46a USC Rule - 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 Appendix, 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 Appendix 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 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.

(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

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 thereof, 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 Appendix) 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.

(c) Terms of sale of vessel to purchaser

In such contract of sale between the purchaser and the Secretary of Transportation, the purchaser shall be required to make cash payments to the Secretary of Transportation of not less than 25 per centum of the price at which the vessel is sold to the purchaser. The cash payments shall be made at the time and in the same proportion as provided for the payments on account of the construction cost in the contract between the shipbuilder and the Secretary of Transportation. The purchaser shall pay, not less frequently than annually, interest on those portions of the Secretary of Transportation’s payments as made to the shipbuilder which are chargeable to the purchaser’s portion of the price of the vessel (after deduction of the purchaser’s cash payments) 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 shall be paid by the purchaser, within twenty-five years after delivery of the vessel and in not to exceed twenty-five equal annual installments, the first of which shall be payable one year after the delivery of the vessel by the Secretary of Transportation to the purchaser. Interest at the rate per annum applicable to payments that are chargeable to the purchaser’s portion of the price of the vessel shall be paid on all such installments of the purchase price remaining unpaid.

(d) Repealed. Pub. L. 87–877, § 2(a),Oct. 24, 1962, 76 Stat. 1200

(e) Construction in navy yards; sales to citizens; terms

If no bids are received for the construction, outfitting, or equipping of such vessel, or if it appears to the Secretary of Transportation that the bids received from privately owned shipyards of the United States are collusive, excessive, or unreasonable, and if a citizen of the United States agrees to purchase said vessel as provided in this section, then, to provide employment for citizens of the United States, the Secretary of Transportation may have such vessel constructed, outfitted, or equipped at not in excess of the actual cost thereof in a navy yard of the United States under such regulations as may be promulgated by the Secretary of the Navy and the Secretary of Transportation. In such event the Secretary of Transportation is authorized to pay for any such vessel so constructed from his construction fund. The Secretary of Transportation is authorized to sell any vessel so constructed, outfitted, or equipped in a navy yard to a citizen of the United States for the fair and reasonable value thereof, but at not less than the cost thereof less the equivalent to the construction differential subsidy determined as provided by subsection (b) of this section, such sale to be in accordance with all the provisions of this subchapter.

(f) Survey of shipbuilding capability; correction of inadequacies; reimbursement of certain vessel construction and delivery expenses

The Secretary of Transportation, with the advice of and in coordination with the Secretary of the Navy, shall at least once each year, as required for purposes of this chapter, survey the existing privately owned shipyards capable of merchant ship construction, or review available data on such shipyards if deemed adequate, to determine whether their capabilities for merchant ship construction, including facilities and skilled personnel, provide an adequate mobilization base at strategic points for purposes of national defense and national emergency. The Secretary of Transportation, in connection with ship construction, reconstruction, reconditioning, or remodeling under this subchapter and subchapter VII of this chapter, upon a basis of a finding that the award of the proposed construction, reconstruction, reconditioning, or remodeling work will remedy an existing or impending inadequacy in such mobilization base as to the capabilities and capacities of a shipyard or shipyards at a strategic point, and after taking into consideration the benefits accruing from standardized construction, the conditions of unemployment, and the needs and reasonable requirements of all shipyards, may allocate such construction, reconstruction, reconditioning, or remodeling to such yard or yards in such manner as he may determine to be fair, just, and reasonable to all sections of the country, subject to the provisions of this subsection. In the allocation of construction work to such yards as herein provided, the Secretary of Transportation may, after first obtaining competitive bids for such work in compliance with the provisions of this chapter, negotiate with the bidders and with other shipbuilders concerning the terms and conditions of any contract for such work, and is authorized to enter into such contract at a price deemed by the Secretary of Transportation to be fair and reasonable. Any contract entered into by the Secretary of Transportation under the provisions of this subsection shall be subject to all of the terms and conditions of this chapter, excepting those pertaining to the awarding of contracts to the lowest bidder which are inconsistent with the provisions of this subsection. In the event that a contract is made providing for a price in excess of the lowest responsible bid which otherwise would be accepted, such excess shall be paid by the Secretary of Transportation as a part of the cost of national defense, and shall not be considered as a part of the construction-differential subsidy. In the event that a contract is made providing for a price lower than the lowest responsible bid which otherwise would be accepted, the construction-differential subsidy shall be computed on the contract price in lieu of such bid.

If, as a result of allocation under this subsection, the purchaser incurs expenses for inspection and supervision of the vessel during construction and for the delivery voyage of the 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 Appendix) shall reimburse the purchaser for such excess, less one-half of 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 construction-differential subsidy: Provided, That no interest shall be paid on any refund authorized under this chapter. If the vessel is constructed under section 1159 of this Appendix 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 Appendix, 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), andsection 1180 (1) of this Appendix, or any other provision of law.

(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 Appendix,

(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.

