

Page 326

TITLE 46-SHIPPING

f1121-1. Priority loading for vessels engaged in
coastwise transportation of coal; exception,
report to Congress
Notwithstanding any other provisions of law,
any vessel engaged in the coastwise transportation of coal produced in the United States, from
a port in the United States to another port in
the United States, shall until June 30, 1987,
have the priority to load at any such ports
ahead of any waiting vessels engaged in the
export trade of coal produced in the United
States: Provided,That, the Secretary of Transportation may, if he determines that it is in the
national interest, eliminate priority loading, as
provided herein, at any such port or ports, and
to report such action to the Congress within 30
days.
(Pub. L. 96-387, § 5, Oct. 7, 1980, 94 Stat. 1548;
Pub. L. 97-31, § 12(68), Aug. 6, 1981, 95 Stat.
159.)
CODIFICATION

Section was not enacted as part of the Merchant
Marine Act, 1936, which comprises this chapter.
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce".
§ 1122. Maritime problems; cooperation with others;
discriminatory charges on exports; cargo carriage; recommendations
The Secretary of Transportation is authorized and directed(a) Study of maritime problems
To study all maritime problems arising in the
carrying out of the policy set forth in subchapter I of this chapter;
(b) Inducing preferences for American vessels; construction of super-liners
To study, and to cooperate with vessel owners
in devising means by which(1) the importers and exporters of the
United States can be induced to give preference to vessels under United States registry;
and
(2) there may be constructed by or with the
aid of the United States express-liner or
super-liner vessels comparable with those of
other nations, especially with a view to their
use in national emergency, and the use in
connection with or in lieu of such vessels of
transoceanic aircraft service;
(c) Collaboration with owners and builders
To collaborate with vessel owners and ship.
builders in developing plans for the economical
construction of vessels and their propelling ma.
chinery, of most modern economical types,
giving thorough consideration to all well-recognized means of propulsion and taking into account the benefits accruing from standardized
production where practicable and desirable; and
(d) Liaison with other agencies and trade organizations
To establish and maintain liaison with such
other boards, commissions, independent establishments, and departments of the United

States Government, and with such representative trade organizations throughout the United
States as may be concerned, directly or indirectly, with any movement of commodities in
the water-borne export and import foreign commerce of the United States, for the purpose of
securing preference to vessels of United States
registry in the shipment of such commodities.
The Federal Maritime Commission is authorized and directedInvestigation of discriminatory charges, etc.,
against exports
To investigate, under the regulatory powers
transferred to it by this chapter, any and all
discriminatory rates, charges, classifications,
and practices whereby exporters and shippers
of cargo originating in the United States are required by any common carrier by water in the
foreign trade of the United States to pay a
higher rate from any United States port to a
foreign port than the rate charged by such carrier on similar cargo from such foreign port to
such United States port, and recommend to
Congress measures by which such discrimination may be corrected.
The Secretary of Transportation is authorized and directed-

(e)

(f) Development and implementation of new methods
of cargo carriage; preferences for cargo contain.
ers
To study means and methods of encouraging
the development and implementation of new
concepts for the carriage of cargo in the domestic and foreign commerce of the United States,
and to study the economic and technological aspects of the use of cargo containers as a
method of carrying out the declaration of
policy set forth in subchapter I of this chapter,
and in carrying out the provisions of this subsection and such policy the United States shall
not give preference as between carriers upon
the basis of length, height, or width of cargo
containers or length, height, or width of cargo
container cells and this requirement shall be
applicable to all existing container vessels and
any container vessel to be constructed or rebuilt; and
(g) Recommendations for further legislation
To make recommendations to Congress, from
time to time, for such further legislation as he
deems necessary better to effectuate the purpose and policy of this chapter.
(June 29, 1936, ch. 858, title II, § 212, 49 Stat.
1990; Mar. 16, 1968, Pub. L. 90-268, § 1, 82 Stat.
49; Aug. 6, 1981, Pub. L. 97-31, § 12(69), 95 Stat.
159.)
AMENDMENTS

1981-Pub. L. 97-31 substituted in provision preceding subsec. (a) "Secretary of Transportation" for
"Commission"; inserted, following subsec. (d), "The
Federal Maritime Commission is authorized and directed-"; inserted, following subsec. (e), "The Secretary of Transportation, is authorized and directed-";
and substituted, in subsec. (g), "he" for "it". For prior
transfers of functions of the Commission, meaning the
United States Maritime Commission, see Transfer of
Functions note below.

TITLE 46-SHIPPING

Page 327

1968-Subsecs. (f), (g). Pub. L. 90-268 added subsec.
(f) and redesignated former subsec. (f) as (g).
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
§ 1122a. Vessel utilization and performance reports;
filing; civil penalty; lien upon vessel; remission or
mitigation of penalty
The operator of a vessel in waterborne foreign commerce of the United States shall file at
such times and in such manner as the Secretary
of Transportation may prescribe by regulations,
such report, account, record, or memorandum
relating to the utilization and performance of
such vessel in commerce of the United States,
as the Secretary may determine to be necessary
or desirable in order to carry out the purposes
and provisions of this chapter. Such report, account, record, or memorandum shall be signed
and verified in accordance with regulations prescribed by the Secretary. An operator who does
not file the report, account, record, or memorandum as required by this section and the regulations issued hereunder, shall be liable to the
United States in a penalty of $50 for each day
of such violation. The amount of any penalty
imposed for any violation of this section upon
the operator of any vessel shall constitute a
lien upon the vessel involved in the violation,
and such vessel may be libeled therefor in the
district court of the United States for the district in which It may be found. The Secretary
of Transportation may, in his discretion, remit
or mitigate any penalty imposed under this section on such terms as he may deem proper.
(June 29, 1936, ch. 858, title II, § 212(A), as
added June 25, 1956, ch. 437, 70 Stat. 332; Aug.
6, 1981, Pub. L. 97-31, § 12(70), 95 Stat. 159.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce" wherever appearing.
FEDERAL RULES OF CIVIL PROCEDURE

Admiralty and maritime rules of practice (which included libel procedures) were superseded, and civil and
admiralty procedures in United States district courts
were unified, effective July 1, 1966, see rule 1 and Supplemental Rules for Certain Admiralty and Maritime
Claims, Title 28, Appendix, Judiciary and Judicial Procedure.
§ 1122b. Mobile trade fairs
(a) Use of United States flag vessels and aircraft Insofar as practicable
The Secretary of Commerce shall encourage
and promote the development and use of
mobile trade fairs which are designed to show
and sell the products of United States business
and agriculture at foreign ports and at other
commercial centers throughout the world
where the operator or operators of the mobile
trade fairs use Insofar as practicable United
States flag vessels and aircraft in the transportation of their exhibits.

§!1123

(b) Technical and financial assistance: exceptions
The Secretary of Commerce is authorized to
provide to the operator or operators of such
mobile trade fairs technical assistance and support as well as financial assistance for the purpose of defraying certain expenses incurred
abroad (other than the cost of transportation
on foreign-flag vessels and aircraft), when the
Secretary determines that such operations provide an economical and effective means of promoting export sales.
() Authorization of appropriations; use of foreign
currencies
There is authorized to be appropriated not to
exceed $500,000 per fiscal year for each of the
six fiscal years during the period beginning
July 1, 1962, and ending June 30, 1968, and not
to exceed $166,000 for the fiscal year ending
June 30, 1969. In addition to such appropriated
sums, the President shall make maximum use
of foreign currencies owned by or owed to the
United States to carry out the purposes of this
section.
(d) Report to Congress
The Secretary of Commerce shall submit annually to the Congress a report on his activities
under this chapter.
(June 29, 1936, ch. 858, title II, § 212(B), as
added Oct. 18, 1962, Pub. L. 87-839, § 1, 76 Stat.
1074, and amended July 7, 1965, Pub. L. 89-66,
79 Stat. 211; July 27, 1968, Pub. L. 90-434, 82
Stat. 449.)
AMENDMENTS

1968-Subsec. (a). Pub. L. 90-434 substituted "use insofar as practicable" for "exclusively use".
Subsec. (b). Pub. L. 90-434 added "(other than the
cost of transportation on foreign-flag vessels and aircraft)," following "expenses incurred abroad".
Subsec. (c). Pub. L. 90-434 authorized appropriation
of not to exceed $166,000 for the fiscal year ending
June 30, 1969.
1965-Subsec. (c). Pub. L. 89-66 cabstituted "six"
and "June 30, 1968" for "three" and "June 30, 1965",
respectively.
§ 1123. Obsolete tonnage; tramp sErvice; relative costs
at yards
The Secretary of TranspoAation shall make
studies of and make reports to Congress on(a) Removal of obsolete tonnalfe
The scrapping or removal from service of old
or obsolete merchant tonnage owned by the
United States or in use Inthe merchant marine;
(b) Tramp shipping; pdtlcipation in by Americans
Tramp shipping service and the advisability
of citizens of the United States participating in
such service with vessels under United States
registry.
(c) Relative cost of construction at different yards;
equalization
The relative cost of construction or reconditioning of comparable ocean vessels in shipyards in the various coastal districts of the
United States, together with recommendations
as to how such shipyards may compete for work
on an equalized basis; reports under this para-

TITLE 46-SHIPPING

§l 1124l

graph shall be made annually on the first day
of October of each year.
(June 29, 1936, ch. 858, title II, § 213, 49 Stat.
1991; Oct. 24, 1962, Pub. L. 87-877, § 2(c), (d), 76
Stat. 1201; Apr. 21, 1976, Pub. L. 94-273, § 27, 90
Stat. 380; Aug. 6, 1981, Pub. L. 97-31, § 12(71),
95 Stat. 159,)
AMENDMENTS

1981-Pub. L. 97-31 substituted In provision preceding subsec. (a) "Secretary of Transportation" for
"Commission". For prior transfers of functions of the
Commission, meaning the United States Maritime
Commission, see Transfer of Functions note below.
1976-Subsec. (c). Pub. L. 94-273 substituted "October" for "July".
1962-Pub. L. 87-877 substituted "reports to Congress" for "a report to Congress as soon as practicable
on", in the text preceding par. (a), and inserted "; reports under this paragraph shall be made annually on
the first day of July of each year" in par. (c).
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949 and Reorg.
Plan No. 21 of 1950, set out under section 1111 of this
title.
§ 1124. Witnesses
(a) Summoning; oaths; production of books and
papers; fees
For the purpose of any investigation which,
in the opinion of the Federal Maritime Commission or the Secretary of Transportation, is
necessary and proper in carrying out the provisions of this chapter, any member of the Commission or any officer or employee thereof designated by it or the Secretary, is empowered to
subpena witnesses, administer oaths and affirmations, take evidence, and require the production of any books, papers, or other documents
which are relevant or material to the matter
under investigation. Such attendance of witnesses and the production of such books,
papers, or other documents may be required
from any place in the United States or any Territory, district, or possession thereof at any designated place of hearing. Witnesses summoned
before the Commission or the Secretary, shall
be paid the same fees and mileage that are paid
witnesses in the courts of the United States.
(b) Refusal to obey subpena; court orders; contempt
Upon failure of any person to obey a subpena
issued by the Commission or the Secretary, it
or he may invoke the aid of any District Court
of the United States within the Jurisdiction in
which such person resides or carries on business
in requiring the attendance and testimony of
witnesses and the production of books, papers,
or other documents. Any such court may issue
an order requiring such person to appear before
the Commission or the Secretary, or member,
officer, or employee designated by the Commission or the Secretary, there to produce books,
papers, or any other documents, if so ordered,
or to give testimony touching the matter under
investigation or in question. Any failure to obey
such order of the court may be punished by
such court as a contempt thereof. Any process
in any such case may be served in the judicial
district wherein such person resides or wherever he may be found.

Page 328

(June 29, 1936, ch. 858, title II, § 214, 49 Stat.,
1991; June 23, 1938, ch. 600, § 3, 52 Stat. 954;
Oct. 15, 1970, Pub. L. 91-452, title II, § 241, 84
Stat. 930; Aug. 6, 1981, Pub. L. 97-31, § 12(72),
95 Stat. 159.)
AMENDMENTS

1981-Subsec. (a). Pub. L. 97-31, § 12(72)(A)-(C), substituted "Federal Maritime Commission or the Secretary of Transportation" for "Commission"; inserted
"or the Secretary," following "designated by it," and
"Commission". For prior transfers of functions of the
Commission, meaning the United States Maritime
Commission, see Transfer of Functions note below.
Subsec. (b). Pub. L. 97-31, § 12(72)(C), (D), inserted
"or the Secretary," following "Commission" in three
instances and substituted "it or he" for "it". For prior
transfers of functions of the Commission, meaning the
United States Maritime Commission, see Transfer of
Functions note below.
1970-Subsec. (c). Pub. L. 91-452 struck out subsec.
(c) which related to the immunity from prosecution of
any person compelled to testify or produce evidence,
document or otherwise, after claiming his privilege
against self-incrimination.
1938-Subsec. (a). Act June 23, 1938, eliminated
words "within the Federal judicial district in which
the witness resides" which followed "place of hearing".
EFFECTIVE DATE OF 1970 AMENDMENT
Amendment by Pub. L. 91-452 effective on the sixtieth day following Oct. 15, 1970, see section 260 of Pub.
L. 91-452, set out as an Effective Date; Savings Provisions note under section 6001 of Title 18, Crimes and
Criminal Procedure.

SAVINGs PROVISIONS

Amendment by Pub. L. 91-452 not to affect any immunity to which any individual is entitled under this
section by reason of any testimony given before the
sixtieth day following Oct. 15, 1970, see section 260 of
Pub. L. 91-452, set out in as an Effective Date; Savings
Provisions note under section 6001 of Title 18, Crimes
and Criminal Procedure.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
FEDERAL RULES OF CIVIL PROCEDURE

Subpoena, see rule 45, Title 28, Appendix, Judiciary
and Judicial Procedure.
CROSS REFERENCES

Immunity of witnesses, see section 6001 et seq. of
Title 18, Crimes and Criminal Procedure.
§ 1125. Acquisition of vessels
The Secretary of Transportation is authorized to acquire by purchase or otherwise such
vessels constructed in the United States as he
may deem necessary to establish, maintain, Improve, or effect replacements upon any service,
route, or line in the foreign commerce of the
United States determined to be essential under
section 1121 of this title, and to pay for the
same out of his construction fund: Provided,
That the price paid therefor shall be based
upon a fair and reasonable valuation, but It
shall not exceed by more than 5 per centum the
cost of such vessel to the owner (excluding any

TITLE 46-SHIPPING

Page 329

construction-differential subsidy and the cost
of national defense features paid by the Secretary of Transportation) plus the actual cost
previously expended thereon for reconditioning
less depreciation based upon a twenty-five year
life expectancy of the vessel. No such vessel
shall be acquired by the Secretary of Transportation unless the Secretary of the Navy has certified to the Secretary of Transportation that
such vessel is suitable for economical and
speedy conversion into a naval or military auxiliary, or otherwise suitable for the use of the
United States in time of war or national emergency. Every vessel acquired under authority of
this section that is not documented under the
laws of the United States at the time of its acquisition shall be so documented as soon as
practicable.
(June 29, 1936, ch. 858, title II, § 215, as added
June 23, 1938, ch. 600, § 4, 52 Stat. 954, and
amended June 12, 1960, Pub. L. 86-518, § 1, 74
Stat. 216; Aug. 6, 1981, Pub. L. 97-31, § 12(73),
95 Stat. 160.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretaiy of Transportation" for "Commission" wherever appearing,
"his" for "it", and "his" for "its" in the first sentence.
In the first sentence following "United States as",
"he" (rather than "his") was substituted for "it" as
the probable intent of Congress. For prior transfers of
functions of the Commission, meaning the United
States Maritime Commission, see Transfer of Functions note below.
1960-Pub. L. 86-518 substituted "twenty-five year
life expectancy" for "twenty-year life expectancy".
EFFECTIVE DATE OF

1960

AMENDMENT

Section 8(a) of Pub. L. 86-518 provided that: "The
amendments made by this Act [amending sections
1125, 1152, 1153, 1156, 1157, 1159, 1160, 1175, 1177,
1181, 1195, 1204, 1274, 1276 and 1276a of this title, and
section 1737 of Title 50, Appendix, War and National
Defense] shall apply only to vessels delivered by the
shipbuilder on or after January 1, 1946, and with respect to such vessels shall become effective on January 1, 1960. With respect to vessels delivered by the
shipbuilder before January 1, 1946, the provisions of
the Merchant Marine Act, 1936 [this chapter], existing immediately before the date of enactment of this
Act [June 12, 1960] shall continue in effect."
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949 and Reorg.
Plan No. 21 of 1950, set out under section 1111 of this
title.
RATE OF DEPRECIATION FOR VESSELS DELIVERED BY
SHIPBUILDER ON OR AFTER JANUARY 1, 1946, AND

BEFORE JANUARY 1, 1960

Section 8(b) of Pub. L. 86-518 provided that with
regard to vessels delivered by the shipbuilder on or
after Jan. 1, 1946, and before Jan. 1, 1960, depreciation
under this section and sections 1152(g), 1157, 1160(d).
1177(b), 1181(c), 1195, 1204 and 1276a(4) of this title
was generally to be taken for the period prior to Jan.
1, 1960, at the rate provided by this chapter, as it existed immediately prior to the amendments made by
Pub. L. 86-518, and for the period after Jan. 1, 1960,
such depreciation was generally to be taken on the
basis of the remaining years of a useful life of twentyfive years unless the vessel was reconstructed or reconditioned in which event such depreciation, from the
time of such reconstruction or reconditioning, was

§ 1125

generally to be taken on the basis of the remaining
years of a useful life of the vessel determined jointly
by the Secretary of Commerce and the Secretary of
the Treasury.
REVISION OF CONTRACTS. COMMITMENTS To INSURE
MORTGAGES, MORTGAGES, AND MORTGAGE INSURANCE
CONTRACTS ENTERED INTO PRIOR 'O JUNE 12, 1960;
AMENDMENT OF CONTRACT DEALING WITH VESSELS
HAVING EXTENDED LIFE

Section 8(c) of Pub. L. 86-518, as amended by Pub. L.
88-225, Dec. 23, 1963, 77 Stat. 469, provided that any
contract, commitment to insure a mortgage under subchapter XI of this chapter, or mortgage, between any
person and the United States or any agency thereof,
or any mortgage insurance contract under subchapter
XI of this chapter, which was entered into prior to
June 12, 1960 and which would have been affected if
the provisions of the amendments made by Pub. L.
86-518, to this section and sections 1152, 1153. 1156,
1157, 1159, 1160, 1175, 1177, 1181, 1195, 1204, 1274,
1276, and 1276a of this title, and section 1737 of Title
50, Appendix, War and National Defense, were applicable thereto, could, at the request of such person
agreed to by any third parties in Interest, or at the request of the mortgagor agreed to by the mortgagee in
the case of such a mortgage insurance contract, made
within one hundred and eighty days after June 12,
1960 to the agency of the United States holding such
contract, be revised to be in accordance with the law
as amended by Pub. L. 86-518, with respect to such of
the vessels covered thereby as were designated by the
applicant, that any such revision was to provide with
respect to the amendments to this section and sections
1152(g), 1157, 1160(d), 1177(b), 1181(c), 1195, 1204, and
1276a(4) of this title, that depreciation for the period
prior to Jan. 1,1960, was to be taken at the rate provided by the Merchant Marine Act, 1936, act June 29,
1936, ch. 858, 49 Stat. 1985, prior to the amendments
made by Pub. L. 86-518, and that the remaining depreciation was to be taken for the period beginning Jan.
1, 1960, on the basis of the remaining years of a useful
life of twenty-five years, unless the vessel was reconstructed or reconditioned, in which event such depreciation from the time of such reconstruction or reconditioning was to be taken on the basis of the remaining
years of a useful life of the vessel determined jointly
by the Secretary of Commerce and the Secretary of
the Treasury, that any such revision was to provide
with respect to any remaining unpaid debts that such
unpaid debts were to be paid in equal annual installments over the remaining years of a useful life of
twenty-five years, and that provisions in such contracts affecting vessels covered by Pub. L. 86-518 providing for refund of construction-differential subsidy
for domestic operations under section 1156 of this title
and costs of national defense features for commercial
use were to be amended so that for such refund payments made for the period after Dec. 31, 1959, the
base upon which such refund payments were computed annually thereafter were to be the undepreciated
amount of subsidy or the national defense feature, as
the case may be, as at Dec. 31, 1959, divided by the
years of life of the vessels as provided under Pub. L.
86-518, remaining after Dec. 31, 1959.
COMMERCIAL EXPECTANCY OR PERIOD OF DEPRECIATION
OF TANKERS AND OTHER LIQUID BULK CARRIERS

Section 9 of Pub. L. 86-518 provided that: "Nothing
in any amendment made by this Act [amending sections 1125, 1152, 1153, 1156, 1157, 1159, 1160, 1175,
1177, 1181, 1195, 1204, 1274, 1276, and 1276a of this
title, and section 1737 of Title 50, Appendix, War and
National Defense] shall operate or be interpreted to
change from twenty to twenty-five years the provisions of the Merchant Marine Act, 1936, as amended
[this chapter], relating to the commercial expectancy

Page 330

TITLE 46-SHIPPING

§ 1125a

or period of depreciation of any tanker or other liquid
bulk carrier."
SECTION REFERRED TO IN OTiHER SECTIONS
This section Is referred to in section 1152 of this
title.

§ 1126-1. Training of future naval officers under
Naval Reserve Officer Training Corps programs
at merchant inarine academies for promotion of
maximum integration of naval and merchant
marine seapower of the Nation

(a) It is the policy of the United States that
the United States Navy and the Merchant
Marine of the United States work closely together to promote the maximum integration of
the total seapower forces of the Nation. In furThe Secretary of Transportation is authorized to construct, reconstruct, repair, equip, and therance of this policy, it is necessary and deoutfit, by contract or otherwise, vessels or parts sirable that special steps be taken to assure
thereof, for any other department or agency of
that Naval Reserve Officer Training Corps programs (for training future naval officers) be
the Government, to the extent that such other
department or agency is authorized by law to
maintained at Federal and State merchant
do so for its own account, and any obligations marine academies.
(b) It is the sense of the Congress that the
heretofore or hereafter incurred by the Secretary for any of the aforesaid purposes shall not
Secretary of the Navy should work with the
diminish or otherwise affect any contract au- Maritime Administrator and the administrators
thorization granted to the Secretary: Provided, of the several merchant marine academies to
The obligations incurred or the expenditures assure that the training available at these academies Is consistent with Navy standards and
made are charged against and, to the amount of
such obligation or expenditure, diminish the needs.
existing appropriation or contract authoriza- (Pub. L. 94-361, title VI, § 603, July 14, 1976, 90
tion of such department or agency.
Stat. 929; Pub. L. 97-31, § 12(76), Aug. 6, 1981,
95 Stat. 160.)
(Feb. 6, 1941, ch. 5, § 4, 55 Stat. 6; Aug. 6, 1981,
1125a. Construction, repair, etc., of vessels for Government agencies

Pub. L. 97-31, § 12(74), 95 Stat. 160.)
CODIFICATION
CODIFICATION

Section was not enacted as part of the Merchant
Marine Act, 1936, which comprises this chapter.
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" the first time it appeared and "Secretary" for "Commission" the next
two times it appeared. For prior transfers of functions
of the Commission, meaning the United States I.laritime Commission, see Transfer of Functions note
below.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949 and Reorg.
Plan No. 21 of 1950, set out under section 1111 of this
title.
§ 1126. Repealed. Pub. L. 96-453, § 3(d), Oct. 15, 1980,
94 Stat. 2009
Section, acts June 29, 1936, ch. 858, title II, § 216, as
added June 23, 1938, ch. 600, § 44, 52 Stat. 965, and
amended Aug. 4, 1939, ch. 417, 1 5, 53 Stat. 1182; 1950
Reorg. Plan No. 21, § 204, eff. May 24, 1950, 15 F.R.
3178, 64 Stat. 1276; Feb. 20, 1956, ch. 64, 70 Stat. 25;
Feb. 20, 1958, Pub. L. 85-331, § 1, 72 Stat. 16; July 20,
1961, Pub. L. 87-93, 75 Stat. 212; Sept. 6, 1961, Pub. L.
87-199, 75 Stat. 468; Sept. 6, 1961, Pub. L. 87-208, 75
Stat. 480; Oct. 2, 1964, Pub. L. 88-611, §4(a)(3), 78
Stat. 991: 1967 Reorg. Plan No. 3, § 401, eff. Nov. 3,
1967, 32 P.R. 11669, 81 Stat. 951; Pub. L. 93-198, title
IV, § 421, Dec. 24, 1973, 87 Stat. 789; Nov. 12, 1977,
Pub. L. 95-173, § 7, 91 Stat. 1360; July 28, 1978, Pub. L.
95-323, § 1, 92 Stat. 396; Aug. 6, 1981, Pub. L. 97-31,
§ 12(75), 95 Stat. 160, provided for the training of Merchant Marine personnel. See section 1295b of this
title.
EFFECTIVE DATE OF REPEAL

Section repealed effective Oct. 1,1981, see section 4
of Pub. L. 96-453, set out as an Effective Date note
under section 1295 of this title.

Section was enacted as part of Pub. L. 94-361, popularly known as the Department of Defense Appropriation Authorization Act. 1977, and not as part of the
Merchant Marine Act, 1936, which comprises this
chapter.
AMENDMENTS

1981-Subsec. (b). Pub. L. 97-31 substituted "Maritime Administrator" for "Assistant Secretary of Commerce for Maritime Affairs".
§ 1126a. Repealed. Aug. 10, 1956, ch. 1041, § 53, 70A
Stat. 641
Section, acts May 25, 1933, ch. 37, 48 Stat. 73; July 8,
1937, ch. 441, 50 Stat. 477; Aug. 9, 1946, ch. 932, 60
Stat. 968: Aug. 4, 1949, ch. 393, j 13. 63 Stat. 559; Aug.
18, 1949, ch. 476, 63 Stat. 614, authorized the issuance
of a bachelor of science degree on graduation from
United States Merchant Marine Academy. See section
1295b(g) of this title.
§ 1126a-1. Repealed. Pub. L. 96-453, § 3(i), Oct. 15,
1980, 94 Stat. 2009
Section, act Aug. 10, 1956, ch. 1041, j 34, 70A Stat.
634; Aug. 6, 1981, Pub. L. 97-31, § 12(77), 95 Stat. 160,
provided for the conferring of the degree of bachelor
of science upon graduates of the Academy. See section
1295b(g) of this title.
EFFECTIVE DATE OF REPEAL

Section repealed effective Oct. 1, 1981, see section 4
of Pub. L. 96-453, set out as an Effective Date note
under section 1295 of this title.
§ 1126b. Repealed. Pub. L. 96-453, § 3(g), Oct. 15, 1980,
94 Stat. 2009
Section, act Aug. 9, 1946, ch. 928, 60 Stat. 961; 1950
Reorg. Plan No. 21, § 204, eff. May 24, 1950, 15 F.R.
3178, 64 Stat. 1276; Aug. 6, 1981, Pub. L. 97-31.
§ 12(78), 95 Stat. 160, provided for the admission of
persons from other American republics to the United
States Merchant Marine Academy. See section
1295b(b)(5) of this title.

TITLE 46-SHIPPING

Page 331
EFFECTIVE DATE OF REPEAL

Section repealed effective Oct. 1, 1981, see section 4
of Pub. L. 96-453, set out as an Effective Date note
under section 1295 of this title.
§ 1126b-1. Repealed. Pub. L. 96-453, § 3(k), Oct. 15,
1980, 94 Stat. 2010
Section, Pub. L. 87-244, Sept. 14, 1961, 75 Stat. 514;
Pub. L. 97-31, § 12(79), Aug. 6. 1951, 95 Stat. 160, authorized the admission of persons from the Trust Territory of the Pacific Islands to the United States Merchant Marine Academy. See section 1295b(b)(4)(A) of
this title.
EFFECTIVE DATE OF REPEAL

Section repealed effective Oct. 1, 1981, see section 4
of Pub. L. 96-453, set out as an Effective Date note
under section 1295 of this title.
§ 1126c. Repealed. Pub. L. 96-453, § 3(f), Oct. 15, 1980,
94 Stat. 2009
Section, act May 11, 1944, ch. 194, 58 Stat. 220; 1950
Reorg. Plan No. 21, 1 204, eff. May 24, 1950, 15 F.R.
3178, 64 Stat. 1276; Aug. 6, 1981, Pub. L. 97-31,
112(80). 95 Stat. 160, related to the Board of Visitors
for United States Merchant Marine Academy. See section 1295b(h) of this title.
EFFECTIVE DATE OF REPEAL
Section repealed effective Oct. 1, 1981, see section 4
of Pub. L. 96-453, set out as an Effective Date note
under section 1295 of this title.

§ 1131

amended Apr. 11. 1942, ch. 240, 56 Stat. 215; Mar. Ipt.
1943, ch. 26, § 3(e). 57 Stat. 50. related to reinsui once.
prohibition against fees to brokers, and rates. Set, section 1287 of this title.
Section 1128c, act June 29, 1936, ch. 858, title II,
1 224. as added June 29, 1940. cl. 447, 54 Stat. 690. and
amended Apr. 11. 1942, ch. 240, 56 Stat. 215; Mar. 24,
1943, ch. 26. 1 3(f). 57 Stat. 50, related to insurance of
government departments and agencies. See section
1285 of this title.
Section 1128d, act June 29, 1936, ch. 858, title II,
j 225. as added June 29, 1940, ch. 447, 54 Stat. 690, and
amended Apr. 11, 1942, ch. 240. 56 Stat. 215; Mar. 24,
1943, ch. 26, § 3(g), 57 Stat. 50, related to actions on
claims for losses and Jurisdiction of courts. See section
1292 of this title.
Section 1128e, act June 29, 1936, ch. 858, title II,
§ 226, as added June 29, 1940, ch. 447, 54 Stat. 691, and
amended Apr. 11, 1942, ch. 240, 56 Stat. 216: Mar. 24,
1943, ch. 26, § 3(h), 57 Stat. 51: Apr. 24, 1944, ch. 178,
§ 1, 58 Stat. 216, related to general administrative provisions, suspension of statute of limitations and definitions. See sections 1281 and 1289 of this title.
SAVINGS PROVISIONS

Act July 25, 1947, provided that section 1 of act Apr.
24, 1944, ch. 178, 58 Stat. 216, which added second sentence to section 1128e(a) of this title, was repealed,
"except that any suspension of the statute of limitations heretofore provided for in an agreement entered
into under the authority of such section shall continue in effect for the period provided in such agreement,
but in no case longer than two years after the date of
enactment of this joint resolution [July 25, 1947."

§ 1126d. Repealed. Pub. L. 96-453, § 3(h), Oct. 15,
1980, 94 Stat. 2009

§ 1128e-1. Omitted

Section, acts July 22, 1947, ch. 290, 61 Stat. 401; July
11, 1956, ch. 564, 70 Stat. 524; Aug. 6, 1981, Pub. L.
97-31, § 12(81), 95 Stat. 160, provided for the appointment of an Advisory Board to the Merchant Marine
Academy. See section 1295b(i) of this title.

Section, act Apr. 24, 1944, ch. 178, § 2, 58 Stat. 216,
which related to compromise or settlement, by the Administrator of the War Shipping Administration, of
claims after expiration of time for filing, has been
omitted in view of termination of War Shipping Administration on Sept. 1, 1946. See note set out under
section 1291 of Title 50, Appendix, War and National
Defense.

EFFECTIVE DATE OF REPEAL
Section repealed effective Oct. 1, 1981, see section 4
of Pub. L. 96-453, set out as an Effective Date note
under section 1295 of this title.
§ 1127. Repealed. Pub. L. 86-360, Sept. 22, 1959, 73
Stat. 643
Section, act June 29, 1936, ch. 858, title II, § 217, as
added Mar. 14, 1942, ch, 186, 56 Stat. 171, and amended Aug. 30. 1954, ch. 1076, j 1(9), 68 Stat. 967, related
to coordination of forwarding and similar servicing of
waterborne export and import foreign commerce.
SUBDIVISION-INSURANCE
H4 1128 to 1128e. Repealed. July 25, 1947, ch. 327, § 1,
61 Stat. 449
Section 1128, act June 29, 1936, ch. 858, title II,
§ 221, as added June 29, 1940. ch. 447, 54 Stat. 689, and
amended Apr. 11, 1942, ch. 240, 56 Stat. 214, related to
the authority of the United States Maritime Commission to provide marine and war-risk insurance, duration of such authority, reports, and an insurance fund.
See section 1281 et seq. of this title,
Section 1128a, act June 29, 1936, ch. 858, title II,
I 222, as added June 29, 1940, ch. 447, 54 Stat, 690, and
amended Mar. 6, 1942, ch. 154, 56 Stat. 140; Apr. 11,
1942, ch. 240, 56 Stat. 214; Mar. 24, 1943, ch. 26, § 2(a),
57 Stat. 47, related to authority of United States Maritime Commission to insure against loss or damage by
risks of war, persons, property and certain insurable
interests. See section 1281 et seq. of this title.
Section 1128b, act June 29, 1936, ch. 858, title II,
§ 223, as added June 29, 1940, ch. 447. 54 Stat. 690, and

CODIFICATION

H4 1128f to 1128h. Repealed. July 25, 1947, ch. 327, § 1,
61 Stat. 449
Section 1128f, act June 29, 1936, ch. 858, title II,
1 227, as added June 29, 1940, ch. 447, 54 Stat. 691, and
amended Apr. 11, 1942, ch. 240, 56 Stat. 216, related to
effect of former sections 1128 to 1128h of this title on
seamen's rights under existing laws. See section 1290
of this title.
Section 1128g, act June 29, 1936, ch. 858, 1 228, as
added June 29, 1940, ch, 447, 54 Stat. 691, and amended Apr. 11, 1942, ch. 240, 56 Stat. 217, vested United
States Maritime Commission's authority in Administrator of War Shipping Administration. See section
1251 et seq. of this title.
Section 1128h, act June 29, 1936, ch. 858, § 229, as
added Mar. 24, 1943, ch. 26, § 3(i), 57 Stat. 51, authorized War Shipping Administration to insure directly or
to reinsure. See section 1251 et seq. of this title.
SUBCHAPTER III-AMERICAN SEAMEN
§ 1131. Manning and wage scales; subsidy contracts
(a) Investigation of wages and working conditions;
establishment of wage and manning scales; incorporation in subsidy contracts
The Secretary of Transportation is authorized and directed to investigate the employment and wage conditions in ocean-going shipping and, after making such investigation and

§1132

TITLE 46-SHIPPING

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

Page 332

qualified, because of their failure to qualify
as members of the United States Naval Reserve.
(June 29, 1936, ch. 858, title III, § 301, 49 Stat.
1992; June 23, 1938, ch. 600, §§ 5, 6, 52 Stat. 954,
955; 1946 Reorg. Plan No. 3, §§ 101-104, eff.
July 16, 1946, 11 F.R. 7875, 60 Stat. 1097; Aug.
6, 1981, Pub. L. 97-31, § 12(82), 95 Stat. 160.)
AMENDMENTS

1981-Subsec. (a). Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" in five instances. For prior transfers of functions of the Commission, meaning the United States Maritime Commission, see Transfer of Functions note below.
Subsec. (b)(2). Pub. L. 97-31 substituted "Secretary
of Transportation" for "Commission" in three instances. For prior transfers of functions of the Commission, meaning the United States Maritime Commission, see Transfer of Functions note set out below.
1938-Subsec. (a). Act June 23, 1938, § 5, substituted
"minimum working conditions" for "reasonable working conditions," eliminated provisions which required
a formal complaint before any change in scales or
working conditions, and permitted representatives of
organizations certified as the proper collective bargaining agencies to represent employees at hearings.
Subsec. (b). Act June 23, 1938, § 6, eliminated provisions which permitted complaints and recommendations to be made to the Coast Guard or the Department of Labor, and which required licensed officers to
take their meals in the main dining salon of the vessel.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
The Coast Guard was transferred to the Department
of Transportation, and all functions, powers, and
duties relating to the Coast Guard of the Secretary of
the Treasury and of other officers and offices of the
Department of the Treasury were transferred to the
Secretary of Transportation by Pub. L. 89-670,
§ 6(b)(1), Oct. 15, 1966, 80 Stat. 938. Section 6(b)(2) of
Pub. L. 89-670, however, provided that notwithstanding such transfer of functions, the Coast Guard shall
operate as part of the Navy In time of war or when the
President directs as provided in section 3 of Title 14,
Coast Guard. See section 108 of Title 49, Transportation.
For transfer of functions of other officers, employees, and agencies of the Department of the Treasury,
with certain exceptions, to the Secretary of the Treasury with power to delegate, see Reorg. Plan No. 26 of
1950, §§ 1, 2, eff. July 31, 1950, 15 F.R. 4935, 64 Stat.
1280, 1281, set out in the Appendix to Title 5, Government Organization and Employees. Functions of the
Coast Guard, and the Commandant of the Coast
Guard, were excepted from transfer wlhon the Coast
Guard is operating as part of the Navy under sections
1 and 3 of Title 14.
Phrase "or the Coast Guard" was inserted in subsec.
(b)(3) on authority of Reorg. Plan No. 3 of 1946,
§§ 101-104, set out as a note under section 1 of this
title.
§ 1132. Citizenship of officers and crew
(a) Vessels documented under laws of United States
All licensed officers of vessels documented
under the laws of the United States, as now required by law, shall be citizens of the United
States, native-born or completely naturalized;
and upon each departure from the United
States of a cargo vessel in respect of which a

Page 333

TITLE 46-SHIPPING

construction or operating subsidy has been
granted all of the crew (crew including all employees of the ship) shall be citizens of the
United States, native-born or completely naturalized.
(b) Passenger vessels granted subsidies
For a period of one year after the effective
date of this chapter upon each departure from
the United States of a passenger vessel in respect of which a construction or operation subsidy has been granted, all licensed officers shall
be citizens of the United States as defined
above, and no less than 80 per centum of the
crew (crew including all employees of the ship
other than officers) shall be citizens of the
United States, native-born or completely naturalized, and thereafter the percentage of citizens, as above defined, shall be increased 5 per
centum per annum until 90 per centum of the
entire crew, including all licensed officers of
any such vessel, shall be citizens of the United
States, native-born or completely naturalized.
(c) Aliens; conditions of employment
Any member of the crew, not required by this
section to be a citizen of the United States, may
be an alien only if he is in possession of a valid
declaration of intention to become a citizen of
the United States, or other evidence of legal admission to the United States for permanent
residence. Such alien, as above defined, may be
employed only in the steward's department on
passenger vessels.
(d) Filling vacancies while on foreign voyage
If any such vessel (as above defined) while on
a foreign voyage is for any reason deprived of
the services of any employee below the grade of
master, his place or a vacancy caused by the
promotion of another to his place may be supplied by a person other than defined in subsections (a) and (b) of this section, until the first
return of such vessel to a port in the United
States.
(e) Penalty for violations
The owner, agent, or officer of any such
vessel who knowingly employs any person in
violation of the provisions of this chapter shall,
upon conviction thereof, be fined $50 for each
person so employed.
(f) Enforcement; effective date; repeal of other laws
This section shall be enforced by the Secretary of the Department in which the Coast
Guard is operating or the Secretary of the
Treasury, for the purpose of carrying out the
provisions of this section, and shall take effect
ninety days after June 29, 1936.
(g) Membership of officers in United States Naval Reserve
All of the deck and engineer officers employed on vessels on which an operating-differential subsidy is paid under authority of subchapter VI of this chapter, or employed on the
Transportation Department's vessels, after one
year after June 29, 1936, shall, if eligible, be
members of the United States Naval Reserve.
(h) Suspension of section during emergency
During a national emergency as proclaimed
by the President he may, in his discretion, suspend any or all of the provisions of this section.

§1115

(June 29, 1936, ch. 858, title III, § 302, 49 Stat.
1992; Aug. 6, 1981. Pub. L. 97-31, § 12(83), 95
Stat. 160,)
AMENDMENTS

1981-Subsec. (f). Pub. L. 97-31, 1 12(83)(A), substi.
tuted "Secretary of the Department in which the
Coast Guard is operating or tile Secretary of the
Treasury" for "Secretary of Commerce". For prior
transfers of functions of the Secretary of Commerce,
see Transfer of Functions note below.
Subsec. (g). Pub, L. 97-31, 1 12(83)(B), substituted
"Transportation Department's vessels" for "Commission's vessels". For prior transfers of functions of the
Commission, meaning the United States Maritime
Commission, see Transfer of Functions note below.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime

Commission, see Reorg. Plan No. 6 of 1949 and Reorg.
Plan No. 21 of 1950, set out under section 1111 of this
title.
For transfer of functions of Secretary of Commerce,
see sections 101 to 104 of Reorg. Plan No. 3 of 1946, set
out as a note under section 1 of this title, Reorg. Plan
No. 26 of 1950, set out in the Appendix to Title 5, Government Organization and Employees, and section 108
of Title 49, Transportation.
TERMINATION OF WAR AND EMERGENCIES

Act July 25, 1947, ch. 327, § 3, 61 Stat. 451, provided
that in the Interpretation of subsec. (h) of this section,
the date July 25, 1947, shall be deemed to be the date
of termination of any state of war theretofore declared by Congress and of the national emergencies
proclaimed by the President on Sept. 8, 1939, and May
27, 1941.
SUBCHAPTER IV-OCEAN MAIL
CONTRACTS
§§ 1141 to 1144. Omitted
CODIFICATION

Sections 1141 to 1144, related to termination and settlement of ocean mail contracts existing when this
chapter became effective.
Section 1141, act June 29, 1936, ch. 858, title IV,
§ 401, 49 Stat. 1993, related to termination of ocean
mail contracts, made prior to June 29, 1936, by June
30, 1937.
Section 1142, acts June 29, 1936, ch. 858, title IV,
§ 402, 49 Stat. 1993; June 1, 1938, ch. 311, 52 Stat. 606;
June 23, 1938, ch. 600, § 7, 52 Stat. 955, related to adI
Justment of rights under terminated contracts.
Section 1143, act June 29, 1936, ch. 858, title IV,
§ 403, 49 Stat. 1994, related to credit of sum payable to
contractor on !oans and mortgage notes.
Section 1144, act June 29, 1936, ch. 858, title IV,
§ 404, 49 Stat. 1995, transferred powers under then existing ocean mail contracts from Postmaster General
to United States Maritime Commission.
§1145. Repealed. Pub. L. 86-682, § 12(c), Sept. 2, 1960,
74 Stat. 725, eff. Sept. 1, 1960
Section, act June 29, 1936, ch. 858, title IV, § 405, 49
Stat. 1995, related to the carriage of United States
mails on vessels and to the transportation of Postal
Service employees on mail-carrying vessels without
charge when on duty.
Such provisions were reenacted by section 1 of Pub.
L. 86-682 as sections 6104 and 6433 of Title 39, The
Postal Service. Title 39 was revised and reenacted by
Pub. L. 91-375, § 2, Aug. 12, 1970. 84 Stat. 719, and the
provisions contained in former sections 6104 and 6433
are covered by sections 5005 and 5007 of Title 39.

§1151

TITLE 46-SHIPPING

SUBCHAPTER V-CONSTRUCTIONDIFFERENTIAL SUBSIDY
SUBCHAPTEn REFERRED TO IN

OTHER SECTIONS

This subchapter is referred to in sections 1161, 1191,
1193, 1204, 1212, 1244, 1274 of this title.

1151. Subsidy authorized for vessels to be operated
in foreign trade
(a) Application for subsidy for construction; conditions precedent to granting
Any proposed ship purchaser who is a citizen
of the United States or any shipyard of the
United States may make application to the Secretary of Transportation for a construction-differential subsidy to aid in the construction of a
new vessel to be used in the foreign commerce
of the United States. No such application shall
be approved by the Secretary of Transportation
unless he determines that (1) the plans and
specifications call for a new vessel which will
meet the requirements of the foreign commerce
of the United States, will aid in the promotion
and development of such commerce, and be
suitable for use by the United States for national defense or military purposes in time of war
or national emergency; (2) if the applicant is
the proposed ship purchaser, the applicant possesses the ability, experience, financial resources, and other qualifications necessary for
the operation and maintenance of the proposed
new vessel, and (3) the granting of the aid applied for is reasonably calculated to carry out
effectively the purposes and policy of this chapter. The contract of sale, and the mortgage
given to secure the payment of the unpaid balance of the purchase price shall not restrict the
lawful or proper use or operation of the vessel
except to the extent expressly required by law.
The Secretary of Transportation may give preferred consideration to applications that will
tend to reduce construction-differential subsidies and that propose the construction of ships
of higher transport capability and productivity.
(b) Submission of plans to Navy Department; certification of approval
The Secretary of Transportation shall submit
the plans and specifications for the proposed
vessel to the Navy Department for examination
thereof and suggestions for such changes therein as may be deemed necessary or proper in
order that such vessel shall be suitable for economical and speedy conversion into a naval or
military auxiliary, or otherwise suitable for the
use of the United States Government in time of
war or national emergency. If the Secretary of
the Navy approves such plans and specifications as submitted, or as modified, in accordance with the provisions of this subsection, he
shall certify such approval to the Secretary of
Transportation.
(c) Application for subsidy for reconstruction or reconditioning; conditions precedent to granting;
contracts
Any citizen of the United States or any shipyard of the United States may make application to the Secretary of Transportation for a
construction-differential subsidy to aid in reconstructing or reconditioning any vessel that

Page 334

is to be used in the foreign commerce of the
United States. If the Secretary of Transportation, in the exercise of his discretion, shall determine that the granting of the financial aid
applied for is reasonably calculated to carry out
effectively the purposes and policy of this chapter, the Secretary of Transportation may approve such application and enter into a contract or contracts with the applicant therefor
providing for the payment by the United States
of a construction-differential subsidy that is to
be ascertained, determined, controlled, granted,
and paid, subject to all the applicable conditions and limitations of this subchapter and
under such further conditions and limitations
as may be prescribed in the rules and regulations of the Secretary of Transportation has
adopted as provided in section 1114(b) of this
title; but the financial aid authorized by this
subsection shall be extended to reconstruction
or reconditioning only in exceptional cases and
after a thorough study and a formal determination by the Secretary of Transportation that
the proposed reconstruction or reconditioning
is consistent with the purposes and policy of
this chapter.
(June 29, 1936, ch. 858, title V, § 501, 49 Stat.
1995; June 23, 1938, ch. 600, § 8, 52 Stat. 955;
July 17, 1952, ch. 939, §§ 1, 2, 66 Stat. 760, 761;
Oct. 21, 1970, Pub. L. 91-469, §§ 6, 35(a), (c), (d),
84 Stat. 1019, 1035; Dec. 31, 1970, Pub. L.
91-603, § 4(a), 84 Stat. 1675; Aug. 6, 1981, Pub.
L. 97-31, § 12(84), 95 Stat. 161.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce" wherever appearing.
1970-Pub. L. 91-469, § 35(a), substituted "Secretary
of Commerce" for "Commission", twice in subsecs. (a)
and (b) and five times in subsee. (c).
Subsec. (a). Pub. L. 91-603 substituted "for the operation and maintenance of" for "to enable it to operate
and maintain" in cl. (2).
Pub. L. 91-469, §§ 6(1), 35(c), substituted "Any proposed ship purchaser who is a citizen of the United
States or any shipyard of the United States" for "Any
citizen of the United States", inserted in subd. (2) the
introductory words "if the applicant is the proposed
ship purchaser," struck out of subd. (3) "to replace
wornout or obsolete tonnage with new and modern
ships, or otherwise" following "reasonably calculated",
and authorized the Secretary of Commerce to give
preferred consideration to applications that will tend
to reduce construction-differential subsidies and that
propose the construction of ships of high transport capability and productivity; and substituted "he" for "it"
preceding "determines", respectively.
Subsec. (c). Pub. L. 91-469, §§ 6(2), 35(d), inserted
"or any shipyard of the United States" following "Any
citizen of the United States" and substituted "his" for
"its" preceding "discretion", respectively.
1952-Subsecs. (a), (c). Act July 17, 1952, §1 1, 2,
eliminated requirements as to essentiality of the service, route, or line to be served by the vessel and provided that the lawful or proper use of the vessel may
not be restricted.
1938-Subsec. (c). Act June 23, 1938, inserted reference to section 1114(b).
COMMISSION ON AMERICAN SHIPBUILDING

Section 4 of Pub. L. 91-469 established a Commission
on American Shipbuilding, provided for the appointment and compensation of an Executive Director of

Page 335

TITLE 46-SHIPPING

the commission and other personnel, empowered the
commission to study American shipbuilding with a
view toward increased productivity and reduced costs,
and to make a report to the President and Congress no
later than three years after Oct. 21, 1970 of the commission's findings and recommendations, and provided
that the commission was to terminate sixty days after
filing its report.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1152, 1173 of
this title.
§ 1152. Construction of vessels; bids; subsidies
(a) Approval of bids; contract with bidder; acceptance
of negotiated price; shipyard records, availability;
contract with applicant or qualified citizen for
purchase of vessel
If the Secretary of the Navy certifies his approval under section 1151(b) of this title, and
the Secretary of Transportation approves the
application, he may secure bids for the construction of the proposed vessel according to
the approved plans and specifications. If the
bid of the shipbuilder who is the lowest responsible bidder Is determined by the Secretary of
Transportation to be fair and reasonable, the
Secretary of Transportation may approve such
bid, and if such approved bid is accepted by the
proposed ship purchaser, the Secretary of
Transportation is authorized to enter into a
contract with the successful bidder for the construction, outfitting, and equipment of the proposed vessel, and for the payment by the Secretary of Transportation to the shipbuilder, on
terms to be agreed upon in the contract, of the
contract price of the vessel, out of the construction fund hereinbefore referred to, or out of
other available funds. Notwithstanding the provisions of the first sentence of section 1155 of
this title with respect to competitive bidding,
the Secretary of Transportation is authorized
to accept a price for the construction of the
ship which has been negotiated between a shipyard and proposed ship purchaser if (1) the
proposed ship purchaser and the shipyard
submit backup cost details and evidence that
the negotiated price is fair and reasonable; (2)
the Secretary of Transportation finds that the
negotiated price is fair and reasonable; and (3)
the shipyard agrees that the Comptroller General of the United States or any of his duly authorized representatives shall, until the expiration of three years after final payment have
access to and the right to examine any pertinent books, documents, papers, and records of
the shipyard or any of its subcontractors related to the negotiation or performance of any
contract or subcontract negotiated under this
subsection and will include in its subcontracts a
provision to that effect. Concurrently with entering into such contract with the shipbuilder,
the Secretary of Transportation is authorized
to enter into a contract for the sale of such
vessel upon its completion, to the applicant if
he is the proposed ship purchaser and if not to
another citizen of the United States, If the Secretary of Transportation determines that such
citizen possesses the ability, experience, financial resources, and other qualifications necessary for the operation and maintenance of the

§ 1152

vessel at a price corresponding to the estimated
cost, as determined by the Secretary of Transportation pursuant to the provisions of this
chapter, of building such vessel in a foreign
shipyard.
() Basis for fixing subsidy; cost of construction in
foreign yards; annual recomputation and publication of foreign cost; limitation on construction
differential; report on American shipbuilding industry
The amount of reduction in selling price
which is herein termed "construction differential subsidy" shall equal, but not exceed, the
excess of the bid of the shipbuilder constructing the proposed vessel (excluding the cost of
any features incorporated in the vessel for national defense uses, which shall be paid by the
Secretary in addition to the subsidy), over the
fair and reasonable estimate of cost, as determined by the Secretary, of the construction of
that type vessel if it were constructed under
similar plans and specifications (excluding national defense features as above provided) in a
foreign shipbuilding center which is deemed by
the Secretary to furnish a fair and representative example for the determination of the estimated foreign cost of construction of vessels of
the type proposed to be constructed. The Secretary of Transportation shall recompute such estimated foreign cost annually unless, in the
opinion of the Secretary, there has been a significant change in shipbuilding market conditions. The Secretary shall publish notice of his
intention to compute or recompute such estimated foreign cost and shall give interested
persons, including but not limited to shipyards
and shipowners and associations thez eof, an opportunity to file written statements. The Secretary's consideration shall include, but not be
limited to, all relevant matter so filed, and his
determination shall include or be accompanied
by a concise explanation of the basis of his determination. The construction differential approved and paid by the Secretary shall not
exceed 50 per centum of the cost of constructing, reconstructing, or reconditioning the vessel
(excluding the cost of national defense features). If the Secretary finds that the construction differential exceeds, in any case, the foregoing percentage of such cost, the Secretary
may negotiate with any bidder (whether or not
such person is the lowest bidder) and may contract with such bidder (notwithstanding the
first sentence of section 1155 of this title) for
the construction, reconstruction, or reconditioning of the vessel involved in a domestic
shipyard at a cost which will reduce the construction differential to such percentage or less.
In the event that the Secretary has reason to
believe that the bidding in any instance is collusive, he shall report all of the evidence on
which he acted (1) to the Attorney General of
the United States, and (2) to the President of
the Senate and to the Speaker of the House of
Representatives if the Congress shall be in session or if the Congress shall not be in session,
then to the Secretary of the Senate and Clerk
of the House, respectively.

