United States Code

AMENDMENTS

1954 Subsec. (f) (1). Act Aug. 31, 1954, allowed the chartering of war-built passenger vessels.

1950 Subsecs. (e) and (f). Act June 30, 1950, added subsecs. (e) and (b).

1947-Subsec. (d). Act June 28, 1947, added subsec.

(d).

ABOLITION OF FEDERAL MARITIME BOARD AND TRANSFER OF FUNCTIONS

Section 304 of 1961 Reorg. Plan No. 7, effective Aug. 12. 1961, 26 F.R. 7315, 75 Stat. 840, set out in the Appendix to Title 5, Government Organization and Employees, abolished the Federal Maritime Board, referred to in subsection (e) of this section, including the offices of the members of the Board. Functions of the Board were transferred either to the Federal Maritime Commission or to the Secretary of Commerce by sections 103 and 202 of 1961 Reorg. Plan No. 7.

ABOLITION OF UNITED STATES MARITIME COMMISSION AND TRANSFER OF FUNCTIONS

All functions of the United States Maritime Commission and of the Chairman of said Commission were transferred to the Secretary of Commerce, except as otherwise provided in Part I, by 1950 Reorg. Plan No. 21, §§ 204, 306, eff. May 24, 1950, 15 F.R. 3178, 64 Stat. 1273, set out in the Appendix to Title 5, Government Organization and Employees, which abolished the United States Maritime Commission.

"Secretary" (meaning Secretary of Commerce) was substituted for "Commission" (meaning United States Maritime Commission) in the text of subsecs. (a-d) and words "but, except upon the affirmative vote of not less than four members of the Commission, such rate shall not be less than 15 per centum per annum of the statutory sales price (computed as of the date of charter)." were omitted preceding the exception provision in the text of subsec. (b), on authority of 1950 Reorg. Plan No. 21. All executive and administrative functions of the United States Maritime Commission were transferred to the Chairman thereof by 1949 Reorg. Plan No. 6, eff. Aug. 19, 1949, 14 F.R. 5228, 63 Stat. 1069.

AUTHORIZATION FOR PAYMENTS BY SECRETARY OF COMMERCE TO PERSONS TO WHOM HE CHARTERED VESSELS Pub. L. 85-721, Aug. 21, 1958, 72 Stat. 710, provided: "That the Secretary of Commerce is authorized to pay to any person to whom he has chartered any vessel under authority of section 5 of the Merchant Ship Sales Act of 1946, as amended (50 U.S.C. App., sec. 1738) [this section], out of the Vessel Operations Revolving Fund established in chapter VIII of the Third Supplemental Appropriations Act, 1951 (46 U.S.C., sec. 1241a), an amount equal to the fair and reasonable expenses incurred by such person, as determined by the Maritime Administrator, during the calendar year beginning January 1, 1957, to activate such vessel. Such amount shall be reduced by the amount of the difference, as determined by the Maritime Administrator, between the charter hire which such person paid for such vessel, and the charter hire which was paid for similar vessels which the United States activated at its own expense during such calendar year."

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1735 to 1737, 1739 to 1745, and 1746 of this Appendix.

§ 1738a. Termination of charters; exceptions.

Any charter (except one in respect of a passenger vessel) in effect at the time of the enactment of this joint resolution [June 29, 1949] shall be terminated by the Commission or the Secretary of Commerce at the earliest date permitted under the terms thereof after June 30, 1949, unless the charterer enters into an agreement with the Commission or the Secretary that each vessel delivered or retained under such charter shall not be redelivered to the Commission or the Secretary, at the option of the charterer,

