Merchant Marine and Defense Act of 1989

Title I: General Provisions - Merchant Marine and Defense Act of 1989 - Sets forth congressional findings regarding the maritime industries and national defense. Declares that it is the policy of the United States to develop the necessary maritime resources to meet U.S. national defense and economic security requirements.

Title II: Operating Differential Subsidy Reform - Amends provisions of the Merchant Marine Act, 1936 relating to the operating-differential subsidy (ODS) to: (1) allow the Secretary of Transportation, in determining whether to approve an application or revise a contract, to consider the availability of funding; and (2) prohibit the Secretary, in making such determinations, from making a distinction between persons already receiving such aid and new applicants. Revises the definition of "essential service" to include any operation determined by the Secretary to be necessary for national defense or for competitive and economical operation of U.S.-flag vessels in foreign commerce. Requires, for ODS aid, that a vessel be a militarily useful dry cargo vessel less than 20 years old and U.S.-documented.

Directs the Secretary, notwithstanding any other law, to allow any qualified U.S. operator to qualify any militarily useful vessels for an ODS if the operator applies within one year of enactment of this Act, meets the requirements for such aid, and meets other requirements. Defines "qualified operator" to mean a U.S. citizen who owned, during the two years ending on the date of enactment of this Act, oceangoing vessels documented in the United States.

Ends the Secretary's authority to determine suitable ocean routes and lines to foreign ports.

Ends the ODS eligibility requirement that vessels be operating in an essential service.

Directs the Secretary to designate ocean services, routes, and lines to not be essential services for purposes of ODS. Prohibits the Secretary from designating a route after two years after enactment of this Act unless operation on that route under an ODS is essential for national security.

Repeals provisions excluding certain vessels from eligibility for an ODS.

Reduces the maximum period for ODS contracts from 20 to ten years.

Modifies the formula for determining the amount of ODS payments. Eliminates ODS coverage for insurance, maintenance and repair, and subsistence of officers and crews. Shields contracts in effect on the date of enactment of this Act from the changes until specified events occur.

Changes the definition of "collective bargaining costs."

Requires wage subsidies to be paid semimonthly rather than monthly.

Prohibits the Secretary from entering into or making payments on ODS contracts for a dry cargo or dry bulk vessel that is more than 25 years old or a tanker vessel that is more than 20 years old. (Current law prohibits ODS payments for vessels that are more than 25 years old.)

Directs the Secretary, in awarding and revising ODS contracts, to ensure that disruptions to parties to existing contracts are minimized.

Provides for a reduction of ODS payments for a particular voyage in proportion to the amount of revenue payable under cargo preference provisions, subject to exception.

Authorizes the Secretary to carry out ODS provisions so as to provide incentives for improving the efficiency of operation of vessels for which an ODS is paid.

Allows the Secretary to authorize a contractor receiving an ODS for operations of a line haul vessel to own or operate certain foreign flag vessels that act as feeder vessels for that line hall vessel.

Authorizes the Secretary, notwithstanding specified provisions, to enter into ODS contracts with U.S. citizens for the operation of any militarily useful vessel built in a foreign shipyard if the citizen has a foreign vessel acquisition right issued by the Secretary and if other requirements are met.

Directs the Secretary to establish a program for the issuance of a foreign vessel acquisition right with respect to each oceangoing merchant vessel over a specified number of deadweight tons for which construction in the United States is started on or after enactment of this Act. Requires the program to provide for the assignment by the Secretary of the rights to any U.S. citizen. Requires amounts received as revenue under the program to be deposited in the Procure and Charter Shipyard Improvement Fund established under title XIV of the Merchant Marine Act, 1936 for use under that title. Declares that these provisions shall not be construed to authorize any vessel built or acquired outside the United States to engage in the coastwise trade.

Authorizes the Secretary: (1) notwithstanding specified provisions, to enter into ODS contracts for one year after enactment of this Act with any qualified operator for the operation of any militarily useful vessel built in a foreign shipyard if the vessel meets certain requirements; and (2) on and after the date of enactment of this Act to enter into ODS contracts for operation of any vessels eligible for such subsidies by reason of these provisions, the contracts to be effective after the vessels are delivered and documented under U.S. laws.

