United States Ship Regulations
United States Government Support for United States Ships:
Maritime nations’ governments have protected and supported their domestic maritime industry for national security and industrial policy reasons for centuries. Hence, United States has provided support to its private commercial maritime industry since 1789. Historically, United States could not easily exert its influence outside the United States without access to commercial cargo and passenger ships. United States realized this in the Spanish-American War and WW I. That is why United States count on domestically controlled fleet in times of war and national emergency.
United States domestic industries which relied on international trade suffered economically even before the United States entered the WWI in 1917. Germans torpedoed commercial ships that reduced the number of available ships and drove up insurance rates. Afterwards, United States Congress has periodically enacted major legislation setting forth maritime policy objectives and establishing a number of support programs for the private merchant marine.
United States Congress enacted:
- Shipping Act, 1916
- Merchant Marine Act, 1920 (Jones Act)
- Merchant Marine Act, 1936
- Merchant Marine Act, 1970
- Maritime Security Act, 2002
Until now, United States Government maintains a number of support programs intended to ensure the availability of ocean-going ship capacity to move goods and people referred to as sealift capacity. United States Government shipping support programs have proved critical to sustainment of a U.S.-flag fleet. It is hard U.S.-flag ships engaged in the foreign trade to compete with ships registered in open registries with substantial structural and legal operating and capital cost advantages.
United States Government also maintains a number of programs and laws which are designed to promote United States shipbuilding. For example, United States build and United States rebuild requirements of the cabotage Jones Act. Ship build requirement applicable to U.S.-flag ships carrying United States Government cargoes and the 50% duty applicable to repairs on U.S.-flag ships performed outside of the United States.
Early 20th century, policy of the United States Government has been to support a privately-owned U.S.-flag commercial fleet instead of maintaining a large publicly owned fleet of cargo ships.
Merchant Marine Act 1936 Section 101, declares that it is necessary for the national defense and development of its foreign and domestic commerce that the United States shall have a merchant marine, among other things, capable of serving as a naval and military auxiliary in time of war and national emergency.
Two main United States Government support programs for U.S.-flag ships engaged in the foreign trade:
Maritime Security Program
Cargo Preference Laws
In 1996, Maritime Security Program authorized to support 47 militarily useful privately-owned U.S.-flag commercial ships. Maritime Security Program reauthorized in 2003 until 2015 and reauthorized in 2010 until 2025. On 1 October 2005, Maritime Security Program increased to 60 ships. Maritime Security Program was further modified in 2012. Genesis of the Maritime Security Program is the Operating Differential Subsidy (ODS) program authorized in 1936 to support U.S.-flag ships in the foreign trade. Operating Differential Subsidy (ODS) program was successful in retaining ships under the U.S.-flag. But Operating Differential Subsidy (ODS) program became controversial over time because there was no cap on the payments made which were based on the difference between U.S.-flag and foreign flag operating costs. Maritime Security Program was designed to settle that controversy by fixing the payments made under the program to U.S.-flag ship owners.
Maritime Security Act establishes ship eligibility criteria as well as ship ownership and operation criteria and requirements for Maritime Security Program. Qualifying ships are enrolled in Maritime Security Program. Afterwards, Maritime Security Program Operating Agreement is signed between the ship owner (bareboat charterer) and the United States Maritime Administration. Ship’s monthly payments are made by the Maritime Administration to the private party so long as the ship operates in a qualifying service. Generally, a ship is engaged in a qualifying service if it is operating in the United States foreign trade not under time charter to the United States Government.
United States coastal (domestic) trade is not a qualifying trade and Maritime Security Program enrolled ships are prohibited from engaging in that trade. United States Government via United States Maritime Administration paid each contractor an annual support of $3.1 million per ship in 2013. United States Maritime Administration paid as long as the ship is in active commercial service and not on time charter to United States Government.
Maritime Security Act of 2005 explains that in order to be eligible to Maritime Security Program, a ships must be militarily useful as determined by the Secretary of Defense. A ship must be suitable for use by the United States for national defense or military purposes in time of war or national emergency. In order to be eligible for Maritime Security Program, a ship must also meet an initial age limitation:
- maximum age 10 years for tankers
- maximum age 25 years for Lighter Aboard Ships (LASH)
- maximum age 15 years for all other ships
In 1996, Maritime Security Program was first introduced and initial selections of ships were made. Maritime Security Program renewed in 2005, many ships were replaced by existing contract holders and many contracts were transferred from the initial contract holders to new persons. Replacement of ships and contractors requires the approval of the United States Maritime Administration and the United States Transportation Command.