within less than six months for liner services, except United States continental coastwise and intercoastal services and services between continental United States ports and Alaska, or four months for bulk services and United States continental coastwise and intercoastal services and services between continental United States ports and Alaska, or for the remainder of the period ending June 30, 1950, if such period is less than said periods of six or four months, respectively. No charter (except one in respect of a passenger vessel) shall be made by the Commission or the Secretary under authority of this joint resolution or after the date of enactment thereof [June 29, 1949] unless the charterer enters into an agreement with the Commission or the Secretary that each vessel delivered or retained under the terms of such charter shall not be redelivered to the Commission or the Secretary, at the option of the charterer, within less than six months for liner services, except United States continental coastwise and intercoastal services and services between continental United States ports and Alaska, or four months for bulk services and United States continental coastwise and intercoastal services and services between continental United States ports and Alaska, or for the remainder of the period ending June 30, 1950, if such period is less than said periods of said six and four months, respectively: Provided, however, That no vessel (except a passenger vessel) so chartered may begin a new voyage after June 30, 1950. (June 29, 1949, ch. 281, § 2, 63 Stat. 349; 1950 Reorg. Plan No. 21, §§ 204, 306, eff. May 24, 1950, 15 F. R. 3178, 64 Stat. 1276, 1277.)

CODIFICATION

Section was not enacted as a part of the "Merchant Ship Sales Act of 1946" which comprises sections 1735—1738, 1739-1745, and 1746 of this Appendix.

TRANSFER OF FUNCTIONS

Words "or the Secretary of Commerce" and "or the Secretary" were inserted throughout the text to conform with 1950 Reorg. Plan No. 21, set out in the Appendix to Title 5, Government Organization and Employees.

All executive and administrative functions of the United States Maritime Commission were transferred to the Chairman thereof by 1949 Reorg. Plan No. 6, eff. Aug. 19, 1949, 14 F.R. 5228, 63 Stat. 1069.

§ 1738b. Condition for chartering vessels.

No additional vessels shall be allocated under charter, nor shall any vessel be continued under charter by reason of any extension of chartering authority beyond June 3, 1949, unless the charterer shall agree that the Maritime Administration shall have no obligation upon redelivery to accept or pay for consumable stores, bunkers, and slop-chest items, except with respect to such minimum amounts of bunkers as the Maritime Administration considers advisable to be retained on the vessel and that prior to such redelivery all consumable stores, slop-chest items, and bunkers over and above such minimums shall be removed from the vessel by the charterer at his own expense. (Pub. L. 91-472, title III, § 301, Oct. 21, 1970, 84 Stat. 1054.)

CODIFICATION

Section was enacted as a part of the Departments of State, Justice, and Commerce, the Judiciary, and Related

Agencies Appropriation Act, 1971, and not as a part of the Merchant Ship Sales Act of 1946, which comprises sections 1735-1738, 1739–1745, and 1746 of this Appendix. SIMILAR PROVISIONS

Similar provisions were contained in the following prior appropriation acts:

1969-Dec. 24, 1969, Pub. L. 91-153, title III, § 301, 83 Stat. 417.

1968-Aug. 9, 1968, Pub. L. 90-470, title III, § 301, 82 Stat. 682.

1967-Nov. 8, 1967, Pub. L. 90-133, title III, § 301, 81 Stat. 425.

1966-Nov. 8, 1966, Pub. L. 89-797, title III, § 301, 80 Stat. 1494.

1965 Sept. 2, 1965, Pub. L. 89-164, title III, § 301, 79 Stat. 634.

1964-Aug. 31, 1964, Pub. L. 88-527, title III, § 301, 78 Stat. 726.

1963-Dec. 30, 1963, Pub. L. 88-245, title III, § 301, 77 Stat. 791.

1962-Oct. 18, 1962, Pub. L. 87-843, title III, § 301, 76 Stat. 1093.

1961-Aug. 3, 1961, Pub. L. 87-125, title II, § 201, 75 Stat. 274.

1960-May 13, 1960, Pub. L. 86-451, title I, § 101, 74 Stat. 97.

1959-July 13, 1959, Pub. L. 86-88, title I, § 101, 73 Stat. 204.

1958-June 25, 1958, Pub. L. 85-469, title I, § 101, 72 Stat. 231.

1957-June 13, 1957, Pub. L. 85-52, title I, § 101, 71 Stat. 74.

