§1160. Acquisition of obsolete vessels
(a) Definitions
When used in this section-
(1) The term "obsolete vessel" means a vessel or vessels, each of which (A) is of not less than one thousand three hundred and fifty gross tons, (B) in the judgment of the Secretary of Transportation, should, by reason of age, obsolescence, or otherwise, be replaced in the public interest and (C) has been owned by a citizen or citizens of the United States for at least three years immediately prior to the date of acquisition hereunder.
(2) The term "new vessel" means a vessel or vessels, each of which (A) is constructed under the provisions of this chapter, and is acquired within two years from the date of completion of such vessel, or is purchased under section 1204 of this Appendix, as amended, by the person turning in an obsolete vessel under this section, or (B) is hereafter constructed in a domestic shipyard on private account and not under the provisions of this chapter, and documented under the laws of the United States.
(b) Promotion of construction of new vessels; allowance on obsolete vessels
In order to promote the construction of new, safe, and efficient vessels to carry the domestic and foreign waterborne commerce of the United States, the Secretary of Transportation is authorized, subject to the provisions of this section, to acquire any obsolete vessel in exchange for an allowance of credit. The obsolete vessel shall be acquired by the Secretary of Transportation, if the owner so requests, either at the time the owner contracts for the construction or purchase of a new vessel or within five days of the actual date of delivery of the new vessel to the owner. The amount of the allowance shall be determined at the time of the acquisition of the obsolete vessel by the Secretary of Transportation. In the event the obsolete vessel is acquired by the Secretary of Transportation at the time the owner contracts for the construction or purchase of the new vessel, the allowance shall not be paid to the owner of the obsolete vessel, but shall be applied upon the purchase price of a new vessel. In the case of a new vessel constructed under the provisions of this chapter, such allowance may, under such terms and conditions as the Secretary of Transportation may prescribe, be applied upon the cash payments required under this chapter. In case the new vessel is not constructed under the provisions of this chapter, the allowance shall, upon acquisition of the obsolete vessel by the Secretary of Transportation, be paid, for the account of the owner, to the shipbuilder constructing such new vessel. In the event that title to the obsolete vessel is acquired by the Secretary of Transportation at the time of delivery of the new vessel, the allowance shall be deposited in the owner's capital construction fund. This subsection shall apply to obsolete vessels exchanged for new vessels hereafter contracted to be built, or eligible for such exchange but not exchanged in connection with a contract for new vessels executed prior to October 1, 1960.
(c) Utility value of new vessel; gross tonnage
The utility value of the new vessel for operation in the domestic or foreign commerce of the United States shall not be substantially less than that of the obsolete vessel. The gross tonnage of the obsolete vessel may exceed the gross tonnage of the new vessel in a ratio not in excess of three to one, if the Secretary of Transportation finds that the new vessel, although of lesser tonnage, will provide utility value equivalent to or greater than that of the obsolete vessel.
(d) Amount of allowance on obsolete vessel; determination of amount
The allowance for an obsolete vessel shall be the fair and reasonable value of such vessel as determined by the Secretary of Transportation. In making such determination the Secretary of Transportation shall consider: (1) the scrap value of the obsolete vessel both in American and foreign markets, (2) the depreciated value based on a twenty or twenty-five year life, whichever is applicable to the obsolete vessel, and (3) the market value thereof for operation in the world trade or in the foreign or domestic trade of the United States. In the event the obsolete vessel is acquired by the Secretary of Transportation at the time the owner contracts for the construction of the new vessel, and the owner uses such vessel during the period of construction of the new vessel, the allowance shall be reduced by an amount representing the fair value of such use. The rate for the use of the obsolete vessel shall be fixed by the Secretary of Transportation for the entire period of such use at the time of execution of the contract for the construction of the new vessel.
(e) Recognition of gain for income tax purposes; basis for gain or loss
No gain shall be recognized to the owner for the purpose of Federal income taxes in the case of a transfer of an obsolete vessel to the Secretary of Transportation under the provisions of this section. The basis for gain or loss upon a sale or exchange and for depreciation under the applicable Federal income-tax laws of a new vessel acquired as contemplated in this section shall be the same as the basis of the obsolete vessel or vessels exchanged for credit upon the acquisition of such new vessel, increased in the amount of the cost of such vessel (other than the cost represented by such obsolete vessel or vessels) and decreased in the amount of loss recognized upon such transfer.
