an amount which bears the same proportion to the construction-differential subsidy paid by the Commission as such temporary period bears to the entire economic life of the vessel. No operating-differential subsidy shall be paid for the operation of such vessel for such temporary period.”

SEC. 16. Section 507 of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"SEC. 507. If a contract is made by the Commission under authority of this title for the construction and sale of a new vessel to replace a vessel then operated in foreign trade, which in the judgment of the Commission should be replaced because it is obsolete or inadequate for successful operation in such trade, the Commission is authorized, in its discretion, to buy such replaced vessel from the owner at a fair and reasonable valuation, which valuation shall not exceed the cost to the owner or any former owner plus the actual cost previously expended thereon for reconditioning, and less a reasonable and proper depreciation, based upon not more than a twenty-year life of the vessel, and apply the purchase price agreed upon to that portion of the construction cost of such new vessel which is to be borne by the purchaser thereof: Prorided, That the owner of such replaced vessel shall execute a bond, with one or more approved sureties, conditioned upon indemnifying the United States from all loss resulting from any existing lien against such vessel: And provided further, That such vessel has been documented under the laws of the United States for a period of at least ten years prior to the date of its purchase by the United States."

SEC. 17. The first sentence and the second sentence down to the first semicolon of section 509 of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"SEC. 509. Any citizen of the United States may make application to the Commission for aid in the construction of a new vessel to be operated in the foreign or domestic trade (excepting vessels engaged solely in the transportation of property on inland rivers and canals exclusively). If such application is approved by the Commission, the vessel may be constructed under the terms and conditions of this title, but no construction-differential subsidy shall be allowed. The Commission shall pay for the cost of national-defense features incorporated in such vessel. The applicant shall be required to pay the Commission not less than 25 per centum of the cost of such vessel (excluding cost of national-defense features) ;”.

SEC. 18. Section 604 of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"SEC. 604. If in the case of any particular foreign-trade route the Commission finds, after consultation with the Secretary of State, that the subsidy provided for in this title is in any respect inadequate to offset the effect of governmental aid paid to foreign competitors, it may grant such additional subsidy as it determines to be necessary for that purpose: Provided, That no such additional subsidy shall be granted except upon an affirmative vote of four of the members of the Commission."

SEC. 19. Section 606 (5) of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"(5) that when at the end of any ten-year period during which an operatingdifferential subsidy has been paid, or when prior to the end of any such tenyear period the contract shall be terminated, if the net profit of the contractor on his subsidized vessels and services incident thereto during such period or time (without regard to capital gains and capital losses), after deduction of depreciation charges based upon a twenty-year life expectancy of the subsidized vessels has averaged more than 10 per centum per annum upon the contractor's capital investment necessarily employed in the operation of the subsidized vessels, services, routes, and lines, the contractor shall pay to the United States an amount equal to one-half of such profits in excess of 10 per centum per annum as partial or complete reimbursement for operating-differentialsubsidy payments received by the contractor for such ten-year period, but the amount of excessive profit so recaptured shall not in any case exceed the amount of the operating-differential-subsidy payments theretofore made to the contractor for such period under such contract and the repayment of such reimbursement to the Commission shall be subject to the provisions of section 607 ;".

SEC. 20. The last sentence of the first paragraph of section 607 (b) of the Merchant Marine Act, 1936, is hereby amended to read as follows: "The proceeds of all insurance and indemnities received by the contractor on account

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of total loss of any subsidized vessel and the proceeds of any sale or other disposition of such vessel shall also be deposited in the capital reserve fund." SEC. 21. Section 607 (b) of the Merchant Marine Act, 1936, is hereby amended by adding at the end thereof a new sentence to read as follows: "The contractor may, with the consent of the Commission, pay from said fund any sums owing but not yet due on notes secured by mortgages on subsidized vessels." SEC. 22. The second paragraph of section 607 (c) of the Merchant Marine Act, 1936, is amended to read as follows:

"If the profits, without regard to capital gains and capital losses, earned by the business of the subsidized vessels and services incident thereto exceed 10 per centum per annum and exceed the percentage of profits deposited in the capital reserve fund, as provided in subsection (b) of this section, the contractor shall deposit annually such excess profits in this reserve fund. From the special reserve fund the contractor may make the following disbursements and no others:".

SEC. 23. Section 607 (c) (2) of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"(2) Reimbursement to the contractor's general funds for current operating losses on completed voyages of subsidized vessels whenever the Commission shall determine it is improbable that such current losses will be made up by profits on other voyages during the current year;".