111152

TITLE 46-SHIPPING

Page 336

cordance with all the provisions of this sub(c) Terms of sale of vessel to purchaser
chapter.
In such contract of sale between the purchaser and the Secretary of Transportation, the (f) Survey of shipbuilding capability; correction of inpurchaser shall be required to make cash payadequacies; reimbursement of certain vessel conments to the Secretary of Transportation of
struction and delivery expenses
not less than 25 per centum of the price at
The Secretary of Transportation, with the
which the vessel is sold to the purchaser. The
cash payments shall be made at the time and in advice of and in coordination with the Secrethe same proportion as provided for the pay- tary of the Navy, shall at least once each year,
ments on account of the construction cost in as required for purposes of this chapter, survey
the contract between the shipbuilder and the the existing privately owned shipyards capable
of merchant ship construction, or review availaSecretary of Transportation. The purchaser
shall pay, not less frequently than annually, in- ble data on such shipyards if deemed adequate,
to determine whether their capabilities for merterest on those portions of the Secretary of
Transportation's payments as made to the ship- chant ship construction, including facilities and
builder which are chargeable to the purchaser's skilled personnel, provide an adequate mobilizaportion of the price of the vessel (after deduc- tion base at strategic points for purposes of nation of the purchaser's cash payments) at a rate tional defense and national emergency. The
not less than (1) a rate determined by the Secre- Secretary of Transportation, in connection with
ship construction, reconstruction, reconditiontary of the Treasury, taking into consideration
the current average market yield on outstand- ing, or remodeling under this subchapter and
ing marketable obligations of the United States subchapter VII of this chapter, upon a basis of
a finding that the award of the proposed conwith remaining periods to maturity compart.ble
to the average maturities of such loans, adjust- struction, reconstruction, reconditioning, or reed to the nearest one-eighth of 1 per centum, modeling work will remedy an existing or impending inadequacy in such mobilization base
plus (ii) an allowance adequate in the judgment
of the Secretary of Transportation to cover ad- as to the capabilities and capacities of a shipministrative costs. The balance of such pur- yard or shipyards at a strategic point, and after
chase price shall be paid by the purchaser, taking into consideration the benefits accruing
within twenty-five years after delivery of the from standardized construction, the conditions
vessel and in not to exceed twenty-five equal of unemployment, and the needs and reasonannual installments, the first of which shall be able requirements of all shipyards, may allocate
payable one year after the delivery of the such construction, reconstruction, reconditioning, or remodeling to such yard or yards in such
vessel by the Secretary of Transportation to
the purchaser. Interest at the rate per annum manner as he may determine to be fair, just,
and reasonable to all sections of the country,
applicable to payments that are chargeable to
the purchaser's portion of the price of the subject to the provisions of this subsection. In
the allocation of construction work to such
vessel shall be paid on all such installments of
yards as herein provided, the Secretary of
the purchase price remaining unpaid.
Transportation may, after first obtaining com1962,
76
24,
(d) Repealed. Pub. L. 87-877, § 2(a), Oct.
petitive bids for such work in compliance with
Stat. 1200
the provisions of this chapter, negotiate with
(e) Construction in navy yards; sales to citizens; the bidders and with other shipbuilders concerning the terms and conditions of any conterms
If no bids are received for the construction, tract for such work, and is authorized to enter
into such contract at a price deemed by the
outfitting, or equipping of such vessel, or if it
Secretary of Transportation to be fair and reaTransportation
of
appears to the Secretary
that the bids received from privately owned sonable. Any contract entered into by the Secshipyards of the United States are collusive, ex- retary of Transportation under the provisions
cessive, or unreasonable, and if a citizen of the of this subsection shall be subject to all of the
United States agrees to purchase said vessel as terms and conditions of this chapter, excepting
provided in this section, then, to provide em- those pertaining to the awarding of contracts to
ployment for citizens of the United States, the the lowest bidder which are inconsistent with
the provisions of this subsection. In the event
Secretary of Transportation may have such
that a contract is made providing for a price in
vessel constructed, outfitted, or equipped at not
in excess of the actual cost thereof in a navy excess of the lowest responsible bid which othyard of the United States under such regula- erwise would be accepted, such excess shall be
paid by the Secretary of Transportation as a
tions as may be promulgated by the Secretary
of the Navy and the Secretary of Transporta- part of the cost of national defense, and shall
tion. In such event the Secretary of Transpor- not be considered as a part of the constructiontation is authorized to pay for any such vessel differential subsidy. In the event that a conso constructed from his construction fund. The tract is made providing for a price lower than
Secretary of Transportation is authorized to the lowest responsible bid which otherwise
would be accepted, the construction-differential
sell any vessel so constructed, outfitted, or
equipped in a navy yard to a citizen of the subsidy shall be computed on the contract price
United States for the fair and reasonable value in lieu of such bid.
If, as a result of allocation under this subsecthereof, but at not less than the cost thereof
less the equivalent to the construction differen- tion, the purchaser incurs expenses for inspectial subsidy determined as provided by subsec- tion and supervision of the vessel during contion (b) of this section, such sale to be in ac- struction and for the delivery voyage of the

Page 337

TITLE 46-SHIPPING

vessel in excess of the estimated expenses for
the same services that he would have incurred
if the vessel had been constructed by the lowest
responsible bidder the Secretary of Transportation (with respect to construction under this
subchapter, except section 1159 of this title)
shall reimburse the purchaser for such excess,
less one-half :Z any gross income the purchaser
receives that is allocable to the delivery voyage
minus one-half of the extra expenses incurred
to produce such gross income, and such reimbursement shall not be considered part of the
subsidy:
Provided,
construction-differential
That no interest shall be paid on any refund
authorized under this chapter. If the vessel is
constructed under section 1159 of this title the
Secretary of Transportation shall reduce the
price of the vessel by such excess, less one-half
of any gross income (minus one-half of the
extra expenses incurred to produce such gross
income) the purchaser receives that is allocable
to the delivery voyage. In the case of a vessel
that is not to receive operating-differential subsidy, the delivery voyage shall be deemed terminated at the port where the vessel begins loading. In the case of a vessel that is to receive operating-differential subsidy, the delivery voyage
shall be deemed terminated when the vessel
begins loading at a United States port in an essential service. In either case, however, the
vessel owner shall not be compensated for
excess vessel delivery costs in an amount greater than the expenses that would have been incurred in delivering the vessel from the shipyard at which it was built to the shipyard of
the lowest responsible bidder. If as a result of
such allocation, the expenses the purchaser
incurs with respect to such services are less
than the expenses he would have incurred for
such services if the vessel had been constructed
by the lowest responsible bidder, the purchaser
shall pay to the Secretary of Transportation an
amount equal to such reduction and, if the
vessel was built with the aid of construction-differential subsidy, such payment shall not be
considered a reduction of the construction-differential subsidy.
(g) Sale of vessels acquired by Secretary
Upon the application of any citizen of the
United States to purchase any vessel acquired
by the Secretary of Transportation under the
provisions of section 1125 of this title, the Secretary of Transportation is authorized to sell
such vessel to the applicant for the fair and
reasonable value thereof, but at not less than
the cost thereof to the Secretary of Transportation less depreciation at the rate of 4 per
centum per annum from the date of completion, excluding the cost of national-defense features added by the Secretary of Transportation, less the equivalent of any applicable construction-differential subsidy as provided by
subsection (b) of this section, such sale to be in
accordance with all the provisions of this subchapter. Such vessel shall thereupon be eligible
for an operating-differential subsidy under subchapter VI of this chapter, notwithstanding the
provisions of section 1171(a)(1), and section
1180(1) of this title, or any other provision of
law.
11-617 VOL. 18 0-84-24

§ 1152

(h) Installation or removal of national defense features; title to such features
The Secretary of Transportation is authorized to construct, purchase, lease, acquire,
store, maintain, sell, or otherwise dispose of national defense features intended for installation
on vessels. The Secretary of Transportation is
authorized to install or remove such national
defense features on any vessel (1) which is in
the National Defense Reserve Fleet as defined
by section 1744(a) of the Appendix to title 50,
(2) which is requisitioned, purchased, or chartered under section 1242 of this title, (3) which
serves as security for the guarantee of an obligation by the Secretary of Transportation
under subchapter XI of this chapter, or (4)
which is the subject of an agreement between
the owner of such vessel and the Secretary of
Transportation to install or remove such national defense features. Title to such national
defense features which the Secretary of Transportation determines are not to be permanently
incorporated in a vessel shall not be affected by
such installation or removal unless otherwise
transferred in accordance with the provisions
of this subchapter.
(I) Plans, specifications, and proposals for national
defense features; certification of approval
The Secretary of Transportation shall submit
the plans and specifications for such national
defense features and the proposals for their acquisition, storage, utilization, or disposition to
the Navy Department for examination thereof
and suggestion for such changes therein as may
be deemed necessary or proper in order that
such features shall be suitable for the use of
the United States Government in time of war
or national emergency. If the Secretary of the
Navy approves such plans, specifications, or
proposals as submitted, or as modified in accordance with the provisions of this subsection,
he shall certify such approval to the Secretary
of Transportation.
(June 29, 1936, ch. 858, title V, § 502, 49 Stat.
1996; June 23, 1938, ch. 600, §§ 9-14, 52 Stat.
955-957; Aug. 4, 1939, ch. 417, § 6, 53 Stat. 1183;
July 26, 1956, ch. 737, 70 Stat. 657; June 12,
1960, Pub. L. 86-518, §§ 1, 2, 74 Stat. 216; July 7,
1960, Pub. L. 86-607, § 1, 74 Stat. 362; Oct. 24,
1962, Pub. L. 87-877, §§ 1, 2(a), (e), (f), 76 Stat.
1200, 1201; July 11, 1964, Pub. L. 88-370, 78
Stat. 313; Aug. 10, 1964, Pub. L. 88-410, § 1, 78
Stat. 385; Aug. 14, 1965, Pub. L. 89-127, 79 Stat.
519; Sept. 19, 1966, Pub. L. 89-589, 80 Stat. 811;
Oct. 12, 1968, Pub. L. 90-572, 82 Stat. 1004; July
8, 1969, Pub. L. 91-40, 83 Stat. 44; Oct. 21, 1970,
Pub. L. 91-469, §§ 7, 35(a), (e)-(g), 84 Stat. 1019,
1035, 1036; Dec. 31, 1970, Pub. L. 91-603, § 4(b),
84 Stat. 1675; July 10, 1973, Pub. L. 93-71, 87
Stat. 169; July 31, 1976, Pub. L. 94-372, §§ 2, 3,
90 Stat. 1042; Mar. 17, 1980, Pub. L. 96-210, 94
Stat. 100; Oct. 7, 1980, Pub. L. 96-387, § 3, 94
Stat. 1545; Aug. 6, 1981, Pub. L. 97-31, § 12(84),
(85), 95 Stat. 161.)
AMENDMENTS

1981-Subsecs. (a), (b). Pub. L. 97-31, § 12(84), substituted "Secretary of Transportation" for "Secretary of
Commerce" wherever appearing.

§ 1152

TITLE 46-SHIPPING

Subsec. (c). Pub. L. 97-31, 1 12(84), (85), substituted
"Secretary of Transportation" for "Secretary of Commerce" wherever appearing, and "Secretary of Transportation's" for "Secretary of Commerce's".
Subsecs. (c) to (1). Pub. L. 97-31. § 12(84), substituted
"Secretary of Transportation" for "Secretary of Commerce" wherever appearing.
1980-Subsee. (a). Pub. L. 96-210 struck out ". at any
time prior to June 30, 1979," preceding "to accept a
price for".
Subsecs. (h), (I).
Pub. L. 96-387 added subsecs. (h)
and (I),
1976-Subsec. (a). Pub. L. 94-372, 1 2, in third sentence, substituted "at any time prior to June 30, 1979"
for "at any time prior to June 30, 1976". struck out
former par. (i) relating to a negotiated price resulting
in a construction-differential subsidy equal to or less
than 45%, 43%, 41%, 39%, 37% and 35% for fiscal years
1971, 1972, 1973, 1974, 1975 and 1976, respectively, and
redesignated former pars. (i1), (1ii), and (iv) as (1), (2),
and (3), respectively.
Subsec. (b). Pub. L. 94-372, § 3, substituted provisions limiting the construction differential to 50% (excluding costs for national defense features), and allowing the Secretary, where such differential is exceeded,
to contract with any bidder (notwithstanding section
1155) to reduce the differential to within such percentage for provisions limiting the differential to 55%
except for passenger vessels having characteristics set
forth In section 1153, which shall be 60%, limiting the
differential after June 30, 1970 to 50%, permitting the
Secretary to negotiate and contract with any bidder,
regardless of section 1155 if in the years 1972, 1973,
1974, 1975 and 1976 a specified percentage is exceeded,
prohibiting contracts commencing in 1972, where such
differential exceeds such limits unless consideration
has been given to the possibility that the commitment
to ship construction programs may not be continued
under existing limits, and requiring notification to the
Commission on American Shipbuilding if the Secretary finds it necessary to enter into such contracts.
1973-Subsec. (a). Pub. L. 93-71 in third sentence,
substituted "June 30, 1976" for "June 30, 1973" and
limited vessel construction subsidy to 39 per centum in
fiscal 1974. 37 per centum in fiscal 1975, and 35 per
centum in fiscal 1976.
1970-Pub. L. 91-469, § 35(a), substituted "Secretary
of Commerce" for "Commission", six times in subsece.
(a), four times in subsec. (c), five times in subsec. (e),
four times in subsec. (f) in the sentences commencing
"In the allocation", "Any contract entered into", and
"In the event", and four times in subsec. (g).
Subsec. (a). Pub. L. 91-603 substituted "for the operation and maintenance of" for "to enable it to operate
and maintain".
Pub. L. 91-469, §§ 7(1), 35(e), struck out of the first
sentence ", on behalf of the applicant," following
"may secure", substituted in the second sentence "proposed ship purchaser, the Secretary of Commerce" for
"applicant, the Commission", inserted conditions precedent to acceptance of negotiated price for ship construction in fiscal years 1971, 1972, and 1973, including
availability of shipyard records in connection therewith, substituted in the last sentence "for the sale" for
"with the applicant for the purchase by him" preceding "of such vessel", and authorized sale of vessel
upon its completion to the applicant if he is the proposed ship purchaser and if not to another citizen, If
the Secretary determines that such citizen possesses
the necessary qualifications to enable it to operate and
maintain the vessel; and substituted "he" for "it" preceding "may secure", respectively.
Subsec. (b). Pub. L. 91-469, § 7(2), provided for recomputation of estimated foreign cost annually, publication of notice to compute or recompute such estimated foreign cost, offer of opportunity to interested
persons to file written statements, consideration of relevant matter so filed, explanation of basis of determination, prohibition commencing with fiscal year 1972
of construction contracts requiring construction-dif-

Page 338

ferential in excess of prescribed percentages unless
there is no likelihood of attaining the percentages and
the commitment to the ship construction program
may not be continued, notice to Commission on American Shipbuilding of execution of such a contract, and
submission of a Commission report on the American
shipbuilding industry within six months of the notice,
substituted "may equal" for "shall equal", "construction of that type vessel" for "construction of the proposed vessel", "exceeds the following percentages: in
fiscal year 1971, 45 per centum; in fiscal year 1972, 43
per centum; in fiscal year 1973, 41 per centum; in fiscal
year 1974, 39 per centum; in fiscal year 1975, 37 per
centum; in fiscal year 1976 and thereafter, 35 per
centum" for "in any case exceeds the foregoing applicable percentage of such cost", and "with such bidder,
notwithstanding the provisions of the first sentence of
section 1155 of this title with respect to competitive
bidding," for "on behalf of the applicant", and inserted "with any bidder, whether or not such bidder is the
lowest bidder," after "the Secretary may negotiate"
and ", or as close thereto as possible" before "or less".
Subsec. (c). Pub. L. 91-469, §§ 7(3), 35(f), inserted "of
sale" after introductory phrase "In such contract", in
revising interest rate substituted provision for a rate
not less than 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 with remaining periods to
maturity comparable to the average maturities of such
loans, adjusted to the nearest one-eighth of 1 per
centum plus an administrative cost allowance for prior
rate of 3X p.or centum per annum, substituted in last
sentence "rate per annum applicable to payments that
are chargeable to the purchaser's portion of the price
of the vessel" for "rate of 3X per centum per annum",
"purchaser" for "applicant" in six instances, "purchaser's portion of the price" for "applicant's purchase
price", and "purchaser's" for "applicant's"; and substituted "Secretary of Commerce's" for "Commission's",
respectively.
Subsec. (e). Pub, L. 91-469, §§ 7(4), 35(g), substituted
"a citizen of the United States" for "the applicant" in
first sentence and for "an applicant" in third rentence
and "his" for "its" in second sentence, respectively.
Subsec. (1). Pub. L. 91-469, § 7(5), in first par., substituted "this subchapter and subchapter VII of this
chapter" for "subchapter VII of this chapter and section 1159 of this title, and the Federal Maritime
Board, in connection with ship construction, reconstruction, or reconditioning under this subchapter
(except section 1159 of this title)," and "in such
manner as he may determine" for "in such manner as
it may be determined" in second sentence; and in
second par., substituted "purchaser" for "applicant" in
six instances and "United States port in an essential
service" for "United States port on any essential service of the operator" in fourth sentence.
Subsec. (g). Pub. L. 91-469, § 7(6), substituted "application" and "any citizen of the United States" for
"agreement" and "an applicant under this subchapter" in the first sentence,
1969-Subsec. (b). 1',ub. L. 91-40 substituted "June
30, 1970" for "June 30, 1969",
1968-Subsec. (b). Pub. L. 90-572 substituted "June
30, 1969" for "June 30, 1968",
1966-Subsec. (b). Pub. L. 89-589 substituted "June
30, 1968" for "June 30, 1966".
1965-Subsec. (b). Pub. L. 89-127 substituted "June
30, 1966" for "June 30, 1965".
1964-Subsec. (b). Pub. L. 88-370 substituted "June
30, 1965" for "June 30, 1964".
Subsec. (f). Pub. L. 88-410 provided for reimbursement of expenses Incurred during construction and
the delivery voyage of a vessel, if as a result of allocation under this subsection, they are in excess of the estimated expenses that would have been incurred if the
vessel had been constructed by the lowest responsible
bidder, less one-half of any gross income allocable to

Page 339

TITLE 46-SHIPPING

the delivery voyage, minus one-half the extra expenses incurred to produce such income, and that such
reimbursement shall not be part of the constructiondifferential subsidy, that no interest be paid on any
refund authorized, that if the vessel is constructed
under section 1159 the price of the vessel is to be reduced by such excess expenses less such gross income,
calculated as above, obtained on the delivery voyage.
that if the vessel is not to receive the operating-differential subsidy the delivery voyage shall be deemed terminated at the port where the vessel begins loading.
and if it does receive the subsidy, when the vessel
begins loading at a United States port on any essential
service of the operator, but in either case there is to be
no compensation greater than the expenses that
would have been incurred in delivering the vessel from
the shipyard at which it was built to the one of the
lowest bidder, that if the allocation results in a saving
of expenses for the applicant, the applicant shall pay
an equal amount to the Secretary, and if the vessel
was built with the subsidy, such payment shall not be
considered a reduction of the subsidy.
1962-Subsec. (b). Pub. L. 87-877, § 1, among other
changes, substituted references to the Secretary, for
references to the Federal Maritime Bor-d, wherever
appearing, and provided that in the reconstruction or
reconditioning of a passenger vessel having the characteristies set forth in section 1153 of this title, the
construction differential shall not exceed 60 per
centum of the cost, excluding national defense features, however, after June 30, 1964, the construction
differential approved by the Secretary for any vessel
shall not exceed 50 per centum of such cost.
Subsec. d). Pub. L. 87-877, § 2(a), repealed subsec.
(d), which provided for giving a preference to Pacific
coast bidders in obtaining a subsidy and specified the
conditions to be met therefor.
Subsec. f). Pub. L. 87-877, 1 2(e), (f), substituted "at
least once each year" for "periodically", "existing or
impending inadequacy" for "existing inadequacy", and
eliminated ", with the approval of the President,"
which preceded "allocate such construction".
1960-Subsec. b). Pub. L. 86-607, § 1(1), increased
the limitation on construction differential from 50 to
55 per centum of the construction cost of a vessel and
provided for such percentage limitation in lieu of
former 33 per centum of construction cost, increased
to 50 per centum on affirmative vote of two Board
members.
Subsec. (c). Pub. L. 86-518, § 1, substituted "twentyfive" for "twenty" in two instances.
Subsec. d). Pub. L. 86-607, 1 1(2), increased the limitation on construction-differential from 50 to 55 per
centum of the construction cost of a vessel.
Subsec. (g). Pub. L. 86-518, 1 2, substituted "at the
rate of 4 per centum per annum" for "based on a
twenty-year life expectancy".
1956-Subsec. f). Act July 26, 1956, substituted provisions that required Secretary of Commerce, with
advice of Secretary of the Navy, to make periodic
survey of privately owned shipyards to determine adequacy for providing mobilization base, and that any inadequacies would be corrected by Secretary of Commerce or Federal Maritime Board with the approval of
the President by allocating work to such yards, for
former provisions allowing periodic survey by the Federal Maritime Board of both Navy and privately
owned shipyards.
1939-Subsec. (b). Act Aug. 4, 1939, substituted "a
foreign shipbuilding center which Is deemed by the
Commission to furnish a fair and representative example for the determination of the estimated foreign cost
of construction of vessels of the type proposed to be
constructed" for "a principil foreign shipbuilding
center which may reasonably be availed of by the
principal foreign competitors in the service in which
the vessel i to be operated, and which is deemed by
the Commission to furnish a fair and representative
example for the determination of the estimated cost
of construction in foreign countries of vessels of the
type proposed to be constructed".

§1152

1938-Subsec. (a). Act June 23, 1938, I 9,substittatcd
"of the contract price of the vessel" for "the cost of
the vessel".
Subsec. b). Act June 23, 1938, I 10, permitted negoti.
ations and contracts to build vessels in domestic ship.
yards in cases where the construction differential ex.
ceeds 33X per centum or 50 per centum of the cost,
and to require a report where there is reason to be.
lieve that the bidding is collusive.
Subsec. Cc). Act June 23, 1938,
11, among other
changes, substituted "of not less than 25 per centum
of the price at which the vessel is sold to the applicant" for "a sum equal to 25 per centum of the construction cost of the vessel paid by the Commission
(excluding cost of national-defense features as above
provided)", and required the applicant to pay, not less
frequently than annually, fiterest at the rate of 3k
per centum per annum on those portions of payments
made to the shipbuilder which are chargeable to the
applicant's purchase price of the vessel (after deduction of the applicant's cash payments).
Subsec. d). Act June 23, 1938, § 12, substituted "construction-differential subsidy" for "construction subsidy", and inserted provisions relating to limitation on
approval of construction-differential in excess of 50
per centum of the construction cost of the vessel paid
by the Commission.
Subsec. (f). Act June 23, 1938, § 13, added subsec. (f).
Subsec. g). Act June 23, 1938, 1 14, added subsec. (g).
EFFECTIVE DATE OF 1962 AMENDMENT
Section 5 of Pub. L. 87-877 provided that: "The
amendment made by the first section of this Act
[amending subsec. (b) of this section] shall be effective only with respect to contracts entered into with
respect to a) the construction of a vessel the keel of
which was laid after June 30, 1959, or Cb) the reconstruction or reconditioning of a vessel the shipyard
contract for which was entered into after June 30,
1959, and the Secretary may, with the consent of the
parties thereto, modify any such contract entered into
prior to the date of the enactment of this Act [Oct. 24,
1962] to the extent authorized by the amendment
made by this Act."
EFFECTIVE DATE OF 1960 AMENDMENTS
Section 2 of Pub. L. 86-607, as amended by Pub. L.
87-222, Sept. 13, 1961, 75 Stat. 494, provided that:
"The amendment made by this Act (amending subsees. (b)and (d) of this section] shall be effective only
with respect to any contract entered into not later
than two years after the date of enactment of this Act
[July 7, 1960] under the provisions of section 502 of
the Merchant Marine Act, 1936 (this section], with respect to Ca) the construction of a vessel the keel of
which was laid, or (b) the reconstruction or reconditioning of a vessel the shipyard contract for which was
entered into after June 30, 1959, and the Federal Maritime Board may, with the consent of the parties thereto, modify any such contract entered into prior to the
date of enactment of the first amendment to Public
Law 86-607 (74 Stat. 362) [Sept. 13, 1961], to the
extent authorized by the amendment made by this
Act, as amended."
Amendment by Pub. L. 86-518 applicable only to vessels delivered by the shipbuilder on or after Jan. 1,
1946, and with respect to such vessels shall become effective on Jan. 1. 1960, and with respect to vessels delivered by the shipbuilder before Jan. 1, 1946, the provisions of this chapter existing immediately before
June 12, 1960, shall continue in effect, see section 8(a)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
MODIFICATION OF CONTRACTS; CONDITIONS
Section 2 of Pub. L. 88-410 provided that: "The
amendment made by this Act [amending subsec. (f) of
this section] shall be effective with respect to any con-

N 1152

TITLE 46-SHIPPING

tract entered Into under the provisions of section 502
of the Merchant Marine Act, 1936, as amended [this
ection], and the Secretary of Commerce shall, with
the consent of the other parties thereto, modify any
such contract entered into prior to the date of the enactment of this Act (Aug. 10, 1964] to the extent authorized by the amendment made by this Act, except
that the Secretary shall not agree to any iuch modification which would result in a payment by the United
States unless, within one year after enactment of this
Act, application is made for such modification. No
payment shall be made by the Secretary under the
provisions of the amendment made by this Act with
respect to any contract entered into after the date of
enactment of this Act unless the recipient of such payment has agreed to the modification of any contract
which was entered into prior to the date of enactment
of this Act and to which such recipient was a party,
and which, if modified under the authority of this section, would result in a payment to the United States."
CONTRACTS FOR NEW SiiIP CONSTRUCTION AWARDED ON
BIDS OPENED PRIOR TO OCTOBER 24, 1962

Section 2(a) of Pub. L. 87-877 provided in part:
"That the repeal of subsection (d) of section 502 of the
Merchant Marine Act, 1936 [subsec. (d) of this section], shall not be effective with respect to contracts
for new ship construction under title V of said Act
[this subchapter] awarded on the basis of bids opened
prior to the date of the enactment of this Act. [Oct.
24, 19621."
RATE OF DELPRECIATION FOR VESSELS DELIVERED BY
SHIPBUILDER ON OR AFTER JANUARY
1, 1946, AND

BEFORE JANUARY 1, 1960
For provisions relating to computation of depreciation with respect to vessels delivered by the shipbuilder on or after Jan. 1, 1946, and before Jan. 1,
1960, see section 8(b) of Pub. L. 86-518, set out as a
note under section 1125 of this title.
REVISION OF CONTRACTS,
MORTGAGES, MORTGAGES,

COMMITMENTS To INSURE
AND MORTGAGE INSURANCE

CONTRACTS ENTERED INTO PRIOR TO JUNE

12, 1960

For provisions authorizing revision, see section 8(c)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
COMMERCIAL EXPECTANCY OR PERIOD OF DEPRECIATION
OF TANKERS AND OTIHER LIQUID BULK CARRIERS

Nothing in any amendment made by Pub. L. 86-518
to operate or be interpreted to change from 20 to 25
years the provisions of this chapter relating to the
commercial expectancy or period of depreciation of
any tanker or other liquid bulk carrier, see section 9 of
Pub. L. 86-518, set out as a note under section 1125 of
this title.
CONSTRUCTION AND SALE OF SUPERLINER PASSENGER
VESSELS

Pub. L. 85-521, July 15, 1958, 72 Stat. 359, provided:
"That it is necessary, in order to carry out the merchant marine policy declared in the Merchant Marine
Act, 1936, as amended [this chapter], to have (a) a superliner passenger vessel equivalent to the steamship
United States, to replace the steamship America for
operation on an essential trade route in the North Atlantic, and (b) a superliner passenger vessel with capacity of approximately one thousand four hundred
passengers for operation on an essential trade route in
the Pacific Ocean. Nothing herein shall preclude the
operation of either of these vessels in other areas, subject to the approval of the Federal Maritime Board.
There is hereby authorized to be appropriated to the
Department of Commerce such sunis as may be necessary, to remain available until expended, for the construction, outfitting, and equipping of such vessels.
"SEc. 2. Concurrently with entering into contracts
with shipbuilders for the construction of said vessels,

Page 340

the Board is authorized to enter into contracts for the
sale of the vessels, fully outfitted and equipped, upon
their completion, (a) with respect to the superliner
passenger vessel equivalent to the steamship United
States, to the United States Lines Company, for the
fixed price of $47,000,000, and (b) with respect to the
superliner passenger vessel for operation in the Pacific
Ocean, to the American President Lines, Limited, for
the fixed price of $34,000,000, or 45 per centum of the
domestic construction cost of the vessel fully outfitted
and equipped (excluding national defense features and
escalation) whichever is the greater. The sales prices
stated herein shall include the cost of stabilizers, all
outfit and equipment not covered by the shipbuilders'
bids, customary architects' and interior decorators'
fees for design, inspection during construction, and all
escalation provided for in the shipbuilders' bids: Provided, however, That such prices shall be increased in
an amount equal to 45 per centum of any net change
in the cost of the vessels (other than national defense
features) arising out of any changes in the bid specifications approved by the Federal Maritime Board or
any changes in the usual outfitting and equipping of
the vessels if such changes are requested by the purchasers and approved by the Federal Maritime Board
after the enactment hereof. Terms and conditions of
payment of the purchase price shall be as provided for
in sections 502(c) and 503 of the Merchant Marine Act,
1936, as amended [subsec. (c)of this section and section 1153 of this title]. In order that such construction
of the superliner passenger vessel equivalent to the
steamship United States may be accomplished
promptly, the Federal Maritime Board, in its discretion, may have such a vessel constructed, without further bidding, under outstanding bids which have hitherto been made by United States shipbuilders on a
similar vessel.
"SEC. 3. Except as otherwise provided in this Act, the
construction and sale of the superliner passenger vessels authorized by this Act shall be in accordance with
the provisions of the Merchant Marine Act, 1936, as
amended [this chapter].
"SEc. 4. For the purposes of this Act the words 'construction differential subsidy' used in the Merchant
Marine Act, 1936, as amended [this chapter], shall
mean the difference between the sales price paid by
the purchaser hereunder and the cost of the vessel
(less national defense features) including the cost of
stabilizers, all outfit and equipment not covered by the
shipbuilders' bids, customary architects' and Interior
decorators' fees for design, inspection during construction, and all escalation provided for in the shipbuilders' bids.
"SEC. 5. Any contract for an operating differential
subsidy on the operation of a vessel constructed and
sold under this Act shall be subject to the provisions
of title VI of the Merchant Marine Act, 1936, as
amended [subchapter VI of this chapter]: Provided,
however, That such contract shall provide that, if at
the end of any recapture period, the net profits on the
operation of such vessel for such recapture period,
computed without regard to profits or losses on other
vessels operated by the contractor, exceed 10 per
centum per annum on a cumulative basis upon the
contractor's capital necessarily employed in the operation of such vessel, as determined by the Federal
Maritime Board, the contractor shall account to the
United States for an amount equal to 75 per centum of
such excess profits."
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1154 of this
title.

Page 341

TITLE 46-SHIPPINQ

111153. Documentation of completed vessel under
laws of United States; delivery to purchaser; first
mortgage to secure deferred payments
Upon completion of the construction of any
vessel in respect to which a construction-differential subsidy is to be allowed under this subchapter and its delivery by the shipbuilder to
the Secretary of Transportation, the vessel
shall be documented under the laws of the
United States, and. concurrently therewith, or
as soon thereafter as practicable, the vessel
shall be delivered with a bill of sale to the purchaser with warranty against liens, pursuant to
the contract of sale between the purchaser and
the Secretary of Transportation. The . vessel
shall remain documented under the laws of the
United States for not less than twenty-five
years, or so long as there remains due the
United States any principal or interest on account of the purchaser price, whichever is the
longer period. At the time of delivery of the
vessel the purchaser shall execute and deliver a
first-preferred mortgage to the United States to
secure payment of any sums due from the purchaser in respect to said vessel: Provided, That
notwithstanding any other provisions of law,
the payment of any sums due in respect to a
passenger vessel purchased under section
1737(b) of Appendix to title 50, reconverted or
restored for normal operation in commercial
services, or in respect to a passenger vessel purchased under subchapter V of this chapter,
which is delivered subsequent to March 8, 1946,
and which (i) is of not less than ten thousand
gross tons, (ii) has a designed speed approved
by the Secretary of Transportation but not less
than eighteen knots, (iii) has accommodations
for not less than two hundred passengers, and,
(iv) is approved by the Secretary of Defense as
being desirable for national defense purposes,
may, with the approval of the Secretary of
Transportation be secured only by a first-preferred mortgage on said vessel. With the approval of the Secretary of Transportation, such
preferred mortgage may provide that the sole
recourse against the purchaser of such a passenger vessel under such mortgage, and any of
the notes secured thereby, shall be limited to
repossession of the vessel by the United States
and the assignment of insurance claims, if the
purchaser shall have complied with all provisions of the mortgage other than those relating
to the payment of principal and interest when
due, and the obligation of the purchaser shall
be satisfied and discharged by the surrender of
the vessel, and all right, title, and interest
therein to the United States. Such vessel upon
surrender shall be (i) free and clear of all liens
and encumbrances whatsoever, except the lien
of the preferred mortgage, (ii) in class, and (iii)
in as good order and condition, ordinary wear
and tear excepted, as when acquired by the
purchaser, 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 United States of claims of
the purchaser under such policies of insurance.
The purchaser shall also comply with all the
provisions of section 868 of this title.

§ 115,1

(June 29, -1936, ch. 858, title V, § 503, 49 Stat.
1997; June 23, 1938, ch. 600, § 15, 52 Stat. 957;
July 17, 1952, ch. 939, § 3, 66 Stat. 761; June 12,
1960, Pub. L. 86-5.18, § 1, 74 Stat. 216 Oct. 21,
1970, Pub. L. 91-469, H 8, 35(a), 84 Stat. 1021,
1035; Aug. 6, 1981, Pub. L. 97-31, § 12(84), 95
Stat. 161.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Trans.
portation" for "Secretary of Commerce" wherever appearing.
1970-Pub. L. 91-469 substituted "purchaser" for
"applicant" in three instances, "sale between the purchaser and the Secretary of Commerce" for "purchase
between the applicant and the Commission" in the
first sentence; and "Secretary of Commerce" for
"Commission", in four instances, respectively.
1960-Pub. L. 86-519 substituted "twenty-five years"
for "twenty years".
1952-Act July 17, 1952, amended section to provide
that as to passenger vessels delivered after Mar. 8,
1946, the balance of the payments shall be secured by
a first preferred mortgage, tat the purchasers' obligation to pay will be discharged by surrender of the
vessel and all rights to the Government, and to set up
conditions governing type of vetsel.
1938-Act June 23, 1938, amended section, substituting "construction-differential subsidy" for "construction subsidy", and "or so long as there remains due"
for "and so long as there remains due".
EFFECTIVE DATE OF

1960

AMENDMENT

Amendment by Pub. L. 86-518 applicable only to vessels delivered by the shipbuilder on or after Jan. 1,
1946, and with respect to such vessels shall become effective on Jan. 1, 1960, and with respect to vessels delivered by the shipbuilder before Jan. 1, 1946, the provisions of this chapter existing immediately before
June 12, 1960, shall continue in effect, see section 8(a)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
REVISION OF CONTRACTS, COMMITMENTS To INSURE
MORTGAGES, MORTGAGES, AND MORTGAGE INSURANCE
CONTRACTS ENTERED INTO PRIOR TO JUNE 12, 1960

For provisions authorizing revision, see section 8(c)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
COMMERCIAL EXPECTANCY OR PERIOD OF DEPRECIATION
OF TANKERS AND OTHER LIQUID BULK CARRIERS

Nothing in any amendment made by Pub. L. 86-518
to operate or be interpreted to change from 20 to 25
years the provisions of this chapter relating to the
commercial expectancy or period of depreciation of
any tanker or other liquid bulk carrier, see section 9 of
Pub. L. 86-518, set out as a note under section 1125 of
this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1154, 1159 of
this title.
§ 1154. Purchase of vessel constructed In accordance
with application for subsidy; bid or negotiated
price basis for subsidy and payments for cost of
national defense features; documentation
If a qualified purchaser under the terms of
this subchapter desires to purchase a vessel to
be constructed in accordance with an application for construction-differential subsidy under
this subchapter, the Secretary of Transportation may, in lieu of contracting to pay the
entire cost of the vessel under section 1152 of

TITLE 46-SHIPPING

!155

this title, contract to pay only construction-differential subsidy and the cost of national defense features to the shipyard constructing
such vessel. The construction-differential subsidy and payments for the cost of national defense features shall be based upon the lowest
responsible domestic bid unless the vessel is
constructed at a negotiated price as provided by
section 1152(a) of this title or under a contract
negotiated by the Secretary of Transportation
as provided in section 1152(b) of this title in
which event the construction-differential subsidy and payments for the cost of national defense features shall be based upon such negotiated price. No construction-differential subsidy,
as provided in this section, shall be paid unless
the said contract or contracts or other arrangements contain such provisions as are provided
in this subchapter to protect the interests of
the United States as the Secretary of Transportation deems necessary. Such vessel shall be
documented under the laws of the United
States as provided in section 1153 of this title.
The contract of sale, and the mortgage given to
secure the payment of the unpaid balance of
the purchase price, shall not restrict the lawful
or proper use or operation of the vessel, except
to the extent expressly required by law.
(June 29, 1936, ch. 858, title V, § 504, 49 Stat.
1998; June 23, 1938, ch. 600, § 16, 52 Stat. 958;
July 17, 1952, ch. 939, § 4, 66 Stat. 761; Oct. 21,
1970, Pub. L. 91-469, §§ 9, 35(a), 84 Stat. 1021,
1035; Aug. 6, 1981, Pub. L. 97-31, § 12(84), 95
Stat. 161.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce" wherever appearing.
1970-Pub. L. 91-469, in revising the text, provided a
negotiated price as an alternative basis for payment of
subsidy and cost of national defense features, and substituted "Secretary of Commerce" for "Commission",
respectively.
1952-Act July 17, 1952, added provision that the
lawful or proper use of the vessel may not be restricted.
19,8--Act June 23, 1938, substituted "domestic shipyards" lt,,r "American shipyards", eliminated "and if it
is the lowest bid" which followed "fair and reasonable", and changed the term "construction subsidy" to
"construction-differential subsidy".
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1224 of this
title.
§ 1155. Eligible shipyards; materials; conditions of
contracts; limitation to American shipyards;
American materials, waiver; ability of bidders;
filing bids and data
All construction in respect of which a construction-differential subsidy is allowed under
this subchapter shall be performed in a shipyard of the United States as the result of competitive bidding, after due advertisement, with
the right reserved in the Secretary of Transportation to disapprove, any or all bids. In all such
construction the shipbuilder, subcontractors,
materialmen, or suppliers shall use, so far as
practicable, only articles, materials, and supplies of the growth, production, or manufacture

Page 342

of the United States as defined in paragraph K
of section 1401 of title 19; Provided, however,
That with respect to other than major components of the hull, superstructure, and any material used in the construction thereof, (1) if
the Secretary of Transportaticn determines
that the requirements of this sentence will unreasonably delay completion of any vessel
beyond its contract delivery date, and (2) if
such determination includes or is accompanied
by a concise explanation of the basis therefor,
then the Secretary of Transportation may
waive such requirements to the extent necessary to prevent such delay. No shipbuilder shall
be deemed a responsible bidder unless he possesses the ability, experience, financial resources, equipment, and other qualifications
necessary properly to perform the proposed
contract. Each bid submitted to the Secretary
of Transportation shall be accompanied by all
detailed estimates upon which it is based. The
Secretary of Transportation may require that
the bids of any subcontractors, or other pertinent data, accompany such bid. All such bids
and data relating thereto shall be kept on file
until disposed of as provided by law. For the
purposes of this subchapter V, the term "shipyard of the United States" means shipyards
within any of the United States and the Commonwealth of Puerto Rico.
(June 29, 1936, ch. 858, title V, § 505, 49 Stat.
1998; June 23, 1938, ch. 600, §§ 17, 40(a), 52
Stat. 958, 964; Oct. 25, 1951, ch. 562, § 3(4), 65
Stat. 639; July 12, 1960, Pub. L. 86-624, § 35(a),
74 Stat. 421; Oct. 21, 1970, Pub. L. 91-469, §§ 10,
35(a), 84 Stat. 1022, 1035; Aug. 6, 1981, Pub. L.
97-31, § 12(84), 95 Stat. 161.)
REFERENCES IN TEXT

Paragraph K of section 1401 of title 19, referred to
in text, which was classified to par. (k) of section 1401
of title 19, was redesignated par. (h) of section 1401 of
title 19 by Pub. L. 91-271, title III, § 301(c)(1), June 2,
1970, 84 Stat. 288.
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce" wherever appearing.
1970-Pub. L. 91-469 struck out subsec. (a) designation, struck out of first sentence "within the continental limits" and "the applicant to reject, ,nd in" following "shipyard" and "right reserved in", provided for
waiver of use of American mateirals, substituted definition of "shipyard of the United States" for definition of "continental limits of the United States", and
struck out: subsec. (b) provisions for conditions of contracts, reports as to costs and net profits, limitation on
profit, payment to Secretary of excess profit, subdivision of contracts, inspection of records and premises,
and contracts for scientific equipment; subsec. (c) provisions as to method of determining profit and limitation on salaries: subsec. (d) provisions for utilization of
Treasury Department employees; and subsec. (e) provisions for rescinding approval of bid on refusal of
bidder to comply with conditions, new bids, and construction in navy yards; and substituted "Secretary of
Commerce" for "Commission" in three instances, respectively.
1960-Subsec. (a). Pub. L. 86-624 inserted the definition of the term "continental limits of the United
States."

Page 343

TITLE 46-SHIPPING

1951-Subsec. (a). Act Oct. 25, 1951, in last sentence.
substituted "on file until disposed of as provided by
law" for "permanently on file".
1938-Subsec. (a). Act June 23, 1938, 1 40(a), substituted "construction-differential subsidy is allowed" for
"subsidy is allowed".
Subsec. (b). Act June 23, 1938, 1 17, made section in-

applicable to contracts or other arrangements entered
into under this subchapter by the terms of which the
United States undertakes to pay only for national-defense features.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1152, 1155a,
1176 of this title.

§ 1155a. Suspension of profit limiting provisions as to
certain subcontracts
(a) The provisions of section 1155(b) of this
title shall not apply to any subcontract which
would otherwise be within such provisions if
such subcontract is entered into in any taxable
year of the subcontractor to which Subchapter
E of Chapter 2 of the Internal Revenue Ccde is
applicable and if the principal contractor and
the subcontractor between which such subcontract is entered into are not affiliated within
the meaning of subsection (b) of this section at
the time such subcontract is entered into or at
any time thereafter up to and including the
date of its completion; and any agreement, pursuant to which the subcontractor is required to
pay to the Secretary of Transportation profit
in excess of 10 per centum of the contract price
of any such subcontract or pursuant to which
such an agreement is required to be obtained
from such subcontractor relative to such subcontract, shall be without effect. This subsection shall apply only if both the principal contractor and the subcontractor are corporations.
(b) For the purposes of this section, two or
more corporations shall be deemed to be affiliated (1) if one corporation owns at least 95 per
centum of the stock of the other or others, or
(2) if at least 95 per centum of the stock of two
or more corporations is owned by the same interests. As used in this subsection, the term
"stock" does not include nonvoting stock which
is limited and preferred as to dividends.
(Oct. 8, 1940, ch. 757, title IV, § 402, 54 Stat.
1003; Aug. 6, 1981, Pub. L. 97-31, § 12(86), 95
Stat. 161.)
REFERENCES IN TEXT

Section 1155(b) of this title, referred to in subsec.
(a), means subsec. (b) of section 1155 prior to the
amendment of section 1155 by Pub. L. 91-469, j 10(2),
Oct. 21, 1970, 84 Stat. 1022, which struck out subsec.
(b).
Subchapter E of Chapter 2 of the Internal Revenue
Code, referred to in subsec. (a), means subchapter E of
chapter 2 of the Internal Revenue Code of 1939, which
was comprised of sections 710 to 784 of former Title
26, Internal Revenue Code. Sections 710 to 736, 740,
742 to 744, 750, 751, 760, 761 and 780 to 784 were repealed by act Nov. 8, 1945, ch. 453, title I, I 122(a), 59
Stat. 568. Section 741 was repealed by act Oct. 21,
1942, ch. 619, title II, §j 224(b), 228(b), 56 Stat. 920,
925. Section 752 was repealed by act Oct. 21, 1942, ch.
619, title II, § 229(a)(1). 56 Stat. 931, eff. as of Oct. 8,
1940.
CODIFICATION

Section was not enacted as part of the Merchant
Marine Act, 1936, which comprises this chapter.

§ 1156
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportatlon" for "United States Maritime Commission".
For prior transfers of functions of United States Mari-

time Commission, see Transfer of Functions note
below.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime

Commission, see Reorg. Plan No. 6 of 1949, Reorg.

Plan No. 21 of 1950. and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.

§ 1156. Operation of subsidy constructed vessel limited to foreign trade: repayments to Secretary for
deviations
Every owner of a vessel for which a construction-differential subsidy has been paid shall
agree that the vessel shall be operated exclusively in foreign trade, or on a round-the-world
voyage, or on a round voyage from the west
coast of the United States to a European port
or ports which includes intercoastal ports of

the United States, or a round voyage from the
Atlantic coast of the United States to the

Orient which includes intercoastal ports of the
United States, or on a voyage in foreign trade
on which the vessel may stop at the State of
Hawaii, or an isiand possession or island territory of the United States, and that if the vessel
is operated in the domestic trade on any of the
above-enumerated services, he will pay annually to the Secretary of Transportation that proportion of one-twenty-fifth of the consti uctiondifferential subsidy paid for such vessel as the
gross revenue derived from the domestic trade
bears to the gross revenue derived from the
entire voyages completed during the preceding
year. The Secretary may consent in writing to
the temporary transfer of such vessel to service
other than the service covered by such agreement for periods not exceeding six months in
any year, whenever the Secretary may determine that such transfer is necessary or appro-

priate to carry out the purposes of this chapter.
Such consent shall be conditioned upon the

agreement by the owner to pay to the Secretary, upon such terms and conditions as he may

prescribe, an amount which bears the same proportion to the construction-differential subsidy
paid by the Secretary as such temporary period
bears to the entire economic life of the vessel.

No operating-differential subsidy shall be paid
for the operation of such vessel for such temporary period.

(June 29, 1936, ch. 858, title V, § 506, 49 Stat.
1999; June 23, 1938, ch. 600, § 18, 52 Stat. 958;

Mar. 18, 1959, Pub. L. 86-3, § 18(b)(1), 73 Stat.
12; June 12, 1960, Pub. L. 86-518, § 3, 74 Stat.

216; Aug. 6, 1981, Pub. L. 97-31, § 12(87), 95
Stat. 161.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" the first time it appeared and "Secretary" for "Commission" tl.e next
four times it appeared. For prior transfers of functions
of the Commission, meaning the United States Mari-

time Commission, see Transfer of Functions note
below.

If1157

Page 344

TITLE 46-SHIPPING

1960-Pub. L. 86-518 substituted "one-twenty-fifth"
for "one-twentieth".
1959-Pub. L. 86-3 included stops at the State of
Hawaii for vessels operated on voyages in foreign
trade,
1938-Act June 23, 1938, made changes in phraseology and substituted "construction-differential subsidy"
for "construction subsidy".
EFFECTIVE DATE OF 1960 AMENDMENT

Amendment by Pub. L. 86-518 applicable only to vessels delivered by the shipbuilder on or after Jan. 1,
1946, and with respect to such vessels shall become effective on Jan. 1, 1960, and with respect to vessels delivered by the shipbuilder before Jan. 1, 1946, the provisions of this chapter existing immediately before
June 12, 1960, shall continue in effect, see section 8(a)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
TRANSFER OF FUNCTIONS
For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
REVISION OF CONTRACTS,

COMMITMENTS To INSURE

MORTGAGES, MORTGAGES, AND MORTGAGE INSURANCE
CONTRACTS ENTERED INTO PRIOR TO JUNE 12, 1960,
AMENDMENT OF CONTRACTS DEALING WITH VESSELS
HAVING EXTENDED LIFE

For provisions authorizing revision and amendment
of certain contracts, see section 8(c) of Pub. L. 86-518,
as amended, set out as a note under section 1125 of
this title.
COMMERCIAL EXPECTANCY OR PERIOD OF DEPRECIATION
OF TANKERS AND OTHER LIQUID BULK CARRIERS

Nothing in any amendment made by Pub. L. 86-518
to operate or be interpreted to change from 20 to 25
years the provisions of this chapter relating to the
commercial expectancy or period of depreciation of
any tanker or other liquid bulk carrier, see section 9 of
Pub. L, 86-518. set out as a note under section 1125 of
this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1177, 1183 of
this title.

ditioned upon indemnifying the United Ste .es
from all loss resulting from any existing lien
against such vessel: And provided further, That
such vessel has been documented under the
laws of the United States for a period of at
least ten years prior to the date of its purchase
by the United States.
(June 29, 1936, ch. 858, title V, § 507, 49 Stat.
2000; June 23, 1938, ch. 600, § 19, 52 Stat. 959;
July 17, 1952, ch. 939, § 5, 66 Stat. 761; June 12,
1960, Pub. L. 86-518, § 1, 74 Stat. 216; Aug. 6,
1981, Pub. L. 97-31, § 12(88), 95 Stat. 161.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" in three instances and
"his" for "its". For prior transfers of functions of the
Commission, meaning the United States Maritime
Commission, see Transfer of Functions note below.
1960-Pub. L. 86-518 substituted "twenty-five-year
life" for "twenty-year life."
1952-Act July 17, 1952, made section applicable to
vessels in domestic trade.
1938-Act June 23, 1938, eliminated provisions which
authorized a deduction for obsolescence.
EFFECTIVE DATE OF

1960

AMENDMENT

Amendment by Pub. L. 86-518 applicable only to vessels delivered by the shipbuilder on or after Jan. 1,
1946, and with respect to such vessels shall become effective on Jan. 1, 1960, and with respect to vessels delivered by the shipbuilder before Jan. 1, 1946, the provisions of this chapter existing immediately before
June 12, 1960, shall continue in effect, see section 8(a)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
RATE Or DEPRECIATION FOR VESSELS DELIVERED BY
SHIPBUILDER ON OR AFTER JANUARY 1, 1946, AND
BEFORE JANUARY 1, 1960

141157. Construction of new vessel to replace obsolete;
purchase of old vessel by Secretary; bond of
seller against liens

For provisions relating to computation of depreciation with respect to vessels delivered by the shipbuilder on or after Jan. 1, 1946, and before Jan. 1,
1960, see section 8(b) of Pub. L. 86-518, set out as a
note under section 1125 of this title.

If a contract is made by the Secretary of
Transportation under authority of this subchapter for the construction and sale of a new

REVISION

vessel to replace a vessel then operated in foreign trade or domestic trade, which in the judgment of the Secretary of Transportation should
be replaced because it is obsolete or inadequate

for successful operation in such trade, the Secretary of Transportation is authorized, In his
discretion, to buy such replaced vessel from the
owner at a fair and reasonable valuation, which
valuation shall not exceed the cost to the owner
or any former owner plus the actual cost previously expended thereon for reconditioning, and
less a reasonable and proper depreciation,

based upon not more than twenty-five-year life
of the vessel, and apply the purchase price
agreed upon to that portion of the construction
cost of such new vessel which is to be borne by
the purchaser thereof: Provided, That the
owner of such replaced vessel shall execute a
bond, with one or more approved sureties, con-

OF CONTRACTS,

COMMITMENTS

To

INSURE

MORTGAGES, MORTGAGES, AND MORTGAGE INSURANCE
CONTRACTS ENTERED INTO PRIOR TO JUNE 12, 1960

For provisions authorizing revision, see section 8(c)

of Pub. L. 86-518, set out as a note under section 1125
of this title,
COMMERCIAL EXPECTANCY OR PERIOD OP DEPRECIATION

OF TANKERS AND OTHER LIQUID BULK CARRIERS

Nothing in any amendment made by Pub. L. 86-518
to operate or be interpreted to change from 20 to 25
years the provisions of this chapter relating to the
commercial expectancy or period of depreciation of
any tanker or other liquid bulk carrier, see section 9 of
Pub. L. 86-518, set out as a note under section 1125 of
this title.
§ 1158. Disposition of vessels transferred to Maritime
Administration of Department of Transportation
If the Secretary of Transportation shall determine that any vessel transferred to the
Maritime Administration of the Department of

TITLE 46-SHIPPING

Page 345

Transportation by section 1112 of this title, or
hereafter acquired, Is of insufficient value for
commercial or military operation to warrant its
iurther preserv-otion, 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.
(June 29, 1936, ch. 858, title V, § 508, 49 Stat.
2000; Aug. 6, 1981, Pub. L. 97-31, § 12(89), 95
Stat. 161.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" in three instances and
"the Maritime Administration of the Department of
Transportation" for "it". For prior transiers of functions of the Commission, meaning the United States
Maritime Commission, see Transfer of Functions note
below.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
§1159. Vessels to be operated in domestic trade;
terms and conditions of construction aid and sale
to purchaser
Any citizen of the United States may make
application to the Secretary of Transportation
for aid in the construction of a new vessel to be
operated in the foreign or domestic trade (excepting vessels engaged solely in the transportation of property on inland rivers and canals
exclusively). If such application Is approved by
the Secretary of Transportation, the vessel may
be constructed under the terms and conditions
of this subchapter, but no construction-differential subsidy shall be allowed. The Secretary
of Transportation shall pay for the cost of national-defense features incorporated in such
vessel. In case the vessel is designed to be of not
less than three thousand five hundred gross
tons and to be capable of sustained speed of not
less than ten knots, or in the case of a passenger vessel operating solely on the inland rivers
and waterways which is designed to be of not
less than one thousand gross tons and to be capable of sustained speed of not less than eight
knots, or In the case of a ferry operating solely
in point-to-point transportation which is designed to be of not less than seventy-five gross
tons and to be capable of a sustained speed of
not less than eight knots, in the case of an
oceangoing tug of more than two thousand five
hundred horsepower or oceangoing barge of
more than two thousand five hundred gross
tons, or in the case of a vessel of more than two
thousand five hundred horsepower designed to

§ 1159

be capable of sustained speed of not less than
forty knots, the purchaser shall be required to
pay the Secretary of Transportation not less
than 12X per centum of the cost of such vessel,
and In the case of any other vessel the purchaser shall be required to pay the Secretary of
Transportation not less than 25 per centum of
the cost of such vessel (excluding from such
cost, in either case, the cost of national defense
features); and the balance of such purchase
price shall be paid by the purchaser within
twenty-five years in not to exceed twenty-five
equal annual installments, with interest at a
rate not less than (I) 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 with remaining periods to maturity comparable to the average maturities of such loans,
adjusted to the nearest one-eighth of 1 per
centum, plus (ii) an allowance adequate in the
judgment of the Secretary of Transportation to
cover administrative costs, the balance of such
purchase price being secured by a preferred
mortgage on the vessel sold and otherwise secured as the Secretary of Transportation may
determine: Provided, That, notwithstanding
any other provisions of law, the balance of the
purchase price of a passenger vessel constructed under this section which Is delivered subsequent to March 8, 1946, and which has the tonnage, speed, passenger accommodations, and
other characteristics set forth in section 1153 of
this title, may, with the approval of the Secretary of Transportation, be secured as provided
in such section, and the obligation of the purchaser of such a vessel shall be satisfied and
discharged as provided in such section.
(June 29, 1936, ch. 858, title V, § 509, 49 Stat.
2000; June 23, 1938, ch. 600, § 20, 52 Stat. 959;
June 6, 1939, ch. 186, 53 Stat. 810; July 17, 1952,
ch. 939, § 6, 66 Stat. 761; June 12, 1960, Pub. L.
86-518, § 1, 74 Stat. 216; Oct. 24, 1962, Pub. L.
87-877, § 2(b), 76 Stat. 1200; Dec. 10, 1967, Pub.
L. 90-183, 81 Stat. 559; Dec. 18, 1967, Pub. L.
90-214, 81 Stat. 660; Oct. 21, 1970, Pub. L.
91-469, § 11, 84 Stat. 1022; Aug. 10, 1972, Pub. L.
92-374, 86 Stat. 528; Nov. 12, 1977, Pub. L.
95-173, § 8, 91 Stat. 1360; Oct. 24, 1978, Pub. L.
95-505, 92 Stat. 1755; Aug. 6, 1981, Pub. L.
97-31, § 12(90), 95 Stat. 161.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce" wherever appearing.
1978-Pub. L. 95-505 substituted "ten knots" for
"fourteen knots".
1977-Pub. L. 95-173 inserted ", or in the case of a
ferry operating solely in point-to-point transportation
which is designed to be of not less than seventy-five
gross tons and to be capable of a sustained speed of
not less than eight knots" following "less than eight
knots".
1972-Pub. L. 92-374 inserted "or in the case of a
vessel of more than two thousand five hundred horsepower designed to be capable of sustained speed of not
less than forty knots" in the sentence dealing with the
percentage of cost payable by the purchaser, following
"barge of more than two thousand five hundred gross
tons".

§1160

TITLE 46-SHIPPING

1970-Pub. L. 91-469 substituted "Secretary of Commerce" for "Commission" in seven instances, "purchaser" for "applicant" in first three instances, and
provision for a rate of interest not less than 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
with remaining periods to maturity comparable to the
average maturities of such loans, adjusted to the nearest one-eighth of 1 per centum plus an administrative
cost allowance for prior rate of 3X per centum per
annum.
19067-Pub. L. 90-214 included provision for oceangoing tugs of more than two thousand five hundred
horsepower or oceangoing barges of more than two
thousand five hundred gross tons.
Pub. L. 90-183 Inserted "or in the case of a passenger
vessel operating solely on the inland rivers and waterways which is designed to be of not less than one thousand gross tons and to be capable of sustained speed of
not less than eight knots" following "fourteen knots,".
1962-Pub. L. 87-877 eliminated the second proiso
which, in the case of a vessel to be constructed under
this ;tction, gave a preference to an applicant who
had Ihis principal place of business on the Pacific coast
of the United States, but not including one in business
on or before Aug. 1, 1935, who subsequently changed
his principal place of business to the Pacific coast, if
such vessel was to be operated from such coast, the
amount of the lowest responsible shipyard bid did not
exceed by more than six per centum, a bid by such a
shipyard on the Atlantic coast, and a port on the Pacific coast was designated and continued as the home
port of tile vessel, which set a lower rate of interest on
deferred payments that would otherwise be applicable
with respect to periods of construction of such vessel
and its operation exclusively in coastwise, intercoastal,
and other domestic trade, and which enumerated four
conditions under which such lower interest rate would
not apply.
1960-Pub. L. 86-518 substituted "twenty-five" for
"twenty" in two instances.
1952-Act July 17, 1952, provided that as to vessels
delivered after Mar. 8, 1946, the balance of the payments shall be secured by a first preferred mortgage
and that the purchaser's obligation to pay will be discharged by surrender of the vessel and all rights to
the Government.
1939-Act June 6, 1939, eliminated "except as otherwise provided In this title" which followed "no construction-differential subsidy shall be allowed", and
inserted provisions requiring the applicant to pay not
less than 12Y, per centum of the cost in case the vessel
is designed to be of not less than 3,500 gross tons and
to be capable ,fa sustained speed of not less than 14
knots.
1938-Act June 23, 1938, substituted "foreign or domestic trade" for "domestic trade", and inserted provisions requiring the Commission to pay for the cost of
national-defense features.
EFFECTIVE DATE OF 1960 AMENDMENT

Amendment by Pub. L. 86-518 applicable only to vessels delivered by the shipbuilder on or after Jan. 1,
1946, and with respect to such vessels shall become effective on Jan. 1, 1960, and with respect to vessels delivered by the shipbuilder before Jan. 1, 1946, the provisions of this chapter existing immediately before
June 12, 1960, shall continue in effect, see section 8(a)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
REVISION OF CONTRACTS, COMMITMENTS To INSURE
MORTGAGES, MORTGAGES, AND MORTGAGE INSURANCE
CONTRACTS ENTERED INTO PRIOR TO JUNE 12, 1960

For provisions authorizing revision, see section 8(c)
of Pub. L. 86-518, set out as a note under section 1125
of this title.