In 2005, when the Maritime Security Program was renewed, existing ships and contract holders were grandfathered into the new program. Till 2005, ships have been replaced in accordance with the commercial requirements of the contract holder with the United States Government’s approval. although the applicable regulations provide a process of awarding contracts pursuant to general notice.
United States Maritime Security Act sets forth eligibility criteria for Maritime Security Program contractors:
- contractor must either be a qualified United States citizen or must meet a citizenship exception
- ship may be owned by a qualified United States citizen trust (with foreign beneficiaries under certain conditions) if it is demise-chartered to a person eligible to document a ship in the United States, or a U.S.-flag ship may be operated by a person who operates or manages ships for the Department of Defense (or charters ships to United States Department of Defense) and has entered into a special security agreement with United States Department of Defense.
Maritime Security Program is not limited to United States citizens. Non-United States citizens can participate in Maritime Security Program under certain conditions. When Maritime Security Program was first authorized it was generally restricted to United States citizens. Later on, major U.S.-flag operators such as Sea-Land were acquired by Non-United States citizen companies and administrative rules were relaxed by the United States Maritime Administration. In 2005, United States Congress altered the rules.
Maritime Security Program ships does not have to be built in the United States. No such requirement under the law that ships be built in the United States and ships which have participated in Maritime Security Program have been built outside the United States. On the other hand, Maritime Security Program ship can not operate in United States domestic trade. Maritime Security Program enrolled ship may not receive the United States Government stipend for any day that the ship participates in the noncontiguous United States domestic trade. Mostly, Maritime Security Program enrolled ships have been built outside of the United States such that they are otherwise prohibited from engaging in the United States domestic trade rendering moot this noncontiguous trade limitation.
Maritime Security Program ships are committed to United States Government in times of national emergency. Maritime Security Program enrolled ships are required to enter into a Voluntary Intermodal Sealift Agreement with the United States Government whereby ship is committed to United States Government if the United States Government requests its full-time use of the ship.
Maritime Security Program contractors are also required to commit a portion of their worldwide intermodal assets pursuant to the VISA Agreement. When ships are requisitioned, they are chartered pursuant to a Ship Contingency Agreement which is a standard form agreement whereby ship owner and United States Government agree in advance as to the charter rate and other terms.
On the other hand, it is possible to enter into a VISA Agreement and commit ship capacity without having a Maritime Security Program ship. VISA program is open to anyone who is willing to commit a militarily useful U.S.-flag ship it owns or bareboat charters. In order to be eligible for VISA Agreement, ship must be owned by ship owner. Time charterer or ship manager cannot execute a VISA Agreement and commit a time-chartered or managed ship. United States Department of Defense has a policy of preferring VISA-enrolled ships over other non-enrolled U.S.-flag ships for cargo opportunities.
Maritime Security Program Agreements
Maritime Security Program Agreements are transferable. Maritime Security Program Agreements are transferable with the permission of United States Maritime Administration and United States Transportation Command so long as the transferee qualifies under Maritime Security Program. If a ship is replaced, that new ship is at least as militarily useful as old ship.
A ship being documented under U.S.-flag must meet United States Coast Guard inspection standards and be inspected by the United States Coast Guard to those standards. United States Coast Guard inspection standards are more stringent and different than inspection standards imposed under international regulations and applied by most registries. Due to the high United States Coast Guard inspection standards, bringing a ship into compliance with the unique United States standards can add significant costs to the transfer of registry of a ship to the U.S. flag. In order to reduce those costs and encourage the re-flagging of militarily useful ships into the United States, Maritime Security Program offers an alternative inspection standard for such ships. United States Maritime Security Program provides that an otherwise qualifying ship automatically complies with United States standards if:
- Ship is classed by ABS (American Bureau of Shipping) or another acceptable classification society
- Ship complies with international standards
- Ship’s country of registry has not been identified by the United States Government as inadequately enforcing international ship regulations
Costs of complying with United States ship standards can be generally avoided by offering a ship to be re-flagged into U.S.-flag to the United States Maritime Administration for enrollment in the Maritime Security Program. Ships that qualify receive the benefit of Maritime Security Program’s international standards provision even if they are not actually enrolled in the Maritime Security Program. Hence, American ship owners whom are seeking to reflag non-U.S.-built ship into the United States registry should consider offering the ship for the Maritime Security Program.
