§1274. Eligibility for guarantee

(a) Purpose of obligations

Pursuant to the authority granted under section 1273(a) of this Appendix, the Secretary, upon such terms as he shall prescribe, may guarantee or make a commitment to guarantee, payment of the principal of and interest on an obligation which aids in-

(1) financing, including reimbursement of an obligor for expenditures previously made for, construction, reconstruction, or reconditioning of a vessel (including an eligible export vessel), which is designed principally for research, or for commercial use (A) in the coastwise or intercoastal trade; (B) on the Great Lakes, or on bays, sounds, rivers, harbors, or inland lakes of the United States; (C) in foreign trade as defined in section 1244 of this Appendix for purposes of subchapter V of this chapter; or (D) as an ocean thermal energy conversion facility or plantship; (E) with respect to floating drydocks in the construction, reconstruction, reconditioning, or repair of vessels; or (F) with respect to an eligible export vessel, in world-wide trade; ¹ Provided, however, That no guarantee shall be entered into pursuant to this paragraph (a)(1) later than one year after delivery, or redelivery in the case of reconstruction or reconditioning of any such vessel unless the proceeds of the obligation are used to finance the construction, reconstruction, or reconditioning of a vessel or vessels, or facilities or equipment pertaining to marine operations;

(2) financing, including reimbursement of an obligor for expenditures previously made for, construction, reconstruction, reconditioning, or purchase of a vessel or vessels owned by citizens or nationals of the United States or citizens of the Northern Mariana Islands which are designed principally for research, or for commercial use in the fishing trade or industry;

(3) financing the purchase, reconstruction, or reconditioning of vessels or fishery facilities for which obligations were guaranteed under this subchapter that, under the provisions of section 1275 of this Appendix:

(A) are vessels or fishery facilities for which obligations were accelerated and paid;

(B) were acquired by the Fund; or

(C) were sold at foreclosure instituted by the Secretary;

(4) financing, in whole or in part, the repayment to the United States of any amount of construction-differential subsidy paid with respect to a vessel pursuant to subchapter V of this chapter;

(5) refinancing existing obligations issued for one of the purposes specified in (1), (2), (3), or (4) whether or not guaranteed under this subchapter, including, but not limited to, short-term obligations incurred for the purpose of obtaining temporary funds with the view to refinancing from time to time;

(6) financing or refinancing, including, but not limited to, the reimbursement of obligors for expenditures previously made for, the construction, reconstruction, reconditioning, or purchase of fishery facilities; or

(7) financing or refinancing, including, but not limited to, the reimbursement of obligors for expenditures previously made, for the purchase of individual fishing quotas in accordance with section 1853(d)(4) of title 16.

Any obligation guaranteed under paragraphs (6) and (7) shall be treated, for purposes of this subchapter in the same manner and to the same extent as an obligation guaranteed under this subchapter which aids in the construction, reconstruction, reconditioning, or purchase of a vessel; except with respect to provisions of this subchapter that by their nature can only be applied to vessels.

(b) Contents of obligations

Obligations guaranteed under this subchapter-

(1) shall have an obligor approved by the Secretary as responsible and possessing the ability, experience, financial resources, and other qualifications necessary to the adequate operation and maintenance of the vessel or vessels which serve as security for the guarantee of the Secretary;

(2) subject to the provisions of subsection (c)(1) of this section and subsection (i) of this section, shall be in an aggregate principal amount which does not exceed 75 per centum of the actual cost or depreciated actual cost, as determined by the Secretary, of the vessel which is used as security for the guarantee of the Secretary: Provided, however, That in the case of a vessel, the size and speed of which are approved by the Secretary; and which is or would have been eligible for mortgage aid for construction under section 1159 of this Appendix (or would have been eligible for mortgage aid under section 1159 of this Appendix except that the vessel was built with the aid of construction-differential subsidy and said subsidy has been repaid) and in respect of which the minimum downpayment by the mortgagor required by that section would be or would have been 12½ per centum of the cost of such vessel, such obligations may be in an amount which does not exceed 87½ per centum of such actual cost or depreciated actual cost: Provided, further, That the obligations which relate to a barge which is constructed without the aid of construction-differential subsidy, or, if so subsidized, on which said subsidy has been repaid, may be in an aggregate principal amount which does not exceed 87½ per centum of the actual cost or depreciated actual cost thereof: Provided further, That in the case of a fishing vessel or fishery facility, the obligation shall be in an aggregate principal amount not to exceed 80 percent of the actual cost or depreciated actual cost of the fishing vessel or fishery facility, except that no debt may be placed under this proviso through the Federal Financing Bank: Provided further, That in the case of an ocean thermal energy conversion facility or plantship which is constructed without the aid of construction-differential subsidy, such obligations may be in an aggregate principal amount which does not exceed 87½ percent of the actual cost or depreciated actual cost of the facility or plantship: Provided further, That in the case of an eligible export vessel, such obligations may be in an aggregate principal amount which does not exceed 87½ of the actual cost or depreciated actual cost of the eligible export vessel;