Page 346

COMMERCIAL EXPECTANCY OR PERIOD OF DEPRECIATION
OF TANKERS AND OTHER LIQUID BULK CARRIERS

Nothing in any amendment made by Pub. L. 86-518
to operate or be interpreted to change from 20 to 25
years the provisions of this chapter relating to the
commercial expectsncy or period of depreciation of
any tanker or other liquid bulk carrier, see section 9 of
Pub. L. 86-518, set out is a note under section 1125 of
this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1152, 1274 of
this title.
§ 1160. Acquisition of obsolete vessels
(a) Definitions
When used in this section(1) The term "obsolete vessel" means a
vessel or vessels, each of which (A) is of not
less than one thousand three hundred and
fifty gross tons, (B) in the judgment of the
Secretary of Transportation, should, by
reason of age, obsolescence, or otherwise, be
replaced in the public interest and (C) has
been owned by a citizen or citizens of the
United States for at least three years immediately prior to the date of acquisition hereunder.
(2) The term "new vessel" means a vessel or
vessels, each of which (A) is constructed
under the provisions of this chapter, and is
acquired within two years from the date of
completion of such vessel, or is purchased
under section 1204 of this title, as amended,
by the person turning in an obsolete vessel
under this section, or (B) is hereafter constructed in a domestic shipyard on private account and not under the provisions of this
chapter, and documented under the laws of
the United States.
(b) Promotion of construction of new vessels; allowance on obsolete vessels

In order to promote the construction of new,
safe, and efficient vessels to carry the domestic
and foreign waterborne commerce of the
United States, the Secretary of Transportation
is authorized, subject to the provisions of this

section, to acquire any obsolete vessel in exchange for an allowance of credit. The obsolete
vessel shall be acquired by the Secretary of

Transportation, if the owner so requests, either
at the time the owner contracts for the construction or purchase of a new vessel or within
five days of the actual date of delivery of the
new vessel to the owner. The amount of the allowance shall be determined at the time of the
acquisition of the obsolete vessel by the Secre-

tary of Transportation. In the event the obsclete vessel is acquired by the Secretary of
Transportation at the time the owner contracts
for the construction or purchase of the new
vessel, the allowance shall not be paid to the
owner of the obsolete vessel, but shall be applied upon the purchase price of a new vessel.
In the case of a new vessel constructed under
the provisions of this chapter, such allowance
may, under such terms and conditions as the
Secretary of Transportation may prescribe, be
applied upon the cash payments required under
this chapter. In case the new vessel is not con-

Page 347

TITLE 46-SHIPPIN6

structed unde: the provisions of this chapter,
the allowance shall, upon acquisition of the obsolete vessel by the Secretary of Transportation, be paid, for the account of the owner, to
the shipbuilder constructing such new vessel.
In the event that title to the obsolete vessel is
acquired by the Secretary of Transportation at
the time of delivery of the new vessel, the allowance shall be deposited in the owner's capital construction fund. This subsection shall
apply to obsolete vessels exchanged for new
vessels hereafter contracted to be built, or eligible for such exchange but not exchanged in
connection with a contract for new vessels executed prior to October 1, 1960.
() Utility value of new vessel; gross tonnage
The utility value of the new vessel for operation in the domestic or foreign commerce of
the United States shall not be substantially less
than that of the obsolete vessel. The gross tonnage of the obsolete vessel may exceed the
gross tonnage of the new vessel in a ratio not in
excess of three to one, if the Secretary of
Transportation finds that the new vessel, although of lesser tonnage, will provide utility
value equivalent to or greater than that of the
obsolete vessel.
(d) Amount of allowance on obsolete vessel; determination of amount

The allowance for an obsolete vessel shall be
the fair and reasonable value of such vessel as
determined by the Secretary of Transportation.
In making such determination the Secretary of
Transportation shall consider: (1) the scrap
value of the obsolete vessel both in American
and foreign markets, (2) the depreciated value
based on a twenty or twenty-five year life,
whichever is applicable to the obsolete vessel,
and (3) the market value thereof for operation
in the world trade or in the foreign or domestic
trade of the United States. In the event the obsolete vessel is acquired by the Secretary of
Transportation at the time the owner contracts
for the construction of the new vessel, and the
owner uses such vessel during the period of
construction of the new vessel, the allowance
shall be reduced by an amount representing the
fair value of such use. The rate for the use of
the obsolete vessel shall be fixed by the Secretary of Transportation for the entire period of
such use at the time of execution of the contract for the construction of the new vessel.
(e) Recognition of gain for income tax purposes;
basis for gain or loss
No gain shall be recognized to the owner for
the purpose of Federal income taxes in the case
of a transfer of an obsolete vessel to the Secretary of Transportation under the provisions of
this section. The basis for gain or loss upon a
sale or exchange and for depreciation under the
applicable Federal income-tax laws of a new
vessel acquired as contemplated in this section
shall be the same as the basis of the obsolete
vessel or vessels exchanged for credit upon the
acquisition of such new vessel, increased in the
amount of the cost of such vessel (other than
the cost represented by such obsolete vessel or
vessels) and decreased in the amount of loss
recognized upon such transfer.

§ 1160

(f) Report to Congress
The Secretary of Transrrrtation shall include in his annual rep,:"4 o Congress a detailed statement of all transactions consummated under the provisions of the preceding subsections during the period covered by such
report.
(g) Use of vessels 25 years old or more
An obsolete vessel acquired by the Secretary
of Transportation under this section which is
or becomes twenty-five years old or more, and
vessels presently in the Secretary's laid-up fleet
which are or become twenty-five years old or
more, shall in no case be used for commercial
operation, except that any such obsolete vessel,
or any such vessel in the laid-up fleet may be
used during any period in which vessels may be
requisitioned under section 1242 of this title, as
amended, and except as otherwise provided in
this chapter for the employment of the Secretary's vessels in steamship lines on trade routes
exclusively serving the foreign trade of the
United States.
(h) Acquisition of tankers for national defense reserve
The Secretary of Transportation is authorized until July 1, 1958 (subject to the provisions
of this section as herein amended), to acquire a
tanker or tankers, determined by him to be desirable for inclusion in the national defense reserve, in exchange for an allowance of credit to
be applied upon the purchase price of a new
tanker or tankers: Provided, That each of the
tankers to be traded in (1) is not less than one
thousand three hundred and fifty gross tons;
(2) is not less than ten years old; (3) is owned
by a citizen or citizens of the United State,; (4)
and preference shall be given to those tankers
which have been documented under the laws of
the United State,3 for not less than three years
immediately preceding; and (5) is in class with
respect to hull and machinery satisfactory to
the Secretary of Transportation on the date of
its physical delivery to the United States and
shall be considered an "obsolete vessel" for purposes of this section: And provided further,
That only a tanker which is constructed after
August 10, 1954 and documented under the
laws of the United States shall be considered a
"new vessel" for purposes of this section.
The Secretary of Transportation is authorized to pay the cost of national defense features
incorporated in any such new tanker. In the
event that the United States acquires ownership of such new tanker, the price paid therefor
shall not include any amount for national defense features paid for by the United States.
The foregoing provisions shall run with the
title to each new tanker and be binding on all
owners thereof.
The allowance of credit for a traded-in tanker
which was sold under the Merchant Ship Sales
Act of 1946, as amended [50 App. U.S.C. 1735 et
seq.], or which was eligible for a price adjustment under section 9 of such Act [50 App.
U.S.C. 1742], shall be: (1) in the case of tankers
sold under such Act, the depreciated net sales
price paid to the United States, and (2) in the

11160

TITLE 46-SHIPPING

case of tankers which were eligible for price ad.
Justment under such Act, the statutory sales
price of such tanker as of March 8, 1946, depreciated: plus the depreciated cost of any additions or betterments to the tanker which were
capitalized by the owner and allowed for Federal Income tax purposes. Such allowance shall be
determined as of the date the owner contracts
for the construction of a new tanker. In each
case, depreciation shall be computed on the
basis of the life of the tanker adopted or accepted by the internal Revenue Service for determining depreciation for income-tax purposes
to the date the owner contracts for the construction of a new tanker.
The allowance of credit for any other tradedin tanker shall be determined In accordance
with the provisions of subsection (d) of this section.
In no event shall the amount of credit allowed under this subsection or subsection (d) of
this section for a traded-in tanker exceed the
price paid by the owner for such tanker, plus
the cost of any additions or betterments to the
tanker capitalized by such owner and allowed
for Income-tax purposes.
If an owner uses any tanker traded in pursuant to this section subsequent to the date of
the contract for construction of a new tanker,
the allowance determined shall be reduced by
an amount equal to depreciation for the period
of such use and computed In accordance with
the schedule adopted or accepted by the Internal Revenue Service. Title to the traded-in
tanker shall in all instances vest in the United
States, and the allowance of credit shall be applied at the time of physical delivery of such
tanker to the United States, which shall be no
later than ninety days after delivery of the new
tanker. The traded-In tanker shall thereupon
be placed in the national defense reserve subject to the provisions of section 11 of the Merchant Ship Sales Act of 1946, as amended [50
App. U.S.C. 1744).
(I) Exchange of vessels; valuation; scrapping of
traded out vessels
The Secretary of Transportation is authorized to acquire mariner class vessels constructed
under subchapter VII of this chapter and
Public Law 911, Eighty-first Congress, and
other suitable vessels, constructed in the
United States, which have never been under
foreign documentation, in exchange for obsolete vessels in the National Defense Reserve
Fleet. For purposes of this subsection, the
trade-in and trade-out vessels shall be valued at
the higher of their scrap value In domestic or
foreign markets as of the date of the exchange:
Provided, That in any exchange transactions,
the value assigned to the traded-in and tradedout vessels will be determined on the same
basis. The value of the traded-out vessels shall
be as nearly as possible equal to the value of
the traded-in vessel plus the fair value of the
cost of towing the traded-out vessel to the place
of scrapping. To the extent the value of the
traded-out vessel exceeds the value of the
traded-in vessel plus the fair value of the cost
of towing, the owner of the traded-in vessel
shall pay the excess to the Secretary of Trans-

Page 348

portation In cash at the time of exchange. This
excess shall be deposited into the Vessel Operations Revolving Fund and all costs incident to
the lay-up of the vessels acquired under this
chapter may be paid from balances in the
Fund. No payments shall be made by the Secretary of Transportation to the owner of any
traded-in vessel in connection with any exchange under this subsection. Notwithstanding
the provisions of sections 808 and 835 of this
title, vessels traded out under this subsection
may be scrapped in approved foreign markets.
The provision of this subsection (0) as it read
prior to the 1975 rmendment shall govern all
transactions made thereunder prior to that
amendment.
(j) Placement in national defense reserve fleet of acquired vessels
Any vessel heretofore or hereafter acquired
under this section, or otherwise acquired by the
Maritime Administration of the Department of
Transportation under any other authority shall
be placed in the national defense reserve fleet
established under authority of section 11 of the
Merchant Ship Sales Act of 1946 (50 U.S.C.
App. 1744) and shall not be traded out or sold
from such reserve fleet, except as provided for
in subsections (g) and (i) of this section. This
limitation shall not affect the rights of the Secretary of Transportation to dispose of a vessel
as provided in other sections of this subchapter
or in subchapters VII or XI of this chapter.
(June 29, 1936, ch. 858, title V, § 510, as added
Aug. 4, 1939, ch. 417, § 7, 53 Stat. 1183, and
amended July 17, 1952, ch. 939, §§ 7, 8, 66 Stat.
762; Aug. 10, 1954, ch. 664, 68 Stat. 680; Feb. 20,
1958, Pub. L. 85-332, 72 Stat. 17; June 12, 1960,
Pub. L. 86-518, § 1, 74 Stat. 216; July 5, 1960,
Pub. L. 86-575, 74 Stat. 312; Oct. 5, 1961, Pub. L.
87-401, 75 Stat. 833; Oct. 5, 1962, Pub. L. 87-755,
76 Stat. 751; Oct. 10, 1965, Pub. L. 89-254, §§ 1,
2, 79 Stat. 980; Oct. 21, 1970, Pub. L. 91-469,
§§ 12, 13, 35(a), 84 Stat. 1022, 1035; Jan. 2, 1975,
Pub. L. 93-605, § 1, 88 Stat. 1965; Nov. 15, 1977,
Pub. L. 95-177, 91 Stat. 1368; Aug. 6, 1981, Pub,
L. 97-31, § 12(91), 95 Stat. 161.)
REFERENCES IN TEXT

The Federal income-tax laws, referred to In subsec.
(e), are classified generally to Title 26, Internal Revenue Code.
The Merchant Ship Sales Act of 1946. as amended,
referred to In subsee. (h), is act Mar. 8, 1946, ch. 82, 60
Stat. 41, as amended, which enacted sections 1735 to
1746 of Title 50, Appendix, War and National Defense.
For complete classification of this Act to the Code, see
Short Title note set out under section 1735 of Title 50,
Appendix, and Tables.
Section 1742 of Title 50, Appendix, referred to in
subsec. (h), was repealed by Pub. L. 94-412, title V,
§ 501(g), Sept. 14, 1976, 90 Stat. 1258.
Public Law 911, Eighty-first Congress, referred to In
subsec. (I), is act Jan. 6, 1951, ch. 1213, 64 Stat. 1223.
Provisions of the act relating to ship construction
appear under the heading "Maritime Activities" at 64
Stat. 1225, 1226, and are not classified to the Code.
AMENDMENTS

1981-Subsecs. (a)(1), (b). Pub. L. 97-31, § 12(91)(A),
substituted "Secretary of Transportation" for "Secretary of Commerce" wherever appearing.

Page 349

TITLE 46-SHIPPING

Subsecs. (c) to (e)..Pub. L. 97-31, 1 12(91)(B), substituted "Secretary of Transportation" for "Commission" wherever appearing. For prior transfers of functions of the Commission, meaning the United States
Maritime Commission, sce Transfer of Functions note
below.
Subsec. (f). Pub. L. 97-31, 1 12(91)(B), (C), substituted "Secretary of Transportation" for "Commission"
and "his" for "its". For prior transfers of functionE of
the Commission, meaning the United States Maritime
Commission, see Transfer of Functions note below.
Subsec. (g). Pub. L. 97-31, 1 12(91)(B), (D), substituted "Secretary of Transportation" for "Commission"
and "Secretary's" for "Commission's" in two places.
For prior transfers of functions of the Commission,
meaning the United States Maritime Commission, see
Transfer of Functions note below.
Subsecs, (h), (i). Pub. L. 97-31, 1 12(91)(A), substituted "Secretary of Transportation" for "Secretary of
Commerce" wherever appearing.
Subsec. (j). Pub. L. 97-31, § 12(91)(A), (E), substituted "Maritime Administration of the Department of
Transportation" for "Secretary of Commerce" and
"Secretary of Transportation" for "Secretary of Commerce".
1977-Subsec. (i). Pub. L. 95-177 struck out ", within
two years after the enactment of this subsection," following "is authorized" and "that are scheduled for
scrapping" following "National Defense Reserve
Fleet", inserted "and other suitable vessels, constructed in the United States, which have never been under
foreign documentation," following "Eighty-first Congress," , and substituted "the trade-in and trade-out
vessels" for "the traded-in and traded-out vessels" and
"the 1975 Amendment" for "this amendment".
1975-Subsec. (i). Pub. L. 93-605 added subsec. (i). A
prior subsec. (I) providing authority for the Secretary
of Commerce to acquire vessels of one thousand five
hunored gross tons or over which were constructed in
the United States in exchange for more modem or efficient ocean-going vessels of one thousand five hundred gross tons or over owned by the United States
under specified conditions expired on July 5, 1972.
1970-Subsec, (a)(1). Pub. L. 91-469, § 12(a), in redefl,,ng "obsolete vessel", substituted in subd. (B) "in
the Judgment of the Secretary of Commerce, should,
by reason of age, obsolescence, or otherwise, be replaced in the public interest" for "is not less than seventeen years old and, in the judgmaent of the Commission, is obsolete or inadequate for successful operation
in the domestic or foreign trade of the United States",
substituted in subd. (C) "has been owned" for "is
owned" and deleted therefrom "and has been owned
by such citizen or citizens" preceding "for at least
three years", and deleted concluding proviso defining
"obsolete vessel" as meaning a vessel, until June 30,
1964, which is not less than 1,350 gross tons, is not less
than 12 years old, and is citizen owned for three year
period prior to acquisition hereunder.
Subsec. (b). Pub, L. 91-469, § 12(b), 35(a), substituted "capital construction fund" for "capital reserve
fund" and "Secretary of Commerce" for "Commission" in seven instances, respectively.
Subsec. (i). Put. L. 91-469, 1 13, in revising first sentence, substituted "1972" and "which were constructed
in the United States" for "1970" and "which were constructed or contracted for by the United States shipyards before September 3, 1945" and struck out "warbuilt vessels (which are defined for purposes of this
subsection as" and "which were constructed or contracted for by the United States shipyards during the
period beginning September 3, 1939, and ending September 2, 1945)" preceding and following "oceangoing
vessels of one thousand five hundred gross tons or
over".
1965-Subsec. (i). Pub. L. 89-254. § l(a), substituted
"before July 5, 1970, vessels of one thousand five hundred gross tons or over which were constructed or contracted for by the United States shipyards before September 3, 1945" for "within five years from the date of

§ 1160

enactment of this Act war-built vessels (which are de.
fined for purposes of this subsection as oceangoing
vessels of one thousand five hundred gross tons or
over which were constructed or contracted for by the
United States shipyards during the period beginning
September 3, 1939, and ending September 2, 1945)",
and inserted "(which are defined for purposes of this
subsection as oceangoing vessels of one thousand five
hundred gross tons or over which were constructed or
contracted for by the United States shipyards during
the period beginning September 3, 1939, and ending
September 2, 1945)".
Subsec. (i)(1). Pub. L. 89-254, § 1(b), reworded par.
(1) to apply the 3 year prohibition against any vessel
being operated under an operating-differential subsidy
to the applicant or any affiliate of the -applicant
rather than to the vessel itself.
Subsec. (i)(2). Pub. L. 89-254, § l(c), required the
value of a traded out vessel to be calculated in the
same manner as its value was determined when it was
traded in. except that vessels traded in prior to Oct. 1,
1960, shall be valued on the basis yielding the highest
fair return to the government commensurate with the
purpose of this subsection, and required in each exchange of vessels under this subsection, the value of
the traded-in vessel, unless based on scrap value, and
the value of the traded-out vessel to be calculated in
the same manner.
Subsec. (i)(9). Pub. L. 89-254, § l(d), substihuted provisions permitting tanker vessels to be traded out
under the provisions of this subsection only for major
conversions into dry cargo carriers or liquid bulk carriers, including natural gas carriers but excluding bulk
petroleum carriers, except where traded out for use
exclusively in trade and commerce on the G:eat
Lakes, including the St. Lawrence River and Gulf, for
provisions which prohibited tanker-vessels to be
traded out under the provisions of this subsection.
Subsec. (j). Pub. L, 89-254, J 2, added subsec. (j).
1962-Subsec. (a)(1). Pub. L. 87-755 substituted
"June 30, 1964" for "June 30, 1962".
1961-Subsec. (b). Pub. L. 87-401, §1(1), provided
that if the owner requests, the vessel shall be acquired
by the Federal Maritime Board or Secretary of Commerce either when the owner contracts for construction or purchase of a new ship or within 5 days of
actual delivery of the new vessel to the owner, that
the amount of allowance be determined at the time of
acquisition of the vessel by the Board or Secretary,
and if at such time, the owner contracts for construction or purchase of a new vessel, the allowance shall
be applied upon the price of the new vessel, that if the
Board or Secretary acquired title to the vessel at time
of delivery of the new vessel, the allowance shall be
deposited in the owner's capital reserve fund, and that
this subsection shall apply to exchanges for vessels
hereafter contracted to be built, or eligible for ex.
change but not so exchanged in connection with contracts for new vessels executed prior to Oct. 1, 1960.
Subsec. (d), Pub. L. 87-401, U1(2), provided for a depreciation value based upon a twenty-year life, if applicable, and substituted "In the event the obsolete
vessel is acquired by the Board or Secretary at the
time the owner contracts for the construction of a new
vessel, and the owner" for "If the owner of the obsolete vessel".
1960-Subsec. (d). Pub. L. 86-518 substituted
"twenty-five-year life" for "twenty-year life".
Subsec. (g). Pub. L. 86-518 substituted "twenty-five
years" for "twenty years" in two instances.
Subsec. (). Pub. L. 86-575 added subsec. ().
1958-Subsec. (a)(1), Pub. L. 85-332 substituted
"June 30, 1962" for "June 30, 1958".
1954-Subsec. (h). Act Aug. 10, 1954, added subsec.
(h).
1952-Subsec. (a)(1). Act July 17, 1952, U7, provided
that until June 30, 1958, the minimum age in determining the eligibility of "obsolete vessels" for turn in

Page 350

TITLE 46-SHIPPING

§ 1161

for credit allowance on a new vessel is reduced from 17
to 12 years.
Subsec. (d). Act July 17, 1952, j 8, provided that the
rate for the use of the obsolete vessel should be fixed
at the time that the contract for the new vessel is entered into.
EFFECTIVE DATE OF 1960 AMENDMENT
Amendment by Pub. L. 86-518 applicable only to vessels delivered by the shipbuilder on or after Jan. 1,
1940, and with respect to such vessels shall become effective on Jan. 1, 1960, and with respect to vessels delivered by the shipbuilder before Jan. 1, 1946, the provisions of this chapter existing immediately before
June 12, 1960, shall coi tlnue In effect, see section 8(a)
of Pub. L. 86-518, set oi,... as a note under section 1125
of this title.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
SECRETARY OF COMMERCE AUTHORIZED To PURCHASE
STEAMSHIP UNITED STATES; REQUISITION OR PURCHASE BY UNITED STATES

Pub. L. 92-296, 1 2, May 16, 1972, 86 Stat. 140, as
amended by Pub. L. 94-536, Oct. 17, 1976, 90 Stat.
2497; Pub. L. 96-111, § 2, Nov. 15, 1979, 93 Stat. 846,
provided that: "The Secretary of Commerce is authorized and directed to purchase the steamship United
States, as is, where is, at the depreciated cost of the
vessel to the owner, as determined by the Secretary of
Commerce, less the unpaid principal and interest on
the mortgage on the vessel, for layup in the National
Defense Reserve Fleet and operation for the account
of any agency or department of the United States
during any period in which vessels may be requisitioned under section 902 of the Merchant Marine Act,
1936 (46 U.S.C. 1242], and/or for sale or charter to a
qualified operator for operation under the American
flag in the coastwise and/or foreign commerce of the
United States and/or between foreign ports notwithstanding the provision of section 506 of the Merchant
Marine Act, 1936 [46 U.S.C. 1156]: Provided,That for
hire carriage in coastwise commerce of the United
States is limited to passengers, their accompanying
baggage, and one thousand measurement tons of
cargo, of forty cubic feet each, per annum in any
single coastwise trade: Provided further, That for hire
carriage of cargo in excess of the aforesaid one thousand tons shall be unlawful, or for use as a floating
hotel in or on the navigable waters of the United
States. Whenever the conditions set forth in section
902, the Merchant Marine Act of 1936 [46 U.S.C.
1242], exist, the vessel may be requisitioned or purchased by the United States and just compensation for
title or use, as the case may be, shall be paid in accordance with section 902 of the Merchant Marine Act, as
amended (46 U.S.C. 1242). The depreciated cost of the
vessel to the owner shall be computed on the schedule
adopted by the Internal Revenue Service for income
tax purposes. Such determination shall be final. The
Secretary of Commerce shall require the owner of the
vessel to agree that it will pay all existing private obligations related to the vessel, and that it will commit
an amount equal to the net proceeds received from
such sale in excess of existing obligations and expenses incident to the sale, within a reasonable period
not to exceed twelve months of receipt, as equity capital for the construction of new vessels which the Secretary determines are built to effectuate the purposes
and policy of the Merchant Marine Act, 1936, as
amended [this chapter]."

RATE OF DEPRECIATION FOR VESSELS DELIVERED BY
SHIPBUILDER ON OR AFTER JANUARY 1, 1946, AND
BEFORE JANUARY 1, 1960

For provisions relating to computation of depreciation with respect to vessels delivered by the shipbuilder on or after Jan. 1, 1946, and before Jan. 1,
1960, see section 8(b) of Pub. L. 86-518, set out as a
note undc:r section 1125 of this title.
REVISION OF CONTRACTS, COMMITMENTS To INSURE
MORTGAGES, MORTGAGES, AND MORTGAGE INSURANCE
CONTRACTS ENTERED INTO PRIOR TO JUNE 12, 1960

For provisions authorizing revision, see section 8(c)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
COMMERCIAL EXPECTANCY OR PERIOD OF DEPRECIATION
OF TANKERS AND OTHER LIQUID BULK CARRIERS

Nothing in any amendment made by Pub. L. 86-518
to operate or be interpreted to change from 20 to 25
years the provisions of this chapter relating to the
commercial expectancy or period of depreciation of
any tanker or other liquid bulk carrier, see section 9 of
Pub. L. 86-518, set out as a note under section 1125 of
this title.
SUSPENSION OF SUBSECTION (g) REPEALED

Act May 14, 1940, ch. 201, 1 1, 54 Stat. 216, as extended June 16, 1942, ch. 416, 56 Stat. 370, which suspended subsec. (g) of this section until six months
after the end of World War II should have been proclaimed or such earlier time as the Congress by concurrent resolution or the President might designate,
was repealed by act July 25, 1947, ch. 327, § 1, 61 Stat.
449.
CROSS REFERENCES

Basis for depreciation, generally, see section 167 of
Title 26, Internal Revenue Code.
Basis for determining gain or loss, generally, see section 1001 et seq. of Title 26.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in title 26 section 1059;
title 50 App. section 1741.
§ 1161. Reserve funds for construction or acquisition
of vessels; taxation
(a) "New vessel" defined

When used in this section the term "new
vessel" means any vessel (1) documented or
agreed with the Secretary of Transportation to
be documented under the laws of the United
States; (2) construction in the United States
after December 31, 1939, or the construction of
which has been financed under subchapters V
or VII of this chapter, or the construction of
which has been aided by a mortgage insured
under subchapter XI of this chapter; and (3)
either (A) of such type, size, and speed as the
Secretary of Transportation shall determine to
be suitable for use on the high seas or Great
Lakes in carrying out the purposes of this chapter, but not of less than two thousand gross
tons or of less speed than twelve knots, unless
the Secretary of Transportation shall determine and certify in each case that a vessel of a
specified lesser tonnage or speed Is desirable for
use by the United States in case of war or national emergency, or (B) constructed to replace
a vessel or vessels requisitioned or purchased by
the United States.

Page 351

TITLE 46-SHIPPING

(b) Establishment of construction reserve funds
For the purposes of promoting the construction, reconstruction, reconditioning, or acquisition of vessels, or for other purposes authorized
in thin section, necessary to carrying out the
policy set forth in section 1101 of this title, any
citizen of the United States who is operating a
vessel or vessels in the foreign or domestic commerce of the United States or in the fisheries or
owns in whole or in part a vessel or vessels
being so operated, or who, at the time of purchase or requisition of the vessel by the Government, was operating a vessel or vessels so engaged or owned in whole or in part a vessel or
vessels being so operated or had acquired or
was having constructed a vessel or vessels for
the purpose of operation in such commerce or
in the fisheries, may establish a construction
reserve fund, for the construction, reconstruction, reconditioning, or acquisition of new vessels, or for other purposes authorized in this
section, to be composed of deposits of proceeds
from sales of vessels, indemnities on account of
losses of vessels, earnings from the operation of
vessels documented under the laws of the
United States and from services incident thereto, and receipts, in the form of Interest or otherwise, with respect to amounts previously deposited. Such construction reserve fund shall be
established, maintained, expended, and used in
accordance with the provisions of this s'ction
and rules or regulations to be prescribed jointly
by the Secretary of Transportation and the
Secretary of the Treasury.
(c) Recognition of gain for taxation where proceeds
of sale or indemnity for loss deposited in fund
In the case of the sale or actual or constructive total loss of a vessel, if the taxpayer deposits an amount equal to the net proceeds of the
sale or to the net indemnity with respect to the
loss in a construction reserve fund established
under subsection (b) of this section, then(1) if the ta;.payer so elects in his incometax return for the taxable year in which the
gain was realized, or
(2) in case a vessel is purchased or requisitioned by the United States, or is lost, in any
taxable year beginning after December 31,
1939, and the taxpayer receives payment for
the vessel so purchased or requisitioned, or
receives from the United States indemnity on
account of such loss, subsequent to the end of
such taxable year, if the taxpayer so elects
prior to the expiration of sixty days after the
receipt of the payment or indemnity, and in
accordance with a form of election to be prescribed by the Commissioner of Internal Revenue with the approval of the Secretary of
the Treasury,
no gain shall be recognized to the taxpayer in
respect of such sale or indemnification in the
computation of net income for the purposes of
Federal income or excess-profits taxes. If an
election is made under subdivision (2) of this
subsection and if computation or recomputation in accordance with this subsection is otherwise allowable but is prevented, on the date of
making such election or within six months
thereafter, by any statute of limitation, such
computation or recomputation nevertheless

§ 1161

shall be made notwithstanding such statute if a
claim therefor is filed within six months after
the date of making such election.
For the purposes of this subsection no
amount shall be considered as deposited in a
construction reserve fund unless it is deposited
within sixty days after it is received by the taxpayer.
As used in this subsection the term "net proceeds" and the term "net indemnity" mean the
sum of (1) the adjusted basis of the vessel and
(2) the amount of gain which would be recognized to the taxpayer without regard to this
subsection.
(d) Basis for determining gain or loss and for depre.
ciation of new vessels
The basis for determining gain or loss and for
depreciation, for the purposes of Federal
income or excess profits taxes, of any new
vessel constructed, reconstructed, reconditioned, or acquired by the taxpayer, or with respect to which purchase-money indebtedness is
liquidated as provided in subsection (g) of this
section, in whole or in part out of the construction reserve fund shall be reduced by that portion of the deposits in the fund expended in the
construction, reconstruction, reconditioning, acquisition, or liquidation of purchase-money indebtedness of the new vessel which represents
gain not recognized for tax purposes under subsection (c) of this section.
(e) Order, proportions, etc., of deposits and withdrawals
For the purposes of this section, (1) if the net
proceeds of a sale or the net indemnity in respect of a loss are deposited in more than one
deposit, the amount consisting of the gain shall
be considered as first deposited; (2) amounts expended, obligated, or otherwise withdrawn shall
be applied against the amounts deposited in the
fund in the order of deposit; and (3) if any deposit consists in part of gain not recognized
under subsection (c) of this section, any expenditure, obligation, or withdrawal applied
against such deposit shall be considered to consist of gain in the proportion that the part of
the deposit consisting of gain bears to the total
amovnt of the deposit.
(f) Amvunts in fund as accumulation of earnings or
profits
With respect to any taxable year, amounts on
deposit on the last day of such year in a construction reserve fund in accordance with this
section and with respect to which all the requirements of subsection (g) of this section
have been satisfied, to the extent that such requirements are applicable as of the last day of
said taxable year, shall not constitute an accumulation of earnings or profits within the
meaning of section 102 of the Internal Revenue
Code.
(g) Benefits of section conditioned upon manner and
time of expenditure of deposits
The provisions of subsections (c) and (f) of
this section shall apply to any deposit in the
construction reserve fund only to the extent
that such deposit is expended or obligated for

§ 1161

TITLE 46--SHIPPING

expenditure, in accordance with rules and regulat.ons to be prescribed jointly by the Secretary
of Transportation and the Secretary of the
Treasury(1) under a contract for the construction or
acquisition of a new vessel or vessels (or in
the discretion of the Secretary of Transportation, for a part interest therein), or, with the
approval of the Secretary of Transportation,
for the reconstruction or recondit'oning of a
new vessel or vessels, entered into within (i)
two years from the date of deposit or the date
of any extension thereof which may be granted by the Secretary of Transportation pursuant to the provisions of subsection (h) of this
section, in the case of deposits made prior to
the date on which these amendatory provisions become effective, or (ii) three years
from the date of such deposit in the case of a
deposit made after such effective date, only if
under such rules and regulations(A) within such period not less than 12
per centum of the construction or contract
price of the vessel or vessels is paid or irrevocably committed on account thereof and
the plans and specifications therefor are approved by the Secretary of Transportation
to the extent by him deemed necessary; and
(B) in case of a vessel or vessels not constructed under the provisions of this subchapter or not purchased from the Secretary of Transportation, (i) said construction
is completed, within six months from the
date of the construction contract, to the
extent of not less than 5 per centum thereof (or in case the contract covers more than
one vessel, the construction of the first
vessel so contracted for is so completed to
the extent of not less than 5 per centum) as
estimated by the Secretary of Transportation and certified by him to the Secretary
of the Treasury, and (ii) all construction
under such contract is completed with reasonable dispatch thereafter;
(2) for the liquidation of existing or subsequently incurred purchase-money indebtedness to persons other than a parent company
of, or a company affiliated or associated with,
the mortgagor on a new vessel or vessels
within (i) two years from the date of deposit
or the date of any extension thereof which
may be granted by the Secretary of Transportation pursuant to the provisions of subsection (h) of this section, in the case -f deposits
made prior to the date on which these amendatory provisior, become effective, or (i) three
years from the date of such deposit in the
case of a deposit made after such effective
date.
(h) Authorizations of extensions of time
The Secretary of Transportation is authorized under rules and regulations to be prescribed jointly by the Secretary of the Treasury
and the Secretary of Transportation to grant
extensions of the period within which the deposits shall be expended or obligated or within
which construction shall have progressed to the
extent of 5 per centum of completion as provided herein, but such extension shall not be
for an aggregate additional period in excess of

Page 352

two years with respect to the expenditure or
obligation of such deposits or more than one
year with respect to the progress of such construction: Provided, That until January 1, 1965,
in addition to the extensions hereinbefore permitted, further extensions may be granted
ending not later than December 31, 1965.
(i) Taxation of deposits upon failure of conditions
Any such deposited gain or portion thereof
which is not so expended or obligated within
the period provided, or which is otherwise withdrawn before the expiration of such period, or
with respect to which the construction has not
progressed to the extent of 5 per centum of
completion within the period provided, or with
respect to which the Secretary of Transportation finds and certifies to the Secretary of the
Treasury that, for causes within the control of
the taxpayer, the entire construction Is not
completed with reasonable dispatch, if otherwise taxable income under the law applicable to
the taxable year in which such gain was realized, shall be included in the gross income for
such taxable year, except for the purpose of
the declared value excess-profits tax and the
capital stock tax. If any such deposited gain or
portion thereof with respect to a deposit made
in any taxable year ending on or before June
3u, 1945 is so included in gross income for such
taxable year, there shall (in addition to any
other deficiency) be assessed, collected, and
paid in the same manner as if it were a deficiency, an amount equal to 1.1 per centum of the
amount of gain so included, such amount being
in lieu of any adjustment with respect to the
declared value excess-profits tax for such taxable year.
(j) Assessment and collection of deficiency tax
Notwithstanding any other provision of law,
any deficiency in tax for any taxable year resulting from the inclusion of any amount in
gross income as provided by subsection (I) of
this section, and the amount to be treated as a
deficiency under such subsection In lieu of any
adjustment with respect to the declared value
excess-profits tax, may be assessed or a proceeding in court for the collection thereof may
be begun without assessment, at any time: Provided, however, That interest on any such deficiency or amount to be treated as a deficiency
shall not begin until the date the deposited
gain or portion thereof in question is required
under subsection (1) of this section to be included in gross income.
(k) Taxable years governed by section
This section shall be applicable to a taxpayer
only in respect of sales or indemnifications for
losses occurring within a taxable year beginning after December 31, 1939, and only in respect of earnings derived during a taxable year
beginning after December 31, 1939.
(1) Vessels deemed constructed or acquired by taxpayers owning stock in corporations constructing
or acquiring vessels
For the purposes of this section a vessel shall
be considered as constructed or acquired by the
taxpayer if constructed or acquired by a corpo-

TITLE 46-SHIPPING

Page 353

ration at a time 'when the taxpayer owns at
least 95 per centum of the total number of
shares of each class of stock of the corporation.
(i)

Definitions

The terms used in this section shall have the
same meaning as in chapter 1 of the Internal
Revenue Code.
(n) Definition of "contract for the construction" and
"construction contract"

The terms "contract for the construction"
and "construction contract", as used In this section, shall include, in the case of a taxpayer
who constructs a new vessel in a shipyard
owned by such taxpayer, an agreement between
such taxpayer and the Secretary of Transportation with respect to such construction and containing provisions deemed necessary or advisable by the Secretary of Transportation to
carry out the purposes and policy of this section.
(o) Definition of "reconstruction and reconditioning"
The terms "reconstruction and reconditioning", as used in Lhis section, shall include the
reconstruction, reconditioning, or modernization of a vessel for exclusive use on the Great
Lakes, including the Saint Lawrence River and
Gulf, if the Secretary of Transportation determines that the objectives of this chapter will be
promoted by such reconstruction, reconditioning, or modernization, and, notwithstanding
any other provisions of law, such vessel shall be
deemed to be a "new vessel" within the meaning of this section for such reconstruction, reconditioning, or modernization.
(June 29, 1936, ch. 858, title V, § 511, as added
Oct. 10, 1940, ch. 849, 54 Stat. 1106, and amended June 17, 1943, ch. 130, 57 Stat. 157; Dec. 23,
1944, ch. 714, 58 Stat. 920; July 17, 1952, ch. 939,
§§ 9-14, 66 Stat. 762-764; Sept. 8, 1959, Pub. L.
86-237, § 1, 73 Stat. 471; Sept. 26, 1961, Pub. L.
87-303, § 3, 75 Stat. 661; Oct. 10, 1362, Pub. L.
87-782, § 1, 76 Stat. 796; Dec. 23, 1963, Pub. L.
88-227, § 1, 77 Stat. 470; Sept. 12, 1964, Pub. L.
88-595, § 1, 78 Stat. 943; Aug. 6, 1981, Pub. L.
97-31, § 12(92), 95 Stat. 161.)
REFERENCES IN TEXT

Section 102 of the Internal Revenue Code, referred
to in subsec. (f), means section 102 of the Internal
Revenue Code of 1939, which was classified to section
102 of former Title 26, Internal Revenue Code. Section
102 was repealed by section 7851(a)(1) of Title 26, Internal Revenue Code. For table of comparisons of the
1939 Code to the 1954 Code, see Table I preceding section 1 of Title 26. See also section 7851(e) of Title 26
for provision that references in the 1954 Code to a
provision of the 1939 Code, not then applicable, shall
be deemed a reference to the corresponding provision
of the 1954 Code, which is then applicable.
Chapter 1 of the Internal Revenue Code, referred to
in subsec. (m), means chapter 1 of the Internal Revenue Code of 1939, which was classified to chapter 1 of
former Title 26, Internal Revenue Code. Chapter 1
was comprised of sections 1 to 482 of former Title 26.
Sections 1 to 142 and 145 to 482 were repealed by section 7851(a)(1) of Title 26, Internal Revenue Code.
Sections 143 and 144 were repealed by section
7851(a)(2) of Title 26. For table of comparisons of the
1939 Code to the 1954 Code, see Table I preceding section 1 of Title 26. See also section 7851(e) of Title 26
for provision that references in the 1954 Code to a
11-617 VOL. 18 0-84-25

111161

provision of the 1939 Code, not then applicable, shall
be deemed a reference to the corresponding provision
of the 1954 Code, which is then applicable.
AMENDMENTS

1981-Subsecs. (a), (b). Pub. L. 97-31, § 12(92)(A).
substituted "Secretary of Transportation" for "Commission" wherever appearing. For prior transfers of
functions of the Commission, meaning the United
States Maritime Commission, see Transfer of Functions note below.
Subsec. (g). Pub. L. 97-31. § 12(92), substituted "Secretary of Transportation" for "Commission" wherever
appearing and in subpars. (A) and (B), substituted
"him" for "it". For prior transfers of functions of the
Commission, meaning the United States Maritime
Commission, see Transfer of Functions note below.
Subsecs. (h), (I), (n), (W). Pub. L. 97-31, § 12(92)(A),
substituted "Secretary of Transportation" for "Commission" wherever appearing. For prior transfers of
functions of the Commission, meaning the United
States Maritime Commission, see Transfer of Functions note below.
1964-Subsec. (h). Pub. L, 88-595 substituted "January 1, 1965" for "January 1, 1964" and "December 31,
1965" for "December 31, 1964".
1963-Subsec. (h). Pub, L. 88-227 substituted "January 1. 1964" for "January 1, 1963" and "December 31,
1964" for "December 31, 1963".
1962-Subsec. (h). Pub. L. 87-782 substituted "January 1, 1963" for "January 1, 1962" and "December 31,
1963" for "December 31, 1962".
1961-Subsec. (h). Pub. L. 87-303, substituted "January 1, 1962" for "January 1, 1961" and "December 31,
1962" for "December 31, 1961".
1959-Subsec. (h). Pub. L. 86-237 substituted "January 1, 1961" and "December 31, 1961" for "March 31,
1953" and "September 30, 1953," respectively.
1952-Subsec. (b). Act July 17, 1952, § 9, extended its
provisions to the reconstruction and reconditioning of
vessels.
Subsec. (c). Act July 17, 1952, § 10, deleted obsolete
language.
Subsec. (d). Act July 17, 1952, § 11, provided for the
adjustment in the tax basis of a vessel if the reserve
funds are used for reconstruction, reconditioning, or
liquidation of a purchase-money indebtedness on vessels.
Subsec. (g). Act July 17, 1952, § 12, provided that the
reserve funds may be used for reconstruction, reconditioning, and liquidation of purchase money indebtedness, and extended the time of required commitment
of deposits in order to avoid the imposition of taxes at
the established rate.
Subsec. (h). Act July 17, 1952, § 13(a), extended extension period.
Subsec. (I). Act July 17, 1952, § 13(b), limited the additional 1.1% tax imposed on deposits in lieu of the
capital-stock tax or declared excess profit tax to deposits made in taxable years ending on or before June
30, 1945.
Subsec. (W). Act July 17, 1952, §14, added subsec. (W).
1944-Subsec. (c). Act Dec. 23, 1944, amended first
sentence generally.
Subsec. (n). Act Dec. 23, 1944, added subsec. (n).
1943-Subsec. (b). Act June 17, 1943, extended provisions of first sentence to ownership in whole or in part
and to persons who had acquired or were having constructed a vessel or vessels.
Subsec. (c). Act June 17, 1943, changed the dates of
deposit in second sentence.
Subsec. (g). Act June 17, 1943, inserted "(or in the
discretion of the Commission, for a part interest
therein)".
Subsec. (h). Act June 17, 1943, substituted "Commission" for "Commissioner of Internal Revenue" at beginning of subsec. and added proviso.

Page 354

TITLE 46-SHIPPING

§ 1171
EFFECTIVE DATE OF

1964

AMENDMENT

Section 2 of Pub. L. 88-595 provided that: "The
amendment made by the first section of this Act
[amending subsec. (h)of this section] shall take effect
December 31, 1964, or on the date of enactment of this
Act [Sept. 12, 1964], whichever date first occurs."
EFFECTIVE DATE OF

1963

AMENDMENT

Section 2 of Pub. L. 88-227 provided that: "The
amendment made by the first section of this Art
[amending subsec. (b)of this section] shall take effect
December 31. 1963, or on the date of enactment of this
Act [Dec. 23, 1963], whichever date first occurs."
EFFECTIVE DATE OF 1962 AMENDMENT
Section 2 of Pub. L. 87-782 provided that: "The
amendment made by the first section of this Act
[amending subsec. (h) of this section] shall take effect
December 31, 1962, or on the date of enactment of this
Act [Oct. 10, 1962], whichever date first occurs."
EFFECrIVE DATE OF

1959

AMENDMENT

Section 2 of Pub. L. 86-237 provided that: "The
amendment made by the first section of this Act
[amending subsec. (h) of this section] shall take effect
June 30, 1959, or on the date of enactment of this Act
[Sept. 8, 1959], whichever date first occurs."
TRANSFER OF ]FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1901, set
out under section 1111 of this title.
TERMINATION OF WAR

Section 5 of act Aug. 8, 1947, ch. 515, 61 Stat. 917, as
amended Apr. 20, 1949, ch. 82, 63 Stat. 56: Oct. 1, 1951,
ch. 443, 65 Stat. 366; July 16, 1952, ch. 913, 66 Stat.
737, provided: "For the purposes of the proviso of subsection (h) of section 511 of the Merchant Marine Act,
1936, as amended, added to such subsection by the Act
of June 17, 1943 (57 Stat. 158) [subsec. (h)of this section], the present war shall be considered as having
terminated on March 31, 1953."
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in title 26 sections 543,
1023, 1059; title 50 App. section 1741.
SUBCHAPTER VI-OPERATINGDIFFERENTIAL SUBSIDY
SUBCHAPTER REFERRED TO IN OTHER SECTIONS

This subchapter is referred to in sections 1131, 1132,
1152, 1191, 1204, 1222, 1223, 1226, 1227, 1228, 1244 of
this title.
§ 1171. Subsidy authorized for operation of vessels in
foreign trade or in off-season cruises
(a) Application for subsidy; conditions precedent to
granting
The Secretary of Transportation is authorized and directed to consider the application of
any citizen of the United States for financial
aid in the operation of a vessel or vessels, which
are to be used In an essential service In the foreign commerce of the United States or in such
service and in cruises authorized under section
1183 of this title. In this subchapter VI the
term "essential service" means the operation of
a vessel on a service, route, or line described in
section 1121(a) of this title or in bulk cargo carrying service described in section 1121(b) of this
title. No such application shall be approved by

the Secretary of Transportation unless he determines that (1) the operation of such vessel
or vessels in an essential service is required to
meet foreign-flag competition and to promote
the foreign commerce of the United States
except to the extent such vessels are to be operated on cruises authorized under section 1183
of this title, and that such vessel or vessels were
built in the United States, or have been documented under the laws of the United States not
later than February 1, 1928, or actually ordered
and under construction for the account of citizens of the United States prior to such date; (2)
the applicant owns, or leases or can and will
build or purchase, or lease, a vessel or vessels of
the size, type, speed, and number, and with the
proper equipment required to enable him to operate in an essential service, in such manner as
may be necessary to meet competitive conditions, and to promote foreign commerce; (3) the
applicant possesses the ability, experience, financial resources, and other qualifications necessary to enable him to conduct the proposed
operations of the vessel or vessels as to meet
competitive conditions and promote foreign
commerce; (4) the granting of the aid applied
for is necessary to place the proposed operations of the vessel or vessels on a parity with
those of foreign competitors, and is reasonably
calculated to carry out effectively the purposes
and policy of this chapter. To the extent the
application covers cruises, as authorized under
section 1183 of this title, the Secretary of
Transportation may make the portion of this
last determination relating to parity on the
basis that any foreign flag cruise from the
United States competes with any American flag
cruise from the United States.
(b) Staterments as to financial interests to accompany
application; penalty for false statements
Every application for an operating-differential subsidy under the provisions of this subchapter shall be accompanied by statements
disclosing the names of all persons having any
pecuniary interest, direct or indirect, in such
application, or in the ownership or use of the
vessel or vessels, routes, or lines covered thereby, and the nature and extent of any such interest, together with such financial and other
statements as may be required by the Secretary
of Transportation. All such statements shall be
under oath or affirmation and in such form as
the Secretary of Transportation shall prescribe.
Any person who, in an application for financial
aid under this subchapter or in any statement
required to be filed therewith, willfully makes
any untrue statement of a material fact, shall
be guilty of a misdemeanor.
(June 29, 1936, ch. 858, title VI, § 601, 49 Stat.
2001; May 27, 1961, Pub. L. 87-45, § 2, 75 Stat.
90; Oct. 21, 1970, Pub. L. 91-469, §§ 14, 35(a),
(h), 84 Stat. 1023, 1035, 1036; Dec. 31, 1970, Pub.
L. 91-603, § 4(c), (d), 84 Stat. 1675; Aug. 6, 1981,
Pub. L. 97-31, § 12(93), 95 Stat. 161.)
AMENDMENTS

1981-Subsec. (a). Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce"
in two instances and for "Commission" in one in-

TITLE 46-SHIPPING

Page 355

stance. For prior transfers of functions of the Commission, meaning the United States Maritime Commission, see Transfer of Functions note below.
Subsec. (b). Pub. L. 97-31 substituted "Secretary of
Transportation" for "Commission" in two instances.
For prior transfers of functions of the Commission,
meaning the United States Maritime Commission, see
Transfer of Functions note below.
1970-Subsec. (a). Pub. L. 91-603 included the leasing of vessels in ci. (2).
Pub. L. 91-469 inserted definition of "essential service", and substituted "an essential service" for "such
service, route, or line" in cl. (1) and "in an essential
service" for "and maintain the service, route, or line"
in cl. (2); substituted "Secretary of Commerce" for
"Commission" in two instances; and substituted "he"
for "it" in the third sentence preceding "determines
that", respectively.
1961-Subsec. (a). Pub. L. 87-45 required the Federal
Maritime Board to consider applications for financial
aid in the operation of vessels in cruises under section
1183 of this title, and permitted the Board, to the
extent the application covers such cruises, to make the
portion of the determination relating to parity on the
basis that any foreign flag cruise from the United
States competes with any American flag cruise from
the United States.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1152 of this
title.
§ 1172. Determination of necessity of subsidy to meet
competition
Except with respect to cruises authorized
under section 1183 of this title, no contract for
an, operating-differentia) subsidy shall be made
by tWe Secretary of Transportation for the operation of a vessel or vessels to meet foreign
competition, except direct foreign-flag competition, until and unless the Secretary of Transportation, after a full and complete investigation and hearing, shall determine that an operating-differential subsidy is necessary to meet
competition of foreign-flag ships.
(June 29, 1936, ch. 858, title VI, § 602, 49 Stat.
2002; June 23, 1938, ch. 600, § 40(b), 52 Stat.
964; May 27, 1961, Pub. L. 87-45, § 3, 75 Stat. 91;
Oct. 21, 1970, Pub. L. 91-469, § 35(a), 84 Stat.
1035; Aug. 6, 1981, Pub. L. 97-31, § 12(94), 95
Stat. 161.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce" wherever appearing.
1970-Pub. L. 91-469 substituted "Secretary of Commerce" for "Commission" in two instances.
1961-Pub. L. 87-45 excepted cruises authorized
under section 1183 of this title.
1938-Act June 23, 1938, amended section, substituting "operating-differential subsidy" for "operating
subsidy".
§ 1173. Contracts for payment of subsidy
(a) Authorization of contracts
If the Secretary of Transportation approves
the application, he may enter into a contract

§ 1173

with the applicant for the payment of an operating-differential subsidy determined in accordance with the provisions of subsection (b) of
this section, for the operation of such vessel or
vessels in an essential service and in cruises authorized under section 1183 of this title for a
period not exceeding twenty years, and subject
to such reasonable terms and conditions, consistent with this chapter, as the Secretary of
Transportation shall require to effectuate the
purposes and policy of this chapter, including a
performance bond with approved sureties, if
such bond is required by the Secretary of
Transportation.
(b) Amount of subsidy
Such contract shall provide, except as the
parties should agree upon a lesser amount, that
the amount of the operating-differential subsidy for the operation of vessels in an essential
service shall equal the excess of the subsidizable wage costs of the United States officers and
crews, the fair and reasonable cost of insurance,
subsistence of officers and crews on passenger
vessels, as defined in section 1183 of this title,
maintenance, and repairs not compensated by
insurance, incurred in the operation under
United States registry of the vessel or vessels
covered by the contract, over the estimated fair
and reasonable cost of the same items of expense (after deducting therefrom any estimated
increase in such items necessitated by features
incorporated pursuant to the provisions of section 1151(b) of this title) if such vessel or vessels were operated under the registry of a foreign country whose vessels are substantial competitors of the vessel or vessels covered by the
contract: Provided, 7towever, That the Secretary of Transportation may, with respect to any
vessel in an essential bulk cargo carrying service as described in section 1121(b) of this title,
pay, in lieu of the operating-differential subsidy provided by this subsection (b), such sums as
he shall determine to be necessary to make the
cost of operating such vessel competitive with
the cost of operating similar vessels under the
registry of a foreign country. For any period
during which a vessel cruises as authorized by
section 1183 of this title, operating-differential
subsidy shall be computed as though the vessel
were operating on the essential service to which
the vessel is assigned: Provided, however, That
if the cruise vessel calls at a port or ports outside of its assigned service, but which is served
with passenger vessels (as defined in section
1183 of this title) by another subsidized operator at an operating-differential subsidy rate for
wages lower than the cruise vessel has on its assigned essential service, the operating-differential subsidy rates for each of the subsidizable
items for each day (a fraction of a day to count
as a day) that the vessel stops at such port
shall be at the respective rates applicable to the
subsidized operator regularly serving the area.

