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Merchant Shipping Act

Merchant Shipping Act


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In the 1868 General Election, Samuel Plimsoll was elected as MP for Derby. He immediately began to campaign for government legislation to protect seamen. To support his case he published Our Seamen (1873), a book that provided documentary evidence about the scale of the problem. This included information that nearly 1,000 sailors a year were being drowned on ships around British shores. As part of his campaign, a copy of Our Seamen was given to every member of the House of Commons.

Samuel Plimsoll was particularly critical of the 1871 Merchant Shipping Act. As a result of this legislation seamen were obliged, subject to imprisonment and fine, to go to sea and complete a voyage once they had signed a contract. This made it difficult for sailors to leave a ship once they realised it was unseaworthy. In March 1873, The Times joined Plimsoll's campaign by printing a story about fifteen seamen who had been imprisoned for three months after they refused to go on board the ship Peru. When the ship finally left Cardiff with a new crew, it sunk in the Bay of Biscay and three men were drowned.

Ship-owners had powerful supporters in the House of Commons and it was argued by them that the government should not pass legislation that restricted the freedom of employers to run their companies. Gradually, other politicians, such as Lord Shaftesbury, became involved in Plimsoll's campaign. In 1875 Benjamin Disraeli, the Conservative prime minister, changed his mind on the issue and in 1875 gave his support to an Unseaworthy Vessels Bill.

The following year Samuel Plimsoll managed to persuade Parliament to amend the 1871 Merchant Shipping Act. This provided for the marking of a line on a ship's sides which would disappear below the water line if the ship was overloaded. A further amendment in 1877 imposed a limit on the weight of cargo which vessels were permitted to carry and created rules governing the engagement of seamen and their accommodation on board ship.


A Short History of the Maritime Administration

Established in 1950 under the auspices of President Harry S Truman’s Reorganization Plan No. 21, the Maritime Administration (MARAD) traces its origins to the Shipping Act of 1916, which established the U.S. Shipping Board, the first Federal agency tasked with promoting a U.S. merchant marine and regulating U.S. commercial shipping. Congress enacted the 1916 law in part because of the severe disruptions in shipping caused by World War I. Specifically, Congress established the Shipping Board “…for the purpose of encouraging, developing, and creating a naval auxiliary and naval reserve and a Merchant Marine, to meet the requirements of the commerce of the United States with its Territories and possessions and with foreign countries to regulate carriers by water engaged in the foreign and interstate commerce of the United States.

The U.S. remained neutral for nearly three years after Austria-Hungary declared war on Serbia in 1914, plunging Europe into what came to be known as the “Great War.” The first loss of an American merchant ship in World War I occurred on January 28, 1915, when a German cruiser destroyed the William P. Frye, which was transporting wheat to Great Britain. Germany quickly apologized for the incident but Americans were outraged. Tensions grew when a German submarine sank the British ocean-liner Lusitania in May 1915, taking 1,195 of its 1,959 passengers and crew down with it, including 128 Americans. America’s oceans could no longer isolate the country from European hostilities as they had for more than a century. After more shipping losses, the Shipping Board’s focus of meeting peacetime shipping requirements was eventually overshadowed when the U.S. declared war on Germany on April 6, 1917.

Under the provisions of the Shipping Act, the Shipping Board created the Emergency Fleet Corporation (EFC). The EFC organized a massive ship and shipyard construction program and acquired, managed and operated ships on behalf of the Shipping Board. The war ended before the construction program reached full capacity however, ships continued to be built until 1921 by which time nearly 2,300 had been completed. This vast program resulted in a postwar surplus of vessels, which spurred a lengthy depression in the industry. In response, Congress passed the Merchant Marine Act of 1920, which had varying degrees of success. In 1928 the EFC was renamed the Merchant Fleet Corporation and in 1930 both it and the Shipping Board were absorbed into the Department of Commerce as the United States Shipping Board Bureau.

Six years later Congress passed the Merchant Marine Act of 1936, creating the U.S. Maritime Commission, which assumed the duties, functions, and property of the Shipping Board Bureau. This seminal legislation governs many of the programs that support the American maritime industry to this day. President Franklin Delano Roosevelt appointed Joseph P. Kennedy, Sr. (father of President John F. Kennedy) as the Commission’s first chairman. Like its predecessors, the U.S. Maritime Commission was charged with advancing and maintaining a strong merchant marine to support U.S. commerce and defense. The Commission regulated ocean commerce, supervised freight and terminal facilities, and administered construction and operational subsidy funds for private commercial ships. The Act also authorized the Commission to design and construct 500 modern merchant ships over a 10-year period, beginning with the transatlantic liner America. This construction program was well underway when war broke out again and the Commission found its peacetime purpose transformed just as the Shipping Board’s had been in 1917.

In 1942 President Franklin Delano Roosevelt established the War Shipping Administration (WSA) in response to America’s entrance into World War II. Executive Order 9054 effectively separated the Maritime Commission into two parts the Commission to design and construct ships and the WSA to acquire and operate them. Although administratively separated, the two agencies worked closely together. The Chairman of the Maritime Commission, Admiral Emory S. Land, also served as WSA’s administrator. Between 1941 and 1946, the Maritime Commission and WSA managed the greatest industrial shipbuilding and ship operations effort ever seen. Nearly 6,000 merchant vessels and naval auxiliaries were constructed, with the WSA routinely managing the simultaneous operations, repair and maintenance of thousands of ships. With the war’s end, the government dissolved the WSA and transferred its functions back to the Maritime Commission in 1946. Under the Merchant Ship Sales Act, several thousand ships were sold or disposed of, while retaining a nucleus of reserve shipping known as the National Defense Reserve Fleet.

In 1950, acting on President Truman’s recommendations in Reorganization Plan No. 21, Congress eliminated the U.S. Maritime Commission and divided its functions between the newly-established Maritime Administration and the Federal Maritime Board (FMB), both placed within the U.S. Department of Commerce. The Maritime Commission’s subsidy and ocean shipping regulatory functions were transferred to the FMB, while the Commission’s remaining promotional and government-owned shipping interests were vested in MARAD. In 1961, as part of Reorganization Plan No. 7, the FMB became an independent regulatory agency and was renamed the Federal Maritime Commission a title it retains to this day. The subsidy functions returned to MARAD in the form of the Maritime Subsidy Board, which reported independently to the MARAD Administrator. The 1961 reforms are the basis of MARAD’s current organizational structure.

In 1981, MARAD was transferred to the Department of Transportation, completing the consolidation of all Federal transportation programs into one cabinet-level department. MARAD is still charged with promoting the development and maintenance of a strong merchant marine for the national defense and development of its foreign and domestic commerce. To that end, MARAD operates the United States Merchant Marine Academy at Kings Point, New York, and provides and maintains training ships and funding for the six state maritime academies that include: the State University of New York (SUNY) Maritime College, Massachusetts Maritime Academy California Maritime Academy Maine Maritime Academy Texas Maritime Academy and Great Lakes Maritime Academy. MARAD also continues to own and operate a fleet of government-owned cargo vessels to support national security requirements. These gray-colored ships of the Ready Reserve Force are strategically positioned in ports around the nation and are readily identifiable by their distinctive red, white and blue stack bands.


The Fourth Arm of Defense: The U.S. Merchant Marine

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Published Jun 27, 2021 5:37 PM by CIMSEC

From its earliest days when the American colonies were dependent on trade with Europe, the United States has been reliant on merchant shipping. During the fight for independence beginning in 1775, an effective American strategy was to arm merchant ships to disrupt the British supply chain of ships along the eastern seaboard and across the Atlantic Ocean. In this way, the U.S. Merchant Marine&rsquos vital role of support in wartime predates both the United States Coast Guard (1790) and the United States Navy (1797). As another measure of its importance, the development and passage of laws related to maritime issues and the merchant fleet were among the early priorities of the newly formed Congress.

The United States benefits economically and strategically from an abundance of ocean coastline and internal rivers and lakes, and U.S. citizen merchant mariners navigate, maintain, and work on the ships, tugboats, towboats, ferries, dredges, and other vessels that provide service in associated waterborne trades. U.S. mariners are expertly trained and perform their respective shipboard tasks to the highest of standards anywhere in the world. The adequacy and viability of a qualified pool of citizen mariners is distinguishable from many other civil occupations since it is critical to U.S. national security and to America&rsquos ability to project power.

Though it is fundamentally a commercial enterprise, the U.S. Merchant Marine has proven throughout history its capability to serve as an auxiliary to the Navy. The often overlooked &ldquofourth arm of defense,&rdquo [along with the Navy, Army, and Air Force] as described by President Franklin Delano Roosevelt, the U.S. Merchant Marine and American seafarers have been called upon repeatedly to deliver U.S. military personnel and materiel to areas of conflict or emergency.

Perhaps most notably, the U.S. Merchant Marine and civilian merchant mariners were integral to the Allied Forces&rsquo victory in World War II, delivering nearly 270 billion long tons of cargo in support of the war while risking their lives in the treacherous waters of the North Atlantic and Pacific Oceans. All told, 733 American cargo ships were lost during World War II. Though U.S. Government records management for merchant mariners failed to match the precision applied to the other services, it is widely held that proportionately, the U.S. Merchant Marine suffered a higher fatality rate during World War II than any of the Armed Forces. According to the 1946 Report of the War Shipping Administration &ldquoUp to V-J Day, 5,638 merchant seamen and officers are dead and missing 581 were made prisoners of war.&rdquo

The U.S. Merchant Marine has continued to demonstrate its value as a strategic resource into the 21st Century and beyond providing worldwide shipping facilities and support to the Department of Defense (DOD) and to essential foreign assistance programs, such as waterborne response related to domestic and international disaster recovery operations. U.S.-flag industry sealift missions in support of U.S. military operations throughout recent decades have been historically efficient, especially its ability to deliver more than 90 percent of all cargoes bound to and from Afghanistan and Iraq during Operations Enduring Freedom and Iraqi Freedom.

U.S.-flag ships have also supported months-long U.S. Gulf of Mexico recovery efforts in the aftermath of Hurricanes Katrina and Rita in 2005, have responded to the devastating 2010 earthquake destruction in Haiti in 2010, and have bolstered federal and state recovery efforts in the New York/New Jersey area following destruction to that region as a consequence of Hurricane Sandy. Sadly, few Americans will forget the evacuation of New York City on 9-11 and the selfless acts of U.S. mariners and private sector companies to evacuate citizens from lower Manhattan &ndash the largest and safest evacuation of citizens in U.S. history.

It is important to note that U.S.-flag capability brought to bear in the wartime and hurricane missions noted above included both U.S. Government-owned sealift vessels and privately-owned commercial ships. However, the same single pool of trained and qualified civilian mariners is called upon during emergencies to crew government ships, the majority of which are idle and maintained in readiness prior to activation&mdashall while simultaneously meeting service requirements in U.S.-flag commercial trades.

The availability of a trained and qualified mariner pool sufficient to support the activation and operation of the U.S. Government&rsquos surge sealift assets is a key element of U.S. strategy and planning. This organic lift includes the Maritime Administration&rsquos (MARAD) Ready Reserve Force (RRF) which currently numbers 41 ships and the Military Sealift Command&rsquos (MSC) 19 Large Medium-Speed Roll-on Roll-off ships (LMSRs). These vessels are maintained by commercial ship managers in prescribed levels of readiness and outported in reduced operating status (ROS) in commercial berths or in government facilities, available to be activated when crises arise. To promote readiness and to enable rapid transition to operational capability, ROS vessels are partially crewed while idle. Once activated and fully crewed, all of these assets, RRF and LMSR alike, fall under MSC&rsquos operational control. The surge sealift capabilities comprised from these vessels enable deployment of combat forces in the early stages of a conflict. Of course, the vessels themselves are essentially useless without trained civilian crews to maintain and operate them.

The government relies on a partnership with U.S.-flag operators and maritime labor organizations to assure access to commercial sealift capability and civilian merchant mariners. The framework through which this is possible is the Maritime Security Program (MSP) and its companion program, the Voluntary Intermodal Sealift Agreement (VISA). These programs are administered jointly by MARAD, an agency within the Department of Transportation, and DOD&rsquos United States Transportation Command. With MSP funding, the Government leverages a relatively small investment, $314 million for fiscal year 2021, and $318 million annually for fiscal years 2022 through 2025 for 60 ships of diverse capability, gaining assured access to militarily useful ships and related intermodal transportation networks.

The investment also works to ensure the continued viability of both a U.S.-flag fleet engaged in international trade and the pool of seafarers to crew those vessels. Without a viable U.S.-flag commercial fleet, and the American merchant mariners this fleet supports, the United States would be unable to deploy and effectively sustain its military forces on a global basis.

The government / private industry partnership itself is unique, and it entails peacetime planning and an operational relationship through peacetime service contracts. The U.S. companies enrolled in MSP/VISA agreements are required to be managed by U.S. citizens, and those companies with a foreign parent are required to execute security agreements that protect the rights and interests of the United States. The companies have the equivalent of a &ldquosecret&rdquo clearance enabling participation in joint planning and operational exercises with U.S. military commands in a secure environment at regular intervals.

MSP is approaching the end of its third 10-year authorization cycle, and the program has been authorized for a fourth time through Fiscal Year 2035. Given the austere fiscal environment facing DOD and every other executive agency from time-to-time, it is important to note from a budgetary standpoint that the fleet of vessels and infrastructure available for military missions through the MSP is capitalized and recapitalized solely through the private investment of the owners and operators of enrolled vessels.

The current annual taxpayer investment in MSP is modest when compared to an alternative scenario that would call for the Government to acquire, operate, and maintain equivalent sealift capabilities on its own. Accordingly, to assess the cost effectiveness of the MSP, it is important to understand this huge cost avoidance at the same time one evaluates the cost of Government programs and policies that support the U.S. Merchant Marine to achieve national sealift objectives. For example, the cost of MSP operating agreements during the program&rsquos first 15 years were less than $1.9 billion meanwhile the U.S. government benefitted by saving nearly $70 billion in other costs that would have been incurred for equal readiness.

Perhaps the largest bargain gained from the government&rsquos maritime investment lies in sustaining jobs on U.S.-flag ships, benefitting America economically as a large international trading power while also ensuring that the country has the readily available pool of trained and qualified citizen seafarers on which the nation relies to provide sealift during emergencies.

A fundamental element of U.S. maritime legislative policy is &mdash and has been &mdash that &ldquovessels of the merchant marine should be operated by highly trained and efficient citizens of the United States.&rdquo Of course, the application of this principle is especially true with respect to developing and maintaining the nation&rsquos military sealift capability. Military planners understand that America&rsquos security is best protected when the country relies on a commercial shipping industry domiciled in the United States, employing U.S. citizens both at sea and ashore, and subject to U.S. laws and regulations.

The statutory requirement for U.S.-flag vessels to be crewed by Americans is enforced by the United States Coast Guard (USCG). There are two general categories, licensed (officers) and unlicensed (non-officers, sometimes referred to as &ldquoratings&rdquo). Only U.S. citizens and aliens lawfully admitted to the United States for permanent residence may be issued a USCG credential. All licensed officers must be U.S. citizens, and only 25 percent of the unlicensed crew on board each vessel may be aliens lawfully admitted to the United States. U.S. mariners are issued licenses and credentials based on their training and experience, and U.S. standards and the level of enforcement are considered by observers to be the most stringent in the international community.

The United States has been able to respond to crises and support military operations in recent decades because its U.S.-flag maritime industry was sufficiently sized to do so. Likewise, U.S. sealift strategy calling first for the deployment of government-owned surge assets followed by the use of commercially sourced ships for the longer sustainment phase of missions has been very effective. As explained earlier, the critical component of this strategy has been maintaining a pool of qualified oceangoing U.S. mariners adequate enough to crew the government&rsquos surge ships when necessary without disrupting commercial crewing requirements. However, recent trends could cause concern among military planners and industry officials with respect to the availability of U.S. mariners to meet surge and sustainment requirements for the duration of a conflict in the future.

The pool of U.S. mariners available to crew government ships when activated has declined over the last decade, creating the distinct likelihood that America&rsquos national security could be adversely impacted in the near future if the trend continues. Much of this decline stems from the fact that it is increasingly difficult for U.S.-flag ships to compete in international commerce against heavily subsidized foreign flag vessels, many of which operate in a tax-free environment.