(f) Report to Congress
The Secretary of Transportation shall include in his annual report to Congress a detailed statement of all transactions consummated under the provisions of the preceding subsections during the period covered by such report.
(g) Use of vessels 25 years old or more
An obsolete vessel acquired by the Secretary of Transportation under this section which is or becomes twenty-five years old or more, and vessels presently in the Secretary's laid-up fleet which are or become twenty-five years old or more, shall in no case be used for commercial operation, except that any such obsolete vessel, or any such vessel in the laid-up fleet may be used during any period in which vessels may be requisitioned under section 1242 of this Appendix, as amended, and except as otherwise provided in this chapter for the employment of the Secretary's vessels in steamship lines on trade routes exclusively serving the foreign trade of the United States.
(i) Exchange of vessels; valuation; scrapping of traded out vessels
The Secretary of Transportation is authorized to acquire suitable documented vessels, as defined in section 2101 of title 46, with funds in the Vessel Operations Revolving Fund derived from the sale of obsolete vessels in the National Defense Reserve Fleet. For purposes of this subsection, the acquired and obsolete vessels shall be valued at their scrap value in domestic or foreign markets as of the date of the acquisition for or sale from the National Defense Reserve Fleet; except that, in a transaction subject to this section, the value assigned to those vessels will be determined on the same basis, with consideration given to the fair value of the cost of positioning the traded-out vessel to the place of scrapping. All costs incident to the lay-up of the vessel acquired under this subsection may be paid from balances in the Fund. Notwithstanding the provisions of sections 808 and 835 of this Appendix, vessels sold from the National Defense Reserve Fleet under this subsection may be scrapped in approved foreign markets.
(j) Placement in national defense reserve fleet of acquired vessels
Any vessel heretofore or hereafter acquired under this section, or otherwise acquired by the Maritime Administration of the Department of Transportation under any other authority shall be placed in the national defense reserve fleet established under authority of section 11 of the Merchant Ship Sales Act of 1946 [50 App. U.S.C. 1744] and shall not be traded out or sold from such reserve fleet, except as provided for in subsections (g) and (i) of this section. This limitation shall not affect the rights of the Secretary of Transportation to dispose of a vessel as provided in other sections of this subchapter or in subchapters VII or XI of this chapter.
(June 29, 1936, ch. 858, title V, §510, as added Aug. 4, 1939, ch. 417, §7, 53 Stat. 1183
; amended July 17, 1952, ch. 939, §§7, 8, 66 Stat. 762
; Aug. 10, 1954, ch. 664, 68 Stat. 680
; Feb. 20, 1958,
Pub. L. 85–332,
72 Stat. 17
; June 12, 1960,
Pub. L. 86–518, §1, 74 Stat. 216
; July 5, 1960,
Pub. L. 86–575,
74 Stat. 312
; Oct. 5, 1961,
Pub. L. 87–401,
75 Stat. 833
; Oct. 5, 1962,
Pub. L. 87–755,
76 Stat. 751
; Oct. 10, 1965,
Pub. L. 89–254, §§1, 2, 79 Stat. 980
; Oct. 21, 1970,
Pub. L. 91–469, §§12, 13, 35(a), 84 Stat. 1022
, 1035; Jan. 2, 1975,
Pub. L. 93–605, §1, 88 Stat. 1965
; Nov. 15, 1977,
Pub. L. 95–177,
91 Stat. 1368
; Aug. 6, 1981,
Pub. L. 97–31, §12(91), 95 Stat. 161
; Dec. 12, 1989,
Pub. L. 101–225, title III, §307(7), 103 Stat. 1925
; Nov. 16, 1990,
Pub. L. 101–595, title VII, §704, 104 Stat. 2994
.)
References in Text
The Federal income-tax laws, referred to in subsec. (e), are classified generally to Title 26, Internal Revenue Code.
