46 U.S.C. § 53710: Contents of obligations

Summary

Any loan or obligation the government guarantees must have payment terms the Secretary or Administrator accepts. It must charge interest (not counting guarantee fees or other fees) at an annual rate the Secretary or Administrator finds reasonable based on similar private loans and the risks. The loan’s final due date must be acceptable to the Secretary or Administrator but cannot be more than 25 years after the vessel’s delivery. If the vessel was rebuilt or reconditioned, the due date can be the later of 25 years after delivery or the vessel’s remaining useful life as the Secretary or Administrator decides. If a delivered vessel is the loan’s security, it must be in an approved class (for example A–1, American Bureau of Shipping) with required certificates including Coast Guard inspection, have needed repairs (unless a delay is allowed), be well equipped, seaworthy, and documented under U.S. law for the guarantee’s term or until paid off. For certain passenger vessels that meet the features in section 503 of the Merchant Marine Act, 1936, the Administrator may allow the government’s only remedy to be taking back the vessel and any insurance claims. The borrower’s debt can be cleared by surrendering the vessel and all interest in it, if the vessel on surrender is free of liens except the government security interest, remains in class, and is in as good condition as when bought (ordinary wear excepted). Insurance can cover shortfalls by assigning insurance claims to the government. The obligation and related agreements must also include protections for the government’s security interest—such as acceleration, assumption, subrogation, issuing notes to the Secretary or Administrator, liens and releases, and tax payments—and any other provisions the Secretary or Administrator requires.

Title 46, §53710

Shipping, Source: USLM XML via OLRC

(a)In General.—

An obligation guaranteed under this chapter must—

(1)provide for payments by the obligor satisfactory to the Secretary or Administrator;

(2)provide for interest (exclusive of guarantee fees and other fees) at a rate not more than the annual rate on the unpaid principal that the Secretary or Administrator determines is reasonable, considering the range of interest rates prevailing in the private market for similar loans and the risks assumed by the Secretary or Administrator;

(3)have a maturity date satisfactory to the Secretary or Administrator, but—

(A)not more than 25 years after the date of delivery of the vessel used as security for the guarantee; or

(B)if the vessel has been reconstructed or reconditioned, not more than the later of—

(i)25 years after the date of delivery of the vessel; or

(ii)the remaining years of useful life of the vessel as determined by the Secretary or Administrator; and

(4)provide, or a related agreement must provide, that if the vessel used as security for the guarantee is a delivered vessel, the vessel shall be—

(A)in class A–1, American Bureau of Shipping, or meet other standards acceptable to the Secretary or Administrator, with all required certificates, including marine inspection certificates of the Coast Guard, and with all outstanding requirements and recommendations necessary for class retention accomplished, unless the Secretary or Administrator permits a deferment of repairs necessary to meet these requirements;

(B)well equipped, in good repair, and in every respect seaworthy and fit for service; and

(C)documented under the laws of the United States for the term of the guarantee of the obligation or until the obligation is paid in full, whichever is sooner.

(b)Provisions for Certain Passenger Vessels.—

(1)In general.—

With the Administrator’s approval, if the vessel used as security for the guarantee is a passenger vessel having the tonnage, speed, passenger accommodations, and other characteristics described in section 503 of the Merchant Marine Act, 1936, an obligation guaranteed under this chapter or a related agreement may provide that—

(A)the only recourse by the United States Government against the obligor for payments under the guarantee will be repossession of the vessel and assignment of insurance claims; and

(B)the obligor’s liability for payments under the guarantee will be satisfied and discharged by the surrender of the vessel and all interest in the vessel to the Government in the condition described in paragraph (2).

(2)Surrender of vessel.—

(A)In general.—

On surrender, the vessel must be—

(i)free and clear of all liens and encumbrances except the security interest conveyed to the Administrator under this chapter;

(ii)in class; and

(iii)in as good order and condition (ordinary wear and tear excepted) as when acquired by the obligor.

(B)Covering deficiencies by insurance.—

To the extent covered by insurance, a deficiency related to a requirement in subparagraph (A) may be satisfied by assignment of the obligor’s insurance claims to the Government.

(c)Other Provisions To Protect Security Interests and Provide for the Financial Stability of the Obligor.—

An obligation guaranteed under this chapter and any related agreement must contain other provisions, which shall include—

(1)provisions for the protection of the security interests of the Government (including acceleration, assumption, and subrogation provisions and the issuance of notes by the obligor to the Secretary or Administrator), liens and releases of liens, payment of taxes; and

(2)any other provisions that the Secretary or Administrator may prescribe.