Competition in global shipping is fierce and survival depends on many factors. Quality of service can eclipse cost to a degree, but much of the market is driven by carriers adhering to a minimum level of compliance with international safety and environmental standards while employing mariners from underdeveloped countries, all to minimize cost. Much of this occurs within open registries which account for more than half the ships in the world&rsquos commercial trading fleet. Competitive pressures have been magnified in recent years by the economic crisis worldwide and by an oversupply of shipping tonnage. The result has been a loss of U.S.-flag oceangoing tonnage and related afloat jobs. This is partly because federal programs designed to support the maritime industry have been reduced in some instances while others have failed to keep pace with rapidly changing national and international factors affecting shipping conditions and economics.

Other issues have further impacted the mariner pool. The loss of shipboard billets when U.S.-flag ships leave commercial service has a compounding effect on the mariner pool since each billet supports roughly two individuals when vacations, training, and other time spent on shore are taken into account. The loss of billets also negatively affects the ability to recruit and develop new mariners to grow the manpower pool. International and domestic regulatory rules limit mariners&rsquo ability to maintain and upgrade their seafaring credentials without possessing sufficient sea time and without meeting recency of service requirements. For example, a mariner might require specific training to update practical experience in technical skills before being allowed to volunteer for an emergency sealift billet during a contingency.

A primary element of DOD&rsquos sealift planning framework are manpower exercises that focus on and test proficiency in the timely recruitment of qualified personnel necessary to crew organic government assets to meet emergency activation requirements. MARAD and MSC place a high priority on working with carriers and labor unions to identify, contact, and prepare qualified mariners leading up to and during emergencies. MARAD has developed and maintains a Mariner Outreach System with the cooperation of willing mariners to maintain and update contact information and current USCG qualifications.

Notwithstanding the willingness of U.S. mariners to maintain their qualifications and stand ready to sail &ndash for any reason &ndash into harm&rsquos way, the retention of mariners in the workforce is a growing problem. This problem exists not only in the United States but globally, especially among mariners in developed economies. For more than a decade, there have been concerns about a global shortage of qualified seafarers and the reasons are numerous and varied. It is a difficult and often dangerous occupation that, for many, is arduous to endure long term.

Time away from family is probably the most prominent downside for individuals sailing far from home. In the modern age of containerization, expedited cargo handling, and sophisticated shipboard technology the job is more intense than ever. Expectations and communications from management are endless, which can impact mariners during working shifts and beyond. The sense of adventure once associated with going to sea has eroded significantly. A mariner today gets only a limited dose of &ldquoseeing the world.&rdquo

Turnaround intervals in ports today are usually numbered in hours &ndash not days &ndash and access to the cities attached to ports of call has been eliminated or minimized at best. Security issues, together with strict limitations on the granting of entry visas by port states, also prominently impact port access. These and other issues cause some mariners entering the workforce to view it as a short term opportunity to make some money rather than as a career.

This is especially true in the United States, where competition from onshore job opportunities is a significant factor that draws mariners away from sailing. The work has always been demanding, but imagine the impact of the ongoing pandemic. New and lasting pressures combine with frequent instances whereby crews remain trapped on board with little certainty of when they can disembark to enjoy families and something approaching normalcy, even as mariners wonder if they can ever forget the risks experienced in close quarters and unknown threats stemming from the virus.

Due in no small measure to America&rsquos standard of living and the reasonable expectations all American workers, including American mariners, have for a living wage, health and pension benefits, a safe workplace environment, and other employment-related terms and conditions, it is difficult for the U.S.-flag maritime industry to compete in the international cargo markets against foreign flag of convenience vessels and their third world crews. This is why the Federal government has administered and must continue to administer programs to support the industry.

Throughout American history, the one constant has been that a strong commercial maritime capability enhances national security. This is as true today as ever. The Maritime Security Program remains the most important of the federal programs that assist U.S.-flag ships in foreign trade, and it should be supported, fully funded, and modified as necessary to keep pace with economic conditions affecting U.S.-flag shipping. The government also administers a framework of cargo preference programs designed to provide access to military and civilian government-impelled cargoes. Especially with respect to food assistance, certain of those programs should be expanded to promote global peace and stability. In any case, authorizing statutes and programs should be supported by all Federal agencies to ensure that taxpayer dollars are spent at least in part to enable U.S.-flag shipping and not spent in their entirety to rely on foreign-flag shipping and foreign crews. Finally, the domestic shipping statutes commonly referred to as the Jones Act should be retained to sustain the commercial shipping base that helps support the civilian manpower pool needed to meet defense requirements.

Ocean-borne transport is largely taken for granted by the American public. It is predominantly about freight, and therefore essentially invisible to most citizens, who view the television in their living room as having come from Walmart instead of from Asia. The United States remains the largest trading nation in the world based on exports and imports of goods and services. Yet only about four percent of U.S. foreign trade is carried on U.S.-flag ships. The benefits of maintaining a strong maritime industry does not naturally resonate with citizens, so the shipping industry is trying to raise public awareness to this vital capability. To learn more about the U.S.-flag maritime industry and the benefits it provides, please visit www.americanmaritime.org.

James Caponiti joined the American Maritime Congress (AMC) in 2011, following 38 years of distinguished service in the Federal Government. He served with the Department of Transportation&rsquos Maritime Administration for 37 years. He is a recipient of the Presidential Meritorious Rank Award and the Distinguished Rank Award, the highest Civil Service awards for Senior Executives. Mr. Caponiti also served as Chairman of NATO&rsquos Planning Board for Ocean Shipping for 14 years, responsible for developing and maintaining plans for civil shipping support to deploy NATO military forces during times of crisis and war.

AMC is a research and educational organization dedicated to informing the public, media, and government officials on policy and issues affecting the U.S.-flag merchant marine and the maritime industry.

This article appears courtesy of CIMSEC and may be found in its original form here.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.


The Maritime Administration’s First 100 Years: 1916 – 2016

The year 2016 marked 100 years since the founding of the Maritime Administration’s (MARAD) first predecessor agency, the United States Shipping Board (USSB). The Shipping Act of 1916 created the USSB, the first Federal agency tasked with promoting a U.S. merchant marine and regulating U.S. commercial shipping. Congress enacted the law in part to reform the nation’s maritime industry and to respond to the severe shipping shortages as a result of World War I.

The 30 years between 1830 and 1860 have been referred to as America’s “Golden Age” in shipping. Sailing ships called “Packets,” carried mail, trade goods, and passengers back-and-forth across the Atlantic on a regular schedule. The Clipper ship soon ushered in faster service, and later the gradual introduction of steam further revolutionized shipping. However, the “Golden Age” did not last. For a variety of reasons, some of which included faulty policy and legislation, the U.S. shipping industry steadily declined in the half-century leading up to the Shipping Act by 1914, U.S.-flagged merchant vessels carried just 10% of ocean trade. World War I made the shortage even more apparent when European nations recalled their ships from international routes and Germany’s unrestricted strategic targeting of merchant shipping further disrupted international trade.

A 1918 United States Shipping Board poster touting the number of ships built by the Emergency Fleet Corporation in support of the U.S. war effort during World War I.
“The Tidal Wave.” Lithograph. Philadelphia: Publications Section, Emergency Fleet Corporation, 1918. From Library of Congress Prints & Photographs Division: WWI Posters.

Ten days after the U.S. declared war on Germany on April 6, 1917, the USSB created the Emergency Fleet Corporation (EFC). The EFC managed a massive construction program to increase the U.S. merchant fleet. By the end of the war in 1918, the EFC had delivered 470 ships and in just 19 months, had become the largest U.S. industrial operation of the war. Edward N. Hurley, USSB Chairman during World War I, later wrote, “I am convinced that the country never has realized to what extent the war was won at home by…the Shipping Board and the Fleet Corporation, by taking the most desperate chances conceivable.”[1]

The November 11 th armistice and subsequent peace talks placed the shipbuilding program at a crossroads. When EFC planners began the program they assumed that the war would last for years. Now there was no massive military effort to sustain, and the shipbuilding program had yet to even reach peak production. However, the USSB elected to continue building vessels to strengthen American merchant shipping in the post-war world.

When the construction program finally ended in 1922, the EFC had completed 2,312 ships, making the U.S. merchant fleet among the largest and most modern in the world. To capitalize on the newly-minted fleet and expand America’s global reach, Congress passed the Merchant Marine Act of 1920, specifically citing the U.S. merchant marine’s role in national defense and commerce. Often referred to as the “Jones Act” after the bill’s sponsor, Senator Wesley Jones, the legislation restricted American coastwise and intercoastal trade to U.S.-flagged vessels. It also encouraged the USSB to sell surplus vessels to U.S. companies to privatize the industry and ensure that U.S.-built ships carried American ocean-born trade. However, while the EFC’s shipbuilding program and the Jones Act were positive steps, a slowing global economy and oversaturation of the shipping market precipitated another decline.

USSB Shipyard In an effort to modernize the U.S. merchant fleet the USSB elected to continue to build ships after the end of World War I. Here four ships are under construction by Virginia Shipbuilding Corporation in 1919.
“Shipways, Virginia Shipbuilding Corp., Feb 14, ’19.” Glass negative. February 14, 1919. From Library of Congress Prints & Photographs Division: National Photo Company.

In an attempt to reverse this, Congress passed the Merchant Marine Act of 1928. The statute’s main provision authorized the USSB to offer generous subsidies in the form of mail contracts to companies that built new, fast vessels for the major oceanic trade routes.[2] It also aimed to replace the program established by the Postal Act of 1891 and encourage the construction of passenger ships, something that was not done under the 1916 act and the EFC. Many of the ships built under this program provided troop service during World War II. However, the bill’s vague terms, liberal distribution of government funds, subsequent subsidy abuse, and the start of the Great Depression, led to criticism of the program and the USSB. President Herbert Hoover wanted to disband the USSB entirely but only succeeded in refusing to fill vacancies thereby reducing the number of commissioners. On August 10, 1933, President Franklin D. Roosevelt abolished the USSB and created the interim United States Shipping Board Bureau (USSBB) within the Department of Commerce. Roosevelt preferred that the regulation of U.S. shipping remain under partial control of a cabinet department but by 1936, Congress replaced the USSBB with the independent regulatory body, the U.S. Maritime Commission.

The legislation that created the Maritime Commission, the Merchant Marine Act of 1936, is often referred to as the “Magna Carta of American Shipping.” As part of the New Deal, it intended to revitalize U.S. merchant shipping and strengthen the nation’s national defense.

To facilitate ship construction and operation, and to help the industry compete against foreign operators, the law authorized two subsidies the construction differential subsidy and the operating differential subsidy. The construction differential subsidy was meant to offset the higher shipbuilding costs in the U.S. by paying up to 50% of the difference between the cost of U.S. and non-U.S. construction with the difference going to the U.S. shipyard. The operating differential subsidy was a direct subsidy paid to U.S. – flag operators to offset the high operating cost of U.S.-flag ships when compared to foreign-flag ships.

The act’s timing was also critical in regards to national defense. In 1936, increasing tensions in Europe and Asia stoked fears of another world war, and the U.S. wanted to avoid a shipping crisis similar to that of World War I. The government hoped the act would revive U.S. shipping and create a fleet of modern ships. To that end, the Maritime Commission designed new cargo ships, sought bids from private companies, and awarded construction contracts. To further increase production, the Commission implemented the Long-Range Shipbuilding Program in 1938.[3] Intended to improve the U.S. fleet and replace aging World War I-era vessels, the program pledged the construction of 500 new ships within ten years. The Commission utilized standardized designs that enabled fast production, but also resulted in ships that were modern, safe, adaptable, efficient, and fast. After Germany invaded Poland in 1939, sparking World War II, the Commission accelerated the program’s production by 1941 the annual output called for 400 ships.

While Europe and Asia descended into war, Congress passed a series of laws known as the Neutrality Acts restricting trade to belligerent nations and barring U.S. ships from sailing to certain combat zones in an attempt to remain neutral. However, U.S. merchant ships were not immune to the danger and the Neutrality Acts could not offer protection as evidenced on November 8, 1940, when the U.S.-flagged ship MS City of Rayville struck a German mine and sank off the coast of Australia, killing an American merchant mariner.

Vessel Alexander H. Stephens at Launch Liberty ship SS Alexander H. Stephens after its launch in July 1942, but before completion of its cargo booms and superstructure. The Liberty ship’s simple design enabled mass production, which formed the bulk of the U.S. merchant fleet during World War II.
Maritime Administration photograph.

In January 1941, President Roosevelt announced a plan to construct 200 ships in addition to those being built for the Long-Range Shipbuilding Program these ships would become the first EC2 “Liberty” type ships. Liberty ships were based on a British concept and were less advanced than Maritime Commission designs, but their simplicity enabled cheap and quick production.[4] The Commission debated building the ships because of concerns that the vessels may not be useful in the post-war world however, the need for ships ultimately outweighed their concern. The January 1941 production increase, the first of several during the war, became known as the Emergency Shipbuilding Program.

On December 7, 1941, the Japanese attacked the U.S. naval base at Pearl Harbor, Hawaii, driving the U.S. into World War II. To handle the operational demands that the war placed upon the Maritime Commission, President Roosevelt created the War Shipping Administration (WSA) on February 7, 1942. While the Commission continued to build ships, the WSA was authorized to control the operation, purchase, charter, requisition, and use of all ocean vessels under the flag or control of the United States, except combatant vessels, auxiliaries, and transports of the armed services and the vessels engaged in coastwise, intercoastal, and inland waterways transportation, which were under the control of the Director of the Office of Defense Transportation. The WSA also oversaw mariner training programs. Although the WSA operated the U.S. merchant fleet, it also utilized the infrastructure already in place and entrusted private shipping companies with operating, maintaining, and crewing their ships at government expense.

Lifeboat Training at Sheepshead Bay Established in December 1942, the U.S. Maritime Service training station at Sheepshead Bay, New York, was a large facility specifically designed for the training of mariners. Here trainees practice lowering lifeboats at Sheepshead Bay.
“Sheepshead Bay, Brooklyn, N.Y. In training for service with merchant vessels apprentice seamen at the new United States Maritime service training station, learn the ropes for the call of ‘Abandon Ship!’” Photograph negative. c1943. From Library of Congress Prints & Photographs Division: Farm Security Administration/Office of War Information Black-and-White Negatives.

The training of merchant seaman and officers was equally as important as shipbuilding and operation. The foundation of wartime training can also be traced back to the Merchant Marine Act of 1936, which created the United States Maritime Service (USMS), the organization responsible for mariner training. Like the Long-Range Shipbuilding Program, the USMS began operation in 1938 and expanded as the likelihood of war increased. After Pearl Harbor, the U.S. enlarged the training program to include a major training facility at Sheepshead Bay, New York, the U.S. Merchant Marine Academy at Kings Point, New York, as well as other training sites throughout the country. To further increase the number of trained mariners as the war progressed, the USMS shortened the length of its training programs and in May 1944 lowered the minimum age of enrollment to just 16.

The U.S. merchant marine played a deciding role in the Allied victory in World War II. In the war against Germany and Italy, U.S. merchant vessels supported the amphibious invasions of North Africa, Italy, and France, and enabled the success of each campaign by transporting and delivering personnel and supplies. In the Atlantic, German U-boats exacted a heavy toll on merchant ships, especially in the first half of 1942 when the U.S. was slow to implement modern anti-submarine tactics and technology, particularly the use of convoys and naval escort ships. As the Allied campaign against Germany progressed, U.S. ships were also exposed to threats from aerial attack, surface vessels, and naval mines. In the Pacific Theater, the vast expanse of the ocean itself and distances to remote island battlefields, presented its own set of challenges. Ships and crews faced the same enemy anti-ship weapons as those in the Atlantic, but Japan’s lack of a coordinated campaign against merchant shipping resulted in far fewer losses.

Convoy in the Pacific A convoy heading for the Southwest Pacific in WWII. Although convoys were used in the Pacific, many merchant ships in that theater often travelled alone due to the absence of a coordinated Japanese submarine campaign against merchant shipping.
“Convoy. Sailing with their sterns to the rising sun, ships of an American convoy set out for the Southwest Pacific. Ships like these and the naval vessels and planes that accompany them are maintaining the “bridges of boats” that link us with our far- flung battle fronts.” Nitrate negative. Between 1940 and 1946. From Library of Congress Prints & Photographs Division: Farm Security Administration/Office of War Information Black-and-White Negatives.

The success of the U.S. merchant marine in World War II would have been impossible without the historic efforts in shipbuilding, ship management, and mariner training. Between 1939 and 1945, the Maritime Commission built 5,171 ships of over 2,000 gross registered tons. In addition to the Liberty ships, the Commission also oversaw the construction of the more modern “Victory” type cargo ships, as well as tankers, combination passenger/cargo ships, tugs, barges, and military auxiliary vessels. In order to operate these ships, the Maritime Commission used a variety of training programs to produce 262,474 mariners between 1938 and December 1945. However, the success of the merchant marine and achievements in production and training did not come without a price more than 700 merchant ships were sunk and more than 8,000 U.S. merchant mariners were killed during the war. The losses suffered are all the more remarkable given that the U.S. merchant marine was not considered a military branch and was composed of volunteers classified by the government as civilians.