SEC. 24. The Merchant Marine Act, 1936, is hereby amended by inserting two new subsections after subsection (e) of section 607 to read as follows:

"(f) Unless otherwise provided in the operating-differential-subsidy contract, upon the termination of any such contract, the reserve funds required under this Act shall be the property of the contractor, except for such amounts as may be due the United States.

"(g) With the approval of the Commission, the contractor may voluntarily increase the amount of either or both reserve funds by depositing in such fund or funds any or all of the earnings otherwise available for distribution to stockholders, or may transfer funds from the special reserve funds to the capital reserve fund."

SEC. 25. Subsection (f) of section 607 of the Merchant Marine Act, 1936, is amended to read as follows:

"(h) The earnings of any contractor receiving an operating-differential subsidy under authority of this Act, which are deposited in the contractor's reserve funds as provided in this section, except earnings withdrawn from the special reserve funds and paid into the contractor's general funds or distributed as dividends or bonuses as provided in paragraph 4 of subsection (c) of this section, shall be exempt from all Federal taxes. Earnings withdrawn from such special reserve fund shall be taxable as if earned during the year of withdrawal from such fund."

SEC. 26. Section 609 of the Merchant Marine Act, 1936, is hereby amended by striking out the letter "(a)" and by repealing subsection (b) thereof. SEC. 27. Section 610 of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"SEC. 610. An operating-differential subsidy shall not be paid under authority of this title on account of the operation of any vessel which does not meet the following requirements: (1) The vessel shall be of steel or other acceptable metal, shall be propelled by steam or motor, shall be as nearly fireproof as practicable, shall be built in a domestic yard (except as provided in section 502 (b)) or shall have been documented under the laws of the United States not later than February 1, 1928, or actually ordered and under construction for the account of citizens of the United States prior to such date, and shall be documented under the laws of the United States during the entire life of the subsidy contract; and (2) if the vessel shall be constructed after the passage of this Act it shall be either a vessel constructed according to plans and specifications approved by the Commission and the Secretary of the Navy, with particular reference to economical conversion into an auxiliary naval vessel, or a vessel approved by the Commission and the Navy Department as otherwise useful to the United States in time of national emergency."

SEC. 28. The Merchant Marine Act, 1936, is hereby amended by adding a new section at the end of title VI thereof to read as follows:

"SEC. 611. (a) The contractor, upon compliance with the provisions of this section, may transfer to foreign registry the vessels covered by an operatingdifferential-subsidy contract held by him in the event that the United States defaults upon such contract or cancels it without just cause. Any contractor

desiring to transfer any such vessel to foreign registry upon such default or cancelation shall file an application to writing with the Commission setting forth its contentions with respect to the lack of just cause or lawful grounds for such default or cancelation. The Commission shall afford the contractor an opportunity for a hearing within twenty days after such contractor files written application therefor, and, after the testimony, if any, in such hearing has been reduced to writing and filed with the Commission, it shall, within a reasonable time, grant or deny the application by order.

"(b) If any such application is denied, the contractor may obtain a review of the order of denial in the United States Court of Appeals for the District of Columbia, by filing in such court, within twenty days after the entry of such order, a written petition praying that the order of the Commission be set aside. A copy of such petition shall be forthwith served upon any member of the Commission, or upon any officer thereof designated by the Commission for that purpose, and thereupon the Commission shall certify and file in the court a transcript of the record upon which the order complained of was entered. Upon the filing of such transcript such court shall have exclusive jurisdiction to determine whether such cancelation or default was without just cause, and to affirm or set aside such order. The judgment and decree of the court affirming or setting aside any such order of the Commission shall be final.

"(c) No transfer of vessels to foreign registry under this section shall become effective until any indebtedness to the Government or to any citizen of the United States, secured by such vessels, has been paid or discharged, and until after the expiration of ninety days from the date of final determination of the application or the appeal, if any. Within such ninety-day period the Commission may (1) with the consent of the contractor purchase the vessels at cost to the contractor plus cost of capital improvements thereon, less 5 per centum annual depreciation upon such vessel, and the actual depreciated costs of capital improvements thereon, or (2) reinstate the contract and adjust or settle, to the satisfaction of the contractor, the default found by the Commission or the court to exist."

SEC. 29. Section 708 of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"SEC. 708. The Commission may, if in its discretion financial aid is deemed necessary, enter into a contract with any charterer of its vessels for payment to such charterer of an operating-differential subsidy upon the same terms and conditions and subject to the same limitations and restrictions, where applicable, as are elsewhere provided in this Act with respect to payments of such subsidies to operators of privately owned vessels."

