(25) "Fair and reasonable overhead expenses": see section 3309(b). (26) "Foreign commerce": see sections 2301(c)(1), (d)(1), (7), 3101(c), 6108(b). (27) "Foreign cost": see section 3313(a). (28) "Foreign trade": see sections 2301(d) (1), (9), 3101(c), 4206(c), 4207. (29) "Home port": see section 4401 (e). (30) "Lender": see section 4501(e). (31) "Loan": see section 4501(c). (32) "Marine insurance companies": see section 6107(a) (2). (33) "Modern or efficient war-built vessels": see section 3111(h). (34) "Mortgage": see section 4501 (d). (35) "Mortgagee": see sections 4401(d), 4501(e). (36) "Mortgagor": see section 4501 (f). (37) "Net earnings": see section 3207 (d) (1). (41) "New vessel": see sections 3111(a) (2), 3112(a)(2), (3). (43) "Officer": see section 3405(c). (44) "Parent": see section 6103(c) (2). (45) "Passenger vessel": see section 3212(a). (46) "Person": see sections 3101(d), 4101 (d), 4401, 6103(d), 6107(a)(3). (47) "Port of documentation": see section 4401 (e). (48) "Preferred maritime lien": see section 4412(a). (49) "Preferred, mortgage": see sections 4403(b), 4410(b). (50) "Preferred mortgage lien": see section 4410(b). (51) "Privately owned United States-flag commercial vessels": see section 6101(a). (52) "Reconstruction and reconditioning": see section 3112(a)(3). (53) "Salary": see section 3405(c). (54) "Seacoasts of the United States": see section 3112(f). (55) "Seamen": see section 4214(e)(1). (56) "Secretary": see section 2205(a). (57) "Special reserve fund": see section 3207(c). (58) "State": see section 5102(e). (59) "Subsidiary": see section 6103(c) (2). (60) "The United States": see section 4214(e)(3). (61) "Transportation in the waterborne commerce of the United States": see section 4601(c). (62) "Vessel": see sections 4101 (f), 4401, 4501 (g), 6103(d), 6105(b). (63) "Vessel of the United States": see section 4401 (f). (64) "War-built vessel": see section 4301(c). (65) "War risks": see section 4601 (d). TITLE III-SUBSIDIES AND RELATED PROVISIONS PART A-CONSTRUCTION-DIFFERENTIAL SUBSIDY DEFINITIONS SEC. 3101. As used in this title (a) "Citizen of the United States" includes a corporation, partnership, or association only if it is a citizen of the United States within the meaning of section 4101 of this Act: Provided, however, That, with respect to a corporation under part B of this title, all directors of the corporation shall be citizens of the United States: Provided further, That, in the case of a corporation, partnership, or association operating a vessel on the Great Lakes, or on bays, sounds, rivers, harbors, or inland lakes of the United States, the amount of interest required to be owned by a citizen of the United States shall be not less than 75 per centum. (b) "Construction" includes outfitting and equipping. (c) Foreign commerce" or "foreign trade" means commerce or trade between the United States, its territories or possessions, or the District of Columbia, or the Commonwealth of Puerto Rico, and a foreign country. (d) "Person" includes corporations, partnerships, and associations existing under or authorized by the laws of the United States, or any State, territory, district, or possession thereof, or the Commonwealth of Puerto Rico, or of any foreign country. APPLICATIONS FOR SUBSIDY FOR CONSTRUCTION, RECONSTRUCTION, OR RECONDITIONING SEC. 3102. (a) Any citizen of the United States may make application to the Secretary for a construction-differential subsidy to aid in the construction of a new vessel to be used in the foreign commerce of the United States. No such application shall be approved by the Secretary unless he determines that (1) the plans and specifications call for a new vessel which will meet the requirements of the foreign commerce of the United States, will aid in the promotion and development of such commerce, and be suitable for use by the United States for national defense or military purposes in time of war or national emergency; (2) the applicant possesses the ability, experience, financial resources, and other qualifications necessary to enable it to operate and maintain the proposed new vessel; and (3) the granting of the aid applied for is reasonably calculated to replace wornout or obsolete tonnage with new and modern ships, or otherwise to carry out effectively the purposes and policy of this Act. The contract of sale, and the mortgage given to secure the payment of the unpaid balance of the purchase price, shall not restrict the lawful or proper use or operation of the vessel except to the extent expressly required by law. (b) The Secretary shall submit the plans and specifications for the proposed vessel to the Navy Department for examination thereof and suggestions for such changes therein as may be deemed necessary or proper in order that such vessel shall be suitable for economical and speedy conversion into a naval or military auxiliary, or otherwise suitable for the use of the United States Government in time of war or national emergency. If the Secretary of the Navy approves such plans and specifications as submitted, or as modified in accordance with the provisions of this subsection, he shall certify such approval to the Secretary of Commerce. (c) Any citizen of the United States may make application to the Secretary for a construction-differential subsidy to aid in reconstructing or reconditioning any vessel that is to be used in the foreign commerce of the United States. If the Secretary, in the exercise of his discretion, shall determine that the granting of the financial aid applied for is reasonably calculated to carry out effectively the purposes and policy of this Act, the Secretary may approve such application and enter into a contract or contracts with the applicant therefor providing for the payment by the United States of a construction-differential subsidy that is to be ascertained, determined, controlled, granted, and