§ 1173

TITLE 46-SHIPPING

(c) Definitions of "collective bargaining costs", "base
period costs", "base period", and "subsidizable
wage costs of United States officers and crews";
determination of collective bargaining costs and
establishment of new base periods; wage change
index
(1) When used in this section-

(A) The term "collective bargaining costs"
means the annual cost, calculated on the basis
of the per diem rate of expense as of any date,
of all items of expense required of the applicant through collective bargaining or other
agreement, covering the employ of United
States officers and crew of a vessel, including
payments require6 by law to assure old-age
pensions, unemployment benefits, or similar
benefits and taxes or other governmental assessments on crew payrolls, but excluding subsistence of officers and crews on vessels other
than passenger vessels as defined in section
1183 of this title and costs relating to:
(i) the officers or members of the crew that
the Secretary of Transportation has found,
prior to the award of a contract for the construction or reconstruction of a vessel, to be
unnecessary for the efficient and economical
operation of such vessel: Provided, That the
Secretary of Transportation shall afford representatives of the collective-bargaining unit
or units responsible for the manning of the
vessel an opportunity to comment on such
finding prior to the effective date of such
finding: And provided further, That in determining whether officers or members of the
crew are necessary for the efficient and economical operation of such vessel, the Secretary of Transportation shall give due consideration to, but shall not be bound by, wage
and manning scales and working conditions
required by a bona fide collective-bargaining
agreement, or
(ii) those officers or members of the crew
that the Secretary of Transportation has
found, prior to ninety days following October
21, 1970, to be unnecessary for the efficient
and economical operation of the vessel.
(B) The term "base period costs" means for
the base period beginning July 1, 1970, and
ending June 30, 1971, the collective-bargaining
costs as of January 1, 1971, less all other items
of cost that have been disallowed by the Secretary of Transportation prior to ninety days following October 21, 1970, and not already excluded from collective-bargaining costs under
subparagraph (A)(i) or (A)(ii) of this subsection. In any subsequent base period the term
"base period costs" means the average of the
subsidizable wage cost of United States officers
and crews for the preceding annual period
ending June 30 (calculated without regard to
the limitation of the last sentence of paragraph
(D) of this subdivision but increased or decreased by the increase or decreased in the
index described in subdivision (3) of this subsection from January 1 of such annual period to
January 1 of the base period), and the collective-bargaining costs as of January 1 of the
base period: Provided, That in no event shall
the base period cost be such that the difference
between the base period. cost and the collective-

Page 356

bargaining costs as of January 1 of any base
period subsequent to the first base period exceeds five-fourths of 1 per centum of the collective-bargaining costs as of such January 1 multiplied by the number of years that have
elapsed since the most recent base period.
(C) The term "base period" means any
annual period beginning July 1, and ending
June 30 with respect to which a base period
cost is established.
(D) The term "subsidizable wage costs of
United States officers and crews" in any period
other than a base period means the most recent
base period costs increased or decreased by the
increase or decrease from January 1 of such
base period to January 1 of such period in the
index described in subdivision (3) hereof, and
with respect to a base period means the base
period cost. The subsidizable wage costs of
United States officers and crews in any period
other than a base period shall not be less than
90 per centum of the collective-bargaining costs
as of January 1 of such period nor greater than
110 per centum of such collective-bargaining
costs.
(2) The Secretary of Transportation shall determine the collective-bargaining costs on ships
in subsidized operation as of January 1, 1971,
and as of each January 1 thereafter, and shall
as of intervals of not less than two years nor
more than four years, establish a new base
period cost, except that the Secretary shall not
establish a new base period unless he announces his intention to do so prior to the December 31 that would be included in the new
base period.
(3) The Bureau of Labor Statistics shall compile the index referred to in subdivision (1).
Such index shall consist of the average annual
change in wages and benefits placed into effect
for employees covered by collective-bargaining
agreements with equal weight to be given to
changes affecting employees in the transportation industry (excluding the offshore maritime
industry) and to changes affecting employees in
private nonagricultural industries other than
transportation. Such index shall be based on
the materials regularly used by the Bureau of
Labor Statistics in compiling its regularly published statistical series on wage and benefit
changes arrived at through collective bargaining. Such materials shall remain confidential
and not be subject to disclosure.
(d) Foreign wage computation; foreign manning
Each foreign wage cost computation shall be
made after an opportunity is given to the contractor to submit in writing and in timely fashion all relevant data within his possession. In
making the computation, the Secretary shall
consider all relevant matter so presented and
all foreign wage cost data collected at his request or on his behalf. Such foreign cost data
shall be made available to an interested contractor, unless the Secretary shall find that disclosure of the data will prevent him from obtaining such data in the future. In determining
foreign manning for purposes of this section,
the foreign manning determined for any ship
type with respect to any base period shall not

Page 357

TITLE 46-SHIPPING

be redetermined until the beginning of a new
base period.
(e) Monthly payment of wage subsidy; procedures for
calculation and payment of subsidy on certain
expenses
The wage subsidy shall be payable monthly
for the voyages completed during the month,
upon the contractor's certification that the subsidized vessels were in authorized service during
the month. The Secretary of Transportation
shall prescribe procedures for the calculation
and payment of subsidy on items of expense
which are included in "collective-bargaining
costs" but are not included in the daily rate because they are unpredictably timed.
(f) Monthly percentage payment of other than wage
subsidy; security for refund of overpayments;
payment of remainder after audit of voyage accounts

Ninety percent of the amount of the insurance and maintenance and repair and subsistence of officers and crews subsidy shall be payable monthly for the voyages completed during
the month on the basis of the subsidy estimated to have accrued with respect to such voyages. Any such payment shall be made only
after there has been furnished to the Secretary
of Transportation such security as he deems to
be reasonable and necessary to assure refund of
any overpayment. The contractor and the Secretary of Transportation shall audit the voyage
accounts as soon as practicable after such payment. The remaining 10 percent of such subsidy shall be payable after such audit.
(June 29, 1936, ch. 858, title VI, § 603, 49 Stat.
2002; Aug. 4, 1939, ch. 417, § 8, 53 Stat. 1185;
May 27, 1961, Pub. L. 87-45, § 4, 75 Stat. 91;
Sept. 14, 1961, Pub. L. 87-243, 75 Stat. 513; Oct.
21, 1970, Pub. L. 91-469, §§ 15-17, 35(a), (i), 84
Stat. 1023, 1024, 1035, 1036; Aug. 6, 1981, Pub.
L. 97-31, § 12(94), 95 Stat. 161.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce" wherever appearing.
1970-Subsec. (a). Pub. L. 91-469, §§ 15, 35(a), (i),
substituted "an essential servic, " for "such service,
route, or line," "Secretary of Commerce" for "Commission" in three instances, and "he" for "it" preceding "may enter", respectively.
Subsec. (b). Pub. L. 91-469, § 16, in amending first
sentence, inserted ", except as the parties should agree
upon a lesser amount," after "shall provide", "subsistence of officers and crews on passenger vessels, as defined in section 1183 of this title," after "cost of insurance," and proviso for payment of necessary sums to
make operating costs of American-flag vessels providing bulk cargo carrying services competitive with operating costs of similar vessels under foreign registry,
and substituted "vessels in an essential service shall
equal the excess of the subsidizable wage costs of the
United States officers and crews," for "vessels on a
service, route, or line shall not exceed the excess of",
"maintenance, and repairs not compensated by insurance" for "maintenance, repairs not compensated by
insurance," and "incurred" for "wages and subsistence
of officers and crews, and any other items of expense
in which the Commission shall find and determine
that the applicant is at a substantial disadvantage in
competition with vessels of the foreign country hereinafter referred to,".

§ 1173

Subsecs. (c) to (e). Pub. L. 01-469, § 17(1), added subseca. (c) to (e). Former subsec. (c) redesignated (f).
Subsec. (fM.Pub. L. 91-469, 1 17, redesignated former
subsec. (c) as (f), substituted provision for monthly
payment of ninety percent of subsidy (insurance and
maintenance and repair and subsistence of officers
and crews) on basis of estimated accrual of subsidy
and payment of remaining ten percent after audit of
voyage accounts for prior provisions for determination
and payment of subsidy on basis of final accounting
made annually or after some agreed fixed period and
for payments on account limited to 75 per centum of
estimated accrued amount and an additional 15 per
centum for any particular voyage after an audit, substituted provision to "assure" rather than "insure"
refund, and repealed second par. prohibition against
payment of subsidy until contractor provided evidence
that minimum wages prescribed by Secretary of Commerce under section 1131(a) of this title had been paid
to ships personnel.
1961-Subsec. (a). Pub. L. 87-45, §4(a), inserted
words "and in cruises authorized under section 1183 of
this title" following "in such service, route, or line",
Subsec. (b). Pub. L. 87-45, § 4(b), inserted provisions
for the computation of the subsidy for periods during
which a vessel cruises as authorized by section 1183 of
this title.
Subsec. Cc). Pub. L. 87-243 increased, effective on
and after July 1. 1962, the amount payable on account
from not more than 75 per centum to not more than
90 per centum of the amount estimated to have accrued on account of such subsidy, and reduced the
amount payable to the contractor after the audit of
the voyage from 15 to 5 per centum.
1939-Subsec. c). Act Aug. 4, 1939, permitted payment to the contractor of an additional 15 per centum.
OPERATING-DIFFERENTIAL SUBSIDY CONTRACTS:
AMENDMENT AND RECAPTURE PROVISIONS

Section 40 of Pub. L. 91-469 provided that:
"(a) The amendments made by this Act [see Short
Title of 1970 Amendment note set out under section
1245 of this title] shall not affect any contract with
the Secretary of Commerce or his delegates that is in
effect on the date of enactment of this Act [Oct. 21,
1970]. At the request of the other party to such operating-differential subsidy contract, the Secretary of
Commerce shall amend such contract so as to be in accordance with all of the amendments made by this
Act. No amendment made by this Act shall be incorporated in such contract unless all such amendments are
incorporated in such contract, except that if the other
party elects to continue under the "old fund" as provided in section 607 as amended by section 21 of this
Act [section 1177 of this title], such amendment need
not be incorporated In such contract. Until such contract is amended or if such contract is not amended, it
shall be administered in accordance with the provisions of the Merchant Marine Act, 1936 (this chapter]
as they existed immediately prior to enactment of this
Act. Nothing in section 16 of this Act amending section 603 of the Merchant Marine Act, 1936 [subsec. Cb)
of this section] or in the contracts made thereunder,
shall be deemed to affect or to change existing law or
contracts with respect to the proceedings now pending
before the Secretary of Commerce relating to the payment of subsidy in respect of cargoes covered by section 901(b)(1) of the Merchant Marine Act, 1936 [section 1241(b)C1) of this title], section 616(a) of Title 15,
United States Code, or section 2631 of Title 10, United
States Code.
"(b) If any operating-differential subsidy contract in
existence on the date of enactment of this Act [Oct.
21, 19701 Isamended by including all of the amendments made by this Act or all of the amendments
made by this Act other than those made by section 21
[amending section 1177 of this title], the operator may
elect to terminate his recapture period as of the date
of such contract amendment and have his recapture

TITLE 46-SHIPPING

§ 117.1

computed on the basis of the shortened period, or he
may elect to continue his recapture period until the
end of Its ten-year term and continue his recapture obligations as provided by the Merchant Marine Act,
1936, prior to the enactment of this Act [see Short
Title of 1970 Amendment note set out under section
1245 of this title] until the end of such ten-year
period. The amendments in either event shall provide
that, with respect to seafaring personnel, in determining the rights and obligations of the contractor under
such contract, the limitation of section 805(c) of the
Merchant Marine Act, 1936 (section 1223(c) of this
title), as it existed immediately before the enactment
of this Act [Oct. 21, 19701 shall not apply."
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1183 of this
title.
§ 1174. Additional subsidy; when authorized
If in the case of any particular foreign-trade
route the Secretary of Transportation shall
find after consultation with the Secretary of
State, that the subsidy provided for in this subchapter is in any respect inadequate to offset
the effect of governmental aid paid to foreign
competitors, he may grant such additional subsidy as he determines to be necessary for that
purpose.
(June 29, 1936, ch. 858, title VI, § 604, 49 Stat.
2003; June 23, 1938, ch. 600, § 21, 52 Stat. 959;
Aug. 4, 1939, ch. 417, § 9, 53 Stat. 1185; Aug. 6,
1981, Pub. L. 97-31, § 12(95), 95 Stat, 162.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" and "he" for "it", and
struck out provision relating to subsidy voting requirements. For prior transfers of functions of the Commission, meaning the United States Maritime Commission, see Transfer of Functions note set out below.
1939-Act Aug. 4, 1939, reduced requirement in proviso from unanimous vote to vote of four commissioners.
1938-Act June 23, 1938, authorized additional subsidies only where the Commission (which had reference
to United States Maritime Commission) by unanimous
vote finds after consultation with the Secretary of
State that the subsidy is inadequate.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of L961, set
out under section 1111 of this title.
§ 1175. Vessels excluded from subsidy
(a) Vessels engaged in coastwise or intercoastal trade;
vessels on inland waterways
No operating-differential subsidy shall be
paid for the operation of any vessel on a voyage
on which it engages in coastwise or intercoastal
trade: Provided, however, That such subsidy
may be paid on a round-the-world voyage or a
round voyage from the west coast of the United
States to a European port or ports or a round
voyage from the Atlantic coast to the Orient
which includes intercoastal ports of the United
States or a voyage in foreign trade on which
the vessel may stop at the State of Hawaii, or
an island possession or island territory of the
United States, and if the subsidized vessel earns
any gross revenue on the carriage of mail, pas-

Page 358

sengers, or cargo by reason of such coastal or
intercoastal trade the subsidy payment for the
entire voyage shall be reduced by an amount
which bears the same ratio to the subsidy otherwise payable as such gross revenue bears to
the gross revenue derived from the entire
voyage. No vessel operating on the inland waterways of the United S'ates shall be considered for the purposes of this chapter to be operating in foreign trade.
(b) Vessels more than 25 years old
No operating-differential subsidy shall be
paid for the operation of a vessel that is more
than twenty-five years of age unless the Secretary of Transportation finds that it is to the
public interest to grant such financial aid for
the operation of such vessel and enters a
formal order thereon.
(c) Vessels to be operated in an essential service
served by citizens of the United States
No contract shall be made under this subchapter with respect to a vessel to be operated
in an essential service served by citizens of the
United States which would be in addition to the
existing service, or services, unless the Secretary of Transportation shall determine after
proper hearing of all parties that the service already provided by vessels of United States registry is inadequate, and that in the accomplishment of the purposes and policy of this chapter
additional vessels should be operated thereon;
and no contract shall be made with respect to a
vessel operated or to be operated in an essential
service served by two or more citizens of the
United States with vessels of United States registry, if the Secretary of Transportation shall
determine the effect of such a contract would
be to give undue advantage or be unduly prejudicial, as between citizens of the United States,
in the operation of vessels in such essential
service unless following public hearing, due
notice of which shall be given to each operator
serving such essential service, the Secretary of
Transportation shall find that it is necessary to
enter into such contract in order to provide
adequate service by vessels of United States
registry. The Secretary of Transportation in determining for the purposes of this section
whether services are competitive, shall take
into consideration the type, size, and speed of
the vessels employed, whether passenger or
cargo, or combination passenger and cargo, vessels, the ports or ranges between which they
run, the character of cargo carried, and such
other facts as he may deem proper.
(June 29, 1936, ch. 858, title VI, § 605, 49 Stat.
2003; July 17, 1952, ch. 939, § 15, 66 Stat. 764;
Mar. 18, 1959, Pub. L. 86-3, § 18(b)(2), 73 Stat.
12; June 12, 1960, Pub. L. 86-518, § 1, 74 Stat.
216; Nov. 8, 1965, Pub. L. 89-348, § 1(9), 79 Stat.
1310; Oct. 21, 1970, Pub. L. 91-469, §§ 18, 19,
26(b), 35(a), (j), 84 Stat. 1025, 1026, 1034-1036'
Aug. 6, 1981, Pub. L. 97-31, § 12(96), 95 Stat,
162.)
AMENDMENTS

1981-Subsecs. (b), (c). Pub. L. 97-31 substituted
"Secretary of Transportation" for "Secretary of Commerce" wherever appearing.

Page 359

§1176

TITLE 46-SHIPPING

1970-Subsec. (a). Pub. L. 91-469, §26(b), deleted "on

the Great Lakes or" following "No vessel operating" in
last sentence.
Subsec. (b). Pub. L. 91-469, § 18, substituted "unless

the Secretary of Commerce" for "unless the Commis-,
sion" and deleted preceding such words "except one
whose life expectancy has been determined ass provided in section 1177(b) of this title for a period in no
case to exceed the life expectancy determined thereunder,".
Subsec. (c). Pub. L.91-469, §§ 19, 35(a), (J), substitut-

ed "in an essential service" for "on a service, route, or
line", "an essential service" for "a service, route, or
line", and "such essential service" for "competitive
services, routes, or lines," and struck out "in such service, route, or line" preceding "is inadequate" in first
sentence; substituted "Secretary of Commerce" for
"Commission" in four instances; and substituted "he"
for "it" preceding "may deem" in last sentence, respectively.
1965-Subsec. (b). Pub. L. 89-348 deleted provisions
which required an annual report covering each case
and the reasons therefor in which an exception is
made to the prohibition against payment of an operating-differential subsidy for the operation of a vessel
beyond its economic life.
1960-Subsec. (b). Pub. L. 86-518 substituted
"twenty-five years" for "twenty years".
1959-Subsec. (a). Pub. L. 86-3 included stops at the
State of Hawaii.
1952-Subsec. (b). Act July 17, 1952, permitted the
recomputation of the life-expectancy of a reconstructed or reconditioned vessel in use under an operating
differential-subsidy contract, and provided for recomputation of depreciation changes.
EFFECTIVE DATE OF 1960 AMENDMENT
Amendment by Pub. L. 86-518 applicable only to vessels delivered by the shipbuilder on or after Jan. 1,
1946, and with respect to such vessels shall become effective on Jan. 1, 1960, and with respect to vessels delivered by the shipbuilder before Jan. 1, 1946, the provisions of this chapter existing immediately before
June 12, 1960, shall continue in effect, see section 8(a)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
REVISION OF CONTRACTS, COMMITMENTS To INSURE
MORTGAGES, MORTGAGES, AND MORTGAGE INSURANCE
CONTRACTS ENTERED INTO PRIOR TO JUNE 12, 1960
For provisions authorizing revision, see section 8(c)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
COMMERCIAL EXPECTANCY OR PERIOD OF DEPRECIATION
OF TANKERS AND OTHER LIQUID BULK CARRIERS
Nothing in any amendment made by Pub. L. 86-518
to operate or be interpreted to change from 20 to 25
years the provisions of this chapter relating to the

commercial expectancy or period of depreciation of
any tanker or other liquid bulk carrier, see section 9 of
Pub. L. 86-518, set out as a note under section 1125 of
this title.
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1183, 1213 of
this title.
§ 1176. Rteadjustments; change in service; withdrawal
from service; payment of excess profits; wages,

etc.; American materials
Every contract for an operating-differential

subsidy under this subchapter shall provide (1)
that the amount of the future payments to the
contractor shall be subject to review and readjustment from time to time, but not more frequently than once a year, at the instance of the

Secretary of Transportation or of the contractor. If any such readjustment cannot be
reached by mutual agreement, the Secretary of
Transportation, on his own motion or on the

application of the contractor, shall, after a
proper hearing, determine the facts and make
such

readjustment

in

the amount

of

such

future payments as he may determine to be fair
and reasonable and in the public interest. The
testimony in every such proceeding shall be reduced to writing and filed in the office of the
Secretary of Transportation. His decision shall
be based upon and governed by the changes
which may have occurred since tile date of the
said contract, with respect to the items theretofore considered and on which such contract was
based, and other conditions affecting shipping,
and shall be promulgated in a formal order,
which shall be accompanied by a report in writing in which the Secretary of Transportation
shall state his findings of fact; (2) that the compensation to be paid under it shall be reduced,
under such terms and in such amounts as the
Secretary of Transportation shall determine,
for any periods in which the vessel or vessels
are laid up; (3) that if the Secretary of Transportation shall determine that a change in an
essential service, which is receiving an operating-differential subsidy under this subchapter,
is necessary in the accomplishment of the purposes of this chapter, it may make such change
upon such readjustment of payments to the
contractor as shall be arrived at by the method
prescribed in clause (1) of these conditions; (4)
that if at any time the contractor receiving an
operating-differential subsidy claims that he
cannot maintain and operate his vessels in such
an essential service, with a reasonable profit
upon his investment, and applies to the Secretary of Transportation for a modification or rescission of his contract to maintain such essential service, and the Secretary of Transportation determines that such claim is proved the
Secretary of Transportation shall modify or rescind such contract and permit the contractor
to withdraw such vessels from such essential
service upon a date fixed by the Secretary of
Transportation, and upon the date of such
withdrawal the further payment of the operating differential subsidy shall cease and the contractor be discharged from any further obligation under such contract; (5) that the contractor shall conduct his operations with respect to
essential services and any services authorized
under section 1183 of this title, covered by his
contract in an economical and efficient manner,
and (6) that whenever practicable, an operator
who receives subsidy with respect to subsistence of officers and crews shall use as such subsistence items only articles, materials, and supplies of the growth, production, and manufacture of the United States, as defined in section
1155 of this title, except when it is necessary to
purchase supplies outside the United States to
enable such vessel to continue and complete
her voyage, and an operator who receives subsidy with respect to repairs shall perform such
repairs within any of the United States or the
Commonwealth of Puerto Rico, except in an
emergency.

TITLE 46-SI IPPING

§1177

(June 29, 1936, ch. 858, title VI, § 606, 49 Stat.
2004; June 23, 1938, ch. 600, § 22, 52 Stat. 960:
July 17, 1952, ch. 939, § 16, 66 Stat. 764; May 10,
1956, ch. 247, § 1, 70 Stat. 148; July 12, 1960,
Pub. L. 86-624, § 35(b), 74 Stat. 421; May 27,
1961, Pub. L. 87-45, § 5, 75 Stat. 91; Oct. 21,
1970, Pub. L. 91-469, §§ 20, 35(a), (k), 84 Stat.
1026, 1035, 1036; Aug. 6, 1981, Pub. L. 97-31,
§ 12(96), 95 Stat. 162.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce" wherever appearing.
1970-Pub. L. 91-469, § 35(a), substituted "Secretary
of Commerce" for "Commission" wherever appeet'ing.
Cl. (1). Pub. L. 91-469, § 35(k)(I)-(3), substtuted
"his" for "its" in two instances, "he" for "it', and
"His" for "Its", respectively.
Cl. (3). Pub. L. 91-469, §§ 20(1), 35(k)(2), substituted
"and essential service" for "the service, route, or line"
and "he" for "it", respectively.
Cl. (4). Pub. L. 91-469, § 20(2), (3), substituted "in
such an essential service" for "on such service, route,
or line" and "essential service" for "service, route, or
line" in two instances, respectively.
Cl. (5). Pub. L. 91-469, § 20(4), (5), (6)-(9), struck out
former cl. (5) providing that when at the end of any
ten-year period the contractor's net profit on his subsidized vessels has averaged more than 10 percent of
his capital necessarily employed, he shall pay one-half
of such net profit to the United States, but not exceeding the operating-differential subsidy paid to him
during the period, as partial or complete reimbursement of the operating subsidy; redesignated former cl.
(6) as (5); and substituted therein "essential services",
"services", and "an economical" for "the vessel's services, routes, and lines", "cruises", and "the most economical" and struck out therefrom "but with due
regard to the wage and manning scales and working
conditions prescribed by the Commission as provided
in subchapter III of this chapter" after "efficient
manner,", respectively.
Cl. (6). Pub. L. 91-469, 1 20(10), (11), redesignated
former cl. (7) as (6) and substituted "an operator who
received subsidy with respect to subsistence of officers
and crews shall use as such subsistence items" for "the
operator shall use", "1155" for "1155(a)", and "and an
operator who receives subsidy with respect to repairs
shall perform such repairs within any of the United
States or the Commonwealth of Puerto Rico," and
struck out "and equipment" preceding "outside the
United States" and definition of "continental limits of
the United States" as including States of Alaska and
Hawaii, respectively.
Cl. (7). Pub. L. 91-469, § 20(10) redesignated former
cl.
(7) as (6).
1961-Cl. (6). Pub. L. 87-45 Inserted words ", and any
cruises authorized under section 1183 of this title," following "services, routes, and lines".
1960-Pub. L. 86-624 inserted the definition of the
term "continental limits of the United States."
1956-Cl. (5). Act May 10, 1956, provided that termination of subsidy contract shall not end the 10-year
recapture period if subsidized operations continue
under a new, or consecutive, contract.
1952-Cl. (5). Act July 17, 1952, substituted "life expectancy of the subsidized vessel determined as provided in section 1177(b) of this title" for "twenty-year
life expectancy of the subsidized vessels".
1938-Cl. (5). Act June 23, 1938, substituted "tenyear period" for "five-year period" in three instances,
and inserted provisions to permit computation of net
profits without regard to capital gains and losses.
AMENDMENT OF CONTRACT

Section 2 of act May 10, 1956, provided that: "Each
operating-differential subsidy contract in force on the

Page 360

date of enactment of this act [May 10, 1956J shall, if
the subsidized contractor consents, be amended to conform to the provisions of section 606 of the Merchant
Marine Act, 1936 [this section], as amended by section
1 of this act."
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1177 of this
title.
§ 1177. Capital construction fund
(a) Agreement rules; persons eligible; replacement,
additional, or reconstructed vessels for prescribed trade and fishery operations; amount of
deposits, annual limitation; conditions and requirements for deposits and withdrawals
Any citizen of the United States owning or
leasing one or more eligible vessels (as defined
in subsection (k)(1) of this section) may enter
into an agreement with the Secretary under,
and as provided in, this section to establish a
capital construction fund (hereinafter in this
section referred to as the "fund") with respect
to any or all of such vessels. Any agreement entered into under this section shall be for the
purpose of providing replacement vessels, additional vessels, or reconstructed vessels, built in
the United States and documented under the
laws of the United States for operation in the
United States foreign, Great Lakes, or noncontiguous domestic trade or in the fisheries of the
United States and shall provide for the deposit
in the fund of the amounts agreed upon as necessary or appropriate to provide for qualified
withdrawals under subsection (f) of this section. The deposits in the fund, and all withdrawals from the fund, whether qualified or
nonqualified, shall be subject to such conditions and requirements as the Secretary may by
regulations prescribe or are set forth in such
agreement; except that the Secretary may not
require any person to deposit in the fund for
any taxable year more than 50 percent of that
portion of such person's taxable income for
such year (computed in the manner provided in
subsection (b)(1)(A) of this section) which is attributable to the operation of the agreement
vessels.
(b) Ceiling on deposits; lessees; "agreement vessel"
defined

(1) The amount deposited under subsection
(a) of this section in the fund for any taxable
year shall not exceed the sum of:
(A) that portion of the taxable income of
the owner or lessee for such year (computed
as provided in chapter 1 of the Internal Revenue Code of 1954 [26 U.S.C. 1 et seq.] but
without regard to the carryback of any net
operating loss or net capital loss and without
regard to this section) which is attributable to
the operation of the agreement vessels in the
foreign or domestic commerce of the United
States or in the fisheries of the United States,
(B) the amount allowable as a deduction
under section 167 of the Internal Revenue
Code of 1954 [26 U.S.C. 167) for such year
with respect to the agreement vessels,
(C) if the transaction is not taken into account for purposes of subparagraph (A), the
net proceeds (as defined in joint regulations)

Page 361

TITLE 46-SHIPPING

from (i) the sale or other disposition of any
agreement vessel, or (i insurance or indemnity attributable to any agreement vessel, and
(D) the receipts from the investment or reinvestment of amounts held in such fund.
(2) In the case of a lessee, the maximum
amount which may be deposited with respect to
an agreement vessel by reason of paragraph
(1)(B) for any period shall be reduced by any
amount which, under an agreement entered
into under this section, the owner is required or
permitted to deposit for such period with respect to such vessel by reason of paragraph
(1)(B).
(3) For purposes of paragraph (1), the term
"agreement vessel" includes barges and containers which are part of the complement of
such vessel and which are provided for in the
agreement.
(c) Investment requirements; depositories; fiduciary
requirements; interest-bearing securities; stock:
percentage for domestic issues, listing and registration, prudent acquisitions, value and percentage equilibrium, and treatment of preferred
issues
Amounts in any fund established under this
section shall be kept in the depository or depositories specified in the agreement and shall
be subject to such trustee and other fiduciary
requirements as may be specified by the Secretary. They may be invested only in interestbearing securities approved by the Secretary;
except that, if the Secretary consents thereto,
an agreed percentage (not in excess of 60 percent) of the assets of the fund may be invested
in the stock of domestic corporations. Such
stock must be currently fully listed and registered on an exchange registered with the Securities and Exchange Commission as a national
securities exchange, and must be stock which
would be acquired by prudent men of discretion
and intelligence in such matters who are seeking a reasonable income and the preservation of
their capital. If at any time the fair market
value of the stock in the fund is more than the
agreed percentage of the assets in the fund, any
subsequent investment of amounts deposited in
the fund, and any subsequent withdrawal from
the fund, shall be made in such a way as to
tend to restore the fund to a situation in which
the fair market value of the stock does not
exceed such agreed percentage. For purposes of
this subsection, if the common stock of a corporation meets the requirements of this subsection and if the preferred stock of such corporation would meet such requirements but for the
fact that it cannot be listed and registered as
required because it is nonvoting stock, such preferred stock shall be treated as meeting the requirements of this subsection.
(d) Nontaxability of deposits; eligible deposits
(1) For purposes of the Internal Revenue
Code of 1954(A) taxable income (determined without
regard to this section) for the taxable year
shall be reduced by an amount equal to the
amount deposited for the taxable year out of
amounts referred to in subsection (b)(1)(A) of
this section,

§ 1177

(B) gain from a transaction referred to in
subsection (b)(1)(C) of this section, shall not
be taken ,nto account if an amount equal to
the net proceeds (as defined in joint regulations) from such transaction is deposited in
the fund,
(C) the earnings (including gains and losses)
from the investment and reinvestment of
amounts held in the fund shall not be taken
into account,
(D) the earnings and profits of any corporation (within the meaning of section 316 of
such Code (26 U.S.C. 316]) shall be determined without regard to this section, and
(M) in applying the tax imposed by section
531 of such Code (26 U.S.C. 531) (relating to
the accumulated earnings tax), amounts
while held in the fund shall not be taken into
account.
(2) Paragraph (1) shall apply with respect to
any amount only if such amount is deposited in
the fund pursuant to the agreement and not
later than the time provided in joint regulations.
(e) Accounts within fund: capital account, capital
gain account, and ordinary income account; limitation on capital losses
For purposes of this section(1) Within the fund established pursuant to
this section three accounts shall be maintained:
(A) the capital account,
(B) the capital gain account, and
(C) the ordinary income account.
(2) The capital account shall consist of(A) amounts referred to in subsection
(b)(1)(B) of this section,
(B) amounts referred to in subsection
(b)(1)(C) of this section other than that portion thereof which represents gain not taken
into account by reason of subsection (d)(1)(B)
of this section,
(C) 85 percent of any dividend received by
the fund with respect to which the person
maintaining the fund would (but for subsection (d)(1)(C) of this section) be allowed a deduction under section 243 of the Internal
Revenue Code of 1954 [26 U.S.C. 243), and
(D) interest income exempt from taxation
under section 103 of such Code [26 U.S.C.
103).
(3) The capital gain account shall consist of(A) amounts representing capital gains on
assets held for more than 6 months and referred to in subsection (b)(1)(C) or (b)(1)(D)
of this section reduced by
(B) amounts representing capital losses on
assets held in the fund for more than 6
months.
(4) The ordinary income account shall consist
of(A) amounts referred to in subsection
(b)(1)(A) of this section,
(B)(i) amounts representing capital gains on
assets held for 6 months or less and referred
to in subsection (b)(1)(C) or (b)(1)(D) of this
section, reduced by(ii) amounts representing capital losses on
assets held in the fund for 6 months or less,

§ 1177

TITLE 46-SHIPPING

(C) interest (not including any tax-exempt
interest referred to in paragraph (2)(D)) and
other ordinary income (not including any
dividend referred to in subparagraph (E)) received on assets held in the fund,
(D) ordinary income from a transaction described in subsection (b)(1)(C) of this section,
and
(E) 15 percent of any dividend referred to in
paragraph (2)(C).
(5) Except on termination of a fund, capital
losses referred to in paragraph (3)(B) or in
paragraph (4)(B)(ii) shall be allowed only as an
offset to gains referred to in paragraph (3)(A)
or (4)(B)(i), respectively.
(f) Purposes of qualified -vithdrawals; nonqualified
withdrawal treatment for nonfulfillment of substantial obligations
(1) A qualified withdrawal from the fund is
one made in accordance with the terms of the
agreement but only if it is for:
CA) the acquisition, construction, or reconstruction of a qualified vessel,
(B) the acquisition, construction, or reconstruction of barges and containers which are
part of the complement of a qualified vessel,
or
(C) the payment of the principal on indebtedness incurred in connection with the acquisition, construction or reconstruction of a
qualified vessel or a barge or container which
is part of the complement of a qualified

vessel.
Except to the extent provided in regulations
prescribed by the Secretary, subparagraph (B),
and so much of subparagraph (C) as relates
only to barges and containers, shall apply only
with respect to barges and containers constructed in the United States.
(2) Under joint regulations, if the Secretary
determines that any substantial obligation
under any agreement is not being fulfilled, he
may, after notice and opportunity for hearing
to the person maintaining the fund, treat the
entire fund or any portion thereof as an
amount withdrawn from the fund in a nonqualified withdrawal.
(g) Tax treatment of qualified withdrawals; basis: reduction
(1) Any qualified withdrawal from a fund
shall be treated(A) first as made out of the capital account,
(B) second as made out of the capital gain
account, and
(C) third as made out of the ordinary
income account.
(2) If any portion of a qualified withdrawal
for a vessel, barge, or container is made out of
the ordinary income account, the basis of such
vessel, barge, or container shall be reduced by
an amount equal to such portion.
(3) If any portion of a qualified withdrawal
for a vessel, barge, or container is made out of
the capital gain account, the basis of such
vessel, barge, or container shall be reduced by
an amount equal to(A) Five-eighths of such portion, in the case
of a corporation (other than an electing small

Page 362

business corporation, as defined in section
1371 of the Internal Revenue Code of 1954
[26 U.S.C. 13711), or
(B) One-half of such portion, in the case of
any other person.
(4) If any portion of a qualified withdrawal to
pay the principal on any indebtedness is made
out of the ordinary income account or the capital gain account, then an amount equal to the
aggregate reduction which would be required
by paragraphs (2) and (3) if this were a qualified withdrawal for a purpose described in such
paragraphs shall be applied,in the order provided in joint regulations, to reduce the basis of
vessels, barges, and containers owned by the
person maintaining the fund. Any amount of a
withdrawal remaining after the application of
the preceding sentence shall be treated as a
nonqualified withdrawal.
(5) If any property the basis of which was reduced under paragraph (2), (3), or (4) is disposed of, any gain realized on such disposition,
to the extent it does not exceed the aggregate
reduction in the basis of such property under
such paragraphs, shall be treated as an amount
referred to in subsection (h)(3)(A) of this section which was withdrawn on the date of such
disposition. Subject to such conditions and requirements as may be provided in joint regulations, the preceding sentence shall not apply to
a disposition where there is a redeposit in an
amount determined under joint regulations
which will, insofar as practicable, restore the
fund to the position it was in before the withdrawal.
(h) Tax treatment of nonqualified withdrawals; FIFO
and LIFO bases; Interest rate
(1) Except as provided in subsection (i) of this
section, any withdrawal from a fund which is
not a qualified withdrawal shall be treated as a
nonqualified withdrawal.
(2) Any nonqualified withdrawal from a fund
shall be treated(A) first as made out of the ordinary income
account,
(B) second as made out of the capital gain
account, and
(C) third as made out of the capital account,
For purposes of this section, items withdrawn
from any account shall be treated as withdrawn
on a first-in-first-out basis; except that (1) any
nonqualified withdrawal for research, development, and design expenses incident to new and
advanced ship design, machinery and equipment, and (ii) any amount treated as a nonqualified withdrawal under the second sentence of
subsection (g)(4) of this section, shall be treated as withdrawn on a last-in-first-out basis.
(3) For purposes of the Internal Revenue
Code of 1954(A) any amount referred to in paragraph
(2)(A) shall be included in income as an item
of ordinary income for the taxable year in
which the withdrawal is made,
(B) any amount referred to in paragraph
(2)(B) shall be included in income for the taxable year in which the withdrawal is made as
an item of gain realized during such year

Page 363

TITLE 46-SHIPPING

from the disposition of an asset held for more
than 6 months, and
(C) for the period on or before the last date
prescribed for payment of tax for the taxable
year in which this withdrawal is made(i) no interest shall be payable under section 6601 of such Code [26 U.S.C. 6601] and
no addition to the tax shall be payable
under section 6651 of such Code [26 U.S.C.
6651J,
(ii) interest on the amount of the additional tax attributable to any item referred
to in subparagraph (A) or (B) shall be paid
at the applicable rate (as defined in paragraph (4)) from the last date prescribed for
payment of the tax for the taxable year for
which such item was deposited in the fund,
and
(fit) no interest shall be payable on
amounts referred to in clauses (I) and (ii) of
paragraph (2) or in the case of any nonqualified withdrawal arising from the application of the recapture provision of section
1176(5) of this title as in effect on December 31, 1969.
(4) For purposes of paragraph (3)(C)(ii), the
applicable rate of interest for any nonqualified
withdrawal(A) made in a taxable year beginning in
1970 or 1971 is 8 percent, or
(B) made in a taxable year beginning after
l1.'1, shall be determined and published jointly by the Secretary of the Treasury and the
Secretary and shall bear a relationship to 8
percent which the Secretaries determine
under joint regulations to be comparable to
the relationship which the money rates and
investment yields for the calendar year immediately preceding the beginning of the taxable year bear to the money rates and investment yields for the calendar year 1970.
(I) Corporate reorganizations and partnership
changes
Under joint regulations(1) a transfer of a fund from one person to
another person in a transaction to which section 381 of the Internal Revenue Code of 1954
[26 U.S.C. 381] applies may be treated as if
such transaction did not constitute a nonqualified withdrawal, and
(2) a similar rule shall be applied in the case
of a continuation of a partnership (within the
meaning of subchapter K of such Code [26
U.S.C. 701 et seq.]).
(J)Treatment of existing funds; relation of old to new
fund
(1) Any person who was maintaining a fund
or funds (hereinafter in this subsection referred to as "old fund") under this section (as
in effect before the enactment of this subsection) may elect to continue such old fund but(A) may not hold moneys in the old fund
beyond the expiration date provided in the
agreement under which such old fund is
maintained (determined without regard to
any extension or renewal entered into after
April 14, 1970),
(B) may not simultaneously maintain such
old fund and a new fund established under
this section, and

§ 1177

(C) if he enters into an agreement under
this section to establish a new fund, may
agree to the extension of such agreement to
some or all of the amounts in the old fund.
(2) In the case of any extension of an agreement pursuant to paragraph (1)(C), each item
in the old fund to be transferred shall be transferred in a nontaxable transaction to the appropriate account in the new fund established
under this section. For purposes of subsection
(h)(3)(C) of this section, the date of the deposit
of any item so transferred shall be July 1, 1971,
or the date of the deposit in the old fund,
whichever is the later.
(k) Definitions
For purposes of this section(1) The term "eligible vessel" means any
vessel(A) constructed in the United States and, if
reconstructed, reconstructed in the United
States,
(B) documented under the laws of the
United States, and
(C) operated in the foreign or domestic
commerce of the United States or in the fisheries of the United States.
Any vessel which (I) was constructed outside of
the United States but documented under the
laws of the United States on April 15, 1970, or
(ii) constructed outside the United States for
use in the United States foreign trade pursuant
to a contract entered into before April 15, 1970,
shall be treated as satisfying the requirements
of subparagraph (A) of this paragraph and the
requirements of subparagraph (A) of paragraph
(2).
(2) The term "qualified vessel" means any
vessel(A) constructed in the United States and, if
reconstructed, reconstructed in the United
States,
(B) documented under the laws of the
United States, and
(C) which the person maintaining the fund
agrees with the Secretary will be operated in
the United States foreign, Great Lakes, or
noncontiguous domestic trade or in the fisheries of the United States.
(3) The term "agreement vessel" means any
eligible vessel or qualified vessel which is subJect to an agreement entered into under this
section.
(4) The term "United States", when used in a
geographical sense, means the continental
United States including Alaska, Hawaii, and
Puerto Rico.
(5) The term "United States foreign trade"
includes (but is not limited to) those areas in
domestic trade in which a vessel built with construction-differential subsidy is permitted to
operate under the first sentence of section 1156
of this title.
(6) The term "Joint regulations" means regulations prescribed under subsection (1) of this
section.
(7) The term "vessel" includes cargo handling
equipment which the Secretary determines is
intended for use primarily on the vessel. The

TITLE 46-SHIPPING

01177

term "vessel"
also includes an ocean-going
towing vessel or an ocean-going barge or comparable towing vessel or barge operated on the
Great Lakes.
(8) The term "noncontiguous trade" means (i)
trade between the contiguous forty-eight States
on the one hand and Alaska, Hawaii, Puerto
Rico and the insular territories and possessions
of the United States on the other hand, and (i)
trade from any point in Alaska, Hawaii, Puerto
Rico, and such territories and possessions to
any other point in Alaska, Hawaii, Puerto Rico,
and such territories and possessions.
(9) The term "Secretary" means the Secretary of Commerce with respect to eligible or
qualified vessels operated or to be operated in
the fisheries of the United States, and the Secretary of Transportation with respect to all
other vessels.

(1) Records; reports; rules and regulations; termination of agreement upon changes in regulations
with substantial effect on rights or obligations
Each person mpntaining a fund under this
section shall keep such records and shall make

such reports as the Secretary or the Secretary
of the Treasury shall require. The Secretary of
the Treasury and the Secretary shall jointly
prescribe all rules and regulations, not inconsistent with the foregoing provisions of this section, as may be necessary or appropriate to the
determination of tax liability under this sec-

tion. If, after an agreement has been entered
into under this section, a change is made either
in the joint regulations or in the regulations
prescribed by the Secretary under this section
which could have a substantial effect on the
rights or obligations of any person maintaining
a fund under this section, such person may terminate such agreement.
(June 29, 1936, ch. 858, title VI, § 607, 49 Stat.
2005; June 23, 1938, ch. 600, §§ 23-28, 52 Stat.
960, 961; Aug. 4, 1939, ch. 417, § 10, 53 Stat.
1185; July 17, 1952, ch. 939, §§ 17-19, 66 Stat.
764, 765; Aug. 14, 1958, Pub. L. 85-637, 72 Stat.
592; June 12, 1960, Pub. L. 86-518, § 1, 74 Stat.
216; May 27, 1961, Pub. L. 87-45, § 6, 75 Stat. 91;
Sept. 21, 1961, Pub. L. 87-271, 75 Stat. 570; Oct.
21, 1970, Pub. L. 91-469, § 21(a), 84 Stat. 1026;
Oct. 1, 1973, Pub. L. 93-116, 87 Stat. 421; Aug. 6,
1981, Pub. L. 97-31, § 12(97), 95 Stat. 162.)
REFERENCES IN TEXT

The Internal Revenue Code of 1954, referred to in
subsecs. (d)(1) and (h)(3), is classified generally to
Title 26, Internal Revenue Code.
Section 1371 of the Internal Revenue Code of 1954,
referred to in subsec. (g)(3)(A), means section 1371,
which was classified to section 1371 of Title 26, Inter.
nal Revenue Code, as it existed prior to the general
amendment of subchapter S (§ 1371 et seq.) of chapter
1 of Title 26 by Pub. L. 97-354, 12, Oct. 19, 1982, 96
Stat. 1669. For definition of an S corporation, see section 1361 of Title 26.
AMENDMENTS

1981-Subsecs. (a), (c), (f), (h)(4). Pub. L. 97-31,
§ 12(97)(A), substituted "Secretary" for "Secretary of
Commerce" wherever appearing.
Subsec. (k). Pub. L. 97-31, § 12(97), substituted in
pars. (2)(C) and (7) "Secretary" for "Secretary of
Commerce" and added par. (9).

Page 364

Subsec. (1). Pub. L. 97-31. 1 12(97)(A), substituted
"Secretary" for "Secretary of Commerce" wherever
appearing.
1973-Subsec. (k)(8). Pub. L. 93-116 substituted "(ii)
trade from any point in Alaska, Hawaii, Puerto Rico,
and such territories and possessions to any other point
in Alaska, Hawaii, Puerto Rico, and such territories
and possessions." for "(ii) trade between Alaska,
Hawaii, and Puerto Rico and such territories and possessions and (iii) trade between the islands of Hawaii."
1970-Pub. L. 91-469 revised tax deferred reserve
fund provisions generally, extended tax deferral privilege to vessels operated in nonsubsidized foreign trade,
noncontiguous domestic trade, Great Lakes trade, and
in fisheries, built in the United States, and documented under her laws, and substituted a new statutory
framework consisting of subsecs. (a) to (1) for determination of tax status of deposits into and withdrawals
from the fund for former subsecs. (a) to (h) and providing as follows:
Subsec. (a), a capital construction fund, agreement
rules, persons eligible, replacement, additional, or reconstructed vessels for prescribed trade and fishery
operations, amount of deposits, annual limitation, and
conditions and requirements for deposits and withdrawals, subsec. (a) formerly permitting a 10 percent
distribution of net profits;
Subsec. (b), ceiling on deposits, deposits of lessees,
and definition of "agreement vessel", subsec. (b) formerly providing for a capital reserve fund, deposits,
and allowable disbursements;
Subsec. (c), investment requirements, depositories,
fiduciary requirements, investment in interest-bearing
certificates (formerly provided in former subsec. (d)(2)
of this section), stock investments, including common
stock treatment of preferred issues, percentage for domestic issues, listing and registration, prudent man acquisitions (provisions formerly covered in former
subsec. (d)(3)(A) of this section), and value and percentage equilibrium, subsec. (c) formerly providing for
creation of a special reserve fund, deposits, and allowable disbursements;
Subsec. (d), nontaxability of deposits and eligible deposits, subsec. (d) formerly providing rules and regulations for administration of reserve funds and investment of funds, now covered in subsec. (c) of this section;
Subsec. (e), capital account, capital gain account,
and ordinary income account within the capital construction fund and limitation on losses, subsec. (e) formerly providing for withdrawals from capital reserve
fund to meet needs due to operating losses;
Subsec. (f), purposes of qualified withdrawals and
nonqualified withdrawal treatment for nonfulfillment
of substantial obligations, subsec. f) formerly providing for title to reserve funds on termination of contract;
Subsec. (g), tax treatment of qualified withdrawals
and reduction of basis, subsec. (g) formerly providing
for increase and transfer of reserve funds and interest
on overpayment of taxes;
Subsec. (h), tax treatment of nonqualified withdrawals, FIFO and LIFO bases, and interest rate, subsec.
(h) formerly providing for exemption of reserve funds
from taxation, in effect a tax deferral;
Subsec. (i), corporate reorganizations and partnership changes;
Subsec. j), treatment of existing funds and relation
of old to new funds;
Subsec. (k), definitions; and
Subsec. (L), records, reports, rules, and regulations,
and termination of agreement upon changes in regulations with substantial effect on rights or obligations.
1961-Subsec. (b). Pub. L. 87-271 authorized the contractor, upon consent of the Secretary of Commerce,
to pay amounts from the capital reserve fund for research, development, and design expenses for new and
advanced ship design machinery and equipment, purchase of cargo containers delivered after June 30,

TITLE 46-SHIPPING

Page 365

1959, payment of principal on indebtedness incurred
for containers, and for reimbursing the contractor's
general funds for expenditures for such purchases or
payments, and required such cargo containers, to the
extent paid for out of the capital reserve fund, to be
treated as vessels for purpose of deposits and withdrawals from the fund, except that depreciation thereon shall be based on life expectancy used for such containers in determination of "net earnings" in subsec.
(d)(1) of this section.
Pub. L. 87-45 Inserted words "and on cruises, if any,
authorized under section 1183 of this title" following
"route or service approved by the Secretary" in the
second paragraph.
1960-Subsec. (b). Pub. L. 86-518 substituted
"twenty-five-year life expectancy" for "twenty-year
life expectancy".
1958-Subsec. d). Pub. L. 85-637 designated the first
and second paragraphs as subdivisions (1) and (2), and
added subdivision (3).
1952-Subsec. (b). Act July 17, 1952, § 17, permitted
the recomputation of the life-expectancy of a reconstructed or reconditioned vessel in use under an operating-differential subsidy contract, and provided for
recomputation of depreciation changes.
Subsec. (d). Act July 17, 1052, § 18, substituted "as
provided for in section 1177(b) of this title" following
"life of the vessel" for "being twenty years".
Subsec. (g). Act July 17, 1952, § 19, barred payment
of interest by Government on overpayment of taxes
resulting from voluntary deposits of earnings.
1939-Subsec. (c)(3). Act Aug. 4, 1939, permitted payment from the capital reserve fund, and authorized
payment from other assets of the contractor if assets
have not been repaid to the reserve funds, or if prepayments of amounts not due before one year after
the date of termination of the contract have been
made from the capital reserve funds.
1938-Subsec. (b). Act June 23, 1938, §§ 23, 24, substituted "insurance and indemnities" for "insurance indemnities" in the first paragraph, and inserted provisions requiring deposit of proceeds of any sale or other
disposition of a vessel in the capital reserve funds, and
to permit the contractor to pay from the fund any
sums owing but not yet due on notes secured by mortgages on subsidized vessels.
Subsec. (c). Act June 23, 1938, § 25, substituted "If
the profitE, without regard to capital gains and capital
losses, earned by the business of the subsidized vessels
and services incident thereto exceed 10 per centum per
annum and exceed the percentage of profits deposited
in the capital reserve fund, as provided in subsection
(b) of this section, the contractor shall deposit annually such excess profits in this reserve fund" for "In this
reserve fund, the contractor shall deposit annually the
profits earned by the business of the subsidized vessels
and services incident thereto in excess of 10 per
centum per annum and in excess of the percentage of
profits deposited in the capital reserve fund, as pro.
vided in subsection (b) of this section", in the second
paragraph.
Subsec. (c)(2). Act June 23, 1938, § 26, substituted
"will be made up" for "will not be made up".
Subsecs, (f), (g). Act June 23, 1938, § 27, added subsees. (f) and (g). Former subsec. (f) redesignated (h).
Subsec, (h). Act June 23, 1938, § 28, redesignated
former subsec, (f) as subsec. (h) and made earnings
withdrawn from the special reserve fund taxable as if
earned during the year of withdrawal from the fund.
EFFECTIVE DATE OF 1970 AMENDMENT
Section 21(b) of Pub. L. 91-469 provided that: "The
amendment made by subsection (a) [amending this
section] shall apply to taxable years beginning after
December 31, 1969."
EFFECTIVE DATE OF

1960

AMENDMENT

Amendment by Pub. L. 86-518 applicable only to vessels delivered by the shipbuilder on or after Jan. 1,

§1177-1

1946, and with respect to such vessels shall become ef.
fective on Jan. 1, 1960, and with respect to vessels delivered by the shipbuilder before Jan. 1, 1946, the provisions of this chapter existing immediately before
June 12, 1960, shall continue in effect, see section 8(a)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
DEPOSITS INTO CAPITAL RESERVE FUND

Pub. L. 92-507, § 6, Oct. 19, 1972, 86 Stat. 917, provided that: "Nothing in this Act [enacting this note
and amending subchapter XI of this chapter] shall
limit or affect the right of an obligor who maintains a
capital reserve fund under section 607 of the Merchant Marine Act, 1936 [this section] to make deposits
of the proceeds of guaranteed obligations into such
capital reserve fund as provided in subparagraph (c)of
condition (6) of section 1107 of the Merchant Marine
Act, 1936 [subparagraph (c)of condition (6) of section
1276a of this title], as in effect prior to the effective
date of this Act [Oct. 9, 1972J."
RATE OF DEPRECIATION FOR VESSELS DELIVERED BY
SHIPBUILDER ON OR AFTER JANUARY 1, 1946, AND
BEFORE JANUARY 1, 1960

For provisions relating to computation of depreciation with respect to vessels delivered by the shipbuilder on or after Jan. 1, 1946, and before Jan. 1,
1960, see section 8(b) of Pub. L. 86-518, set out as a
note under section 1125 of this title.
OF

CONTRACTS,

COMMITMENTS

MORTGAGES,

MORTGAGES,

AND

REVISION

To

INSURE

MORTGAGE INSURANCE

CONTRACTS ENTERED INTO PRIOR TO JUNE

12, 1960

For provisions authorizing revision, see section 8(c)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
COMMERCIAL EXPECTANCY OR PERIOD OF DEPRECIATION
OF TANKERS AND OTHER LIQUID BULK CARRIERS

Nothing in any amendment made by Pub. L. 86-518
to operate or be interpreted to change from 20 to 25
years the provisions of this chapter relating to the
commercial expectancy or period of depreciation of
any tanker or other liquid bulk carrier, seesection 9 of
Pub. L. 86-518, set out as a note under section 1125 of
this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1177-1, 1185,
1244 of this title; title 26 sections 46, 132, 543; title 42
section 9141.
§ 1177-1. Small fishing vessel construction reserves
In addition to any other vessel which may be

deemed an "eligible vessel" and a "qualified
vessel" under section 1177 of this title, a commercial fishing vessel under five net tons but
not under two net tons(1) which is constructed in the United
States and, if reconstructed, is reconstructed
in the United States;
(2) which is owned by a citizen of the

United States;
(3) which has a home port in the United
States; and
(4) which is operated in the commercial
fisheries of the United States,
shall be considered to be an "eligible vessel"
and a "qualified vessel" for the purposes of
such section 1177 of this title.
(Pub. L. 94-455, title VIII, § 807, Oct. 4, 1976, 90

Stat. 1606.)

TITLE 46-SHIPPING

§ 1177a
CODIFICATION

Section was not enacted as part of the Merchant
Marine Act, 1936, which comprises this chapter.
§ 1177a. i)eposits In special reserve fund; excusal; tax
treatment
On and after June 13, 1957, to the extent that
the operating-differential subsidy accrual (computed on the basis of parity) is represented on
the operator's books by a contingent accounts
receivable item against the United States as a
partial or complete offset to the recapture accrual, the operator (1) shall be excused from
making deposits in the special reserve fund, and
(2) as to the amount of such earnings the deposit of which is so excused shall be entitled to
the same tax treatment as though it had been
deposited in said special reserve fund. To the
extent that any amount paid to the operator by
the United States reduces the balance in the
operator's
contingent
receivable
account
against the United States, such amount shall
forthwith be deposited in the special reserve
fund of the operator.
(Pub. L. 85-52, title I, § 101, June 13, 1957, 71
Stat. 73.)
CODIFICATION

Section was not enacted as part of the Merchant
Marine Act, 1936, which comprises this chapter.
§ 1178. Sale or assignment of contract; consent of
Secretary; purchaser subject to terms of contract;
rescinding contract on transfer without consent
No contract executed under this subchapter
or any interest therein shall be sold, assigned,
or transferred, either directly or indirectly, or
through any reorganization, merger, or consolidation, nor shall any agreement or arrangement be made by the holder whereby the maintenance, management, or operation of the service, route, line, vessel, or vessels is to be performed by any other person, without the written consent of the Secretary of Transportation.
If he consents to such agreement or arrangement, the agreement or arrangement shall
make provision whereby the person undertaking such maintenance, management, or operation agrees to be bound by all of the provisions
of the contract and of this chapter applicable
thereto, and the rules and regulations prescribed pursuant to this chapter. If the holder
of any such contract shall voluntarily sell such
contract or any interest therein, or make such
assignment, transfer, agreement, or arrangement whereby the maintenance, management,
or operation of the service, route, line, vessel, or
vessels is to be performed by any other person,
without the consent of the Secretary of Transportation, or if the operation of the service,
route, line, or vessel, shall pass out of the direct
control of the holder of such contract by reason
of any voluntary or involuntary receivership or
bankruptcy proceedings, the Secretary of
Transportation shall have the right to modify
or rescind such contract, without further liability thereon by the United States, and is vested
with exclusive jurisdiction to determine the
purposes for which any payments made by him
under such contract shall be expended.

Page 366

(June 29, 1936, ch. 858, title VI, § 608, 49 Stat.
2007; Aug. 6, 1981, Pub. L. 97-31, § 12(98), 95
Stat. 162.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" in three instances and
"he" and "him" for "it". For prior transfers of functions of the Commission, meaning the United States
Maritime Commission, see Transfer of Functions note
below.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
§ 1179. Withholding payment to defaulting contractor
The Secretary of Transportation shall withhold the payment of operating-differential subsidy while any contractor therefor is in default
in any payments due on account of construction-loan, ship-sales mortgage notes, or any
other obligation due the United States, and
shall apply the amount so withheld to the satisfaction of such debt.
(June 29, 1936, ch. 858, title VI, § 609, 49 Stat.
2007; June 23, 1938, ch. 600, § 29, 52 Stat. 961;
Aug. 6, 1981, Pub. L. 97-31, § 12(99), 95 Stat.
162.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission". For prior transfers of
functions of the Commission, meaning the United
States Maritime Commission, see Transfer of Functions note below.
1938-Act June 23, 1938, repealed subsec. (b), which
related to cancelation or modification of a contract
where a contractor filed bankruptcy or was in default
of payments.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
§ 1180. Vessels eligible to subsidy
An operating-differential subsidy shall not be
paid under authority of this subchapter on account of the operation of any vessel which does
not meet the following requirements: (1) The
vessel shall be of steel or other acceptable
metal, shall be propelled by steam or motor,
shall be as nearly fireproof as practicable, shall
be built in a domestic yard or shall have been
documented under the laws of the United
States not later than February 1, 1928, or actually ordered and under construction for the account of citizens of the United States prior to
such date, and shall be documented under the
laws of the United States, during the entire life
of the subsidy contract; and (2) if the vessel
shall be constructed after June 29, 1936 it shall
be either a vessel constructed according to
plans and specifications approved by the Secretary of Transportation and the Secretary of the
Navy, with particular reference to economical
conversion into an auxiliary naval vessel, or a
vessel approved by the Secretary of Transpor-

TITLE 46-SHIPPING

Page 367

tation and the Navy Department as otherwise
useful to the United States in time of national
emergency.
(June 29, 1936, ch. 858. title VI, § 610, 49 Stat.
2007; Aug. 6, 1981, Pub. L. 97-31, § 12(99), 95
Stat. 162.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission". For prior transfers of
functions of the Commission, meaning the United
States Maritime Commission, see Transfer of Functions note below.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1152 of this
title.
§ 1181. Transfer of vessels to foreign registry on default of United States
(a) Application; hearing; grant or denial
The contractor, upon compliance with the
provisions of this section, may transfer to foreign registry the vessels covered by any operating-differential subsidy contract held by him, in
the event that the United States defaults upon
such contract or cancels it without just cause.
Any contractor desiring to transfer any such
vessel to foreign registry upon such default or
cancelation shall file an application in writing
with the Secretary of Transportation setting
forth its contentions with respect to the lack of
just cause or lawful grounds for such default or
cancelation. The Secretary of Transportation
shall afford the contractor an opportunity for a
hearing within twenty days after such contractor files written application therefor, and after
the testimony, if any, in such hearing has been
reduced to writing and filed with the Secretary
of Transportation, he shall, within a reasonable
time, grant or deny the application by order.
(b) Appeal from denial of application
If any such application is denied, the contractor may obtain a review of the order of denial
in the United States Court of Appeals for the
District of Columbia, by filing in such court,
within twenty days after the entry of such
order, a written petition praying that the order
of the Secretary of Transportation be set aside.
A copy of such petition shall be forthwith
transmitted by the clerk of the court to the
Secretary of Transportation or any officer designated by him for that purpose, and thereupon the Secretary of Transportation shall file
in the court the record upon which the order
complained of was entered, as provided in section 2112 of title 28, Upon the filing of such petition such court shall have exclusive jurisdiction to determine whether such cancelation or
default was without just cause, and to affirm or
set aside such order. The judgment and decree
of the court affirming or setting aside any such
order of the Secretary of Transportation shall
be final.