Cargo Preference is a requirement to utilize a certain ship for certain cargoes. United States Government has adopted several cargo preference requirements over time which mandate that a percentage of United States Government cargoes must be transported in privately owned U.S.-flag commercial ships. Generally, cargo preference requirement provides that U.S.-flag ships need not be accorded the preference if they are not physically available to carry the cargo pursuant to the shipper’s requirements or if they are not available at fair and reasonable rates.
Three cargo preference laws and requirements:
- Cargo Preference Act of 1904: reserves 100% of United States military cargoes to privately owned U.S.-flag ships so long as the ships are available at rates that are not excessive or unreasonable.
- Public Resolution: reserves 100% of cargoes to privately owned U.S.-flag ships with respect to export cargoes financed through United States Government loans so long as the ships are available in sufficient number, in sufficient tonnage capacity, on necessary schedules, or at reasonable rates.
- Cargo Preference Act of 1954: reserves 50% of civilian agency cargoes or where United States Government is engaged in financing in any way so long as the ships are available at fair and reasonable rates for commercial ships of the United States.
Aim of United States Cargo Preference:
The purpose of Cargo Preference is to provide a base of cargo for U.S.-flag ships to assist offset the higher cost of operating under U.S.-flag. Operating a ship under open registries would be cheaper. By doing so, ships will be available to United States Government in the event of war or national emergency. Cargo preference is critical to survival of a privately-owned U.S.-flag fleet engaged in United States foreign trade. Usually, ships enrolled in the Maritime Security Program are free to carry cargoes reserved to privately owned U.S.-flag ships and simultaneously receive Maritime Security Program stipend, except that no stipend can be paid by law if an enrolled ship carries more than 7,500 tons of civilian bulk preference cargoes.
U.S.-flag foreign-built ship may qualify to carry United States Government reserved cargoes, depending on which cargo reservation applies. U.S.-flag foreign-built ships can immediately upon reflagging transport cargoes reserved to U.S.-flag ships by the Cargo Preference Act of 1904 and Public Resolution. Nevertheless, Cargo Preference Act of 1954 prohibits foreign-built ships from obtaining the benefit of the cargo reservation for 3 years following registration under U.S.-flag, which is called three-year wait. On the other hand, ships that are enrolled in Maritime Security Program are not subject to the three-year wait. According to Public Resolution, there is no restriction on the foreign modification or rebuilt of a U.S.-flag ship. However, according to Cargo Preference Act 1954, ships that are rebuilt outside the United States, loses the cargo reservation and commences a new three-year wait to restore that preference. Generally, Cargo Preference Act 1904 has no foreign modification or rebuilding restriction, except that a ship being reflagged to United States registry for the purpose of entering into a time charter with the Department of Defense must have all of its reflagging or repair work done in the United States. Cargo preference requirements limits U.S.-flag rates in some way. United States Maritime Administration has enacted regulations which provide in the carriage of bulk cargoes for the establishment of rates based on the provision of detailed cost information to that agency.
Cargo Preference Act 1904, McCumber Amendment provides that U.S.-flag ship owners cannot charge United States Government any freight rate that is higher than freight rates paid for transporting like goods for private persons.
In 1866, United States Congress enacted a 50% tariff on the value of repairs performed abroad by U.S.-flag ships. Ad Valorem refers to value of U.S.-flag ship repairs out of United States.
U.S.-flag ship which has undergone for repairs at foreign shipyard (if there is no exemption), ship owner of U.S.-flag ship must pay the United States Government 50% of the value of the covered repairs upon return to the United States. United States Department of Homeland Security department Customs and Border Protection checks and administers U.S.-flag ship repair duty. United States has entered a free trade agreement with Canada and Singapore, in order to not to impose any duty or tariff on shipyard services. U.S.-flag ship must pay the United States Government 50% of the value of the covered repairs upon return to the United States, but not for emergency repairs or improvements and modifications. Besides, spare parts, equipment or paint job which are sourced from a non-duty place and are installed or applied in the foreign shipyard are not dutiable under the ship repair statute.