1956-June 20, 1956, ch. 415, title 1, § 101, 70 Stat. 318. 1955-June 30, 1955, ch. 253, title I, § 101, 69 Stat. 231. 1954 July 2, 1954, ch. 456, title III, § 301, 68 Stat. 426. 1953-Aug. 5, 1953, ch. 328, title III, § 301, 67 Stat. 381. 1952-July 5, 1952, ch. 578, title II, § 201, 66 Stat. 414. 1951-Aug. 31, 1951, ch. 376, title II, § 201, 65 Stat. 286. 1950-Sept. 6, 1950, ch. 896, ch. VIII, title I, § 101, 64 Stat. 717.

1949-Oct. 10, 1949, ch. 662, title I, § 101, 63 Stat. 743.

§ 1739. Sale of vessels to non-citizens; conditions; priority of mortgage on unpaid balance.

(a) Any person not a citizen of the United States may make application to the Secretary to purchase a war-built vessel (other than a P-2 type or other passenger type and other than a Liberty type collier or tanker), under the jurisdiction and control of the Secretary. If the Secretary determines

(1) that the applicant has the financial resources, ability, and experience necessary to enable him to fulfill all obligations with respect to payment of any deferred portion of the purchase price, and that sale of the vessel to him would not be inconsistent with any policy of the United States in permitting foreign sales under section 9 of the Shipping Act, 1916, as amended [section 808 of Title 461; and

(2) after consultation with the Secretary of the Navy, that such vessel is not necessary to the defense of the United States; and

(3) that such vessel is not necessary to the promotion and maintenance of an American merchant marine described in section 2 [section 1735 of this Appendix]; and

(4) that for a reasonable period of time, which in the case of tankers and "C" type vessels shall not end before ninety days after publication of the applicable prewar domestic cost in the Federal Register under subsection 3(c) of this Act [section 1736(c) of this Appendix], such vessel has been available for sale at the statutory sales price to

citizens of the United States, or for charter under section 5 [section 1738 of this Appendix] to citizens of the United States, and that no responsible offer has been made by a citizen of the United States to purchase or charter such vessel; then the Secretary is authorized to approve the application and sell such vessel to the applicant at not less than the statutory sales price. In case of application submitted by a citizen of the Commonwealth of the Philippines, paragraph (4) of this subsection shall not apply. Notwithstanding paragraph (4) of this subsection, not to exceed ten "C" type vessels, except C-3's, may be sold to noncitizens at any time after such date of publication at not less than the statutory sales price.

(b) Notwithstanding any other provision of law, no war-built vessel shall be sold to any person not a citizen of the United States, except in accordance with subsection (a) of this section, or upon terms or conditions more favorable than those at which such war-built vessel is offered to a citizen of the United States, but where the vessel so sold is being transferred to foreign register and flag, the mortgage securing the unpaid balance of the purchase price and interest thereon shall contain provisions according to such mortgage the priorities over other liens and encumbrances accorded such mortgages on merchant vessels under the laws of such registry and flag. (Mar. 8, 1946, ch. 82, § 6, 60 Stat. 43; 1950 Reorg. Plan No. 21, §§ 204, 306, eff. May 24, 1950, 15 F. R. 3178, 64 Stat. 1276, 1277.) TERMINATION OF

AUTHORITY UNDER THIS SECTION ON
JUNE 30, 1950

Section 1 (b) of Joint Res. Feb. 27, 1948, ch. 78, 62 Stat. 38, as amended Feb. 28, 1949, ch. 12, 63 Stat. 9; June 29, 1949, ch. 281, § 1, 63 Stat. 349; 1950 Reorg. Plan No. 21, §§ 204, 306, eff. May 24, 1950, 15 F. R. 3178, 64 Stat. 1276, 1277, provided that: "Notwithstanding the provisions of subsection (a) [subsection (a) of section 1 of act Feb. 27, 1948, ch. 78, 62 Stat. 38, sections 1735 note and 1744 (a) of this Appendix], no contract of sale under section 6 of the Merchant Ship Sales Act of 1946 [this section] shall be made after June 30, 1950; and nothing contained in this or any other Act shall be deemed to authorize the Secretary of Commerce to charter any war-built vessel (as defined in the Merchant Ship Sales Act of 1946 [sections 1735-1738, 1739-1745, and 1746 of this Appendix]) to any person who is not a citizen of the United States (as defined in the Merchant Ship Sales Act of 1946 [sections 1735-1738, 1739–1745, and 1746 of this Appendix]): Provided, however, That vessels may be chartered to the Republic of the Philippines, or citizens thereof, for use in the interisland commerce of the Philippines in accordance with section 306 of the Philippine Rehabilitation Act of April 30, 1946 (former section 1786 of this Appendix)."