paid, subject to all the applicable conditions and limitations of this part and under such further conditions and limitations as may be prescribed in the rules and regulations the Secretary has adopted as provided in section 2205 of this Act; but the financial aid authorized by this subsection shall be extended to reconstruction or reconditioning only in exceptional cases and after a thorough study and a formal determination by the Secretary that the proposed reconstruction or reconditioning is consistent with the purposes and policy of this Act. CONSTRUCTION OF VESSELS; BIDS; AMOUNT OF SUBSIDY SEC. 3103. (a) If the Secretary of the Navy certifies his approval under section 3102(b) of this Act, and the Secretary of Commerce approves the application, the Secretary of Commerce may secure, on behalf of the applicant, bids for the construction of the proposed vessel according to the approved plans and specifications. If the bid of the shipbuilder who is the lowest responsible bidder is determined by the Secretary of Commerce to be fair and reasonable, the Secretary may approve such bid, and if such approved bid is accepted by the applicant, the Secretary is authorized to enter into a contract with the successful bidder for the construction of the proposed vessel, and for the payment by the Secretary to the shipbuilder, on terms to be agreed upon in the contract, of the contract price of the vessel, out of the construction fund referred to in section 4213 of this Act, or out of other available funds. Concurrently with entering into such contract with the shipbuilder, the Secretary is authorized to enter into a contract with the applicant for the purchase by the applicant of such vessel upon its completion, at a price corresponding to the estimated cost, as determined by the Secretary pursuant to the provisions of this title, of building such vessel in a foreign shipyard. (b) The amount of the reduction in selling price whi struction-differential subsidy" may equal, but not e of the shipbuilder constructing the proposed vessel features incorporated in the vessel for national def by the Secretary in addition to the subsidy), over th is herein termed "con , the excess of the bid luding the cost of any es, which shall be paid and reasonable estimate of cost, as determined by the Secretary, of the construction of the proposed vessel if it were constructed under similar plans and specifications (excluding national defense features as above provided) in a foreign shipbuilding center which is deemed by the Secretary to furnish a fair and representative example for the determination of the estimated foreign cost of construction of vessels of the type proposed to be constructed. The construction differential approved and paid by the Secretary shall not exceed 55 per centum of the construction cost of the vessel, except that in the case of reconstruction or reconditioning of a passenger vessel having the tonnage, speed, passenger accommodations, and other characteristics set forth in section 3104 of this Act, the construction differential approved and paid shall not exceed 60 per centum of the reconstruction or reconditioning cost (excluding the cost of national defense features as above provided): Provided, however, That after June 30, 1966, the construction differential approved by the Secretary shall not exceed in the case of the construction, reconstruction or reconditioning of any vessel, 50 per centum of such cost. When the Secretary finds that the construction differential in any case exceeds the foregoing applicable percentage of such cost, the Secretary may negotiate and contract on behalf of the applicant to construct, reconstruct, or recondition such vessel in a domestic shipyard at a cost which will reduce the construction differential to such applicable percentage or less. In the event that the Secretary has reason to believe that the bidding in any instance is collusive, he shall report all of the evidence on which he acted (1) to the Attorney General of the United States, and (2) to the President of the Senate and to the Speaker of the House of Representatives if the Congress shall be in session or if the Congress shall not be in session, then to the Secretary of the Senate and the Clerk of the House, respectively. (c) In such contract between the applicant and the Secretary, the applicant shall be required to make cash payments to the Secretary of not less than 25 per centum of the price at which the vessel is sold to the applicant. The cash payments shall be made at the time and in the same proportion as provided for the payments on account of the construction cost in the contract between the shipbuilder and the Secretary. The applicant shall pay, not less frequently than annually, interest at the rate of 311⁄2 per centum per annum on those portions of the Secretary's payments as made to the shipbuilder which are chargeable to the applicant's purchase price of the vessel (after deduction of the applicant's cash payments). Except as otherwise provided in section 6109 of this Act, the balance of such purchase price shall be paid by the applicant within twenty-five years after delivery of the vessel and in not to exceed twenty-five equal annual installments, the first of which shall be payable one year after the delivery of the vessel by the Secretary to the applicant. Interest at the rate of 31⁄2 per centum per annum shall be paid on all such installments of the purchase price remaining unpaid. (d) If no bids are received for the construction of such vessel, or if it appears to the Secretary that the bids received from privately owned shipyards of the United States are collusive, excessive, or unreasonable, and if the applicant agrees to purchase said vessel as provided in this section, then, to provide employment for citizens of the United States, the Secretary may have such vessel constructed at not in excess of