If U.S.-flag ship arrives in the United States two or more years after leaving the United States, U.S.-flag ship does not have to pay duty on any foreign ship repairs unless:
- those repairs were undertaken during the first six months after leaving United States
- U.S.-flag leave United States for the sole purpose of obtaining such repairs
Foreign Shipyard Repairs of a U.S.-flag Ship
Foreign Shipyard Repairs of a U.S.-flag Ship: In order to separate dutiable items (repairs), from non-dutiable items (improvements or parts), U.S.-flag ship owners should insist on detailed invoicing from foreign repairing shipyard sufficient to support a claim that only certain items in the overall project are dutiable. United States Customs and Border Protection controls and administers this ship repair duty.
Usually, United States Customs and Border Protection does not accept bare allegations without proof of distinguishable invoice items. United States Customs and Border Protection regulations require a responsible U.S.-flag ship owner to file a ship repair entry and an application for relief within prescribed time periods.
United States Congress enacted:
- Shipping Act, 1916
- Merchant Marine Act, 1920 (Jones Act)
- Merchant Marine Act, 1936
- Merchant Marine Act, 1970
- Maritime Security Act, 2002
1- The Shipping Act of 1916
The Shipping Act of 1916 was a piece of legislation passed in the United States to establish a framework for the regulation of shipping within U.S. waters. The act was enacted during a period of substantial change and growth in the shipping industry, marked by a surge in international trade and technological advances.
Some of the key provisions of the Shipping Act of 1916 included:
- Establishment of the United States Shipping Board: The act created the United States Shipping Board, which was granted the power to regulate, monitor, and control the commercial shipping industry in the United States. The Board was responsible for ensuring fair business practices among carriers, protecting shippers, and maintaining a merchant fleet capable of serving as naval auxiliaries in times of war or national emergency.
- Regulation of Commerce Practices: The act prohibited a range of business practices in the shipping industry that it deemed to be unfair, such as discriminatory practices against shippers, or the use of anti-competitive practices like rate fixing.
- Common Carriage Provisions: The act required vessel-operating common carriers to establish, observe, and enforce just and reasonable regulations and practices related to the receiving, handling, storing, and delivering of property.
- Oversight of Carrier Agreements: All agreements between carriers related to rates, routes, or other competitive matters had to be filed with the Shipping Board, which could then disapprove any that it found to be unjustly discriminatory or detrimental to commerce or the shipping industry.
- Acquisition of Vessels: The act granted authority to the Shipping Board to have vessels constructed and purchased, allowing the U.S. to maintain an active merchant marine fleet.
- Antitrust immunity: One of the significant aspects of the Shipping Act of 1916 was that it granted limited antitrust immunity to shipping companies, allowing them to enter into certain types of cooperative agreements that would otherwise be considered anti-competitive under federal antitrust law. This provision allowed shipping companies to create “conferences,” groups of carriers that collectively set uniform shipping rates.
- National defense and security: By establishing a U.S. merchant marine fleet, the Shipping Act of 1916 also played a role in national defense. It ensured that the U.S. had a fleet of vessels and experienced mariners that could be used in times of war or national emergency.
- Penalties for violations: The Act set out penalties for violations, including fines and imprisonment. It also allowed the U.S. Shipping Board to alter or annul any rates, fares, charges, classifications, regulations, or practices it found to be unjust or unreasonable.
- Regulation of shipping agents and brokers: The Shipping Act of 1916 also regulated shipping agents and brokers, setting licensing requirements and specifying duties and obligations. This helped ensure fair and reasonable practices in these professions.
- Impact on maritime law: The Shipping Act of 1916 and its subsequent amendments have had a significant impact on maritime law in the U.S. They set a precedent for the regulation of commercial shipping and have influenced later legislation and regulation in this area.
- Modern Relevance: In the modern era, the act’s principles continue to guide the regulatory framework for maritime commerce in the U.S., even though the specific details have evolved over the years. The Federal Maritime Commission, the successor to the United States Shipping Board, continues to enforce the Shipping Act, which now focuses on maintaining competition and integrity in the U.S.’s ocean freight system.