Wartime ship production made the U.S. merchant marine fleet the largest and most modern in the world by 1946, the U.S. operated nearly two-thirds of the world’s shipping. In the war’s immediate aftermath, Maritime Commission ships supplied U.S. occupation forces, brought American service personnel serving overseas home, and delivered material to help rebuild the war-torn nations. Many Maritime Commission vessels, especially the Victory ships built in the last years of the war, quickly formed the basis of the U.S.’s post-war civilian merchant fleet.

Although World War II resulted in the U.S. emerging as a world superpower, the government rapidly demobilized the military. For the merchant marine, this culminated in the Merchant Ship Sales Act of 1946, part of which directed the Commission to sell surplus merchant ships to civilian ship operators, including foreign shipping companies. While the U.S.’s goodwill helped rebuild foreign shipping fleets, it also depressed the U.S. maritime industry for the next two decades. The act also created the National Defense Reserve Fleet (NDRF). Unlike the post-World War I years where many surplus vessels fell into disrepair, Congress wanted a well-maintained fleet of ships ready for deployment in the event of war or other national emergency.

The post-World War II era also brought organizational changes to the Maritime Commission. In 1946, Congress abolished the WSA and its responsibilities reverted to the Commission. On May 24, 1950, Congress created the Maritime Administration and Federal Maritime Board (FMB) to replace the Maritime Commission. These new agencies were placed under the Department of Commerce and were closely intertwined but had different missions MARAD maintained all U.S. merchant shipping promotional programs and the NDRF, while the FMB took on a regulatory role. In 1961, Congress implemented Reorganization Plan No. 7, renaming the FMB the Federal Maritime Commission (FMC), making it a truly independent organization responsible for regulating U.S. international maritime shipping. The plan also replaced the subsidy functions performed by the FMB with the Maritime Subsidy Board (MSB), which reported directly to the Maritime Administration’s Administrator. The 1961 changes remain the foundation of MARAD’s current organizational structure.[5]

Beaumont Reserve Fleet Aerial An aerial view of the Beaumont Reserve Fleet, Beaumont, Texas, in the mid-20th century. After World War II, many merchant ships built by the U.S. were laid up until they could be sold to commercial operators or were needed by the military.
Maritime Administration photograph.

Various events in the 1950s demonstrated the value of the NDRF. The first occurred in June 1950, when a simmering conflict on the Korean peninsula soon spiraled into full-fledged war between North and South Korea. A United Nations (UN) force, led by the U.S., quickly intervened. Although President Harry Truman deemed it a “police action,” the U.S. soon became engrossed in a full-scale conventional war, sending thousands of troops and millions of tons of supplies to the country. Unlike the world wars when the U.S. government rushed to purchase and build ships to meet the needs of the military, the NDRF provided a ready fleet of ships to support the mission.

The NDRF also responded to humanitarian crises around the globe. During the early 1950s NDRF ships transported large amounts of critically needed coal to Northern Europe and grain to India to help those regions overcome shortages. Beginning in 1953, in a unique deployment of NDRF vessels, MARAD used reserve ships to store some of the U.S.’s grain surplus, essentially using them as floating grain silos. By February 1954, MARAD was storing 72 million bushels of grain aboard 317 NDRF ships. MARAD’s grain storage program lasted 10 years, and at its peak stored 136 million bushels of surplus grain. NDRF vessels deployed in a more conventional role due to the international shipping shortage created by the temporary shutdown of the Suez Canal in 1956.

During the Vietnam War, 172 NDRF vessels supported sealift operations and transported military cargo to Southeast Asia between July 1965 and June 1970. The majority of the NDRF ships activated during the war were World War II-era Victory ships, and activating the old vessels was one MARAD’s biggest challenges. Further complicating matters was the largescale ship activation required to coincide with the sudden troop escalation in Vietnam between July and December 1965 MARAD activated 76 ships. MARAD employed shipyards on every coast to help activate ships that had not operated in years. While MARAD secured the ships necessary to support the military’s mission in Vietnam, it had difficulty finding enough trained mariners to crew these ships. To overcome this shortage, MARAD authorized the early graduation of cadets at the U.S. Merchant Marine Academy, and the state maritime schools followed suit.

Because the Vietnam War was largely an unconventional conflict, U.S. merchant ships were mostly spared serious danger, although some vessels suffered minor damage after coming under fire in what MARAD described as “harassing incidents.” One notable exception was the SS Baton Rouge Victory, which sunk when a saboteur attached a mine to the ship’s hull and detonated it on the night of August 23, 1966. The explosion killed seven crewmen and caused extensive damage to the hull and engine room, requiring the scrapping of the ship.

Stevedore in Vietnam A Vietnamese stevedore observes U.S. military cargo being unloaded from USNS Private Leonard C. Brostrom and NDRF vessel SS Meredith Victory. Between 1965 and 1970 MARAD activated 172 NDRF ships to support military operations in Vietnam.
Marad 1970: Year of Transition. The Annual Report of the Maritime Administration for Fiscal Year 1970. Washington D.C.: U.S. Government Printing Office, 1971.

The NDRF reached its peak effort in Vietnam in 1967 when it carried 34% of all military cargo. After 1967 the need for NDRF vessels steadily declined as the logistics network improved and the military’s needs were more easily met. The NDRF’s role in Vietnam officially ended on November 16, 1970, when the refrigerator-ship SS Contestreturned to MARAD’s Suisun Bay Reserve Fleet in Benicia, California.

Despite their ability to meet the military’s needs during the Vietnam War, the NDRF vessels began showing their age and obsolescence. The same was also true of many of the privately owned and operated vessels by June 1970, the U.S. merchant fleet totaled just 819 ships, two-thirds of which were more than 25-years-old. A variety of political and economic factors had again put American shipbuilding and shipping companies into decline, so much so that MARAD’s 1969 Annual Report stated the industry was “drifting to the brink of disaster.” To help revive U.S. merchant shipbuilding, Congress passed the Merchant Marine Act of 1970, which, for the first time, extended subsidies to bulk carriers. Although it was the most significant maritime legislation in over three decades, the act did not reinvigorate the U.S. maritime industry and only 200 of 300 planned ships were built over the next 10 years.

The need to modernize and modify the NDRF also became apparent during the 1970s. In 1976, a Ready Reserve Fleet (RRF) component was established as a subset of the NDRF made up of vessels that can be activated on short notice to provide rapid deployment of military equipment during an emergency. The ships are partially crewed and maintained in a condition that allows them to be fully operational in five or 10 days, depending on ship-type. After activation, the U.S. Navy’s Military Sealift Command (MSC) takes operational control. The RRF’s ability to rapidly deploy satisfies crucial supply needs for the U.S. military, especially during the early critical phases of military operations and disaster response. In its 40-year history, RRF vessels have been activated many times to support various military operations and to provide aid during disasters. The Ready Reserve Fleet later became known as the Ready Reserve Force.

In 1990, the RRF consisted of 96 ships, 79 of which were activated during Operations Desert Shield/Desert Storm, the U.S.-led coalition’s military response to Iraq’s invasion of Kuwait. This was the first large-scale activation of the RRF since its establishment. The vessels involved were roll-on/roll-off (Ro-Ro) vessels (which describe how cargo is handled), break-bulk cargo ships, tankers, and barge carriers. During the 1990s MARAD also deployed RRF vessels to Haiti, Somalia, and Central America. The 46 vessels that make up today’s RRF continue to be an integral part of MARAD operations and U.S. military planning and performance.

Cape Trinity OIF Cape Trinity approaching anchorage with several other Ready Reserve Force vessels in the distance. Cape Trinity transported military cargo to the Middle East in support of Operation Iraqi Freedom. RRF vessels also supported Operation Enduring Freedom.
Maritime Administration photograph.

Another important development during the 1990s was the creation of the Maritime Security Program (MSP) in 1996. The MSP is comprised of privately owned U.S.-flagged vessels engaged in international trade that are available for use by the Department of Defense (DOD) in the event of war or national emergency. The program enables DOD to use U.S.-flagged ships for missions, and in return, the shipping companies receive financial assistance. The MSP is

Empire State Katrina In the aftermath of Hurricanes Katrina and Rita in 2005 that devastated the Gulf Coast, MARAD activated the training ship Empire State, used to train cadets at the State University of New York Maritime College. The vessel provided housing and support for port workers and petroleum industry workers as they began repairs on strategic infrastructure and facilities in Louisiana.
Maritime Administration photograph.

currently extended through fiscal year 2025, and is composed of 60 vessels that provide approximately 2,400 mariner jobs.

In the 21 st century MARAD has continued to play a vital role in strengthening national defense and providing assistance during humanitarian crises. From 2002-2008 MARAD activated RRF ships to support Operations Enduring Freedomand Iraqi Freedom (OEF/OIF), accruing a total of 13,575 ship operating days. During the same period, U.S. flagged vessels enrolled in the MSP carried almost 38% of all cargo to support OEF/OIF. MARAD ships were not limited to only serving American interests overseas nine MARAD vessels supported the Federal Emergency Management Agency’s relief efforts in the aftermath of Hurricanes Katrina and Rita. MARAD also deployed vessels for humanitarian aid after the 2010 Haiti earthquake, and used RRF and NDRF “school ships” to provide berthing space for emergency responders in 2012 after Hurricane Sandy made landfall on the U.S. East Coast.[6]

Since 1916, MARAD and its predecessors have been dedicated to the promotion and advancement of the U.S. merchant marine. MARAD and its predecessors have served U.S. interests in times of war and peace, transported troops and supplies across the globe from World War I to Operation Enduring Freedom, and provided humanitarian aid during emergencies at home and abroad. Today MARAD continues to support the U.S. maritime transportation system, which includes infrastructure, industry, and labor, to meet the nation’s economic and security needs.

Select Bibliography

De la Pedraja, René. A Historical Dictionary of the U.S. Merchant Marine & Shipping Industry. Westport, CT: Greenwood Press, 1994.

De la Pedraja, René. The Rise & Decline of U.S. Merchant Shipping in the Twentieth Century. New York: Twayne Publishers, 1992.

Gibson, Andrew and Arthur Gibson. The Abandoned Ocean. Columbia, SC: University of South Carolina Press, 2000.

Hurley, Edward N. The Bridge to France. Philadelphia & London: J.B. Lippincott Company, 1927.

Jones, Wesley L. “The Merchant Marine Act of 1920.” Proceedings of the Academy of Political Science in the City of New York 9, no. 2 (February 1921): 89-98.

Lane, Frederic C. Ships for Victory. A History of Shipbuilding under the U.S. Maritime Commission in World War II. Baltimore: The John’s Hopkins University Press, 1951. Reprint, 2011.

Lindberg, Michael and Daniel Todd. Anglo-American Shipbuilding in World War II. Westport, CT: Praeger, 2004.

Matthews, James K. United States Transportations Command the National Defense Reserve Fleet and the Ready Reserve Force: A Chronology, Edited by Margaret J. Nigra and Cora J. Holt. United States Transportation Command Research Center, 1999.

McMahon, Christopher J. “The U.S. Merchant Marine.” Naval War College Review 69, no. 1 (Winter 2016): 86-108.

Moore, Arthur R. A Careless Word…A Needless Sinking. Kings Point, NY: American Merchant Marine Museum, 1983. Reprint, 1998.

Roland, Alex, W. Jeffry Bolster, and Alexander Keyssar. The Way of the Ship. Hoboken, NJ: John Wiley & Sons, 2008.

Sawyer, L. A., and W. H. Mitchell. From America to United States. Kendal: World Ship Society, 1979.

[1] Edward N. Hurley, The Bridge to France (Philadelphia & London: J.B. Lippincott Company, 1927).

[2] The subsidies were referred to as mail contracts due to the criticism of government subsidies during the 1920s. However, the term is accurate because ships awarded these subsidies agreed to carry U.S. mail on their routes, a practice established by the Postal Subsidy Act of 1891.

[3] This was also necessitated because Depression-era companies could not take advantage of the subsides offered in the Merchant Marine Act of 1936.

[4] The British design stemmed from their order of ships from U.S. shipyards in 1940. The British needed ships that could be built quickly to reinforce their fleet and replace losses suffered in the war.

[5] In 1981 MARAD was transferred to the Department of Transportation.


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See also

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The Merchant Shipping Act 1995 is an Act of Parliament passed in the United Kingdom in 1995. It consolidated much of the UK's maritime legislation, repealing several Acts in their entirety and provisions in many more, some dating back to the mid-nineteenth century. It appoints several officers of Admiralty Jurisdiction such as the Receiver of Wreck. The Act of 1995 updates the prior Merchant Shipping Act 1894. The lead part on British ships was impacted by the outcome of the Factortame case, as the Merchant Shipping Act 1988 was impugned by the Common Fisheries Policy.

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Telegraph Act is a stock short title which used to be used for legislation in the United Kingdom, relating to telegraphy.

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The Statute Law Revision Act 1872 is an Act of the Parliament of the United Kingdom.

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Merchant Shipping Act - History

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Facts About the KMA

The Kenya Maritime Authority was established vide Presidential Order in 2004 to oversee the transfer of responsibilities in shipping matters from the Kenya Ports Authority to an autonomous State Corporation. In 2006, it was legally constituted under the Kenya Maritime Act, No 5 with its mandate being to “regulate, coordinate and oversee maritime affairs” in the country. In 2009, amended new version of the Merchant Shipping Act (Merchant Shipping Act 2009) was enacted, thereby creating a comprehensive and modern legal regime for merchant shipping in Kenya. The Act provides the basis for addressing maritime safety, security and training as well as opening opportunities for investment in water transport and related industries.


Merchant Shipping Act - History

TITLE I -- DECLARATION OF POLICY

SECTION 101. It is necessary for the national defense and development of its foreign and domestic commerce that the United States shall have a merchant marine

(a) sufficient to carry its domestic water-borne commerce and a substantial portion of the water-borne export and import foreign commerce of the United States and to provide shipping service on all routes essential for maintaining the flow of such domestic and foreign water-borne commerce at all times

(b) capable of serving as a naval and military auxiliary in time of war or national emergency,

(c) owned and operated under the United States flag by citizens of the United States insofar as may be practicable, and

(d) composed of the best-equipped, safest, and most suitable types of vessels, constructed in the United States and manned with a trained and efficient citizen personnel. It is hereby declared to be the policy of the United States to foster the development and encourage the maintenance of such a merchant marine.

TITLE II—UNITED STATES MARITIME COMMISSION

SEC. 201.

(a) An agency is hereby created, to be known as the United States Maritime Commission (hereinafter referred to as the Commission). The Commission shall be composed of five persons, in this title referred to as members, to be appointed by the President by and with the advice and consent of the Senate. The President shall designate the member to act as chairman of the Commission, and the Commission may elect one of its members as vice chairman. The members of the Commission shall be appointed as soon as practicable after the enactment of this Act and shall continue in office as designated by the President at the time of nomination, for terms of two, three, four, five, and six years, respectively, from the date upon which they qualify and take office but their successors shall be appointed for terms of six years, except that any person chosen to fill a vacancy shall be appointed only for the unexpired term of the member whom he succeeds. The members shall be appointed with due regard to their special fitness for the efficient discharge of the duties imposed upon them by this Act. Not more than three of the members shall be appointed from the same political party. A vacancy in the Commission shall be filled in the same manner as an original appointment. Any member may be removed by the President for neglect of duty or malfeasance in office. Vacancies in the Commission, so long as there shall be three members in office, shall not impair the power of the Commission to execute its functions, and three of the members in office shall constitute a quorum for the transaction of the business of the Commission. Each member shall receive a salary at the rate of $12,000 per annum.

(b) No person shall hold office as a member of the Commission who, within three years prior to his appointment, shall have been employed by, or have had any pecuniary interest in, any carrier by water or substantial pecuniary interest in any other person who derives a substantial portion of his revenues from any business associated with ships or shipping. Each member shall devote his full time to the duties of his office. It shall be unlawful for any member, officer, or employee of the Commission to be in the employ of any other person, firm, or corporation, or to have any pecuniary interest in, or hold any official relationship with, any carrier by water, shipbuilder, contractor, or other person, firm, association, or corporation with whom the Commission may have business relations.