Amends the Merchant Marine Act, 1936 to modify the definition, for purposes of provisions relating to cargo preference, of the term "privately owned United States-flag commercial vessels" so as to allow certain foreign-built vessels to carry preference cargo, subject to limitation. Authorizes the Secretary, notwithstanding cargo preference limitations, to declare a foreign-built vessel eligible for preference cargo, if the Secretary is authorized to enter into an ODS contract with respect to that vessel and if other conditions are met.

Title III: Procure and Charter Program - Part A: Design and Construction of Vessels and Improvement of Shipyards - Directs the Secretary of Transportation (Secretary) and the Secretary of Defense to establish a program under which amounts in the Procure and Charter Revolving Fund (Fund) must be used to: (1) fund contracts for the design in the United States of military useful merchant vessels; (2) fund contracts for the construction of such vessels in privately owned U.S. shipyards; and (3) provide assistance to such shipyards for improvements to equipment, systems, and techniques.

Directs the Secretary to enter into contracts for the: (1) design and construction of prototypes of militarily useful merchant vessels; and (2) construction of militarily useful merchant vessels in accordance with such designs and prototypes. Sets forth vessel requirements, contractor eligibility requirements, and contract restrictions. Directs the Secretary to require that, as part of the contract, any person awarded a contract improve facilities and management systems of the person and achieve improvements in productivity and cost reductions through serial construction.

Authorizes the Secretary to provide vessel construction contractors under these provisions financial assistance in an amount equal to one-half of the costs of improvements in vessel construction equipment, systems, and techniques to be used in carrying out the contract. Prohibits the assistance unless the Secretary determines that the assistance will result in reduced total costs and increased productivity in carrying out construction under these provisions. Limits the amount of the assistance. Authorizes appropriations from the fund as necessary for constructing an average of 12 vessels in each of the FY 1989 through 2000.

Part B: Vessel Charter and Sale - Directs the Secretary to establish a program for the chartering and disposing of vessels constructed under part A of this title.

Authorizes the Secretary to enter into contracts with any eligible person for the charter by the person of such vessels. Sets forth charter contract terms.

Directs the Secretary, as a condition of a contract, to require: (1) a deposit to ensure the faithful performance of all requirements of the contracts, including indemnity against liens on the vessel; and (2) insurance at the expense of the person entering into the contract.

Sets forth contracting procedures. Allows the Secretary to terminate a contract: (1) on a presidential proclamation that termination is required for national defense; and (2) during a national emergency declared by the President. Directs the Secretary, in chartering vessels, to avoid conferring any unfair advantage on a charterer.

Authorizes the Secretary of Transportation (Secretary) and the Secretary of Defense to contract for the charter of any vessel constructed under part A of this title, for use by the Department of the Navy, at rates determined by the Secretary (but not less than the prevailing commercial rate) for not more than two years.

Authorizes the Secretary of Defense to contract with any private person to subcharter any vessel constructed under part A, unless the operation of the vessel under that contract will adversely affect the commercial operation of a vessel documented under U.S. laws.

Authorizes the Secretary of Transportation (Secretary) to sell or otherwise dispose (including by transfer to the National Defense Reserve Fleet) of a vessel constructed under this title if the vessel is not under contract and no reasonable contract offers have been received, and if other conditions are met. Mandates that the Secretary require as compensation for a vessel sold or disposed of an amount at least as much as the U.S. cost in constructing the vessel, less depreciation. Directs the Secretary, in disposing of vessels, to avoid conferring any unfair advantage on any person who acquires the vessel. Authorizes the Secretary to dispose of a vessel to any person for purposes of scrapping the vessel.

Part C: Procure and Charter Revolving Fund - Establishes in the Treasury the Procure and Charter Revolving Fund, to consist of amounts deposited in and transferred to the Fund under these provisions.