§1181

(c) Effectiveness of transfer
No transfer of vessels to foreign registry
under this section shall become effective until
any indebtedness to the Government or to any
citizen of the United States, secured by such
vessels, has been paid or discharged, and until
after the expiration of ninety days from the
date of final determination of the application
or the appeal, if any. Within such ninety-day
period the Secretary of Transportation may (1)
with the consent of the contractor purchase
the vessels at cost to the contractor plus cost of
capital improvements thereon, less 4 per
centum annual depreciation upon such vessel,
and the actual depreciated costs of capital improvements thereon, or (2) reinstate the contract and adjust or settle the default found by
the Secretary of Transportation or the court to
exist.
(June 29, 1936, ch. 858, title VI, § 611, as added
June 23, 1938, ch. 600, § 30, 52 Stat. 961, and
amended Aug. 28, 1958, Pub. L. 85-791, § 17, 72
Stat. 947; June 12, 1960, Pub. L. 86-518, § 4, 74
Stat. 216; Aig. 6, 1981, Pub. L. 97-31, § 12(100),
95 Stat. 162.)
AMENDMENTS

1981-Subsec. (a). Pub. L. 97-31, § 12(100)(A), (B),
substituted "Secretary of Transportation" for "Commission" in three instances and "he" for "it". For
prior transfers of functions of the Commission, meaning the United States Maritime Commission, see
Transfer of Functions note below.
Subsec. (b). Pub. L. 97-31, § 12(100)(A), (C), substituted "Secretary of Transportation" for "Commis.
sion" in three instances and "the Secretary of Transportation or any other officer designated by him for
that purpose" for "any member of the Commission, or

any officer thereof designated by the Commission for
that purpose". For prior transfers of functions of the
Commission, meaning the United States Maritime
Commission, see Transfer of Functions note below.
Subsec. (c). Pub. L. 97-31, §12(100)(A), substituted
"Secretary of Transportation" for "Commission". For
prior transfers of functions of the Commission, meaning the United States Maritime Commission, see
Transfer of Functions note below.
1960-Subsec. (c). Pub. L. 86-518 substituted "4 per

centum" for "5per centum".
1958-Subsec. (b), Pub. L. 85-791, in second sentence,
substituted "transmitted by the clerk of the court to"
for "served upon", eliminated "upon" preceding "any
officer", substituted "file in the court" for "certify
and file in the court a transcript of", and inserted "as
provided in section 2112 of title 28". and which, in
third sentence, substituted "petition" for "transcript".
EFFECTIVE DATE OF 1960 AMENDMENT

Amendment by Pub. L. 86-518 applicable on!y to vessels delivered by the shipbuilder on or after Jan. 1,

1946, and with respect to such vessels shall become effective on Jan. 1,1960, and with respect to vessels delivered by the shipbuilder before Jan. 1,1946, the pro-

visions of this chapter existing immediately before
June 12, 1960, shall continue in effect, see section 8(a)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.

TITLE 46-SHIPPING

0l1182
RATE

OF

DEPRECIATION

FOR

SIIIPBUILDER ON OR AFTER
BEFORE JANUARY 1. 1960

VESSELS

JANUARY

DELIVERED

BY

1, 1946, AND

For provisions relating to computation of depreciation with respect to vessels delivered by the shipbuilder on or after Jan. 1, 1946, and before Jan. 1,
1960, see section 8(b) of Pub. L. 86-518, set out as a
note under section 1125 of this title.
REVISION OF CONTRACTS, COMMITMENTS
To INSURE
MORTGAGES, MORTGAGES, AND MORTGAGE INSURANCE
CONTRACTS ENTERED INTO PRIOR TO JUNE 12, 1960

For provisions authorizing revision, see section 8(c)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
COMMERCIAL EXPECTANCY OR PERIOD OF DEPRECIATION
OF TANKERS AND OTHER LIQUID BULK CARRIERS

Nothing in any amendment made by Pub. L. 86-518
to operate or be interpreted to change from 20 to 25
years the provisions of this chapter relating to the

commercial expectancy or period of depreciation of
any tanker or other liquid bulk carrier, see section 9 of
Pub. L. 86-518, set out as a note under section 1125 of
this title.
SECTION REFERRED TO IN

OTHER SECTIONS

This section is referred to in section 808 of this title.
§ 1182. Subordination of Secretary's interest to Re.
construction Finance Corporation
The Secretary of Transportation is authorized to subordinate his interest as mortgagee in
any vessel subsidized under the provisions of
this subchapter in favor of any loan for working capital made by the Reconstruction Finance Corporation under the Reconstruction
Finance Corporation Act, as amended [15
U,S.C. 601 et seq.], if the Secretary of Transportation finds that the making of such loan by
the Reconstruction Finance Corporation would
be in furtherance of the policies of this chapter
or would, in his opinion, preserve or protect his
mortgage interest in said subsidized vessel: Provided, That the obligations evidencing such
loans by the Reconstruction Finance Corporation shall not be transferred, except to some
other governmental agency.
(June 29, 1936, ch. 858, title VI, § 612, as added
June 22, 1938, ch. 600, § 30, 52 Stat. 961, and
amended Aug. 6, 1981, Pub. L. 97-31, § 12(101),
95 Stat. 162.)
REFERENCES IN TEXT

The Reconstruction Finance Corporation Act, as

amended, referred to in text, is act Jan. 22, 1932, ch. 8,

47 Stat. 5, as amended, which was classified to chapter
14 (§ 601 et seq.) of Title 15, Commerce and Trade, and
has been eliminated from the Code. For complete classification of this Act prior to its elimination from the
Code, see Tables.
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" in two instances and
"his" for "its" in three instances. For prior transfers
of functions of the Commission, meaning the United
States Maritime Commission, see Transfer of Func-

tions note below.

TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime

Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.

ABOLITION OF RECONSTRUCTION

Page 368
FINANCE CORPORATION

Section 6(a) of Reorg. Plan No. 1 of 1957, eff. June

30, 1957, 22 F.R. 4633, 71 Stat. 647, set out under section 601 of Title 15, Commerce and Trade, abolished
the Reconstruction Finance Corporation.

§ 1183. Off-season cruises by passenger vessels
(a) )efinition
In this section, "passenger vessel" means a
vessel which (1) is of not less than ten thousand
gross tons, and (2) has accommodations for not
less than one hundred passengers.
(b) Authorization for payment of subsidy
If the Secretary of Transportation finds that
the operation of any passenger vessel with respect to which a contract for the payment of an
operating-differential subsidy has been entered
into under section 1173 of this title effective
before January 2, 1960, is not required for all of
each year, in order to furnish adequate service
on the service, route, or line covered by such
contract, he may amend such contract to agree
to pay an operating-differential subsidy for operation of the vessel (1) on such service, route,
or line for some part or no part of each year,
and (2) on cruises for all or part of each year if
such specific cruise is approved by the Secretary of Transportation under subsection (e) of
this section: Provided, however, That no such
vessel may cruise for more than seven months
of each year to ports which are regularly served
by another United States-flag passenger vessel
pursuant to an operating-differential subsidy
contract.
(c) Authorization for payment of subsidy to passenger vessels providing domestic service
The Secretary of Transportation may authorize passenger vessels under operating-differential subsidy contracts to provide domestic service between specified ports while the vessels are
on voyages in an essential service in the foreign
commerce of the United States without reduction of operating-differential subsidy and the
partial payback of construction-differential
subsidy for operating in the domestic trades, if
he finds that such domestic service will not
result in a substantial deviation from the service, route, or line for which operating-differential subsidy is paid and will not adversely affect
service on such service, route, or line.
(d) Conditions for cruises or domestic service while
on voyages in an essential service in foreign commerce
When a vessel is being operated on cruises or
has been authorized under this section to provide domestic passenger services while on voyages in an essential service in foreign commerce
of the United States(1) except as provided in subdivision (4) of
this subsection, it shall carry no mail unless
required by law, or cargo except passengers'
luggage, except between those ports between
which it may carry mail and cargo on its regular service assigned by contract;
(2) it may not carry one-way passengers between those ports served by another United
States carrier on its regular service assigned
by contract, without the consent of such car-

TITLE 46-SHIPPING

Page 369

rier, except between those ports between
which it may carry one-way passengers on its
own regular service assigned by contract;
(3) it shall stop at other domestic ports only
for the same time and the same purpose as is
permitted with respect to a foreign-flag vessel
which is carrying passengers who embarked
at a domestic port, except that a cruise may
end at a different port or coast from that
where it began and may embark or disembark
passengers at other domestic ports, either
when not involving transportation in the domestic offshore trade in competition with a
United States-flag passenger vessel offering
berth service therein, or, if involving such
transportation, with the consent of such carrier: Provided, however, That nothing herein
shall be construed to repeal or modify section
1223(a) of this title.
(4) Any other provisions of this chapter or
of the Shipping Act, 1916 [46 U.S.C. 801 et
seq.], to the contrary notwithstanding, with
the approval of the Secretary of Transportation, it may carry cargo and mail between
ports to the extent such carriage is not in
direct competition with a carrier offering
United States-flag berth service between
those ports, or, if such carriage is in direct
competition with one or more carriers offering United States-flag berth service between
such ports, with the consent of the next
scheduled United States-flag carrier, which
consent shall not be unreasonably withheld
in the judgment of the Maritime Administrator.
Section 1175(c) of this title shall not apply to
cruises authorized under this section. Notwithstanding the applicable provisions of sections
1175(c) and 1156 of this title requiring the reduction of operating differential subsidy and
the partial payback of construction differential
subsidy for operating in the domestic trades,
such reduction of operating subsidy and partial
payback of construction subsidy under sections
1175(a) and 1156, respectively, of this title,
shall not apply to cruises or domestic services
authorized under this section.
(e) Application for approval of cruise; notice to other
American flag operators
Upon the application of any operator for approval of a specific cruise, the Secretary of
Transportation, after notice to all other American flag operators who may be affected and
after affording all such operators an opportunity to submit written data, views or arguments,
with or without opportunity to present the
same orally in any manner, and after consideration of all relevant matter presented, shall approve the proposed cruise, if he determines
that the proposed cruise will not substantially
adversely affect an existing operator's service
performed with passenger vessels of United
States registry. Such approval shall not be
given more than two years in advance of the beginning of the cruise.
(June 29, 1936, ch. 858, title VI, § 613, as added
May 27, 1961, Pub. L. 87-45, § 1, 75 Stat. 89, and
amended June 22, 1968, Pub. L. 90-358, §§ 1, 2,
82 Stat. 248; May 14, 1970, Pub. L. 91-250, 84
11-617

VOL. 18 0-84-26

§ 1183

Stat. 215; June 30, 1972, Pub. L. 92-323, 86 Stat.
389; Aug. 6, 1981, Pub. L. 97-31, § 12(102), 95
Stat. 162.)
REFERENCES IN TEXT

The Shipping Act, 1916, referred to in subsec. (d)(4),
is act Sept. 7, 1916, ch. 451, 39 Stat. 728, as amended.
which Is classified principally to chapter 23 ( 801 et
seq.) of this title. For complete classification of this
Act to the Code, see section 842 of this title and
Tables.
AMENDMENTS

1981-Subsec. (b). Pub. L. 97-31, § 12(102)(A), substituted "Secretary of Transportation" for "Secretary of
Commerce" wherever appearing.
Subsec. (c). Pub. L. 97-31, § 12(102)(A), (B), substituted "Secretary of Transportation" for "Secretary of
Commerce" and "he" for "it".
Subsec. (d)(4). Pub. L. 97-31, § 12(102)(A). substituted "Secretary of Transportation" for "Secretary of
Commerce".
Subsec. (e). Pub. L. 97-31, § 12(102)(B), (C), substituted "Secretary of Transportation" for "Board" and
"he" for "it". For prior transfers of functions of tile
Board, meaning the Federal Maritime Board, see
Transfer of Functions note set out below.
1972-Subsec. (b). Pub. L. 92-323, § 1(a), substituted
provisions authorizing the Secretary of Commerce to
permit passenger vehicles with respect to which an operating differential subsidy contract was entered into
prior to January 2, 1960, to cruise for the whole year,
for provisions permitting such passenger vessels to
cruise off their essential trade routes for two-thirds of
each year.
Subsec. (d). Pub. L. 92-323, § l(b), added subd. (4)
and qualified subd. (1)by making it subject to the provisions in subd. (4).
Subsec. (e). Pub. L. 92-323, § l(c), changed phraseology.
1970-Subsec. (b). Pub. L. 91-250, §1(a), substituted
"(e" for "(d)" after the words "under subsection".
Subsec. (c). Pub. L. 91-250, § l(b), substituted provision that Secretary of Commerce may authorize passenger vessels under operating-differential subsidy
contracts to provide domestic service between specified ports under stated conditions, for provision stating conditions for operating passenger vessels on
cruises.
Subsec. (d). Pub. L. 91-250, § 1(c), added subsec. (d).
Former subsec. (d)redesignated (e).
Subsec. (e). Pub, L. 91-250, § 1(c), (d), redesignated
former subsec. (d)as (e). Former subsec. (e), which defined seacoasts of the United States, was eliminated.
1968-Subsec, (b). Pub. L. 90-358, §1, substituted reference to passenger vessels with respect to which a
contract for the payment of an operating-differential
subsidy has been entered into under section 1173 of
this title effective before January 2, 1960, for reference to passenger vessels with respect to which an application for operating-differential subsidy has been
filed under section 1171 of this title, increased from
four to eight months of each year the length of the
period during which vessels may engage in cruises, and
limited the cruising period each year to seven months
in the case of ports regularly served by another United
States-flag passenger vessel pursuant to an operatingdifferential subsidy contract.
Subsecs. (d) to f). Pub. L. 90-358, § 2(a), (b), redesignated subsecs. (e)and (f) as (d)and (e), respectively.
Former subsec. (d), making provision for periodic
review of operating differential subsidy contracts entered into under this subchapter and for amendment
of such contracts, was repealed.

Page 370

TITLE 46-SHIPPING

§11831a
TRANSFER OF FUNCTIONS

For transfer of functions of Federal Maritime Board,
see Reorg. Plan No. 7 of 1961, set out under section
1111 of this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section Is referred to in sections 865a, 1171,
1172, 1173, 1176, 1183a of thu. title.
§ 1183a. Off-season cruises additional to right of operator to make voyages on regular service, route,
or line, including approved deviations
The cruises authorized by section 1183 of this
title shall be in addition to and not in derogation of the right of an operator to make voyages on his regular service, route or line, including approved deviations within the general area
of his essential service. There shall be no adJustment of subsidy in the event of such deviations if they are without prejudice to the adequacy of service.
(Pub. L. 87-45, § 7, May 27, 1961, 75 Stat. 91.)
CODIFICATION

Section was not enacted as part of the Merchant
Marine Act, 1936, which comprises this chapter.
§ 1184. Suspension of operating differential subsidy
contracts by operator recipients
(a) Any operator receiving operating differential subsidy funds may elect, for all or a portion
of its ships, to suspend its operating differential
subsidy contract with all attendant statutory
and contractual restrictions, except as to those
pertaining to the domestic intercoastal or coastwise service, including any agreement providing
for the replacement of vessels, if(1) the vessel is less than ten years of age;
(2) the suspension period is not less than
twelve months;
(3) the operator's financial condition is
maintained at a level acceptable to the Secretary of Commerce; and
(4) the owner agrees to pay to the Secretary, upon such terms and conditions as he
may prescribe, an amount which bears the
same proportion to the construction differential subsidy paid by the Secretary as the portion of the suspension period during which
the vessel is operated in any preference trade
from which a subsidized vessel would otherwise be excluded by law or contract bears to
the entire economic life of the vessel.
(b) Any operator making an election under
this section is entitled to full reinstatement of
the suspended contract on request. The Secretary of Commerce may prescribe rules and regulations consistent with the purpose of this section.
(June 29, 1936, ch. 858, § 614, as added Aug. 13,
1981, Pub. L. 97-35, title XVI, § 1603, 95 Stat.
751.)
§ 1185. Construction, reconstruction, or acquisition of
vessels over five thousand deadweight tons in foreign shipyards; preconditions
(a) The Secretary of Commerce may, until
September 30, 1983, authorize an operator receiving or applying for operating differential

subsidy under this subchapter to construct, reconstruct, or acquire its vessels of over five
thousand deadweight tons in a foreign shipyard
if the Secretary finds and certifies in writing
that such operator's application for construction differential subsidy cannot be approved
due to the unavailability of funds in the construction differential subsidy account. Vessels
constructed, reconstructed, or modified pursuant to this section shall be deemed to have been
United States built for the purposes of this subchapter, section 1241(b) of this title, and section 391a(7) of this title: Provided, That the
provisions of section 1177 of this title shall not
apply to vessels constructed, reconstructed,
modified, or acquired pursuant to this section.
(b) The provisions of this section shall be effective for fiscal year 1983 only if the President
in his annual budget message for that year requests at least $100,000,000 in construction differential subsidy or proposes an alternate program that would create equivalent merchant
shipbuilding activity in privately owned United
States shipyards and the Secretary reports to
Congress on the effect such action will have on
the shipyard mobilization base at least thirty
days prior to making the certification referred
to in subsection (a) of this section.
(June 29, 1936, ch. 858, § 615, as added Aug. 13,
1981, Pub. L. 97-35, title XVI, § 1610, 95 Stat.
753.)
SUBCHAPTER VII-PRIVATE CHARTER
OPERATION
SUBCHAPTER REFERRED TO IN

OTHER SECTIONS

This subchapter is referred to in sections 1131, 1152,
1160, 1161, 1222, 1223. 1226, 1227, 1228 of this title;
title 50 section 198; title 50 App. section 1738.

§ 1191. Additional powers of Secretary for completion
of program
Whenever the Secretary of Transportation
shall find and determine, and such finding and
determination shall be approved by the President of the United States, that the national
policy declared in section 1101 of this title, and
the objectives set forth in section 1120 of this
title, cannot be fully realized within a reasonable time, in whole or in part, under the provisions of subchapters V and VI of this chapter,
the Secretary of Transportation is authorized
and directed to complete his long-range program previously adopted as provided in this
subchapter.
(June 29, 1936, ch. 858, title VII, § 701, 49 Stat.
2008; Aug. 6, 1981, Pub. L. 97-31, § 12(103), 95
Stat. 162.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" in two instances. For
prior transfers of functions of the Commission, meaning the United States Maritime Commission, see
Transfer of Functions note below.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.

TITLE 46-SHIPPING

Page 371

Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
FINDING OF COMMISSION

Former United States Maritime Commission made
findings and determinations on Apr. 28, 1938, which
were approved by the President on Apr. 29, 1938, that
the national policy declared in section 1101 of this
title and the objectives set forth in section 1120 of this
title could not with respect to construction of new vessels be fully realized within a reasonable time under
the provisions of subchapters V and VI of this chapter.
CRoss REFERENCES

Operational and charter authority for vessels acquired under emergency powers, see section 198 of
Title 50, War and National Defense.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1196 of this
title.
§ 1192. Construction or reconditioning of vessels by
Secretary
The Secretary of Transportation is authorized to have constructed in shipyards in the
continental United States such new vessels as
he shall determine may be required to carry out
the objects of this chapter, and to have old vessels reconditioned or remodeled in such yards:
Provided, That if satisfactory contracts for

§119.1

any other vessel, shall be made by the Secretary of Transportation with any private shipbuilder, except after due advertisement and
upon sealed competitive bids.
(b) Requirements
All contracts for the construction, reconditioning, or reconstruction of a vessel or vessels
by a private shipbuilder under authority of this
subchapter shall be subject to all the provisions
and requirements prescribed in subchapter V of
this chapter with respect to contracts with a
private shipbuilder for the construction of vessels under authority of said subchapter.
(c) Opening of bids
All bids required by the Secretary of Transportation for the construction, reconstruction,
or reconditioning of vessels, and for the chartering of the Secretary's vessels hereinafter
provided for, shall be opened at the time, hour,
and place stated in the advertisement for bids,
and all interested persons, including representatives of the press, shall be permitted to
attend, and the results of such bidding shall be
publicly announced.
(June 29, 1936, ch. 858, title VII, § 703, 49 Stat.
2008; Aug. 6, 1981, Pub. L. 97-31, § 12(105), 95

Stat. 163.)

such new construction or reconstruction, in ac-

AMENDMENTS

cordance with the provisions of this chapter,
cannot be obtained from private shipbuilders,
the Secretary of Transportation is authorized
to have such vessels constructed, reconditioned,
or remodeled in United States navy yards. For
the purposes of this section, the term "continental United States" includes the States of
Alaska and Hawaii.

1981-Subsec. (a). Pub. L. 97-31, § 12(105)(A), substituted "Secretary of Transportation" for "Commission". For prior transfers of functions of the Commission, meaning the United States Maritime Commission, see Transfer of Functions note below.
Subsec. (c). Pub. L. 97-31, § 12(105), substituted
"Secretary of Transportation" for "Commission" and
"Secretary's" for "Commission's". For prior transfers
of functions of the Commission, meaning the United
States Maritime Commission, see Transfer of Functions note below.

(June 29, 1936, ch. 858, title VII, § 702, 49 Stat.
2008; Aug. 28, 1957, Pub. L. 85-191, 71 Stat. 471;
July 12, 1960, Pub. L. 86-624, § 35(c), 74 Stat.
421; Aug. 6, 1981, Pub. L. 97-31, § 12(104), 95

Stat. 162.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" in two instances and
"he" for "it". For prior transfers of functions of the
Commission, meaning the United States Maritime
Commission, see Transfer of Functions note below.
1960-Pub, L. 86-624 inserted the definition of the
term "continental United States."
1957-Pub. L. 85-191 substituted "in shipyards in the
continental United States" for "in domestic yards, on
the Atlantic and Gulf and Pacific coasts,".
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1196 of this
title.
§ 1193. Competitive bidding
(a) Construction, reconstruction, or reconditioning of
vessels
No contract for the building of a new vessel,
or for the reconditioning or reconstruction of

TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1196 of this
title.
§ 1194. Charter or sale of vessels acquired by Department of Transportation

All vessels transferred to or otherwise acquired by the Department of Transportation in
any manner may be chartered or sold by the

Secretary of Transportation pursuant to the
further provisions of this chapter.
(June 29, 1936, ch. 858, title VII, § 704, 49 Stat.
2008; Apr. 1, 1937, ch. 64, 50 Stat. 57; Aug. 6,
1981, Pub. L. 97-31, § 12(106), 95 Stat. 163.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Department of
Transportation" for "Commission" the first place it
appeared and "Secretary of Transportation" for
"Commission" the second place it appeared, and
struck out provisions relating to discontinuance of operation of Commission's vessels on lines in foreign
commerce under operating agreements within one

TITLE 46-SHIPPING

§119.5

year after June 27, 1936. For prior transfers of functions of the Commission, meaning the United States
Maritime Commission, see Transfer of Functions note
below.
1937-Act Apr. 1, 1937, substituted "may be temporarily operated" for "shall be temporarily operated",
required preference to be given to present operators,
permitted private operators to commence voyages
prior to the expiration date and to complete them
thereafter, and inserted provisions providing that
nothing contained In this section should be construed
as limiting the power of sale under section 1195 of this
title.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No.21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
AUTHORITY FOR WARTIME SALE OR CHARTER REPEALED

Act May 14, 1940, ch. 201, §2, 54 Stat. 216, as extended June 16, 1942, ch. 416, 56 Stat. 370, which related to sale or charter of vessels by United States Maritime Commission until six months after the end of
World War II should have been proclaimed or such
earlier time as the Congress by concurrent resolution
or the President might designate, was repealed by act
July 25, 1947, ch. 327, § 1,61 Stat. 449.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to In section 1196 of this
title.
§ 1195. Employment of vessels on foreign trade
routes; selection of routes; encouraging private
operation by sale or charter; selling price
As soon as practicable after June 29, 1936,
and continuing thereafter, the Secretary of
Transportation shall arrange for the employment of the Department of Transportation's
vessels in steamship lines on such trade routes,
exclusively serving the foreign trade of the
United States, as the Secretary of Transportation shall determine are necessary and essential
for the development and maintenance of the
commerce of the United States and the national defense: Provided, That such needs are not
being adequately served by existing steamship
lines privately owned and operated by citizens
of the United States and documented under the
laws of the United States. It shall be the policy
of the Secretary of Transportation to encourage private operation of each essential steamship line now owned by the United States by
selling such lines to citizens of the United
States in the manner provided in section 866 of
this title, and in strict accordance with the provisions of section 864 of this title, or by demising his vessels on bare-boat charter to citizens
of the United States who shall agree to maintain such line or lines in the manner hereinafter provided. No vessel constructed under the
provisions of this chapter, as amended, shall be
sold by the Secretary of Transportation for operation in the foreign trade for a sum less than
the estimated foreign construction cost exclusive of national defense features (determined as
of the date the construction contract therefor
is executed) less depreciation based on a
twenty-five year life, nor shall any such vessel
be sold by the Secretary of Transportation for
operation in the domestic trade for a sum less
than the cost of construction in the United

Page 372

States exclusive of national defense features
less depreciation based on a twenty-five year
life.
(June 29, 1936, ch. 858, title VII, § 705, 49 Stat.
2009; Aug. 4, 1939, ch. 417, § 11(a), 53 Stat. 1185;
June 12, 1960, Pub. L. 86-518, § 1, 74 Stat. 216;
Aug. 6, 1981, Pub. L. 97-31, § 12(107), 95 Stat.
163.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" in four instances, "the
Department of Transportation's vessels" for "its vessels", and "his vessels" for "its vessels". For prior
transfers of functions of the Commission, meaning the
United States Maritime Commission, see Transfer of
Functions note below.
1960-Pub. L. 86-518 substituted "twenty-five-year
life" for "twenty-year life" In two instances.
1939-Act Aug. 4, 1939, prohibited the sale of any
vessel constructed under this chapter for operation in
the foreign trade for a sum less than the estimated
foreign construction cost exclusive of national defense
features less depreciation based on a 20 year life, nor
for operation in the domestic trade for a sum less than
the cost of construction in the United States exclusive
of national defense features less depreciation based on
a 20 year life.
EFFECTIVE DATE OF 1960 AMENDMENT

Amendment by Pub. L. 86-518 applicable only to vessels delivered by the shipbuilder on or after Jan. 1,
1946, and with respect to such vessels shall become effective on Jan. 1, 1960, and with respect to vessels delivered by the shipbuilder before Jan. 1, 1946, the provisions of this chapter existing immediately before
June 12, 1960, shall continue in effect, see section 8(a)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
RATE OF DEPRECIATION FOR VESSELS DELIVERED BY
SHIPBUILDER ON OR AFTER JANUARY 1, 1946, AND
BEFORE JANUARY 1, 1960

For provisions relating to computation of depreciation with respect to vessels delivered by the shipbuildor on or after Jan. 1, 1946, and before Jan. 1,
1960, see section 8(b) of Pub. L. 86-518, set out as a
note under section 1125 of this title.
REVISION OF
MORTGAGES,

CONTRACTS,
MORTGAGES,

COMMITMENTS To INSURE
AND MORTGAGE INSURANCE

CONTRACTS ENTERED INTO PRIOR TO JUNE 12, 1960
For provisions authorizing revision, see section 8(c)

of Pub. L. 86-518, set out as a note under section 1125
of this title.
COMMERCIAL EXPECTANCY OR PERIOD OF DEPRECIATION
OF TANKERS AND OTHER LIQUID BULK CARRIERS

Nothing in any amendment made by Pub. L. 86-518
to operate or be interpreted to change from 20 to 25
years the provisions of this chapter relating to the

commercial expectancy or period of depreciation of
any tanker or other liquid bulk carrier, see section 9 of
Pub. L. 86-518, set out as a note under section 1125 of
this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section Is referred to in section 1196 of this
title.

TITLE 46-SHIPPING

Page 373

§ 1196. Advertising for bids for charters; rejection
bids

of

(a) The Secretary of Transportation shall not
charter the Department of Transportation's
vessels to private operators except upon competitive sealed bids submitted in strict compliance with all the terms and conditions of a
public advertisement soliciting such bids. Each
and every advertisement for bids to charter the
Department of Transportation's vessels shall
state the number, type, and tonnage of the vessels the Secretary of Transportation is offering
for bare-boat charter for operation as a steamship line on a designated trade route, the minimum number of sallings that will be required,
the length of time for which the charter will be
given, and all other information the Secretary
of Transportation shall deem necessary for the
information of prospective bidders.
(b) The Secretary of Transportation shall
have authority to, and shall announce in his advertisements for bids that the Secretary of
Transportation reserves the right to, reject any
and all bids submitted. The Secretary of Transportation shall reject any bid for the charter
(under sections 1191 to 1203 of this title) of any
vessel constructed under the provisions of this
chapter, as amended, if the charter hire offered
by the bidder is lower than the minimum
charter hire for such vessel would be if chartered under the provisions of section 1204 of
this title.
(June 29, 1936, ch. 858, title VII, § 706, 49 Stat.
2009; Aug. 4, 1939, ch. 417, § 11(b), 53 Stat. 1186;
Aug. 6, 1981, Pub. L. 97-31, § 12(108), 95 Stat.
163,)
AMENDMENTS

1981-Subsec. (a). Pub. L. 97-31, § 12(108)(A) to (C),
substituted "Secretary of Transportation" for "Commission" in three instances, "the Department of
Transportation's vessels" for "its vessels", and "the
Department of Transportation's vessels" for "Commission's vessels". For prior transfers of functions of the
Commission, meaning the United States Maritime
Commission, see Transfer of Functions note below.
Subsec. (b). Pub. L. 97-31, § 12(108)(A), (D), substituted "Secretary of Transportation" for "Commission" in three instances and "his" for "its". For prior
transfers of functions of the Commission, meaning the
United States Maritime Commission, see Transfer of
Functions note below.
1939-Subsec. (b). Act Aug. 4, 1939, required the rejection of any bids for charter if the charter hire offered by the bidder is lower than the minimum
charter hire for such vessel would be if chartered
under the provisions of section 1204 of this title.
TRANSFER OF FUNCTIONS
For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
§ 1197. Awarding charter on bids
(a) Highest bid
The Secretary of Transportation shall award
the charter to the bidder proposing to pay the
highest monthly charter hire unless the Secretary of Transportation shall reject such bid for
the reasons set forth in subsection (b) of this
section.

§ II198

(b) Rejection of highest bid
The Secretary of Transportation may reject
the highest or most advantageous or any other
bid, if, in the Secretary's discretion, the charter
hire offered Is deemed too low, or the Secretary
of Transportation determines that the bidder
lacks sufficient capital, credit, or experience to
operate successfully the line; but the reason or
reasons for rejection of any bid, upon request
of the bidder, shall be stated to such bidder in
writing.
(c) Next highest bid; rejection of all bids and re.
advertisement
If the highest bid is rejected, the Secretary of
Transportation may award the charter to the
next highest bidder, or may reject all bids and
readvertise the line: Provided, however, That
the Secretary of Transportation may operate
the line until conditions appear to be more favorable for a reoffering of the line for private
charter.
(June 29, 1936, ch. 858, title VII, § 707, 49 Stat.
2009; Aug. 6, 1981, Pub. L. 97-31, § 12(109), 95
Stat. 163.)
AMENDMENTS

1981-Subsec. (a). Pub. L. 97-31, § 12(109)(A), substituted "Secretary of Transportation" for "Commission" in two instances. For prior transfers of functions
of the Commission, meaning the United States Maritime Commission, see Transfer of Functions note
below.
Subsec. (b). Pub. L. 97-31, § 12(109), substituted
"Secretary of Transportation" for "Commission" in
two instances and "Secretary's discretion" for "Commission's discretion". For prior transfers of functions
of the Commission, meaning the United States Maritime Commission, see Transfer of Functions note
below.
Subsec. (c). Pub. L. 97-31, § 12(109)(A), substituted
"Secretary of Transportation" for "Commission" in
two instances. For prior transfers of functions of the
Commission, meaning the United States Maritime
Commission, see Transfer of Functions note below.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1196 of this
title.
§ 1198. Payment of subsidies to charterers
The Secretary of Transportation may, if in
his discretion financial aid is deemed necessary,
enter into a contract with any charterer of his
vessels for payment to such charterer of an operating-differential subsidy upon the same
terms and conditions and subject to the same
limitations and restrictions, where applicable,
as are elsewhere provided in this chapter with
respect to payments of such subsidies to operators of privately owned vessels.
(June 29, 1936, ch. 858, title VII, § 708, 49 Stat.
2009; June 23, 1938, ch. 600, § 31, 52 Stat. 962;
Aug. 6, 1981, Pub. L. 97-31, § 12(110), 95 Stat.
163.)

Page 374

TITLE 46-SHIPPING

§1199
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" and "his" for "its" in two
instances. For prior transfers of functions of the Commission, meaning the United States Maritime Commission, see Transfer of Functions note below.
1938-Act June 23, 1938, inserted ", where applicable," preceding "as are elsewhere provided".
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.

§ 1200. Undertaking required of charterer

Every charterer of the Secretary of Transportation's vessels shall be required to deposit with
the Secretary of Transportation an undertaking with approved sureties as security for the
faithful performance of all of the conditions of
the charter, including indemnity against liens
on the chartered vessels, in such amount as the
Secretary of Transportation shall require.
(June 29, 1936, ch. 858, title VII, § 710, 49 Stat.
2010; Aug. 6, 1981, Pub. L. 97-31, § 12(112), 95
Stat. 163.)

SECTION REFERRED TO IN OTHER SECTIONS

AMENDMENTS

This section is referred to in section 1196 of this
title; title 50 App. section 1738.

1981-Pub. L. 97-31 substituted "Secretary of Transportation's vessels" for "Commission's vessels" and
"Secretary of Transportation" for "Commission" in
two places. For prior transfers of functions of the
Commission, meaning the United States Maritime
Commission, see Transfer of Functions note below.

11199. Excess profit; payment to Secretary; formula
for determining profit
(a) Every charter made by the Secretary of
Transportation pursuant to the provisions of
this subchapter shall provide that whenever, at
the end of any calendar year subsequent to the
execution of such charter, the cumulative net
voyage profits (after payment of the charter
hire reserved in the charter and payment of the
charterer's fair and reasonable overhead expenses applicable to operation of the chartered
vessels) shall exceed 10 per centum per annum
on the charterer's capital necessarily employed
in the business of such chartered vessels, the
charterer shall pay over to the Secretary of
Transportation, as additional charter hire, onehalf of such cumulative net voyage profit in
excess of 10 per centum per annum: Provided,
That the cumulative net profit so accounted for
shall not be included in any calculation of cumulative net profit in subsequent years.
(b) Every charter shall contain a definition of
the terms "net voyage profit" and "fair and
reasonable overhead expenses", and "capital
necessarily employed", as said terms are used in
subsection (a) of this section, setting forth the
formula for determining such profit and overhead expense and capital necessarily employed,
which definitions shall have been previously
approved by the Secretary of Transportation
and published in the advertisement for bids for
such charter.
(June 29, 1936, ch. 858, title VII, § 709, 49 Stat.
2010; Aug. 6, 1981, Pub. L. 97-31, § 12(111), 95
Stat. 163.)

TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1196 of this
title; title 50 App. section 1738.
§ 1201. Terms and conditions of charters
The charters to be made by the Secretary of
Transportation pursuant to the provisions of
this subchapter shall demise the vessels to the
charterer subject to all usual conditions contained in bareboat charters, and until January
1, 1940, shall be for terms of three years or less
as the Secretary of Transportation may decide:
Provided, That after January 1, 1940, charters
may be executed by the Secretary of Transportation for such terms as the experience gained

by the Secretary of Transportation shall indicate are to the best interests of the United
States and the merchant marine.
(June 29, 1936, ch. 858, title VII, § 711, 49 Stat.
2010; Aug. 6. 1981, Pub. L. 97-31, § 12(113), 95

Stat. 163.)
AMENDMENTS

AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" in four instances. For
prior transfers of functions of the Commission, meaning the United States Maritime Commission, see
Transfer of Functions note below.

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" in two instances in
subsec. (a) and once in subsec. (b). For prior transfers
of functions of the Commission, meaning the United
States Maritime Commission, see Transfer of Functions note below.

TRANSFER OF FUNCTIONS
For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.

TRANSFER OF FUNCTIONS
For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1196, 1205 of
this title; title 50 App. section 1738.

SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 1196 of this
title.
§ 1202. Insurance requirements; repairs; inspection by
Secretary; termination of charter in national
emergency
Every charter shall provide-

TITLE 46-SHIPPING

Page 375

(a) That the charterer shall carry on the
chartered vessels, at his own expense, policies
of insurance covering all marine and port risks,
protection and indemnity risks, and all other
hazards and liabilities, in such amounts, in such
form, and in such insurance companies as the
Secretary of Transportation shall require and
approve, adequate to cover all damages claimed
against and losses sustained by the chartered
vessels arising during the life of the charter:
Provided, That in accordance with existing law,
some or all of such insurance risks may be underwritten by the Secretary of Transportation
himself as in his discretion he may determine.
(b) That the charterer shall at its own expense keep the chartered vessel in good taste of
repair and in efficient operating condition and
shall at its own expense make any and all repairs as may be required by the Secretary of
Transportation.
(c) That the Secretary of Transportation
shall have the right to inspect the vessel at any
and all times to ascertain its condition.
(d) That whenever the President shall proclaim that the security of the national defense
makes it advisable, or during any national
emergency declared by proclamation of the
President, the Secretary of Transportation may
terminate the charter without cost to the
United States, upon such notice to the charterers as the President shall determine.
(June 29, 1936, ch. 858, title VII, § 712, 49 Stat.
2010; Aug. 7, 1939, ch. 555, § 1, 53 Stat. 1254;
Aug. 6, 1981, Pub. L. 97-31, § 12(114), 95 Stat.
163.)
AMENDMENTS

1981-Subsec. (a). Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" in two instances, and "himself", "his", and "he" for "itself",
"its", and "it", respectively. For prior transfers of
functions of the Commission, meaning the United
States Maritime Commission, see Transfer of Functions note below.
Subsecs. (b) to (d). Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission". For prior
transfers of functions of the Commission, meaning the
United States Maritime Commission, see Transfer of
Functions note below.
1939-Subsec. (d). Act Aug. 7, 1939 permitted the termination of a charter whenever the President proclaims that the security of the national defense makes
It advisable.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No, 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
TERMINATION OF WAR AND EMERGENCIES

Act July 25, 1947, ch. 327, § 3, 61 Stat. 451, provided
that in the interpretation of subsec. (d) of this section,
the date July 25, 1947, shall be deemed to be the date
of termination of any state of war theretofore declared by Congress and of the national emergencies
proclaimed by the President on Sept. 8, 1939, and May
27, 1941.
CROSS REFERENCES

War risk insurance, see section 1281 et seq. of this
title.

§1204

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1196 of this
title; title 50 App. section 1738.
d 1203. Financial resources and other factors consid.
ered in awarding charters
In the awarding of charters, the Secretary of
Transportation shall take in consideration the
charterer's financial resources and credit standing, practical experience in the operation of
vessels, and any other factors that would be
considered by a prudent businessman in entering into a transaction involving a large investment of his capital', and the Secretary of Trans.
portation is directed to refrain from chartering
the Department of Transportation's vessels to
any person appearing to lack sufficient capital,
credit, and experience to operate successfully
the vessel over the period covered by the
charter.
(June 29, 1936, ch. 858, title VII, § 713, 49 Stat.
2010; Aug. 6, 1981, Pub. L. 97-31, § 12(115), 95
Stat. 164.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Trans-

portation" for "Commission" in two instances and
"the Department of Transportation's vessels" for "its
vessels". For prior transfers of functions of the Commission, meaning the United States Maritime Commission, see Transfer of Functions note below.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1196 of this
title; title 50 App. section 1738.
§ 1204. Construction and chartering of vessels for unsuccessful routes; purchase of vessel by charterer;
purchase price; operation of vessel in foreign
trade
If the Secretary of Transportation shall find
that any trade route (determined by the Secretary of Transportation to be an essential trade
route as provided in section 1121 of this title)
cannot be successfully developed and maintained and the Secretary of Transportation's
replacement program cannot be achieved under
private operation of such trade route by a citizen of the United States with vessels registered
under the laws thereof, without further Government aid in addition to the financial aids authorized under subchapters V and VI of this
chapter, the Secretary of Transportation is authorized to have constructed, in private shipyards or in navy yards, the vessel or vessels of
the types deemed necessary for such trade
route, and to demise such new vessel or vessels,
or bare-boat charter to the American-flag operator established on such trade route, without
advertisement or competition, upon an annual
charter hire of not less than 4 per centum of
the price (herein referred to as the "foreign
cost") at which such vessel or vessels would be
sold if constructed under subchapter V of this

§l120,1

TITLE 46-SHIPPING

chapter plus an amount equal to (I) the sum of
a percentage of the depreciated foreign cost
computed annually upon the basis of a twentyfive year life of the vessel determined by the
Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the United
States with remaining periods to maturity comparable to the term of the charter, adjusted to
the nearest one-eighth of 1 per centum, plus (ii)
an allowance adequate in the judgment of the
Secretary of Transportation to cover administrative costs. Such charter may contain an
option to the charterer to purchase such vessel
or vessels from the Secretary of Transportation
within five years after delivery thereof under
the charter, upon the same terms and conditions as are provided in subchapter V of this
chapter for the purchase of new vessels from
the Secretary of Transportation, except that
(a) the purchase price shall be the foreign cost
less depreciation to the date of purchase based
upon a twenty-five year life; (b) the required
cash payment payable at the time of such purchase shall be 25 per centum of the purchase
price as so determined; (c) the charter may provide that all or any part of the charter hire
paid in excess of the minimum charter hire provided for in this section may be credited against
the cash payment payable at the time of such
purchase; (d) the balance of the purchase price
shall be paid within the years remaining of the
twenty-five years after the date of delivery of
the vessel under the charter and in approximately equal annual installments, except that
the first of said installments, which shall be
payable upon the next ensuing anniversary
date of such delivery under the charter, shall
be a proportionate part of the annual installment, interest to be payable upon the unpaid
balances from the date of purchase, at a rate
not less than (i) 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
with remaining periods to maturity comparable
to the average maturities of such loans, adjusted to the nearest one-eighth of 1 per centum,
plus (i) an allowance adequate in the judgment
of the Secretary of rransportation to cover administrative costs.
Such charter shall provide for operation of
the vessel exclusively in foreign trade, or on a
round-the-world voyage, or on a round voyage
from the west coast of the United States to a
European port or ports which includes intercoastal ports of the United States, or a round
voyage from the Atlantic coast of the United
States to the Orient which includes intercoastal
ports of the United States, or on a voyage in
foreign trade on which the vessel may stop at
the State of Hawaii, or an island possession or
island Territory of the United States, and if the
vessel is operated in the domestic trade on any
of the above-enumerated services the charterer
will pay annually to the Secretary of Transportation that proportion of one-twenty-fifth of
the difference between the domestic and foreign cost of such vessel as the gross revenue derived from the domestic trade bears to the gross
revenue derived from the entire voyages completed during the preceding year.

Page 376

(June 29, 1936, ch. 858, title VII, § 714, 49 Stat.
2011; June 23, 1938, ch. 600, § 32, 52 Stat. 962;
Aug. 4, 1939, ch. 417, § 12, 53 Stat. 1186; Mar.
18, 1959, Pub. L. 86-3, § 18(b)(3), 73 Stat. 12;
June 12, 1960, Pub. L. 86-518, § 5, 74 Stat. 216;
Oct. 21, 1970, Pub. L. 91-469, § 22, 84 Stat. 1032;
Aug. 6, 1981, Pub. L. 97-31, § 12(116), 95 Stat.
164.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce" and "Secretary of Transportation's" for "Secretary of Commerce s".
1970-Pub. L. 91-469 substituted: "Secretary of Commerce" and "Secretary of Commerce's" for "Commis.
sion" and "Commission's" wherever appeaiing; provision for an additional amount for charter hire equal to
sum of depreciated foreign cost computed annually
upon basis of a twenty-five year life of vessel determined by the Secretary of the Treasury, taking into
consideration the current average market yield or outstanding marketable obligations of the United States
with remaining periods to maturity comparable to the
term of the charter, adjusted to the nearest oneeighth of 1 per centum plus an administrative cost allowance for prior provision for 3X per centum of depreciated foreign cost computed annually upon the
basis of a twenty-five year life of vessel; and provision
for interest upon unpaid balances of purchase price
payable in annual installments from date of purchase,
at a rate not less than 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 with remaining
periods to maturity comparable to the average maturities of such loans, adjusted to the nearest one-eighth
of 1 per centum plus an administrative cost allowance
.or prior interest upon unpaid balances of 31 per
centum per annum from date of purchase.
1960-Pub. L. 86-518 substituted "4 per centum" for
"5 per centum", "twenty-five-year life" for "twentyyear life" in two instances, "twenty-five years" for
"twenty years", and "one-twenty-fifth" for "one-twentieth".
1959-Pub. L. 86-3 included stops at the State of
Hawaii for vessels operated on voyages in foreign
trade,
1939-Act Aug. 4, 1939, amended section generally,
and among other changes, substituted "price (herein
referred to as the 'foreign cost') at which such vessel
or vessels would be sold if constructed under sections
1151-1161 of this title plus 3X per centum of the depreciated foreign cost computed annually upon the
basis of a twenty-year life of the vessel" for "construction cost of such new vessel or vessels", and added the
second paragraph relating to mixed foreign and domestic trade.
1938-Act June 23, 1938, required the charter to contain an agreement of the purchaser to pay interest at
the rate of 3X per centum per annum upon all unpaid
portions of the purchase price from the date of the delivery of the vessel to the purchaser under the charter
agreement, and provided that if the option to purchase is exercised, the deferrt'd payments shall not be
extended beyond the life of the vessel computed on a
20 year expectancy.
1960 AMENDMENT
Amendment by Pub. L. 86-518 applicable only to vessels delivered by the shipbuilder on or after Jan. 1,
1946, and with respect to such vessels shall become effective on Jan. 1, 1960, and with respect to vessels delivered by the shipbuilder before Jan. 1, 1946, the provisions of this chapter existing immediately before
June 12, 1960, shall continue in effect, see section 8(a)
EFFECTIVE DATE OF

Page 377

TITLE 46-SHIPPING

of Pub. L. 86-518, set out as a note under section 1125
of this title.
RATE OF DEPRECIATION FOR VESSELS DELIVERED BY
SHIPBUILDER ON OR AFTER JANUARY 1. 1946, AND
BEFORE JANUARY 1, 1960

For provisions relating to computation of depreciation with respect to vessels delivered by the shipbuilder on or after Jan. 1, 1946, and before Jan. 1,
1960, see section 8(b) of Pub. L. 86-518, set out as a
note under section 1125 of this title.
REVISION OF CONTRACTS, COMMITMENTS To INSURE
MORTGAGES, MORTGAGES, AND MORTGAGE INSURANCE
CONTRACTS ENTERED INTO PRIOR TO JUNE 12, 1960

For provisions authorizing revision, see section 8(c)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
COMMERCIAL EXPECTANCY OR PERIOD OF DEPRECIATION
OF TANKERS AND OTHER LIQUID BULK CARRIERS

Nothing in any amendment made by Pub. L. 86-518
to operate or be interpreted to change from 20 to 25
years the provisions of this chapter relating to the
commercial expectancy or period of depreciation of
any tanker or other liquid bulk carrier, see section 9 of
Pub. L. 86-518, set out as a note under section 1125 of
this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1160, 1196 of
this title.
§ 1205. Experimental operation and testing of United
States vessels; number; bareboat charters; review
of charters and agency agreements; provisions
applicable to charters and agreements
The Secretary of Transportation, for the purpose of practical development, trial, and testing, is authorized without regard to other provisions of this subchapter or other laws relating
to chartering and general agency operations, to
operate, under general agency agreements, or
bareboat charter, vessels owned by the United
States (including any national defense reserve
vessel) which have been constructed, reconditioned, or remodeled for experimental or testing purposes, in the foreign or domestic trade
of the United States or for use for the account
of any agency or department of the United
States, under such reasonable terms or conditions as the Secretary of Transportation determines to be necessary to carry out the objects
of this chapter: Provided, however, That not in
excess of ten such vessels shall be operated and
tested under the authority of this section in
any one year. Bareboat charters entered into
under this section shall be made at reasonable
rates of charter and shall include such restrictions and conditions as the Secretary of Transportation determines to be necessary or appropriate to protect the public interest, including
provisions for recapture of profits as provided
for in section 1199 of this title. Charters and
general agency agreements entered into under
this section shall be reviewed annually for the
purpose of determining whether conditions
exist which would justify continuance of the
charter or agreement. Those provisions of law
prescribed or incorporated under section 1241a
of this title, which relate to vessel operating activities of the Secretary of Transportation and
to employment of seamen through general

§ 1206

agents, shall be applicable in connection with
charters and agreements entered into under
this section.
(June 29, 1936, ch. 858, title VII, § 715, as added
July 11, 1956, ch. 574, 70 Stat. 531, and amended Aug. 6, 1981, Pub. L. 97-31, § 12(117), 95 Stat.
164.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Trans.
portation" for "Secretary of Commerce" wherever appearing.

§ 1206. Construction of nuclear-powered merchant
ship; appropriations; special services; cooperation
with other Federal agencies
There is authorized to be appropriated to the
Department of Transportation, Maritime Administration, and the Atomic Energy Commission, such sums as may be necessary, to remain
available until expended, for the construction,
outfitting, and preparation for operation, including training of qualified personnel, of a nuclear-powered merchant ship capable of providing shipping services on routes essential for
maintaining the flow of the foreign commerce
of the United States. The Maritime Administration, and the Atomic Energy Commission, in
carrying on activities and functions under this
section, may collaborate with and employ persons, firms, and corporations on a contract or
fee basis for the performance of special services
deemed necessary by such agencies in carrying
on such activities and functions. The Administration may, for the same purposes, with the
approval of the Secretary of Transportation
and where appropriate (,he Atomic Energy
Commission, avail itself of the use of licenses,
information, services, facilities, offices, and employees of any executive department, independent establishment, or other agency of the Government, including any field service thereof.
(June 29, 1936, ch. 858, title VII, § 716, as added
July 30, 1956, ch. 792, 70 Stat. 731, and amended Aug. 6, 1981, Pub. L. 97-31, § 12(118), 95 Stat.
164.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Department of
Transportation" for "Department of Commerce" and
"Secretary of Transportation" for "Secretary of Commerce".
TRANSFER OF FUNCTIONS

The Atomic Energy Commission was abolished and
all functions were transferred to the Administrator of
the Energy Research and Development Administration (unless otherwise specifically provided) by section
5814 of Title 42, The Public Health and Welfare. The
Energy Research and Development Administration
was terminated and functions vested by law in the Administrator thereof were transfelred to the Secretary
of Energy (unless otherwise specifically provided) by
sections 7151(a) and 7293 of Title 42.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in title 42 section 2210.

TITLE 46-SHIPPING

111211

SUBCHAPTER VIII-CONTRACT
PROVISIONS
9 1211. Provision for books and records; filing halsince sheets; inspection and auditing by Secretary; rescission of contract on failure to comply
with provisions
Every contract executed by the Secretary of
Transportation under the provisions of subchapters VI or VII of this chapter shall contain
provisions requiring (1) that, the contractor
and every affiliate, domestic agent, subsidiary,
or holding company connected with, or directly
or indirectly controlling or controlled by, the
contractor, to keep its books, records, and accounts, relating to the maintenance, operation,
and servicing of the vessels, services, routes,
and lines covered by the contract, in such form
and under such regulations as may be prescribed by the Secretary of Transportation:
Provided, That the provisions of this paragraph
shall not require the duplication of books, records, and accounts required to be kept in some
other form by the Interstate Commerce Commission; (2) that the contractor and every affiliate, domestic agent, subsidiary, or holding company connected with, or directly or indirectly
controlling or controlled by, the contractor, to
file, upon notice from the Secretary of Transportation, balance sheets, profit and loss statements, and such other statements of financial
operations, special report, memoranda of any
facts and transactions, which in the opinion of
the Secretary of Transportation affect the financial results in, the performance of, or transactions or operations under, such contract; (3)
that the Secretary of Transportation shall be
authorized to examine and audit the books, records, and accounts of all persons referred to in
this section whenever he may deem it necessary
or desirable; and (4) that upon the willful failure or refusal of any person described in this
section to comply with the contract provisions
required by this section, the Secretary of
Transportation shall have the right to rescind
the contract, and upon such rescission, the
United States shall be relieved of all further liability on such contract.
(June 29, 1936, ch. 858, title VIII, § 801, 49 Stat.
2011; Aug. 6, 1981, Pub. L. 97-31, § 12(119), 95
Stat. 164.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" in six instances and in cl.
(3) "he may deem" for "it may deem". For prior transfers of functions of the Commission, meaning the
United States Maritime Commission, see Transfer of
Functions note below.

Page 378

In the event the United States shall, through
purchase or requisition, acquire ownership of
the vessel or vessels on which a constructiondifferential subsidy was paid, the owner shall
be paid therefor the value thereof, but in no
event shall such payment exceed the actual depreciated construction cost thereof (together
with the actual depreciated cost of capital improvements thereon, but excluding the cost of
national-defense features) less the depreciated
amount of construction-differential subsidy
theretofore paid incident to the construction or
reconditioning of such vessel or vessels, or the
fair and reasonable scrap value of such vessel as
determined by the Secretary of Transportation,
whichever is the greater. Such determination
shall be final. In computing the depreciated
value of such vessel, depreciation shall be computed on each vessel on the schedule adopted
by the Internal Revenue Service for income-tax
purposes.
The foregoing provision respecting the requisition or the acquisition of ownership by the
United States shall run with the title to such
vessel or vessels and be binding on all owners
thereof.
(June 29, 1936, ch. 858, title VIII, § 802, 49 Stat.
2011; June 23, 1938, ch. 600, § 33, 52 Stat. 962;
Aug. 7, 1939, ch. 555, § 2, 53 Stat. 1254; Aug. 6,
1981, Pub. L. 97-31, § 12(120), 95 Stat. 164.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" in two instances. For
prior transfers of functions of the Commission, meaning the United States Maritime Commission, see
Transfer of Functions note below.
1939-Act Aug. 7, 1939, eliminated words "fair
actual" in first sentence which followed "owner shall
be paid therefor the".
1938-Act June 23, 1938, inserted ", or the fair and
reasonable scrap value of such vessel as determined by
the Commission, whichever is the greater. Such determination shall be final." at the end of the first sentence, and the word "depreciated" following "In computing the" in the second sentence.
CHANGE OF NAME

The official title of the Bureau of Internal Revenue
was changed to the Internal Revenue Service by
Treas. Dept. Order 150-29, eff. July 9, 1953.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1241a, 1242 of
this title.

TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.