(c) The Commission shall, through its secretary, keep a true record of all its meetings and the yea-and-nay votes taken therein, on every action, order, contract,, or financial transaction approved or disapproved by the Commission. It shall have an official seal which shall be judicially noticed, and shall adopt rules and regulations in regard to its procedure and the conduct of its business.

(d) The Commission may make such expenditures as are necessary in the performance of its functions from funds made available to it by this Act or hereafter appropriated, which further appropriations are hereby authorized.

(e) Without regard to the civil-service laws or the Classification Act of 1923, as amended, the Commission may appoint and prescribe the duties and fix the salaries of a secretary, a director for each of not to exceed five divisions, a general counsel, a clerk to each member of the Commission, and not more than three assistants, not more than a total of twelve each of naval architects, special experts, attorneys, and examiners and not more than two inspectors at each shipyard at which vessels are being constructed by it or under its supervision. No employee so appointed may receive an annual salary at a rate in excess of that provided under the Classification Act of 1923, as amended. The Commission may, subject to the provisions of the civil-service laws and the Classification Act of 1923, as amended, appoint such other officers, engineers, inspectors, attorneys, examiners, and other employees as are necessary in the execution of its functions: Provided, That trained and satisfactory present employees of the United States Shipping Board Bureau or United States Shipping Board Merchant Fleet Corporation shall be eligible for transfer to the Commission, and if after the expiration of a probationary period of six months from the date of employment the Commission shall certify to the United States Civil Service Commission that the services of any employee so transferred are satisfactory, the employee shall thereupon acquire the same status as though certified after examination by the Civil Service Commission.

(f) Each member, any employee of the Commission, and any person detailed to it from any other agency of the Government shall receive necessary traveling and subsistence expenses, or per diem allowance in lieu thereof, within the limitations prescribed by law, while away from his official station upon official business of the Commission. Expenditures by the Commission shall be allowed and paid on the presentation of itemized vouchers therefor approved by the Commission or a designated employee thereof.

(g). This section shall take effect immediately upon approval of this Act.

SEC. 202. All money, notes, bonds, mortgages, and securities of every kind, contracts and contract rights, lands, vessels, docks, wharves, piers, and property and interests of every kind, owned by the United States, and now controlled by the Department of Commerce as the successor to the powers and functions of the former United States Shipping Board, by virtue of the President’s Executive order of June 10, 1933, are hereby transferred to the Commission.

SEC. 203. The United States Shipping Board Merchant Fleet Corporation shall, cease to exist and shall stand dissolved. All the records, books, papers, and corporate property of said dissolved corporation shall be taken over by the Commission. All existing contractual obligations of the dissolved corporation shall be assumed by the United States. Any suit against the dissolved corporation pending in any court of the United States shall be defended by the Commission upon behalf of the United States, under the supervision of the Attorney General, and any judgment obtained against the dissolved corporation in any such pending suit shall be reported to Congress in the manner provided in section 226, title 31, United States Code, for reporting judgments against the United States in the Court of Claims.

(a) All the functions, powers, and duties vested in the former United States Shipping Board by the Shipping Act, 1916, the Merchant Marine Act, 1920, the Merchant Marine Act, 1928, the Intercoastal Shipping Act, 1933, and amendments to those Acts, and now vested in the Department of Commerce pursuant to section 12 of the President’s Executive order of June 10, 1933, are hereby transferred to the United States Maritime Commission: Provided however, That after the date of the passage of this Act no further construction loans shall be made under the provisions of section 11 of the Merchant Marine Act, 1920, as amended.

(b) The Commission is hereby authorized to adopt all necessary rules and regulations to carry out the powers, duties, and functions vested in it by this Act. After the expiration of two years from the effective date of this Act, the President is authorized to transfer, by Executive order, to the Interstate Commerce Commission any or all the regulatory powers, regulatory duties, and regulatory functions which, by this title, are vested in the United States Maritime Commission.

(c) The orders issued by the United States Maritime Commission in the exercise of the powers transferred to it by this title shall be enforced in the same manner as heretofore provided by law for enforcement of the orders issued by the former United States Shipping Board, and violation of such orders shall subject the person or corporation guilty of such violation to the same penalties or punishment as heretofore provided for violation of the orders of said Board.

SEC. 206. Without limiting the power and authority otherwise vested in the Commission, it shall be unlawful for any common carrier by water, either directly or indirectly, through the medium of an agreement, conference, association, understanding, or otherwise, to prevent or attempt to prevent any other such carrier from serving any port designed for the accommodation of ocean-going vessels located on any improvement project authorized by the Congress or through it by any other agency of the Federal Government, lying within the continental limits of the United States, at the same rates which it charges at the nearest port already regularly served by it.

SEC. 206. All sums of money now in the construction loan fund created by section 11 of the Merchant Marine Act, 1920, as amended, together with the proceeds of all debts, accounts, choses in action and the proceeds of all notes, mortgages, and other evidences of indebtedness, hereby transferred to the Commission, and all of the proceeds of sales of ships and surplus property heretofore or here-after made, including proceeds of notes or other evidences of debt taken therefor and the interest received thereon, shall be deposited in the Treasury of the United States and there maintained as a revolving fund, herein designated as the construction fund and shall be controlled and employed by the Commission in carrying out the provisions of this Act. All moneys received by the Commission under the provisions of titles IV, V, VI, and VII, of this Act shall be deposited in its construction fund, and all disbursements made by the Commission under authority of said titles shall be paid out of said fund. Further appropriations by Congress to replenish said fund are hereby authorized.

SEC. 207. The Commission may enter into such contracts, upon behalf of the United States, as may, in its discretion, be necessary to carry on the activities authorized by this Act, in the same manner that a private corporation may contract within the scope of the authority conferred by its charter. All the Commission’s financial transactions shall be audited in the General Accounting Office according to approved commercial practice as provided in the Act of March 20, 1922 (42 Stat. 444): Provided, That it shall be recognized that, because of the business activities authorized by this Act, the accounting officers shall allow credit for all expenditures shown to be necessary because of the nature of such authorized activities, notwithstanding any existing statutory provision to the contrary. The Comptroller General shall report annually or oftener to Congress any departure by the Commission from the provisions of this Act.

SEC. 208. The Commission shall, at the beginning of each regular session, make a report to Congress, which shall include the results of its investigations, a summary of its transactions, its recommendations for legislation, a statement of all receipts under this Act, and the purposes for which all expenditures were made.

(a) There are hereby authorized to be appropriated such sums as are necessary to carry out the provisions of this Act.

(b) All appropriations and unexpended balances of appropriations available for expenditure by the United States Shipping Board Bureau and United States Shipping Board Merchant Fleet Corporation which would otherwise be applicable to functions transferred to the Commission by this Act, including the fund appropriated to enable the United States Shipping Board Merchant Fleet Corporation to operate ships or lines of ships which have been or may be taken back from purchasers by reason of competition or other methods employed by foreign shipowners or operators as appropriated by the Independent Offices Act, 1928, approved February 11, 1927 (44 Stat. 1082), and reappropriated by the Department of Commerce Appropriation Acts, shall be available for expenditure by or at the direction of the Commission for any and all objects of expenditure authorized by this Act in the discretion of the Commission, without regard to the requirement of apportionment under the Antideficiency Act of February 27, 1906 (U. S. C., title 31, sec. 665).

(c) After the transfer, under section 404 of this Act, to the Commission of the powers and duties of the Postmaster General with respect to existing ocean-mail contracts entered into pursuant to title IV, Merchant Marine Act, 1928 (U. S. C., Supp. VII, title 46, secs. 891e to 891r, inclusive), all appropriations and unexpended balances of appropriations available for expenditure by the Post Office Department for the transportation of foreign mails under contracts authorized by the Merchant Marine Act, 1928, less any amount necessary to be paid out by the Post Office Department, shall be available for an and all objects of expenditure authorized by this Act, by or a the direction of the Commission, without regard to the requirement of apportionment under the Antideficiency Act of February 27, 1906.

(d) Funds made available under the provisions of subsection (b) of this section shall be available for expenditures authorized by the Commission under the provisions of section 201 of this Act as soon as a majority of the members of the Commission shall have taken the oath of office, notwithstanding the provisions of section 907 of this Act.

SEC. 210. It shall be the duty of the Commission to make a survey of the American merchant marine, as it now exists, to determine what additions and replacements are required to carry forward the national policy declared in section 101 of this Act, and the Commission is directed to study, perfect, and adopt a long-range program for replacements and additions to the American merchant marine so that as soon as practicable the following objectives may be accomplished:

First, the creation of an adequate and well-balanced merchant fleet, including vessels of all types, to provide shipping service on all routes essential for maintaining flow of commerce of the United States, the vessels in such fleet to be so designed as to be readily and quickly convertible into transport and supply vessels in a time of national emergency. In planning the development of such a fleet the Commission is directed to cooperate closely with the Navy Department as to national-defense needs and the possible speedy adaptation of the merchant fleet to national-defense requirements.

Second, the ownership and the operation of such a merchant fleet by citizens of the United States insofar as may be practicable.

Third, the planning of vessels designed to afford the best and most complete protection for passengers and crew against fire and all marine perils.

SEC. 211. The Commission is authorized and directed to investigate, determine, and keep current records of --

(a) The ocean services, routes, and lines from ports in the United States, or in a Territory, district, or possession thereof, to foreign markets, which are, or may be, determined by the Commission to be essential for the promotion, development, expansion, and maintenance of the foreign commerce of the United States, and in reaching its determination the Commission shall consider and give due weight to the cost of maintaining each of such steamship lines, the probability that any such line cannot be maintained except at a heavy loss is disproportionate to the benefit accruing to foreign trade, the number of sailings and types of vessels that should be employed in such lines, and any other facts and conditions that a prudent business man would consider when dealing with his own business, with the added consideration, however, of the intangible benefit the maintenance of any such line may afford to the foreign commerce of the United States and to the national defense

(b) The type, size, speed, and other requirements of the vessels, including express-liner or super-liner vessels, which should be employed in such services or on such routes or lines, and the frequency and regularity of the sailings of such vessels, with a view to furnishing adequate, regular, certain, and permanent service

(c) The relative cost of construction of comparable vessels in the United States and in foreign countries

(d) The relative cost of marine insurance, maintenance, repairs wages and subsistence of officers and crews, and all other items of expense, in the operation of comparable vessels in particular services, routes, and lines under the laws, rules, and regulations of the United States and under those of the foreign countries whose vessels are substantial competitors of any such American service, route, or line

(e) The extent and character of the governmental aid and subsidies granted by foreign governments to their merchant marine

(f) The number, location, and efficiency of the shipyards existing on the date of the enactment of this Act or thereafter built in the United States

(g) To investigate and determine what provisions of this Act and other Acts relating to shipping should be made applicable to aircraft engaged in foreign commerce in order to further the policy expressed in this Act, and to recommend appropriate legislation to this end

(h) The advisability of enactment of suitable legislation authorizing the Commission, in an economic or commercial emergency, to aid the farmers and cotton, coal, lumber, and cement producers in any section of the United States in the transportation and landing of their products in any foreign port, which products can be carried in dry-cargo vessels by reducing rates, by supplying additional tonnage to any American operator, or by operation of vessels directly by the Commission, until such time as the Commission shall deem such special rate reduction and operation unnecessary for the benefit of the American farmers and such producers and

(i) New designs, new methods of construction, and new types of equipment for vessels the possibilities of promoting the carrying of American foreign trade in American vessels and intercoastal and inland water transportation, including their relation to transportation by land and air.

SEC. 212. The Commission is authorized and directed --

(a) To study all maritime problems arising in the carrying out of the policy set forth in title I of this Act

(b) To study, and to cooperate with vessel owners in devising means by which --

(1) the importers and exporters of the United States can be induced to give preference to vessels under United States registry and

(2) there may be constructed by or with the aid of the United States express-liner or super-liner vessels comparable with those of other nations, especially with a view to their use in national emergency, and the use in connection with or in lieu of such vessels of transoceanic aircraft service

(c) To collaborate with vessel owners and shipbuilders in developing plans for the economical construction of vessels and their propelling machinery, of most modern economical types, giving thorough consideration to all well-recognized means of propulsion and taking into account the benefits accruing from standardized production where practicable and desirable

(d) To establish and maintain liaison with such other boards, commissions, independent establishments, and departments of the United States Government, and with such representative trade organizations throughout the United States as may be concerned, directly or indirectly, with any movement of commodities in the water-borne export and import foreign commerce of the United States for the purpose of securing preference to vessels of United States registry in the shipment of such commodities and

(e) To investigate, under the regulatory powers transferred to it by this Act, any and all discriminatory rates, charges, classifications, and practices whereby exporters and shippers of cargo originating in the United States are required by any common carrier by water in the foreign trade of the United States to pay a higher rate from any United States port to a foreign port than the rate charged by such carrier on similar cargo from such foreign port to such United States port, and recommend to Congress measures by which such discrimination may be corrected.

(f) To make recommendations to Congress, from time to time, for such further legislation as it deems necessary better to effectuate the purpose and policy of this Act.

SEC. 213. The Commission shall make studies of and make a report to Congress as soon as practicable on --

(a) The scrapping or removal from service of old or obsolete merchant tonnage owned by the United States or in use in the merchant marine

(b) Tramp shipping service and the advisability of citizens of the United States participating in such service with vessels under United States registry.

(c) The relative cost of construction or reconditioning of comparable ocean vessels in shipyards in the various coastal districts of the United States, together with recommendations as to how such shipyards may compete for work on an equalized basis.

(a) For the purpose of any investigation which, in the opinion of the Commission, is necessary and proper in carrying out the provisions of this Act, any member of the Commission, or any officer or employee thereof designated by it, is empowered to subpena witnesses, administer oaths and affirmations, take evidence, and require the production of any books, papers, or other documents which are relevant or material to the matter under investigation. Such attendance of witnesses and the production of such books, papers, or other documents may be required from any place in the United States or any Territory, district, or possession thereof at any designated place of hearing within the Federal judicial district in which the witness resides. Witnesses summoned before the Commission shall be paid the same fees and mileage that are paid witnesses in the courts of the United States.

(b) Upon failure of any person to obey a subpena issued by the Commission, it may invoke the aid of any District Court of the United States within the jurisdiction in which such person resides or carries on business in requiring the attendance and testimony of witnesses and the production of books, papers, or other documents. Any such court may issue an order requiring such person to appear before the Commission, or member, officer, or employee designated by the Commission, there to produce books, papers, or any other documents, if so ordered, or to give testimony touching the matter under investigation or in question. Any failure to obey such order of the court may be punished by such court as a contempt thereof. Any process in any such case may be served in the judicial district wherein such person resides or wherever he may be found.

(c) No person shall be excused from attending and testifying or from producing books, papers, or other documents before the Commission, or any member or officer or employee thereof, in any investigation instituted by the Commission under this Act, on the ground that the testimony or evidence, documentary or otherwise, required of him may tend to incriminate him or subject him to a penalty or forfeiture but no person shall be prosecuted or subject to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which he is compelled, after having claimed his privilege against self-incrimination, to testify or produce evidence, documentary or otherwise, except that such person so testifying shall not be exempt from prosecution and punishment for perjury committed in so testifying.

TITLE III -- AMERICAN SEAMEN

SEC. 301.

(a). The Commission is authorized and directed to investigate the employment and wage conditions in ocean-going shipping and, after making such investigation and after appropriate hearings, to incorporate in the contracts authorized under titles VI and VII of this Act minimum-manning scales and minimum-wage scales and reasonable working conditions for all officers and crews employed on all types of vessels receiving an operating-differential subsidy. After such minimum manning and wage scales and working conditions shall have been adopted by the Commission, no change shall be made therein by the Commission except upon formal complaint, public notice of the hearing to be had on such complaint, and a hearing by the Commission of all interested parties, under such rules as the Commission shall prescribe. Every contractor receiving an operating-differential subsidy shall post and keep posted in a conspicuous place on each such vessel operated by such contractor a printed copy of the minimum manning and wage scales and work-in conditions prescribed by his contract and applicable to such vessel: Provided, however, That any increase in the operating expenses of the subsidized vessel occasioned by any change in the wage, manning scales, and working conditions as provided in this section shall be added to the operating-differential subsidy previously authorized for the vessel.

