§ 1187a. Operating Agreements

(a) In general

     The Secretary of Transportation shall require, as a condition of including any vessel in the Fleet, that the owner or operator of the vessel enter into an operating agreement with the Secretary under this section. Notwithstanding subsection (g) of this section, the Secretary may enter into an operating agreement for, among other vessels that are eligible to be included in the Fleet, any vessel which continues to operate under an operating-differential subsidy contract under part A of this subchapter or which is under charter to the Department of Defense.

(b) Requirements for operation

     An operating agreement under this section shall require that, during the period a vessel is operating under the agreement—

     (1) the vessel—

     (A) shall be operated exclusively in the foreign trade or in mixed foreign and domestic trade allowed under a registry endorsement issued under section 12105 of title 46, and

     (B) shall not otherwise be operated in the coastwise trade; and

     (2) the vessel shall be documented under chapter 121 of title 46.

(c) Regulatory relief

     A contractor of a vessel included in an operating agreement under this part may operate the vessel in the foreign commerce of the United States without restriction, and shall not be subject to any requirement under section 1211, 1226, 1213, or 1227 of this Appendix. Participation in the program established by this part shall not subject a contractor to section 1223 of this Appendix or to any provision of part A of this subchapter. The restrictions of section 1241(b)(1) of this Appendix concerning the building, rebuilding, or documentation of a vessel in a foreign country shall not apply to a vessel for any day the operator of that vessel is receiving payments under an operating agreement under this part.

(d) Effectiveness and annual payment requirements of operating agreements

(1) Effectiveness

     The Secretary of Transportation may enter into an operating agreement under this part for fiscal year 1996. The agreement shall be effective only for 1 fiscal year, but shall be renewable, subject to the availability of appropriations, for each subsequent fiscal year through the end of fiscal year 2005.

(2) Annual payment

     An operating agreement under this part shall require, subject to the availability of appropriations and the other provisions of this section, that the Secretary of Transportation pay each fiscal year to the contractor, for each vessel that is covered by the operating agreement, an amount equal to $2,300,000 for fiscal year 1996 and $2,100,000 for each fiscal year thereafter in which the agreement is in effect. The amount shall be paid in equal monthly installments at the end of each month. The amount shall not be reduced except as provided by this section.

(e) Certification required for payment

     As a condition of receiving payment under this section for a fiscal year for a vessel, the contractor for the vessel shall certify, in accordance with regulations issued by the Secretary of Transportation, that the vessel has been and will be operated in accordance with subsection (b)(1) of this section for at least 320 days in the fiscal year. Days during which the vessel is drydocked, surveyed, inspected, or repaired shall be considered days of operation for purposes of this subsection.

(f) Operating agreement is obligation of United States Government

     An operating agreement under this part constitutes a contractual obligation of the United States Government to pay the amounts provided for in the agreement to the extent of actual appropriations.

(g) Limitations

     The Secretary of Transportation shall not make any payment under this part for a vessel with respect to any days for which the vessel is—

     (1) subject to an operating-differential subsidy contract under part A of this subchapter or under a charter to the United States Government, other than a charter pursuant to section 1187b of this Appendix;

     (2) not operated or maintained in accordance with an operating agreement under this part; or

     (3) more than 25 years of age, except that the Secretary may make such payments for a LASH vessel for any day for which the vessel is more than 25 years of age if that vessel—

     (A) is modernized after January 1, 1994,

     (B) is modernized before it is 25 years of age, and

     (C) is not more than 30 years of age.

(h) Payments

     With respect to payments under this part for a vessel covered by an operating agreement, the Secretary of Transportation—

     (1) except as provided in paragraph (2), shall not reduce any payment for the operation of a vessel to carry military or other preference cargoes under section 2631 of title 10, section 1241–1 of this Appendix, section 1241(a), 1241(b), or 1241f of this Appendix, or any other cargo preference law of the United States;

     (2) shall not make any payment for any day that a vessel is engaged in transporting more than 7,500 tons of civilian bulk preference cargoes pursuant to section 1241(a), 1241(b), or 1241f of this Appendix that is bulk cargo; and

     (3) shall make a pro rata reduction in payment for each day less than 320 in a fiscal year that a vessel covered by an operating agreement is not operated in accordance with subsection (b)(1) of this section, with days during which the vessel is drydocked or undergoing survey, inspection, or repair considered to be days on which the vessel is operated.