Amendments
1990-Subsec. (i). Pub. L. 101–595 amended subsec. (i) generally. Prior to amendment, subsec. (i) read as follows: "The Secretary of Transportation is authorized to acquire mariner class vessels constructed under subchapter VII of this chapter and Public Law 911, Eighty-first Congress, and other suitable vessels, constructed in the United States, which have never been under foreign documentation, in exchange for obsolete vessels in the National Defense Reserve Fleet. For purposes of this subsection, the trade-in and trade-out vessels shall be valued at the higher of their scrap value in domestic or foreign markets as of the date of the exchange: Provided, That in any exchange transactions, the value assigned to the traded-in and traded-out vessels will be determined on the same basis. The value of the traded-out vessels shall be as nearly as possible equal to the value of the traded-in vessel plus the fair value of the cost of towing the traded-out vessel to the place of scrapping. To the extent the value of the traded-out vessel exceeds the value of the traded-in vessel plus the fair value of the cost of towing, the owner of the traded-in vessel shall pay the excess to the Secretary of Transportation in cash at the time of exchange. This excess shall be deposited into the Vessel Operations Revolving Fund and all costs incident to the lay-up of the vessels acquired under this chapter may be paid from balances in the Fund. No payments shall be made by the Secretary of Transportation to the owner of any traded-in vessel in connection with any exchange under this subsection. Notwithstanding the provisions of sections 808 and 835 of this Appendix, vessels traded out under this subsection may be scrapped in approved foreign markets. The provision of this subsection (i) as it read prior to the 1975 amendment shall govern all transactions made thereunder prior to that amendment."
1989-Subsec. (h). Pub. L. 101–225 struck out subsec. (h) which related to acquisition of tankers for national defense reserve.
1981-Subsecs. (a)(1), (b). Pub. L. 97–31, §12(91)(A), substituted "Secretary of Transportation" for "Secretary of Commerce" wherever appearing.
Subsecs. (c) to (e). Pub. L. 97–31, §12(91)(B), substituted "Secretary of Transportation" for "Commission" wherever appearing. For prior transfers of functions of the Commission, meaning the United States Maritime Commission, see Transfer of Functions note below.
Subsec. (f). Pub. L. 97–31, §12(91)(B), (C), substituted "Secretary of Transportation" for "Commission" and "his" for "its". For prior transfers of functions of the Commission, meaning the United States Maritime Commission, see Transfer of Functions note below.
Subsec. (g). Pub. L. 97–31, §12(91)(B), (D), substituted "Secretary of Transportation" for "Commission" and "Secretary's" for "Commission's" in two places. For prior transfers of functions of the Commission, meaning the United States Maritime Commission, see Transfer of Functions note below.
Subsecs. (h), (i). Pub. L. 97–31, §12(91)(A), substituted "Secretary of Transportation" for "Secretary of Commerce" wherever appearing.
Subsec. (j). Pub. L. 97–31, §12(91)(A), (E), substituted "Maritime Administration of the Department of Transportation" for "Secretary of Commerce" and "Secretary of Transportation" for "Secretary of Commerce".
1977-Subsec. (i). Pub. L. 95–177 struck out ", within two years after the enactment of this subsection," after "is authorized" and "that are scheduled for scrapping" after "National Defense Reserve Fleet", inserted "and other suitable vessels, constructed in the United States, which have never been under foreign documentation," after "Eighty-first Congress,", and substituted "the trade-in and trade-out vessels" for "the traded-in and traded-out vessels" and "the 1975 Amendment" for "this amendment".
1975-Subsec. (i). Pub. L. 93–605 added subsec. (i). A prior subsec. (i) providing authority for the Secretary of Commerce to acquire vessels of one thousand five hundred gross tons or over which were constructed in the United States in exchange for more modern or efficient ocean-going vessels of one thousand five hundred gross tons or over owned by the United States under specified conditions expired on July 5, 1972.
1970-Subsec. (a)(1). Pub. L. 91–469, §12(a), in redefining "obsolete vessel", substituted in subd. (B) "in the judgment of the Secretary of Commerce, should, by reason of age, obsolescence, or otherwise, be replaced in the public interest" for "is not less than seventeen years old and, in the judgment of the Commission, is obsolete or inadequate for successful operation in the domestic or foreign trade of the United States", substituted in subd. (C) "has been owned" for "is owned" and deleted therefrom "and has been owned by such citizen or citizens" preceding "for at least three years", and deleted concluding proviso defining "obsolete vessel" as meaning a vessel, until June 30, 1964, which is not less than 1,350 gross tons, is not less than 12 years old, and is citizen owned for three year period prior to acquisition hereunder.