TRANSFER OF FUNCTIONS

"Secretary" (meaning Secretary of Commerce) was substituted for "Commission" (meaning United States Maritime Commission) on authority of 1950 Reorg. Plan No. 21, set out in the Appendix to Title 5, Government Organization and Employees.

DETERMINATION OF SELLING PRICE Elements to be considered in determination of the selling price of vessels, see section 864b of Title 46, Shipping. SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1735 to 1738, 1740 to 1745, and 1746 of this Appendix.

§ 1740. Order of preference in sales and charters; determination; operation of commercial vessels by Government.

(a) In exercising its powers under this Act [sections 1735 to 1738, 1739 to 1745, and 1746 of this Appendix] and under other provisions of law with respect to the sale and charter of war-built vessels, the Secretary shall give preference to citizen applicants over noncitizen applicants, and as between citizen applicants to purchase or between citizen applicants charter, shall, so far as practicable and consistent with the policies of this Act [said sections], give preference to citizen applicants to purchase. In determining the order of preference between citizen applicants to purchase or between citizen applicants to charter, the Secretary shall consider, among other relevant factors, the extent to which losses and requisitions of the applicant's prewar tonnage have been overcome and shall in all cases, in the sale and charter of a war-built vessel, give preference in such sale or charter, as the case may be, to the former owner of such vessel, or to the person for whom the vessel was constructed but to whom delivery thereof was prevented by the United States. In determining the order of preference between noncitizen applicants to purchase, the Secretary shall give preference to citizens of the Commonwealth of the Philippines, and in determining the order of preference between other noncitizen applicants to purchase shall consider the extent to which losses in prewar tonnage of the various member nations of the United Nations, incurred in the interests of the war effort, have been overcome, and the relative effects of such losses upon the national economy of such member nations.

(b) After the cessation of hostilities, operation of vessels in commercial service by the United States, either for its own account or through operating agents under agency agreements, shall, except as to the Panama Canal Company and other services specifically authorized by law, be continued only to the extent necessary to effect orderly transfer of vessels to private operation. (Mar. 8, 1946, ch. 82, § 7, 60 Stat. 44; 1950 Reorg. Plan No. 21, §§ 204, 306, eff. May 24, 1950, 15 F. R. 3178, 64 Stat. 1276, 1277; Sept. 26, 1950, ch. 1049, § 2 (a) (2), 64 Stat. 1038.)

REFERENCES IN TEXT

"Cessation of hostilities", referred to in subsec. (b), was proclaimed at 12 o'clock noon on Dec. 31, 1946, by 1946 Proc. No. 2714, 12 F.R. 1, set out as a note under section 601 of this Appendix.

CHANGE OF NAME

The Panama Railroad Company was redesignated the Panama Canal Company by act Sept. 26, 1950.

TRANSFER OF FUNCTIONS

was

"Secretary" (meaning Secretary of Commerce) substituted for "Commission" (meaning United States Maritime Commission) on authority of 1950 Reorg. Plan No. 21, set out in the Appendix to Title 5, Government Organization and Employees.

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1735 to 1738, 1739, to 1745, and 1746 of this Appendix.

§ 1741. Exchange of vessels.

(a) Allowance as credit on purchase price; vessels acceptable.