(3) shall have maturity dates satisfactory to the Secretary but, subject to the provisions of paragraph (2) of subsection (c) of this section, not to exceed twenty-five years from the date of the delivery of the vessel which serves as security for the guarantee of the Secretary or, if the vessel has been reconstructed or reconditioned, not to exceed the later of (i) twenty-five years from the date of delivery of the vessel and (ii) the remaining years of the useful life of the vessel as determined by the Secretary;

(4) shall provide for payments by the obligor satisfactory to the Secretary;

(5) shall bear interest (exclusive of charges for the guarantee and service charges, if any) at rates not to exceed such per centum per annum on the unpaid principal as the Secretary determines to be reasonable, taking into account the range of interest rates prevailing in the private market for similar loans and the risks assumed by the Secretary;

(6) shall provide, or a related agreement shall provide, that if the vessel used as security for the guarantee of the Secretary is a delivered vessel, the vessel shall be in class A–1, American Bureau of Shipping, or shall meet such other standards as may be acceptable to the Secretary, with all required certificates, including but not limited to, marine inspection certificates of the United States Coast Guard or, in the case of an eligible export vessel, of the appropriate national flag authorities under a treaty, convention, or other international agreement to which the United States is a party, with all outstanding requirements and recommendations necessary for retention of class accomplished, unless the Secretary permits a deferment of such repairs, and shall be tight, stanch, strong, and well and sufficiently tackled, appareled, furnished, and equipped, and in every respect seaworthy and in good running condition and repair, and in all respects fit for service; and

(7) may provide, or a related agreement may provide, if the vessel used as security for the guarantee of the Secretary is a passenger vessel having the tonnage, speed, passenger accommodations and other characteristics set forth in subchapter V of this chapter, and if the Secretary approves, that the sole recourse against the obligor by the United States for any payments under the guarantee shall be limited to repossession of the vessel and the assignment of insurance claims and that the liability of the obligor for any payments of principal and interest under the guarantee shall be satisfied and discharged by the surrender of the vessel and all right, title, and interest therein to the United States: Provided, That the vessel upon surrender shall be (i) free and clear of all liens and encumbrances whatsoever except the security interest conveyed to the Secretary under this subchapter, (ii) in class, and (iii) in as good order and condition, ordinary wear and tear excepted, as when acquired by the obligor, except that any deficiencies with respect to freedom from encumbrances, condition and class may, to the extent covered by valid policies of insurance, be satisfied by the assignment to the Secretary of claims of the obligor under such policies.

The Secretary may not establish, as a condition of eligibility for guarantee under this subchapter, a minimum principal amount for an obligation covering the reconstruction or reconditioning of a fishing vessel or fishery facility. For purposes of this subchapter, the reconstruction or reconditioning of a fishing vessel or fishery facility does not include the routine minor repair of maintenance of the vessel or facility.

(c) Security

(1) The security for the guarantee of an obligation by the Secretary under this subchapter may relate to more than one vessel and may consist of any combination of types of security. The aggregate principal amount of obligations which have more than one vessel as security for the guarantee of the Secretary under this subchapter may equal, but not exceed, the sum of the principal amount of obligations permissible with respect to each vessel.

(2) If the security for the guarantee of an obligation by the Secretary under this subchapter relates to more than one vessel, such obligation may have the latest maturity date permissible under subsection (b) of this section with respect to any of such vessels: Provided, That the Secretary may require such payments of principal, prior to maturity, with respect to all related obligations as he deems necessary in order to maintain adequate security for his guarantee.