Subsec. (b). Pub. L. 91–469, §§12(b), 35(a), substituted "capital construction fund" for "capital reserve fund" and "Secretary of Commerce" for "Commission" in seven places, respectively.
Subsec. (i). Pub. L. 91–469, §13, in amending first sentence, substituted "1972" and "which were constructed in the United States" for "1970" and "which were constructed or contracted for by the United States shipyards before September 3, 1945" and struck out "war-built vessels (which are defined for purposes of this subsection as" and "which were constructed or contracted for by the United States shipyards during the period beginning September 3, 1939, and ending September 2, 1945)" before and after "oceangoing vessels of one thousand five hundred gross tons or over".
1965-Subsec. (i). Pub. L. 89–254, §1(a), substituted "before July 5, 1970, vessels of one thousand five hundred gross tons or over which were constructed or contracted for by the United States shipyards before September 3, 1945" for "within five years from the date of enactment of this Act war-built vessels (which are defined for purposes of this subsection as oceangoing vessels of one thousand five hundred gross tons or over which were constructed or contracted for by the United States shipyards during the period beginning September 3, 1939, and ending September 2, 1945)", and inserted "(which are defined for purposes of this subsection as oceangoing vessels of one thousand five hundred gross tons or over which were constructed or contracted for by the United States shipyards during the period beginning September 3, 1939, and ending September 2, 1945)".
Subsec. (i)(1). Pub. L. 89–254, §1(b), amended par. (1) to apply the 3 year prohibition against any vessel being operated under an operating-differential subsidy to the applicant or any affiliate of the applicant rather than to the vessel itself.
Subsec. (i)(2). Pub. L. 89–254, §1(c), required the value of a traded out vessel to be calculated in the same manner as its value was determined when it was traded in, except that vessels traded in prior to Oct. 1, 1960, shall be valued on the basis yielding the highest fair return to the government commensurate with the purpose of this subsection, and required in each exchange of vessels under this subsection, the value of the traded-in vessel, unless based on scrap value, and the value of the traded-out vessel to be calculated in the same manner.
Subsec. (i)(9). Pub. L. 89–254, §1(d), substituted provisions permitting tanker vessels to be traded out under the provisions of this subsection only for major conversions into dry cargo carriers or liquid bulk carriers, including natural gas carriers but excluding bulk petroleum carriers, except where traded out for use exclusively in trade and commerce on the Great Lakes, including the St. Lawrence River and Gulf, for provisions which prohibited tanker-vessels to be traded out under the provisions of this subsection.
Subsec. (j). Pub. L. 89–254, §2, added subsec. (j).
1962-Subsec. (a)(1). Pub. L. 87–755 substituted "June 30, 1964" for "June 30, 1962".
1961-Subsec. (b). Pub. L. 87–401, §1(1), provided that if the owner requests, the vessel shall be acquired by the Federal Maritime Board or Secretary of Commerce either when the owner contracts for construction or purchase of a new ship or within 5 days of actual delivery of the new vessel to the owner, that the amount of allowance be determined at the time of acquisition of the vessel by the Board or Secretary, and if at such time, the owner contracts for construction or purchase of a new vessel, the allowance shall be applied upon the price of the new vessel, that if the Board or Secretary acquired title to the vessel at time of delivery of the new vessel, the allowance shall be deposited in the owner's capital reserve fund, and that this subsection shall apply to exchanges for vessels hereafter contracted to be built, or eligible for exchange but not so exchanged in connection with contracts for new vessels executed prior to Oct. 1, 1960.
Subsec. (d). Pub. L. 87–401, §1(2), provided for a depreciation value based upon a twenty-year life, if applicable, and substituted "In the event the obsolete vessel is acquired by the Board or Secretary at the time the owner contracts for the construction of a new vessel, and the owner" for "If the owner of the obsolete vessel".
1960-Subsec. (d). Pub. L. 86–518 substituted "twenty-five-year life" for "twenty-year life".
Subsec. (g). Pub. L. 86–518 substituted "twenty-five years" for "twenty years" in two places.
Subsec. (i). Pub. L. 86–575 added subsec. (i).