the actual cost thereof in a navy yard of the United States under such regulations as may be promulgated by the Secretary of the Navy and the Secretary of Commerce. In such event the Secretary is authorized to pay for any such vessel so constructed from his construction fund. The Secretary is authorized to sell any vessel so constructed in a navy yard to an applicant for the fair and reasonable value thereof, but at not less than the cost thereof less the equivalent to the construction-differential subsidy determined as proved by subsection (b), such sale to be in accordance with all the provisions of this part. (e) The Secretary of Commerce, with the advice of and in coordination with the Secretary of the Navy, shall at least once each year, as required for purposes of this Act, survey the existing privately owned shipyards capable of merchant ship construction, or review available data on such shipyards if deemed adequate, to determine whether their capabilities for merchant ship construction, including facilities and skilled personnel, provide an adequate mobilization base at strategic points for purposes of national defense and national emergency. The Secretary of Commerce, in connection with ship construction, reconstruction, reconditioning, or remodeling under parts A and C of this title, upon a basis of a finding that the award of the proposed construction, reconstruction, reconditioning, or remodeling work will remedy an existing or impending inadequacy in such mobilization base as to the capabilities and capacities of a shipyard or shipyards at a strategic point, and after taking into consideration the benefits accruing from standardized construction, the conditions of unemploy ment, and the needs and reasonable requirements of all shipyards, may allocate such construction, reconstruction, reconditioning, or remodeling to such yard or yards in such manner as may be determined to be fair, just, and reasonable to all sections of the country, subject to the provisions of this subsection. In the allocation of construction work to such yards as herein provided, the Secretary may, after first obtaining competitive bids for such work in compliance with the provisions of this title, negotiate with the bidders and with other shipbuilders concerning the terms and conditions of any contract for such work, and is authorized to enter into such contract at a price deemed by the Secretary to be fair and reasonable. Any contract entered into by the Secretary under the provisions of this subsection shall be subject to all of the terms and conditions of this title, except those pertaining to the awarding of contracts to the lowest bidder which are inconsistent with the provisions of this subsection. In the event that a contract is made providing for a price in excess of the lowest responsible bid which otherwise would be accepted, such excess shall be paid by the Secretary as a part of the cost of national defense, and shall not be considered as a part of the construction-differential subsidy. In the event that a contract is made providing for a price lower than the lowest responsible bid which otherwise would be accepted, the construction-differential subsidy shall be computed on the contract price in lieu of such bid. If, as a result of allocation under this subsection, the applicant incurs expenses for inspection and supervision of the vessel during construction and for the delivery voyage of the vessel in excess of the estimated expenses for the same services that he would have incurred if the vessel had been constructed by the lowest responsible bidder the Secretary (with respect to construction under this part, except section 3110) shall reimburse the applicant for such excess, less one-half of any gross income the applicant receives that is allocable to the delivery voyage minus one-half of the extra expenses incurred to produce such gross income, and such reimbursement shall not be considered part of the construction-differential subsidy: Provided, That no interest shall be paid on any refund authorized under this title. If the vessel is constructed under section 3110 the Secretary shall reduce the price of the vessel by such excess, less one-half of any gross income (minus one-half of the extra expenses incurred to produce such gross income) the applicant receives that is allocable to the delivery voyage. In the case of a vessel that is not to receive operating-differential subsidy, the delivery voyage shall be deemed terminated at the port where the vessel begins loading. In the case of a vessel that is to receive operating-differential subsidy, the delivery voyage shall be deemed terminated when the vessel begins loading at a United States port on any essential services of the operator. In either case, however, the vessel owner shall not be compensated for excess vessel delivery costs in an amount greater than the expenses that would have been incurred in delivering the vessel from the shipyard at which it was built to the shipyard of the lowest responsible bidder. If as a result of such allocation, the expenses the applicant incurs with respect to such services are less than the expenses he would have incurred for such services if the vessel had been constructed by the lowest responsible bidder, the applicant shall pay to the Secretary an amount equal to such reduction and, if the vessel was built with the aid of construction-differential subsidy, such payment shall not be considered a reduction of the construction-differential subsidy. (f) Upon the agreement of an applicant under this part to purchase any vessel acquired by the Secretary under the provisions of section 4202 of this Act, the Secretary is authorized to sell such vessel to the applicant for the fair and reasonable value thereof, but at not less than the cost thereof to the Secretary, less depreciation at the rate of 4 per centum per annum from