(d) Restrictions

(1)(A) No commitment to guarantee, or guarantee of, an obligation shall be made by the Secretary of Transportation unless the Secretary finds that the property or project with respect to which the obligation will be executed will be economically sound. In making that determination, the Secretary shall consider-

(i) the need in the particular segment of the maritime industry for new or additional capacity, including any impact on existing equipment for which a guarantee under this subchapter is in effect;

(ii) the market potential for the employment of the vessel over the life of the guarantee;

(iii) projected revenues and expenses associated with employment of the vessel;

(iv) any charters, contracts of affreightment, transportation agreements, or similar agreements or undertakings relevant to the employment of the vessel;

(v) other relevant criteria; and

(vi) for inland waterways, the need for technical improvements, including but not limited to increased fuel efficiency, or improved safety.

(B) No commitment to guarantee, or guarantee of, an obligation shall be made by the Secretary of Commerce unless the Secretary finds, at or prior to the time such commitment is made or guarantee becomes effective, that the property or project with respect to which the obligation will be executed will be, in the Secretary's opinion, economically sound and in the case of fishing vessels, that the purpose of the financing or refinancing is consistent with the wise use of the fisheries resources and with the development, advancement, management, conservation, and protection of the fisheries resources, or with the need for technical improvements including but not limited to increased fuel efficiency or improved safety.

(2) No commitment to guarantee, or guarantee of an obligation may be made by the Secretary under this subchapter for the purchase of a used fishing vessel or used fishery facility unless-

(A) the vessel or facility will be reconstructed or reconditioned in the United States and will contribute to the development of the United States fishing industry; or

(B) the vessel or facility will be used in the harvesting of fish from, or for a purpose described in section 1271(k) of this Appendix with respect to, an underutilized fishery.

(3) No commitment to guarantee, or guarantee of an obligation may be made by the Secretary under this subchapter for the construction, reconstruction, or reconditioning of an eligible export vessel unless-

(A) the Secretary finds that the construction, reconstruction, or reconditioning of that vessel will aid in the transition of United States shipyards to commercial activities or will preserve shipbuilding assets that would be essential in time of war or national emergency, and

(B) the owner of the vessel agrees with the Secretary of Transportation that the vessel shall not be transferred to any country designated by the Secretary of Defense as a country whose interests are hostile to the interests of the United States.

(e) Guarantee fees

(1) Except as otherwise provided in this subsection, the Secretary shall prescribe regulations to assess in accordance with this subsection a fee for the guarantee of an obligation under this subchapter.

(2)(A) The amount of a fee under this subsection for a guarantee is equal to the sum determined by adding the amounts determined under subparagraph (B) for the years in which the guarantee is in effect.

(B) The amount referred to in subparagraph (A) for a year is the present value (determined by applying the discount rate determined under subparagraph (F)) of the amount determined by multiplying-

(i) the estimated average unpaid principal amount of the obligation that will be outstanding during the year (determined in accordance with subparagraph (E)), by

(ii) the fee rate established under subparagraph (C) for the obligation for each year.

(C) The fee rate referred to in subparagraph (B)(ii) for an obligation shall be-

(i) in the case of an obligation for a delivered vessel or equipment, not less than one-half of 1 percent and not more than 1 percent, determined by the Secretary for the obligation under the formula established under subparagraph (D); or

(ii) in the case of an obligation for a vessel to be constructed, reconstructed, or reconditioned, or of equipment to be delivered, not less than one-quarter of 1 percent and not more than one-half of 1 percent, determined by the Secretary for the obligation under the formula established under subparagraph (D).

(D) The Secretary shall establish a formula for determining the fee rate for an obligation for purposes of subparagraph (C), that-

(i) is a sliding scale based on the creditworthiness of the obligor;

(ii) takes into account the security provided for a guarantee under this subchapter for the obligation; and

(iii) uses-

(I) in the case of the most creditworthy obligors, the lowest rate authorized under subparagraph (C)(i) or (ii), as applicable; and

(II) in the case of the least creditworthy obligors, the highest rate authorized under subparagraph (C)(i) or (ii), as applicable.

(E) For purposes of subparagraph (B)(i), the estimated average unpaid principal amount does not include the average amount (except interest) on deposit in a year in the escrow fund under section 1279a of this Appendix.

(F) For purposes of determining present value under subparagraph (B) for an obligation, the Secretary shall apply a discount rate determined by the Secretary of the Treasury taking into consideration current market yields on outstanding obligations of the United States having periods to maturity comparable to the period to maturity for the obligation with respect to which the determination of present value is made.