Notes & Related Subsidiaries

Historical and Revision Notes

Revised SectionSource (U.S. Code)Source (Statutes at Large) 53710(a)(1)46 App.:1274(b)(4).June 29, 1936, ch. 858, title XI, § 1104A(b)(3)–(7), (h) [§ 1104A formerly § 1104], as added June 23, 1938, ch. 600, § 46, 52 Stat. 970; 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; Pub. L. 86–123, §§ 1(3), 2, July 31, 1959, 73 Stat. 269, 271; Pub. L. 86–127, § 1(3), (4), July 31, 1959, 73 Stat. 273; Pub. L. 86–518, § 1, June 12, 1960, 74 Stat. 216; Pub. L. 86–685, §§ 2, 3, Sept. 2, 1960, 74 Stat. 733; Pub. L. 90–341, June 15, 1968, 82 Stat. 180; Pub. L. 91–469, §§ 31, 32, Oct. 21, 1970, 84 Stat. 1035; restated Pub. L. 92–507, § 3, Oct. 19, 1972, 86 Stat. 911, 914; Pub. L. 97–31, § 12(136), Aug. 6, 1981, 95 Stat. 166; Pub. L. 98–595, § 1(7), Oct. 30, 1984, 98 Stat. 3131; § 1104 renumbered as § 1104A, Pub. L. 101–380, title IV, § 4115(f)(1), Aug. 18, 1990, 104 Stat. 521; Pub. L. 103–160, title XIII, § 1356(3)(C), Nov. 30, 1993, 107 Stat. 1813. 53710(a)(2)46 App.:1274(b)(5). 53710(a)(3)46 App.:1274(b)(3). 53710(a)(4)46 App.:1274(b)(6). 53710(b)46 App.:1274(b)(7). 53710(c)46 App.:1274(h). During review of this bill, the American Bureau of Shipping, through counsel, explained that it disagrees with an existing interpretation by the Maritime Administration of language restated in subsection (a)(4)(A) of this section, and requested the Committee to clarify that this codification should not be construed as a ratification of that regulatory interpretation. The Committee therefore states that this codification should not be construed as an expression of any opinion whatsoever concerning any such administrative interpretation. In subsection (a)(3), the words “subject to the provisions of paragraph (2) of subsection (c) of this section” are omitted as unnecessary. In subsection (a)(4)(B), the words “well equipped, in good repair, and in every respect seaworthy and fit for service” are substituted for “tight, stanch, strong, and well and sufficiently tackled, appareled, furnished, and equipped, and in every respect seaworthy and in good running condition and repair, and in all respects fit for service” to eliminate unnecessary words. In subsection (b)(1), the reference to section 503 of the Merchant Marine Act, 1936, is substituted for the reference to “subchapter V of this chapter” because the relevant characteristics referred to in the text are contained in that section and because that section is part of the

Construction

-differential subsidy program, which is not being restated.

Editorial Notes

References in Text

section 503 of the Merchant Marine Act, 1936, referred to in subsec. (b)(1), is section 503 of act June 29, 1936, ch. 858, 49 Stat. 1985, which is set out as a note under section 53101 of this title.

Amendments

2019—Subsec. (a)(4)(A). Pub. L. 116–92, § 3506(g)(1)(A)(i), struck out “or, in the case of an eligible export vessel, of the appropriate foreign authorities under a treaty, convention, or other international agreement to which the United States is a party” after “certificates of the Coast Guard”. Subsec. (a)(4)(C). Pub. L. 116–92, § 3506(a)(1)(A)(ii)–(C), added subpar. (C). Subsec. (c). Pub. L. 116–92, § 3506(g)(2), in heading, inserted “and Provide for the Financial Stability of the Obligor” after “Interests” and, in text, inserted “provisions, which shall include—” after “must contain other” and par. (1) designation before “provisions for the protection of”, substituted “; and” for “, and other matters that the Secretary or Administrator may prescribe.”, and added par. (2). 2008—Pub. L. 110–181, § 3522(b), repealed Pub. L. 109–163, § 3507(a)(1)(D), (2)(C). See 2006 Amendment note below. Subsec. (a). Pub. L. 110–181, § 3522(a)(10)(B), incorporated the substance of the amendment by Pub. L. 109–163, § 3507(a)(1)(D), into this section by inserting “or Administrator” after “Secretary” wherever appearing. See 2006 Amendment note below and section 18(a) of Pub. L. 109–304, set out as a Legislative Purpose and

Construction

note preceding section 101 of this title. Subsec. (b). Pub. L. 110–181, § 3522(a)(5), (9)(A), incorporated the substance of the amendment by Pub. L. 109–163, § 3507(a)(2)(C), into this section by substituting “Administrator’s” for “Secretary’s” in introductory provisions of par. (1) and “Administrator” for “Secretary” in par. (2)(A)(i). See 2006 Amendment note below and section 18(a) of Pub. L. 109–304, set out as a Legislative Purpose and

Construction

note preceding section 101 of this title. Subsec. (c). Pub. L. 110–181, § 3522(a)(10)(B), incorporated the substance of the amendment by Pub. L. 109–163, § 3507(a)(1)(D), into this section by inserting “or Administrator” after “Secretary” in two places. See 2006 Amendment note below and section 18(a) of Pub. L. 109–304, set out as a Legislative Purpose and

Construction

note preceding section 101 of this title. 2006—Pub. L. 109–163, § 3507(a)(1)(D), (2)(C), which directed the amendment of section 1274(b)(3)–(7), (h) of the former Appendix to this title from which this section was derived, was repealed by Pub. L. 110–181, § 3522(b). See 2008 Amendment notes for subsecs. (a), (b), and (c) and

Historical and Revision Notes

above.

§53710 Contents of Obligations

Summary

Title 46, §53710

Notes & Related Subsidiaries

Historical and Revision Notes

Construction

Editorial Notes

References in Text

Amendments

Construction

Construction

Construction

Historical and Revision Notes

Citations & Metadata