(i) Priority for awarding agreements

     Subject to the availability of appropriations, the Secretary shall enter into operating agreements according to the following priority:

(1) Vessels owned by citizens

(A) Priority

     First, for any vessel that is—

     (i) owned and operated by persons who are citizens of the United States under sections 802 and 803 of this Appendix; or

     (ii) less than 10 years of age and owned and operated by a corporation that is—

(I) eligible to document a vessel under chapter 121 of title 46; and

(II) affiliated with a corporation operating or managing for the Secretary of Defense other vessels documented under that chapter, or chartering other vessels to the Secretary of Defense.

(B) Limitation on number of operating agreements

     The total number of operating agreements that may be entered into by a person under the priority in subparagraph (A)—

     (i) for vessels described in subparagraph (A)(i), may not exceed the sum of—

(I) the number of United States-documented vessels the person operated in the foreign commerce of the United States (except mixed coastwise and foreign commerce) on May 17, 1995; and

(II) the number of United States-documented vessels the person chartered to the Secretary of Defense on that date; and

     (ii) for vessels described in subparagraph (A)(ii), may not exceed 5 vessels.

(C) Treatment of related parties

     For purposes of subparagraph (B), a related party with respect to a person shall be treated as the person.

(2) Other vessels owned by citizens and Government contractors

     To the extent that amounts are available after applying paragraph (1), any vessel that is owned and operated by a person who is—

     (A) a citizen of the United States under sections 802 and 803 of this Appendix, that has not been awarded an operating agreement under the priority established under paragraph (1); or

     (B)(i) eligible to document a vessel under chapter 121 of title 46; and

     (ii) affiliated with a corporation operating or managing other United States-documented vessels for the Secretary of Defense or chartering other vessels to the Secretary of Defense.

(3) Other vessels

     To the extent that amounts are available after applying paragraphs (1) and (2), any other eligible vessel.

(j) Transfer of operating agreements

     A contractor under an operating agreement may transfer the agreement (including all rights and obligations under the agreement) to any person eligible to enter into that operating agreement under this part after notification of the Secretary in accordance with regulations prescribed by the Secretary, unless the transfer is disapproved by the Secretary within 90 days after the date of that notification. A person to whom an operating agreement is transferred may receive payments from the Secretary under the agreement only if each vessel to be covered by the agreement after the transfer is an eligible vessel under section 1187(b) of this Appendix.

(k) Reversion of unused authority

     The obligation of the Secretary to make payments under an operating agreement under this part shall terminate with respect to a vessel if the contractor fails to engage in operation of the vessel for which such payment is required—

     (1) within one year after the effective date of the operating agreement, in the case of a vessel in existence on the effective date of the agreement, or

     (2) within 30 months after the effective date of the operating agreement, in the case of a vessel to be constructed after that effective date.

(l) Procedure for considering application; effective date for certain vessels

(1) Procedures

     No later than 30 days after October 8, 1996, the Secretary shall accept applications for enrollment of vessels in the Fleet, and within 90 days after receipt of an application for enrollment of a vessel in the Fleet, the Secretary shall enter into an operating agreement with the applicant or provide in writing the reason for denial of that application.

(2) Effective date

     Unless an earlier date is requested by the applicant, the effective date for an operating agreement with respect to a vessel which is, on the date of entry into an operating agreement, either subject to a contract under part A of this subchapter or on charter to the United States Government, other than a charter under section 1187b of this Appendix, shall be the expiration or termination date of the contract under part A of this subchapter or of the Government charter covering the vessel, respectively, or any earlier date the vessel is withdrawn from that contract or charter.