(3) A fee under this subsection shall be assessed and collected not later than the date on which amounts are first paid under an obligation with respect to which the fee is assessed.

(4) A fee paid under this subsection is not refundable. However, an obligor shall receive credit for the amount paid for the remaining term of the guaranteed obligation if the obligation is refinanced and guaranteed under this subchapter after such refinancing.

(5) A fee paid under subsection (e) of this section shall be included in the amount of the actual cost of the obligation guaranteed under this subchapter and is eligible to be financed under this subchapter.

(f) Investigation of applications

The Secretary shall charge and collect from the obligor such amounts as he may deem reasonable for the investigation of applications for a guarantee, for the appraisal of properties offered as security for a guarantee, for the issuance of commitments, for services in connection with the escrow fund authorized by section 1279a of this Appendix and for the inspection of such properties during construction, reconstruction, or reconditioning: Provided, That such charges shall not aggregate more than one-half of 1 per centum of the original principal amount of the obligations to be guaranteed.

(g) Disposition of moneys

All moneys received by the Secretary under the provisions of sections 1271 to 1276 and 1279 ² of this Appendix shall be deposited in the Fund.

(h) Additional requirements

Obligations guaranteed under this subchapter and agreements relating thereto shall contain such other provisions with respect to the protection of the security interests of the United States (including acceleration, assumption, and subrogation provisions and the issuance of notes by the obligor to the Secretary), liens and releases of liens, payments of taxes, and such other matters as the Secretary may, in his discretion, prescribe.

(i) Limitation on authority to establish uniform percentage limitations

The Secretary may not, with respect to-

(1) the general 75 percent or less limitation in subsection (b)(2) of this section;

(2) the 87½ percent or less limitation in the 1st, 2nd, 4th, or 5th proviso to subsection (b)(2) of this section or section 1279e(b) of this title; or

(3) the 80 percent or less limitation in the 3rd proviso to such subsection;

establish by rule, regulation, or procedure any percentage within any such limitation that is, or is intended to be, applied uniformly to all guarantees or commitments to guarantee made under this section that are subject to the limitation.

(j) Guarantees for eligible export vessels

(1) Upon receiving an application for a loan guarantee for an eligible export vessel, the Secretary shall promptly provide to the Secretary of Defense notice of the receipt of the application. During the 30-day period beginning on the date on which the Secretary of Defense receives such notice, the Secretary of Defense may disapprove the loan guarantee based on the assessment of the Secretary of the potential use of the vessel in a manner that may cause harm to United States national security interests. The Secretary of Defense may not disapprove a loan guarantee under this section solely on the basis of the type of vessel to be constructed with the loan guarantee. The authority of the Secretary to disapprove a loan guarantee under this section may not be delegated to any official other than a civilian officer of the Department of Defense appointed by the President, by and with the advice and consent of the Senate.

(2) The Secretary of Transportation may not make a loan guarantee disapproved by the Secretary of Defense under paragraph (1).

(June 29, 1936, ch. 858, title XI, §1104A, formerly §1104, as added June 23, 1938, ch. 600, §46, 52 Stat. 970 ; amended Aug. 4, 1939, ch. 417, §14, 53 Stat. 1187 ; Sept. 28, 1950, ch. 1093, §4, 64 Stat. 1078 ; Aug. 15, 1953, ch. 513, §2, 67 Stat. 626 ; Sept. 3, 1954, ch. 1265, §4, 68 Stat. 1269 ; Pub. L. 86–123, §§1(3), 2, July 31, 1959, 73 Stat. 269 , 271; Pub. L. 86–127, §1(3), (4), July 31, 1959, 73 Stat. 273 ; Pub. L. 86–518, §1, June 12, 1960, 74 Stat. 216 ; Pub. L. 86–685, §§2, 3, Sept. 2, 1960, 74 Stat. 733 ; Pub. L. 90–341, June 15, 1968, 82 Stat. 180 ; Pub. L. 91–469, §§31, 32, Oct. 21, 1970, 84 Stat. 1035 ; Pub. L. 92–507, §3, Oct. 19, 1972, 86 Stat. 910 ; Pub. L. 95–257, Apr. 7, 1978, 92 Stat. 194 ; Pub. L. 96–320, title II, §202(b), (c), Aug. 3, 1980, 94 Stat. 992 ; Pub. L. 96–561, title II, §220(3), Dec. 22, 1980, 94 Stat. 3292 ; Pub. L. 97–31, §12(136), Aug. 6, 1981, 95 Stat. 166 ; Pub. L. 97–35, title XVI, §1606(c), (d), Aug. 13, 1981, 95 Stat. 752 ; Pub. L. 98–595, §1(2)–(7), (12), Oct. 30, 1984, 98 Stat. 3130 , 3131; Pub. L. 99–509, title V, §5003, Oct. 21, 1986, 100 Stat. 1912 ; renumbered §1104A, Pub. L. 101–380, title IV, §4115(f)(1), Aug. 18, 1990, 104 Stat. 521 ; Pub. L. 103–160, div. A, title XIII, §1356(3), Nov. 30, 1993, 107 Stat. 1813 ; Pub. L. 104–208, div. A, title I, §101(a) [title II, §211(b)], Sept. 30, 1996, 110 Stat. 3009 , 3009-41; Pub. L. 104–239, §13(c), Oct. 8, 1996, 110 Stat. 3136 ; Pub. L. 104–297, title III, §302(a), Oct. 11, 1996, 110 Stat. 3615 .)

