§57531 — Title 46 Shipping | U.S. Code

Summary

The Secretary of Transportation may arrange to have ships built, in private shipyards or navy yards, and lease them without public bidding to a U.S. operator when an essential trade route cannot be kept going by private U.S.-flag ships and cannot be fixed under the existing replacement program without extra government help. The leased ships go to a U.S. operator running the route. The yearly lease must be at least 4% of the ship’s foreign construction cost, plus a yearly depreciation charge set using a Treasury-based rate and a small administrative fee. Depreciation is figured over 25 years for dry-cargo and passenger ships and 20 years for tankers and liquid carriers. The lease can include a buy option within 5 years. The purchase price is the foreign cost minus accumulated depreciation; 25% of that price must be paid in cash at purchase. Extra lease payments above the minimum can count toward that cash. The remainder is paid in roughly equal yearly payments over the ship’s remaining useful life, with interest from the purchase date at a Treasury-based rate plus an administrative allowance. The ship must operate only on foreign trade or certain specified long routes. If it is used in domestic trade on those services, the lessee must pay an annual share of 1/25 of the cost difference between a domestic and foreign-built ship based on the share of domestic revenue.

Title 46, §57531

Shipping — Source: USLM XML via OLRC

(a)If the Secretary of Transportation finds that a trade route determined to be essential under section 50103 of this title cannot be successfully developed and maintained and the Secretary’s replacement program cannot be achieved under private operation of the trade route by a citizen of the United States with vessels documented under chapter 121 of this title, without further aid by the United States Government in addition to the financial aid authorized under title V of the Merchant Marine Act, 1936, the Secretary, without advertisement or competition, may—

(1)have constructed, in private shipyards or in navy yards, vessels of the types necessary for the trade route; and

(2)demise charter those new vessels to the operator of vessels of the United States established on the trade route.

(b)(1)The annual charter hire under subsection (a) shall be at least 4 percent of the price (referred to in this section as the “foreign cost”) at which the vessel would be sold if constructed under title V of the Merchant Marine Act, 1936, plus—

(A)a percentage of the depreciated foreign cost computed annually determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the Government with remaining periods to maturity comparable to the term of the charter, adjusted to the nearest one-eighth percent; and

(B)an allowance adequate in the judgment of the Secretary of Transportation to cover administrative costs.

(2)Depreciation under paragraph (1)(A) shall be based on—

(A)a 25-year life for dry-cargo and passenger vessels; and

(B)a 20-year life for tankers and other bulk liquid carrier vessels.

(c)The charter may contain an option to the charterer to purchase the vessels from the Secretary of Transportation within 5 years after delivery under the charter, on the same terms and conditions as provided in title V of the Merchant Marine Act, 1936, for the purchase of new vessels from the Secretary. However—

(1)the purchase price shall be the foreign cost less depreciation to the date of purchase based on the useful life specified in subsection (b)(2);

(2)the required cash payment payable at the time of the purchase shall be 25 percent of the purchase price;

(3)the charter may provide that 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 the purchase;

(4)the balance of the purchase price shall be paid within the remaining years of useful life (as specified in subsection (b)(2)) after the date of delivery of the vessel under the charter and in approximately equal annual installments, except that the first installment, which shall be payable on the next ensuing anniversary date of the delivery under the charter, shall be a proportionate part of the annual installment; and

(5)interest shall be payable on the unpaid balances from the date of purchase, at a rate not less than—

(A)a rate determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the Government with remaining periods to maturity comparable to the average maturities of the loans, adjusted to the nearest one-eighth percent; plus

(B)an allowance adequate in the judgment of the Secretary of Transportation to cover administrative costs.

(d)(1)The charter shall provide for operation of the vessel exclusively—

(A)in foreign trade;

(B)on a round-the-world voyage;

(C)on a round voyage from the west coast of the United States to a European port that includes an intercoastal port of the United States;

(D)on a round voyage from the Atlantic coast of the United States to the Orient that includes an intercoastal port of the United States; or

(E)on a voyage in foreign trade on which the vessel may stop at Hawaii or an island territory or possession of the United States.

(2)The charter shall provide if the vessel is operated in domestic trade on any of the services specified in paragraph (1), the charterer will pay annually to the Secretary of Transportation that proportion of 1⁄25 of the difference between the domestic and foreign cost of the 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.

Notes & Related Subsidiaries

Historical and Revision Notes

Revised SectionSource (U.S. Code)Source (Statutes at Large) 5753146 App.:1204.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; Pub. L. 86–3, § 18(b)(3), Mar. 18, 1959, 73 Stat. 12; Pub. L. 86–518, § 5, June 12, 1960, 74 Stat. 216; Pub. L. 91–469, § 22, Oct. 21, 1970, 84 Stat. 1032; Pub. L. 97–31, § 12(116), Aug. 6, 1981, 95 Stat. 164. In subsection (a)(2), the words “demise charter” are substituted for “demise . . . or bare-boat charter” to eliminate unnecessary words. The words “operator of vessels of the United States” are substituted for “American-flag operator” for consistency in the revised title. Subsection (b)(2) is substituted for “Upon the basis of a twenty-five year life of the vessel” because of section 9 of Public Law 86–518 (June 12, 1960, 74 Stat. 217), which provided that “Nothing in any amendment made by this Act [including section 5 substituting ‘twenty-five’ for ‘twenty’ in 46 App. U.S.C. 1204] shall operate or be interpreted to change from twenty to twenty-five years the provisions of the Merchant Marine Act, 1936, as amended, relating to the commercial expectancy or period of depreciation of any tanker or other liquid bulk carrier.” In subsection (c), in paragraphs (1) and (4), references to the useful life specified in subsection (b)(2) are substituted for references to the twenty-five year useful life for the reason stated in explaining subsection (b)(2).

Editorial Notes

References in Text

The Merchant Marine Act, 1936, referred to in subsecs. (a), (b)(1), (c), is act June 29, 1936, ch. 858, 49 Stat. 1985. Title V of the Act enacted provisions set out as a note under section 53101 of this title. For complete classification of this Act to the Code, see

Short Title

of 1936 Amendment note set out under section 101 of this title and Tables.

Amendments

2016—Subsec. (a). Pub. L. 114–120 substituted “title V” for “titles V and VI” in introductory provisions.

§57531 Construction and Charter of Vessels for Unsuccessful Routes