The Secretary is authorized to acquire, in exchange for an allowance of a credit on the purchase of any war-built vessel under section 4 [section 1737 of this Appendix] or any vessel acquired through exchange under subsection (d) of this section

(1) Any vessel owned by a citizen of the United States, other than a vessel purchased under this Act [sections 1735 to 1738, 1739 to 1745, and 1746 of this Appendix]; or

(2) Any vessel owned by a foreign corporation, if

(A) the vessel was constructed in the United States, and has, after December 7, 1941, been chartered to, or otherwise taken for use by, the United States; and

(B) the controlling interest in such corporation is, at the time of acquisition of such vessel hereunder, owned by a citizen or citizens of the United States, and has been so owned for a period of at least three years immediately prior to such acquisition; and

(C) such corporation agrees that the warbuilt vessel purchased with the use of such credit shall be owned by such citizen or citizens and shall be documented under the laws of the United States.

Such allowance shall not be applied upon the cash payment required under section 4 [section 1737 of this Appendix]. A war-built vessel shall be deemed a "new vessel" for the purpose of section 511 of the Merchant Marine Act, 1936, as amended [section 1161 of Title 461, and section 510 (e) of such Act [section 1160(e) of Title 46] shall be applicable with respect to vessels exchanged under this section to the same extent as applicable to obsolete vessels exchanged under section 510 of such Act [section 1160 of Title 46).

(b) Amount of allowance.

(1) If, prior to December 31, 1946, the owner of a vessel eligible for exchange under subsection (a) of this section makes a firm offer binding for at least ninety days, to transfer the vessel to the Commission in exchange for an allowance of credit provided in subsection (a) of this section, the amount of such allowance shall be the fair and reasonable value of the vessel as determined by the Commission under this section. In making such determination the Commission shall consider: (A) The value of the vessel determined in accordance with the standards of valuation established pursuant to Executive Order 9387 (8 F. R. 14105) as of the date of such offer, (B) any liability of the United States for repair and restoration of the vessel, (C) the utility value of the vessel, (D) the effect of this Act [sections 1735 to 1738, 1739 to 1745, and 1746 of this Appendix] upon the market value of such vessel, and (E) the public interest in promoting exchanges of vessels as a means of rehabilitating and modernizing the American merchant marine. In no event shall the amount of such allowance, in case of dry cargo vessels and tankers, exceed (A) (1) if the vessel or vessels tendered in exchange are of equal or greater dead-weight tonnage than the war-built

vessel or vessels being acquired, 33% per centum of the statutory sales price (unadjusted) of the war-built vessel or vessels, or (2) if the vessel or vessels tendered in exchange are of lesser deadweight tonnage than the war-built vessel or vessels, such proportionate part of 333 per centum of the statutory sales price (unadjusted) of such war-built vessel or vessels as the dead-weight tonnage of such vessel or vessels tendered in exchange bear to the dead-weight tonnage of such warbuilt vessel or vessels, or (B) the liability of the United States in connection with the repair or restoration of such vessel under any charter to which the United States is a party, whichever is higher. In the case of passenger vessels tendered in exchange, the amount of the allowance shall not exceed the percentages of statutory sales price computed under (A) (1) and (2) above by gross tons instead of deadweight tons, or such liability for the repair or restoration of such passenger vessel, whichever is the higher. In any case where the vessel tendered in exchange was acquired from the United States, the exchange allowance under this section shall not exceed the price paid the United States therefor plus the depreciated cost of any improvements thereon. In the case of any vessel tendered in exchange which has been restored to condition by the United States for the purpose of redelivering such vessel to its owner in compliance with the charter of such vessel with the United States, or where, for such restoration a cash allowance has been made to the owner, there shall be deducted from the amount of the allowance of credit for such vessel determined by the Commission under this section, an amount equal to the liability of the United States for such restoration or such cash allowance made to the owner.

(2) If, after such offer is made, and prior to its acceptance, or prior to the acquisition of the vessel, by the Commission, the vessel is lost by reason of causes for which the United States is responsible, then in lieu of paying the owner any amount on account of such loss, the offer shall, for the purposes of subsection (a) of this section and this subsection, be considered as having been accepted and the vessel as having been acquired by the Commission under said subsection (a) immediately prior to such loss. (c) Transfers in settlement of claims.