References in Text

Sections 1276 and 1279 of this Appendix, referred to in subsec. (g), were repealed by Pub. L. 101–225, title III, §307(7), Dec. 12, 1989, 103 Stat. 1925 .

Amendments

1996-Subsec. (a). Pub. L. 104–297, §302(a)(4), substituted "paragraphs (6) and (7)" for "paragraph (6)" in concluding provisions.

Subsec. (a)(7). Pub. L. 104–208 made technical amendment to reference in original act which appears in text as reference to section 1853(d)(4) of title 16.

Pub. L. 104–297, §302(a)(1)–(3), added par. (7).

Subsec. (b)(2). Pub. L. 104–297, §302(a)(5), substituted "not to exceed" for "equal to" in third proviso.

Subsec. (e). Pub. L. 104–239 amended subsec. (e) generally. Prior to amendment, subsec. (e) authorized Secretary to fix fees, calculate fee amount, prorate principal amount of obligation in certain cases, and compute and pay fees under regulations prescribed by Secretary, which regulations were to provide a formula to determine creditworthiness of obligors.

1993-Subsec. (a)(1). Pub. L. 103–160, §1356(3)(A), amended provisions before proviso generally. Prior to amendment, such provisions read as follows: "financing, including reimbursement of an obligor for expenditures previously made for, construction, reconstruction, or reconditioning of a vessel or vessels owned by citizens of the United States which are designed principally for research, or for commercial use (A) in the coastwise or intercoastal trade; (B) on the Great Lakes, or on bays, sounds, rivers, harbors, or inland lakes of the United States; (C) in foreign trade as defined in section 1244 of this Appendix for purposes of subchapter V of this chapter;; or (D) as an ocean thermal energy conversion facility or plantship; or (E) with respect to floating drydocks, in the construction, reconstruction, reconditioning, or repair of vessels:".

Subsec. (b)(2). Pub. L. 103–160, §1356(3)(B), substituted "subject to the provisions of subsection (c)(1) of this section and subsection (i) of this section," for "subject to the provisions of paragraph (1) of subsection (c) of this section," and inserted before semicolon at end ": Provided further, That in the case of an eligible export vessel, such obligations may be in an aggregate principal amount which does not exceed 87½ of the actual cost or depreciated actual cost of the eligible export vessel".

Subsec. (b)(6). Pub. L. 103–160, §1356(3)(C), inserted "or, in the case of an eligible export vessel, of the appropriate national flag authorities under a treaty, convention, or other international agreement to which the United States is a party" after "United States Coast Guard".

Subsec. (d)(3). Pub. L. 103–160, §1356(3)(D), added par. (3).

Subsecs. (i), (j). Pub. L. 103–160, §1356(3)(E), added subsecs. (i) and (j).

1986-Subsec. (b)(2). Pub. L. 99–509 substituted "That in the case of a fishing vessel or fishery facility, the obligation shall be in an aggregate principal amount equal to 80 percent of the actual cost or depreciated actual cost of the fishing vessel or fishery facility, except that no debt may be placed under this proviso through the Federal Financing Bank" for "That in the case of any vessel to be used in the fishing trade or industry, such obligations may be in an aggregate principal amount which does not exceed 87½ per centum of the actual cost or depreciated actual cost of the vessel".