§ 1213. Contracts designed equitably for all ports;
minimum allocation of funds; report to Congress;
preference to citizens of United States; regional
offices for Maritime Administration

§ 1212. Purchase or requisition of vessels by United
States; amount of payment

(a) Contracts under this chapter shall be entered into so as to equitably serve, insofar as
possible, the foreign-trade requirements of the
Atlantic, Gulf, Great Lakes, and Pacific ports
of the United States. In order to assure equitable treatment for each range of ports referred

Every contract executed by the Secretary of
Transportation under authority of subchapter
V of this chapter shall provide that-

TITLE 46-SHIPPING

Page 379

to in the preceding sentence, not less than 10
percent of the funds appropriated for construction-differential subsidy and operating-differential subsidy pursuant to this chapter or any law
authorizing funds for the purposes of this
chapter shall be allocated to each such port
range: Provided, however, That such allocation
shall apply to the extent that subsidy contracts
are approved by the Secretary of Transportation. For the purposes of this section and section 1121(a) of this title, the Secretary shall establish trade routes, services, or lines that take
into account the seasonal closure of the Saint
Lawrence Seaway and provide for alternate
routing of ships via a different range of ports
during that closure so as to maintain continuity
of service on a year-round basis, For the purposes of section 1175(c) of this title, such an alternate routing via a different range of ports
shall be deemed to be service from Great Lakes
ports, provided such alternative routing is
based upon receipt or delivery of cargo at Great
Lakes-Saint Lawrence Seaway ports under
through intermodal bills of lading. The Secretary shall include in the annual report pursuant to section 1118 of this title a detailed report
(1) describing the actions that have been taken
pursuant to this chapter to assure insofar as
possible that direct and adequate service is provided by United States-flag commercial vessels
to each range of ports referred to in this section; and (2) including any recommendations
for additional legislation that may be necessary
to achieve the purpose of this section. In
awarding contracts under this chapter, preference shall be given to persons who are citizens
of the United States and who have the support,
financial and otherwise, of the domestic communities primarily interested.
(b) There shall be established and maintained
within the Maritime Administration such regional offices as may be necessary, including,
but not limited to, one such office for each of
the four port ranges specified in subsection (a)
of this section. The Secretary of Transportation shall appoint a qualified individual to be
the Director of each such regional office and
shall carry out appropriate functions, activities,
and programs of the Maritime Administration
through such regional offices.
(June 29, 1936, oh. 858, title VIII, § 809, 49 Stat.
2015; Oct. 21, 1970, Pub. L. 91-469, § 26(a), 84
Stat. 1034; Mar. 23, 1975, Pub. L. 94-10, § 3, 89
Stat. 16; Nov. 13, 1975, Pub. L. 94-127, § 4, 89
Stat. 680; Oct. 19, 1980, Pub. L. 96-470, title II,
§ 201(a), 94 Stat. 2241; Aug. 6, 1981, Pub. L.
97-31, § 12(121), 95 Stat. 164; Aug. 13, 1981,
Pub. L. 97-35, title XVI, § 1604, 95 Stat. 751.)
AMENDMENTS

1981-Subsec. (a). Pub. L. 97-35 added provisions respecting the establishment of trade routes, services or
lines taking into consideration the seasonal closure of
the Saint Lawrence Seaway, and alternate routing of
ships.
Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce".
Subsec. (b). Pub. L. 97-31 substituted "Secretary of
Transportation" for "Secretary of Commerce".
1980-Subsec. (a). Pub. L. 96-470 substituted "The
Secretary shall include in the annual report pursuant
to section 1118 of this title" for "Not later than March

§1222

1,1976, and annually thereafter, the Secretary shall
submit to Congress".
1975-Subsec. (a). Pub. L. 94-127 required minimum
allocation of funds for each range of ports and submission of an annual report to Congress.
Pub. L. 94-10 designated existing provisions as
subsec. (a) and added subsec. (b).
1970-Pub. L. 91-469 included ports on the Great
Lakes.
§ 1214. Omitted
CODIFICATION

Section, act Feb. 6, 1941, ch. 5,§ 3.55 Stat. 0,which
authorized the United States Maritime Commission to
enter into contracts for the purpose of carrying out
this chapter, was omitted in view of the abolition of
the United States Maritime Commission by section 306
of Reorg. Plan No. 21 of 1950, eff. May 24, 1950, 15
F.R. 3178, 64 Stat. 1273, set out under section 1111 of
this title.
ANNUAL APPRoPRIATIONS

Aug. 25, 1937, ch. 757, title I, § 101, 50 Stat. 759$115,000,000.
Mar. 16, 1939, ch. 11, § 1, 53 Stat. 543-$230,000,000.
June 27, 1940, ch. 437, title I, § 101, 54 Stat. 634$50,000,000.
Feb. 6. 1941, ch. 5. §3.55 Stat. 6-$65,000,000.
Apr. 5,1941, ch. 40, 1 1, 55 Stat. 119-$180,000,000.
Aug. 25, 1941, ch. 409, title III,§ 301, 55 Stat. 682$1,296,650,000.
June 27. 1942, ch. 450, § 1,56 Stat. 419-$90,000,000.
SUBCHAPTER VIII-A-OFFENSES AND
PENALTIES
A1221. Repealed. Pub. L. 91-469, § 23, Oct. 21, 1970, 84
Stat. 1033
Section, acts June 29, 1936, ch. 858, title VIII, §803,
49 Stat. 2012; June 23, 1938, ch. 600, §34, 52 Stat. 963,
restricted employment of persons, concerns, etc. (in
which contractor or charterer is financially interested)
furnishing supplies and services to operator's subsidized or chartered vessel and exemption therefrom
where enforcement is unnecessary and agreement provides for accounting and payment of all profits to contractor, etc.
§ 1222. Operating competing foreign-flag vessel forbidden
(a) Operating-differential subsidy; competition with
essential American-flag service
Except as provided in subsections (b) and (c)
of this section, it shall be unlawful for any contractor receiving an operating-differential subsidy under subchapter VI of this chapter or for
any charterer of vessels under subchapter VII
of this chapter, or any holding company, subsidiary, affiliate, or associate of such contractor
or such charterer, or any officer, director,
agent, or executive thereof, directly or indirectly to own, charter, act as agent or broker for, or
operate any foreign-flag vessel which competes
with any American-flag service determined by
the Secretary of Transportation to be essential
as provided in section 1121 of this title.
(b)Waiver; special circumstances
Under special circumstances and for good
cause shown, the Secretary of Transportation
may, in his discretion, waive the provisions of
subsection (a) of this section as to any contractor, for a specific period of time.

§ 122'1

TITLE 46-SHIPPING

(c) Exceptions
Upon application to the Secretary of Transportation the provisions of subsection (a) of
this section shall not apply to the following
specified activities of any contractor under subchapter VI of this chapter, or those in the foregoing specified relationship to him, who was
not such a contractor on April 15, 1970, and
who shall have complied with the requirement
set forth in subsection (d) of this section:
(1) Until April 15, 1990(A) the continued ownership, charter, or
operation of a foreign-flag vessel engaged in
the carriage of dry or liquid cargoes in bulk
which was owned, chartered, or operated by
such contractor, or those in the foregoing
specified relationship to him, on April 15,
1970;
(B) the continued acting as agent or
broker for a vessel described in subsection
(c)(1)(A) of this section which is owned,
chartered, or operated by such contractor,
or those in the foregoing specified relationship to him, and for which such contractor,
or those in the foregoing specified relationship to him, were acting as agent or broker
on April 15, 1970;
(2) Until April 15, 1972, the continued
acting as agent or broker for a foreign-flag
vessel engaged in the carriage of dry or liquid
cargoes in bulk (other than one described in
subsection (c)(1)(A)), for which the contractor, or those In the foregoing specified relationship to him, were acting as agent or
broker on April 15, 1970.
(d) Statement to be filed with Secretary
No contractor under subchapter VI of this
chapter, whether he shall have become such a
contractor before or after October 21, 1970,
shall avail himself of the provisions of subsection (c) of this section unless not later than
ninety days after October 21, 1970, there shall
have been filed with the Secretary of Transportation a full and complete statement, satisfactory in form and substance to the Secretary, of
all foreign-flag vessels which he, or those in the
foregoing specified relationship to him, directly
or indirectly owned, chartered, acted as agent
or broker for, or operated on April 15, 1970.
(e) Report to Congress
During the period of time provided for in subsection (c) of this section, the Secretary of
Transportation shall include in the annual
report pursuant to section 1118 of this title, a
report on the activities of contractors under
such subsection, including but not limited to,
the nature and extent of such activities; its
effect, if any, upon carrying forward the national policy declared in section 1101 of this
title; and the Secretary's recommendations for
legislation, if such is deemed to be necessary.
(June 29, 1936, ch. 858, title VIII, § 804, 49 Stat.
2012; June 23, 1938, ch. 600, § 35, 52 Stat. 963;
Oct. 21, 1970, Pub. L. 91-469, § 24, 84 Stat. 1033;
Oct. 19, 1980, Pub, L. 96-470, title II, § 201(b),
94 Stat. 2241; Aug. 6, 1981, Pub. L. 97-31,
§ 12(121), 95 Stat. 164.)

Page 380
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "S cretary of Commerce" wherever appearing.
1980-Subsec. (e). Pub. L. 96-470 substituted "shall
include in the annual report pursuant to section 1118
of this title, a report" for "shall, at the beginning of
each regular session, make a report to the Congress".
1970-Subsecs. (a) to (d). Pub. L. 91-469 designated
existing provisions as subsecs. (a) and (b) and added
subsecs. (c)to (e).
1938-Act June 23, 1938, inserted words "for a specific period of time" following "contractor,".
§ 1223. Forbidden practices relating to coastwise service, salaries, officers, and employees
(a) Foreign trade subsidy contractor engaging in
coastwise or intercoastal trade
It shall be unlawful to award or pay any subsidy to any contractor under authority of subchapter VI of this chapter, or to charter any
vessel to any person under subchapter VII of
this chapter if said contractor or charterer, or
any holding company, subsidiary, affiliate, or
associate of such contractor or chartarer, or
any officer, director, agent, or executive thereof, directly or indirectly, shall own, operate, or
charter any vessel or vessels engaged in the domestic intercoastal or coastwise service, or own
any pecuniary interest, directly or indirectly, in
any person or concern that owns, charters, or
operates any vessel or vessels in the domestic
intercoastal or coastwise service, without the
written permission of the Secretary of Transportation. Every person, firm, or corporation
having any interest in such application shall be
permitted to intervene and the Secretary of
Transportation shall give a hearing to the applicant and the intervenors. The Secretary of
Transportation shall not grant any such application if the Secretary of Transportation finds
it will result in unfair competition to any
person, firm, or corporation operating exclusively in the coastwise or intercoastal service or
that it would be prejudicial to the objects and
policy of this chapter: Provided, That if such
contractor or other person above-described or a
predecessor in interest was in bona-fide operation as a common carrier by water in the domestic, intercoastal, or coastwise trade in 1935
over the route or routes or in the trade or
trades for which application is made and has so
operated since that time or if engaged in fur.
nishing seasonal service only, was in bona-fide
operation in 1935 during the season ordinarily
covered by its operation, except in either event,
as to interruptions of service over which the applicant or its predecessor in interest had no
control, the Secretary of Transportation shall
grant such permission without requiring further proof that public interest and convenience
will be served by such operation, and without
further proceedings as to the competition in
such route or trade.
If such application be allowed, it shall be unlawful for any of the persons mentioned in this
section to divert, directly or indirectly, any
moneys, property, or other thing of value, used
in foreign-trade operations, for which a subsidy
is paid by the United States, into any such

TITLE 46-SHIPPING

Page 381

coastwise or intercoastal operations; and whosoever shall violate this provision shall be guilty
of a misdemeanor.
(b) Contractor in default paying more than specified
salary

Whenever any contractor under subchapters
VI or VII of this chapter receiving an operating-differential subsidy is in default with respect to any mortgage, note, purchase contract,
or other obligation to the Secretary of Transportation, or has not maintained, in a manner
satisfactory to the Secretary of Transportation,
all of the reserves provided for in this chapter,
the Secretary of Transportation shall have the
right to supervise the number and compensation of all officers and employees of the contractor.
(c) Repealed. Pub. L. 91-469, § 25, Oct. 21, 1970, 84

Stat. 1034
(d) Employing other persons or concerns as managing or operating agent

It shall be unlawful, without express written
consent of the Secretary of Transportation, for
any contractor holding a contract authorized
under subchapters VI or VII of this chapter to
employ any other person or concern as the
managing or operating agent of such operator,
or to charter any vessel, on which an operatingdifferential subsidy is to be paid, for operation
by another person or concern, and if such
charter is made, the person or concern operating the chartered vessel or vessels shall be subject to all the terms and provisions of this chapter, including limitations of profits and salaries.
(e) Employing Member of Congress
It shall be unlawful for any contractor or
charterer who holds any contract made under
authority of any provision in this chapter to
employ any Member of Congress, either with or
without compensation, as an attorney, agent,
officer, or director of such person.
(f) Penalty

Any willful violation of any provision of this
section shall constitute a breach of the contract
or charter in force under this chapter, and
upon determining that such a violation has occurred the Secretary of Transportation may
forthwith declare such contract or charter rescinded and any person willfully violating the
provisions of this section shall be guilty of a
misdemeanor.
(June 29, 1936, ch. 858, title VIII, § 805, 49 Stat.
2012; June 23, 1938, ch. 600, §§ 36, 37, 52 Stat.
963; July 17, 1952, ch. 939, § 20, 66 Stat. 765;
Oct. 21, 1970, Pub. L. 91-469, § 25, 84 Stat. 1034;
Dec. 31, 1970, Pub. L. 91-603, § 4(e), 84 Stat.
1675; Aug. 6, 1981, Pub. L. 97-31, § 12(122), 95
Stat. 164.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" wherever appearing. For
prior transfers of functions of the Commission, meaning the United States Maritime Commission, see
Transfer of Functions note below.
1970-Subsec. (c). Pub. L. 91-469 struck out restric.
tion against taking into account for subsidy accounting purposes any salary for personal services in excess

§ 1224

of $25,000 paid by the contractor and definition of
terms 1'ilirector", "officer", "employee", and "salary".
Subsec. (d). Pub. L. 91-603 eliminated provisions
which prohibited a contractor from receiving an oper.
ating-differential subsidy for the operation of any
chartered vessel save and except during a period of
actual emergency determined by the Secretary, or
except as provided in section 1198 of this title.
1952-Subsec. (c). Act July 17, 1952, removed limitation of amount of salaries paid to employers, and de.
fined director, officer, or employee.
1938-Subsec. (d). Act June 23, 1938. substituted
"contractor. (c) No director" for "contractor (c) no director", and inserted "or except as provided in section
1198 of this title".
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1183 of this
title.
§ 1224. Collusion with respect to bidding
Whoever shall consult with, or enter into an
agreement with, or inform any other bidder, or
officer, director, executive, agent, or employee
of any such other bidder, as to the amount, the
terms, or the conditions of any bid submitted to
the Commission or the Secretary of Transportation prior to the public opening of such bids,
or enter into any combination, understanding,

agreement, or arrangement whatsoever, to prevent the making of any bona-fide bid for any
contract or charter under this chapter, to
induce any other person not to bid for any such
contract or charter, or to deprive the United
States in any way of the benefit of full, free,
and secret competition in the awarding of any
such contract or charter shall be guilty of a
misdemeanor: Provided, That this section shall
also apply to bidding for contracts under the
provisions of section 1154 of this title.

(June 29, 1936, ch. 858, title VIII, § 806(a), 49
Stat. 2014; Aug. 6, 1981, Pub. L. 97-31, § 12(123),
95 Stat. 164.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Commission or the
Secretary of Transportation" for "Commission". For
prior transfers of functions of the Commission, meaning the United States Maritime Commission, see
Transfer of Functions note below.
CODIFICATION

Section Is comprised of subsec. (a) of section 806 of
act June 29, 1936. Subsecs. (b) to (d) of section 806 are
classified to section 1228 of this title.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.

Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1228 of this
title.

TITLE 46-SHIPPING

11225

§ 1225. Employment of persons to appear before Con.
gress or governmental agency; filing statement of

employment

It shall be unlawful for any person employed
or retained by any shipbuilder or ship operator
holding or applying for a contract under the
provisions of this chapter, or employed or retained by any subsidiary, affiliate, associate, or
holding company of such shipbuilder or ship
operator, to present, advocate, or oppose any
matter within the scope of the Shipping Act,
1916, as amended (46 U.S.C. 801 et seq.], the
Merchant Marine Act, 1920, as amended [46
U.S.C. 861 et seq. and 911 et seq.], the Merchant Marine Act, 1928, as amended [46 U.S.C.
891 et seq.], the Intercoastal Shipping Act, 1933
[46 U.S.C. 843 et seq.], or this chapter, before
the Congress or any committee thereof, or
before the Commission or the Secretary of
Transportation, unless such shipbuilder or ship
operator shall have previously filed with the
Secretary of Transportation in such form and
detail as the Secretary of Transportation shall
by rules and regulations or order prescribe as
necessary or appropriate in the public interest,
a statement of the subject matter in respect of
which such person is retained or employed, the
nature and character of such retainer or employment, and the amount of compensation received or to be received by such person, directly
or indirectly, in connection therewith. It shall
be the duty of every such person so employed
or retained to file with the Secretary of Transportation within thirty days after the close of
each calendar month during such retainer or
employment, in such form and detail as the
Secretary of Transportation shall by rules and
regulations or order prescribe as necessary or
appropriate in the public interest, a statement
of the expenses incurred and the compensation
received by such person during such month in
connection with such retainer or employment.
Whosoever shall violate this provision shall be
guilty of a misdemeanor.
(June 29, 1936, ch. 858, title VIII, § 807, 49 Stat.
2014; June 23, 1938, ch. 600, § 38, 52 Stat. 963;
Aug. 6, 1981, Pub. L. 97-31, § 12(124), 95 Stat.
164.)
REFERENCES IN TEXT

The Shipping Act. 1916, as amended, referred to in
text, is act Sept. 7, 1916, ch. 451, 39 Stat. 728, as
amended, which is classified principally to chapter 23
(1 801 et seq.) of this title. For complete classification
of this Act to the Code, see section 842 of this title and
Tables.
The Merchant Marine Act, 1920, referred to in text,

is act June 5, 1920, ch. 250, 41 Stat. 988, as amended,
which is classified generally to chapters 24 (1 861 et
seq.) and 25 (Q 911 et seq.) of this title. For complete
classification of this Act to the Code, see References
in Text note set out under section 889 of this title and
Tables.
The Merchant Marine Act, 1928, referred to in
subsec. (a), is act May 22, 1928, ch. 675, 45 Stat. 689, as
amended, which is classified principally to chapter

24A (1 891 et seq.) of this title. For complete classification of this Act to the Code, see References in Text
note set out under section 891x of this title and
Tables.

The Intercoastal Shipping Act, 1933, referred to in
text, is act Mar. 3, 1933, ch. 199, 47 Stat. 1425, as

Page 382

amended, which is classified generally to chapter 23A
(§ 843 et seq.) of this title. For complete classification
of this Act to the Code, see section 848 of this title and
Tables.
AMENDMENTS

1981-Pub. L. 97-31 substituted "Commission or the
Secretary of Transportation" for "Commission" and
"Secretary of Transportation" for "Commission" in
four instances. For prior transfers of functions of the
Commission, meaning the United States Maritime

Commission, see Transfer of Functions note below.

1938-Act June 23, 1938, amended section generally,
and among other changes, inserted provisions to include matters within the scope of the Shipping Act,
1916, the Merchant Marine Act, 1920, the Merchant
Marine Act, 1928, and the Intercoastal Shipping Act,
1933, and substituted "thirty days" for "ten days".
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime

Commission, see Reorg. Plan No. 6 of 1949, Reorg.

Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1q61, set
out under section 1111 of this title.

§ 1226. Discrimination in respect to cargo
It shall be unlawful for any contractor receiving an operating-differential subsidy under subchapter VI of this chapter or for any charterer
under subchapter VII of this chapter unjustly
to discriminate in any manner so as to give
preference directly or indirectly in respect to
cargo in which such contractor or charterer has
a direct or indirect ownership, or purchase or
vending interest; and whosoever shall violate
this provision shall be guilty of a misdemeanor.
(June 29, 1936, ch. 858, title VIII, § 808, 49 Stat.
2015.)
§ 1227. Agreements with other carriers forbidden;
withholding subsidies; actions by injured persons
for damages
It shall be unlawful for any contractor receiving an operating-differential subsidy under subchapter VI of this chapter or for any charterer
of vessels under subehapter VII of this chapter
to continue as a party to or to conform to any
agreement with another carrier or carriers by
water, or to engage In any practice in concert
with another carrier or carriers by water, which
is unjustly discriminatory or unfair to any
other citizen of the United States who operates
a common carrier by water exclusively employing vessels registered under the laws of the
United States on any established trade route
from and to a United States port or ports.
No payment or subsidy of any kind shall be
paid directly or indirectly out of funds of the
United States or any agency of the United
States to any contractor or charterer who shall
violate this section. Any person who shall be injured in his business or property by reason of
anything forbidden by this section may sue
therefor in any district court of the United
States in which the defendant resides or is
found or has an agent, without respect to the
amount in controversy, and shall recover threefold the damages by him sustained, and the
cost of suit, including a reasonable attorney's
fee.

Page 383

TITLE 46-SHIPPING

§ 12411

(June 29, 1936, ch. 858, title VIII, § 810, 49 Stat.
2015.)

SUBCHAPTER IX-MISCELLANEOUS
PROVISIONS

FEDERAL RULES OF CIVIL PROCEDURE

§ 1241. Transportation in American vessels of Gov-

Effect of rule 54 on this section, see note by Advisory Committee under rule 54, Title 28, Appendix, Judiciary and Judicial Procedure.
Judgment and costs, see rule 54.

§ 1228. Fines and penalties; conviction as rendering
persons ineligible to receive benefits of law
Whenever any natural person is found guilty
in any district court of the United States of any
act or acts declared in this chapter to constitute
a misdemeanor, he shall be punished by a fine
of not more than $10,000, or by imprisonment
for not less than one year or more than five
years, or by both fine and imprisonment.
Whenever any corporation is found guilty of
any act or acts declared in this chapter to be
unlawful, such corporation shall be punished
by a fine of not more than $25,000.
In addition to the punishment prescribed in
section 1224 of this title, any person or corporation convicted of a misdemeanor under the provisions of this chapter shall be ineligible, at the
discretion of the Commission or the Secretary
of Transportation, to receive any benefits
under subchapters V and VI of this chapter, or
to receive a charter under subchapter VII of
this chapter for a period of five yeaxs after conviction.
Whoever knowingly and willfully violates any
order, rule, or regulation of the Federal Maritime Commission or the Secretary of Transportation made or issued in the exercise of the
powers, duties, or functions transferred to it or
him or vested in it or him by this chapter, as
amended, for which no penalty is otherwise expressly provided, shall upon conviction thereof
be subject to a fine of not more than $500. If
such violation is a continuing one, each day of
such violation shall constitute a separate offense.
(June 29, 1936, ch. 858, title VIII, § 806(b)-(d),
49 Stat. 2014; Aug. 4, 1939, ch. 417, § 13, 53 Stat.
1187; Aug. 6, 1981, Pub. L. 97-31, § 12(125), 95
Stat. 164.)

ernment personnel and certain cargoes

(a) Requirement that officers and employees travel
on American ships
Any officer or employee of the United States
traveling on official business overseas or to or
from any of the possessions of the United
States shall travel and transport his personal
effects on ships registered under the laws of
the United States where such ships are available unless the necessity of his mission requires
the use of a ship under a foreign flag: Provided,
That the Comptroller General of the United
States shall not credit any allowance for travel
or shipping expenses incurred on a foreign ship
in the absence of satisfactory proof of the necessity therefor.
(b)

Cargoes procured, furnished or financed by

United States; waiver in emergencies; exceptions;
definition

(1) Whenever the United States shall procure,
contract for, or otherwise obtain for its own account, or shall furnish to or for the account of
any foreign nation without provision for reimbursement, any equipment, materials, or commodities, within or without the United States,
or shall advance funds or credits or guarantee
the convertibility of foreign currencies in connection with the furnishing of such equipment,
materials, or commodities, the appropriate
agency or agencies shall take such steps as may
be necessary and practicable to assure that at
least 50 per centum of the gross tonnage of
such equipment, materials or commodities
(computed separately for dry bulk carriers, dry
cargo liners, and tankers), which may be transported on ocean vessels shall be transported on
privately owned United States-flag commercial
vessels, to the extent such vessels are available
at fair and reasonable rates for United Statesflag commercial vessels, in such manner as will
insure a fair and reasonable participation of
United States-flag commercial vessels in such
cargoes by geographic areas: Provided, That
CODIFICATION
the provisions of this subsection may be waived
Section is comprised of subsecs. (b) to (d) of section
whenever the Congress by concurrent resolu806 of act June 29, 1936. Subsec. (a) of section 806 is
tion or otherwise, or the President of the
classified to section 1224 of this title.
United States or the Secretary of Defense deAMENDMENTS
clares that an emergency exists justifying a
1981-Pub. L. 97-31 substituted "Commission or the
temporary waiver of the provisions of this paraSecretary of Transportation" for "Commission", "Fed.
graph and so notifies the appropriate agency or
eral Maritime Commission or the Secretary of Transagencies: And provided further, That the proviportation" for "United States Maritime Commission", sions
of this subsection shall not apply to carand "it or him" for "it" in two places. For prior transfers of functions of the Commission, meaning the goes carried in the vessels of the Panama Canal
United States Maritime Commission, see Transfer of Company. Nothing herein shall repeal or otherwise modify the provisions of section 1241-1 of
Functions note below.
1939-Act Aug. 4, 1939, added third par.
this title. For purposes of this section, the term
"privately owned United States-flag commercial
TRANSFER OF FUNCTIONS
vessels" shall not be deemed to include any
For transfer of functions of United States Maritime
vessel
which, subsequent to September 21, 1961,
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
shall have been either (a) built outside the
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
United States, (b) rebuilt outside the United
out under section 1111 of this title.
States, or (c) documented under any foreign
SECTION REFERRED TO IN OTHER SECTIONS
registry, until such vessel shall have been documented under the laws of the United States for
This section is referred to in section 1276 of this
title.
a period of three years: Provided, however,

TITLE 46-SHIPPING

1112,11-1

That the provisions of this amendment shall
not apply where, (1) prior to September 21,
1961, the owner of a vessel, or contractor for
the purchase of a vessel, originally constructed
in the United States and rebuilt abroad or contracted to be rebuilt abroad, has notified the
Maritime Administration in writing of its intent
to document such vessel under United States
registry, and such vessel is so documented on
its first arrival at a United States port not later
than one year subsequent to September 21,
1961, or (2) where prior to September 21, 1961,
the owner of a vessel under United States registry has made a contract for the rebuilding
abroad of such vessel and has notified the Maritime Administration of such contract, and such
rebuilding is completed and such vessel is thereafter documented under United States registry
on its first arrival at a United States port not
later than one year subsequent to September
21, 1961.
(2) Every department or agency having responsibility under this subsection shall administer its programs with respect to this subsection
under regulations issued by the Secretary of
Transportation. The Secretary of Transportation shall review such administration and shall
annually report to the Congress with respect
thereto.
(c) Motor vehicle owned by Government personnel
Notwithstanding any other provision of law,
privately owned American shipping services
may be utilized for the transportation of motor
vehicles owned by Government personnel
whenever transportation of such vehicles at
Government expense is otherwise authorized
by law.
(June 29, 1936, ch. 858, title IX, § 901, 49 Stat.
2015; Aug. 26, 1954, ch. 936, 68 Stat. 832; May
28, 1956, ch. 325, 70 Stat. 187; Sept. 21, 1961,
Pub. L. 87-266, 75 Stat. 565; Oct. 21, 1970, Pub.
L. 91-469, § 27, 84 Stat. 1034; Aug. 6, 1981, Pub.
L. 97-31, § 12(126), 95 Stat. 165.)
REFERENCES IN TEXT

Panama Canal Company, referred to in subsec.
(bXl), deemed to refer to Panama Canal Commission,
see section 3602(b)(5) of Title 22, Foreign Relations
and Intercourse.
This amendment, referred to in subsec. (b)(1), means
the amendment to this section by Pub. L. 87-266. See
1961 Amendment note below.
AMENDMENTS

1981-Subsec. (b)(2). Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce" in two instances.
1970-Subsec. (b). Pub. L. 91-469 redesignated
subsec. (b) as (b)(l), substituted "this paragraph" for
"this subsection" following "temporary waiver of the
provisions of" therein, and added subsec. (b)(2).
1961-Subsec. (b). Pub. L. 87-266 excluded from the
term "privately owned United States-flag commercial
vehicles" those vessels which, subsequent to Sept. 21,
1961, have been either built outside the United States,
rebuilt outside the United States, or documented
under foreign registry, until such vessels have been
documented under the laws of the United States for 3
years.
1956-Subsec. (c). Act May 28, 1956, added subsec.
(c).
1954-Act Aug. 26, 1954, designated existing provisions as subsec. (a) and added subsec. (b).

Page 384
EXEMPTIONS

Export sales of certain agricultural commodities, see
section 1707a of Title 7, Agriculture.
Functions authorized by Foreign Assistance Act of
1961, as amended, as exempt, see Ex. Ord. No. 11223,
eff. May 12, 1965, 30 F.R. 6635, set out under section
2393 of Title 22, Foreign Relations and Intercourse.
Act Aug. 3, 1956, ch. 933, j 3, 70 Stat. 988, provided
that sales of fresh fruit and the products thereof
under sections 1701 to 1709 of Title 7. Agriculture,
should be exempt from the requirements of this section.
CROSS REFERENCES

Free transportation of Government personnel in
American vessels prohibited; exceptions; reduction of
Government rate; penalty, see section 817b of this
title.
Motor vehicles belonging to members of armed
forces, transportation on Government-owned vessels,
see section 2634 of Title 10, Armed Forces.
Transportation at Government expense of automobiles owned by civilian officers and employees prohibited, see section 5727 of Title 5, Government Organization and Employees.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1185 of this
title; title 22 sections 2223, 2353, 2399d.
§ 1241-1. Shipment of exports financed by Government in United States vessels
It is the sense of Congress that in any loans
made by any instrumentality of the Government to foster the exporting of agricultural or
other products, provision shall be made that
such products shall be carried exclusively in
vessels of the United States, unless, as to any or
all of such products, the Secretary of Transportation, after investigation, shall certify to the
instrumentality of the Government that vessels
of the United States are not available in sufficient numbers, or in sufficient tonnage capacity, or on necessary sailing schedule, or at reasonable rates.
(Mar. 26, 1934, ch. 90, 48 Stat. 500; June 29,
1936, ch. 858, § 204, 49 Stat. 1987; 1957 Reorg.
Plan No. 1, eff. June 30, 1957, 22 F.R. 4633, 71
Stat. 647; Aug. 6, 1981, Pub. L. 97-31, § 12(127),
95 Stat. 165.)
CODIFICATION

Provisions of this section reading "any loans made
by any instrumentality of the Government" and
"shall certify to the instrumentality of the Government" were substituted for "any loans made by the
Reconstruction Finance Corporation or any other instrumentality of the Government" and "shall certify
to the Reconstruction Finance Corporation or any
other instrumentality of the Government" in view of
the abolition of the Reconstruction Finance Corporation and transfer of its remaining functions to Housing and Home Finance Agency, Administrator of General Services, Administrator of Small Business Administration, and Secretary of Treasury pursuant to
Reorg. Plan No. 1 of 1957, set out In Appendix of Title
5, Government Organization and Employees.
Section was not enacted as part of the Merchant
Marine Act, 1936, which comprises this chapter.
Section was formerly classified to section 616a of
Title 15, Commerce and Trade.

Page 385

TITLE 46-SHIPPING
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Trans.
portation" for "Commission". For prior transfers of
functions of the Commission, meaning the United
States Maritime Commission, see Transfer of Functions note below.
TRANSFER OF FUNCTIONS

Functions of Shipping Board Bureau were assumed
by United States Maritime Commission on Oct. 26,
1936, under provisions of act June 29, 1936, set out as
section 1114 of this title. For subsequent transfers of
functions, see Reorg. Plan No. 6 of 1949, Reorg. Plan
No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set out
under section 1111 of this title.
EXEMPTIONS

Export sales of certain agricultural commodities, see
section 1707a of Title 7, Agriculture.
Functions authorized by Foreign Assistance Act of
1961, as amended, as exempt, see Ex. Ord. No. 11223,
eff. May 12, 1965, 30 F.R. 6635, set out under section
2393 of Title 22, Foreign Relations and Intercourse.
Act Aug. 3, 1956, ch. 933, j 3, 70 Stat. 988, provided
that sales of fresh fruit and the products thereof
under sections 1701 to 1709 of Title 7, Agriculture,
should be exempt from the requirements of this section.
Section not affected by other requirements regarding transportation of certain cargoes in American vessels, see section 1241 of this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1241 of this
title.
§ 1241a. Vessel operations revolving fund; establish.
ment; uses; limitation
There

is established a

working capital

of

$20,000,000 to remain available until expended,
for the "Vessel Operations Revolving Fund",
which is created for the purpose of carrying out

vessel operating functions of the Secretary of

Transportation, including charter, operation,

. 111241a

ing any other provisions of law, the unexpended balances of any working funds or of allocation accounts established, subsequent to January 1, 1951, for the activities provided for under

this appropriation, together with receipts heretofore and hereafter received from such activities, may be transferred to and consolidated
with this Fund, which shall be available for the
purposes of such working funds or allocation

accounts.
No money made available to the Department
of Transportation, for Maritime Activities, by
this section or any other Act shall be used in
payment for a vessel the title to which is acquired by the Government either by requisition
or purchase, or the use of which is taken either
by requisition or agreement, or which is insured
by the Government and lost while so insured,
unless the price or hire to be paid therefor,
(except in cases where section 1212 of this title
is applicable) is computed in accordance with
subsection (a) of section 1242 of this title, as
that subsection is interpreted by the General
Accounting Office.
(June 2, 1951, ch. 121, ch. VIII, 65 Stat. 59; 1970
Reorg. Plan No. 2, § 102, eff. July 1, 1970, 35
F.R. 7959, 84 Stat. 2085; Aug. 6, 1981, Pub. L.
97-31, § 12(128), 95 Stat. 165.)
CODIFICATION

Section was not enacted as part of the Merchant
Marine Act, 1936, which comprises this chapter.
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce" in four instances and "Department of Transportation" for "Department of Commerce".

maintenance, repair, reconditioning, and betterment of merchant vessels under the jurisdiction

of the Secretary of Transportation.

TRANSFER OF FUNCTIONS

conducted thereunder: Provided, That the provisions of sections 1291(a), (c), 1293(c), and 1294
of Appendix to title 50 shall be applicable in
connection with such operations and to seamen

All functions vested by law (including reorganization
plan) in the Bureau of the Budget or the Director of
the Bureau of the Budget were transferred to the
President of the United States by section 101 of
Reorg. Plan No. 2 of 1970, eff. July 1, 1970, 35 F.R.
7959, 84 Stat. 2085, set out in the Appendix to Title 5,
Government Organization and Employees. Section 102
of Reorg. Plan No. 2 of 1970, redesignated the Bureau
of the Budget as the Office of Management and
Budget.

employed through general agents as employees
of the United States, who may be employed in

AUTHORIZATION FOR PAYMENTS OUT OF FUND

Notwithstanding any other provision of law,
rates for shipping services rendered under said
Fund shall be prescribed by the Secretary of

Transportation and the Fund shall be credited
with all receipts from vessel operating activities

accordance with customary commercial prac-

tices in the maritime industry, notwithstanding
the provisions of any law applicable in terms to
the employment of persons by the United
States: Provided further, That such sums as

may be determined to be necessary by the Secretary of Transportation, with the approval of
the Office of Management and Budget, but not
exceeding 2 per centum of vessel operating expenses, may be advanced from this Fund to the
appropriation "Salaries and expenses" for the
purposes of that appropriation in connection
with vessel operating functions, but without
regard to the limitations on amounts as stated
therein: Provided further, That notwithstand-

Pub. L. 85-721, Aug. 21, 1958, 72 Stat. 710, as authorizing Secretary of Commerce to make certain payments out of Vessels Operations Revolving Fund to
persons to whom he chartered vessel, see note set out
under section 1738 of Appendix to Title 50, War and
National Defense.
CROSS REFERENCES

Emergency foreign vessel acquisition, see sections
196 to 198 of Title 50, War and National Defense.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1205, 1241c,
1280 of this title.

TITLE 46-SHIPPING

91241b

§ 1241b. Availability of vessel operations revolving
fund; vessels involved in mortgage.foreclosure or
forfeiture proceedings; redelivery and layup of
chartered ships; custody and husbanding of Government-owned ships
On and after June 20, 1956, the vessel operations revolving fund shall be available for necessary expenses incurred, In connection with
protection, preservation, maintenance, acquisition, or use of vessels involved In mortgage-foreclosure or forfeiture proceedings instituted by
the United States, including payment of prior
claims and liens, expenses of sale, or other
charges incident thereto; for necessary expenses incident to the redelivery and lay-up, in
the United States, of ships now chartered
under agreements which do not call for their
return to the United States; for activation,
repair and deactivation of merchant ships chartered for limited emergency purposes during
the fiscal year 1957 under the Jurisdiction of
the Secretary of Transportation; and for payment of expenses of custody and husbanding of
Government-owned ships other than those
within reserve fleets.
(June 20, 1956, ch. 415, title I, § 101, 70 Stat.
319; Aug. 6, 1981, Pub. L. 97-31, § 12(129), 95
Stat. 165.)
CODIFICATION

Section was not enacted as part of the Merchant
Act, 1936, which comprises this chapter.
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce".
SIMILAR PROVISIONS

Similar provisions were contained in the following
prior appropriation act:
June 30, 1955, ch. 253, title I, § 101, 69 Stat. 231, as
amended by act May 19, 1956, ch. 313, ch. II, § 201, 70
Stat. 162.

Page 386
CODIFICATION

Section was not enacted as part of the Merchant
Act, 1936, which comprises this chapter.
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce" in two instances.

§ 1242. Requisition or purchase of vessels in time of
emergency
(a) Compensation; restoration; consequential dam.
ages
Whenever the President shall proclaim that
the security of the national defense mrkes it
advisable or during any national emergency declared by proclamation of the President, it shall
be lawful for the Secretary of Transportation
to requisition or purchase any vessel or other
watercraft owned by citizens of the United
States, or under construction within the United
States, or for any period during such emergency, to requisition or charter the use of any such
property, The termination of any emergency so
declared shall be announced by a further proclamation by the President. When any such
property or the use thereof is so requisitioned,
the owner thereof shall be paid just compensation for the property taken or for the use of
such property, but in no case shall the value of
the property taken or used be deemed enhanced by the causes necessitating the taking
or use. If any property is taken and used under
authority of this section, but the ownership
thereof is not required by the United States,
such property shall be restored to the owner in
a condition at least as good as when taken, less
ordinary wear and tear, or the owner shall be
paid an amount for reconditioning sufficient to
place the property in such condition. The
owner shall not be paid for any consequential
damages arising from a taking or use of property under authority of this section.

§ 1241c. Expenses for activation, repair and deactiva.
tion of merchant ships; receipts

(b) Determination of value of vessel
When any vessel is taken or used under authority of this section, upon which vessel a construction-differential subsidy has been allowed
and paid, the value of the vessel at the time of
its taking shall be determined as provided in
section 1212 of this title, and in determining
the value of any vessel taken or used, on which
a construction-differential subsidy has not been
paid, the value of any national defense features
previously paid for by the United States shall
be excluded.

The vessel operations revolving fund created
by section 1241a of this title, shall, beginning
July 1, 1956, be available for expenses incurred
in connection with the activation, repair, and
deactivation of merchant ships chartered under
the Jurisdiction of the Secretary of Transportation. There shall be credited to such fund all receipts on account of operations after July 1,
1956, under charters of Government-owned
ships under the jurisdiction of the Secretary of
Transportation.
(Aug. 1, 1956, ch. 846, 70 Stat. 897; Aug. 6, 1981,
Pub. L. 97-31, § 12(130), 95 Stat. 165.)

(c) Charter of vessels; compensation; reimbursement
for loss or damage
If any property is taken and used under authority of this section, but the ownership thereof is not required by the United States, the Secretary of Transportation, at the time of the
taking or as soon thereafter as the exigencies of
the situation may permit, shall transmit to the
person entitled to the possession of such property a charter setting forth the terms which, in
the Secretary's Judgment, should govern the relationships between the United States and such
person and a statement of the rate of hire

LIMITATION ON FUNDS FOR FISCAL YEAR

1957

Act June 20, 1956, ch. 415, title I, § 101, 70 Stat. 319,
provided in part that not to exceed $5,000,000 of the
funds of the vessel operations revolving fund were to
be used In fiscal year 1957 for the purp ses set forth
in this section.
Similar provisions on limitation on funds were contained in act June 30, 1955, ch. 253, title I, § 101, 69
Stat. 231.

Page 387

TITLE 46-SHIPPING

which, in the Secretary's judgment, will be just
compensation for the use of such property and
for the services required under the terms of
such charter. If such person does not execute
and deliver such charter and accept such rate
of hire, the Secretary of Transportation shall
pay to such person as a tentative advance only,
on account of such just compensation a sum
equal to 75 per centum of such rate of hire as
the same may from time to time be due under
the terms of the charter so tendered, and such
person shall be entitled to sue the United
States in a court having jurisdiction of such
claims to recover such amounts as would be
equal to just compensation for the use of the
property and for the services required in connection with such use: Provided, however, That
in the event of an election by such person to
reject the rate of hire fixed by the Secretary of
Transportation and to sue in the courts, the
excess of any amounts advanced on account of
just compensation over the amount of the court
judgment will be required to be refunded. In
the event of loss or damage to such property,
due to operation of a risk assumed by the
United States under the terms of a charter prescribed in this subsection, but no valuation of
such vessel or other property or mode of compensation has been agreed to, the United States
shall pay just compensation for such loss or
damage, to the extent the person entitled
thereto is not reimbursed therefor through
policies of insurance against such loss or
damage.
(d) Determination of amount of compensation
In all cases, the just compensation authorized
by this section shall be determined and paid by
the Secretary of Transportation as soon as
practicable, but if the amount of just compensation determined by the Secretary is unsatisfactory to the person entitled thereto; such
person shall be paid, as a tentative advance
only, 75 per centum of the amount so determined and shall be entitled to sue the United
States to recover such amount as would equal
just compensation therefor, in the manner provided for by sections 1346 and 1491 of title 28:
Provided, however, That in that event of an
election to reject the amount determined by
the Secretary of Transportation and to sue in
the courts, the excess of any amounts advanced
on account of just compensation over the
amount of the court judgment will be required
to be refunded.
The existence of any valid claim by way of
mortgage or maritime claim or attachment lien
upon such vessel shall not prevent the taking
thereof pursuant to this section: Provided, however, That in the event any such claim exists
the Secretary of Transportation may in his discretion deposit such portion of the compensation hereunder, or advances on account thereof,
as may equal but not exceed the amount of
such claims in respect of the vessel, with the
Treasurer of the United States, and the fund so
deposited shall be available for the payment of
such compensation, and shall be imubject to be
applied to the payment of the amount of any
valid claim by way of mortgage or maritime lien
or attachment lien upon such vessel, or of any

§ 12i12

stipulation therefor in a court of the United
States, or of any State, subsisting at the time of
such requisition or taking of title or possession;
the holder of any such claim may commence
prior to June 30, 1943, or within six months
after the first such deposit with the Treasurer
and publication of notice thereof in the Federal
Register, whichever date is later, and maintain
in the United States district court from whose
custody such vessel has been or may be taken
or in whose territorial jurisdiction the vessel
was lying at the time of requisitioning or taking
of title or possession, a suit in admiralty according to the principles of libels in rem against the
fund, which shall proceed and be heard and determined according to the principles of law and
to the rules of practice obtaining in like cases
between private parties, and any decree in said
suit shall be paid out of the first and all subsequent deposits of compensation; and such suit
shall be commenced in the manner provided by
section 742 of this title and service of process
shall be made in the manner therein provided
by service upon the United States attorney and
by mailing by registered mail to the Attorney
General and the Secretary of Transportation
and due notice shall under order of the court be
given to all interested persons, and any decree
shall be subject to appeal and revision as now
provided in other cases of admiralty and maritime jurisdiction.
(e) Use of vessels by Secretary; transfer to other departments or agencies; reimbursement of Secre.
tary
The Secretary of Transportation is authorized to repair, recondition, reconstruct, and operate, or charter for operation, any property acquired under authority of this section. The Secretary of Transportation is further authorized
to transfer the possession or control of any
such property to any department or agency of
the Government of the United States upon
such terms and conditions as may be approved
by the President. In case of any such transfer
the department or agency to which the transfer
is made shall promptly reimburse the Secretary
of Transportation for the Department of
Transportation's expenditures on account of
just compensation, purchase price, repairs, reconditioning, reconstruction, or charter hire for
the property transferred. Such reimbursements
shall be deposited in the construction fund established by section 1116 of this title.
(June 29, 1936, ch. 858, title IX, § 902, 49 Stat.
2015; Aug. 7, 1939, ch. 555, § 3, 53 Stat. 1255;
Mar. 24, 1943, ch. 26, § 3(d), 57 Stat. 49; Aug. 3,
1956, ch. 929, §§ 2, 3, 70 Stat. 985; Aug. 6, 1981,
Pub. L. 97-31, § 12(131), 95 Stat. 165.)
CODIFICATION

In subsec. (d), "sections 1346 and 1491 of title 28"
were substituted for "section 24, paragraph 20, and
section 145 of the Judicial Code (U.S.C., 1946 edition,
title 28, secs. 41(20) and 250)" on authority of act June
25, 1948, ch. 646, 62 Stat. 869, the first section of
which enacted Title 28, Judiciary and Judicial Procedure. Section 1346 of Title 28 sets forth the basic jurisdiction of the district courts in cases in which the
United States is defendant. Section 1491 of Title 28
sets forth the basic Jurisdiction of the United States

TITLE 46-SHIPPING

§1212-1

Court of Claims. Sections 24(20) and 145 of the Judicial Code were also restated in sections 1496, 1501,
1503, 2401, 2402, and 2501 of Title 28.
AMENDMENTS

1981-Subsec. (a). Pub. L. 97-31, J12(131)(A), substituted "Secretary of Transportation" for "Commission". For prior transfers of functions of the Commission, meaning the United States Maritime Commission, see Transfer of Functions note below.
Subsec. (c). Pub. L. 97-31, § 12(131)(A). (B), substituted "Secretary of Transportation" for "Commission" In three Instances and "Secretary's" for "Commission's" in two places. For prior transfers of functions of the Commission, meaning the United States
Maritime Commission, see Transfer of Functions note
below.
Subsec. (d). Pub. L. 97-31, § 12(131)(A), (C), (D), substituted "Secretary of Transportation" for "Commission" and "United States Maritime Commission" and
"his discretion" for "its discretion". For prior transfers
of functions of United States Maritime Commission,
see Transfer of Functions note below.
Subsec. (e). Pub. L. 97-31, § 12(131)(A), (E), substituted "Secretary of Transportation" for "Commission" and "the Department of Transportation's expenditures" for "its expenditures". For prior transfers
of functions of the Commission, meaning the United
States Maritime Commission, see Transfer of Functions note below.
1956-Subsec. (c). Act Aug. 3, 1956, § 2, inserted "as a
tentative advance only," in the second sentence, and
substituted "in a court having jurisdiction of such
claims to recover such amounts as would be equal to
Just compensation for the use of the property and for
the services required in connection with such use: Provided, however, That in the event of an election by
such person to reject the rate of hire fixed by the
Commission and to sue in the courts, the excess of any
amounts advanced on account of just compensation
over the amount of the court judgment will be required to be refunded." for "to recover such further
sum as added to such 75 per centum will make up such
amount as will be just compensation for the use of the
property and for the services required in connection
with such use.".
Subsec. (d). Act Aug. 3, 1956, §3, inserted "as a tentative advance only", substituted "such amount as
would equal" for "such further sum as, added to said
75 per centim will make up such amount as will be"
and added proviso.
1943-Subsec. (d). Act Mar. 24, 1943, added second
par.
1939-Subsecs. (c) to (e), Act Aug. 7, 1939, added subsec s. (c) to (e).
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.
For transfer of functions of other officers, employ.
ees, and agencies of the Department of the Treasury,
with certain exceptions, to the Secretary of the Treasury with power to delegate, see Reorg. Plan No. 26 of
1950, §§ 1, 2, eff. July 31, 1950, 15 F.R. 4935, 64 Stat.
1280, 1281, set out in the Appendix to Title 5, Government Organization and Employees. The Treasurer of
the United States, referred to in this section, is an officer of the Treasury department.
TERMINATION OF WAR AND EMERGENCIES

Act July 25, 1947, ch. 327, § 3, 61 Stat. 451, provided
that in the interpretation of subsec. (a) of this section,
the date July 25, 1947, shall be deemed to be the date
of termination of any state of war theretofore declared by Congress and of the national emergencies
proclaimed by the President on Sept. 8, 1939, and May
27, 1941.

Page 388

FEDERAL RULES OF CIVIL PROCEDURE

Admiralty and maritime rules of practice (which included libel procedurep) were superseded, and civil and
admiralty procedures in United States district courts
were unified, effective July 1, 1966, see rule 1 and Supplemental Rules for Certain Admiralty and Maritime
Claims, Title 28, Appendix, Judiciary and Judicial Procedure.
CROSS REFERENCES
Emergency foreign vessel acquisition, see sections
196 to 198 of Title 50, War and National Defense.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to In sections 865a, 1152,
1160, 1241a, 1289 of this title; title 50 sections 196, 197;
title 50 App. section 1744.
§ 1242-1. Omitted
CODIFICATION

Section, Pub. L. 85-469, title I, § 101, June 25, 1958,
72 Stat. 231, which required computation of funds
spent in payment for requisitioned or purchased vessels in accordance with section 1242(a) of this title was
not repeated in subsequent appropriation acts.
§ 1242a. Maintenance of and adjustment of obligations with respect to essential vessels affected by
Neutrality Act
(a) Definition of "essential vessel"

When used in this section the term "essential
vessel" means any vessel (1) which is (A) security for any mortgage indebtedness to the
United States or (B) constructed under this
chapter, or required by the terms of a contract
under this chapter to be operated on a certain
essential foreign trade route, and (2) which it is
necessary in the interests of commerce and national defense to maintain In condition for
prompt use.
(b) Adjustment of obligations and arrangements for
maintenance of essential vessels

For the purposes of preserving in the national interest the full availability and usefulness
of essential vessels, which, under the provisions
of the Neutrality Act of 1939 [22 U.S.C. 441 et

seq.] (or any proclamation issued thereunder),
or

compatibly

with

the

national

interest,

cannot be operated in the service, route, or line
to which such vessels are assigned pursuant to
this chapter, or in which they would otherwise

be operated, the Secretary of Transportation is
authorized to make adjustments of obligations
in respect to such vessels and to make arrangements for the maintenance of such vessels, subject to the provisions of this section and to such

rules and regulations as the Secretary of Transportation shall prescribe as necessary or appropriate for carrying out the purposes and provisions of this section. If the Secretary of Transportation, upon written application in respect
of any essential vessel, determines after such
examination, investigation, and proceedings as
he deems desirable, that (1) the operation of

such vessel in the service, route, or line to
which such vessel is assigned pursuant to this
chapter, or in which it would otherwise be operated, is either (A) not lawful under the Neutrality Act of 1939 (or any proclamation issued
thereunder), or (B) not compatible with the

Page 389

TITLE 46-SHIPPING

maintenance of availability of such vessel for
purposes of national defense and commerce, (2)
it is not feasible under existing law to employ
such vessel in any other service or operation in
either the foreign or domestic trades (except
temporary or emergency operation under subsection (c)(5) hereof), and (3) the applicant, by
reason of the restrictions of the Neutrality Act
of 1939, or the withdrawal of vessels for -iational-defense purposes under clause (1) hereof, is
not earning or will not earn a fair and reasonable return on the capital necessarily employed
in its business, the Secretary of Transportation
may make adjustments and arrangements with
the applicant as provided in subsection (c) of
this section, which shall continue in effect only
during the circumstances above described.
(c) Provisions included within adjustments and arrangements
Such adjustments and arrangements shall include suspension of the requirement to operate
such vessel in foreign trade under the applicable operating-differential or construction-differential subsidy contract or mortgage or other
agreement, and of the right to operating-differential subsidy in respect of such vessel, and
may include any one or more of the following
provisions, in whole or in part, as, and to the
extent that, the Secretary of Transportation
may deem to be necessary or appropriate to
carry out the purposes of this chapter, or the
purposes and provisions of this section:
(1) Lay-up of the vessel by the owner or, at
the option of the Secretary of Transportation, in the custody of the Secretary of Transportation, with payment or reimbursement by
the Secretary of Transportation of necessary
and proper expenses thereof (including reasonable overhead and insurance), or in lieu of
such payment or reimbursement, a fixed periodic allowance therefor;
(2) Postponement, for a period not in excess
of the period or periods of lay-up, of the maturity date of each installment on account of
the principal of obligations to the United
States in respect of the vessel (whether or not
such maturity date shall fall within such
period or periods), or rearrangement of such
maturities;
(3) Postponement or cancellation of interest
accruing on such obligations during such
period or periods of lay-up;
(4) Extension for a period not in excess of
the period or periods of lay-up, of the twentyyear life limitation in respect of the vessel,
and of the period or periods of other limitations and provisions of this chapter, insofar
as they are based upon a twenty-year life;
(5) Provisions for such temporary or emergency employment of the vessel in lieu of layup as may be practicable, with such arrangements for management of the vessel, payment
of expenses, and application of the proceeds
of such employment, as the Secretary of
Transportation may approve, the period or
periods of such operation being included as
part of the period or periods of lay-up;
(6) The payment to the Secretary of Transportation, upon termination of the arrangements with the applicant hereunder, out of
11-617 VOL. 18 0-84-27

111242a

the applicant's net profits, earned while such
arrangements were in effect, in excess of 10
per centum per annum on the capital necessarily employed in the applicant's business, in
reimbursement, to the extent that the Secretary of Transportation shall deem it necessary to carry out the purposes of this section,
on account of obligations postponed or Lanceled and expenses incurred or paid by the
Secretary of Transportation under this subsection. For the purposes of this paragraph
capital of the applicant represented by vessels
of the applicant laid up or operated under
this section shall not be excluded from capital
necessarily employed in the applicant's business, The Secretary of Transportation may
require that the vessels so laid up or operated
be security for reimbursement hereunder.
(d) Readjustment or modification of adjustments and
arrangements
The adjustments and arrangements made
under subsection (c) of this section in respect of
any vessel shall be subject to such readjustment or modification from time to time as may
be deemed necessary by the Secretary of Transportation to carry out the purposes and provisions of this section.
(e) Expenses incurred in adjustments and arrangements
Moneys In the construction fund of the Secretary of Transportation shall be available for expenses of the Secretary of Transportation incurred in adjustments or arrangements made
under this section.
(June 29, 1940, ch. 442, 54 Stat. 684; Aug. 6,
1981, Pub. L. 97-31, § 12(132), 95 Stat. 165.)
REFERENCES IN TEXT

The Neutrality Act of 1939, referred to in subsec.
(b), is act Nov. 4, 1939, ch. 2, 54 Stat. 4, as amended,
which is classified generally to subchapter II (§ 441 et
seq.) of chapter 9 of Title 22, Foreign Relations and
Intercourse. For complete classification of this Act to
the Code, see Short Title note set out under section
441 of Title 22 and Tables.
CODIFICATION

Section was not enacted as part of the Merchant
Marine Act, 1936, which comprises this chapter.
AMENDMENTS

1981-Subsec. (b). Pub. L. 97-31 substituted "Secretary of Transportation" for "United States Maritime
Commission" and "Commission" wherever appearing
and "he deems" for "it deems". For prior transfers of
functions of United States Maritime Commission, see
Transfer of Functions note below.
Subsecs. (c) to (e). Pub. L. 97-31 substituted "Secretary of Transportation" for "Commission" wherever
appearing. For prior transfers of functions of the
Commission, meaning the United States Maritime
Commission, see Transfer of Functions note below.
TRANSFER OF FUNCTIONS

For transfer of functions of United States Maritime
Commission, see Reorg. Plan No. 6 of 1949, Reorg.
Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set
out under section 1111 of this title.