- Economic Impact: The Shipping Act has had significant economic effects. By regulating the competition among shipping companies and overseeing their practices, it aimed to prevent unfair or predatory practices, ensuring a level playing field. This has helped to maintain a vibrant and competitive shipping industry, essential to the U.S. economy given the country’s heavy reliance on maritime transportation for international trade.
- Protection of Consumers: By prohibiting unfair and discriminatory practices, the Act has also protected shippers and consumers. For instance, it prevented carriers from giving preferential treatment to certain shippers, which could have led to higher costs for consumers. Through such regulation, the Act has helped ensure fair pricing and access to shipping services.
- Influence on Global Maritime Laws: The Shipping Act of 1916 also had a significant influence on maritime laws and regulations in other countries. As one of the early comprehensive pieces of legislation in this field, it served as a model for similar laws around the world.
- Impact on Labor: The Shipping Act of 1916 also had implications for labor in the maritime industry. The establishment and maintenance of a U.S. merchant marine fleet helped create jobs and stabilize employment in the industry. Also, by ensuring fair practices, it indirectly contributed to better working conditions.
- Challenges and Controversies: Despite its importance, the Act has not been without controversy. The antitrust immunity it granted to shipping companies, for instance, has been criticized for potentially leading to higher prices and limiting competition. The Act’s approach to regulation has also been challenged over the years, leading to revisions and amendments.
- Ongoing Relevance: Even though some parts of the Shipping Act of 1916 have been superseded by other legislation, its core principles remain relevant. Issues of fair competition, the regulation of practices, and the oversight of the maritime industry continue to be important in the 21st century. This demonstrates the enduring impact of this legislation.
The Shipping Act of 1916 was a groundbreaking piece of legislation that has shaped the U.S. maritime industry over the last century. Despite numerous changes and amendments, the principles and framework it established continue to guide maritime law and policy today.
The Shipping Act of 1916 served as the cornerstone of U.S. maritime policy until it was largely replaced by the Merchant Marine Act of 1920, also known as the Jones Act, which included provisions requiring that goods shipped between U.S. ports be carried on ships built, owned, and operated by U.S. citizens. The Shipping Act has been amended numerous times since it was first enacted, with significant amendments in 1984 and 1998, which further defined its role in the modern maritime industry.
2- The Merchant Marine Act of 1920 (Jones Act)
The Merchant Marine Act of 1920, also known as the Jones Act, is a United States federal statute that provides for the promotion and maintenance of the American merchant marine. Its purpose is to control maritime commerce in U.S. waters and between U.S. ports, and it does so by implementing various regulations and protections.
There are several key provisions of the Jones Act:
- Cabotage Law: The Act stipulates that all goods transported by water between U.S. ports must be carried on U.S. flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents. This is known as cabotage law, which restricts the operation of transport services within a certain territory to local carriers.
- Seamen’s Rights: The Act also provides protections and certain legal rights to sailors. For example, it allows injured sailors to obtain damages from their employers for the negligence of the ship owner, the captain, or fellow members of the crew. It also gives sailors the right to seek damages for ship unseaworthiness, whether or not the ship owner was negligent.
- Promotion of U.S. Merchant Marine: The Act aims to support a vibrant U.S. merchant marine industry. The intent was to ensure that the U.S. would have a strong fleet of commercial and military ships, capable of both carrying domestic goods during peacetime and providing support to the U.S. Navy during times of conflict.
Critics of the Jones Act argue that the Act leads to higher shipping costs and has inhibited the growth of the U.S. shipping industry due to increased costs and less competition. However, supporters argue that the Act is vital for national security reasons and for protecting jobs and industry within the U.S.
The Jones Act covers a wide range of maritime activities. It was primarily designed to support the development and maintenance of a robust merchant marine industry within the United States, given the country’s vast coastline and dependence on maritime commerce.
The cabotage regulations under the Jones Act are part of a larger global practice. Many countries have similar rules in place to protect their domestic maritime industries, although the specifics vary from country to country.
One of the most controversial aspects of the Jones Act is the requirement for U.S. built, owned, and operated vessels. Critics argue that this protectionist measure has resulted in an older and less efficient fleet in the United States compared to other maritime nations. They believe that allowing U.S. companies to purchase ships built overseas could result in a more modern and efficient fleet. On the other hand, supporters assert that the U.S. shipbuilding industry would be under threat without this provision, potentially compromising national security and causing job losses.
