§53734 Replacement of Vessels Because of Changes in Operating Standards

Summary

The Secretary or Administrator can promise to back loans that pay for building or rebuilding commercial ships when a new law or rule makes an older ship unusable. They can do this only if the ship will be used in coastwise, intercoastal, or foreign trade; the new ship is really replacing one forced out of service by the rule change; the borrower already moves the same kind of cargo and will use the new ship only to replace the obsolete one; the new ship does not increase the cargo capacity of the old ship; the Secretary or Administrator does not expect the market for the ship to shrink badly over its life; reconstructed ships will have at least 15 years of useful life after work; and the Secretary or Administrator has considered the factors in section 53708(a)(3)–(5). A guaranteed loan can run up to 25 years and cover at most 87.5% of the actual or depreciated cost to build or rebuild the ship. The Secretary or Administrator may set specific terms, may vary the percentage instead of using one uniform rate, and must require adequate security against default. These guarantees must follow other program rules listed in sections 53701, 53702(a), 53704, 53705, 53707(a), 53708(d)–(e), 53709(a), 53710(a)(1),(2),(4) and (c), 53711(a), 53713, 53714, 53717, and 53721–53725. The Secretary or Administrator may also charge an extra guarantee fee: either up to an additional 1% per year on top of the fee in section 53714, or a fee based on the loan amount compared to the share of the fleet being replaced.