(b) Every contract executed under authority of titles VI and VII of this Act shall require --

(1) Insofar as is practicable, officers’ living quarters shall be kept separate and apart from those furnished for members of the crew

(2) Licensed officers and unlicensed members of the crew shall be entitled to make complaints or recommendations to the Commission, Coast Guard, or Department of Labor, providing they file such complaint or recommendation with their immediate superior, who shall be required to forward such complaint or recommendation with his remarks to the Commission, Coast Guard, or Department of Labor

(3) Licensed officers who are members of the Naval Reserve Corps shall wear on their uniforms such special distinguishing insignia as may be approved by the Secretary of the Navy officers being those men serving under licenses issued by the Bureau of Navigation and Steamboat Inspection

(4) The uniform stripes, decoration, or other insignia shall be of gold braid or woven gold or silver material to be worn by officers, and no member of the ship’s crew other than licensed officers shall be allowed to wear any uniform with such officer’s identifying insignia

(5) No discrimination shall be practiced against licensed officers, who are otherwise qualified, because of their failure to qualify as members of the Naval Reserve Corps and

(6) Licensed officers shall take their meals in the main dining salon of the vessel and no other place during regular meal hours, except in cases of emergency.

(a) All licensed officers of vessels documented under the laws of the United States, as now required by law, shall be citizens of the United States native-born or completely naturalized and upon each departure from the United States of a cargo vessel in respect of which a construction or operating subsidy has been granted all of the crew (crew including all employees of the ship) shall be citizens of the United States, native-born or completely naturalized.

(b) For a period of one year after the effective date of this Act, upon each departure from the United States of a passenger vessel in respect of which a construction or operation subsidy has been granted, all licensed officers shall be citizens of the United States as defined above, and no less than 80 per centum of the crew (crew including all employees of the ship other than officers) shall be citizens of the United States, native-born or completely naturalized, and thereafter the percentage of citizens, as above defined, shall be increased 5 per centum per annum until 90 per centum of the entire crew, including all licensed officers of any such vessel, shall be citizens of the United States, native-born or completely naturalized.

(c) Any member of the crew, not required by this section to be a citizen of the United States, may be an alien only if he is in possession of a valid declaration of intention to become a citizen of the United States, or other evidence of legal admission to the United States for permanent residence. Such alien, as above defined, may be employed only in the steward’s department on passenger vessels.

(d) If any such vessel (as above defined) while on a foreign voyage is for any reason deprived of the services of any employee below the grade of master, his place or a vacancy caused by the promotion of another to his place may be supplied by a person other than defined in paragraphs (a) and (b), until the first return of such vessel to a port in the United States.

(e) The owner, agent, or officer of any such vessel who knowingly employs any person in violation of the provisions of this Act shall, upon conviction thereof, be fined $50 for each person so employed.

(f) This section shall be enforced by the Secretary of Commerce, for the purpose of carrying out the provisions of this section, and shall take effect ninety days after its enactment, and will then repeal paragraph (c), section 405, Merchant Marine Act, 1928.

(g) All of the deck and engineer officers employed on vessels on which an operating-differential subsidy is paid under authority of title VI, or employed on the Commission’s vessels, after one year after the passage of this Act, shall, if eligible, be members of the United States Naval Reserve.

(h) During a national emergency as proclaimed by the President he may, in his discretion, suspend any or all of the provisions of this section.

TITLE IV -- OCEAN-MAIL CONTRACTS

SEC. 401. No contract heretofore made by the Postmaster General, pursuant to the provisions of the Merchant Marine Act of 1928, for the carriage of mail, shall be continued in effect after June 30, 1937, and after that date it shall be unlawful for any officer of the United States to pay from any public funds any compensation to the holder of such contract for services thereunder, except for such voyages as were completed prior to the expiration date herein fixed and for voyages commenced prior to said expiration date and which shall not have been completed prior to said expiration date.

SEC. 402.

(a) The holder of any mail contract that is to be terminated as provided in section 401 of this title may, within ninety days after the passage of this Act., file an application with the Commission to adjust and settle all the rights of the parties under such contract and to substitute in whole or in part thereof or a contract or contracts authorized in titles V and VI of this Act in accordance with the conditions hereinafter prescribed. Such application shall be in such form and filed under such regulations as the Commission may prescribe.

“(b) As soon as practicable after the filing of any such application, the Commission shall proceed to attempt to adjust all differences with such contractor, including any claims of the contractor against the United States and any claims of the United States against such contractor, arising out of its foreign ocean mail contract. In adjusting such differences and claims, the Commission shall not take into consideration any prospective or speculative future profits, but shall consider any and all payments theretofor made by the United States pursuant to such mail contract, and the profits realized as a result thereof, and the interest paid and the interest due according to law on construction loans, and all other facts deemed pertinent. If the contractor shall be willing to accept such determination and receive payment for the amount determined by the Commission to be a fair adjustment of such differences the Commission is authorized and directed to enter into and execute a settlement agreement with such contractor, wherein such contractor shall release the United States from any and all further claims arising from such contractor’s mail contract: Provided, That the Attorney General of the United States may, if he is dissatisfied with such finding, appeal the same to the Court of Claims within a period of sixty days from the date such settlement is agreed upon, of record, by the Commission and the contractor. If such appeal is not taken for the United States by the Attorney General within sixty days from the record agreement between the Commission and the contractor, the contractor shall be paid any sum of money due him under such settlement agreement from any funds controlled by the Commission or hereafter appropriated for that purpose or if such appeal is taken by the Attorney General, then, within sixty days from the rendition of the final judgment by the courts, the contractor shall be paid any sum of money due him under such judgment from any funds controlled by the Commission or hereafter appropriated for that purpose.

“(c) If the holder of any ocean mail contract terminated by the provisions of section 401 of this title does not enter into and execute a settlement agreement as provided in subsection (b) hereof such holder may sue the United States in the United States Court of Claims, but such suit shall not be maintained unless brought before January 1, 1938. If suit is filed in the Court of Claims the claimant and the United States shall have the right in such court to set up and have determined and adjusted by the court all legal and equitable claims, differences, offsets credits, and recoupments to which either may be entitled to the end that all conflicting claims, assertions, and rights may be fully, fairly, and completely settled and adjudged by the court, including any question as to the legality of the contract as originally made or as modified, altered, or amended. The jurisdiction of said court to award any damages or payments to the ocean mail contractor is hereby expressly limited to an award of just compensation under the provisions heretofore set forth and such just compensation shall not include any allowances for prospective profits or for speculative future profits that might have been realized by the claimant if permitted further to carry out the contract. The remedy herein provided shall be exclusive and no other suit shall be maintained by the applicant or by any other person in any court of the United States arising out of any claims under or connected with said contract.”

(a) If any sum of money is payable to the contractor under the terms of any settlement agreement made pursuant to section 402 (b) of this title, such sum shall be applied as a credit upon any amount owing by the contractor to the United States on any loan agreement entered into under section 11 of the Merchant Marine Act, ( 1920, as amended, or upon unpaid ship-sales mortgage notes.

SEC. 404. All the powers and duties now vested by law in the Postmaster General, with respect to existing ocean-mail contracts, executed pursuant to title IV of the Merchant Marine Act, 1928, are hereby transferred to and vested in the Commission.

(a) All mails of the United States carried on vessels between ports between which it is lawful under the navigation laws for a vessel not documented under the laws of the United States to carry merchandise shall, insofar as practicable, be carried on vessels of United States registry.

(b) Every steamship company carrying the mails shall carry on any ship it operates and without extra charge therefor the persons in charge of the mails and when on duty and traveling to and from duty, and all duly accredited agents and officers of the Post Office Department and post-office inspectors while traveling on official business, upon the exhibition of their credentials.

TITLE V --CONSTRUCTION-DIFFERENTIAL SUBSIDY

SEC. 501.

(a) Any citizen of the United States may make application to the Commission for a construction-differential subsidy to aid in the construction of a new vessel, to be used on a service, route, or line in the foreign commerce of the United States, determined to be essential under section 211 of this Act. No such application shall, be approved by the Commission unless it determines that

(1) the service, route, or line requires a new vessel of modern and economical design to meet foreign-flag competition and to promote the foreign commerce of the United States

(2) the plans and specifications call for a new vessel which will meet the needs of the service, route, or line, and the requirements of commerce

(3) the applicant possesses the ability, experience, financial resources, and other qualifications necessary to enable it to operate and maintain the proposed new vessel in such service, or on such route or line, and to maintain and continue adequate service on said route or line, including replacement of worn-out or obsolete tonnage with new and modern ships and

(4) the granting of the aid applied for is reasonably calculated to carry out effectively the purposes and policy of this Act.

(b) The Commission shall submit the plans and specifications for the proposed vessel to the Navy Department for examination thereof and suggestions for such changes therein as may be deemed necessary or proper in order that such vessel shall be suitable for economical and speedy conversion into a naval or military auxiliary, or otherwise 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 and specifications as submitted, or as modified, in accordance with the provisions of this subsection, he shall certify such approval to the Commission.

(c) Any citizen of the United States may make application to the Commission for a construction-differential subsidy to aid in reconstructing or reconditioning any vessel that is to be exclusively used on a service, route, or line in the foreign commerce of the United States, determined to be essential under section 211 of this Act. If the Commission, in the exercise of its discretion, shall determine that the granting of the financial aid applied for is reasonably calculated to carry out effectively the purposes and policy of this Act, the Commission may approve such application and enter into a contract or contracts with the applicant therefor providing for the payment by the United States of a construction-differential subsidy that is to be ascertained, determined, controlled, granted, and paid, subject to all the applicable conditions and limitations of this title and under such further conditions and limitations as may be prescribed in the rules and regulations the Commission has adopted as provided in section 201 (c) of this Act but the financial aid authorized by this subsection shall be extended to reconstruction or reconditioning only in exceptional cases and after a thorough study and a formal determination by the commission that the proposed reconstruction or reconditioning is consistent with the purposes and policy of this Act.

(a) If the Secretary of the Navy certifies his approval under section 501 (b) of this Act, and the Commission approves the application, it may secure, on behalf of the applicant, 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 Commission to be fair and reasonable, the Commission may approve such bid, and if such approved bid is accepted by the applicant, the Commission 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 Commission to the shipbuilder, on terms to be agreed upon in the contract, the cost of the vessel, out of the construction fund hereinbefore referred to, or out of other available funds. Concurrently with entering into such contract with the shipbuilder, the Commission is authorized to enter into a contract with the applicant for the purchase by him of such vessel upon its completion, at a price corresponding to the estimated cost, as determined by the Commission pursuant to the provisions of this Act, of building such vessel in a foreign shipyard.

(b) The amount of the reduction in selling price which is herein termed the “construction-differential subsidy” may 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 Commission in addition to the subsidy), over the fair and reasonable estimate of cost, as determined by the Commission, of the construction of the proposed vessel if it were constructed under like plans and specifications (excluding national-defense features as above provided) in a principal foreign shipbuilding center which is 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: Provided, That the construction differential approved by the Commission shall not exceed 331/3 per centum of the construction cost of the vessel paid by the Commission (excluding the cost of national-defense features as above provided), except in cases where the Commission possesses conclusive evidence that the actual differential is greater than that percentage, in which cases the Commission may approve an allowance not to exceed 50 per centum of such cost, upon the affirmative vote of four members, except as otherwise provided in subsection 201 (a).

(c) In such contract between the applicant and the Commission, the applicant shall be required to pay the Commission 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) such cash payment to be made at the time and in the same proportion as provided for the payment of the construction cost in the contract between the shipbuilder and the Commission and the balance of such purchase price shall be. paid by the applicant, within twenty years after delivery of the vessel and in not to exceed twenty equal annual installments, the first of which shall be payable one year after the delivery of the vessel by the Commission to the applicant. Interest at the rate of 3.5 per centum per annum shall be paid on all installments of purchase price remaining unpaid.

(d) In case a construction subsidy is applied for under this title by an applicant who has as his principal place of business a place on the Pacific coast of the limited States (but not including one who, having been in business on or before August 1, 1935, has changed his principal place of business to a place on the Pacific coast of the United’ States after such date) to aid in the construction or reconditioning of a vessel to be operated in foreign trade in a service, route, or line from ports on the Pacific coast of the United States, and the amount of the bid of the shipbuilder on the Pacific coast who is the lowest responsible bidder on such coast for such construction or reconditioning does not exceed the amount of the bid of the shipbuilder on the Atlantic coast of the United States who is the lowest responsible bidder therefor by more than 6 per centum of the amount of the bid of such Atlantic coast shipbuilder, the Commission shall, except as provided in subsection (e), approve such Pacific coast bid, and in such case no payment shall be made to aid in such construction or reconditioning unless the applicant accepts the bid of such Pacific coast shipbuilder and agrees to designate and continue as the home port of the vessel to be constructed or reconditioned. a port on the Pacific coast.

(e) If no bids are received for the construction, outfitting, or equipping of such vessel, or if it appears to the Commission that the bids received from privately owned shipyards of the United States are collusive, excessive, or unreasonable, and if the applicant agrees to purchase said vessel as provided in this section, then, to provide employment for citizens o the United States, the Commission 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 Commission. In such event the Commission is authorized to pay for any such vessel so constructed from its construction fund. The Commission is authorized to sell any vessel so constructed, outfitted, or equipped in a navy yard to an applicant 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), such sale to be in accordance with all the provisions of this title.

SEC. 503. Upon completion of the construction of any vessel in respect to which a construction subsidy is to be allowed under this title and its delivery by the shipbuilder to the Commission, the vessel shall be documented under the laws of the United States, and concurrently therewith, or as soon thereafter as practicable, the vessel shall be delivered with a bill of sale to the applicant with warranty against liens, pursuant to the contract of purchase between the applicant and the Commission hereinbefore provided for. The vessel shall remain documented under the laws of the United States for not less than twenty years, and so long as there remains due the United States any principal or interest on account of the purchase price, whichever shall be the longer period. At the time of delivery of the vessel the applicant shall execute and deliver a first preferred mortgage to the United States to secure payment of any sums due from the applicant in respect to said vessel. The purchaser shall also comply with all the provisions of section 9 of the Merchant Marine Act, 1920.

SEC. 504. Where an eligible applicant under the terms of this title desires to finance the construction of a proposed vessel according to approved plans and specifications rather than purchase the same vessel from the Commission as hereinabove authorized, the Commission may permit the applicant to obtain and submit to it competitive bids from American shipyards for such work. If the Commission considers the bid of the shipyard in which the applicant desires to have the vessel built fair and reasonable and if it is the lowest bid, it may approve such bid and become a party to the contract or contracts or other arrangements for the construction of such proposed vessel and may agree to pay to the shipbuilder a construction subsidy in an amount determined by the Commission in accordance with section 502 of this title: Provided, however, That no subsidy as provided in this section shall be paid unless the said contract or contracts or other arrangements contain such provisions as are provided in this title to protect the interests of the United States as the Commission deems necessary. Such vessel shall be documented under the laws of the United States as provided in section 503 of this title and operated as approved by the Commission under the requirements applicable to vessels constructed under this Act.
SEC. 505.

(a) All construction in respect of which a subsidy is allowed under this title shall be performed in a shipyard within the continental limits of the United States as the result of competitive bidding, after due advertisement, with the right reserved in the applicant to reject, and in the Commission to disapprove, any or all bids. In all such construction the shipbuilder, subcontractors, materialmen, or suppliers shall use, so far as practicable, only articles, materials, and supplies of the growth, production, or manufacture of the United States as defined in paragraph K of section 401 of the Tariff Act of 1930. No shipbuilder shall be deemed a responsible bidder unless he possesses the ability, experience, financial resources, equipment, and other qualifications necessary properly to perform the proposed contract. Each bid submitted to the Commission shall be accompanied by all detailed estimates upon which it is based. The Commission may require that the bids of any subcontractors, or other pertinent data, accompany such bid. All such bids and data relating thereto shall be kept permanently on file.

(b) No contract shall be made for the construction of any vessel under this Act unless the shipbuilder shall agree

(1) to make a report under oath to the Commission upon completion of the contract, setting forth in the form prescribed by the Commission the total contract price the total cost of performing the contract, the amount of the shipbuilder’s overhead charged to such cost, the net profits and the percentage such net profit. bears to the contract price, and such other information as the Commission shall prescribe

(2) to pay to the Commission profit as hereinafter provided shall be determined by the Commission, in excess of 10 per centum of the total contract prices of such contracts within the scope of this section as are completed by the particular contracting party within the income taxable year, such amount to become the property of the United States, but the surety under such contracts shall not be liable for the payment of such excess profit: Provided, That if there is a net loss on all such contracts or subcontracts completed by the particular contractor or subcontractor within any income taxable year, such net loss shall be allowed as a credit in determining the excess profit, if any, for the next succeeding income taxable year: Provided, That, if such amount is not voluntarily paid, the Commission shall determine the amount of such excess profit and collect it in the same manner that other debts due the United States may be collected

(3) to make no subdivisions of any contract or subcontract for the same article or. articles for the purpose of evading the provisions of this Act, and any subdivision of any contract or subcontract involving an amount in excess of $10,000 shall be subject to the conditions herein prescribed

(4) that the books, files, and all other records of the shipbuilder, or any holding, subsidiary, affiliated, or associated company, shall at all times be subject to, inspection and audit by any person designated by the Commission, and the premises, including ships under construction, of the shipbuilder, shall at all reasonable times be subject to inspection by the agents of the Commission and

(5) to make no subcontract unless the subcontractor agrees to the foregoing conditions: Provided, That this section shall not apply to contracts or subcontracts for scientific equipment used for communication and navigation as may be so designated by the Commission, and the Commission shall report annually to the Congress the names of such contractors and subcontractors affected by this provision, together with the applicable contracts and the amounts thereof.