1984-Subsec. (a)(3). Pub. L. 98–595, §1(2), substituted provisions relating to financing of purchase, reconstruction or reconditioning of designated vessels or fishery facilities for former provisions relating to financing of vessels acquired by the Federal Ship Financing Fund pursuant to section 1275 of this Appendix.

Subsec. (a)(5). Pub. L. 98–595, §1(3), inserted "or" after "time".

Subsec. (a)(6). Pub. L. 98–595, §1(4), substituted a period for "; or" after "facilities".

Subsec. (a)(7). Pub. L. 98–595, §1(5), struck out par. (7) which related to the financing of the purchase of fishing vessels or fishery facilities sold at foreclosure instituted by the Secretary.

Subsec. (d)(1). Pub. L. 98–595, §1(6), substituted provisions establishing economical soundness as a requirement for a commitment by the Secretary and detailing factors for evaluation for former provisions which established the general criteria of economical soundness and wise use of fishery resources.

Subsec. (e). Pub. L. 98–595, §1(12), inserted "Such regulations shall provide a formula for determining the creditworthiness of obligors under which the most creditworthy obligors pay a fee computed on the lowest allowable percentage and the least creditworthy obligors pay a fee which may be computed on the highest allowable percentage (the range of creditworthiness to be based on obligors which have actually issued guaranteed obligations)."

Subsec. (h). Pub. L. 98–595, §1(7), inserted ", assumption," after "acceleration".

1981-Subsecs. (a) to (c). Pub. L. 97–31 struck out "of Commerce" after "Secretary" wherever appearing.

Subsec. (d). Pub. L. 97–35, §1606(c), in par. (1) substituted "No" for "Except as provided in paragraph (2), no", struck out par. (2) which related to application of par. (1), and redesignated par. (3) as (2).

Pub. L. 97–31 struck out "of Commerce" after "Secretary" wherever appearing.

Subsecs. (e), (f). Pub. L. 97–31 struck out "of Commerce" after "Secretary" wherever appearing.

Subsec. (g). Pub. L. 97–35, §1606(d), designated par. (1) as entire provision, and struck out par. (2) which required the Secretary to establish subfunds within the Fund.

Pub. L. 97–31 struck out "of Commerce" after "Secretary".

Subsec. (h). Pub. L. 97–31 struck out "of Commerce" after "Secretary" in two places.

1980-Subsec. (a). Pub. L. 96–561, §220(3)(A)(vi), inserted provision after par. (7) that any obligation guaranteed under par. (6) be treated, for purposes of this subchapter, in the same manner and to the same extent as an obligation guaranteed under this subchapter which aids in the construction, reconstruction, reconditioning, or purchase of a vessel, except with respect to provisions of this subchapter that by their nature can only be applied to vessels.

Subsec. (a)(1). Pub. L. 96–561, §220(3)(A)(i), (ii), substituted "; or (D)" for "(D) in the fishing trade or industry; (E)" and redesignated cl. (F) as (E).

Pub. L. 96–320, §202(b), redesignated cl. (E), relating to floating drydocks, as cl. (F) and added cl. (E) relating to ocean thermal energy conversion facilities or plantships.

Subsec. (a)(2). Pub. L. 96–561, §220(3)(A)(iii), added par. (2) and redesignated former par. (2) as (3).

Subsec. (a)(3). Pub. L. 96–561, §220(3)(A)(iii), redesignated former par. (2) as (3). Former par. (3) redesignated (4).

Subsec. (a)(4). Pub. L. 96–561, §220(3)(A)(iii), (iv), redesignated former par. (3) as (4) and substituted "this chapter;" for "this chapter; or". Former par. (4) redesignated (5).

Subsec. (a)(5). Pub. L. 96–561, §220(3)(A)(iii), (v), redesignated former par. (4) as (5) and substituted "(3), or (4)" for "or (3)" and a semicolon for the period at end.

Subsec. (a)(6), (7). Pub. L. 96–561, §220(3)(A)(vi), added pars. (6) and (7).

Subsec. (b). Pub. L. 96–561, §220(3)(B), inserted provision after par. (7) prohibiting the Secretary from establishing, as a condition of eligibility for guarantee, a minimum principal amount for an obligation covering the reconstruction or reconditioning of a fishing vessel or fishery facility, which reconstruction or reconditioning does not include the routine minor repair or maintenance of the vessel or facility.