Directs the Secretary of the Treasury to: (1) deposit in the Fund all proceeds of charters, sales, and disposals under part B of this title, all duties under specified provisions of the Tariff Act of 1930, all proceeds of issuance of foreign vessel acquisition rights under provisions of the Merchant Marine Act, 1936 as amended by this Act, and interest on such amounts; and (2) transfer to the Fund, for each of the FY 1990 through 2000, any difference between the deposited amounts and the amount authorized to be appropriated under part A of this title. Makes amounts in the Fund available to the Secretary for vessel design and construction and shipyard assistance.

Terminates the Fund, with the balance reverting to the general fund of the Treasury, upon a finding by the Secretary that amounts in the Fund plus anticipated receipts are insufficient for funding construction contracts. Mandates deposit in the general fund of the Treasury of any amounts received after termination of the Fund.

Part D: General Provisions - Directs the Secretary to: (1) submit an annual report to the Congress regarding matters under this title; and (2) issue regulations to carry out this title.

Title IV: Simplification of Procedure for Long-Term Military Leases - Amends Federal law to exempt noncombatant oceangoing vessels from provisions relating to authorization required for certain long-term leases of vessels and aircraft by military departments. Directs the Secretary of Defense to submit an annual report to specified committees of the Congress describing each case in which the Department of the Navy is seeking, or considering seeking, to enter into a long-term charter of an oceangoing vessel under the provisions amended by this title.

Title V: Vessel Prototype Design and Construction Program - Directs the Secretary of Transportation to: (1) establish a program for the design and construction of dry and liquid cargo vessel prototypes and troop carrying vessel prototypes; (2) establish guidelines for such design and construction; and (3) conduct a series of competitions for the selection of designs for vessel prototypes. Sets forth design criteria.

Authorizes the Secretary to contract for the production of vessel prototype designs. Directs the Secretary to encourage such cooperation between naval architecture firms and ship building firms as may facilitate the use of modern production techniques.

Directs the Secretary to contract for the construction in private U.S. shipyards of one of each vessel prototype design. Sets forth criteria for selection of shipyards. Directs the Secretary to base contract awards, to the maximum extent practicable, on consideration (in addition to other considerations required by law) of maintaining the U.S. ship building mobilization base.

Requires prototypes constructed under this title to be chartered or otherwise disposed of under the program established under part B of title III of this Act.

Requires information obtained through the design and construction of prototypes to be made available to private shipyards and ship suppliers.

Title VI: Federal Ship Mortgage Insurance - Amends the Merchant Marine Act, 1936 to exclude from the definition of "vessel," as used in provisions relating to Federal ship mortgage insurance: (1) any vessel used primarily for offshore exploration or exploitation of petroleum; and (2) barges, tugs, towboats, and workboats.

Title VII: Tax Incentives for Modernization of U.S. Shipyards - Amends provisions of the Merchant Marine Act, 1936 and the Internal Revenue Code regarding tax incentives and relating to merchant marine capital construction funds to define "reconstruction" to include general repairs to a qualified vessel to the extent that their costs exceeds a specified amount. Adds references to shipyards to the same provisions of both Acts. (Current law provides the incentives only for certain vessels and related barges or containers.)

Amends the Internal Revenue Code to add qualified vessels and qualified shipyards to the list of exceptions to the termination of the regular percentage, for purposes of determining the amount of the investment tax credit. Restores, for such vessels and shipyards, the depreciation schedule which was in effect on the day before the enactment of the Tax Reform Act of 1986.

Title VIII: Tariff and Trade Reform for Vessel Construction and Operation - Amends the Tariff Act of 1930 to impose, when purchased or performed in a foreign country, an ad valorem duty on: (1) modifications and permanent additions to the hull, fittings, or superstructure of a vessel, including inspections required by the classifications societies, insurers, and governmental entities; and (2) vessel drydocking and all services necessary for drydocking. Excluding emergency repairs from imposition of such duty. Relieves the owner or operator of a vessel from liability for the duty if the owner or operator elects to spend, in a shipyard in the United States within five years, for equipment, repair parts or materials, or repairs, a cumulative amount at least equal to the duty. Makes an owner or operator who fails to so spend liable for the duty plus accrued interest. Requires amounts received as a duty to be deposited into the Procure and Charter Revolving Fund established by this Act.

