§57531 Construction and charter of vessels for unsuccessful routes

Summary

If the Secretary of Transportation finds that an essential trade route cannot be run successfully by private U.S. shipowners even with existing aid, the Secretary may have the needed ships built in private or navy shipyards and lease them, without advertising or bidding, to a U.S. operator on that route. The yearly lease must be at least 4 percent of the ship’s foreign cost, plus a yearly depreciation amount set by the Treasury (using current market yields and rounded to the nearest one-eighth percent) and an extra amount to cover administration. Depreciation is based on a 25-year life for dry-cargo and passenger ships and a 20-year life for tankers and liquid bulk carriers. The lease can let the operator buy the ship within 5 years on the same terms as under Title V of the Merchant Marine Act, 1936. The purchase price is the foreign cost minus depreciation to the purchase date. The buyer must pay 25 percent of that price in cash at purchase. Any lease payments above the minimum may be credited toward that cash down payment. The rest of the price is paid in equal yearly installments over the remaining useful life, with interest from the purchase date at a Treasury-based rate (rounded to the nearest one-eighth percent) plus an administrative allowance. The ship must be used only on specified foreign or international services. If it is used in domestic trade on those services, the operator must pay each year a share of 1/25 of the difference between domestic and foreign cost equal to the ratio of domestic revenue to total voyage revenue from the prior year.