(c) The method of determining the shipbuilder’s profit shall be prescribed by the Commission: Provided, That in computing such profits no salary of more than $25,000 per year to any individual shall be considered as a part of the cost of building such ship, and the Commission shall scrutinize construction costs and overhead expenses to determine that they are fair, just, and not in excess of a reasonable market price for commodities or goods or services purchased or charged.
(d) The Commission may, with the consent of the Secretary of the Treasury, utilize the services of Treasury Department employees engaged in similar functions in the determination or collection of shipbuilder profits in naval construction.

(e) If the shipbuilder whose bid has been approved by the Commission and accepted by the applicant, as provided in section 502 of this title, shall refuse to agree to any of the requirements of this section, the Commission is authorized to rescind its approval of such bid and to advertise for new bids, or, in its discretion, the Commission may have the vessel or vessels in question constructed in a United States navy yard.

SEC. 506. It shall be unlawful to operate any vessel, for the construction of which any subsidy has been paid pursuant to this title, other than exclusively in foreign trade, or on a round-the-world voyage or a round voyage from the west coast of the United States to a European port or ports or a round voyage from the Atlantic coast to the Orient which includes intercoastal ports of the United States, or on a voyage in foreign trade on which the vessel may stop at an island possession or island territory of the United States, unless the owner of such vessel shall receive the written consent of the Commission so to operate and prior to such operation shall agree to pay to the Commission, upon such terms and conditions as the Commission may prescribe, an amount which bears the same proportion to the construction subsidy theretofore paid or agreed to be paid (excluding cost of national-defense features as hereinbefore provided), as the remaining economic life of the vessel bears to its entire economic life. If an emergency arises which, in the opinion of the Commission, warrants the temporary transfer of a vessel, for the construction of which any subsidy has been paid pursuant to this title, to service other than exclusive operation in foreign trade, the Commission may permit such transfer Provided That no operating differential subsidy shall be paid during the duration of such temporary or emergency period, and such period shall not exceed three months. Every contractor receiving a contract for a construction-differential subsidy under the provisions of this title shall agree that if the subsidized vessel engages in domestic trade on a round-the-world voyage or a round voyage from the west coast of the United States to a European port or ports or loads or discharges cargo or passengers at an island possession or island territory as permitted by this section, that the contractor will repay annually to the Commission that proportion of one-twentieth of such construction subsidy as the gross revenue of such protected trade bears to the gross revenue derived from the entire voyages completed during the preceding year.

SEC. 507. If a contract is made by the Commission under authority of this title for the construction and sale of a new vessel to replace a vessel exclusively operated in foreign trade, which in the judgment of the Commission should be replaced because it is obsolete or inadequate for successful operation in such trade, the Commission is authorized, in its discretion, to buy such replaced vessel from the owner at a fair and reasonable valuation, which valuation shall not exceed the cost to the owner or any former owner plus the actual cost previously expended thereon for reconditioning, and less a reasonable and proper depreciation, based upon not more than a twenty-year life of the vessel and less a proper deduction for obsolescence, and apply the purchase price agreed upon to that portion of the construction cost of such new vessel which is to be borne by the purchaser thereof: Provided, That the owner of such replaced vessel shall execute a bond, with one or more approved sureties, conditioned upon indemnifying the United States from all loss resulting from any existing lien against such vessel: And provided further, That such vessel has been documented under the laws of the United States for a period of at least ten years prior to the date of its purchase by the United States.

SEC. 508. If the Commission shall determine that any vessel transferred to it by section 202 of this Act, or hereafter acquired, is of insufficient value for commercial or military operation to warrant its further preservation, the Commission is authorized

(1) to scrap said vessel, or

(2) to sell such vessel for cash, after appraisement and due advertisement, and upon competitive sealed bids, either to citizens of the United States or to aliens: Provided, That the purchaser thereof shall enter into an undertaking with sureties approved by the Commission that such vessel shall not be operated in the foreign commerce of the United States at any time within the period of ten years after the date of the sale, in competition with any other vessel owned by a citizen or citizens of the United States and registered under the laws thereof.

SEC. 509. Any citizen of the United States may make application to the Commission for aid in the construction of a new vessel to be operated in the domestic trade (excepting vessels engaged solely in the transportation of property on inland rivers and canals exclusively). If such application is approved by the Commission, the vessel may be constructed and sold to such applicant under the same terms and conditions as are provided in this Act for the construction and sale of vessels to be operated in foreign trade, but no construction subsidy shall be allowed (except for the cost of national-defense features which shall be paid by the Commission), and the applicant shall be required to pay the Commission not less than 25 per centum of the cost of such vessel (excluding cost of national-defense features) and the balance of such purchase price shall be paid by the applicant within twenty years in not to exceed twenty equal annual installments, with interest at 3.5 per centum per annum, secured by a preferred mortgage on the vessel sold and otherwise secured as the Commission may determine: Provided, That in case a vessel is to be constructed under this section for an applicant who has as his principal place of business a place on the Pacific coast of the United States (but not including one who having been in business on or before August 1, 1935, has changed his principal place of business to a place on the Pacific coast of the United States after such date), to be operated in a coastwise, intercoastal, or other domestic service, route, or line from or on the Pacific coast of the United States, and the amount of the lowest responsible bid of shipyards on such coast for the construction of such vessel does not exceed the amount of the lowest responsible bid therefor of shipyards on the Atlantic coast of the United States by more than 6 per centum of the amount of the bid of such Atlantic coast shipyard, such vessel shall be constructed for the applicant by the Commission only if the applicant accepts such lowest responsible bid of the Pacific coast shipyard, and agrees to designate and continue as the home port of the vessel to be constructed a port on the Pacific coast of the United States. The minimum rate of interest on deferred payments shall be three-fourths of 1 per centum lower than the minimum rate which would otherwise be applicable, with respect to the periods of construction of such vessel and its operation exclusively in coastwise, intercoastal, and other domestic trade. Such lower interest rate shall not apply with respect to any period in which the applicant

(1) Does not continue as its home port a port on the Pacific coast of the United States

(2) Operates the vessel in coastwise or other domestic trade other than on the Pacific coast

(3) Operates the vessel in intercoastal or foreign trade except to and from ports on the Pacific coast or

(4) Having been in business before August 1, 1935, and having changed his principal place of business to a. place on the Pacific coast after such date, maintains his principal place of business at any place on the Pacific coast.

TITLE VI – OPERATING-DIFFERENTIAL SUBSIDY

(a) The Commission is authorized and directed to consider the application of any citizen of the United States for financial aid in the operation of a vessel or vessels, which are to be used in an essential service in the foreign commerce of the United States. No such application shall be approved by the Commission unless it determines that

(1) the operation of such vessel or vessels in such service, route, or line is required to meet foreign-flag competition and to promote the foreign commerce of the United States, and that such vessel or vessels were built in the United States, or have been documented under the laws of the United States not later than February 1, 1928, or actually ordered and under construction for the account of citizens of the United States prior to such date

(2) the applicant owns, or can and will build or purchase, a vessel or vessels of the size, type, speed, and number, and with the proper equipment required to enable him to operate and maintain the service, route, or line, in such manner as may be necessary to meet competitive conditions, and to promote foreign commerce

(3) the applicant possesses the ability, experience, financial resources, and other qualifications necessary to enable him to conduct the proposed operations of the vessel or vessels as to meet competitive conditions and promote foreign commerce

(4) the granting of the aid applied for is necessary to place the proposed operations of the vessel or vessels on a parity with those of foreign competitors, and is reasonably calculated to carry out effectively the purposes and policy of this Act.

(b) Every application for an operating-differential subsidy under the provisions of this title shall be accompanied by statements disclosing the names of all persons having any pecuniary interest, direct or indirect, in such application, or in the ownership or use of the vessel or vessels, routes, or lines covered thereby, and the nature and extent of any such interest, together with such financial and other statements as may be required by the Commission. All such statements shall be under oath or affirmation and in such form as the Commission shall prescribe. Any person who, in an application for financial aid under this title or in any statement required to be filed therewith, willfully makes any untrue statement of a material fact, shall be guilty of a misdemeanor.

SEC. 602. No contract for an operating-differential subsidy shall be made by the Commission for the operation of a vessel or vessels to meet foreign competition, except direct foreign-flag competition, until and unless the Commission, after a full and complete investigation and hearing, shall determine that an operating subsidy is necessary to meet competition of foreign-flag ships.

(a) If the Commission approves the application, it may enter into a contract with the applicant for the payment of an operating-differential subsidy determined in accordance with the provisions of subsection (b) of this section, for the operation of such vessel or vessels in such service, route, or line for a period not exceeding twenty years, and subject to such reasonable terms and conditions, consistent with this Act, as the Commission shall require to effectuate the purposes and policy of this Act, including a performance bond with approved sureties, if such bond is required by the Commission.

(b) Such contract shall provide that the amount of the operating. differential subsidy shall not exceed the excess of the fair and reasonable cost of insurance, maintenance, repairs not compensated by insurance, wages and subsistence of officers and crews, and any other items of expense in which the Commission shall find and determine that the applicant is at a substantial disadvantage in competition with vessels of the foreign country hereinafter referred to, in the operation under United States registry of the vessel or vessels covered by the contract, over the estimated fair and reasonable cost of the same items of expense (after deducting therefrom any estimated increase in such items necessitated by features incorporated pursuant to the provisions of section 501 (b) if such vessel or vessels were operated under the registry of a foreign country whose vessels are substantial competitors of the vessel or vessels covered by the contract.

(c) The amount of such subsidy shall be determined and payable on the basis of a final accounting made as soon as practicable after the end of each year or other period fixed in the contract. The Commission may provide for in the contract, or otherwise approve, the payment, from time to time during any such period of such amounts on account as it deems proper. Such payments on account shall in no case exceed 75 per centum of the amount estimated to have accrued on account of such subsidy and shall be made only after there has been furnished to the Commission such security as it determines to be reasonable and necessary to insure the refund of any overpayment.

No such operating-differential subsidy shall be paid until the contractor shall have furnished evidence satisfactory to the Commission that the wages prescribed in accordance with subsection 301 (a) of this Act have been paid to the ship’s personnel.

SEC. 604. If in the case of any particular foreign-trade route the Commission finds the subsidy provided for in this part of this title in any respect inadequate to offset the effect of governmental aid paid to foreign competitors, it may grant such additional subsidy as it determines to be necessary for that purpose: Provided, That no such additional subsidy shall be granted, and no part thereof paid, except upon an affirmative vote of all the members of the Commission.

(a) No operating-differential subsidy shall be paid for the operation of any vessel on a voyage on which it engages in coastwise or intercoastal trade: Provided, however, That such subsidy may be paid on a round-the-world voyage or a round voyage from the west coast of the United States to a European port or ports or a round voyage from the Atlantic coast to the Orient which includes intercoastal ports of the United States or a voyage in foreign trade on which the vessel may stop at an island possession or island territory of the United States, and if the subsidized vessel earns any gross revenue on the carriage of mail, passengers, or cargo by reason of such coastal or intercoastal trade the subsidy payment for the entire voyage shall be reduced by an amount which bears the same ratio to the subsidy otherwise payable as such gross revenue bears to the gross revenue derived from the entire voyage. No vessel operating on the Great. Lakes or on the inland waterways of the United States shall be considered for the purposes of this Act to be operating in foreign trade.

(b) No operating-differential subsidy shall be paid for the operation of a vessel that is more than twenty years of age unless the Commission finds that it is in the public interest to grant such financial aid for the operation of such vessel and enters a formal order thereon, and the Commission shall include in each annual report a full report covering each case in which such exception is made, with the reasons therefor.

(c) No contract shall be made under this title with respect to a vessel to be operated on a service, route, or line served by citizens of the United States which would be in addition to the existing service, or services, unless the Commission shall determine after proper hearing of all parties that the service already provided by vessels of United States registry in such service, route, or line is inadequate, and that in the accomplishment of the purposes and policy of this Act additional vessels should be operated thereon and no contract shall be made with respect to a vessel operated or to be operated in a service, route, or line served by two or more citizens of the United States with vessels of United States registry, if the Commission shall determine the effect of such a contract would be to give undue advantage or be unduly prejudicial, as between citizens of the United States, in the operation of vessels in competitive services, routes, or lines, unless following public hearing, due notice of which shall be given to each line serving the route, the Commission shall find that it is necessary to enter into such contract in order to provide adequate service by vessels of United States registry. The Commission, in determining for the purposes of this section whether services are competitive, shall take into consideration the type, size, and speed of the vessels employed, whether passenger or cargo, or combination passenger and cargo, vessels, the ports or ranges between which they run, the character of cargo carried, and such other facts as it may deem proper.

SEC. 606. Every contract for an operating-differential subsidy under this title shall provide

(1) that the amount of the future payments to the contractor shall be subject to review and readjustment from time to time, but not more frequently than once a year, at the instance of the Commission or of the contractor. If any such readjustment cannot be reached by mutual agreement, the Commission, on its own motion or on the application of the contractor, shall, after a proper hearing, determine the facts and make such readjustment in the amount of such future payments as it may determine to be fair and reasonable and in the public interest. The testimony in every such proceeding shall be reduced to writing and filed in the office of the Commission. Its decision shall be based upon and governed by the changes which may have occurred since the date of the said contract, with respect to the items theretofore considered and on which such contract was based, and other conditions affecting shipping, and shall be promulgated in a formal order, which shall be accompanied by a report in writing in which the Commission shall state its findings of fact

(2) that the compensation to be paid under it shall be reduced, under such terms and in such amounts as the Commission shall determine, for any periods in which the vessel or vessels are laid up

(3) that if the Commission shall determine that a change in the service, route, or line, which is receiving an operating-differential subsidy under this title, is necessary in the accomplishment of the purposes of this Act it may make such change upon such readjustment of payments to the contractor as shall be arrived at by the method prescribed in clause (1) of these conditions

(4) that if at any time the contractor receiving an operating-differential subsidy claims that he cannot maintain and operate his vessels on such service, route, or line, with a reasonable profit upon his investment, and applies to the Commission for, a modification or rescission of his contract to maintain such service, route, or line, and the Commission determines that such claim is proved, the Commission shall modify or rescind such contract and permit the contractor to withdraw such vessels from such service, route, or line, upon a date fixed by the Commission, and upon the date of such withdrawal the further payment of the operating-differential subsidy shall cease and the con-tractor be discharged from any further obligation under such con-tract

(5) that when at the end of any five-year period during which an operating-differential subsidy has been paid, and when prior to the end of any such five-year period the contract shall be terminated, if the net profit of the contractor on his subsidized vessels and services incident thereto during such period or time, after deduction of depreciation charges based upon a twenty-year life expectancy of the subsidized vessels, has exceeded 10 per centum per annum upon the contractor’s capital investment necessarily employed in the operation of the subsidized vessels services, routes, and lines, the contractor shall pay to the United States an amount equal to one-half of such profits in excess of 10 per centum per annum as partial or complete reimbursement for operating-differential-subsidy payments received by the contractor for such five-year period, but the amount of excessive profit so recaptured shall not in any case exceed the amount of the operating-differential-subsidy payments theretofore made to the contractor for such period under such contract and the repayment of such reimbursement to the Commission shall be subject to the pro-visions of section 607

(6) that the contractor shall conduct his operations with respect to the vessel’s services, routes, and lines covered by his contract in the most economical and efficient manner, but with due regard to the wage and manning scales and working conditions prescribed by the Commission as provided in title III and

(7) that whenever practicable, the operator shall use only articles, materials, and supplies of the growth, production, and manufacture of the United States, as, defined in section 505a herein, except when it is necessary to purchase supplies and equipment outside the United States to enable such vessel to continue and complete her voyage, and the operator shall perform repairs to subsidized vessels within the continental limits of the United States, except in an emergency.

