§ 1274a. Authorization of Secretary or Administrator to guarantee obligations arising from statutorily mandated change in standards for operation of vessels
(a) Purpose of obligations; principal and interest
Notwithstanding the provisions of this subchapter, except as provided in subsection (d) of this section, the Secretary or Administrator, upon the terms the Secretary or Administrator may prescribe, may guarantee or make a commitment to guarantee, payment of the principal of and interest on an obligation which aids in financing and refinancing, including reimbursement to an obligor for expenditures previously made, of a contract for construction or reconstruction of a vessel or vessels which are designed and to be employed for commercial use in the coastwise or intercoastal trade or in foreign trade as defined in section 1244 of this Appendix if—
(1) the construction or reconstruction by an applicant is made necessary to replace vessels the continued operation of which is denied by virtue of the imposition of a statutorily mandated change in standards for the operation of vessels, and where, as a matter of law, the applicant would otherwise be denied the right to continue operating vessels in the trades in which the applicant operated prior to the taking effect of the statutory or regulatory change;
(2) the applicant is presently engaged in transporting cargoes in vessels of the type and class that will be constructed or reconstructed under this section, and agrees to employ vessels constructed or reconstructed under this section as replacements only for vessels made obsolete by changes in operating standards imposed by statute;
(3) the capacity of the vessels to be constructed or reconstructed under this subchapter will not increase the cargo carrying capacity of the vessels being replaced;
(4) the Secretary or Administrator has not made a determination that the market demand for the vessel over its useful life will diminish so as to make the granting of the guarantee fiduciarily imprudent; and
(b) Limitations on length and amount of guaranteed obligations; useful life of vessel
For the purposes of this section—
(2) obligations guaranteed may not exceed 871/2 percent of the actual cost or depreciated actual cost to the applicant for the construction or reconstruction of the vessel; and
(3) reconstruction cost obligations may not be guaranteed unless the vessel after reconstruction will have a useful life of at least 15 years.
The Secretary or Administrator may not by rule, regulation, or procedure establish any percentage within the 871/2 percent or less limitation in paragraph (2) that is, or is intended to be, applied uniformly to all guarantees or commitments to guarantee made under this section.
(c) Security against default; fees; Vessel Replacement Guarantee Fund
(1) The Secretary or Administrator shall by rule require that the applicant provide adequate security against default. The Secretary or Administrator may, in addition to any fees assessed under section 1274 (e) of this Appendix, establish a Vessel Replacement Guarantee Fund into which shall be paid by obligors under this section—
(A) annual fees which may be an additional amount on the loan guarantee fee in section 1274 (e) of this Appendix not to exceed an additional 1 percent; or
(2) The Vessel Replacement Guarantee Fund shall be a subaccount in the Federal Ship Financing Fund, and shall—
(A) be the depository for all moneys received by the Secretary or Administrator under sections 1271 through 1276 and 1279  of this Appendix with respect to guarantee or commitments to guarantee made under this section;
(B) not include investigation fees payable under section 1274 (f) of this Appendix which shall be paid to the Federal Ship Financing Fund; and
(C) be the depository, whenever there shall be outstanding any notes or obligations issued by the Secretary or Administrator under section 1275 (d) of this Appendix with respect to the Vessel Replacement Guarantee Fund, for all moneys received by the Secretary or Administrator under sections 1271 through 1276 and 1279  of this Appendix from applicants under this section.
(d) Additional requirements
The program created by this section shall, in addition to the requirements of this section, be subject to the provisions of sections 1271 through 1273; 1274(b)(1), (4), (5), (6); 1274(e); 1274(f); 1274(h); and 1275, 1276, and 1279  of this Appendix; except that the Federal Ship Financing Fund is not liable for any guarantees or commitments to guarantee issued under this section.
 See References in Text note below.