June 13, 1960, Pub. L. 86-518, § 1, 74 Stat. 216; July 5, 1960, Pub. L. 86-575, 74 Stat. 312; 1961 Reorg. Plan. No. 7, eff. Aug. 12, 1961, 26 F.R. 7315, 75 Stat. 840; Oct. 5, 1961, Pub. L. 87-401; 75 Stat. 833; Oct. 5, 1962, Pub. L. 87-755, 76 Stat. 751; Oct. 10, 1965, Pub. L. 89-254, §§ 1, 2, 79 Stat. 980; Oct. 21, 1970, Pub. L. 91-469, §§ 12, 13, 35 (a), 84 Stat. 1022, 1035.)

§ 1161. Reserve funds for construction or acquisition of vessels; taxation. (a) "New vessel" defined.

When used in this section the term "new vessel" means any vessel (1) documented or agreed with the Secretary of Commerce to be documented under the laws of the United States; (2) construction in the United States after December 31, 1939, or the construction of which has been financed under subchapters V or VII of this chapter, or the construction of which has been aided by a mortgage insured under subchapter XI of this chapter; and (3) either (A) of such type, size, and speed as the Secretary shall determine to be suitable for use on the high seas or Great Lakes in carrying out the purposes of this chapter, but not of less than two thousand gross tons or of less speed than twelve knots, unless the Secretary shall determine and certify in each case that a vessel of a specified lesser tonnage or speed is desirable for use by the United States in case of war or national emergency, or (B) constructed to replace a vessel or vessels requisitioned or purchased by the United States.

(b) Establishment of construction reserve funds.

For the purposes of promoting the construction, reconstruction, reconditioning, or acquisition of vessels, or for other purposes authorized in this section, necessary to carrying out the policy set forth in section 1101 of this title, any citizen of the United States who is operating a vessel or vessels in the foreign or domestic commerce of the United States or in the fisheries or owns in whole or in part a vessel or vessels being so operated, or who, at the time of purchase or requisition of the vessel by the Government, was operating a vessel or vessels so engaged or owned in whole or in part a vessel or vessels being so operated or had acquired or was having constructed a vessel or vessels for the purpose of operation in such commerce or in the fisheries, may establish a construction reserve fund, for the construction, reconstruction, reconditioning, or acquisition of new vessels, or for other purposes authorized in this section, to be composed of deposits of proceeds from 905 (e), as added Oct. 10, 1940, ch. 849, 54 Stat. 1106, and amended June 17, 1943, ch. 130, 57 Stat. 157; Dec. 23, 1944, ch. 714, 58 Stat. 920; 1950 Reorg. Plan No. 21, §§ 204, 306, eff. May 24, 1950, 15 F.R. 3178, 64 Stat. 1276, 1277; July 17, 1952, ch. 939, §§ 9-14, 21, 66 Stat. 762, 765; Sept. 8, 1959, Pub. L. 86-237, § 1, 73 Stat. 471; Sept. 26, 1961, Pub. L. 87-303, § 3, 75 Stat. 661; Oct. 10, 1962, Pub. L. 87-782, § 1. 76 Stat. 796; Dec. 23, 1963, Pub. L. 88-227, § 1, 77 Stat. 470; Sept. 12, 1964. Pub. L. 88-595, § 1, 78 Stat. 943.)

SUBCHAPTER VI.-OPERATING-DIFFERENTIAL

SUBSIDY

SUBCHAPTER REFERRED TO IN OTHER SECTIONS

This subchapter is referred to in sections 1131, 1132, 1152, 1160, 1191, 1204. 1221, 1222, 1223, 1226, 1227, 1228, of this title.

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§ 1171. Subsidy authorized for operation of vessels in foreign trade. (a) Application for subsidy; conditions precedent to granting.

The Secretary of Commerce 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 or in such service and in cruises authorized under section 1183 of this title. In this subchapter VI the term "essential service" means the operation of a vessel on a service, route, or line described in section 1121 (a) of this title or in bulk cargo carrying service described in section 1121 (b) of this title. No such application shall be approved by the Secretary of Commerce unless he determines that (1) the operation of such vessel or vessels in an essential service is required to meet foreign-flag competition and to promote the foreign commerce of the United States except to the extent such vessels are to be operated on cruises authorized under section 1183 of this title, 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 leases or can and will build or purchase, or lease, a vessel or vessels of the size, type, speed, and number, and with the proper equipment required to enable him to operate in an essential service, 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 chapter. To the extent the application covers cruises, as authorized under section 1183 of this title, the Secretary may make the portion of this last determination relating to parity on the basis that any foreign flag cruise from the United States competes with any American flag cruise from the United States.