Page 390

TITLE 46-SHIPPING

§1243

§ 12,13. Omitted
CODIFICATION

Section, act June 29, 1936, ch. 858, title IX, 1 904, 49
Stat. 2016, which amended prior acts by substituting
"United States Maritime Commission" for "United
States Shipping Board" or "the Board", was omitted
in view of the abolition of the United States Maritime
Commission by section 306 of Reorg. Plan No. 21 of
1950, eff. May 24, 1950, 15 F.R. 3178, 64 Stat. 1277, set
out under section 1111 of this title.
§ 12ii. )efinitions
When used in this chapter(a) The words "foreign commerce" or "foreIgn trade" mean commerce or trade between
the United States, its Territories or possessions,
or the District of Columbia, and a foreign country, except that in the context of section 1177
of this title concerning capital construction
funds and in the context of subchapter V of
this chapter concerning construction-differential subsidy, the said words "foreign commerce"
or "foreign trade" shall also include, in the case
of liquid and dry bulk cargo carrying services,
trading between foreign ports in accordance
with normal commercial bulk shipping practices in such manner as will permit U.S.-flag
bulk vessels freely to compete with foreign-flag
bulk carrying vessels in their operation or in
competing for charters, subject to rules and
regulations promulgated by the Secretary of
Transportation pursuant to section 1114(b) of
this title.
(b) The term "person" includes corporations,
partnerships, and associations existing under or
authorized by the laws of the United States, or
any State, Territory, District, or possession
thereof, or of any foreign country.
(c) The words "citizen of the United States"
include a corporation, partnership, or association only if it is a citizen of the United States
within the meaning of section 802 of this title,
and with respect to a corporation under subchapter VI of this chapter, all directors of the
corporation are citizens of the United States
and, in the case of a corporation, partnership,
or association operating a vessel on the Great
Lakes, or on bays, sounds, rivers, harbors, or
inland lakes of the United States the amount of
interest required to be owned by a citizen of the
United States shall be not less than 75 per
centum.
(d) The word "construction" includes outfitting and equipping.
(e) Repealed. Pub. L. 97-31, § 12(133)(B), Aug.
6, 1981, 95 Stat. 165.
(f) The terms "Representative" and "Member
of the Congress" include Delegates to the
House of Representatives from the District of
Columbia, Guam, and the Virgin Islands, and
the Resident Commissioner to the House of
Representatives from the Commonwealth of
Puerto Rico.
(g) The term "United States" includes the
District of Columbia, the Commonwealth of
Puerto Rico, the Northern Mariana Islands,
Guam, American Samoa, the Virgin Islands,
and the areas and installations in the Republic
of Panama 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.
(June 29, 1936, ch. 858, title IX, § 905, 49 Stat.
2016; June 23, 1938, ch. 600, § 39, 52 Stat. 964;
July 17, 1952, ch. 939, § 21, 66 Stat. 765; Sept.
21, 1959, Pub. L. 86-327, § 4, 73 Stat. 597; Oct.
21, 1970, Pub. L. 91-469, § 28, 84 Stat. 1034; Aug.
22, 1972, Pub. L. 92-402, § 2, 86 Stat. 617; Oct.
15, 1980, Pub. L. 96-453, § 3(b), 94 Stat. 2008;
Aug. 6, 1981, Pub. L. 97-31, § 12(133), 95 Stat.
165.)
AMENDMENTS

1981-Subsec. (a). Pub. L. 97-3I, § 12(133)(A), substituted "Secretary of Transportation" for "Secretary of
Commerce".
Subsec. (e). Pub. L. 97-31, § 12(133)(B), struck out
subsec. (e), which defined the terms "United States
Maritime Commission" and "Commission" to mean
the Secretary of Commerce, the Maritime Administrator, or the Federal Maritime Commission as the context required.
1980-Subsecs. (f), (g). Pub. L. 96-453 added subsecs.
(f) and (g).
1972-Subsec. (a). Pub. L. 92-402 made definition of
"foreign commerce" or "foreign trade" In context of
subchapter V of this chapter concerning constructiondifferential subsidy applicable in context of section
1177 of this title concerning capital construction
funds, made such definition subject to rules and regulations promulgated by the Secretary of Commerce
pursuant to section 1114(b) of this title rather than
only to uniform regulations promulgated by the Secretary and also applicable, in the case of bulk cargo carrying services, to trading between foreign ports in
such manner as will permit U.S.-flag bulk carrying vessels freely to compete with foreign-flag bulk carrying
vessels in their operation or in competing for charters.
1970-Subsec. (a). Pub. L. 91-469 expanded definition of "foreign commerce" or "foreign trade" to
permit United States operators of dry and liquid bulk
ships built with construction subsidy to engage in foreign-to-foreign carriage to the extent permitted by
regulations issued by the Secretary of Commerce.
1959-Subsec. (c). Pub. L. 86-327 inserted requirement that all the directors of a corporation under subchapter VI of this chapter be United States citizens.
1952-Subsec. (e). Act July 17, 1952, added subsec.
(e), which defined the terms "United States Maritme
Commission" and "Commission".
1938-Subsec. (a). Act June 23, 1938, added words
"foreign commerce".
Subsec. (c), Act June 23, 1938, inserted provisions relating to interest of citizens of the United States in
vessels operated on the Great Lakes, or on bays,
sounds, rivers, harbors, or inland lakes of the United
States.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-453 effective Oct. 1, 1981,
see section 4 of Pub. L. 96-453, set out as an Effective
Date note under section 1295 of this title.

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1274 of this
title; title 30 section 1412; title 42 section 9141; title 50
App. section 1745.
§ 1245. Separability of provisions; short title of chapter
If any provisions of this chapter, or the application thereof to any person or circumstance, is

TITLE 46-SHIPPING

Page 391

held invalid, the remainder of the chapter, and
the application of such provisions to other persons or circumstances, shall not be affected
thereby. This chapter may be cited as the Merchant Marine Act, 1936.
(June 29, 1936, ch. 858, title IX, § 906, 49 Stat.
2016.)
SHORT TITLE OF

1980

AMENDMENT

For rhort title of Pub. L. 96-453, Oct. 15, 1980, 94
Stat. 1997, which enacted subchapter XIII of this
chapter as the Maritime Education and Training Act
of 1980, see Short Title note set out under section 1295
of this title.
SHORT TITLE OF

1976

AMENDMENT

Pub. L. 94-372, § 1, July 31, 1976, 90 Stat. 1042, provided: "That this Act [amending section 1152 of this
title] may be cited as the 'Negotiated Shipbuilding
Contracting Act of 1976'."
SHORT TITLE OF

1972

AMENDMENT

Pub. L. 92-507, § 8, Oct. 19, 1972, 86 Stat. 917, provided that: "This Act [amending sections 1271 to 1276,
1279a, and 1279b of this title, repealing sections 1276a,
1277, and 1278 of this title, and enacting provisions set
out as notes under sections 1177 and 1273 of this title]
may be cited as the 'Federal Ship Financing Act of
1972'."
SHORT TITLE OF

1970

AMENDMENT

Pub. L. 91-469, § 1, Oct. 21, 1970, 84 Stat. 1018, provided that: "This Act [enacting section 1507a of Title
15, Commerce and Trade, and section 270f of Title 40,
Public Buildings, Property, and Works, amending section 5315 of Title 5, Government Organization and
Employees, sections 985 and 988 of Title 33, Navigation and Navigable Waters, sections 1101, 1111, 1119 to
1121, 1151 to 1155, 1159, 1160, 1171 to 1173, 1175 to
1177, 1204, 1213, 1222, 1223, 1241, 1244, 1271, 1273 to
1275, and 1294 of this title, repealing section 1221 of
this title, and enacting provisions set out as notes
under sections 1151, 1173, and 1177 of this title] may
be cited as the 'Merchant Marine Act of 1970'."
§ 1246. Effective date of chapter
Except as otherwise provided in this chapter
it shall take effect thirty days after a majority
of the members of the Commission have taken
the oath of office.
(June 29, 1936, ch. 858, title IX, § 907, 49 Stat.
2017.)
TRANSFER OF FUNCTIONS

The Commission, referred to in text, was, in the
original, a reference to the United States Maritime
Commission, which was abolished and its functions
transferred to the Federal Maritime Board and the
Secretary of Commerce by Reorg. Plan No. 21 of 1950,
eff. May 24, 1950, 15 F.R. 3178, 64 Stat. 1274, set out
under section 1111 of this title. Reorg. Plan No. 21 of
1950 was, in turn, superseded by Reorg. Plan No. 7 of
1961, eff. Aug. 12, 1961, 26 F.R. 7315, 75 Stat. 840, set
out under section 1111 of this title. Reorg. Plan No. 7
of 1961 abolished the Federal Maritime Board, Including the offices of the members thereof, and transferred its functions either to the newly created Federal Maritime Commission or to the Secretary of Commerce. See also section 1244 of this title. Sections 1601
and 1602 of this title transferred the Maritime Administration of the Department of Commerce to the Department of Transportation and transferred the functions of the Secretary of Commerce relating to the Administration to the Secretary of Transportation.

§ 1217

§ 1247. Appointment of Secretary as trustee or receiver; operation of vessels under court orders; payment of operating costs; claims against corpora.
tion
(a) Notwithstanding any other provision of
law, in any proceeding in a bankruptcy, equity,
or admiralty court of the United States in
which a receiver or trustee may be appointed
for any corporation engaged in the operation of
one or more vessels of United States registry
between the United States and any foreign
country, upon which the United States holds
mortgages, the court, upon finding that it will
inure to the advantage of the estate and the
parties in interest and that it will tend to further the purposes of this chapter, may constitute and appoint the Secretary of Transportation as sole trustee or receiver, subject to the
directions and orders of the court, and in any
such proceeding the appointment of any person
other than the Secretary as trustee or receiver
shall become effective upon the ratification
thereof by the Secretary without a hearing,
unless the Secretary shall deem a hearing necessary, In no such proceeding shall the Secretary be constituted as trustee or receiver without the Secret-try's express consent.
(b) If the cotirt, in any such proceeding, is unwilling to permit the trustee or receiver to operate such vessels in such service pending the termination of such proceeding, without financial
aid from the Government, and the Secretary
certifies to the court that the continued operation of such vessel is, in the opinion of the
Secretary, essential to the foreign commerce of
the United States and is reasonably calculated
to carry out the purposes and policy of this
chapter, the court may permit the Secretary to
operate the vessels subject to the orders of the
court and upon terms decreed by the court sufficient to protect all the parties in interest, for
the account of the trustee or receiver, directly
or through a managing agent or operator employed by the Secretary, if the Secretary undertakes to pay all operating losses resulting from
such operation, and comply with the terms imposed by the court, and such vessel shall be
considered to be a vessel of the United States
within the meaning of the Suits in Admiralty
Act [46 U.S.C. 741 et seq.]. The Secretary shall
have no claim against the corporation, its
estate, or its assets for the amount of such payments, but the Secretary may pay such sums
for depreciation as it deems reasonable and
such other sums as the court may deem Just.
The payment of such sums, and compliance
with other terms duly imposed by the court, together with the payment of the operating
losses, shall be in satisfaction of all claims
against the Secretary on account of the operation of such vessels.
(June 29, 1936, ch. 858, title IX, § 908, as added
Nov. 6, 1978, Pub. L. 95-598, title III, § 334, 92
Stat. 2680, and amended Aug. 6, 1981, Pub. L.
97-31, § 12(134), 95 Stat. 165.)
REFERENCES IN TEXT

The Suits in Admiralty Act, referred to in subsec.
(b), is act Mar. 9, 1920, ch. 95, 41 Stat. 525, as amend-

TITLE 46-SHIPPING

§1248

ed, which is classified generally to chapter 20 (§ 741 et
seq.) of this title. For complete classification of this
Act to the Code, see Short Title note set out under
section 741 of this title and Tables.
AMENDMENTS

1981-Subsec. (a). Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce".
EFFECTIVE DATE

Section effective Oct. 1, 1979, see section 402(a) of
Pub. L. 95-598, set out as a note preceding section 101
of Title 11, Bankruptcy.
§ 12418. Enrollment in a sealift readiness program
No vessel may receive construction differential subsidy or operating differential subsidy If
it is not offered for enrollment In a sealift
readiness program approved by the Secretary
of Defense.
(June 29, 1936, ch. 858, title IX, § 909, as added
Aug. 13, 1981, Pub. L. 97-35, title XVI, § 1605,
95 Stat. 752.)
SUBCHAPTER X-MARITIME LABOR
RELATIONS
WORKING HOURS AND OVERTIME OF EMPLOYEES

Act May 2, 1941, ch. 84, § 4, 55 Stat. 150, as extended
by act June 16, 1942, ch. 416, 56 Stat. 370, relating to
working hours and overtime of employees engaged in
United States Maritime Commission ship construction
and national defense work, formerly set out as note
under this subchapter, was repealed by act May 7,
1943, ch. 93, § 5, 57 Stat. 77.
§§ 1251 to 1255. Omitted
CODIFICATION
Sections 1251 to 1255 expired at the end of 4 years
from June 23, 1938, pursuant to former section 1262 of
this title.
Section 1251, act June 29, 1936, ch. 858, title IX,
§ 1001, as added June 23, 1938, ch. 600, 1 45, 52 Stat.
965, declared the policy of this subchapter to be the
elimination of obstruction to free flow of water-borne
commerce by means of collective bargaining.
Section 1252, act June 29, 1936, ch. 858, title IX,
11002, as added June 23, 1938, ch. 600, § 45, 52 Stat.
965, related to the effect of this subchapter on other
laws.
Section 1253, act June 29, 1936, ch. 858, title IX,
§ 1003, as added June 23, 1938, ch, 600, § 45, 52 Stat.
965, related to definitions.
Section 1254, act June 29, 1936, ch. 858, title IX,
§ 1004, as added June 23, 1938, ch. 600, § 45, 52 Stat.
966, and amended June 23, 1941, ch. 228, § 2, 55 Stat.
259, related to the duty of the Maritime Labor Board
to encourage employer-employee agreements and settlements.
Section 1255, act June 29, 1936, ch. 858, title IX,
11005, as added June 23, 1938, ch. 600, § 45, 52 Stat.
967, related to the filing of copies of labor contracts
with the Maritime Labor Board and the penalty for
failure to file.
§ 1256. Repealed. June 23, 1941, ch. 228, §3, 55 Stat.
259

Page 392

1258, 1259, and last sentence of 1260 provided: "That
the Maritime Labor Board may continue to act as mediator in any disputes wherein its mediation services
have been requested and the mediation of which the
Board has actively undertaken prior to the date of the
enactment of this Act (June 23, 19411."
§ 1257. Repealed. Pub. L. 89-554, § 8(a), Sept. 6, 1966,
80 Stat. 650
Section, act June 29, 1936, ch. 858, title X, §1007, as
added June 23, 1938, ch. 600, 1 45, 52 Stat. 967, provided for appointment, composition, tenure, pay,
travel, conflict of interest, removal, and delegation of
functions of Maritime Labor Board.
§§ 1258, 1259. Repealed. June 23, 1941, ch. 228, § 3, 55
Stat, 259
Section 1258, act June 29, 1936, ch. 858, title X,
1 1008, as added June 23, 1938, ch. 600, §45, 52 Stat.
968, related to mediation and assistance relating to
agreements.
Section 1259, act June 29, 1936, ch. 858, title X,
11009, as added June 23, 1938, ch. 600, 145, 52 Stat.
968, related to arbitration of disputes.
SAVINGS PROVISIONS
Savings provisions for act June 23, 1941, ch. 228, 55
Stat. 259, see Savings Provisions note set out under
section 1256 of this title.
§§ 1260 to 1262. Omitted
CODIFICATION

Sections 1260 to 1262 expired at the end of 4 years
from June 23, 1938, pursuant to former section 1262 of
this title.
Section 1260, act June 29, 1936, ch. 858, title X,
§ 1010, as added June 23, 1938, ch. 600, § 45, 52 Stat.
969 and amended June 23, 1941, ch. 228, § 3, 55 Stat.
259, related to a report of a plan for permanent labor
policy.
Section 1261, act June 29, 1936, ch. 858, title X,
11011, as added June 23, 1938, ch. 600, § 45, 52 Stat.
969, authorized appropriations.
Section 1262, act June 29, 1936, ch. 858, title X,
11012, as added June 23, 1938, ch. 600, §45, 52 Stat.
969, and amended June 23, 1941, ch. 228, § 1, 55 Stat.
259, provided that the provisions of this subchapter
expire at the end of four years from June 23, 1938.
SUBCHAPTER XI-FEDERAL SHIP
MORTGAGE INSURANCE
SUBCHAPTER REFERRED TO IN OTHER SECTIONS

This subchapter is referred to in sections 1152, 1160,
1161 of this title.
§ 1271, Definitions

As used in this subchapter(a) The term "mortgage" includes a preferred
mortgage as defined in the Ship Mortgage Act,
1920, as amended [46 U.S.C. 911 et seq.], on any
vessel of the United States (other than a tow-

boat, barge, scow, lighter, car float, canal boat,
or tank vessel of less than twenty-five gross

tons), and a mortgage on such a vessel which

Section, act June 29, 1936, ch. 858, title X, § 1006, as
added June 23, 1938, ch. 600, J 45, 52 Stat. 967, related
to adjustment of agreements and disputes between
maritime employers and employees.

will become a preferred mortgage when recorded and endorsed as required by the Ship Mortgage Act, 1920, as amended;
(b) The term "vessel" includes all types,

SAVINGS PROVISIONS
Last portion of section 3 of act June 23, 1941, ch.
228, 55 Stat. 259, repealing this section and sections

passenger cargo and combination passengercargo carrying vessels, tankers, tugs, towboats,

whether in existence or under construction, of
barges, dredges and ocean thermal energy con-

Page #3
TITLE 46-SHIPPING

version 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 documentirig vessels in the coastwise trade within
the meaning of section 802 of this title, floating
drydocks which have a capacity of thirty-five
thousand or more lifting tons and a beam of
one hundred and twenty-five feet or more between the wing walls and oceanographic research or instruction or pollution treatment,
abatement or control vessels owned by citizens
of the United States;
(c) The term "obligation" shall mean any
note, bond, debenture, or other evidence of indebtedness (exclusive of notes or other obligations issued by the Secretary pursuant to section 1275(d) of this title and obligations eligible
for investment of funds under sections 1272 and
1279(d) of this title), issued for one of the purposes specified in section 1274(a) 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;
() The term "actual cost" of a vessel as of
any specified date means the aggregate, as determined by the Secretary, of (i) all amounts
paid by or for the account of the obligor on or
before that date, and (ii) all amounts which the
obligor is then obligated to pay from time to
time thereafter, for the construction, reconstruction, or reconditioning of such vessel;
(g) The ternh "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 and 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

§ 1271

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 802 of this title;
(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); or
(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;
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 802 of this
title, and for purposes of applying such section
802 of this title 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
(i) 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;
(1) The term "fishing vessel" has the meaning
given such term by section 1802(11) of title 16;
and any reference in this subchapter 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

TITLE 46-SHIPPING

§ 1272

vessels or fishery facilities includes all States
referred to in subsection (k)(i) of this section.
(n) The term "Secretary" means the Secretary of Commerce with respect to fishing vessels and fishing facilities as provided by this
subchapter, and the Secretary of Transportation with respect to all other vessels.
(June 29, 1936, ch. 858, title XI, § 1101, as added
June 23, 1938, ch. 600. § 46, 52 Stat. 969, and
amended Sept. 3, 1954, ch. 1265, § 1, 68 Stat.
1267; Aug. 7. 1956, ch. 1026, § 1(a), (b), 70 Stat.
1087; July 31, 1959, Pub. L. 86-127, § 1(1), 73
Stat. 272; Sept. 2, 1960, Pub. L. 86-685, § 1, 74
Stat. 733; Sept. 26, 1961, Pub. L. 87-303, § 2, 75
Stat. 661; Oct. 21, 1970, Pub. L. 91-469, § 29, 84
Stat. 1035; Oct. 19, 1972, Pub. L. 92-507, § 1, 86
Stat. 909; Aug. 3, 1980, Pub. L. 96-320, title II,
§ 202(a), 94 Stat. 992; Dec. 22, 1980, Pub. L.
96-561, title II, § 220(1), 94 Stat. 3291; Aug. 6,
1981, Pub. L. 97-31, § 12(135), 95 Stat. 165.)
REFERENCES IN TEXT

The Ship Mortgage Act, 1920, referred to In subsec.
(a), is section 30 of act June 5, 1920, ch. 250, 41 Stat.
1000, as amended, which is classified generally to
chapter 25 (§ 911 et seq.) of this title. For complete
classification of this Act to the Code, see section 984 of
this title and Tables.
AMENDMENTS

1981-Subsec. (c). Pub. L. 97-31, j 12(135)(A), struck
out "of Commerce" following "Secretary".
Subsec. f). Pub. L. 97-31, 1 12(135)(A), struck out
"of Commerce" following "Secretary".
Subsec. (g). Pub. L. 97-31, § 12(135)(A), struck out
"of Commerce" following "Secretary" wherever appearing.
Subsec. n). Pub. L. 97-31, § 12(135)(B), added
subsec. (n).
1980-Subsec. (b). Pub. L. 96-320, § 202(a)(1), added
reference to ocean thermal energy conversion facilities
ur plantships.
Subsec. (1). Pub. L. 96-320, j 202(a)(2)-(4), added
subsec. (i).
Subsecs. (J) to (m). Pub. L. 96-561 added subsecs. (J)
to (m).
1972-Subsec. (a). Pub. L. 92-507 reduced the minimum size requirement for certain vessels from 200
gross tons to 25 gross tons.
Subsec. b). Pub. L. 92-507 substituted definition of
"vessel" for definition of "loan".
Subsec. (c). Pub. L. 92-507 substituted definition of
"obligation" for definition of "vessel".
Subsec. d). Pub. L. 92-507 substituted definition of
"obligor" for definition of "mortgagee".
Subsec. (e). Pub. L. 92-507 substituted definition of
"obligee" for the definition of "mortgagor".
Subsec. f). Pub. L. 92-507 struck out the proviso and
substituted obligor for mortgagor or borrower.
Subsecs. (g), (h). Pub. L. 92-507 added subsecs. (g)
and (h).
1970-Subsec. Cc). Pub. L. 91-469 included oceanographic research or instruction vessels in definition of
term "vessel".
1961-Subsec. Ca). Pub. L. 87-303 excluded towboats,
barges, scows, lighters, car floats, canal boats or tank
vessels of less than two hundred gross tons,
1960-Subsec. Cc). Pub. L. 86-685 included floating
drydocks which have a capacity of 35,000 or more lift.
ing tons and a beam of 125 feet or more between the
wing walls.
1959-Subsec. (f). Pub. L. 86-127 inserted In the proviso the words "in respect of the unpaid balance of the
principal of a mortgage or loan" and the exception
clause.
1956-Subsec.
f). Act Aug. 7. 1956, eliminated
except for certain special purpose vessels as pro-

Page 394

vided for In subsections (a) and (b) of section 1273 of
this title," in the proviso following the words "That In
no event", and eliminated "90 per centum of" both
preceding and following "75 per centum, or".
1954-Act Sept. 3, 1954, defined "loan" and "actual
cost" and redefined "mortgagee".
SECRETARY OF COMMERCE: FISHING VESSEL INSURANCE

Secretary of Commerce authorized to exercise authority in relation to issuance of insurance on fishing
vessels comparable to authority of Secretary of Commerce under this subchapter, see note set out under
section 1275 of this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1274, 1279c of
this title; title 30 section 1412.
§ 1272. Federal Ship Financing Fund
There is created a Federal Ship Financing
Fund (hereinafter referred to as the Fund)
which shall be used by the Secretary as a revolving fund for the purpose of carrying out
the provisions of this subchapter, and there
shall be allocated to such fund the sum of
$1,000,000 out of funds made available to the

Secretary under the appropriation authorized
by section 1279 of this title. Moneys in the
Fund shall be deposited in the Treasury of the
United States to the credit of the Fund or invested in bonds or other obligations of, or guar-

anteed as to principal and interest by, the
United States.
(June 29, 1936, ch. 858, title XI, § 1102, as added
June 23, 1938, ch. 600, § 46, 52 Stat. 969, and

amended Sept. 3, 1954, ch. 1265, § 2, 68 Stat.
1268; July 31, 1959, Pub. L. 86-123, § 1(2), 73
Stat. 269; Oct. 19, 1972, Pub. L. 92-507, § 2, 86
Stat. 910; Aug. 6, 1981, Pub. L. 97-31, § 12(136),

95 Stat. 166.)
AMENDMENTS

1981-Pub. L. 97-31 struck out "of Commerce" following "Secretary" in two instances.
1972-Pub. L. 92-507 substituted "Federal Ship Financing Fund" for "Federal Ship Mortgage Insurance
Fund", and "Fund" for "fund" in four places.
1959-Pub. L. 86-123 substituted "section 1110" for
"section 1109" of act June 29, 1936, which for purposes
of codification has been changed to "section 1279 of
this title".
1954-Act Sept. 3, 1954, omitted provisions relating
to the purchase of debentures and substituted "Secretary of Commerce" for "Commission".
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1271, 1274,
1275, 1279c of this title.
§ 1273. Authorization of Secretary to guarantee obligations
(a) Principal and interest
The Secretary, upon application by a citizen
of the United States, 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 subchapter.

Page 395

TITLE 46-SHIPPING

(b) Security interest

No obligation shall be guaranteed under this
subchapter 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 interest
of the United States.
(c) Amount of guarantee; percentage limitation; de-

termination of actual cost of vessel
The Secretary shall not guarantee the principal of obligations in an amount in excess of 75
per centum, or 87X per centum, whichever is
applicable under section 1274 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 1279a of this title, in
which case the Secretary may guarantee 75 per
centum or 87Y, per centum, whichever is applicable under section 1274 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 subchapter 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 subchapter
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.
(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 $1,650,000,000
shall be limited to obligations pertaining to
commerical demonstration ocean thermal
energy conversion facilities or plantships guaranteed under section 1279c of this title, and of
which $850,000,000 shall be limited to obligations pertaining to guarantees of obligations for
fishing vessels and fishery facilities made under
this subchapter. 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 subchapter shall be denied
eligibility because of its type.
(June 29, 1936, ch. 858, title XI, § 1103, as added
June 23, 1938, ch. 600, § 46, 52 Stat. 969, and
amended Aug. 15, 1953, ch. 513, § 1, 67 Stat. 626;
Sept. 3, 1954, ch. 1265, § 3, 68 Stat. 1268; June
25, 1956, ch. 438, 70 Stat. 332; Aug. 7, 1956, ch.
1026, § 1(a), (c), (d), 70 Stat. 1087; Oct. 21, 1970,
Pub. L. 91-469, §30, 84 Stat. 1035; Oct. 19, 1972,

§ 1273

Pub. L. 92-507, § 3, 86 Stat. 910; July 10. 1973,
Pub. L. 93-70, § 3, 87 Stat. 168; Nov. 13, 1975,
Pub. L. 94-127, j 5, 89 Stat. 681; June 26, 1978,
Pub. L. 95-298, § 5, 92 Stat. 340; Aug. 3, 1980,
Pub. L. 96-320, title II, § 203(b)(1), 94 Stat. 994;
Dec. 22, 1980, Pub. L. 96-561. title II. § 220(2),
94 Stat. 3292; Aug. 6, 1981, Pub. L. 97-31,
§ 12(136), 95 Stat. 166; Aug. 13, 1981, Pub. L.
97-35, title XVI, i 1606(a), (b), 95 Stat. 752; Jan.
6, 1983, Pub. L. 97-424, title IV, § 425, 96 Stat.
2167.)
AMENDMENTS

1983-Subsec. (f).
Pub. L. 97-424 added provision
that 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, and that no vessel eligible
for guarantees under this subchapter shall be denied
eligibility because of its type.
1981-Subsecs. (a) to (c), e). Pub. L. 97-31 struck out
"of Commerce" following "Secretary" wherever appearing.
Subsec. (). Pub. L. 97-35, 1 1606(b), Increased the
maximum
amount
from
$10,000,000,000
to
$12,000,000,000, and substituted provisions relating to
monetary limitations and criteria for obligations, for
former pars. (1) and (2) relating to percentage limitations and criteria for obligations, and required aggregate amount.
1980-Subsec. (f). Pub. L. 96-561 added pars. (1) and
(2) and provision that the aggregate amount reserved
for the purposes set forth in pars. (1) and (2) equal 10
percent of such sum.
Pub. L. 96-320, 1 203(b), which effective Oct. 1, 1981,
substituted "$12,000,000,000, of which $2,000,000,000
shall be limited to obligations pertaining to commercial demonstration ocean thermal energy conversion
facilities or plantships guaranteed pursuant to section
1279c of this title" for "$10,000,000,000" was later repealed by Pub. L. 97-35. See Repeals note set out
below.
1978-Subsec. (M). Pub. L. 95-298 increased limitation
on amount of outstanding obligations from
$7,000,000,000 to $10,000,000,000.
1975-Subsec, (f). Pub. L. 94-127 increased limitation
on amount of outstanding obligations from
$5,000,000,000 to $7,000,000,000.
1973-Subsee. (f), Pub. L. 93-70 increased limitation
on amount of outstanding
obligations from
$3,000,000,000 to $5,000,000,000.
1972-Subsec, (a). Pub. L. 92-507 incorporated provisions of former subsecs. (a) and (b) into subsec. (a) and
substituted provisions authorizing the Secretary to
guarantee the payment of principal and interest on
the obligation for provisions authorizing the Secretary
to insure a mortgage or a loan.
Subsec. (b). Pub. L. 92-507 added subsec. (b). Provisions of former subsec. (b) were incorporated Into
subsec, (a).
Subsec, (c). Pub. L. 92-507 substituted provisions
making the Secretary's determination of actual cost of
the vessel conclusive for the purposes of determining
the maximum amount which may be guaranteed, for
provisions making the mortgagee or lender the beneficiary of insurance contracts.
Subsee. (d). Pub. L. 92-507 substituted provisions
pledging the full faith and credit of the United States
for payment of all guarantees with interest, for provisions pledging the faith of the United States to the
payment of principal and interest of each mortgage
and loan.
Subsec. (e). Pub, L. 92-507 added subsec. (e). Former
subsec. (e) redesignated (f).
Subsec. (f). Pub. L. 92-507 redesignated former
subsec, (e) as subsec. (f), and in subsec. () as so redes-

TITLE 46-SHIPPING

§127,1

ignated, substituted "obligations guaranteed" for
"mortgages and loans Insured".
1970-Subsec. (e). Pub. L. 91-469 increased limitation
on outstanding amount of mortgages and loans insured under this section from one to three billion dollars.
1956-Subsec. (a). Act Aug. 7, 1956, § 1(a), (c), eliminated "90 per centum of" preceding "the unpaid balance" and eliminated proviso that as to special purpose vessels certified essential to national defense,
Secretary of Commerce may insure 100 per centum of
principal and Interest on eligible mortgages.
Subsec. (b). Act Aug. 7, 1956, j 1(a), (c), eliminated
"90 per centum of" preceding "the unpaid balance"
and eliminated proviso that as to special purpose vessels certified essential to national defense, Secretary
of Commerce may insure 100 per centum of principal
and Interest on eligible loans.
Subsec. (d). Act Aug. 7, 1956, § l(d), eliminated "the"
preceding "interest on and" and the words "90 per
centum of" following such words.
Act June 25, 1956, pledged the faith of the United
States, in the case of special-purpose vessels, to the
payment of the Interest on and 100 per centum of the
unpaid balance of the principal amount of each mortgage and loan insured under this bubchapter.
1954-Act Sept. 3, 1954, provided for the insurance
of mortgages by Secretary up to 90 per centum of
unpaid balance except that vessels essential to national defense may be insured up to 100 per centum, to
provide for insurance contracts, pledged the United
States as security, and limited aggregate unpaid principal to $1,000,000,000.
1953-Act Aug. 15, 1953, designated existing provisions as subsec. (a), inserted after "provided" the
words "90 per centum of the unpaid balance" and
struck out the last sentence relating to aggregate
amount of mortgage obligations, and added subsecs.
(b) and (c).
EFFECTIVE DATE OF

1956

AMENDMENT

Act June 25, 1956, which amended subsec. (d) of this
section, provided in part that the amendment of
subsec. (d) should be effective Sept. 3,1954.
REPEALS

Pub. L. 96-320, title II,§ 203(b), Aug. 3. 1980, 94 Stat.
994, cited as a credit to this section, which amended
subsec. (f) of this section, effective Oct. 1,1981, by increasing the aggregate unpaid principal amount of obligations
guaranteed
under
this
section
to
$12,000,000,000 of which $2,000,000,000 was to be limited to obligations pertaining to commercial demonstration ocean thermal energy conversion facilities or
plantships guaranteed pursuant to section 1279c of
this title, was repealed by Pub. L. 97-35, title XVI,
§ 1606(a), Aug. 13, 1981, 95 Stat. 752.
ELECTION OF COVERAGE

Section 7 of Pub. L. 92-507 provided that: "Any citizen of the United States to whom the Secretary of
Commerce issued an approval in principle of an application for loan or mortgage insurance or a commitment with respect to such insurance under the provisions of title XI of the Merchant Marine Act, 1936
[this subchapter], prior to the effective date of this
Act [Oct. 19, 1972] may elect, with respect to the vessels covered by such approval or commitment, to be
bound either by the provisions of title XI of the Merchant Marine Act, 1936 [this subchapter], as in effect
prior to the effective date of this Act [Oct. 19, 1972] or
by the provisions of this Act [see Short Title of 1972
Amendment note under section 1245 of this title]."
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1274, 1279c of
this title.

Page 396

§ 1271. Eligibility for guarantee
(a) Purpose of obligations
Pursuant to the authority granted under section 1273(a) of this title, 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 or vessels owned by citizens
of the United States which are 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 1244
of this title for purposes of subchapter V of
this chapter;; or (D) ' as an ocean thermal
energy conversion facility or plantship; or (E)
with respect to floating drydocks, in the construction, reconstruction, reconditioning, or
repair of vessels: 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 of vessels theretofore acquired by the Fund under the provisions of section 1275 of this title and recondi-

tioning and reconstructing such vessels;
(4) financing, in whole or in part, the repayment to the United States of any amount of
construction-differential subsidy paid with re-

spect to a vessel pursuant to subchapter V of
this chapter;
(5) refinancing existing obligations issued

for one of the purposes specified in (1), (2),
(3), or (4) whether or not guaranteed under
this subchapter, 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 the purchase of fishing vessels
or fishery facilities, the construction, reconstruction, reconditioning, or purchase of
which was guaranteed under this subchapter,
So in original. Probably should be "chapter; (D)".

Page 397

TITLE 46-SHIPPING

that are sold at foreclosure instituted by the
Secretary, or are sold by the Secretary following purchase at foreclosure, and the reconstruction or reconditioning thereof.
Any obligation guaranteed under paragraph (6)
shall be treated, for purposes of this subchapter In the same manner and to the same
extent as an obligation guaranteed under this
subchapter which aids in the construction, reconstruction, reconditioning, or purchase of a
vessel; except with respect to provisions of this
subchapter that by their nature can only be applied to vessels.
(b) Contents of obligations
Obligations guaranteed under this subchapter(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 paragraph
(1) of subsection (c) of this section, 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 1159 of this title
(or would have been eligible for mortgage aid
under section 1159 of this title 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 12X per centum of the cost of such
vessel, such obligations may be in an amount
which does not exceed 87X 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
per
amount which does not exceed 87
centum of the actual cost or depreciated
actual cost thereof: Provided,further, That in
the case of any vessel to be used in the fishing trade or industry, such obligations may be
in an aggregate principal amount which does
not exceed 87X per centum of the actual cost
or depreciated actual cost of the vessel: 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 87T percent of
the actual cost or depreciated actual cost of
the facility or plantship;
(3) shall have maturity dates satisfactory to
the Secretary but, subject to the provisions of
paragraph (2) of subsection (c) of this section,

§127 1

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-i, 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, 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 ser ice; 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 subchapter V of this chapter, 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 subehapter,
(i) 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 subchapter, a minimum principal amount for an
obligation covering the reconstruction or recon-

§f 12741

TITLE 46-SHIPPING

ditioning of a fishing vessel or fishery facility.
For purposes of this subchapter, the reconstruction or reconditioning of a fishing vessel or
fishery facility does not include the routine
minor repair of maintenance of the vessel or facility.
(c) Security
(1) The security for the guarantee of an obligation by the Secretary under this subchapter
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 subchapter may equal, but not exceed, the sum of
the principal amount of obligations permissible
with respect to each vessel.
(2,1 If the security for the guarantee of an obligation by the Secretary under this subchapter
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) No commitment to guarantee an obligation shall be made by the Secretary unless he
finds, at or prior to the time such commitment
is made, that the property or project with respect to which the obligation will be executed
wll be, in his 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, and no obligation, unless made
pursuant to a prior commitment, shall be guaranteed unless the Secretary finds, at or prior to
the time the guarantee becomes effective, that
the property or project with respect tu which
the obligation is executed will be, in his 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,
(2) No commitment to guarantee, or guarantee of an obligation may be made by the Secretary under this subchapter 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 1271(k) of this title with respect to, an underutilized fishery.
(e) Guarantee fees
The Secretary is authorized to fix a fee for
the guarantee of an obligation under this subchapter. If the security for the guarantee of an
obligation under this subchapter relates to a

Page 398

delivered vessel, such fee shall not be less than
one-half of 1 per centum per annum nor more
than 1 per centum per annum of the average
principal amount of such obligation outstanding, excluding the average amount (except interest) on deposit in an escrow fund created
under section 1279a of this title. If the security
for the guarantee of an obligation under this
subchapter relates to a vessel to be constructed,
reconstructed, or reconditioned, such fee shall
not be less than one-quarter of 1 per centum
per annum nor more than one-half of 1 per
centum per annum of the average principal
amount of such obligation outstanding, excluding the average amount (except interest) on deposit in an escrow fund created under section
1279a of this title. For purposes of this subsection (e), if the security for the guarantee of an
obligation under this subchapter relates both to
a delivered vessel or vessels and to a vessel or
vessels to be constructed, reconstructed, or reconditioned, the principal amount of such obligation shall be prorated in accordance with regulations prescribed by the Secretary. Fee payments shall be made by the obligor to the Secretary when moneys are first advanced under a
guaranteed obligation and at least sixty days
prior to each anniversary date thereafter. All
fees shall be computed and shall be payable to
the Secretary under such regulations as the
Secretary may prescribe.
(f) Investigation of applications
The Secretary shall charge and collect from
the obligor such amounts as he may deem reasonable for the investigation of applications for
a guarantee, for the appraisal of properties offered as security for a guarantee, for the issuance of commitments, for services in connection
with the escrow fund authorized by section
1279a of this title 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 1271 to 1276 and 1279
of this title shall be deposited in the Fund.
(h) Additional requirements
Obligations guaranteed under this subchapter
and agreements relating thereto shall contain
such other provisions with respect to the protection of the security interests of the United
States (including acceleration 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.
(June 29, 1936, ch. 858, title XI, § 1104, as added
June 23, 1938, ch. 600, § 46, 52 Stat. 970, and
amended Aug. 4, 1939, ch. 417, § 14, 53 Stat.
1187; Sept. 28, 1950, ch. 1093, § 4, 64 Stat. 1078;
Aug. 15, 1953, ch. 513, § 2, 67 Stat. 626; Sept. 3,
1954, ch. 1265, § 4, 68 Stat. 1269; July 31, 1959,
Pub. L. 86-123, §§ 1(3), 2, 73 Stat. 269, 271; July
31, 1959, Pub. L. 86-127, § 1(3), (4), 73 Stat. 273;
June 12, 1960, Pub. L. 86-518, § 1, 74 Stat. 216;

Page 399

TITLE 46-SHIPPING

Sept. 2, 1960, Pub. L. 86-685, §§ 2, 3, 74 Stat.
733; June 15, 1968, Pub. L. 90-341, 82 Stat. 180;
Oct. 21, 1970, Pub. L. 91-469, §§ 31, 32, 84 Stat.
1035; Oct. 19, 1972. Pub. L. 92-507, § 3, 86 Stat.
910; Apr. 7, 1978, Pub. L. 95-257, 92 Stat. 194;
Aug. 3, 1980, Pub. L. 96-320, title II, § 202(b),
(c), 94 Stat. 992; Dec. 22, 1980, Pub. L. 96-561,
title II, § 220(3), 94 Stat. 3292; Aug. 6, 1981,
Pub. L. 97-31, § 12(136), 95 Stat. 166; Aug. 13,
1981, Pub. L. 97-35, title XVI, § 1606(c), (d), 95
Stat. 752.)
AMENDMENTS

1981-Subsecs. (a) to (c). Pub. L. 97-31 struck out "of
Commerce" following "Secretary" wherever appearing.
Subsec. (d). Pub. L. 97-35, § 1606(c), in par. (1) sub.
stituted "No" for "Except as provided in paragraph
(2), no", struck out par. (2) which related to application of par. (1), and redesignated par. (3) as (2).
Pub. L. 97-31 struck out "of Commerce" following
"Secretary" wherever appearing.
Subsecs. (e), (f). Pub. L. 97-31 struck out "of Commerce" following "Secretary" wherever appearing.
Subsec. (g). Pub. L. 97-35, § 1606(d), designated par.
(1) as entire provision, and struck out par. (2). which
required the Secretary to establish subfunds within
the Fund.
Pub. L. 97-31 struck out "of Commerce" following
"Secretary".
Subsec. (h). Pub. L. 97-31 struck out "of Commerce"
following "Secretary" in two instances.
1980-Subsec. (a). Pub. L. 96-561, § 220(3)(A)(vi), inserted provision following par. (7) that any obligation
guaranteed under par. (6) be treated, for purposes of
this subchapter, in the same manner and to the same
extent as an obligation guaranteed under this subchapter which aids in the construction, reconstruction, reconditioning, or purchase of a vessel, except
with respect to provisions of this subchapter that by
their nature can only be applied to vessels.
Subsec. (a)(1). Pub. L. 96-561, § 220(3)(A)(i), (Ii), substituted "; or D)" for "(D) in the fishing trade or in.
dustry; (E)" and redesignated cl. (F) as (E).
Pub. L. 96-320, § 202(b), redesignated cl. (E), relating
to floating drydocks, as cl. (F) and added cl. (E) relating to ocean thermal energy conversion facilities or
plantships.
Subsec. (a)(2). Pub. L. 96-561, § 220(3)(A)(iii), added
par. (2) and redesignated former par. (2) as (3).
Subsec. (a)(3). Pub. L. 96-561, § 220(3)(A)(iii), redesignated former par. (2) as (3). Former par. (3) redesignated (4).
Subsec. (a)(4). Pub. L. 96-561, § 220(3)(A)(iii), (iv), redesignated former par. (3) as (4), and in par. (4) as so
redesignated, substituted "this chapter;" for "this
chapter; or". Former par. (4) redesignated (5).
Subsec. (a)(5). Pub. L. 96-561, § 220(3)(A)(iii), (v), redesignated former par. (4) as (5), and in par. (5) as so
redesignated, substituted "(3), or (4)" for "or (3)" and
a semicolon for a period at the end thereof.
Subsec. (a)(6), (7). Pub. L. 96-561, § 220(3)(A)(vi),
added pars. (6) and (7).
Subsec. (b)(2). Pub. L. 96-320, § 202(c), added proviso
that in the case of an ocean thermal energy conversion facility or plantship which is constructed without
the aid of construction-differential subsidy, the obli.
gations may be in an aggregate principal amount
which does not exceed 87X percent of the actual cost
or depreciated actual cost of the facility or plantship.
Subsec. (b). Pub. L. 96-561, § 220(3)(B), inserted provision following par. (7) prohibiting the Secretary
from establishing, as a condition of eligibility for guarantee, a minimum principal amount for an obligation
covering the reconstruction or reconditioning of a
fishing vessel or fishery facility, which reconstruction
or reconditioning does not include the routine minor
repair or maintenance of the vessel or facility.

§127.1

Subsec. (d). Pub. L. 96-561, §220(3)(C), designated
existing provision as par. (1), and in par. (l), as so designated, substituted "Except as provided in paragraph
(2), no" for "No", and added pars, (2) and (3).
Subsec. (g). Pub. L. 96-561, 1 220(3)(D), designated
existing provision as par. (1) and added par. (2).
1978-Subsec. (b)(2). Pub. L. 95-257 added proviso relating to vessels to be used in the fishing trade or industry.
1972-Subsec. (a). Pub. L. 92-507 substituted provisions relating to the purposes for which guarantees
may be made, for provisions relating to the eligibility
of mortgages for insurance.
Subsec. (b). Pub. L. 92-507 substituted provisions relating to the eligibility requirements of obligations for
guarantee, for provisions relating to the eligibility of
loans for insurance.
Subsec. (c). Pub. L. 92-507 substituted provisions
that security for guarantee may relate to more than
one vessel, that security may consist of any combination of types of security, and that an obligation may
have the latest maturity date permissible for any
vessel which serves as security for the government
guarantee of the related obligations, for provisions relating to the prior determination of the soundness of
the property or project for mortgage or loan.
Subsec. (d). Pub. L. 92-507 incorporated provisions of
former subsec. (c)into subsec. (d) and extended provisions of this subchapter to commercial fishing vessels.
Provisions of former subsec. (d)were incorporated into
subsec. (e).
Subsec. (e). Pub. L. 92-507 incorporated provisions of
former subsec. (d) into subsec. (e) and substituted
therein provisions authorizing the Secretary to fix a
fee for the guarantee of obligations and providing separate formulae for delivered vessels and vessels under
construction, for provisions authorizing the Secretary
to fix a premium charge for the insurance of mortgages and loans and providing separate formulae for
mortgages and loans by reference to section 1273 of
this title. Provisions of former subsec. (e)were incorporated into subsec. (f).
Subsec. (f). Pub. L. 92-507 incorporated provisions of
former subsec. (e), relating to the collection of investigation fees from applicants for insurance into subsee.
(f), and substituted therefor provisions relating to the
collection of investigation fees from applicants for
guarantee. Provisions of former subsec. (f)incorporated Into subsec. (g).
Subsec. (g). Pub. L. 92-507 incorporated provisions of
former subsec. (f)into subsec. (g.
Subsec. (h). Pub. L. 92-507 added subsec. (h).
1970-Subsec. (a)(8). Pub. L. 91-469, § 31, inserted
"research, or for" preceding "commercial use".
Subsec. (b). Pub. L. 91-469, § 32, inserted In par. (2)
"research, or for" preceding "commercial use", substituted in par. (4) "not exceed" for "be less than", and
Inserted in par. (4) restriction that advance and principal amount of other advances under insured loans outstanding at time of advance shall not exceed 87X per
centum of actual cost of vessel where in the case of
the approved vessel the minimum downpayment by
the mortgagor required by section 1159 of this title
would be 12 per centum of cost of vessel.
1968-Subsec. (a)(5). Pub. L. 90-341 substituted provision that the maximum interest rates allowed on
ship mortgages eligible for insurance coverage be at
such rates on the outstanding principle obligation as
determined by the Secretary of Commerce to be reasonable, taking into account the prevailing rates and
the risks assumed by the Department of Commerce,
for provision setting a maximum of 5 per centum per
annum, or 6 per centum per annum when the Secretary determined that in certain areas or under special
circumstances the mortgage or lending market demanded it.
1960-Subsec. (a)(3). Pub. L. 86-518 substituted
"twenty-five years" for "twenty years".
Subsec. (a)(8). Pub. L. 86-685, § 2,inserted cl. (e).

TITLE 46-SHIPPING

§ 1275

Subsec. (b)(2). Pub. L. 86-685, § 3, Inserted cl. (e).
1959-Subsee. (a)t2). Pub. L. 86-123, § 2, substituted
"and which Is, or in the case of a vessel to be reconstructed or reconditioned would have been, eligible for

mortgage aid for construction" for "which is eligible
for mortgage aid" in the proviso.
Subsec. (d). Pub. L. 86-127, § 1(3), Inserted In two in-

stances "excluding the average amount (except interest) on deposit in an escrow fund created under section 1279a of this title".
Subsec. (c). Pub. L. 86-127, § 1(4), inserted after
"commitments" the words "for services in connection
with the escrow fund authorized by section 1279a of
this title".
Subsec. (f). Pub. L. 86-123, §1(3), substituted "sec-

tions 1101 to 1110" for "sections 1101 to 1109" of Act
June 29, 1936, which, for purposes of codification, has
been changed to "sections 1271 to 1279 of this title".

1954-Act Sept. 3, 1954, provided standards of eligi-

bility for both mortgages and loans, set up restrictions, and provided for premium charges.

1953-Subsec. (a)(2). Act Aug. 15, 1953, § 2(1), added

"or, in the case of vessels, constructed under subchapter V of this title, involved in an obligation In a
principal amount which does not exceed 75 per
centum of the cost of the vessel (exclusive of construction-differential subsidy and cost of national-defense
features)".
Subsec. (a)(8). Act Aug. 15, 1953. § 2(2), added "construction of vessels under subchapter V of this chapter".
Subsecs. (a)(8), (c). Act Aug. 15, 1953, § 2(3), ex-

tended coverage to vessels engaged in foreign trade.

1950-Subsee. (a)(2), (7), (8). Act Sept. 28, 1950, in-

serted provisions concerning purchase of vessels for

use on the Great Lakes pursuant to the Merchant
Ship Sales Act of 1946.

1939-Subsec. (a)(8). Act Aug. 4, 1939, included mort-

gages to secure new loans or advances made to aid financing of vessels designed for use in the fishing trade
or Industry.
EFFECTIVE DATE OF 1960 AMENDMENT

Amendment by Pub. L. 86-518 applicable only to vessels delivered by the shipbuilder on or after Jan. 1,
1946, and with respect to such vessels shall become effective on Jan. 1, 1960, and with respect to vessels delivered by the shipbuilder before Jan. 1, 1946, the pro-

visions of this chapter existing immediately before
June 12, 1960. shall continue in effect, see section 8(a)
of Pub. L. 86-518, set out as a note under section 1125
of this title.

REVISION OF CONTRACTS, COMMITMENTS To INSURE
MORTGAGES, MORTGAGES, AND MORTGAGE INSURANCE
CONTRACTS ENTERED INTO PRIOR TO JUNE 12, 1960

For provisions authorizing revision, see section 8(c)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
COMMERCIAL EXPECTANCY OR PERIOD OF DEPRECIATION
OF TANKERS AND OTHER LIQUID BULK CARRIERS

Nothing in any amendment made by Pub. L. 86-518

to operate or be interpreted to change from 20 to 25
years the provisions of this chapter relating to the
commercial expectancy or period of depreciation of
any tanker or other liquid bulk carrier, see section 9 of
Pub. L. 86-518, set out as a note under section 1125 of

this title.

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1271, 1273,

1279a, 1279c of this title.
§ 1275. Defaults

(a) Rights of obligee
In the event of a default, which has continued for thirty days, in any payment by the obli-

Page 400

gor of principal or interest due under an obligation guaranteed under this subchapter, the obligee or his 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 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 notify the obligee or his agent of
such default and the obligee or his 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 sixty 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 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.
(c) Secretary to complete, sell or operate property
In the event of any payment 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 or 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 1272
of this title 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

Page 401

TITLE 46-SHIPPING

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 chapter 31 of title 31,
and the purposes for which securities may be
issued under such chapter, 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 the Secretary shall receive through the
sale of property an amount of cash in excess of
any payment made to an obligee under subsection (a) or (b) of this section and the expenses
of collection of such amounts, he shall pay such
excess to the obligor.
(June 29, 1936, ch. 858, title XI, § 1105, as added
June 23, 1938, ch. 600, § 46, 52 Sta. 971, and
amended Aug. 15, 1953, ch. 513, § 3, 67 Stat. 626;
Sept. 3, 1954, ch. 1265, § 5, 68 Stat. 1272; Aug. 7,
1956, ch. 1026, § l(e)-(g), 70 Stat. 1087; July 15,
1958, Pub. L. 85-520, 72 Stat. 358; Oct. 21, 1970,
Pub. L. 91-469, § 33, 84 Stat. 1035; Oct. 19, 1972,
Pub. L. 92-507, § 3, 86 Stat. 914; Dec. 22, 1980,
Pub. L. 96-561, title II, § 220(4), 94 Stat. 3294;
Aug. 6, 1981, Pub. L. 97-31, § 12(136), 95 Stat.
166; Aug. 13, 1981, Pub. L. 97-35. title XVI,
§ 1606(e), 95 Stat. 752.)
11-617 VOL. IN 0-84-28

§ 1275
CODIFICATION

In subsec. (d), "chapter 31 of title 31" and "such
chapter" were substituted for "tile Second Liberty
Bond Act, as amended" and "such Act, as amended,",
respectively, on authority of Pub. L. 97-258, § 4(b),
Sept. 13, 1982, 96 Stat. 1067, the first section of which
enacted Title 31, Money and Finance.
AMENDMENTS

1981-Subsecs. (a) to (c). Pub. L. 97-31 struck out "of
Commerce" following "Secretary" wherever appearIng.
Subsec. (d). Pub. L. 97-35 struck out of first sentence
the requirement of payment from the appropriate subfund established under section 1274(g)(2) of this title.
Pub. L. 97-31 struck out "of Commerce" following
"Secretary" in five instances.
Subsec. (e). Pub. L. 97-31 struck out "of Commerce"
following "Secretary" in four instances.
1980-Subsec. (d). Pub. L. 96-561 inserted in first
sentence ", and shall be paid from the appropriate
subfund required to be established under section
1274(g)(2) of this title" following "paid in cash".
1972-Subsec. (a). Pub. L. 92-507 substituted provisions relating to the rights of obligee to demand and
receive payment from the Secretary under certain circumstances, for provisions relating to the rights of
mortgagee and lender to demand and receive payment
under certain circumstances and tie authority of the
Secretary to terminate the insurance contract by notification to the mortgagee or the lender as the case
may be.
Subsec. (b). Pub. L. 92-507 added provisions relating
to notification of default to the obligee, and payment
of unpaid principal and interest amount, by the Secretary within certain time. Former subsec. (b) redesignated (d).
Subsec. (c). Pub. L. 92-507 incorporated substantially
the provisions of subsec. (d) into subsec. (c). Former
subsec. (c) is now covered by subsec. (e).
Subsec. (d). Pub. L. 92-507 incorporated provisions of
former subsec. (b) into subsec. (d). Former subsec. (d)
is now covered by subsec. (c).
Subsec. (e). Pub. L. 92-507 incorporated provisions of
former subsec. (c) relating to actions by the Secretary
in the event of defaults by mortgagors and borrowers,
into subsec. (e), and substituted therefor provisions relating to actions by the Secretary in the event of defaults by obligors of guaranteed obligations and related agreements. Provisions of former subsec. (e) relating to termination and cancellation of insurance contracts and the incontestability of such contracts
except for fraud, duress or mutual mistake of fact are
omitted.
1970-Subsec. (d). Pub. L. 91-469 substituted provision for Inclusion of interest in the installments on the
purchase price remaining unpaid at a rate not less
than a rate determined by the Secretary of the Treasury, taking into consideration the current average
market yield on outstanding maketable obligations of
the United States with remaining periods to maturity
comparable to the average maturities of such installments, adjusted to the nearest one-eighth of 1 per
centum plus an administrative cost allowance, for
prior rate of 3Xi per centum per annum on installments
of purchase price remaining unpaid.
1958-Subsec. (b). Pub. L. 85-520 authorized the Secretary of Commerce to issue notes or obligations
whenever the moneys in the Federal Ship Mortgage
Insurance Fund are Insufficient to pay amounts required to be paid under subsec. (a) of this section.
1956-Subsec. (a)(1), (2). Act Aug. 7. 1956, § l(c),
eliminated "the insured portion of" preceding "the
unpaid principal amount", wherever appearing.
Subsec. (c)(1). Act Aug. 7, 1956, § 1(f), substituted
"such excess to tile borrower" for "to the mortgagee
such cash amounts to the extent that the mortgagee
has not been made whole through other sources for

TITLE 46-SHIPPING

§1276

amounts advanced to the mortgagor but in no event
shall such payments to the mortgagee exceed 10 per
centum of the unpaid principal amount of mortgage
and the interest thereon, and any excess of the
amounts thus due the Government and the mortgagee
shall be paid to the mortgagor".
Subsec. (c)(2). Act Aug. 7, 1956, § l(g), substituted
"such excess to the borrower" for the words "to the
lender such cash amount to the extent that the lender
has not been made whole through other sources for
amounts advanced to the borrower but in no event
shall such payment to the lender exceed 10 per
centum of the unpaid principal amount of loan and
the interest thereon, and any excess of the amounts
thus due the Government and the lender shall be paid
to the borrower".
1954-Act Sept. 3, 1954, gave new rights to both borrowers and lenders and set up new foreclosure procedures.
1953-Act Aug. 15, 1953, provided that in the event
of a default in payment of either principal or Interest,
the lender may tender an assignment of the mortgage
and all collateral to the Secretary who shall promptly
pay the unpaid balance in cash, provided for the foreclosure and repossession of mortgaged vessels; allowed
the Secretary to take any necessary steps to minmlze
the loss, and made all insurance commitments conclusive.
SEcRETARY OF COMMERCE;

FISHING VESSEL INSURANCE

Pub. L. 86-577, July 5, 1960, 74 Stat. 314, provided:
"That in order to permit the efficient execution of
functions relating to the issuance of Federal ship
mortgage insurance on fishing vessels, pursuant to the
Merchant Marine Act of June 29, 1936, as amended
(this chapter] (49 Stat. 1985; 46 U.S.C., 1952 edition,
sec. 1271 and the following), which functions relating
to fishing vessels have been transferred to the Secretary of the Interior pursuant to the Fish and Wildlife
Act of 1956 [section 742a et seq. of Title 16, Conservation], the Secretary of the Interior hereafter may exercise authority comparable to the authority of the
Secretary of Commerce under the said Merchant
Marine Act of 1936 [this chapter], including, but not
limited to the authority contained in the amendment
to such Act of July 15, 1958 (72 Stat. 358) [amending
this section]."
Functions relating to the issuance of Federal ship
mortgage insurance on fishing vessels, which functions
were transferred to the Secretary of the Interior, were
retransferred to the Secretary of Commerce by Reorg.
Plan No. 4 of 1970, § 1, eff. Oct. 3, 1970, 35 F.R. 15627,
84 Stat. 2090, set out in the Appendix to Tit'a 5, Government Organization and Employees.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1271, 1274,
1279c. 1280 of this title.
4 1276. Offenses and penalties
Whoever, for the purpose of obtaining any
loan or advance of credit from any person, partnership, association, or corporation with the
intent that an obligation relating to such loan
or advance of credit shall be offered to or accepted by the Secretary to be guaranteed, or
for the purpose of obtaining any extension or
renewal of any loan, advance of credit, or mortgage relating to an obligation guaranteed by
the said Secretary, or the acceptance, release,
or substitution of any security on such a loan,
advance of credit, or for the purpose of influencing in any way the action of said Secretary
under this subchapter, makes, passes, utters, or
publishes, or causes to be made, passed, uttered,
or published any statement, knowing the same
to be false, or alters, forges, or counterfeits, or

Page 402

causes or procures to be altered, forged, or
counterfeited, any instrument, paper, or document, or utters, publishes, or passes as true, or
causes to be uttered, published, or passed as
true, any instrument, paper, or document,
knowing it to have been altered, forged, or
counterfeited, or willfully overvalues any security, asset, or income shall be guilty of a misdemeanor and punished as provided under the
first paragraph of section 1228 of this title.
(June 29, 1936, ch. 858, title XI, § 1106, as added
June 23, 1938, ch. 600, § 46, 52 Stat. 972, and
amended Sept. 3, 1954, ch. 1265, § 6, 68 Stat.
1275; July 31, 1959, Pub. L. 86-123, § 1(4), 73
Stat. 269; June 12, 1960, Pub. L. 86-518, § 6, 74
Stat. 216; Oct. 19, 1972, Pub. L. 92-507, § 3, 86
Stat. 915; Aug. 6, 1981, Pub. L. 97-31, § 12(136),
95 Stat. 166.)
AMENDMENTS

1981-Pub. L. 97-31 struck out "of Commerce" following "Secretary" in three instances.
1972-Pub. L. 92-507 substituted provisions relating
to offenses and penalties, for provisions relating to insurance of mortgages securing existing loans and refinancing of existing mortgages.
1960-Pub. L. 86-518 substituted "twenty-five years
from the date of the original mortgage" for "the maturity date of the original mortgage" in clauses (1),
(2), and (3).
1959-Pub. L. 86-123 inserted "as provided in section
1276a of this title or" following "except" in opening
provisions.
1954-Act Sept. 3, 1954, limited a new mortgage for
refinancing to the same maturity date as the old mortgage, and added par. (4).
EFFECTIVE DATE OF 1960 AMENDMENT

Amendment by Pub. L. 86-518 applicable only to vessels delivered by the shipbuilder on or after Jan. 1,
1946, and with respect to such vessels shall become effective on Jan. 1, 1960, and with respect to vessels de.
livered by the shipbuilder before Jan. 1, 1946, the provisions of this chapter existing immediately before
June 12, 1960, shall continue In effect, see section 8(a)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
REVISION

OF CONTRACTS,

MORTGAGES,

MORTGAGES,

COMMITMENTS
AND MORTGAGE

To

INSURE

INSURANCE

CONTRACTS ENTERED INTO PRIOR TO JUNE 12, 1960

For provisions authorizing revision, see section 8(c)
of Pub. L. 86-518, set out as a note under section 1125
of this title.
COMMERCIAL EXPECTANCY OR PERIOD OF DEPRECIATION
OF TANKERS AND OTHER LIQUID BULK CARRIERS

Nothing in any amendment made by Pub. L. 86-518
to operate or be Interpreted to change from 20 to 25
years the provisions of this chapter relating to the
commercial expectancy or period of depreciation of
any tanker or other liquid bulk carrier, see section 9 of
Pub. L. 80-518, set out as a note under section 1125 of
this title.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1274, 1279c of
this title.
§ 1276a to 1278. Repealed. Pub. L. 92-507, § 3, Oct.
19, 1972, 86 Stat, 910
Section 1276a, act June 29, 1936, ch. 858, title XI,
§ 1107, as added July 31, 1959, Pub. L. 86-123, § 1(5), 73
Stat. 269, and amended June 12, 1960, Pub. L. 86-518,

TITLE 46-SHIPPING

Page 403

§i1, 7, 74 Stat. 216, related to the authority of the
Secretary to make commitments to insure mortgages.
Section 1277, act June 29, 1936, ch. 858, title XI,
§ 1108, formerly § 1107, as added June 23, 1938. ch.
600, j 46, 52 Stat. 973, amended Sept. 3, 1954, ch. 1265,
§ 7, 68 Stat. 1275, and renumbered July 31, 1959, Pub.
L. 86-123, § 1(1), 73 Stat. 269, related to offenses and
set the penalties therefor. See section 1276 of this
title.
Section 1278, act June 29, 1936, ch. 858, title XI,
§ 1109, formerly § 1108, as added June 23, 1938, ch.
600, § 46, 52 Stat. 973, amended Sept. 3, 1954, ch. 1265,
j 8, 68 Stat. 1276, and renumbered July 31, 1959, Pub.
L. 86-123, § 1(1), 73 Stat. 269, authorized the promulgation of rules and regulations. See section 1279b of
this title.
§ 1279. Authorization of appropriations
There is authorized to be appropriated the
sum of $1,000,000 and such further sums as
may be necessary to carry out the provisions of
this subchapter.
(June 29, 1936, ch. 858, title XI, § 1107, formerly § 1109, as added June 23, 1938, ch. 600, § 46,
52 Stat. 973, amended Sept. 3, 1954, ch. 1265,
§ 9, 68 Stat. 1276; renumbered § 1110, July 31,
1959, Pub. L. 86-123, § 1(1), 73 Stat. 269, and renumbered § 1107, Oct. 19, 1972, Pub. L. 92-507,
§ 4, 86 Stat. 916.)
AMENDMENTS

1954-Act Sept. 3, 1954, reenacted section without
change.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1272, 1274,
1279c of this title.
§ 1279a. Escrow fund
(a) Creation
If the proceeds of an obligation guaranteed
under this subchapter 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 subchapter whose
proceeds are to be so used which is equal to: (1)
the excess of the principal amount of all obligations whose proceeds are to be so used over 75
per centum, or 87X per centum, whichever is
applicable under section 1274 of this title, of
the amount paid by or for the account of the
obligor for the construction, reconstruction, or
reconditioning of the vessel or vessels; (i) 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.
(h) Disbursement prior to termination of escrow
agreement
The Secretary shall, as specified in the
escroav agreement, disburse the escrow fund to
pay amounts the obligor is obligated to pay as

§!1279a

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 subchapter, to
redeem such obligations in connection with a
refinancing under paragraph (4) of section
1274(a) of this title 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 87Y, per centum,
whichever is applicable under section 1274 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.
(June 29, 1936, ch. 858, title XI, § 1108, formerly § 1111, as added July 31, 1959, Pub. L. 86-127,
§ 1(2), 73 Stat. 272, and renumbered and
amended Oct. 19, 1972, Pub. L. 92-507, § 5, 86
Stat. 916; Aug. 6, 1981, Pub. L. 97-31, § 12(136),
95 Stat. 166.)
REFERENCES IN TEXT

Paragraph (4) of section 1274(a) of this title, referred to in subsec. (b), was redesignated paragraph
(5) of section 1274(a) of this title by Pub. L. 96-561,
title II, § 220(3)(A)(iii), Dec. 22, 1980, 94 Stat. 3292.