SEC. 30. Section 714 of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"SEC. 714. If the Commission shall find that any trade route (determined by the Commission to be an essential trade route as provided in section 211 of this Act) cannot be successfully developed and maintained and the Commission's replacement program cannot be achieved under private operation of such trade route by a citizen of the United States with vessels registered under the laws thereof, without further Government aid in addition to the financial aids. authorized under titles V and VI of this Act, the Commission is authorized to have constructed, in private shipyards or in navy yards, the vessel or vessels: of the types deemed necessary for such trade route, and to demise such new vessel or vessels on bare-boat charter to the American-flag operator established on such trade route, without advertisement or competition, upon an annual charter hire of not less than 5 per centum of the construction cost of such new vessel or vessels. Such charter may contain an option to the charterer to purchase such vessel or vessels from the Commission, within five years after the execution of the charter, upon the same terms and conditions as are provided in title V for the purchase of new vessels from the Commission and upon the agreement of the purchaser to pay interest at the rate of 32 per centum per annum upon all unpaid portions of the purchase price from the date of the delivery of the vessel to the purchaser under the charter agreement with credit on the purchase price for all charter-hire theretofore paid by the purchaser on account of such charter. If the option to purchase is exercised, the deferred payments of the purchase price shall not be extended beyond the life of the vessel computed on a twenty-year expectancy."

SEC. 31. Section 802 of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"SEC. 802. Every contract executed by the Commission under authority of title V of this Act shall provide that

"In the event the United States shall, through purchase or requisition, acquire ownership of the vessel or vessels on which a construction-differential subsidy was paid, the owner shall be paid therefor the fair actual value thereof, but in no event shall such payment exceed the actual depreciated construction cost there (together with the actual depreciated cost of capital improvements thereon, but excluding the cost of national-defense features) less the depreciated amount of construction-differential subsidy theretofore paid incident to the construction or reconditioning of such vessel or vessels, or the fair and reasonable scrap value of such vessel as determined by the Commission, whichever is the greater. Such determination shall be final. In computing the depreciated value of such vessel, depreciation shall be computed on each vessel on the schedule adopted by the Bureau of Internal Revenue for income-tax purposes.

"The foregoing provision respecting the requisition or the acquisition of ownership by the United States shall run with the title to such vessel or vessels and be binding on all owners thereof."

SEC. 32. Section 803 of the Merchant Marine Act, 1936, is hereby amended by striking out the provisos, and inserting in lieu thereof the following: "except that the Commission, by a vote of four members (except as provided in section 201 (a) may grant an exemption in writing from the provisions of this section, upon such terms and conditions and for such specific period of time as the Commission deems necessary or appropriate to carry out the policy of this Act, in any case where-

"(a) The Commission finds that the enforcement of such provisions is not necessary to safeguard the economical and fair application of subsidies paid the contractor under this Act, and that such exemption will promote economy or efficiency of service by the merchant marine; and

"(b) The person performing the services or supplying the facilities agrees to account for and pay over to the contractor any and all profits resulting from performing such services or suplying such facilities."

SEC. 33. The proviso in section 804 of the Merchant Marine Act, 1936, is amended to read as follows: "Provided, however, That under special circumstances and for good cause shown the Commission may, in its discretion, waive the provisions of this section as to any contractor, for a specific period of time, by affirmative vote of four of its members, except as otherwise provided in subsection 201 (a)".

SEC. 34. Section 805 (b) of the Merchant Marine Act, 1936, is hereby amended by inserting a period after the word "contractor" at the end thereof.

SEC. 35. Section 805 (c) of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"(c) No director, officer, or employee (which terms shall be construed in the broadest sense to include, but not to be limited to, managing trustee or other administrative agent) shall receive from any contractor, holding a contract authorized by title VI or title VII of this Act, and its affiliate, subsidiary, associate, directly or indirectly, wages, salary, allowances, or compensation in any form for personal services which will result in such person's receiving a total compensation for his personal services from such sources exceeding in amount or value $25,000 per annum, and no such person or concern shall be qualified to receive or thereafter to hold any contract under this part if such person or concern, its subsidiary, affiliate, or associate, pays or causes to be paid, directly or indirectly, wages, salary, allowances, or compensation in any form for personal services which result in such person's receiving a total compensation for his personal services from such sources exceeding in amount or value $25,000 per annum, except that the Commission, by a vote of four members (except as provided in section 201 (a)) may grant an exemption in writing from the provisions of this subsection, upon such terms and conditions and for such specific period of time as the Commission deems necessary or appropriate to carry out the policy of this Act, in any case where the Commission finds that such exemption is justified by reason of the character or extent of shipping operations conducted by the contractor, and that the enforcement of any such provisions is not necessary to safeguard the economical and fair application of subsidies paid the contractor under this Act, or that such exemption will promote economy or efficiency of service.”