(b) Statements as to financial interests to accompany application; penalty for false statements.

Every application for an operating-differential subsidy under the provisions of this subchapter 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 Secretary of Commerce. All such statements shall be under oath or affirmation and in such form as the Secretary shall prescribe. Any person who, in an application for financial aid under this subchapter or in any statement required to be filed therewith, willfully makes any untrue statement of a material fact, shall be guilty of a misdemeanor. (June 29, 1936, ch. 858, § § 601, 905 (e), 49 Stat. 2001; 1950 Reorg. Plan No. 21, § § 105 (1), 306, eff. May 24, 1950, 15 F.R. 3178, 64 Stat. 1274, 1275, 1277; July 17, 1952, ch. 939, § 21, 66 Stat. 765; May 27, 1961, Pub. L. 87-45, § 2, 75 Stat. 90; 1961

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Reorg. Plan No. 7, eff. Aug. 12, 1961, 26 F.R. 7315, 75 Stat. 840: Oct. 21, 1970, Pub. L. 91-469, § § 14, 35 (a), (h), 84 Stat. 1023, 1055, 1036; Dec. 31, 1970, Pub. L. 91-603, § 4(c), (d), 84 Stat. 1675.)

§ 1172. Determination of necessity of subsidy to meet competition.

Except with respect to cruises authorized under section 1183 of this title, no contract for an operating-differential subsidy shall be made by the Secretary of Commerce for the operation of a vessel or vessels to meet foreign competition, except direct foreign-flag competition, until and unless the Secretary of Commerce, after a full and complete investigation and hearing, shall determine that an operating-differentia! subsidy is necessary to meet competition of foreign-flag ships. (June 29, 1936, ch. 858, §§ 602, 905 (e), 49 Stat. 2002; June 23, 1938, ch. 600, § 40 (b), 52 Stat. 964; 1950 Reorg. Plan. No. 21, § § 105(1), 306, eff. May 24, 1950, 15 F.R. 3178, 64 Stat. 1274, 1275, 1277; July 17, 1952, ch. 939, § 21, 66 Stat. 765; May 27, 1961, Pub. L. 87-45, § 3, 75 Stat. 91: 1961 Reorg. Plan No. 7, eff. Aug. 12, 1961, 26 F.R. 7315, 75 Stat. 840; Oct. 21, 1970, Pub. L. 91-469, § 35 (a), 84 Stat. 1035.)

§ 1180. Vessels eligible to subsidy.

An operating-differential subsidy shall not be paid under authority of this subchapter 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, shal! 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 June 29, 1936 it shall be either a vessel constructed according to plans and specifications approved by the Secretary of Commerce and the Secretary of the Navy, with particular reference to economical conversion into an auxiliary naval vessel, or a vessel approved by the Secretary of Commerce and the Navy Department as otherwise useful to the United States in time of national emergency. (June 29, 1936, ch. 858, § § 610, 905 (e), 49 Stat. 2007: 1950 Reorg. Plan No. 21, §§ 105(1), 306, eff. May 24, 1950, 15 F.R. 3178, 64 Stat. 1274, 1275, 1277; July 17, 1952, ch. 939, § 21, 66 Stat. 765; 1961 Reorg. Plan No. 7, eff. Aug. 12, 1961, 26 F.R. 7315, 75 Stat. 840.)

§ 1181. Transfer of vessels to foreign registry on default of United States.

(a) The contractor, upon compliance with the provisions of this section, may transfer to foreign registry the vessels covered by any operating-differential subsidy contract held by him, in the event that the United States defaults upon such contract or cancels it without just cause. Any contractor desiring to transfer any such vessel to foreign registry upon such default or cancelation shall file an application in writing with the Secretary of Commerce setting forth its contentions with respect to the lack of just cause or lawful grounds for such default or cancelation. The Secretary shall afford the contractor an opportunity for a hearing within twenty days after such

contractor files written application therefor, and after the testimony, if any, in such hearing has been reduced to writing and filed with the Secretary, he shall, within a reasonable time, grant or deny the application by order.