the date of completion, except as otherwise provided in section 6109 of this Act, excluding the cost of national defense features added by the Secretary, less the equivalent of any applicable construction differential subsidy as provided by subsection (b), such sale to be in accordance with all the provisions of this part. Such vessel shall thereupon be eligible for an operating differential subsidy under part II of this title, notwithstanding the provisions of section 3201(a)(1) and section 3210(1), or any other provision of law. DOCUMENTATION OF COMPLETED VESSELS; DELIVERY ΤΟ APPLICANT; FIRSTPREFERRED MORTGAGE TO SECURE DEFERRED PAYMENTS SEC. 3104. Upon completion of the construction of any vessel in respect to which a construction-differential subsidy is to be allowed under this part and its delivery by the shipbuilder to the Secretary, the vessel shall be documented under the laws of the United States, and concurrently therewith, or as soon thereafter as practicable, the vessel shall be delivered with a bill of sale to the applicant with warranty against liens, pursuant to the contract of purchase between the applicant and the Secretary. The vessel shall remain documented under the laws of the United States for not less than twenty-five years, except as otherwise provided in section 6109 of this Act, or so long as there remains due the United States any principal or interest on account of the purchase price, whichever is the longer period. At the time of delivery of the vessel the applicant shall execute and deliver a first-preferred mortgage to the United States to secure payment of any sums due from the applicant in respect to said vessel: Provided, That, notwithstanding any other provisions of law, the payment of any sums due in respect to a passenger vessel purchased under section 4(b) of the Merchant Ship Sales Act of 1946, reconverted or restored for normal operation in commercial services, or in respect to a passenger vessel purchased under this part, which is delivered subsequent to March 8, 1946, and which (1) is of not less than ten thousand gross tons, (2) has a designed speed approved by the Secretary but not less than eighteen knots, (3) has accommodations for not less than two hundred passengers, and (4) is approved by the Secretary of Defense as being desirable for national defense purposes, may, with the approval of the Secretary of Commerce, be secured only by a first-preferred mortgage on said vessel. With the approval of the Secretary such preferred mortage may provide that the sole recourse against the purchaser of such a passenger vessel under such mortgage, and any of the notes secured thereby, shall be limited to repossession of the vessel by the United States and the assignment of insurance claims, if the purchaser shall have complied with all provisions of the mortgage other than those relating to the payment of principal and interest when due, and the obligation of the purchaser shall be satisfied and discharged by the surrender of the vessel, and all right, title, and interest therein to the United States. Such vessel upon surrender shall be (1) free and clear of all liens and encumbrances whatsoever, except the lien of the preferred mortgage, (2) in class, and (3) in as good order and condition ordinary wear and tear excepted, as when acquired by the purchaser, 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 United States of claims of the purchaser under such policies of insurance. The purchaser shall also comply with all the provisions of section 4211 of this Act. FINANCING CONSTRUCTION BY APPLICANT RATHER THAN PURCHASE FROM SECRETARY SEC. 3105. Where an eligible applicant under the terms of this part desires to finance the construction of a proposed vessel according to approved plans and specifications rather than purchase the same vessel from the Secretary as hereinabove authorized, the Secretary may permit the applicant to obtain and submit to him competitive bids from domestic shipyards for such work. If the Secretary considers the bid of the shipyard in which the applicant desires to have the vessel built fair and reasonable, he may approve such bid and become a party to the contract or contracts or other arrangements for the construction of such proposed vessel and may agree to pay a construction-differential subsidy in an amount determined by the Secretary in accordance with section 3103 of this Act, and for the cost of national-defense features. The construction-differential subsidy and payments for national-defense features shall be based on the lowest responsible domestic bid. No construction-differential subsidy, as provided in this section, shall be paid unless the said contract or contracts or other arrangements contain such provisions as are provided in this part to protect the interests of the United States as the Secretary deems necessary. Such vessel shall be documented under the laws of the United States as provided in section 3104 of this Act. The contract of sale, and the mortgage given to secure the payment of the unpaid balance of the purchase price, shall not restrict the lawful or proper use or operation of the vessel, except to the extent expressly required by law. ELIGIBLE SHIPYARDS; MATERIALS; CONDITIONS OF CONTRACTS SEC. 3106. (a) All construction in respect of which a construction-differential subsidy is allowed under this part shall be performed in a shipyard within the continental limits of the United States or within the States of Alaska or Hawai as the result of competitive bidding, after due advertisement, with the right reserved in the applicant to reject, and in the Secretary to disapprove, any or all bids. In all such construction the shipbuilder, subcontractors, materialmen, or suppliers shall use, so far as practicable, only articles, materials, and supplies of the growth, production, or manufacture of the United States as defined in |