§ 1273. Authorization of Secretary or Administrator to guarantee obligations
(a) Principal and interest
The Secretary or Administrator is authorized to guarantee, and to enter into commitments to guarantee, the payment of the interest on, and the unpaid balance of the principal of, any obligation which is eligible to be guaranteed under this subchapter. A guarantee, or commitment to guarantee, made by the Secretary or Administrator under this subchapter shall cover 100 percent of the amount of the principal and interest of the obligation.
(b) Security interest
No obligation shall be guaranteed under this subchapter unless the obligor conveys or agrees to convey to the Secretary or Administrator such security interest, which may include a mortgage or mortgages on a vessel or vessels, as the Secretary or Administrator may reasonably require to protect the interest of the United States.
(c) Amount of guarantee; percentage limitation; determination of actual cost of vessel
The Secretary or Administrator shall not guarantee the principal of obligations in an amount in excess of 75 per centum, or 871/2 per centum, whichever is applicable under section 1274  of this Appendix, of the amount, as determined by the Secretary or Administrator which determination shall be conclusive, paid by or for the account of the obligor for the construction, reconstruction, or reconditioning of a vessel or vessels with respect to which a security interest has been conveyed to the Secretary or Administrator, unless the obligor creates an escrow fund as authorized by section 1279a of this Appendix, in which case the Secretary or Administrator may guarantee 75 per centum or 871/2 per centum, whichever is applicable under section 1274 of this Appendix, of the actual cost of such vessel or vessels.
(d) Pledge of United States
The full faith and credit of the United States is pledged to the payment of all guarantees made under this subchapter with respect to both principal and interest, including interest, as may be provided for in the guarantee, accruing between the date of default under a guaranteed obligation and the payment in full of the guarantee.
(e) Proof of obligations
Any guarantee, or commitment to guarantee, made by the Secretary or Administrator under this subchapter shall be conclusive evidence of the eligibility of the obligations for such guarantee, and the validity of any guarantee, or commitment to guarantee, so made shall be incontestable. Notwithstanding an assumption of an obligation by the Secretary or Administrator under section 1275 (a) or (b) of this Appendix, the validity of the guarantee of an obligation made by the Secretary or Administrator under this subchapter is unaffected and the guarantee remains in full force and effect.
(f) Limitation on outstanding amount
The aggregate unpaid principal amount of the obligations guaranteed under this section and outstanding at any one time shall not exceed $12,000,000,000, of which
(1) $850,000,000 shall be limited to obligations pertaining to guarantees of obligations for fishing vessels and fishery facilities made under this subchapter, and
(2) $3,000,000,000 shall be limited to obligations pertaining to guarantees of obligations for eligible export vessels. No additional limitations may be imposed on new commitments to guarantee loans for any fiscal year, except in such amounts as established in advance in annual authorization Acts. No vessel eligible for guarantees under this subchapter shall be denied eligibility because of its type.
(g) Restrictions on commitments to guarantee obligations on eligible export vessels
(1) The Secretary or Administrator may not issue a commitment to guarantee obligations for an eligible export vessel unless, after considering—
(A) the status of pending applications for commitments to guarantee obligations for vessels documented under the laws of the United States and operating or to be operated in the domestic or foreign commerce of the United States,
the Secretary or Administrator determines, in the sole discretion of the Secretary or Administrator, that the issuance of a commitment to guarantee obligations for an eligible export vessel will not result in the denial of an economically sound application to issue a commitment to guarantee obligations for vessels documented under the laws of the United States operating in the domestic or foreign commerce of the United States.
(2) The Secretary or Administrator may not issue commitments to guarantee obligations for eligible export vessels under this section after the later of—
(A) the 5th anniversary of the date on which the Secretary or Administrator publishes final regulations setting forth the application procedures for the issuance of commitments to guarantee obligations for eligible export vessels,
(B) the last day of any 5-year period in which funding and guarantee authority for obligations for eligible export vessels have been continuously available, or
(h) Risk categories
(1) The Secretary or Administrator shall—
(A) establish in accordance with this subsection, and update annually, a system of risk categories for obligations guaranteed under this subchapter, that categorizes the relative risk of guarantees made under this subchapter with respect to the risk factors set forth in paragraph (3);
(B) annually determine for each of the risk categories a subsidy rate equivalent to the cost of obligations in the category, expressed as a percentage of the amount guaranteed under this subchapter for obligations in the category; and
(C) ensure that each risk category is comprised of loans that are relatively homogeneous in cost and share characteristics predictive of defaults and other costs, given the facts known at the time of obligation or commitment, using a risk category system that is based on historical analysis of program data and statistical evidence concerning the likely costs of defaults or other costs that expected to be associated with the loans in the category.
(A) Before making a guarantee under this section for an obligation, and annually for projects subject to a guarantee, the Secretary or Administrator shall apply the risk factors set forth in paragraph (3) to place the obligation in a risk category established under paragraph (1)(A).
(B) The Secretary or Administrator shall consider the aggregate amount available to the Secretary or Administrator for making guarantees under this subchapter to be reduced by the amount determined by multiplying—
(C) The estimated cost to the Government of a guarantee made by the Secretary or Administrator under this subchapter for an obligation is deemed to be the amount determined under subparagraph (B) for the obligation.
(3) The risk factors referred to in paragraphs (1) and (2) are the following:
(A) If applicable, the country risk for each eligible export vessel financed or to be financed by an obligation.
(C) The amount of an obligation, which is guaranteed or to be guaranteed, in relation to the total cost of the project financed or to be financed by the obligation.
(E) If applicable, any guarantee related to the project, other than the guarantee under this subchapter for which the risk factor is applied.
(F) If applicable, the projected employment of each vessel or equipment to be financed with an obligation.
(G) If applicable, the projected market that will be served by each vessel or equipment to be financed with an obligation.
(J) Whether a guarantee under this subchapter is or will be in effect during the construction period of the project.
(i) Priority for national defense tank vessels
In guaranteeing and entering commitments to guarantee under this section, the Administrator shall give priority to guarantees and commitments for vessels that are otherwise eligible for a guarantee under this section and that are constructed with assistance under subtitle D of the Maritime Security Act of 2003.
(j) Priority for other vessels suitable for service as a naval auxiliary
In guaranteeing and entering commitments to guarantee under this section, the Administrator shall, after applying subsection (i) of this section, give priority to a guarantee or commitment for a vessel that is otherwise eligible for a guarantee under this section and that the Secretary of Defense determines—
The Secretary of Defense shall determine whether a vessel satisfies paragraphs (1) and (2) by not later than 30 days after receipt of a request from the Administrator for such a determination.
 See References in Text note below.