412791h

TITLE 46-SHIPPING
AMENDMENTS

1981-Subsecs. (a). (b), (d), (f). Pub. L. 97-31 struck
out "of Commerce" following "Secretary" wherever
appearing.
1972-Subsec. (a). Pub. L. 92-507 substantially reenacted subsec. (a) and substituted requirement that an
escrow fund be created out of proceeds of obligations,
for requirement that such fund be created out of sale
of bonds.
Subsec. (b). Pub. L. 92-507 substituted provisions for
the disbursement of escrow fund to pay certain payments the obligor is obligated to pay, for provisions
for the disbursement of such fund to pay certain payments the mortgagor or borrower is obligated to pay.
Subsec. (c). Pub. L. 92-507 substituted provisions for
the disbursement of the remainder of funds in the
escrow fund to the obligor on the termination of the
escrow agreement, for provisions for the disbursement
of such funds to the mortgagor or borrower as the
case may be.
Subsec. (d). Pub. L. 92-507 substituted "the escrow
fund" for "such fund".
Subsec. (e). Pub. L. 92-507 substituted provisions for
payment of income to obligor, for provisions for payment of such Income to mortgagor or borrower.
Subsec. (f). Pub. L. 92-507 substituted "to protect
fully" for "to fully protect".
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1271, 1273,
1274 of this title.
} 1279b. Rules and regulations
The Secretary is authorized and directed to
make such rules and regulations as may be
deemed necessary or appropriate to carry out
the purposes and provisions of this subchapter.
(June 29, 1936. ch. 858, title XI, § 1109, formerly § 1112, as added Dec. 14, 1967, Pub. L. 90-194,
81 Stat. 580, and renumbered and amended Oct.
19, 1972, Pub. L. 92-507, § 5, 86 Stat. 916, 917;
Aug. 6, 1981, Pub. L. 97-31, § 12(136), 95 Stat.
166.)
AMENDMENTS

1981-Pub. L. 97-31 struck out "of Commerce" following "Secretary".
1972-Pub. L. 92-507 substituted authority of the
Secretary to make rules and regulations, for provisions
relating to insurance of mortgage securing loan for
restoration and return of merchant vessel, Kaiulani.
§ 1279c. Ocean thermal energy conversion demonstra.
tion facilities and plantships
(a) Financing of construction, reconstruction, or reconditioning
Pursuant to the authority granted under section 1273(a) of this title, the Secretary, upon
such terms as he shall prescribe, may guarantee
or make a commitment to guarantee, payment
of the principal of and interest on an obligation
which aids in financing, including reimbursement of an obligor for expenditures previously
made for, construction, reconstruction, or reconditioning of a commercial demonstration
ocean thermal energy conversion facility or
plantship owned by citizens of the United
States. Guarantees or commitments to guarantee under this subsection shall be subject to all
the provisos, requirements, regulations, and
procedures which apply to guarantees or commitments to guarantee made pursuant to section 1274(a)(1) of this title, except that-

Page 404

(1) no guarantees or commitments to guarantee may be made by the Secretary under
this subsection before October 1, 1981;
(2) the provisions of subsection (d) of section 1274 of this title shall apply to guarantees or commitments to guarantee for that
portion of a commercial demonstration ocean
thermal energy conversion facility or plantship not to be supported with appropriated
Federal funds;
(3) guarantees or commitments to guarantee made pursuant to this section may be in
an aggregate principal amount which does
not exceed 87X percent of the actual cost or
depreciated actual cost of the commercial
demonstration ocean thermal energy conversion facility or plantship: Provided, That, if
the commercial demonstration ocean thermal
energy conversion facility or plantship is supported with appropriated Federal funds, such
guarantees or commitments to guarantee may
not exceed 87Y2 percent of the aggregate principal amount of that portion of the actual
cost or depreciated actual cost for which the
obligor has an obligation to secure financing
in accordance with the terms of the agreement between the obligor and the Department of Energy or other Federal agency; and
(4) the provisions of this section may be
used to guarantee obligations for a total of
not more than 5 separate commercial demonstration ocean thermal energy conversion
facilities and plantships or a demonstrated
400 megawatt capacity, whichever comes first.
(b) Certification of reasonableness of risk
A guarantee or commitment to guarantee
shall not be made under this section unless the
Secretary of Energy, in consultation with the
Secretary, certifies to the Secretary that, for
the ocean thermal energy conversion facility or
plantship for which the guarantee or commitment to guarantee is sought, there is sufficient
guarantee of performance and payment to
lower the risk to the Federal Government to a
level which is reasonable. The Secretary of
Energy must base his considerations on the following: (1) the successful demonstration of the
technology to be used in such facility at a scale
sufficient to establish the likelihood of technical and economic viability in the proposed
market; and (2) the need of the United States
to develop new and renewable sources of energy
and the benefits to be realized from the construction and successful operation of such facility or plantship.
(c) OTEC Demonstration Fund
A special subaccount in the Federal Ship Financing Fund, to be known as the OTEC Demonstration Fund, shall be established on October 1, 1981. The OTEC Demonstration Fund
shall be used for obligation guarantees authorized under this section which do not qualify
under other sections of this subchapter. Except
as specified otherwise in this section, the operation of the OTEC Demonstration Fund shall
be identical with that of the parent Federal
Ship Financing Fund: except that, notwithstanding the provisions of section 1274(g) of
this title. (1) all moneys received by the Secre-

TITLE 46-SHIPPING

Page 405

tary pursuant to sections 1271 through 1276
and 1279 of this title with respect to guarantees
or commitments to guarantee made pursuant to
this section shall be deposited only in the
OTEC Demonstration Fund, and (2) whenever
there shall be outstanding any notes or other
obligations issued by the Secretary pursuant to
section 1275(d) of this title with respect to the
OTEC Demonstration Fund, all moneys received by the Secretary pursuant to sections
1271 through 1276 and 1279 of this title with
respect to ocean thermal energy conversional
facilities or plantships shall be deposited in the
OTEC Demonstration Fund. Assets in the
OTEC Demonstration Fund may at any time be
transferred to the parent fund whenever and to
the extent that the balance thereof exceeds the
total guarantees or commitments to guarantee
made pursuant to this section then outstanding, plus any notes or other obligations issued
by the Secretary pursuant to section 1275(d) of
this title with respect to the OTEC Demonstration Fund. The Federal Ship Financing Fund
shall not be liable for any guarantees or commitments to guarantee issued pursuant to this
section. The aggregate unpaid principal amount
of the obligations guaranteed with the backing
of the OTEC Demonstration Fund and outstanding at any one time shall not exceed
$1,650,000,000.
(d) Notes and obligations
The provisions of section 1275(d) of this title
shall apply specifically to the OTEC Demonstration Fund as well as to the Fund: Provided,
however, That any notes or obligations issued
by the Secretary pursuant to section 1275(d) of
this title with respect to the OTEC Demonstration Fund shall be payable solely from proceeds
realized by the OTEC Demonstration Fund.
(e) Taxability of interest
The interest on any obligation guaranteed
under this section shall be included in gross
income for purposes of chapter 1 of title 26.
(June 29, 1936, ch. 858, § 1110, as added Aug. 3,
1980, Pub. L. 96-320, title II, § 203(a), 94 Stat.
992, and amended Aug. 6, 1981, Pub. L. 97-31,
§ 12(136), 9F Stat. 166; Aug. 13, 1981, Pub. L.
97-35, title XVI, § 1606(f), 95 Stat. 752.)
AMENDMENTS

1981-Subsecs. (a), (b). Pub. L. 97-31 struck out "of
Commerce" following "Secretary" wherever appearing.
Subsec.
(c).
Pub.
L.
97-35
substituted
"$1,650,000,000" for "$2,000,000,000".
Pub. L. 97-31 struck out "of Commerce" following
"Secretary" wherever appearing.
Subsec. (d). Pub. L. 97-31 struck out "of Commerce"
following "Secretary".
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1273 of this
title.
§ 1280. Advances to fund
The Secretary is authorized to advance to the
Federal Ship Financing Fund from the "Vessel
operations revolving fund" (46 U.S.C. 1241a),
such amounts :s may be required for the payment, pursuant .o section 1275 of this title, of

§ 1281

unpaid principal amounts of defaulted mortgages and loans and of unpaid interest thereon:
Provided, That such advances shall be repaid to
the "Vessel operations revolving fund" as soon
as practicable consistent with the status of the
Federal Ship Financing Fund: Providedfurther,
That the total advances outstanding at any one
time shall not exceed $10,000,000.
(Pub. L. 85-469, title I, § 101, June 25, 1958, 72
Stat. 231; Pub. L. 92-507, § 2, Oct. 19, 1972, 86
Stat. 910; Pub. L. 97-31, § 12(137), Aug. 6, 1981,
95 Stat. 166.)
CODIFICATION

"Federal Ship Financing Fund" was substituted for
"Federal Ship Mortgage Insirance Fund" to conform
to change of name in the amendment of section 1272
of this title by Pub. L. 92-507, 1 2, Oct. 19, 1972, 86
Stat. 910.
Section was not enacted as part of the Merchant
Marine Act, 1936, which comprises this chapter.
AMENDMENTS

1981-Pub. L. 97-31 struck out "of Commerce" following "Secretary".
SUBCHAPTER XII-WAR RISK
INSURANCE
§ 1281. Definitiois
As used in this subchapter(a) The term "American vessels" includes any
vessel registered, enrolled, or licensed under the
laws of the United States and any undocumented vessel owned or chartered by or made available to the United States or any department or
agency thereof and any tug or barge or other
watercraft (documented or undocumented)
owned by a citizen of the United States used in
essential water transportation or in the fishing
trade or industry, except watercraft used exclusively in or for sport fishing.
(b) The term "transportation in the waterborne commerce of the United States" includes
the operation of vessels In the fishing trade or
industry, except watercraft used exclusively in
or for sport fishing.
(c) The term "war risks" includes to such
extent as the Secretary may determine all or
any part of those losses which are excluded
from marine insurance coverage under a "free
of capture and seizure" clause, or analogous
clauses.
(d) The term "citizen of the United States"
includes corporations, partnerships, and associations existing, authorized, or organized under
the laws of the United States or any State, district, Territory, or possession thereof.
(e) The term "Secretary" shall mean the Secretary of Transportation.
(June 29, 1936, ch. 858, title XII, § 1201, as
added Sept. 7, 1950, ch. 906, 64 Stat. 773; Aug. 6,
1981, Pub. L. 97-31, § 12(138), 95 Stat. 166.)
AMENDMENTS

1981-Subsec. (e). Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce".

TITLE 46-SHIPPING

0 1282

111282. Authority to provide insurance; consideration
of risk
(a) The Secretary, with the approval of the
President, and after such consultation with interested agencies of the Government as the
President may require, may provide insurance
and reinsurance against loss or damage by war
risks in the manner and to the extent provided
In this subchapter, whenever it appears to the
Secretary that such insurance adequate for the
needs of the water-borne commerce of the
United States cannot be obtained on reasonable
terms and conditions from companies authorized to do an insurance business in a State of
the United States.
(b) Any insurance or reinsurance Issued under
any of the provisions of this subchapter shall
be based, insofar as practicable, upon consideration of the risk involved.
(June 29, 1936, ch. 858, title XII, § 1202, as
added Sept. 7, 1950, ch. 906, 64 Stat. 773.)
CROSS REFERENCES

Expiration of authority to provide Insurance, see
section 1294 of this title.
Insurance of interests of United States, see sections
869 and 1202 of this title.
SECTION RErEnRE TO IN OTHER SECTIONS
This section is referred to in section 1283 of this
title.
} 1283. Persons, property, and interests insurable
The Secretary may provide the insurance and
reinsurance authorized by section 1282 of this
title with respect to the following persons,
property, or interest:
(a) American vessels, including vessels under
construction, foreign-flag vessels owned by citizens of the United States or engaged in transportation in the water-borne commerce of the
United States or in such other transportation
by water or such other services as may be
deemed by the Secretary to be in the interest of
the national defense or the national economy
of the United States, when so engaged. In determining whether to grant such insurance or
reinsurance to foreign-flag vessels, the Secretary shall further consider the characteristics,
the employment, and the general management
of the vessel by the owner or charterer. American- and foreign-flag vessels so insured or reinsured shall be subject to such vessel location reporting requirements as the Secretary may establish by regulation.
(b) Cargoes shipped or to be shipped on any
such vessels, including shipments by express or
registered mail; cargoes owned by citizens or
residents of the United States, its Territories or
possessions; cargoes imported to, or exported
from, the United States, its Territories or possessions, and cargoes sold or purchased by citizens or residents of the United States, its Territories or possessions, under contracts of sale or
purchase by the terms of which the risk of loss
by war risks or the obligation to provide insurance against such risks is assumed by or falls
upon a citizen or resident of the United States,
its Territories or possessions; cargoes shipped
between ports in the United States, or between

Page 406

ports in the United States and its Territories
and possessions, or between ports in such Territories or possessions. For the purposes of this
subchapter, the term "cargo" shall include
loaded or empty containers located aboard such
vessels.
(e) The disbursements, including advances to
masters and general average disbursements,
and freight and passage moneys of such vessels.
(d) The personal effects of the masters, officers, and crews of such vessels, and of other
persons transported on such vessels.
(e) Masters, officers, members of the crews of
such vessels and other persons employed or
transported thereon against loss of life, injury,
detention by an enemy of the United States following capture.
(f) Statutory or contractual obligations or
other liabilities of such vessels or of the owner
or charterer of such vessels of the nature customarily covered by insurance.
(June 29, 1936, ch. 858, title XII, § 1203, as
added Sept. 7, 1950, ch. 906, 64 Stat. 773, and
amended Oct. 17, 1976, Pub. L. 94-523, §§ 1-3,
90 Stat. 2474.)
AMENDMENTS

1976-Subsec. (a). Pub. L. 94-523, § 1, prescribed criteria to be considered In granting insurance or reinsurance to foreign-flag vessels and made insured or reinsured vessels subject to vessel location reporting requirements established by regulation.
Subsec. (b). Pub. L. 94-523, § 2, defined term "cargo"
to include loaded or empty containers located aboard
the vessels.
Subsec. (f). Pub. L. 94-523, § 3, substituted "Statutory or" for "Statutory on".
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1284 of this
title.
§ 1284. Risks other than war risks
Whenever the Secretary shall insure any risk
included under subsections (d), (e), or (f) of section 1283 of this title, insofar as it concerns liabilities relating to the masters, officers, and
crews of such vessels or to other persons transported thereon, the insurance on such risks
may include risks other than war risks to the
extent that the Secretary determines to be necessary or advisable.
(June 29, 1936, ch, 858, title XII, § 1204, as
added Sept. 7, 1950, ch. 906, 64 Stat. 774.)
§ 1285. Insurance of property of Government departments and agencies
(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 subchapter, except
as provided in sections 721 and 722 of title 40.
(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

Page 407

TITLE 46-SHIPPING

Defense and such other agencies are authorized
to execute such indemnity agreement with the
Secretary.
(June 2C 1936, ch. 858, title XII, § 1205, as
added Sept. 7, 1950, ch. 906, 64 Stat. 774.)
§ 1286. Liability insurance for persons performing
services or providing facilities for vessels
The Secretary is authorized to provide insurance for any person who performs services or
provides facilities for or with respect to any
American- or foreign-flag vessel, public or private, against legal liabilities that may be incurred by such person in connection with the
performance of such services or the providing
of such facilities. Such insurance shall not be
issued against liability to employees in respect
of employers' liability or workmen's compensation. No such insurance shall be provided
unless, in the opinion of the Secretary, such insurance is required in the prosecution of the
war effort or in connection with national defense and cannot be obtained at reasonable
rates or upon reasonable conditions from approved companies authorized to do insurance
business in any State of the United States.
(June 29, 1936, ch. 858, title XII, § 1206, as
added Sept. 7, 1950, ch. 906, 64 Stat. 774, and
amended Aug. 3, 1956, ch. 929, § 5, 70 Stat. 986.)
AMENDMENTS

1956-Act Aug. 3, 1956, deleted from first sentence
following "authorized" the words "during any time
the United States is at war or during any period of
emergency declared to exist by the President of the
United States".
§ 1287. Reinsurance; rates; allowances to insurance
carriers
(a) To the extent that he is authorized by
this subchapter to provide marine, war risk,
and liability insurance, the Secretary may reinsure, in whole or in part, any company authorized to do an insurance business in any State of
the United States. The Secretary may reinsure
with, or cede or retrocede to, any such company
any insurance or reinsurance provided by the
Secretary in accordance with the provisions of
this subchapter.
(b) Reinsurance shall not be provided by the
Secretary at rates less than nor obtained by the
Secretary at rates more than the rates established by the Secretary on the same or similar
risks or the rates charged by the insurance carrier for the insurance so reinsured whichever is
most advantageous to the Secretary, except
that the Secretary may make to the insurance
carrier such allowances for expenses on account
of the cost of services rendered or facilities furnished as he deems reasonably to accord with
good business practice, but such allowance to
the carrier shall not provide for any payment
by the carrier on account of solicitation for or
stimulation of insurance business.
(June 29, 1936, ch. 858, title XII, § 1207, as
added Sept. 7, 1950, ch. 906, 64 Stat. 775.)
§ 1288. Insurance fund; investments; appropriations
(a) The Secretary shall create an insurance
fund in the Treasury to enable him to carry out

§ 1208a

the provisions of this subchapter. Moneys ap.
propriated by Congress to carry out the provisions of this subchapter and all moneys received from premiums, salvage, or other recoveries and all receipts in connection with this
subchapter 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 subchapter shall be made from such
fund through the Fiscal Service, 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 subchapter are authorized to be appropriated to such fund.
(June 29, 1936, ch. 858, title XII, § 1208, as
added Sept. 7, 1950, ch. 906, 64 Stat. 775, and
amended Oct. 3, 1962, Pub. L. 87-743, 76 Stat.
740; Aug. 6, 1981, Pub. L. 97-31, § 12(139), 95
Stat. 166.)
AMENDMENTS

1981-Subsec. (a). Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce".
1962-Subsec. (a). Pub. L. 87-743 authorized the investment or reinvestment of all or part of the fund in
securities of the United States or in securities guaranteed as to principal and interest by the United States,
and required the interest and benefits accruing from
such securities to be deposited to the credit of the
fund.
TRANSFER OF FUNCTIONS

"Fiscal Service" was substituted for "Division of Disbursement" in subsec. (a) on authority of section
1(a)(1) of 1940 Reorg. Plan No. III, elf. June 30, 1940,
5 F.R. 2107, 54 Stat. 1231, set out in the Appendix to
Title 5, Government Organization and Employees,
which consolidated such division into the Fiscal Service of the Treasury Department. See section 306 of
Title 31, Money and Finance.
§ 1288a. Transfer of funds from Vessel Operations
Revolving Fund
For the war-risk insurance revolving fund, authorized by this subchapter, the Secretary of
Transportation is authorized to transfer to said
fund, at such times as it may become necessary
in order to place into effect the insurance coverage authorized by this subchapter, and in
such amounts as he may determine, not to
exceed a total of $10,000,000 from the "Vessel
Operations Revolving Fund".
(Nov. 1, 1951, ch. 664, ch. VI, § 601, 65 Stat. 746;
Aug. 6, 1981, Pub. L. 97-31, § 12(140), 95 Stat.
166.)
CODIFICATION

Section was not enacted as part of the Merchant
Marine Act, 1936, which comprises this chapter.
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce".

§1289

TITLE 46-SHIPPING

111289. Administrative provisions
(a) Issuance of policies, rules, and regulations; settlement of claims; valuation; rejection and review of
valuation
(1) The Secretary, in the administration of
this subchapter, may issue such policies, rules,
and regulations as he deems proper and may
adjust and pay losses, compromise and settle
claims, whether in favor of or against the
United States and pay the amount of any judgment rendered against the United States in any
suit, or the amount of any settlement agreed
upon, In respect of any claim under insurance
authorized by this subchapter.
(2) In respect of hull insurance, the valuation
in the policy for actual or constructive total
loss of the vessel insured shall be a stated valuation (exclusive of National Defense features
paid for by the Government) determined by the
Secretary which shall not exceed the amount
that would be payable if the vessel had been
requisitioned for title under section 1242(a) of
this title at the time of the attachment of the
insurance under said policy: Provided, That the
insured shall have the right within sixty days
after the attachment of the insurance under
said policy, or within sixty c.ays after determination of such valuation by the Secretary,
whichever is later, to reject such valuation, and
shall pay, at the rate provided for in said
policy, premiums upon such asserted valuation
as the insured shall specify at the time of rejection, but such asserted valuation shall not operate to the prejudice of the Government In any
subsequent action on the policy. In the event of
the actual or constructive total loss of the
vessel, if the insured has not rejected such valuation the amount of any claim therefor which
is adjusted, compromised, settled, adjudged, or
paid shall not exceed such stated amount, but
if the insured has so rejected such valuation,
the insured shall be paid as a tentative advance
only, 75 per centum of such valuation so determined by the Secretary and shall be entitled to
sue the United States in a court having jurisdiction of such claims to recover such valuation as
would be equal to the just compensation which
such court determines would have been payable
if the vessel had been requisitioned for title
under section 1242(a) of this title at the time of
the attachment of the insurance under said
policy: Provided, That in the event of an election by the insured to reject the stated valuation fixed by the Secretary and to sue in the
courts, the amount of the judgment will be payable without regard to the limitations contained in section 1242-1 of this title, although
the excess of any amounts advanced on account
of Just compensation over the amount of the
court judgment will be required to be refunded.
In the event of such court determination, premiums under the policy shall be adjusted on
the basis of the valuation as finally determined
and of the rate provided for in said policy.
(b) Forms and policies; rates; fees
The Secretary may prescribe and change
forms and policies, and fix, adjust, and change
the amounts insured and rates of premium provided for in this subchapter. The Secretary

Page 408

may charge and collect an annual fee in an
amount calculated to cover the expenses of
processing applications for insurance, the employment of underwriting agents, and the appointment of experts.
(c) Commercial practice controlling; limitation on
fees
The Secretary, in administering this subchapter, may exercise his powers, perform his
duties and functions, and make his expenditures, in accordance with commercial practice
in the marine insurance business. Except as authorized in subsection (d) of this section, no insurance broker or other person acting in a similar intermediary capacity shall be paid any fee
or other consideration by the Secretary by
virtue of his participation in arranging any insurance wherein the Secretary directly insures
any of the risk thereof.
(d) Underwriting agents
The Secretary may, and whenever he finds it
practical to do so shall, employ domestic companies or groups of domestic companies authorized to do a marine insurance business in any
State of the United States, to act as his underwriting agent. The Secretary may allow such
companies or groups of companies fair and reasonable compensation for servicing insurance
written by such companies or groups of companies as underwriting agent for the Secretary.
The services of such underwriting agents may
be utilized in the adjustment of claims under
insurance provided by this subchapter, but no
claim shall be paid unless and until it has been
approved by the Secretary. Such compensation
may include an allowance for expenses reasonably incurred by such agent, but such allowance shall not include any payment by such
agent on account of solicitation for or stimulation of insurance business.
(e) Employment of marine insurance experts
The Secretary without regard to the laws,
rules, or regulations relating to the employment of employees of the United States may
appoint and prescribe the duties of such
number of experts In marine insurance as he
deems necessary under this subchapter.
(f) Utilization of services of other Government agencies
The Secretary with the consent of any executive department, independent establishment, or
other agency of the Government, including any
field service thereof, may avail himself of the
use of information, services, facilities, officers,
and employees thereof in carrying out the provisions of this subchapter.
(June 29, 1936, ch. 858, title XII, § 1209, as
added Sept. 7, 1950, ch. 906, 64 Stat. 775, and
amended Aug. 3, 1956, ch. 929, § 1, 70 Stat. 984;
Aug. 22, 1964, Pub. L. 88-478, § 1, 78 Stat. 587;
Oct. 17, 1976, Pub. L. 94-523, § 4, 90 Stat. 2474.)
REFERENCES IN TEXT

Section 1242-1 of this title, referred to in subsec.
(a)(2), was omitted from the Code.

TITLE 46-SHIPPING

Page 409
AMENDMENTS

1976-Subsec. (b). Pub. L. 94-523 authorized Imposition and collection of an annual fee to cover expenses
of processing applications for insurance, employment
of underwriting agents, and appointment of experts.
1964-Subsec. (a)(2). Pub. L. 88-478 eliminated provisions which required for purposes of hull insurance, in
the case of a construction-subsidized vessel, that the
valuation determined for actual or constructive loss
for the period of insurance prior to requisition for title
or use, be reduced by such proportion as the amount
of construction subsidy paid with respect to the vessel
bears to the entire construction cost and capital improvements thereof (excluding the cost of national defense features), and for the period of insurance after
requisition for use limited the valuation to the amount
which would be payable under section 1212 of this
title.
1956-Subsec. (a). Act Aug. 3, 1956, eliminated provisions limiting settlement of claims of vessels insured
under this subchapter to vessel's fair and reasonable
value, designating the remaining provisions, as so
amended, as par. (1), and added par. (2).
EFFECTIVE DATE OF

1964

AMENDMENT

Section 2 of Pub. L. 88-478 provided that: "The
amendments made by this Act [amending subsec.
(a)(2) of this section] shall be applicable to war risk insurance coverage attaching after the date of enactment (Aug. 22, 19641."
AMENDMENT OF INSURANCE IN FORCE ON

AUOUST 3, 1956

Section 4 of act Aug. 3, 1956, provided that: "All warrisk insurance issued under title XII of the Merchant
Marine Act, 1936 [this subchapter], which is in force
on the date of the enactment of this Act [Aug. 3, 1956]
shall, as of the beginning of such date, be deemed to
have been amended to conform to the requirements of
section 1209 of the Merchant Marine Act, 1936 [this
section], as amended by this Act unless the insured,
within ten days after such date, objects to such
amendment."
§ 1290. Seamen's rights unaffected
This subchapter shall not affect rights of
seamen under existing law.
(June 29, 1936, ch. 858, title XII, § 1210, as
added Sept. 7, 1950, ch. 906, 64 Stat. 776.)
§ 1291. Reports to Congress
The Secretary shall include in his annual
report to Congress a detailed statement of all
activities and of all expenditures and receipts
under this subchapter for the period covered by
such report.
(June 29, 1936, ch. 858, title XII, § 1211, as
added Sept. 7, 1950, ch. 906, 64 Stat. 776, and
amended Nov. 8, 1965, Pub. L. 89-348, § 1(7), 79
Stat. 1310.)
AMENDMENTS

1965-Pub. L. 89-348 repealed provisions of this section which required quarterly reports of contracts entered into, proposed contracts, and general progress
with respect to war risk insurance activities under this
chapter.

§ 1292. Actions on claims for losses; jurisdiction of
courts; limitation or actions
Upon disagreement as to a loss insured under
this subchapter, suit may be maintained
against the United States in admiralty in the
district in which the claimant or his agent re-

§ 1293

sides, and this remedy shall be exclusive of any
other action by reason of the same subject
matter against any agent or employee of the
United States employed or retained under this
subchapter. If the claimant has no residence in
the United States, suit may be brought in the
district court of the District of Columbia or in
such other district court in which the Attorney
General of the United States agrees to accept
service. Such suits shall be heard and determined under the provisions of the Act of March
9, 1920, as amended (known as the Suits in Adiairalty Act) (46 U.S.C. 741 et seq.]. All persons
having or claiming or who might have an Interest in such insurance, may be made parties
either initially or upon the motion of either
party. In any case where the Secretary acknowledges the indebtedness of the United
States on account of such insurance, and there
is a dispute as to the persons entitled to receive
payment, the United States may bring an
action in the nature of a bill of interpleader
against such parties, in the District Court for
the District of Columbia, or in the district court
of the district in which any such person resides.
In such actions any party, if not a resident of or
found within the district, may be brought in by
order of court served in such reasonable
manner as the court directs. If the court is satisfied that persons unknown might assert a
claim on account of such insurance, it may
direct service upon such persons unknown by
publication in the Federal Register. Judgment
in any such suit shall discharge the United
States from further liability to any parties to
such action, and to all persons when service by
publication upon persons unknown is directed
by the court. The period within which suits
may be commenced contained in said Suits in
Admiralty Act shall, if claim be filed therefor
within such period, be suspended from such
time of filing until the claim shall have been
administratively denied by the Secretary and
for sixty days thereafter: Provided, however,
That such claim shall be deemed to have been
administratively denied if not acted upoo
within six months after the time of filing,
unless the Secretary for good cause shown shall
have otherwise agreed with the claimant.
(June 29, 1936, ch. 858, title XII, § 1212, as
added Sept. 7, 1950, ch. 906, 64 Stat. 776.)
REFERENCES IN TEXT

The Suits in Admiralty Act, referred to in text, is act
Mar, 9, 1920, ch, 95, 41 Stat. 525, as amended, which is
classified generally to chapter 20 (§ 741 et seq.) of this
title. For complete classification of this Act to the
Code, see Short Title note set out under section 741 of
this title and Tables.
§ 1293. Additional insurance with other underwriters
A person having an insurable interest in a
vessel may, with the approval of the Secretary,
insure with other underwriters in an amount in
excess of the amount insured with the Secretary of Transportation, and in that event the
Secretary of Transportation shall not be entitled to the benefit of such Insurance.
(June 29, 1936, ch. 858, title XII, § 1213, as
added Sept. 7, 1950, ch. 906, 64 Stat. 777, and

II 1291

Page 410

TITLE 46--SHIPPING

amended Aug. 6, 1981, Pub. L. 97-31, § 12(141),
95 Stat. 166.)
AMENDMENTS

1981-Pub. L. 97-31 substituted "Secretary of Transportation" for "Secretary of Commerce" in two instances.
1291. Expiration of authority to provide insurance
The authority of the Secretary to provide insurance and reinsurance under this subchapter
shall expire September 30, 1984.
(June 29, 1936, ch. 858, title XII, § 1214, as
added Sept. 7, 1950. ch. 906, 64 Stat. 777, and
amended Aug. 3, 1955, ch. 492, 69 Stat. 440; July
31, 1959, Pub. L. 86-120, 73 Stat. 286; July 27,
1965, Pub. L. 89-89, 79 Stat. 264; Oct. 21, 1970,
Pub. L. 91-469, § 34, 84 Stat. 1035; Oct. 17, 1976,
Pub. L. 94-523, § 5, 90 Stat. 2474; Feb. 25, 1980,
Pub. L. 96-195, 94 Stat. 63.)
AMENDMENTS

1980-Pub. L. 96-195 substituted "September 30,
1984" for "September 30, 1979".
1976-Pub. L. 94-523 substituted "September 30,
1979" for "September 7, 1975".
1970-Pub. L. 91-469 substituted "September 7,
1975" for "twenty years from September 7, 1950".
1965-Pub. L. 89-89 extended the authority of the
Secretary to provide insurance and reinsurance for an
additional five years.
1959-Pub. L. 86-120 extended the authority of the
Secretary to provide Insurance and reinsurance for an
additional five years.
1955-Act Aug. 3, 1955, extended the authority of
the Secretary to provide insurance and reinsurance for
an additional five years.
SUBCHAPTER XIII-MARITIME
EDUCATION AND TRAINING
SUBCHAPTER REFERRED TO IN OTHER SECTIONS

This subchapter is referred to in section 1119 of this
title.
§ 1295. Congressional declaration of policy
It is the policy of the United States that merchant marine vessels of the United States
should be operated by highly trained and efficient citizens of the United States and that the
United States Navy and the merchant marine
of the United States should work closely together to promote the maximum integration of
the total seapower forces of the United States.
In furtherance of this policy(1) the Secretary of Transportation is authorized to take the steps necessary to provide for the education and training of citizens
of the United States who are capable of providing for the safe and efficient operation of
the merchant marine of the United States at
all times and as a naval and military auxiliary
in time of war or national emergency; and
(2) the Secretary of Navy, in cooperation
with the Maritime Administrator and the
head of each State maritime academy, shall
assure that the training of future merchant
marine officers at the United States Merchant Marine Academy and at the State maritime academies includes programs for naval
science training in the operation of merchant
marine vessels as a naval and military auxil-

lary and that naval officer training programs
for the training of future officers, insofar as
possible, be maintained at designated maritime academies consistent with United States
Navy standards and needs.
(June 29, 1936, ch. 858, § 1301, as added Oct. 15,
1980, Pub. L. 96-453, § 2, 94 Stat. 1997, and
amended Aug. 6, 1981, Pub. L. 97-31, § 12(142),
95 Stat. 166.)
AMENDMENTS

1981-Par. (1). Pub. L. 97-31, § 12(142)(A), substituted "Secretary of Transportation" for "Secretary of
Commerce".
Par. (2). Pub. L. 97-31, § 12(142)(B), substituted
"Maritime Administrator" for "Assistant Secretary of
Commerce for Maritime Affairs".
EFFECTIVE DATE

Section 4 of Pub. L. 96-453 provided that: "This Act
[enacting this subchapter, amending sections 1119 and
1244 of this title, and repealing sections 1126, 1126a-1
to 1126d, 1331 to 1334, and 1381 to 1388 of this title]
shall take effect on October 1, 1981."
SHORT TITLE

Section 1 of Pub. L. 96-453 provided that: "This Act
[enacting this subehapter, amending sections 1119 and
1244 of this title, and repealing sections 1126, 1126a-1
to 1126d, 1331 to 1334, and 1381 to 1388 of this title]
may be cited as the 'Maritime Education and Training
Act of 1980'."
§ 1295a. Definitions
For purposes of this subchapter(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 1295b of this title;
(3) the term "State maritime academy"
means any maritime academy or college
which is assisted under section 1295c of this
title 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 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.
(June 29, 1936, ch. 858, § 1302, as added Oct. 15,
1980, Pub. L. 96-453, § 2, 94 Stat. 1997, and
amended Aug. 6, 1981, Pub. L. 97-31, § 12(143),
95 Stat. 166.)
AMENDMENTS

1981-Par. (1). Pub. L. 97-31 substituted "Secretary
of Transportation" for "Secretary of Commerce".

Page 411

TITLE 46-SHIPPING

§ 1295b. Maintenance of Academy
(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 Ilemisphere 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 Governor of American Samoa
(until a delegate ta the House of Representatives from American Samoa takes office) 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, a resident of
the Northern Mariana Islands if the individual is nominated by the Governor of the
Northern Mariana Islands, or a resident of
American Samoa if the individual is nominated by the Governor of American Samoa.
(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.
'So in original. Probably should be followed by a dash.

§ 1295b

(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 'he
Governor of American Samoa (until a delegate to the House of Representatives from
American Samoa takes office).
(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

4129511

TITLE 46-SHIPPING

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 aL 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 rec,!ive instruction under this paragraph shall reimburse the Secretary for the cost of such
instructions (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

Page 412

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) Any individual appointed as a cadet to the
Academy under paragraph (3), or receiving instruction at the Academy under paragraph (4),
(5), or (6), is not entitled to hold any license
authorizing service on any 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
Any citizen of the United States who is appointed as a cadet at the 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).
(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 October 1, 1981, 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;
(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;
(i) as an employee in a United States
maritime-related industry, profession, or
marine science (as determined by the Secre-

Page 413

TITLE 46-SHIPPING

tary), if the Secretary determines that service under clause (I) is not availaole 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
(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) 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.
(4) 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

§ 1295b

to take such examination solely because of
physical disqualification.
(h) Board of Visitors
(1) A Board of Visitors to the Academy shall
be established 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.
(i) Advisory Board
(1) An Advisory Board to the Academy shall
be established to visit the Academy at least
once during each Pcademic 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, in-

TITLE 46-SHIPPING

§1295c

cluding per diem in lieu of subsistence, in the
same manner as persons employec intermittently in the Government service are allowed
expenses under section 5703 of title 5.
(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.
(June 29, 1936, ch. 858, § 1303, as added Oct. 15,
1980, Pub. L. 96-453, § 2, 94 Stat. 1998, and
amended Aug. 6, 1981, Pub. L. 97-31, § 12(144),
95 Stat. 166; Aug. 13, 1981, Pub. L. 97-35, title
XVI, § 1607, 95 Stat. 752.)
REFERENCES IN TEXT

The Federal Advisory Committee Act (5 U.S.C. App.
1 et seq.), referred to in subsec. (i)(5), is Pub. L. 92-463,
Oct. 6, 1972, 86 Stat. 770, as amended, which is set out
in the Appendix to Title 5, Government Organization
and Employees.
AMENDMENTS

1981-Subsec. (c)(3). Pub. L. 97-31, § 12(144)(A),
struck out "and the Secretary of Transportation" following "Secretary of Defense".
Subsec. (c)(4). Pub. L. 97-31, § 12(144)(B), struck out
"the Secretary of the department in which the United
States Coast Guard is operating with respect to the
United States Coast Guard and" preceding "the Secretary of Commerce".
Subsec. (h)(2)(D). Pub. L. 97-35 increased the membership on the Board from 1 to 2 Members of the
House of Representatives.
Subsec. (i)(1). Pub. L. 97-31, § 12(144)(C), substituted
"Maritime Administrator" for "Assistant Secretary of
Commerce for Maritime Affairs".
TERMINATION OF ADVISORY BOARDS

Advisory boards established after Jan. 5, 1973, to terminate not later than the expiration of the two-year
period beginning on the date of their establishment,
unless, in the case of a board established by the President or an officer of the Federal Government, such
board is renewed by appropriate action prior to the expiration of such two-year period, or in the case of a
board established by the Congress, its duration is otherwise provided for by law, see section 3(2) and 14 of
Pub. L. 92-463, Oct. 6, 1972, 86 Stat. 770, 776, set out in
the Appendix to Title 5, Government Organization
and Employees.
DEGREES FOR PERSONS WHO GRADUATED BEFORE
ACCREDITING OF MERCHANT MARINE ACADEMY

Act Aug. 10, 1956, ch. 1041, § 35, 70A Stat. 634, provided in part that, under conditions prescribed by the
Secretary of Commerce, the Superintendent of the
United States Merchant Marine Academy may confer
the degree of bachelor of science upon living graduates of the Academy who were graduated before the
date of accrediting of the Academy and who have met
the requirements of the Academy for that degree.
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1295a, 1295f,
1295g of this title.
§ 1295c. State maritime academies
(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.

Page 414

(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) of this section. 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;
(it) 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) of this section;
(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 allow-

Page 415

TITLE 46-SHIPPING

ances for transportation (including reimbursement of traveling expenses) in accordance with
any regulations promulgated by the Secretary.
(d) Annual payments
(1) 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) of this section, and with each regional maritime academy which meets the requirements of subsection (f)(1) of this section, to
make annual payments to each such academy
for the maintenance and support of such academy. The amount of each such annual payment
shall be not less than the amount furnished to
such academy for its maintenance and support
by the State or territory in which such academy is located or, in the case of a regional maritime academy an amount equal to tne amount
furnished to such academy for its maintenance
and support by all States or territories, or both,
cooperating to support such academy, but shall
not exceed $25,000, or $100,000 if such academy
meets the requirements of subsection (f)(2) of
this section.
(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; and
(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.
(2) As a condition to receiving an annual payment of any amount in excess of $25,000 under
subsection (d) of this section, 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

§ 1295c

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) of this section, to make
student incentive payments to such individual,
which payments shall be in amounts equaling
$1,200 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 to the individual
in such payments as the Secretary shall prescribe while such individual is attending such
academy.
(2) Each agreement entered into under paragraph (1) shall requie the individual to apply
for midshipman status in the United States
Naval Reserve (including the Merchant Marine
Reserve, United States Naval Reserve) before
rece!ving 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;
(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;
(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 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

§1295d

Page 416

TITLE 46-SHIPPING

the United States or on vessels owned and
operated by the United States or by any
State or territory of the United States;
0i) 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 (1) 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
(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 attended a State maritime academy for not less than 2 years has failed to fulfill the part of the acreement (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.
(6) 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) This subsection shall apply only to individuals first entering a State maritime academy
after the date occurring 6 months after October
1, 1981.
(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).

(June 29, 1936, ch. 858, § 1304, as added Oct. 15,
1980, Pub. L. 96-453, § 2, 94 Stat. 2003, and
amended Aug. 6, 1981. Pub. L. 97-31, § 12(145),
95 Stat. 166.)
AMENDMENTS

1981-Subsec. (g). Pub. L. 97-31 in par. (5) struck out
"and the Secretary of Transportation" following "Secretary of Defense", and in par. (6) struck out "the Secretary of the department in which the United States
Coast Guard is operating with respect to the United
States Coast Guard and" preceding "the Secretary of
Commerce".
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1119, 1295a,
1295f, 1295g of this title.
§ 1295d. Additional training
(a) The Secretary may provide additional
training on maritime subjects, as the Secretary
deems necessary, to supplement other training
opportunities and may make any such training
available to the personnel of the merchant
marine of the United States and to individuals
preparing for a career in the merchant marine
of the United States.
(b) The Secretary may prepare or purchase
any equipment or supplies required for any
training provided under subtction (a) of this
section and may contract with any person, partnership, firm, association, or corporation (without regard to section 5 of title 41) for the performance of any services deemed necessary by
the Secretary in the preparation of any such
equipment or supplies and in the supervision
and administration of any such training.
(June 29, 1936, ch. 858, § 1305, as added Oct. 15,
1980, Pub. L. 96-453, § 2, 94 Stat. 2006.)
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1119 of this
title.
§ 1295e. United States Maritime Service
(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 traning; 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 (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

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TITLE 46-SHIPPING

the same as are then prescribed for the personnel of the United States Coast Guard.
(June 29, 1936, ch. 858, § 1306, as added Oct. 15,
1980, Pub. L. 96-453, § 2, 94 Stat. 2006.)
§ 1295f. Civilian nautical school
(a) Definition
As used in this section, the term "civilian nautical school" means any school operated and
conducted in the United States (except the
Academy maintained under section 1295b of
this title, any State maritime academy assisted
under section 1295c of this title, and any other
school operated by the United States or any
agency of the United States) which offers instruction to individuals quartered on board any
vessel for the primary purpose of training them
for service in the merchant marine.
(b) Examination and inspection of school; rating and
certification
Each civilian nautical school shall be subject
to examination and inspection by the Secretary, and the Secretary may (under such rules
and regulations as the Secretary may prescribe)
provide for the rating and certification of such
schools as to the adequacy of the course of Instruction, the competency of the instructors,
and the suitability of the equipment used by, or
in connection with, such school.
(c) Inspection of vessels
(1) Any vessel or other floating equipment,
other than a vessel of the United States Navy
or the United States Coast Guard, used by or in
connection with any civilian nautical school
(whether such vessel or other floating equipment is being navigated or not) shall be subject
to the vessel inspection laws of the United
States under the same terms as is a passenger
carrying vessel or a vessel carrying passengers
for hire.
(2) The Secretary of the department in which
the United States Coast Guard is operating
shall issue regulations to carry out the inspection of such vessels and floating equipment.
(d) Fines and penalties
Whoever(1) violates this section or any regulations
promulgated to implement this section;
(2) is an owner of a vessel or floating equipment which is in violation of the require.
ments of this section;
(3) is an officer or member of the Board of
Directors of a school, organization, association, partnership, or corporation which owns
a vessel or floating equipment which is used
in violation of the requirements of this section or which uses such a vessel or floating
equipment in violation of this section,
shall be fined not more than $10,000 or imprisoned for not more than one year, or both, for
each offense.
(June 29, 1936, ch. 858, § 1307, as added Oct. 15,
1980, Pub. L. 96-453, § 2, 94 Stat. 2007.)
11-617 VOL. 18 0-84-29

§ 1295g

9 1295g. Powers and duties of Secretary
(a) Rules and regulations
The Secretary shall establish such rules and
regulations as may be necessary to carry out
this subchapter.
(b Excess vessels and equipment
The Secretary may cooperate with and assist
the Academy, any State maritime academy, and
any nonprofit training institution which has
been jointly approved by the Secretary and the
Secretary of the department in which the
United States Coast Guard is operating as offering training courses which meet Federal regulations for maritime training, by making vessels, shipboard equipment, and other marine
equipment, owned by the United States which
have been determined to be excess or surplus,
available by gift, loan, sale, lease, or charter to
such institution for instructional purposes on
such terms as the Secretary deems appropriate.
(c) Securing of information, facilities, or equipment;
detailing of personnel
(1) The Secretary may secure directly from
any department or agency of the United States
any information, facilities, or equipment, on a
reimbursable basis, necessary to carry out this
subchapter.
(2) Upon the request of the Secretary, the
head of any department or agency of the
United States (including any military department of the United States) may detail, on a reimbursable basis, any of the personnel of such
department or agency to the Secretary to assist
in carrying out this subchapter.
(d) Employment of personnel
To carry out this subchapter, the Secretary
may employ at the Academy any individual as a
professor, lecturer, or instructor, without
regard to the provisions of title 5 (governing appointments in the competitive service), and
may pay such individual without regard to the
provisions of chapter 51 and subchapter III of
chapter 53 of such title (relating to classification and General Schedule pay rates).
(e) Inspection of vessels
(1) The Secretary of the department in which
the United States Coast Guard is operating
shall inspect, and prescribe regulationa for the
inspection of, any vessel of more than 15 gross
tons, other than a vessel of the United States
Navy or the United States Coast Guard, which
is used primarily for training or instruction provided by the Academy under section 1295b of
this title or by a State maritime academy assisted under section 1295c of this title. Any such
vessel shall not be subject to inspection under
any other law or regulation requiring the inspection of such vessel by the United States
Coast Guard.
(2) Any inspection under paragraph (1) shall
include inspections of lifesaving and firefighting equipment, structure and arrangement generally, safe loading, and living and working conditions.
(3) Any regulations prescribed under paragraph (1) shall take into account the function,
purpose, and use of such vessels, the routes of

TITLE 46-SHIPPING

§1300

such vessels, and the numbtr of individuals who
may be carried on such vessels.
(4) Any vessel which is described in paragraph (1) may not be used ii connection with
any training or instruction provided by the
Academy under section 1295b of this title or by
a State maritime academy assisted under section 1295c of this title as long as such vessel is
in violation of any regulations prescribed pursuant to this subsection or does not pass any inspection conducted pursuant to this subsection.
(5) Whoever(A) refuses to allow, or impedes or interferes with, any inspection required by this
subsection; or
(B) violates any regulations prescribed
under this subsection,
shall be fined not more than $10,000 or imprisoned for not more than one year, or both, for
each offense.
(June 29, 1936, ch. 858, § 1308, as added Oct. 15,
1980, Pub. L. 96-453, § 2, 94 Stat. 2007.)
REFERENCES IN TEXT

The provisions of title 5 governing appointments in
the competitive service, referred to in subsec. (d), are
classified generally to section 3301 et sec. of Title 5,
Government Organization and Employees.
CIIAPTER 28-CARRIAGE OF GOODS BY SEA
Sec.
1300.
Bills of lading subject to chapter.
1301.
Definitions.
1302.
Duties and rights of carrier.
1303.
Responsibilities and liabilities of carrier and
ship.
(1) Seaworthiness.
(2) Cargo.
(3) Contents of bill.
(4) Bill as prima facle evidence.
(5) Guaranty of statements.
(6) Notice of loss or damage: limitation
of actions.
(7) "Shipped" bill of lading.
(8) Limitation of liability for negligence.
1304.
Rights and immunities of carrier and ship.
(1) Unseaworthiness.
(2) Uncontrollable causes of loss.
(3) Freedom from negligence.
(4) Deviations.
(5) Amount of liability; valuation of
cargo.
(6) Inflammable, explosive, or dangerous
cargo.
1305.
Surrender of rights; increase of liabilities;
charter parties; general average.
1306.
Special agreement as to particular goods.
1307.
Agreement as to liability prior to loading or
after discharge.
1308.
Rights and liabilities under other provisions.
1309.
Discrimination between competing shippers.
1310.
Weight of bulk cargo.
1311.
Liabilities before loading and after discharge; effect on other laws.
1312.
Scope of chapter; "United States"; "foreign
trade".
1313.
Suspension of provisions by President.
1314.
Effective date; retroactive effect.
1315.
Short title.
§ 1300. Bills of lading subject to chapter
Every bill of lading or similar document of
title which is evidence of a contract for the carriage of goods by sea to or from ports of the

Page 418

United States, in foreign trade, shall have
effect subject to the provisions of this chapter.
(Apr. 16, 1936, ch. 229, 49 Stat. 1207.)
1301. Definitions
When used in this chapter(a) The term "carrier" includes the owner or
the charterer who enters into a contract of carriage with a shipper.
(b) The term "contract of carriage" applies
only to contracts of carriage covered by a bill of
lading or any similar document of title, insofar
as such document relates to the carriage of
goods by sea, including any bill of lading or any
similar document as aforesaid issued under or
pursuant to a charter party from the moment
at which such bill of lading or similar document
of title regulates the relations between a carrier
and a holder of the same.
(c) The term "goods" includes goods, wares,
merchandise, and articles of every kind whatsoever, except live animals and cargo which by
the contract of carriage is stated as being carried on deck and is so carried.
(d) The term "ship" means any vessel used
for the carriage of goods by sea.
(e) The term "carriage of goods" covers the
period from the time when the goods are
loaded on to the time when they are discharged
from the ship.
(Apr. 16, 1936, ch. 229, § 1, 49 Stat. 1208.)
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1313 of this
title.
§ 1302. Duties and rights of carrier
Subject to the provisions of section 1306 of
this title, under every contract of carriage of
goods by sea, the carrier in relation to the loading, handling, stowage, carriage, custody, care,
and discharge of such goods, shall be subject to
the responsibilities and liabilities and entitled
to the rights and immunities set forth in sections 1303 and 1304 of this title.
(Apr. 16, 1936, ch. 229, § 2, 49 Stat. 1208.)
SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1313 of this
title.
§ 1303. Responsibilities and liabilities of carrier and
ship
(1) Seaworthiness
The carrier shall be bound, before and at the
beginning of the voyage, to exercise due diligence to(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
(c) Make the holds, refrigerating and cooling
chambers, and all other parts of the ship in
which goods are carried, fit and safe for their
reception, carriage, and preservation.
(2) Cargo
The carrier shall properly and carefully load,
handle, stow, carry, keep, care for, and discharge the goods carried.