(a) Every contract for an operating-differential subsidy made under authority of this title shall provide that the contractor shall be entitled to annually withdraw from net earnings of subsidized vessels and services incident thereto as profit, if the contractor is a natural person or a partnership, or may pay to its shareholders or stockholders, as dividends, if the contractor is an association or corporation, a sum not in excess of 10 per centum per annum on the contractor’s capital necessarily employed in his business, except subject to the further provisions of this section which likewise shall be incorporated in such contract.

(b) To insure the prompt payment of the contractor’s obligations to the United States and the replacement of the contractor’s subsidized vessels as may be required, the contractor shall create and maintain, out of gross earnings, during the life of such contract, a “capital reserve fund”, in such depository or depositories as may be approved by the Commission. In this fund the contractor shall deposit, annually or oftener, as the Commission may require, an amount equal to the annual depreciation charges on the contractor’s vessels on which the operating differential is being paid, such depreciation charges to be computed on a twenty-year life expectancy of the subsidized vessels: Provided, however, That if, during an accounting year, the annual depreciation charges on the contractor’s line of subsidized vessels has not been earned, in whole or in part, over and above the annual expense of operation of such vessels (exclusive of said annual depreciation thereon), the contractor shall not be required to deposit in his capital reserve fund for such accounting year a sum in excess of the amount of annual depreciation actually earned during that year but shall make up any and all deficiencies in his capital reserve fund as soon as the earnings of his subsidized vessels in excess of annual expenses of operation shall permit. The proceeds of all insurance indemnities received by the contractor on account of the total loss of any subsidized vessel shall in also be deposited in the capital reserve fund.

The contractor shall also deposit in the capital reserve fund, from time to time, such percentage of the annual net profits of the contractor’s business covered by the contract as the Commission shall determine is necessary to further build up a fund for replacement of the contractor’s subsidized ships but the Commission shall not require the contractor to make such deposit of the contractor’s net in profits in the capital reserve fund unless the cumulative net profits of the contractor, at the time such deposit is to be made, shall be in excess of 10 per centum per annum from the date the contract was executed. From the capital reserve fund so created, the contractor may pay the principal, when due, on all notes secured by mortgage on the subsidized vessels and may make disbursements for the purchase of replacement vessels or reconstruction of vessels or additional vessels to be employed by the contractor on an essential foreign-trade line, route, or service approved by the Commission, but payments from the capital reserve fund shall not be made for any other purpose.

(c) To attain the public objects for which the financial aid provided for in such contract is extended and to insure the continued maintenance and successful operation of the subsidized vessels, the contractor shall create and maintain during the life of such contract, a “special reserve fund” in such depository or depositories as the Commission shall approve.

In this reserve fund, the contractor shall deposit annually the profits earned by the business of the subsidized vessels and services incident thereto in excess of 10 per centum per annum and in excess of the percentage of profits deposited in the capital reserve fund, as provided in subsection (b) of this section. From the special reserve fund the contractor may make the following disbursements and no others:

(1) Reimbursement to the contractor’s general funds for any losses on the operation of the subsidized vessels and services incident thereto sustained subsequent to the execution of the operating-differential-subsidy contract

(2) Reimbursement to the contractor’s general funds for current operating losses on completed voyages of subsidized vessels whenever the Commission shall determine it is improbable that such current losses will not be made up by profits on other voyages during the current year

(3) Payment of amounts due from the contractor to the Commission for reimbursement as provided in clause 5 of section 606, but such reimbursement shall be deferred until the amount on deposit in the special reserve fund shall be sufficiently in excess of 5 per centum of the capital necessarily employed in the business so that payment of such reimbursement to the Commission will not reduce the special reserve fund below a sum equal to such 5 per centum of capital necessarily employed in the business: Provided, however, That such reimbursement to the Commission, if so deferred, shall be payable from the special reserve fund or other funds upon termination of the contract and the United States shall then have a preferred lien on the special reserve fund for such deferred reimbursement

(4) After reimbursement to the contractor’s general funds of all operating losses has been made as provided in clause 1, and after reimbursement to the Commission of all amounts due from the contractor, as determined under clause 5 of section 606, if the amount accumulated in the special reserve fund shall then be in excess of 5 per centum of the capital necessarily employed in the business, the contractor may, if the Commission approves, withdraw some or all of such excess reserve and pay the sum so withdrawn into the contractor’s general funds or distribute the sum so withdrawn as a special dividend to the contractor’s shareholders or stockholders or as a bonus to officers or employees, as the contractor may determine.

(d) The Commission shall adopt and prescribe rules and regulations for the administration of the reserve funds contemplated by this section and shall include therein a definition of the term “net earnings” and the term “capital necessarily employed in the business”, as such terms are employed in this section: Provided, however, That the term “net earnings” shall take into account as a proper accounting charge to operation of vessels expense, an annual depreciation charge on the vessels, computed on the economic life of the vessel being twenty years and the term “capital necessarily employed in the business” shall not include borrowed capital.

Upon application of the contractor, the Commission, in its discretion, may permit the investment by the operator of some or all of the contractor’s capital and special reserve fund in approved interest-bearing securities, approved by the Commission, upon condition that the interest on such securities shall be deposited in the capital reserve fund.

(e) If, during any accounting year, the contractor’s general funds have become seriously depleted due to operating losses on the subsidized vessels and the special reserve fund has been exhausted, the Commission may, in its discretion, permit the contractor temporarily to withdraw from his capital reserve fund such excess therein on deposit over and. above the amount necessary to pay the principal amount currently due or about to become due on the contractor’s mortgage obligation on the subsidized vessels: Provided, however, That the sum so withdrawn shall be repaid to the capital reserve fund as soon as the contractor’s financial condition shall permit.

(f) The earnings of any contractor receiving an operating-differential subsidy under authority of this Act, which are deposited in the contractor’s reserve funds as provided in this section, except earnings withdrawn from the “special reserve funds” and paid into the contractor’s general funds or distributed as dividends or bonuses as provided in paragraph 4 of subsection (c) of this section, shall be exempt from all Federal taxes.

SEC. 608. No contract executed under this title or any interest therein shall be sold, assigned, or transferred, either directly or indirectly, or through any reorganization, merger, or consolidation, nor shall any agreement or arrangement be made by the holder whereby the maintenance, management, or operation of the service, route, line, vessel, or vessels is to be performed by any other person, without the written consent of the Commission. If it consents to such agreement or arrangement, the agreement or arrangement shall make provision whereby the person undertaking such maintenance management, or operation agrees to be bound by all of the provisions of the contract and of this Act applicable there to, and the rules and regulations prescribed pursuant to this Act. If the holder of any such contract shall voluntarily sell such contract or any interest therein, or make such assignment, transfer, agreement, or arrangement whereby the maintenance, management, or operation of the service, route, line, vessel, or vessels is to be performed by any other person, without the consent of the Commission, or if the operation of the service, route, lines or vessel, shall pass out of the direct control of the holder of such contract by reason of any voluntary or involuntary receivership or bankruptcy proceedings, the Commission shall have the right to modify or rescind such contract without further liability thereon by the United States, and is hereby vested with exclusive jurisdiction to determine the purposes for which any payments made by it under such contract shall be expended.

(a) The Commission shall withhold the payment of operating-differential subsidy while any contractor therefor is in default in any payments due on account of construction-loan, ship-sales mortgage notes, or any other obligation due the United States, and shall apply the amount so withheld to the satisfaction of such debt.

(b) If the holder of any contract under this title has filed a petition under any provision of the Bankruptcy Act or has applied for the appointment of a receiver or is in default under any provisions of a ship mortgage given to the United States, the Commission may cancel or modify the contract as it finds advisable, and is hereby granted exclusive power to determine the purpose for which any payments made by it under such contract shall be expended.

SEC. 610. An operating-differential subsidy shall not be paid under authority of this title on account of the operation of any vessel which does not meet the following requirements:

(1) The vessel shall be of steel or other acceptable metal, shall be propelled by steam or motor, shall be as nearly fireproof as practicable, shall be built in a domestic yard or shall have been documented under the laws of the United States not later than February 1, 1928, or actually ordered and under construction for the account of citizens of the United States prior to such date, and shall be documented under the laws of the United States, during the entire life of the subsidy contract and

(2) if the vessel shall be constructed after the passage of this Act it shall be either a vessel constructed according to plans and specifications approved by the Commission and the Secretary of the Navy, with particular reference to economical conversion into an auxiliary naval vessel, or a vessel approved by the Commission and the Navy Department as otherwise useful to the United States in time of national emergency.

TITLE VII—PRIVATE CHARTER OPERATION

SEC. 701. Whenever the Commission shall find and determine, and such finding and determination shall be approved by the President of the United States, that the national policy declared in section 101 of this Act, and the objectives set forth in section 210 of this Act, cannot be fully realized within a reasonable time, in whole or in part, under the provisions of titles V and VI, the Commission is hereby authorized and directed to complete its long-range program previously adopted as hereinafter provided in this title.

SEC. 702. The Commission is authorized to have constructed in domestic yards, on the Atlantic and Gulf and Pacific coasts, such new vessels as it shall determine may be required to carry out the objects of this Act, and to have old vessels reconditioned or remodeled in such yards: Provided, That if satisfactory contracts for such new construction or reconstruction, in accordance with the provisions of this Act, cannot be obtained from private shipbuilders, the Commission is authorized to have such vessels constructed, reconditioned, or remodeled in United States navy yards.

SEC. 703.

(a) No contract for the building of a new vessel or for the reconditioning or reconstruction of any other vessel, shall be made by the Commission with any private shipbuilder, except after due advertisement and upon sealed competitive bids.

(b) All contracts for the construction, reconditioning, or reconstruction of a vessel or vessels by a private shipbuilder under authority of this title shall be subject to all the provisions and requirements prescribed in title V of this Act with respect to contracts with a private shipbuilder for the construction of vessels under authority of that title.

(c) All bids required by the Commission for the construction, reconstruction, or reconditioning of vessels, and for the chartering of the Commission’s vessels hereinafter provided for, shall be opened at the time, hour, and place stated in the advertisement for bids, and all interested persons, including representatives of the press, shall be permitted to attend, and the results of such bidding shall be publicly announced.

SEC. 704. All vessels transferred to or otherwise acquired by the Commission in any manner may be chartered or sold by the Commission pursuant to the further provisions of this Act. All vessels transferred to the Commission by this Act and now being operated by private operators on lines in foreign commerce of the United States may be temporarily operated by the Commission for its account by private operators until such time and upon such operating agreements as the Commission may deem advantageous, but the Commission shall arrange as soon as practicable to offer all such lines of vessels for charter as hereinafter provided and all operation of the Commission’s vessels by private operators under such operating agreements shall be discontinued within one year after the passage of this Act.

SEC. 705. As soon as practicable after the passage of this Act, and continuing thereafter, the Commission shall arrange for the employment of its vessels in steamship lines on such trade routes, exclusively serving the foreign trade of the United States, as the Commission shall determine are necessary and essential for the development and maintenance of the commerce of the United States and the national defense: Provided, That such needs are not being adequately served by existing steamship lines privately owned and operated by citizens of the United States and documented under the laws of the United States. It shall be the policy of the Commission to encourage private operation of each essential steamship line now owned by the United States by selling such lines to citizens of the United States in the manner provided in section 7 of the Merchant Marine Act, 1920, and in strict accordance with the provisions of section 5 of said Act, or by demising its vessels on bare-boat charter to citizens of the United States who shall agree to maintain such line or lines in the manner hereinafter provided.

(a) The Commission shall not charter its vessels to private operators except upon competitive sealed bids submitted in strict compliance with all the terms and conditions of a public advertisement soliciting such bids. Each and every advertisement for bids to charter the (Commission’s vessels shall state the number, type, and tonnage of the vessels the Commission is offering for bare-boat charter for operation as a steamship line on a designated trade route, the minimum number of sailings that will be required, the length of time for which the charter will be given, and all other information the Commission shall deem necessary for the information of prospective bidders.

(b) The Commission shall have authority to, and shall announce its advertisements for bids that the Commission reserves the right to, reject any and all bids submitted.

(a) The Commission shall award the charter to the bidder proposing to pay the highest monthly charter hire unless the Commission shall reject such bid for the reasons set forth in subsection (b) of this section.

(b) The Commission may reject the highest or most advantageous or any other bid, if, in the Commission’s discretion, the charter hire offered is deemed too low, or the Commission determines that the bidder lacks sufficient capital, credit, or experience to operate successfully the line but the reason or reasons for rejection of any bid, upon request of the bidder, shall be stated to such bidder in writing.

(c) If the highest bid is rejected, the Commission may award the charter to the next highest bidder, or may reject all bids and readvertise the line: Provided, however, That the Commission may operate the line until conditions appear to be more favorable for a reoffering of the line for private charter.

SEC. 708. The Commission may, if in its discretion financial aid is deemed necessary, enter into a contract with any charterer of its vessels for payment to such charterer of an operating-differential subsidy upon the same terms and conditions and subject to the same limitations and restrictions as are elsewhere provided in this Act with respect to payments of such subsidies to operators of privately owned vessels.

(a) Every charter made by the Commission pursuant to the provisions of this title shall provide that whenever, at the end of any calendar year subsequent to the execution of such charter, the cumulative net voyage profits (after payment of the charter hire reserved in the charter and payment of the charterer’s fair and reasonable overhead expenses applicable to operation of the chartered vessels) shall exceed 10 per centum per annum on the charterer’s capital necessarily employed in the business of such chartered vessels, the charterer shall pay over to the Commission, as additional charter hire, one-half of such cumulative net voyage profit in excess of 10 per centum per annum: Provided, That the cumulative net profit so accounted for shall not be included in. any calculation of cumulative net profit in subsequent years.

(b) Every charter shall contain a definition of the terms “net voyage profit” and “fair and reasonable overhead expenses”, and “capital necessarily employed”, as said terms are used in subsection (a) of this section, setting forth the formula for determining such profit and overhead expense and capital necessarily employed, which definitions shall have been previously approved by the Commission and published in the advertisement for bids for such charter.

SEC. 710. Every charterer of the Commission’s vessels shall be required to deposit with the Commission an undertaking with approved sureties as security for the faithful performance of all of the conditions of the charter, including indemnity against liens on the chartered vessels, in such amount as the Commission shall require.

SEC. 711. The charters to be made by the Commission pursuant to the provisions of this title shall demise the vessels to the charterer subject to all usual conditions contained in bare-boat charters, and until January 1, 1940, shall be for terms of three years or less as the Commission may decide: Provided, That after January 1, 1940, charters may be executed by the Commission for such terms as the experience gained by the Commission shall indicate are to the best interests of the United States and the merchant marine.

SEC. 712. Every charter shall provide --

(a) That the charterer shall carry on the chartered vessels, at his own expense, policies of insurance covering all marine and port risks, protection and indemnity risks, and all other hazards and liabilities, in such amounts, in such form, and in such insurance companies as the Commission shall require and approve, adequate to cover all damages claimed against and losses sustained by the chartered vessels arising during the life of the charter: Provided, That in accordance with existing law, some or all of such insurance risks may be underwritten by the Commission itself as, in its discretion, it may determine.

(b) That the charterer shall at its own expense keep the chartered vessel in good state of repair and in efficient operating condition and shall at its own expense make any and all repairs as may be required by the Commission.

(c) That the Commission shall have the right to inspect the vessel at any and all times to ascertain its condition.

(d) That in any national emergency as proclaimed by the President of the United States, the Commission may terminate the charter without cost to the United States, upon such notice to the charterers as the President of the United States shall determine.

SEC. 713. In the awarding of charters, the Commission shall take in consideration the charterer’s financial resources and credit standing, practical experience in the operation of vessels, and any other factors that would be considered by a prudent businessman in entering into a transaction involving a large investment of his capital and the Commission is directed to refrain from chartering its vessels to any person. appearing to lack sufficient capital, credit, and experience to operate successfully the vessel over the period covered by the charter.

SEC. 714. If the Commission shall find that any trade route (determined by the Commission to be an essential trade route as provided in section 211 of this Act) cannot be successfully developed and maintained and the Commission’s replacement program cannot be achieved under private operation of such trade route by a citizen of the United States with vessels registered under the laws thereof, without further Government aid in addition to the financial aids authorized under title V and VI of this Act, the Commission is authorized to have constructed, in private shipyards or in navy yards, the vessel or vessels of the types deemed necessary for such trade route, and to demise such new vessel or vessels on bare-boat charter to the American-flag operator established on such trade route, without advertisement or competition, upon an annual charter hire of not less than 5 per centum of the construction cost of such new vessel or vessels. Such charter may contain an option to the charterer to purchase such vessel or vessels from the Commission, within five years after the execution of the charter, upon the same terms and conditions as are provided in title V for the purchase of new vessels from the Commission with credit on the purchase price for all charter-hire theretofore paid by the purchaser on account of such charter.