Title IX: Expansion of Cargo Reserved for U.S. Vessels - Amends cargo preference provisions of the Merchant Marine Act, 1936 to require that 100 percent of the agricultural and nonagricultural ocean-borne cargoes generated by the U.S. Government, including cargoes generated as a result of a foreign aid cash transfer program, be transported on privately owned U.S.-flag commercial vessels, subject to exception. (Current law requires that 50 percent of nonagricultural and 25 percent of certain agricultural commodities be transported on U.S.-flag commercial vessels.) States that, in authorizing a vessel which is not U.S.-registered to transport any cargo which is foreign assistance subject to the provisions being amended, the Secretary of Transportation must require that 50 percent of the cargo be transported on U.S.-registered vessels and the remainder on vessels registered in the country receiving the assistance.

Title X: Increasing Defense Readiness of United States Merchant Marine - Amends the Merchant Marine Act, 1936 to direct the Secretary of Transportation, before approving any assistance under such Act for the construction of a vessel intended for use in the coastwise trade, to submit the plans to the Secretary of Defense for review and approval.

Directs the Secretary of Defense to either: (1) certify that the plans are suitable for construction of a vessel which is capable of economical and expeditious conversion to use during war or national defense emergency; or (2) request changes in the plans necessary to enable that conversion.

Directs the Secretary of Transportation, subject to appropriations, to pay to a person constructing a vessel in the United States after enactment of this Act to be operated in the coastwise trade, before construction begins, the costs of: (1) constructing any national defense features; (2) maintaining the features for 15 years; (3) additional operating expenses because of the features during that period; and (4) lost revenue during that period because of reduced cargo space.

Declares that it is the sense of the Congress that: (1) rates paid by the Department of Defense for the carriage of ocean-borne cargoes should fully compensate the vessel owner and could be based on established commercial rates; and (2) contracts for such carriage should be awarded, compatible with sound business practice (including cost minimization), so as to enhance the strategic sealift capabilities of the U.S.-flag commercial merchant fleet.

Prohibits the Department of Defense, subject to exception and after enactment of this Act, from entering into any contract for carriage of cargoes on a vessel which was: (1) not U.S.-built; or (2) documented in the United States after enactment of this Act.

Directs the Secretary of Transportation (Secretary) and the Secretary of Defense to establish a national maritime industries research and development program to carry out commercial water-borne and commercial intermodal transportation and strategic sealift-related research and development. Makes the Secretary responsible for administering the program and lists areas which must be included in the program. Directs the two Secretaries to jointly establish the Maritime Research and Development Advisory Board.

Directs the Secretary, as a condition of a research and development project under these provisions, to require that private industry pay a portion of the cost of the project. Limits the Federal share to 66 percent and the non-Federal share to a specified dollar amount for each fiscal year. Authorizes appropriations for FY 1991 through 2001.

Title XI: Maritime Labor Reform - Repeals provisions of Federal law relating to merchant mariners' documents.

Authorizes the Secretary of Transportation, notwithstanding any law, to issue regulations to: (1) allow performance of both deck and engine duties on vessels by qualified personnel; (2) establish the numbers and qualifications of the crew and the watch on vessels; (3) create and keep current licensed and unlicensed personnel ratings; and (4) govern the requirements and standards for documentation of licensed and unlicensed personnel of vessel crews.

Directs the Secretary to conduct a study and report to the Congress regarding methods for reducing allowable compensation for port and shipyard workers' injuries and disabilities under the Longshoremen's and Harbor Workers' Compensation Act to a level comparable to other industrial occupations.

Title XII: Miscellaneous - Directs the Secretary of State, the Secretary of Transportation, the Secretary of Commerce, the Administrator of the Federal Maritime Commission, and the U.S. Trade Representative to jointly submit an annual report to the Congress regarding unfair foreign trade practices that affect the U.S.-flag merchant marine and maritime industries.

Directs the Secretary of Defense to submit an annual report to the Congress regarding specified current and projected maritime defense matters.

Directs the Secretary of Transportation to include certain information in an annual report to the Congress required by specified provisions of the Merchant Marine Act, 1936.