Public Policy and Law Alert
October 2008
Authors:
Darrell L. Conner
+1.202.661.6220
darrell.conner@klgates.com
Rolf Marshall
+1.202.661.6249
rolf.marshall@klgates.com
Yvette T. Wissmann
+1.202.661.3829
yvette.wissmann@klgates.com
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President Signs New Maritime Measures
into Law
Congress Provides Significant New Authorities and Funding to the
Maritime Administration
In a year of few significant legislative enactments and no Coast Guard Authorization bill,
a perennial favorite for maritime legislation, several significant maritime-related measures
were enacted during the final weeks of the 110th Congress, including provisions relating to
cargo preference, coastwise waivers, and the Title XI maritime loan guarantee program. The
new laws, recently signed by the President, were contained in the Duncan Hunter National
Defense Authorization Act for Fiscal Year 2009 (“NDAA FY09”) (S. 3001), enacted
October 14, 2008, and the Continuing Resolution for Fiscal Year 2009 (“CR FY09”) (P.L.
110-329), enacted September 30, 2008, and grant the Maritime Administration (“MarAd”)
significant new legal authorities and funds for key programs run by the agency. A summary
of key provisions is provided below.
Maritime Administration Obtains Additional Authorities in the
NDAA FY09
MarAd, the agency responsible for promoting the U.S.-flag maritime industry, was the
beneficiary of several new provisions enacted in Title XXXV of the NDAA FY09. Among
the provisions are new measures that grant additional cargo preference authority to the
agency and enhance the agency’s role in administrative waivers of the coastwise laws. In
addition, the new laws modify and reauthorize current programs such as the Small Shipyard
Assistance Program, the Maritime Security Fleet Maintenance and Repair Pilot Project, and
U.S. Merchant Marine Academy and State maritime academy programs, and also amend
the statutory requirements for the use of foreign riding gangs on commercial U.S.-flag
ships under contract or charter to the Department of Defense (“DoD”).
Transportation in American Vessels of Government Personnel and Certain Cargoes
(Section 3511). With enactment of this provision, MarAd is granted additional authority
to ensure shippers and shipper agencies are complying with the cargo preference laws,
specifically providing sole authority to MarAd for determining if programs administered
by other agencies are subject to the cargo preference requirements under the Cargo
Preference Act of 1954. Prior to this change, those determinations were established by
the administering agencies under regulations promulgated by MarAd. For the first time,
the new law would provide for remedies for non-compliance with the requirements by:
imposing possible civil penalties of up to $25,000 per violation (with each day being
potentially a separate violation); giving MarAd the authority to require “make up” cargoes
for U.S.-flag vessels when violations have occurred; and granting MarAd broad authority
to take measures under the Federal Acquisition Regulations to address violations. It
also clarifies the scope of the cargo preference laws to “eliminate[] confusion over the
application of cargo preference.” These changes are intended to ensure that agencies
engaged in international food aid or other federal assistance programs are requiring certain
cargoes to be transported on U.S.-flag vessels.
Public Policy and Law Alert
Consultation on Jones Act Waivers (Section 3510).
A new statutory requirement that MarAd agree with
any decision to waive the inspection and navigation
laws of the United States under 46 U.S.C. 501 was
included in the new law. A primary purpose of the
provision is to address the increased propensity of the
Executive Branch to waive the Jones Act in times of
national emergencies without a prior evaluation of the
compelling need for such waivers or the availability
of U.S.-flag assets to handle affected cargoes. The
previous law permitted the head of each department
or agency responsible for the administration of
the navigation and inspection laws (currently the
Department of Homeland Security) the authority to
waive those laws when necessary in the interest of
national defense. The new law requires MarAd to make
an affirmative determination that U.S.-flag vessels
are not available to address the situation prior to the
issuance of such navigation and inspection waivers
(which include the coastwise laws).
State Maritime Academies (Sections 3501 and 3503).
The State Maritime Academies were authorized to
receive $10.9 million for the maintenance and repair
of federally-owned State Maritime Academy school
training ships. Additionally, State Maritime Academy
cadets who participate in the Student Incentive Payment
(“SIP”) Program are authorized to receive $4,000
annually to offset school costs. The new law increases
the SIP amount from $4,000 to $8,000 per year and
allows cadets to use the payments for tuition.
Riding Gang Member Requirements (Section 3504).
Congress, in two separate prior legislative enactments,
restricted the use of foreign riding gang members
on U.S.-flag vessels, one pertaining to U.S.-flag
operators generally (administered by the U.S. Coast
Guard (“USCG”)) and a more restrictive requirement
for vessels engaged in defense contracting or cargo
carriage administered by DoD. (Riding gang members
are persons not part of the required crew complement
performing certain maintenance and repair functions.)