TITLE VIII -- CONTRACT PROVISIONS

SEC. 801. Every contract executed by the Commission under the provision of titles VI or VII of this Act shall contain provisions requiring

(1) that the contractor and every affiliate, domestic agent, subsidiary, or holding company connected with, or directly or indirectly controlling or controlled by, the contractor, to keep its books, records and accounts, relating to the maintenance, operation, and servicing of the vessels, services, routes, and lines covered by the contract, in such form and under such regulations as may be prescribed by the Commission: Provided, That the provisions of this paragraph shall not require the duplication of books, records, and accounts required to be kept in some other form by the Interstate Commerce Commission

(2) that the contractor and every affiliate, domestic agent, subsidiary, or holding company connected with, or directly or indirectly controlling or controlled by, the contractor, to file, upon notice from the Commission, balance sheets, profit and loss statements, and such other statements of financial operations, special report, memoranda of any facts and transactions, which in the opinion of the Commission affect the financial results in, the performance of, or transactions or operations under, such contract

(3) that the Commission shall be authorized to examine and audit the books, records, and accounts of all persons referred to in this section whenever it may deem it necessary or desirable and

(4) that upon the willful failure or refusal of any person described in this so section to comply with the contract provisions required by this section, the Commission shall have the right to rescind the contract, and upon such rescission the United States shall be relieved of all further liability on such contract.

SEC. 802. Every contract executed by the Commission under authority of title V of this Act shall provide that:
In the event the United States shall, through purchase or requisition, acquire ownership of the vessel or vessels on which a construction-differential subsidy was paid, the owner shall be paid therefor the fair actual value thereof, but in no event shall such payment exceed the actual depreciated construction cost thereof (together with the actual depreciated cost of capital improvements thereon, but excluding the cost of national-defense features) less the depreciated amount of construction subsidy theretofore paid incident to the construction or reconditioning of such vessel or vessels. In computing the value of such vessel, depreciation shall be computed on each vessel on the schedule adopted by the Bureau of Internal Revenue for income-tax purposes.

The foregoing provision respecting the requisition or the acquisition of ownership by the United States shall run with the title to such vessel or vessels and be binding on all owners thereof.

SEC. 803. It shall be unlawful for any contractor receiving an operating-differential subsidy under title VI or for any charterer under title VII of this Act to employ any person or concern performing or supplying stevedoring, ship-repair, ship-chandler, towboat, or kindred services to supply such services to the operator’s subsidized or chartered vessels if such contractor, or any subsidiary company, holding company, affiliate company, or associate company of such contractor, or any officer, director, or employee of such contractor, or any member of the immediate family of any such contractor, officer, director, or employee, or any member of the immediate family of any officer, director, or employee, of such subsidiary company, holding company, affiliate company, or associate company of such contractor, owns any pecuniary interest directly or indirectly in the person or concern supplying such services to the contractor’s subsidized or chartered vessels or receives any payment or other thing of value directly or indirectly as a result of such employment or services: Provided, That, with the express written approval of the Commission, such contractor or a subsidiary company wholly owned by such contractor may perform such services to its own vessels if the profits, if any, of such subsidiary company or companies with respect to such services shall become a part of the earnings of such contractor and shall be accounted for as provided in clause 5 of section 606: Provided further, That the contractor may, in the discretion of the Commission, contract with a holding company, affiliate company, or associate company of such contractor for the use of terminal facilities by such contractor, if the contract is approved by the Commission.

SEC. 804. It shall be unlawful for any contractor receiving an operating-differential subsidy under title VI or for any charterer of vessels under title VII of this Act, or any holding company, subsidiary, affiliate, or associate of such contractor or such charterer, or any officer, director, agent, or executive thereof, directly or indirectly, to own, charter, act as agent or broker for, or operate any foreign-flag vessel which competes with any American-flag service determined by the Commission to be essential as provided in section 211 of this Act: Provided, however, That under special circumstances and for good cause shown, the Commission may, in its discretion, waive the provisions of this section as to any contractor, by affirmative vote of four of its members, except as otherwise provided in subsection 201 (a).

(a) It shall be unlawful to award or pay any subsidy to any contractor under authority of title VI of this Act, or to charter any vessel to any person under title VII of this Act, if said contractor or charterer, or any holding. company, subsidiary, affiliate, or associate of such contractor or charterer, or any officer, director, agent, or executive thereof, directly or indirectly, shall own, operate, or charter any vessel or vessels engaged in the domestic intercoastal or coastwise service, or own any pecuniary interest, directly or indirectly, in any person or concern that owns, charters, or operates any vessel or vessels in the domestic intercoastal or coastwise service, without the written permission of the Commission. Every person, firm, or corporation having any interest in such application shall be permitted to intervene and the Commission shall give a hearing to the applicant and the intervenors. The Commission shall not grant any such application if the Commission finds it will result in unfair competition to any person, firm, or corporation operating exclusively in the coastwise or intercoastal service or that it would be prejudicial to the objects and policy of this Act: Provided, That if such contractor or other person above-described or a predecessor in interest was in bona-fide operation as a common carrier by water in the domestic, intercoastal, or coastwise trade in 1935 over the route or routes or in the trade or trades for which application is made and has so operated since that time or if engaged in furnishing seasonal service only, was in bona-fide operation in 1935 during the season ordinarily covered by its operation, except in either event, as to interruptions of service over which the applicant or its predecessor in interest had no control, the Commission shall grant such permission without requiring further proof that public interest and convenience will be served by such operation, and without, further proceedings as to the competition in such route or trade.

If such application be allowed it shall be unlawful for any of the persons mentioned in this section to divert, directly or indirectly, any moneys, property, or other thing of value, used in foreign-trade operations, for which a subsidy is paid by the United States, into any such coastwise or intercoastal operations and whosoever shall violate this provision shall be guilty of a misdemeanor.

(b) Whenever any contractor under title VI or title VII receiving an operating-differential subsidy is in default with respect to any mortgage, note, purchase contract, or other obligation to the Commission, or has not maintained, in a manner satisfactory to the Commission all of the reserves provided for in this Act, the Commission shall have the right to supervise the number and compensation of all officers and employees of the contractor (c) no director, officer, or employee (which terms shall be construed in the broadest sense to include, but not to be limited to, managing trustee or other administrative agent) shall receive from any contractor, holding a contract authorized by title VI or title VII of this act and its affiliate, subsidiary, associate, directly or indirectly, wages, salary, allowances of compensation in any form for personal services which will result in such person’s receiving a total compensation for his personal services from such sources exceeding in amount or value $25,000 per annum, and no such person or concern shall be qualified to receive or thereafter to hold any contract under this part, if such person or concern its subsidiary, affiliate, or associate pays or causes to be paid, directly or indirectly, wages, salary, allowances, or compensation in any form for personal services which result in such person’s receiving a total compensation for his personal services from such sources exceeding in amount or value $25,000 per annum.

(d) It shall be unlawful, without express written consent of the Commission for any contractor holding a contract authorized under title VI or VII of this Act to employ any other person or concern as the managing or operating agent of such operator, or to charter any vessel, on which an operating-differential subsidy is to be paid, for operation by another person or concern, and if such charter is made, the person or concern operating the chartered vessel or vessels shall be subject to all the terms and provisions of this Act, including limitations of profits and salaries. No contractor shall receive an operating-differential subsidy for the operation of any chartered vessel save and except during a period of actual emergency determined by the Commission.

(e) It shall be unlawful for any contractor or charterer who holds any contract made under authority of any provision in this Act to employ any Member of Congress, either with or without compensation, as an attorney, agent, officer, or director of such person.

(f) Any willful violation of any provision of this section shall constitute a breach of the contract or charter in force under this Act, and upon determining that such a violation has occurred the Commission may forthwith declare such contract or charter rescinded and any person willfully violating the provisions of this section shall be guilty of a misdemeanor.

(a) Whoever shall consult with, or enter into an agreement with, or inform any other bidder, or officer, director, executive, agent, or employee of any such other bidder, as to the amount, the terms, or the conditions of any bid submitted to the Commission prior to the public opening of such bids, or enter into any combination, understanding, agreement, or arrangement whatsoever, to prevent the making of any bona-fide bid for any contract or charter under this Act, to induce any other person not to bid for any such contract or charter, or to deprive the United States in any way of the benefit of full, free, and secret competition in the awarding of any such contract or charter shall be guilty of a misdemeanor: Provided, that this section shall also apply to bidding for contracts under the provisions of section 504 of this Act.

(b) Whenever any natural person is found guilty in any district court of the United States of any act or acts declared in this Act to constitute a misdemeanor, he shall be punished by a fine of not more than $10,000, or by imprisonment for not less than one year or more than five years, or by both fine and imprisonment. Whenever any corporation is found guilty of any act or acts declared in this Act to be unlawful, such corporation shall be punished by a fine of not more than $25,000.

(c) In addition to the punishment prescribed in subsection (a) of this section, any person or corporation convicted of a misdemeanor under the provisions of this Act shall be ineligible, at the discretion of the Commission, to receive any benefits under titles V and VI of this Act, or to receive a charter under title VII of this Act, for a period of five years after conviction.

SEC. 807. It shall be unlawful for any person employed or retained by any shipbuilder or ship operator holding or applying for a contract under the provisions of this Act, or employed or retained by any subsidiary, affiliate, associate, or holding company of such shipbuilder or ship operator, to present, advocate, or oppose any matter affecting any such shipbuilder or ship operator or any subsidiary, affiliate, associate, or holding company thereof, before the Congress or any Member or committee thereof, or before the Commission, or any other governmental agency or any member, officer, or employee thereof, unless such shipbuilder or ship operator shall have previously filed with the Commission in such form and detail as the Commission shall by rules and regulations or order prescribe as necessary or appropriate in the public interest, a statement of the subject matter in respect of which such person is retained or employed, the nature and character of such retainer or employment, and the amount of compensation received or to be received by such person, directly or indirectly, in connection therewith. It shall be the duty of every such person so employed or retained to file with the Commission within ten days after the close of each calendar month during such retainer or employment, in such form and detail as the Commission shall by rules and regulations or order prescribe as necessary or appropriate in the public interest, a statement of the expenses incurred and the compensation received by such person during such month in connection with such retainer or employment. Whosoever shall violate this provision shall be guilty of a misdemeanor.

SEC. 808. It shall be unlawful for any contractor receiving an operating-differential subsidy under title VI or for any charterer or under title VII of this Act unjustly to discriminate in any manner so as to give preference directly or indirectly in respect to cargo in which such contractor or charterer has a direct or indirect ownership, or purchase or vending interest and whosoever shall violate this provision shall be guilty of a misdemeanor.

SEC. 809. Contracts under this Act shall be entered into so as to equitably serve, insofar as possible, the foreign-trade requirements of the Atlantic, Gulf, and Pacific ports of the United States. In awarding contracts under this Act, preference shall be given to persons who are citizens of the United States and who have the support, financial and otherwise, of the domestic communities primarily interested.

SEC. 810. It shall be unlawful for any contractor receiving an operating-differential subsidy under title VI or for any charterer of vessels under title VII of this Act, to continue as a party to or to conform to any agreement with another carrier or carriers by water, or to engage in any practice in concert with another carrier or carriers by water, which is unjustly discriminatory or unfair to any other citizen of the United States who operates a common carrier by water exclusively employing vessels registered under the laws of the United States on any established trade route from and to a United States port or ports.

No payment or subsidy of any kind shall be paid directly or indirectly out of funds of the United States or any agency of the United States to any contractor or charterer who shall violate this section. Any person who shall be injured in his business or property by reason of anything forbidden by this section may sue therefor in any district court of the United States in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney’s fee.

TITLE IX -- MISCELLANEOUS PROVISIONS

SEC. 901. Any officer or employee of the United States traveling on official business overseas or to or from any of the possessions of the United States shall travel and transport his personal effects on ships registered under the laws of the United States where such ships are available unless the necessity of his mission requires the use of a ship under a foreign flag: Provided, That the Comptroller General of the United States shall not credit any allowance for travel or shipping expenses incurred on a foreign ship in the absence of satisfactory proof of the necessity therefor.

(a) It shall be lawful for the Commission to requisition any vessel documented under the laws of the United States, during any national emergency declared by proclamation of the President, and when so taken or used, the owner shall be paid the fair actual value of the vessel at the time of taking, or paid the just compensation for the vessel’s use based upon such fair actual value (excluding any national defense features previously paid for by the United States), less a deduction from such fair actual value of any construction differential subsidy allowed under this Act, and in no case shall such fair actual value be enhanced by the causes necessitating the taking. In the case of a vessel taken and used, but not purchased, the vessel shall be restored to the owner in a condition at least as good as when taken, less reasonable wear and tear, or the owner shall be paid an amount for reconditioning sufficient to place the vessel in such condition. The owner shall not be paid for any consequential damages arising from such taking or use.

(b) Except in cases of vessels where a construction differential subsidy has been allowed and paid, in which case the value of the vessel for the purposes of this section shall be established as provided in section 802, the Commission shall ascertain the fair compensation for such taking or use and shall certify to Congress the amount so found by it to be due for appropriation and payment to the person entitled thereto. If the amount found by the Commission to be due is unsatisfactory to the person entitled thereto, such person shall be entitled to sue the United States for the amount of such just compensation and such suit shall be brought in the manner prescribed by paragraph 20 of section 24, or by section 145 of the Judicial Code, as amended (U. S. C., title 28, secs. 41, 250).

SEC. 903. The following Acts and parts of Acts shall stand repealed:

(a) All of the provisions of sections 3 to 8, inclusive, section 10, section 11, section 35, and section 43 of the Shipping Act, 1916, as amended.

(b) All of the provisions of subsection (b) (4) of section 2, section 3, section 11, section 14, and section 35 of the Merchant Marine Act, 1920, as amended.

(c) All of the provisions of sections 201, 301, 302, 401 to 413, inclusive, 601, and 702 of the Merchant Marine Act, 1928, as amended: Provided, That any contract lawfully entered into under authority of sections 401 to 413, inclusive, of such Act shall remain in full force and effect as though these sections were not repealed, subject, however, to the further provisions of this Act.

(d) The last sentence in section 3 of the Intercoastal Shipping Act, 1933.

SEC. 904. Whenever the words “United States Shipping Board” or the words “the Board” are used in any prior Act, such Acts are hereby amended so that such words shall be applicable to the United States Maritime Commission.

SEC. 905. When used in this Act --

(a) The words “foreign trade” mean trade between the United States, its Territories or possessions, or the District of Columbia, and a foreign country.

(b) The term “person” includes corporations, partnerships, and associations existing under or authorized by the laws of the United States, or any State, Territory, District, or possession thereof, or of any foreign country.

(c) The words “citizen of the United States” include a corporation, partnership or association only if it is a citizen of the United States within the meaning of section 2 of the Shipping Act, 1916, as amended (U. S. C., title 46, sec. 802).

(d) The word “construction” includes outfitting and equipping.

SEC. 906. If any provisions of this Act, or the application thereof to any person or circumstance, is held invalid, the remainder of the Act, and the application of such provisions to other persons. or circumstances, shall not be affected thereby. This Act may be cited as the Merchant Marine Act, 1936.

SEC. 907. Except as otherwise provided herein this Act shall take effect thirty days after a majority of the members of the Commission have taken the oath of office.


On This Day in Trinity House History – 12 August

The General Lighthouse Fund is Established

The Merchant Shipping Act, 1898, abolished the Mercantile Marine Fund and established the General Lighthouse Fund.

The aids to navigation service provided by Trinity House is financed from ‘Light Dues’ levied on commercial vessels calling at ports in the British Isles, based on the net registered tonnage of the vessel. The rate is set by the Department of Transport, and annually reviewed. Light Dues are currently charged at 40 pence* per net registered ton, subject to a maximum charge of £16,000 per voyage. Vessels are charged for a maximum of nine voyages per annum. Tugs and fishing vessels are liable for annual payments based on the registered length of the vessel.

Light dues are paid in to the General Lighthouse Fund (GLF), which is under the stewardship of the Department for Transport. The fund is used to finance the lighthouse services provided by Trinity House, the Northern Lighthouse Board (responsible for Scotland and the Isle of Man) and the Commissioners of Irish Lights (responsible for the waters around both Northern Ireland and the Republic of Ireland). Major initiatives such as lighthouse and lightvessel automation and the solarisation of buoys and a growing number of lighthouses have made a significant contribution to the reduction of Light Dues.


Watch the video: Law of The Land - The Merchant Shipping Bill, 2016 (May 2022).