The Jones Act also plays a role in ensuring maritime safety. The Act’s requirements help maintain standards for shipbuilding and crew training, which contribute to the safety and security of the vessels.
In addition, the Jones Act has significant implications for maritime law and insurance. The Act allows sailors to pursue claims against their employers for on-the-job injuries, a right not granted to other workers in other industries. This has led to a specialized area of law known as “Jones Act cases.”
It’s also worth noting that the Act has occasionally been partially waived in times of emergency, such as after natural disasters, to allow foreign-flagged ships to move goods between U.S. ports and facilitate recovery efforts. Such waivers, however, are typically temporary and subject to specific conditions.
The Merchant Marine Act of 1920 is indeed a significant piece of legislation that has shaped and continues to impact the U.S. maritime industry, its workers, and its contributions to the economy and national security.
3- The Merchant Marine Act of 1936
The Merchant Marine Act of 1936 is an important piece of legislation in the United States concerning the U.S. maritime industry. This act was put into place to stimulate and support the American maritime trade industry. The reasons for this were both economic and strategic, as the act would support jobs and stimulate the economy while also building a strong maritime industry that could support the U.S. Navy during times of conflict.
Here are some key points about the Merchant Marine Act of 1936:
- Establishment of the U.S. Maritime Commission: The act established the United States Maritime Commission, a new federal agency responsible for overseeing and supporting the American merchant marine industry.
- Funding and Subsidies: The act provided substantial funding and subsidies to shipbuilders and ship operators, enabling them to build new ships and operate them competitively against foreign competition. These subsidies were both construction and operating subsidies.
- Shipbuilding Program: A major aspect of the act was a significant shipbuilding program. The goal was to increase the number of American-made and American-flagged ships on the high seas. This was both to increase the strength and competitiveness of the American maritime industry, and to ensure that in the event of a war, the United States would have a strong fleet to transport troops and supplies.
- Crew Requirements: The act also stipulated that ships that received subsidies had to be crewed by U.S. citizens, a measure intended to protect and promote American jobs.
- National Defense Aspect: The act contained national defense aspects, with the aim of maintaining a merchant marine capable of serving as a naval auxiliary in times of war or national emergency.
- Cargo Preference Policies: The Act initiated policies of cargo preference, which required a portion of U.S. government-impelled cargoes to be carried on U.S.-flagged vessels.
- Training and Education: The act also placed a significant emphasis on training and education for American merchant mariners. It aimed to create a pool of trained and experienced American mariners who could operate the nation’s merchant fleet and who could also be called upon to serve in the U.S. Navy in times of war.
- Merchant Marine Reserves: The Act facilitated the establishment of the United States Maritime Service as a voluntary organization to train individuals to serve in the merchant marine, and also in the U.S. Naval Reserve. The United States Maritime Service became an important component of the United States Merchant Marine.
- Regulation of Maritime Practices: The Act empowered the U.S. Maritime Commission to regulate maritime practices, such as rates charged by carriers, and to promote fair competition among different carriers.
- Vessel Construction and Repair Loan Guarantees: The Act also introduced the provision of loan guarantees for the construction and repair of vessels. This was to ensure the financial viability and competitiveness of U.S. shipyards and shipping companies.
The Merchant Marine Act of 1936 has had a significant impact on the American maritime industry. Its goal was to revitalize the U.S. merchant fleet, enhance its competitiveness, and ensure that it could support the needs of the country, both in times of peace and during war. Despite numerous amendments and revisions over the years, the original goals of the Act – to promote a robust and competitive U.S. merchant marine – remain central to American maritime policy today.
The Merchant Marine Act of 1936 aimed to bolster the American maritime industry for economic, strategic, and national defense reasons. It continues to have a significant impact on U.S. maritime policy, although it has been revised and updated several times since its initial passage.
4- The Merchant Marine Act of 1970
The Merchant Marine Act of 1970 transcends being a mere remedy for the economic afflictions of American shipyards. It signifies substantial augmentations to the count of ships eligible to procure construction or operating subsidies, while simultaneously restructuring and streamlining the management of funds involved in these programs. Notable amendments of the 1936 Act, as emphasized in H.R. 15424, include:
The legislation empowers the President to designate a Commission on American Shipbuilding to assess the progress of the American shipbuilding industry in meeting production and subsidy objectives of the new program.