Subsec. (b)(2). Pub. L. 96–320, §202(c), inserted proviso that in the case of an ocean thermal energy conversion facility or plantship which is constructed without the aid of construction-differential subsidy, the obligations may be in an aggregate principal amount which does not exceed 87½ percent of the actual cost or depreciated actual cost of the facility or plantship.

Subsec. (d). Pub. L. 96–561, §220(3)(C), designated existing provision as par. (1), substituted "Except as provided in paragraph (2), no" for "No", and added pars. (2) and (3).

Subsec. (g). Pub. L. 96–561, §220(3)(D), designated existing provision as par. (1) and added par. (2).

1978-Subsec. (b)(2). Pub. L. 95–257 inserted proviso relating to vessels to be used in the fishing trade or industry.

1972-Subsec. (a). Pub. L. 92–507 substituted provisions relating to the purposes for which guarantees may be made, for provisions relating to the eligibility of mortgages for insurance.

Subsec. (b). Pub. L. 92–507 substituted provisions relating to the eligibility requirements of obligations for guarantee, for provisions relating to the eligibility of loans for insurance.

Subsec. (c). Pub. L. 92–507 substituted provisions that security for guarantee may relate to more than one vessel, that security may consist of any combination of types of security, and that an obligation may have the latest maturity date permissible for any vessel which serves as security for the government guarantee of the related obligations, for provisions relating to the prior determination of the soundness of the property or project for mortgage or loan.

Subsec. (d). Pub. L. 92–507 incorporated provisions of former subsec. (c) into subsec. (d) and extended provisions of this subchapter to commercial fishing vessels. Provisions of former subsec. (d) were incorporated into subsec. (e).

Subsec. (e). Pub. L. 92–507 incorporated provisions of former subsec. (d) into subsec. (e) and substituted therein provisions authorizing the Secretary to fix a fee for the guarantee of obligations and providing separate formulae for delivered vessels and vessels under construction, for provisions authorizing the Secretary to fix a premium charge for the insurance of mortgages and loans and providing separate formulae for mortgages and loans by reference to section 1273 of this Appendix. Provisions of former subsec. (e) were incorporated into subsec. (f).

Subsec. (f). Pub. L. 92–507 incorporated provisions of former subsec. (e), relating to the collection of investigation fees from applicants for insurance into subsec. (f), and substituted therefor provisions relating to the collection of investigation fees from applicants for guarantee. Provisions of former subsec. (f) incorporated into subsec. (g).

Subsec. (g). Pub. L. 92–507 incorporated provisions of former subsec. (f) into subsec. (g).

Subsec. (h). Pub. L. 92–507 added subsec. (h).

1970-Subsec. (a)(8). Pub. L. 91–469, §31, inserted "research, or for" before "commercial use".

Subsec. (b). Pub. L. 91–469, §32, inserted in par. (2) "research, or for" before "commercial use", substituted in par. (4) "not exceed" for "be less than", and inserted in par. (4) restriction that advance and principal amount of other advances under insured loans outstanding at time of advance shall not exceed 87½ per centum of actual cost of vessel where in the case of the approved vessel the minimum downpayment by the mortgagor required by section 1159 of this Appendix would be 12½ per centum of cost of vessel.

1968-Subsec. (a)(5). Pub. L. 90–341 substituted provision that the maximum interest rates allowed on ship mortgages eligible for insurance coverage be at such rates on the outstanding principle obligation as determined by the Secretary of Commerce to be reasonable, taking into account the prevailing rates and the risks assumed by the Department of Commerce, for provision setting a maximum of 5 per centum per annum, or 6 per centum per annum when the Secretary determined that in certain areas or under special circumstances the mortgage or lending market demanded it.

1960-Subsec. (a)(3). Pub. L. 86–518 substituted "twenty-five years" for "twenty years".

Subsec. (a)(8). Pub. L. 86–685, §2, inserted cl. (e).

Subsec. (b)(2). Pub. L. 86–685, §3, inserted cl. (e).

1959-Subsec. (a)(2). Pub. L. 86–123, §2, substituted "and which is, or in the case of a vessel to be reconstructed or reconditioned would have been, eligible for mortgage aid for construction" for "which is eligible for mortgage aid" in proviso.