(b) If any such application is denied, the contractor may obtain. a review of the order of denial in the United States Court of Appeals for the District of Columbia, by filing in such court, within twenty days after the entry of such order, a written petition praying that the order of the Secretary be set aside. A copy of such petition shall be forthwith transmitted by the clerk to the Secretary of Commerce or any officer designated by the Secretary for that purpose, and thereupon the Secretary shall file in the court the record upon which the order complained of was entered, as provided in section 2112 of Title 28. Upon the filing of such petition such court shall have exclusive jurisdiction to determine whether such cancelation or default was without just cause, and to affirm or set aside such order. The judgment and decree of the court affirming or setting aside any such order of the Secretary shall be final.

(c) No transfer of vessels to foreign registry under this section. shall become effective until any indebtedness to the Government or to any citizen of the United States, secured by such vessels, has been paid or discharged, and until after the expiration of ninety days from the date of final determination of the application or the appeal, if any. Within such ninety-day period the Secretary of Commerce may (1) with the consent of the contractor purchase the vessels at cost to the contractor plus cost of capital improvements thereon, less 4 per centum annual depreciation upon such vessel, and the actual depreciated costs of capital improvements thereon, or (2) reinstate the contract and adjust or settle the default found by the Secretary or the court to exist. (June 29, 1936, ch. 858, §§ 611, 905 (e), as added June 23, 1938, ch. 600, § 30, 52 Stat. 961, and amended 1950 Reorg. Plan No. 21, §§ 204, 306, eff. May 24, 1950, 15 F.R. 3178, 61 Stat. 1276, 1277; July 17, 1952, Ch. 939, § 21, 66 Stat. 765; Aug. 28, 1958, Pub. L. 85-791, § 17, 72 Stat. 947; June 12, 1960, Pub. L. 86-518, § 4, 74 Stat. 216.)

§ 1182. Subordination of Secretary's interest to Reconstruction Finance Corporation.

The Secretary of Commerce is authorized to subordinate his interest as mortgagee in any vessel subsidized under the provisions of this subchapter in favor of any loan for working capital made by the Reconstruction Finance Corporation under the Reconstruction Finance Corporation Act, as amended, if the Secretary finds that the making of such loan by the Reconstruction Finance Corporation would be in furtherance of the policies of this chapter or would, in its opinion, preserve or protect his mortgage interest in said subsidized vessel: Provided, That the obligations evidencing such loans by the Reconstruction Finance Corporation shall not be transferred, except to some other governmental agency. (June 29, 1936, ch. 858, §§ 612, 905 (e), as added June 23, 1938, ch. 600, $ 30, 52 Stat. 961, and amended 1950 Reorg. Plan No. 21, §§ 204, 306, eff. May 24, 1950, 15 F.R. 3178, 64 Stat. 1276, 1277; July 17, 1952, ch. 939, § 21, 66 Stat. 765.)

SUBCHAPTER VIII-A.-OFFENSES AND PENALTIES

§ 1223. Forbidden practices relating to coastwise service, salaries, officers, and employees.

(a) Foreign trade subsidy contractor engaging in coastwise or intercoastal trade.

It shall be unlawful to award or pay any subsidy to any contractor under authority of subchapter VI of this chapter, or to charter any vessel to any person under subchapter VII of this chapter 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 Secretary of Commerce. Every person, firm, or corporation having any interest in such application shall be permitted to intervene and the Secretary shall give a hearing to the applicant and the intervenors. The Secretary shall not grant any such application if the Secretary 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 chapter: 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 bonafide 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 Secretary 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 coast wise or intercoastal operations; and whosoever shall violate this provision shall be guilty of a misdemeanor.

(f) Penalty.

Any willful violation of any provision of this section shall constitute a breach of the contract or charter in force under this chapter, and upon determining that such a violation has occurred the Secretary of Commerce may forthwith declare such contract or charter rescinded and any person willfully violating the provisions of this section shall be guilty of a misdemeanor. (June 29, 1936, ch. 858, §§ 805, 905(e), 49 Stat. 2012; June 23, 1938, ch. 600, $$ 36, 37, 52 Stat. 963; 1950 Reorg. Plan No. 21, §§ 105(1), 204, 306, eff. May 24, 1950, 15 F.R. 3178, 64 Stat. 1274-1276; July 17, 1952, ch. 939, $$ 20, 21, 66 Stat. 765; 1961 Reorg. Plan No. 7, eff. Aug. 12, 1961, 26 F.R. 7315, 75 Stat. 840; Oct. 21, 1970, Pub. L. 91-469, § 25, 84 Stat. 1034; Dec. 31, 1970, Pub. L. 91– 603, § 4 (e), 84 Stat. 1675.)