Sec.501.d enables the Secretary of Commerce to stipulate that vessels constructed with the assistance of construction differential funds for a specific foreign trade must be confined to that trade or service.
Sec.503.b imposes an upper limit on construction subsidies at 50% after 30 June 1970, with a subsequent reduction to 45% in 1971. Furthermore, it calls for gradual reductions in maximum allowable payments by 2% annually, thereby lowering the overall maximum construction subsidy to 35% in 1976.
Sec.505.a (referred to as the “Buy American” clause) grants the Secretary of Commerce the authority to authorize the procurement of foreign components and equipment, excluding major hull and structural components, only if the construction of the vessel would be delayed due to extended deliveries by U.S. manufacturers.
Sec.601.a extends funding for operating differential subsidy to bulk carriers.
Sec.607.a encourages “Any citizen of the United States who owns vessels that operate in the United States foreign trade. . . .”
Sec.607.f imposes interest on tax-deferred capital reserve funds in a manner that discourages hoarding funds for the purpose of gaining interest. However, earnings withdrawn from the fund are still taxed only in the year of withdrawal, while interest payments shall be levied on the amount of tax that would have been due in the year of interest.
Additionally, the proposed Senate version demonstrates a more liberal perspective in defining U.S. foreign commerce, aiming to facilitate the construction of U.S.-flag vessels that operate between foreign nations without the need to call at a U.S. port. This objective is to be achieved with the assistance of CDS funds.
Naturally, there are several other significant aspects covered in the two revisions that have been adopted. Among these provisions are the expansions in loan and mortgage coverage, specifically to include research vessels, with an increased overall liability ceiling of $3 billion. It is intriguing to note that despite being an industry marked by fragmentation, the revisions offer benefits for various stakeholders, including owners, operators, unions, and shipbuilders alike.
One of the key factors to consider when evaluating such legislation is the underlying motivation behind it. While the sponsors of the Administration have been resolute in expressing their views, the revisions themselves reflect a similar determination to take action. Much of the bill aims to streamline the practical administration of the Merchant Marine Act, and some of the major proposals outlined above are already in effect due to existing regulations. For instance, the bill grants authorization to the Secretary of Commerce to impose restrictions on the operation of CDS-funded ships, ensuring they are used in their intended trade. Presently, the operating differential is the only subsidy that limits a vessel’s area of trade or service, and the construction subsidy has rarely been extended to vessel owners without an operating subsidy. Since it is anticipated that certain vessels constructed with CDS funds will not require operating subsidies to remain competitive, such as those operating in the North Atlantic and West Coast-Far East Trades, this proposal simply guarantees continued federal support for U.S. vessels engaged in specific services or trades. Another proposal seeks to eliminate federal recapture of excessive profits from subsidized operators, effectively streamlining the current process accomplished through corporate income tax.
Overall, the proposed revisions aim to enhance the legislation, enabling a more comprehensive framework for U.S. foreign commerce while addressing various concerns and benefiting multiple stakeholders involved in the maritime industry.
5- The Maritime Transportation Security Act (MTSA) 2002
The Maritime Transportation Security Act (MTSA) of 2002 is a significant piece of legislation in the United States designed to enhance security measures in maritime transportation. It was signed into law in response to the terrorist attacks on September 11, 2001, to prevent similar threats and increase the safety and security of U.S. ports and waterways.
Key points of the Maritime Transportation Security Act of 2002 include:
- Area Maritime Security Committees: The Act mandated the creation of Area Maritime Security Committees for each Captain of the Port zone in the United States. These committees work to identify risks, communicate those risks, and create plans to mitigate them.
- Vessel and Facility Security Plans: Vessels and facilities that may be at risk are required to develop security plans that include measures for access control, response to security threats, and security training for personnel.
- Transportation Worker Identification Credential (TWIC): The MTSA introduced the TWIC program, which requires all mariners holding Coast Guard-issued credentials, as well as other workers with regular access to secure areas of maritime facilities and vessels, to undergo a background check and fingerprinting to receive an ID card.