The Secretary is also authorized to make available any war-built vessel for transfer in complete or partial settlement of any claim against the United States (1) for just compensation upon requisition for title of any vessel, or (2) for indemnity for the loss of any vessel which was acquired for use by the United States, but only to the extent such vessel is available for sale to the claimant.

(d) Transfer of substitute vessels.

In the case of any vessel constructed in the United States after January 1, 1937, which has been taken by the United States for use in any manner, the Secretary, if in his opinion the transfer would aid in carrying out the policies of this Act [sections 1735 to 1738, 1739 to 1745, and 1746 of this Appendix], is authorized to transfer to the owner of such vessel another vessel which is deemed by the Secretary to be of comparable type with adjustments for depreciation and difference in design or speed, and to the

extent applicable, adjustments with respect to the retained vessel as provided for in section 9 [section 1742 of this Appendix], and such other adjustments and terms and conditions, including transfer of mortgage obligations in favor of the United States binding upon the old vessel, as the Secretary may prescribe. (Mar. 8, 1946, ch. 82, § 8, 60 Stat. 45; 1950 Reorg. Plan No. 21, §§ 204, 306, eff. May 24, 1950, 15 F. R. 3178, 64 Stat. 1276, 1277.)

TRANSFER OF FUNCTIONS

"Secretary" (meaning Secretary of Commerce) was substituted for "Commission" (meaning United States Maritime Commission), except where otherwise indicated by the context, on authority of 1950 Reorg. Plan No. 21, set out in the Appendix to Title 5, Government Organization and Employees.

SECTION REFERRED TO IN OTHEP. SECTIONS

This section is referred to in sections 1735 to 1738, 1739, 1740, 1742 to 1745, and 1746 of this Appendix.

§ 1742. Price adjustment on prior sales to citizens. (a) Form, manner, and time of application.

A citizen of the United States who on the date of the enactment of this Act [March 8, 1946]—

(1) owns a vessel which he purchased from the Commission prior to such date, and which was delivered by its builder after December 31, 1940;

(2) is party to a contract with the Commission to purchase from the Commission a vessel, which has not yet been delivered to him; or

(3) owns a vessel on account of which a construction-differential subsidy was paid, or agreed to be paid, by the Commission under section 504 of the Merchant Marine Act, 1936, as amended [section 1154 of Title 46], and which was delivered by its builder after December 31, 1940; or

(4) is party to a contract with a shipbuilder for the construction for him of a vessel, which has not yet been delivered to him, and on account of which a construction-differential subsidy was agreed, prior to such date, to be paid by the Commission under section 504 of the Merchant Marine Act, 1936, as amended [section 1154 of Title 461, shall, except as hereinafter provided, be entitled to an adjustment in the price of such vessel under this section if he makes application therefor, in such form and manner as the Commission may prescribe, within sixty days after the date of publication of the applicable prewar domestic costs in the Federal Register under section 3 (c) of this Act [section 1736 (c) of this Appendix]. No adjustment shall be made under this section in respect of any vessel the contract for the construction of which was made after September 2, 1945, under the provisions of title V [subchapter V of chapter 27 of Title 46] (including section 504 [section 1154 of Title 461) or title VII of the Merchant Marine Act, 1936, as amended [subchapter VII of chapter 27 of Title 461. (b) Determination of amount.

Such adjustment shall be made, as hereinafter provided, by treating the vessel as if it were being sold to the applicant on the date of the enactment of this Act [March 8, 1946], and not before that

time. The amount of such adjustment shall be determined as follows:

(1) The Commission shall credit the applicant with the excess of the cash payments made upon the original purchase price of the vessel over 25 per centum of the statutory sales price of the vessel as of such date of enactment [ March 8, 19461. If such payment was less than 25 per centum of the statutory sales price of the vessel, the applicant shall pay the difference to the Commission.

(2) The applicant's indebtedness under any mortgage to the United States with respect to the vessel shall be adjusted.