The new law would make the DoD riding gang
requirements for U.S.-flag vessels more consistent
with USCG requirements, and specifically exempts
DoD-owned vessels from both the general and DoDspecific riding gang limitations.
Maintenance and Repair Reimbursement Program
for Maritime Security Fleet (Section 3505). Public
Law 109-163, enacted in January 2006, implemented
a mandatory maintenance and repair pilot program
for Maritime Security Program (“MSP”) participants
to encourage such work to be performed in shipyards
in the United States. Under the pilot program, MarAd
was required to enter into an agreement with one or
more MSP contractors, subject to appropriations, for
the maintenance and repair in a U.S. shipyard of one
or more vessels enrolled in the MSP program. That law
was interpreted to only apply to future, not current,
MSP contracts, and therefore it remained effectively
a voluntary program for MSP participants. The new
law changes the pilot program to try to address the
discrepancy so that MarAd can seek agreements for
maintenance and repair with existing MSP operators.
Assistance for Small Shipyards and Maritime
Communities (Section 3508). Congress established a
small shipyard assistance program in 2005 to provide
grants, loans and loan guarantees to U.S. shipyards
for capital improvements and training programs in
maritime communities. That statute is amended to
improve the program and expand the eligibility of
small shipyards and workers that may qualify for
assistance. The program received $10 million in
Federal appropriations in FY08, which was used to
provide grants to 19 shipyards.
U.S. Merchant Marine Academy. In addition to the
usual authorizations of appropriations for the U.S.
Merchant Marine Academy, Congress granted authority
to the Maritime Administrator to transfer MarAd
employees to the Academy and to contract with up to
25 “personal services contractors” to provide services
as adjunct professors to support Academy programs.
The new law would grandfather prior contracts, which
otherwise would have been out of compliance with
Federal requirements. Additionally, MarAd gains new
authority to accept and use money and property gifts
for the benefit of the Academy, and establishes an
“Academy Gift Fund” for such purposes.
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Public Policy and Law Alert
CR FY09 Provides Funding for Key
Maritime Programs
Congress failed to approve funding bills for continued
government operations in Fiscal Year 2009, which
began on October 1. To avoid a government shutdown,
Congress passed a “continuing resolution” funding
government programs at FY08 levels (with certain
exceptions). The CR FY09, however, did include
several appropriations bills providing full-year FY09
funding for military construction and the departments
of Defense, Veterans Affairs and Homeland Security.
MarAd programs did not receive FY09 appropriations,
and therefore are covered by the general continuing
resolution requirements on the obligation and
expenditure of funds by the agency, the only exception
being the Title XI loan guarantee program, which was
funded out of DoD appropriations. Notable programs
covered by the CR FY09 are as follows.
M a r i t i m e S e c u r i t y F l e e t P ro g r a m . T h e
Administration’s FY09 budget and the respective
House and Senate subcommittees recommended full
funding of $174 million for MSP. However, since the
Department of Transportation (“DoT”) was not among
those departments receiving full funding for FY09,
MSP operations were funded at the FY08 annual level
of $156 million for five months (through early March,
when the CR expires) until the Congress addresses
full-year funding for the program. This equates to
approximately $65 million in appropriations for MSP
for MarAd to allocate to MSP operators. Congress will
likely address the issue of full funding for MSP either
in a lame duck session later this year or when the new
111th Congress convenes as part of a larger package
to ensure full-year funding for Federal government
programs, either as part of an omnibus appropriations
bill or a longer-term continuing resolution.
Title XI Loan Guarantees. The Title XI Loan
Guarantee program received significant funding
for FY09, funding levels not seen since 2003. That
program provides “for a full faith and credit guarantee
by the United States Government to promote the
growth and modernization of the U.S. merchant
marine and U.S. shipyards.” In addition to continued
funding at FY08’s $5 million annual level until early
March through the continuing resolution affecting
DoT, Congress approved $48 million for the program
out of DoD’s National Defense Sealift Fund. The
result is approximately $50 million in new funding
for Title XI loan guarantees – $48 million full-year
funding out of DoD accounts plus $2 million under
the DoT continuing resolution – which could equate
to between $500 million and $1 billion in new project
loan guarantees.
Small Shipyard Assistance Program Funding. In
additional to reauthorizing and modifying the Small
Shipyard Assistance Program in the NDAA FY09,
Congress provided funding for the program through the
period of the continuing resolution until early March.
On a pro rata basis, during the period of the continuing
resolution, funding will be approximately $4 million.
State Maritime Academy School Training Ship
Funding. In addition to the annual programmatic
funding for all six of the State Maritime Academies,
the CR FY09 provided an additional $10 million out of
the DoD’s National Defense Sealift Fund for upgrading
a federally-owned training ship used by one of the
State Academies.
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