Source

(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; Pub. L. 86–518, §§ 1, 2,June 12, 1960, 74 Stat. 216; Pub. L. 86–607, § 1,July 7, 1960, 74 Stat. 362; Pub. L. 87–877, §§ 1, 2(a), (e), (f),Oct. 24, 1962, 76 Stat. 1200, 1201; Pub. L. 88–370, July 11, 1964, 78 Stat. 313; Pub. L. 88–410, § 1,Aug. 10, 1964, 78 Stat. 385; Pub. L. 89–127, Aug. 14, 1965, 79 Stat. 519; Pub. L. 89–589, Sept. 19, 1966, 80 Stat. 811; Pub. L. 90–572, Oct. 12, 1968, 82 Stat. 1004; Pub. L. 91–40, July 8, 1969, 83 Stat. 44; Pub. L. 91–469, §§ 7, 35(a), (e)–(g), Oct. 21, 1970, 84 Stat. 1019, 1035, 1036; Pub. L. 91–603, § 4(b),Dec. 31, 1970, 84 Stat. 1675; Pub. L. 93–71, July 10, 1973, 87 Stat. 169; Pub. L. 94–372, §§ 2, 3,July 31, 1976, 90 Stat. 1042; Pub. L. 96–210, Mar. 17, 1980, 94 Stat. 100; Pub. L. 96–387, § 3,Oct. 7, 1980, 94 Stat. 1545; Pub. L. 97–31, § 12(84), (85),Aug. 6, 1981, 95 Stat. 161.)

Amendments

1981—Subsecs. (a), (b). Pub. L. 97–31, § 12(84), substituted “Secretary of Transportation” for “Secretary of Commerce” wherever appearing.

Subsec. (c). Pub. L. 97–31, § 12(84), (85), substituted “Secretary of Transportation” for “Secretary of Commerce” wherever appearing, and “Secretary of Transportation’s” for “Secretary of Commerce’s”.

Subsecs. (e) to (i). Pub. L. 97–31, § 12(84), substituted “Secretary of Transportation” for “Secretary of Commerce” wherever appearing.

1980—Subsec. (a). Pub. L. 96–210struck out “, at any time prior to June 30, 1979,” before “to accept a price for”.

Subsecs. (h), (i). Pub. L. 96–387added subsecs. (h) and (i).

1976—Subsec. (a). Pub. L. 94–372, § 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. (ii), (iii), 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. 93–71in 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 subsec. (a), four times in subsec. (c), five times in subsec. (e), four times in subsec. (f), and four times in subsec. (g).

Subsec. (a). Pub. L. 91–603substituted “for the operation and maintenance of” for “to enable it to operate and maintain”.

Pub. L. 91–469, §§ 7(1), 35(e), struck out in first sentence “, on behalf of the applicant,” after “may secure”, substituted in 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 last sentence “for the sale” for “with the applicant for the purchase by him” before “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” before “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-differential 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 Appendix 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 31/2 per 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 31/2 per centum per annum”, “purchaser” for “applicant” in six places, “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 sentence and “his” for “its” in second sentence, respectively.

Subsec. (f). 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 Appendix, and the Federal Maritime Board, in connection with ship construction, reconstruction, or reconditioning under this subchapter (except section 1159 of this Appendix),” 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 places 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 first sentence.

1969—Subsec. (b). Pub. L. 91–40substituted “June 30, 1970” for “June 30, 1969”.

1968—Subsec. (b). Pub. L. 90–572substituted “June 30, 1969” for “June 30, 1968”.

1966—Subsec. (b). Pub. L. 89–589substituted “June 30, 1968” for “June 30, 1966”.

1965—Subsec. (b). Pub. L. 89–127substituted “June 30, 1966” for “June 30, 1965”.

1964—Subsec. (b). Pub. L. 88–370substituted “June 30, 1965” for “June 30, 1964”.

Subsec. (f). Pub. L. 88–410provided 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 the delivery voyage, minus one-half the extra expenses incurred to produce such income, and that such reimbursement shall not be part of the construction-differential 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 Board, wherever appearing, and provided that in the reconstruction or reconditioning of a passenger vessel having the characteristics set forth in section 1153 of this Appendix, 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, § 2(e), (f), substituted “at least once each year” for “periodically”, “existing or impending inadequacy” for “existing inadequacy”, and struck out “, with the approval of the President,” before “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 331/3 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 “twenty-five” for “twenty” in two places.

Subsec. (d). Pub. L. 86–607, § 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, § 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 principal foreign shipbuilding center which may reasonably be availed of by the principal foreign competitors in the service in which the vessel is 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”.

1938—Subsec. (a). Act June 23, 1938, § 9, substituted “of the contract price of the vessel” for “the cost of the vessel”.

Subsec. (b). Act June 23, 1938, § 10, permitted negotiations and contracts to build vessels in domestic shipyards in cases where the construction differential exceeds 331/3 per centum or 50 per centum of the cost, and to require a report where there is reason to believe that the bidding is collusive.

Subsec. (c). 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, interest at the rate of 31/2 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, § 14, added subsec. (g).

Effective Date of 1962 Amendment

Section 5 ofPub. L. 87–877provided that: “The amendment made by the first section of this Act [amending 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 (b) 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 ofPub. 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 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 (a) 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. 86–518applicable 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) ofPub. L. 86–518, set out as a note under section 1125 of this Appendix.

Modification of Contracts; Conditions

Section 2 ofPub. L. 88–410provided that: “The amendment made by this Act [amending this section] shall be effective with respect to any contract entered into under the provisions of section 502 of the Merchant Marine Act, 1936, as amended [this section], 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 such 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 Ship Construction Awarded on Bids Opened Prior to October 24, 1962

Section 2(a) ofPub. L. 87–877provided in part: “That the repeal of subsection (d) ofsection 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, 1962].”

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) ofPub. L. 86–518, set out as a note under section 1125 of this Appendix.

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) ofPub. L. 86–518, set out as a note under section 1125 of this Appendix.

Commercial Expectancy or Period of Depreciation of Tankers and Other Liquid Bulk Carriers

Nothing in any amendment made by Pub. L. 86–518to 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 ofPub. L. 86–518, set out as a note under section 1125 of this Appendix.

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 sums 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, 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 [sections 1152 (c) and 1153 of this Appendix]. 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.”