- Maritime Security Levels: The Act established three security levels consistent with the Homeland Security Advisory System. Each security level corresponds to a set of measures to be taken by vessels and port facilities.
- Port Security Grants: The MTSA authorized a grant program to help implement area maritime transportation security plans and facility security plans. These grants assist in the protection of ports by funding the improvement of security measures.
- International Code for the Security of Ships and of Port Facilities (ISPS Code): The Act incorporates the ISPS Code, an amendment to the Safety of Life at Sea (SOLAS) Convention, which sets forth detailed security-related requirements for governments, port authorities, and shipping companies.
- National Maritime Transportation Security Plan: The MTSA mandates the development of a National Maritime Transportation Security Plan. This plan includes procedures for recovery from a transportation security incident, and a plan for coordination among various modes of transportation, and between governmental authorities, at all levels, and with the private sector.
- Maritime Intelligence: Under the Act, a system was to be developed to collect, integrate, and analyze intelligence data among federal, state, and local agencies, with emphasis on the highest security threat vessels and facilities.
- Maritime Security Research and Development: The Act also mandated a program to conduct research and development to enhance maritime security. This includes development of surveillance technologies and equipment that can detect anomalies in containers, development of technology to track vessels, and development of methods and equipment to detect chemical, biological, and nuclear weapons.
- Vessel and Intermodal Security Reports and Assessments: The Act mandates an assessment of vessel and intermodal security to be conducted at least every 3 years, to include an evaluation of the effectiveness of the security measures at foreign ports, the risk of terrorist activity related to vessels and containers in transportation, and the capabilities of vessels and facilities to respond to and recover from a terrorist attack.
- Automatic Identification System (AIS): The Act requires vessels to be equipped with an automatic identification system to enhance the ability of vessel traffic services to track vessels.
- Maritime Security Professional Training: The Act specifies the development of standards and curricula to allow for the training and certification of maritime security professionals.
- Interagency Coordination: One of the key achievements of the MTSA has been its fostering of increased cooperation among various agencies, such as the U.S. Coast Guard, the Department of Homeland Security, the Department of Transportation, and other local and state law enforcement agencies. This has led to the sharing of intelligence and resources that has helped strengthen overall maritime security.
- International Implications: The MTSA also has significant international implications, as it includes measures that align with international maritime security standards. It requires foreign vessels entering U.S. waters to comply with certain security standards and to allow for verification of compliance. This has contributed to an overall elevation of global maritime security standards.
- Economic Implications: By enhancing the security of U.S. ports and waterways, the MTSA also protects the economic vitality of the maritime sector. It ensures the steady flow of commerce, providing businesses with greater certainty and reducing the risk of costly disruptions.
- Technology and Innovation: The MTSA has also stimulated technology development and innovation in the field of maritime security. Its call for research and development in surveillance technologies, automatic identification systems, and detection methods for chemical, biological, and nuclear weapons has paved the way for advances in maritime security technologies.
- Environment and Safety: Finally, by enhancing security, the MTSA indirectly protects the maritime environment and public safety. Preventing terrorist attacks or other security breaches helps avoid potential environmental disasters and loss of life.
In conclusion, while the MTSA is a complex piece of legislation with many moving parts, its essence is clear: to protect and secure the United States’ maritime transportation system, its economy, and the safety of its citizens. Since its enactment, the law has been instrumental in creating a safer, more secure maritime environment, stimulating technological innovation, and fostering international cooperation.
Since its enactment in 2002, the MTSA has laid the groundwork for the current structure of maritime security in the United States. It has been instrumental in enhancing the security of the U.S. maritime transportation system, ensuring the safety of the public, the environment, and commerce itself. The requirements set forth in the MTSA have led to an unprecedented level of cooperation and coordination among various stakeholders, including government agencies at all levels, the maritime industry, port authorities, and the private sector. Despite the enormous challenges, these efforts have been instrumental in safeguarding the nation’s ports and waterways against potential threats.
By setting up a framework for securing the U.S. maritime transportation system, the MTSA of 2002 significantly improved the safety of the nation’s ports and waterways, making it more difficult for terrorists to exploit this sector of transportation. It has also increased the resilience of the maritime transportation system, enabling it to respond and recover more quickly in the event of a threat or actual attack.