§ 53710. Contents of obligations

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(a)In General.— An obligation guaranteed under this chapter must—

(1)provide for payments by the obligor satisfactory to the Secretary or Administrator;

(2)provide for interest (exclusive of guarantee fees and other fees) at a rate not more than the annual rate on the unpaid principal that the Secretary or Administrator determines is reasonable, considering the range of interest rates prevailing in the private market for similar loans and the risks assumed by the Secretary or Administrator;

(3)have a maturity date satisfactory to the Secretary or Administrator, but—

(A)not more than 25 years after the date of delivery of the vessel used as security for the guarantee; or

(B)if the vessel has been reconstructed or reconditioned, not more than the later of—

(i)25 years after the date of delivery of the vessel; or

(ii)the remaining years of useful life of the vessel as determined by the Secretary or Administrator; and

(4)provide, or a related agreement must provide, that if the vessel used as security for the guarantee is a delivered vessel, the vessel shall be—

(A)in class A–1, American Bureau of Shipping, or meet other standards acceptable to the Secretary or Administrator, with all required certificates, including marine inspection certificates of the Coast Guard, and with all outstanding requirements and recommendations necessary for class retention accomplished, unless the Secretary or Administrator permits a deferment of repairs necessary to meet these requirements;

(B)well equipped, in good repair, and in every respect seaworthy and fit for service; and

(C)documented under the laws of the United States for the term of the guarantee of the obligation or until the obligation is paid in full, whichever is sooner.

(b)Provisions for Certain Passenger Vessels.—

(1)In general.— With the Administrator’s approval, if the vessel used as security for the guarantee is a passenger vessel having the tonnage, speed, passenger accommodations, and other characteristics described in section 503 of the Merchant Marine Act, 1936, an obligation guaranteed under this chapter or a related agreement may provide that—

(A)the only recourse by the United States Government against the obligor for payments under the guarantee will be repossession of the vessel and assignment of insurance claims; and

(B)the obligor’s liability for payments under the guarantee will be satisfied and discharged by the surrender of the vessel and all interest in the vessel to the Government in the condition described in paragraph (2).

(2)Surrender of vessel.—

(A)In general.— On surrender, the vessel must be—

(i)free and clear of all liens and encumbrances except the security interest conveyed to the Administrator under this chapter;

(ii)in class; and

(iii)in as good order and condition (ordinary wear and tear excepted) as when acquired by the obligor.

(B)Covering deficiencies by insurance.— To the extent covered by insurance, a deficiency related to a requirement in subparagraph

(A)may be satisfied by assignment of the obligor’s insurance claims to the Government.

(c)Other Provisions To Protect Security Interests and Provide for the Financial Stability of the Obligor.— An obligation guaranteed under this chapter and any related agreement must contain other provisions, which shall include—

(1)provisions for the protection of the security interests of the Government (including acceleration, assumption, and subrogation provisions and the issuance of notes by the obligor to the Secretary or Administrator), liens and releases of liens, payment of taxes; and

(2)any other provisions that the Secretary or Administrator may prescribe.

(Pub. L. 109–304, § 8(c), Oct. 6, 2006, 120 Stat. 1610; Pub. L. 109–163, div. C, title XXXV, § 3507(a)(1)(D), (2)(C), Jan. 6, 2006, 119 Stat. 3555; Pub. L. 110–181, div. C, title XXXV, § 3522(a)(5), (9)(A), (10)(B), (b), Jan. 28, 2008, 122 Stat. 598; Pub. L. 116–92, div. C, title XXXV, § 3506(g), Dec. 20, 2019, 133 Stat. 1972.)

During review of this bill, the American Bureau of Shipping, through counsel, explained that it disagrees with an existing interpretation by the Maritime Administration of language restated in subsection (a)(4)(A) of this section, and requested the Committee to clarify that this codification should not be construed as a ratification of that regulatory interpretation. The Committee therefore states that this codification should not be construed as an expression of any opinion whatsoever concerning any such administrative interpretation.

In subsection (a)(3), the words “subject to the provisions of paragraph

(2)of subsection

(c)of this section” are omitted as unnecessary.

In subsection (a)(4)(B), the words “well equipped, in good repair, and in every respect seaworthy and fit for service” are substituted for “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” to eliminate unnecessary words.

In subsection (b)(1), the reference to section 503 of the Merchant Marine Act, 1936, is substituted for the reference to “subchapter V of this chapter” because the relevant characteristics referred to in the text are contained in that section and because that section is part of the construction-differential subsidy program, which is not being restated.

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