Section 1 states the short title of the proposal, the "Maritime Administration Authorization Act for Fiscal Year 2001".

Section 2 of the proposal authorizes appropriations for the Maritime Administration (MARAD) and related programs at the funding levels contained in the President’s budget for Fiscal Year 2001.

Section 2(a)(1) authorizes $80,240,000 for MARAD operations and training activities, of which $33,520,000 is authorized for MARAD operations. Operations and training activities include the costs incurred by headquarters and region staffs in the administration and direction of the various MARAD programs which cut across the American maritime industries, such as:

• Emergency planning and operations, including administration of the Maritime Security Program agreements.
• Negotiation of agreements, understandings and arrangements to reduce barriers that restrict American access to foreign ports and markets.
• Port, intermodal, and environmental activities.
• Labor, training, and safety activities.
• Administration of the capital construction fund/construction reserve fund.
• Monitoring compliance with cargo reservation statutes.
• Administration of the Operating-Differential Subsidy agreements.

Operations and training funds also include funds for the operation of the United States Merchant Marine Academy (USMMA) at Kings Point, New York, and continuing assistance to the six state maritime academies. Expenses for maritime training at the USMMA is authorized at $37,236,000 and expenses for financial assistance to the state maritime academies are authorized at $9,484,000.

The USMMA offers a four-year undergraduate, full scholarship program which leads to a Bachelor of Science degree and to a merchant marine license as Third Mate or Third Assistant Engineer or both. In addition, the students are enrolled as midshipmen and are commissioned upon graduation as ensigns in the U.S. Naval Reserve.

The state maritime academies program assists states in the training of individuals for service as officers in the U.S. merchant marine. Assistance is provided to participating states (California, Maine, Massachusetts, Michigan, New York, and Texas) in the form of direct payments to the academies, incentive payments to cadets currently enrolled in the Student Incentive Payment (SIP) Program, and funding the cost of maintenance and repair for MARAD ships provided on loan to the schools for use as training ships.

Operations and training funds will also allow MARAD to implement its new duties regarding the citizenship of certain fishing vessels, contained in the American Fisheries Act established by P.L. 105-277, the Omnibus Appropriations Act for Fiscal Year 1999. Among other things, the measure designates MARAD as the primary agency responsible for ensuring that the proper citizenship requirements are adhered to for ownership of vessels 100 feet or greater that have, or are seeking, a fisheries endorsement to their documentation. In enforcing citizenship standards, MARAD will be required to rigorously scrutinize transfers of ownership or control with particular attention to leases, charters, mortgages, and financing arrangements for fishing vessels. Further, MARAD will need to approve qualified trustees to hold mortgages where vessel financing is procured through foreign lenders. MARAD will also determine, upon request, whether an individual or an entity has exceeded the statutory limitation on harvesting or processing of pollock in the directed pollock fishery. The agency is actively developing the American Fisheries Program. P.L. 106-113, the Consolidated Appropriations Act for Fiscal Year 2000, provides that funds made available for implementation of the American Fisheries Act remain available until expended. These funds will be used to continue MARAD’s implementation of the Act in Fiscal Year 2000.

Section 2(b) of the proposal contains the authorization for the maritime guaranteed loan program that is administered by MARAD under Title XI of the Merchant Marine Act, 1936, as amended (46 App. U.S.C. 1271 et seq.). Title XI authorizes the Secretary of Transportation (delegated to the Maritime Administrator) to enter into commitments to guarantee private sector debt financing for the construction or reconstruction of U.S.-flag vessels and export vessels in U.S. shipyards, and for U.S. shipyard modernization and improvement projects. Title XI loan guarantees enable ship owners and shipyards to borrow private sector funds on more favorable terms than might otherwise be available.

Federal accounting procedures enacted in the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.) require that estimated costs of potential defaults and administrative costs be appropriated before a loan guarantee commitment may be entered into by the Government. An authorization of $2,000,000 for the estimated costs of loan guarantee commitments would enable MARAD to provide loan guarantees of $40,000,000 based on a 5 % loan subsidy rate. The Title XI program has had substantial carryover balances of loan guarantee funds in recent years. Continued carryover would permit MARAD to have a robust Title XI program in fiscal year 2001. The Federal Credit Reform Act of 1990 requires, and MARAD requests, a separate authorization of $4,179,000 for administrative expenses for the entire Title XI program, to manage both the existing portfolio of loan guarantees and new guarantees.