SEC. 36. The last sentence of section 805 (d) of the Merchant Marine Act, 1936, is hereby amended to read as follows: "No contractor shall receive an

operating-differential subsidy for the operation of any chartered vessel save and except during a period of actual emergency determined by the Commission, or except as provided in section 708."

SEC. 37. Section 807 of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"SEC. 807. It shall be unlawful for any person employed or retained by any shipbuilder or ship operator holding or applying for a contract under the provisions of this Act, or employed or retained by any subsidiary, affiliate, associate, or holding company of such shipbuilder or ship operator, to present, advocate, or oppose any matter within the scope of the Shipping Act, 1916, as amended; the Merchant Marine Act, 1920, as amended; the Merchant Marine Act, 1928, as amended; the Intercoastal Shipping Act, 1933; or this Act, before the Congress or any committee thereof, or before the Commission, unless such shipbuilder or ship operator shall have previously filed with the Commission in such form and detail as the Commission shall by rules and regulations or order prescribe as necessary or appropriate in the public interest, a statement of the subject matter in respect of which such person is retained or employed, the nature and character of such retainer or employment, and the amount of compensation received or to be received by such person, directly or indirectly, in connection therewith. It shall be the duty of every such person so employed or retained to file with the Commission within thirty days after the close of each calendar month during such retainer or employment, in such form and detail as the Commission shall by rules and regulations or order prescribe as necessary or appropriate in the public interest, a statement of the expenses incurred and the compensation received by such person during such month in connection with such retainer or employment. Whosoever shall violate this provision shall be guilty of a misdemeanor."

SEC. 38. Section 810 of the Merchant Marine Act, 1936, is hereby repealed. SEC. 39. Section 905 (a) of the Merchant Marine Act, 1936, is hereby amended to read as follows:

"(a) The words 'foreign commerce' or 'foreign trade' mean commerce or trade between the United States, its Territories or possessions, or the District of Columbia and a foreign country."

SEC. 40. The Merchant Marine Act, 1936, is hereby amended by striking out the words "construction subsidy" wherever they appear in said Act and inserting in lieu thereof the words "construction-differential subsidy".

SEC. 41. The Merchant Marine Act, 1936, is hereby amended by striking out the words "operating subsidy" wherever they occur in said Act and inserting in lieu thereof the words "operating-differential subsidy".

SEC. 42. Section 9 of the Shipping Act, 1916, is hereby amended by striking cut paragraphs 3 and 4 and inserting in lieu thereof the following:

"Except as provided in section 611 of the Merchant Marine Act, 1936, as amended, it shall be unlawful, without the approval of the United States Maritime Commission, to sell, mortgage, lease, charter, deliver, or in any manner transfer, or agree to sell, mortgage, lease, charter, deliver, or in any manner transfer, to any person not a citizen of the United States, or transfer or place under foreign registry or flag, any vessel or any interest therein (1) owned in whole or in part by any person a citizen of the United States, or (2) any vessel documented under the laws of the United States.

"Any vessel, or any interest therein chartered, sold, transferred, or mortgaged to a person not a citizen of the United States or placed under a foreign registry or flag, or operated in violation of any provision of this section, shall be forfeited to the United States, and whoever violates any provision of this section shall be guilty of a misdemeanor and subject to a fine of not more than $5,000 or to imprisonment for not more than five years, or both."

SEC. 43. The Intercoastal Shipping Act, 1933, is hereby amended by adding two new sections to be numbered "SEC. 4" and "SEC 5", to read as follows: "SEC. 4. Whenever the Commission finds that any rate, fare, charge, classification, tariff, regulation, or practice demanded, charged, collected, or observed by any carrier subject to the provisions of this Act is unjust or unreasonable, it may determine, prescribe, and order enforced a just and reasonable maximum or minimum, or maximum and minimum rate, fare, or charge, or a just and reasonable classification, tariff, regulation, or practice."

"SEC. 5. The provisions of this Act are extended and shall apply to every common carrier by water in interstate commerce, as defined in section 1 of the Shipping Act, 1916."

The Intercoastal Shipping Act, 1933, is further amended by striking out the words "SEC. 4" and inserting in lieu thereof the words "SEC. 6."