(m) Early termination

     An operating agreement under this part shall terminate on a date specified by the contractor if the contractor notifies the Secretary, by not later than 60 days before the effective date of the termination, that the contractor intends to terminate the agreement. Vessels covered by an operating agreement terminated under this subsection shall remain documented under chapter 121 of title 46 until the date the operating agreement would have terminated according to its terms. A contractor who terminates an operating agreement pursuant to this subsection shall continue to be bound by the provisions of section 1187b of this Appendix until the date the operating agreement would have terminated according to its terms. All terms and conditions of an Emergency Preparedness Agreement entered into under section 1187b of this Appendix shall remain in effect until the date the operating agreement would have terminated according to its terms, except that the terms of such Emergency Preparedness Agreement may be modified by the mutual consent of the contractor and the Secretary of Transportation and the Secretary of Defense.

(n) Nonrenewal for lack of funds

     If, by the first day of a fiscal year, sufficient funds have not been appropriated under the authority provided by section 1187d of this Appendix for that fiscal year, the Secretary of Transportation shall notify the Congress that operating agreements authorized under this part for which sufficient funds are not available will not be renewed for that fiscal year if sufficient funds are not appropriated by the 60th day of that fiscal year. If funds are not appropriated under the authority provided by section 1187d of this Appendix for any fiscal year by the 60th day of that fiscal year, then each vessel covered by an operating agreement under this part for which funds are not available is thereby released from any further obligation under the operating agreement, and the vessel owner or operator may transfer and register such vessel under a foreign registry deemed acceptable by the Secretary of Transportation, notwithstanding any other provision of law. If section 1242 of this Appendix is applicable to such vessel after registration of the vessel under such a registry, the vessel is available to be requisitioned by the Secretary of Transportation pursuant to section 1242 of this Appendix.

(o) Award of operating agreements

(1) In general

     The Secretary of Transportation, subject to paragraph (4), shall award operating agreements within each priority under subsection (i)(1), (2), and (3) of this section under regulations prescribed by the Secretary.

(2) Number of agreements awarded

     Regulations under paragraph (1) shall provide that if appropriated amounts are not sufficient for operating agreements for all vessels within a priority under subsection (i)(1), (2), or (3) of this section, the Secretary shall award to each person submitting a request a number of operating agreements that bears approximately the same ratio to the total number of vessels in the priority, as the amount of appropriations available for operating agreements for vessels in the priority bears to the amount of appropriations necessary for operating agreements for all vessels in the priority.

(3) Treatment of related parties

     For purposes of paragraph (2), a related party with respect to a person shall be treated as the person.

(4) Preference for United States-built vessels

     In awarding operating agreements for vessels within a priority under subsection (i)(1), (2), or (3) of this section, the Secretary shall give preference to a vessel that was constructed in the United States, to the extent such preference is consistent with establishment of a fleet described in the first sentence of section 1187(a) of this Appendix (taking into account the age of the vessel, the nature of service provided by the vessel, and the commercial viability of the vessel).

(p) Notice to United States shipbuilders required

     The Secretary shall include in any operating agreement under this part a requirement that the contractor under the agreement shall, by not later than 30 days after soliciting any bid or offer for the construction of any vessel in a foreign shipyard and before entering into a contract for construction of a vessel in a foreign shipyard, provide notice of the intent of the contractor to enter into such a contract to each shipyard in the United States that is capable of constructing the vessel.

(June 29, 1936, ch. 858, title VI, § 652, as added Pub. L. 104–239, § 2(2), Oct. 8, 1996, 110 Stat. 3119; amended Pub. L. 105–85, div. C, title XXXVI, § 3603(b), Nov. 18, 1997, 111 Stat. 2075.)

     1997—Subsec. (c). Pub. L. 105–85 inserted at end "The restrictions of section 1241(b)(1) of this Appendix concerning the building, rebuilding, or documentation of a vessel in a foreign country shall not apply to a vessel for any day the operator of that vessel is receiving payments under an operating agreement under this part."

     This section is referred to in sections 1187b, 1187c of this Appendix.