Subsec. (d). Pub. L. 86–127, §1(3), inserted "excluding the average amount (except interest) on deposit in an escrow fund created under section 1279a of this Appendix" in two places.

Subsec. (e). Pub. L. 86–127, §1(4), inserted "for services in connection with the escrow fund authorized by section 1279a of this Appendix" after "commitments" .

Subsec. (f). Pub. L. 86–123, §1(3), substituted "sections 1101 to 1110" for "sections 1101 to 1109" of Act June 29, 1936, which, for purposes of codification, has been changed to "sections 1271 to 1279 of this Appendix".

1954-Act Sept. 3, 1954, provided standards of eligibility for both mortgages and loans, set up restrictions, and provided for premium charges.

1953-Subsec. (a)(2). Act Aug. 15, 1953, §2(1), inserted "or, in the case of vessels, constructed under subchapter V of this title, involved in an obligation in a principal amount which does not exceed 75 per centum of the cost of the vessel (exclusive of construction-differential subsidy and cost of national-defense features)".

Subsec. (a)(8). Act Aug. 15, 1953, §2(2), (3), inserted "construction of vessels under subchapter V of this chapter" in introductory provisions, and in cl. (c) substituted "in foreign trade" for provisions relating to specified trade.

1950-Subsec. (a)(2), (7), (8). Act Sept. 28, 1950, inserted provisions concerning purchase of vessels for use on the Great Lakes pursuant to the Merchant Ship Sales Act of 1946.

1939-Subsec. (a)(8). Act Aug. 4, 1939, included mortgages to secure new loans or advances made to aid financing of vessels designed for use in the fishing trade or industry.

Effective Date of 1996 Amendment

Section 101(a) [title II, §211(b)] of div. A of Pub. L. 104–208 provided that the amendment made by that section is effective 15 days after Oct. 11, 1996.

Effective Date of 1960 Amendment

Amendment by Pub. L. 86–518 applicable only to vessels delivered by the shipbuilder on or after Jan. 1, 1946, and with respect to such vessels shall become effective on Jan. 1, 1960, and with respect to vessels delivered by the shipbuilder before Jan. 1, 1946, the provisions of this chapter existing immediately before June 12, 1960, shall continue in effect, see section 8(a) of Pub. L. 86–518, set out as a note under section 1125 of this Appendix.

Prohibition of New Loans for Construction of Fishing Vessels Under Certain Conditions

Pub. L. 104–297, title III, §302(b), Oct. 11, 1996, 110 Stat. 3615 , as amended by Pub. L. 105–277, div. C, title II, §212, Oct. 21, 1998, 112 Stat. 2681–635 , provided that:

"(1) Until October 1, 2001, no new loans may be guaranteed by the Federal Government for the construction of new fishing vessels if the construction will result in an increased harvesting capacity within the United States exclusive economic zone.

"(2) No loans may be provided or guaranteed by the Federal Government for the construction or rebuilding of a vessel intended for use as a fishing vessel (as defined in section 2101 of title 46, United States Code), if such vessel will be greater than 165 feet in registered length, of [or] more than 750 gross registered tons, or have an engine or engines capable of producing a total of more than 3,000 shaft horsepower, after such construction or rebuilding is completed. This prohibition shall not apply to vessels to be used in the menhaden fishery or in tuna purse seine fisheries outside the exclusive economic zone of the United States or the area of the South Pacific Regional Fisheries Treaty."

Revision of Contracts, Commitments To Insure Mortgages, Mortgages, and Mortgage Insurance Contracts Entered Into Prior to June 12, 1960

For provisions authorizing revision, see section 8(c) of Pub. L. 86–518, set out as a note under section 1125 of this Appendix.

Commercial Expectancy or Period of Depreciation of Tankers and Other Liquid Bulk Carriers

Nothing in any amendment made by Pub. L. 86–518 to operate or be interpreted to change from 20 to 25 years the provisions of this chapter relating to the commercial expectancy or period of depreciation of any tanker or other liquid bulk carrier, see section 9 of Pub. L. 86–518, set out as a note under section 1125 of this Appendix.

Section Referred to in Other Sections

This section is referred to in sections 1271, 1273, 1274a, 1279a, 1279c of this Appendix; title 16 section 1853.

¹ So in original. The semicolon probably should be a colon.

² See References in Text note below.