1958-Subsec. (a)(1). Pub. L. 85–332 substituted "June 30, 1962" for "June 30, 1958".
1954-Subsec. (h). Act Aug. 10, 1954, added subsec. (h).
1952-Subsec. (a)(1). Act July 17, 1952, §7, provided that until June 30, 1958, the minimum age in determining the eligibility of "obsolete vessels" for turn in for credit allowance on a new vessel is reduced from 17 to 12 years.
Subsec. (d). Act July 17, 1952, §8, provided that the rate for the use of the obsolete vessel should be fixed at the time that the contract for the new vessel is entered into.
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.
Transfer of Functions
For transfer of functions of United States Maritime Commission, see Reorg. Plan No. 6 of 1949, Reorg. Plan No. 21 of 1950, and Reorg. Plan No. 7 of 1961, set out under section 1111 of this Appendix.
Secretary of Commerce Authorized To Purchase Steamship United States; Requisition or Purchase by United States
Pub. L. 92–296, §2, May 16, 1972, 86 Stat. 140
, as amended by
Pub. L. 94–536, Oct. 17, 1976, 90 Stat. 2497
;
Pub. L. 96–111, §2, Nov. 15, 1979, 93 Stat. 846
, provided that: "The Secretary of Commerce is authorized and directed to purchase the steamship United States, as is, where is, at the depreciated cost of the vessel to the owner, as determined by the Secretary of Commerce, less the unpaid principal and interest on the mortgage on the vessel, for layup in the National Defense Reserve Fleet and operation for the account of any agency or department of the United States during any period in which vessels may be requisitioned under section 902 of the Merchant Marine Act, 1936 [46 App. U.S.C. 1242], and/or for sale or charter to a qualified operator for operation under the American flag in the coastwise and/or foreign commerce of the United States and/or between foreign ports notwithstanding the provision of section 506 of the Merchant Marine Act, 1936 [46 App. U.S.C. 1156]: Provided, That for hire carriage in coastwise commerce of the United States is limited to passengers, their accompanying baggage, and one thousand measurement tons of cargo, of forty cubic feet each, per annum in any single coastwise trade: Provided further, That for hire carriage of cargo in excess of the aforesaid one thousand tons shall be unlawful, or for use as a floating hotel in or on the navigable waters of the United States. Whenever the conditions set forth in section 902, the Merchant Marine Act of 1936 [46 App. U.S.C. 1242], exist, the vessel may be requisitioned or purchased by the United States and just compensation for title or use, as the case may be, shall be paid in accordance with section 902 of the Merchant Marine Act, as amended (46 U.S.C. 1242) [46 App. U.S.C. 1242]. The depreciated cost of the vessel to the owner shall be computed on the schedule adopted by the Internal Revenue Service for income tax purposes. Such determination shall be final. The Secretary of Commerce shall require the owner of the vessel to agree that it will pay all existing private obligations related to the vessel, and that it will commit an amount equal to the net proceeds received from such sale in excess of existing obligations and expenses incident to the sale, within a reasonable period not to exceed twelve months of receipt, as equity capital for the construction of new vessels which the Secretary determines are built to effectuate the purposes and policy of the Merchant Marine Act, 1936, as amended [this chapter]."
Rate of Depreciation for Vessels Delivered by Shipbuilder on or After January 1, 1946, and Before January 1, 1960
For provisions relating to computation of depreciation with respect to vessels delivered by the shipbuilder on or after Jan. 1, 1946, and before Jan. 1, 1960, see section 8(b) of Pub. L. 86–518, set out as a note under section 1125 of this Appendix.
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.
Suspension of Subsection (g) Repealed
Act May 14, 1940, ch. 201, §1, 54 Stat. 216
, as extended by act June 16, 1942, ch. 416, 56 Stat. 370
, which suspended subsec. (g) of this section until six months after the end of World War II should have been proclaimed or such earlier time as the Congress by concurrent resolution or the President might designate, was repealed by act July 25, 1947, ch. 327, §1, 61 Stat. 449
.
Cross References
Basis for depreciation, generally, see section 167 of Title 26, Internal Revenue Code.
Basis for determining gain or loss, generally, see section 1001 et seq. of Title 26.
Section Referred to in Other Sections
This section is referred to in title 10 section 2218; title 16 section 5405; title 26 section 1061.