(3) The adjusted mortgage indebtedness shall be in an amount equal to the excess of the statutory sales price of the vessel as of the date of the enactment of this Act [March 8, 1946] over the sum of the cash payment retained by the United States under paragraph (1) plus the readjusted trade-in allowance (determined under paragraph (7)) with respect to any vessel exchanged by the applicant on the original purchase. The adjusted mortgage indebtedness shall be payable in equal annual installments thereafter during the remaining life of such mortgage with interest on the portion of the statutory sales price remaining unpaid at the rate of 32 per centum per annum.

(4) The Commission shall credit the applicant with the excess, if any, of the sum of the cash payments made by the applicant upon the original purchase price of the vessel plus the readjusted trade-in allowance (determined under paragraph (7)) over the statutory sales price of the vessel as of the date of the enactment of this Act [ March 8, 1946] to the extent not credited under paragraph (1).

(5) The Commission shall also credit the applicant with an amount equal to interest at the rate of 32 per centum per annum (for the period beginning with the date of the original delivery of the vessel to the applicant and ending with the date of the enactment of this Act [ March 8, 1946]) on the excess of the original purchase price of the vessel over the amount of any allowance allowed by the Commission on the exchange of any vessel on such purchase; the amount of such credit first being reduced by any interest on the original mortgage indebtedness accrued up to such date of enactment and unpaid. Interest so accrued and unpaid shall be canceled.

(6) The applicant shall credit the Commission with all amounts paid by the United States to him as charter hire for use of the vessel (exclusive of service, if any, required under the terms of the charter) under any charter party made prior to the date of the enactment of this Act [March 8, 1946], and any charter hire for such use accrued up to such date of enactment and unpaid shall be canceled; and the Commission shall credit the applicant with the amount that would have been paid by the United States to the applicant as charter hire for bare-boat use of vessels exchanged by the applicant on the original purchase

(for the period beginning with date on which the vessels so exchanged were delivered to the Commission and ending with the date of the enactment of this Act [March 8, 1946]).

(7) The allowance made to the applicant on any vessel exchanged by him on the original purchase shall be readjusted so as to limit such allowance to the amount provided for under section 8 [section 1741 of this Appendix].

(8) There shall be subtracted from the sum of the credits in favor of the Commission under the foregoing provisions of this subsection the amount of any overpayments of Federal taxes by the applicant resulting from the application of subsection (c) (1) of this section, and there shall be subtracted from the sum of the credits in favor of the applicant under the foregoing provisions of this subsection the amount of any deficiencies in Federal taxes of the applicant resulting from the application of subsection (c) (1) of this section. If, after making such subtractions, the sum of the credits in favor of the applicant exceeds the sum of the credits in favor of the Commission, such excess shall be paid by the Commission to the applicant. If, after making such subtractions, the sum of the credits in favor of the Commission exceeds the sum of the credits in favor of the applicant, such excess shall be paid by the applicant to the Commission. Upon such payment by the Commission or the applicant, such overpayments shall be treated as having been refunded and such deficiencies as having been paid.

For the purposes of this subsection, the purchase price of a vessel on account of which a constructiondifferential subsidy was paid or agreed to be paid under section 504 of the Merchant Marine Act, 1936, as amended [section 1154 of Title 461, shall be the net cost of the vessel to the owner.

An adjustment shall be made under this section only if the applicant enters into an agreement with the Commission binding upon the citizen applicant and any affiliated interest to the effect that

(1) depreciation and amortization allowed or allowable with respect to the vessel up to the date of the enactment of this Act [March 8, 1946] for Federal tax purposes shall be treated as not having been allowable; amounts credited to the Commission under subsection (b)(6) of this section shall be treated for Federal tax purposes as not having been received or accrued as income; amounts credited to the applicant under subsection (b) (5) and (6) of this section shall be treated for Federal tax purposes as having been received and accrued as income in the taxable year in which falls the date of the enactment of this Act (March 8, 1946);

(2) the liability of the United States for use (exclusive of service, if any, required under the terms of the charter) of the vessel on or after the date of the enactment of this Act [March 8, 1946] under any charter party shall not exceed 15 per centum per annum of the statutory sales price of the vessel as of such date of enactment [March 8,

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