Section 3(a) would amend Title IX of the Merchant Marine Act, 1936, as amended, to create a new section 903 eliminating the three-year period bulk or breakbulk vessels (including heavylift vessels) newly registered under the U.S.-flag must wait in order to carry government-impelled cargo. This new section would remain in effect for one year from the date of enactment, or until enactment of legislation to implement the Organization for Economic Cooperation and Development (OECD) Agreement on Shipbuilding Subsidies (which would permit new vessels built in OECD countries to immediately carry preference cargoes). Present law requires a vessel that is registered under a foreign flag, or is foreign built or reconstructed in a foreign shipyard to be under U.S. registry for at least three years before the vessel is able to carry cargo reserved to U.S.-flag vessels under the Cargo Preference Act of 1954. This requirement does not apply to liner vessels that receive operating payments under the Maritime Security Program. However, bulk vessels do not qualify for operating payments under the Maritime Security Program and are subject to the three-year wait period.

Due to inherently higher U.S.-flag operating costs and low world charter rates, a foreign-flag vessel newly transferred to U.S. registry cannot support itself in U.S. foreign commercial trades during the three-year waiting period. Thus, there is a barrier to replacement and modernization of the U.S.-flag bulk and breakbulk fleet, which is required by statute to transport 75 percent of agricultural products exported under certain food aid programs.

No drybulk vessels have been built in U.S. shipyards in over twenty-five years. The youngest U.S.-flag self-propelled bulk vessel in foreign trade is 14 years old and the average age of the U.S.-flag bulk carrier fleet is 26 years, far beyond normal economic operating life. The resulting decrease in the U.S.-flag bulk fleet has a significant adverse impact upon our national security since the bulk fleet provides jobs for mariners needed to operate our reserve fleet vessels in time of national emergency. The availability of trained mariners is a serious concern to the Departments of Defense and Transportation.

Food aid programs for Russia, North Korea, and Indonesia are expected to generate about 3.5 million metric tons of bulk grain shipments this year, in addition to the normal flow of aid cargoes to other countries. The existing U.S.-flag drybulk capacity will be unable to meet the anticipated need. Shippers of preference cargoes will continue to have difficulty in obtaining U.S.-flag drybulk and breakbulk vessels, and will turn to other types of vessels for the services they need. The use of other types of vessels will increase the cost to the taxpayer.

The proposed amendment provides a limited opportunity for modern foreign-built vessels to register under the U.S. flag and be immediately eligible to carry preference cargoes. In return, the vessels must perform non-emergency shipyard repairs, and other shipyard work necessary to conform the vessel to U.S.-flag standards, in a shipyard of the United States and such vessels shall not be granted preapproval to leave U.S. registry under section 9(e) of the Shipping Act, 1916, as amended on October 19, 1996. The vessels are not presently entitled to any benefit of the Capital Construction Fund under section 607 of the 1936 Act.

It is anticipated that this amendment will improve the vessel profile of the U.S.-flag drybulk and breakbulk fleet, add jobs for U.S. merchant mariners, and increase the percentage of U.S. foreign commerce carried in U.S.-flag vessels. These additional modern vessels will increase the competition for carriage of government-impelled cargoes which could result in substantial cost savings to the U.S. Government. The three-year wait period to carry preference cargoes has not had a significant impact on domestic shipyards. Foreign-built vessels presently are able to carry military cargo immediately upon registering under the U.S.-flag and can carry preference cargoes three years thereafter. Additionally, the OECD agreement, originally requested by U.S. shipyards, will eliminate the three-year wait provision.

Section 3(b) would amend Section 901(b)(c)(2) of the Merchant Marine Act, 1936, to make the cargo preference year for determining compliance coincide with the Federal Government Fiscal Year. This would simplify record keeping and management of the program without impact to any involved agencies or shippers.

MARAD is responsible for the disposal of obsolete vessels in the National Defense Reserve Fleet (NDRF). P.L. 103-451, the National Maritime Heritage Act of 1994, requires that these vessels be disposed of by September 30, 2001. There are currently 110 obsolete vessels in the NDRF. It is expected that the inventory of obsolete vessels will increase to 134 by the year 2001 if no additional vessels are sold.

MARAD will be unable to dispose of this number of vessels by the September 30, 2001 deadline. MARAD’s primary method of disposal has been selling the vessels for scrapping. From 1991 to 1994, MARAD sold 80 vessels for scrapping overseas. However, since 1995, MARAD has been unable to scrap obsolete NDRF vessels overseas due to concerns about the environment and worker health and safety at the foreign scrap sites. Although MARAD has sought to scrap the vessels in the domestic market, the capacity of the domestic market is very limited. Moreover, the Department of the Navy, which is responsible for the disposal of obsolete combatant vessels, has initiated a program to pay for the costs of disposing of its obsolete vessels.

A five year extension will provide MARAD with additional time to develop an action plan, and begin implementation of the plan, to dispose of this growing number of vessels. A significant number of these vessels pose an immediate environmental threat. In addition to being in extremely poor condition, the vessels contain PCB’s, asbestos, fuel oil and other hazardous substances. The Department of Defense provides funds to ensure that no environmental contamination occurs.