B-155039, SEPTEMBER 30, 1964, 44 COMP. GEN. 180

B-155039: Sep 30, 1964

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UPON PREPAYMENT OF THE UNAMORTIZED BALANCE OF THE GOVERNMENT SUBSIDY IS PROPER IN VIEW OF THE LEGISLATIVE HISTORY OF THE SUBSIDY REPAYMENT PROVISION IN SECTION 506 WHICH SUPPORTS THE CONCLUSION THAT THE GOVERNMENT'S INTEREST IS PROTECTED WHEN THE OWNER REPAYS THE UNAMORTIZED BALANCE TO BE RELEASED FROM THE FOREIGN-TRADE RESTRICTION IN THE SAME WAY AS WHEN THE OWNER OPERATES THE SUBSIDY COVERED VESSEL IN THE FOREIGN TRADE FOR THE STATUTORY LIFE OF THE VESSEL. 1964: REFERENCE IS MADE TO YOUR LETTER OF AUGUST 21. INVOLVING DOCUMENTATION UNDER THE LAWS OF THE UNITED STATES AND THE GOVERNMENT'S REQUISITIONING AUTHORITY ARE NOT INVOLVED. IT IS REPORTED THAT IN 1958 THE FEDERAL MARITIME BOARD GRANTED TO GRACE LINE.

B-155039, SEPTEMBER 30, 1964, 44 COMP. GEN. 180

MARITIME MATTERS - SUBSIDIES - CONSTRUCTION-DIFFERENTIAL - FOREIGN-TRADE RESTRICTION RELEASE AUTHORITY THE AMENDMENT OF TWO CONSTRUCTION-DIFFERENTIAL SUBSIDY CONTRACTS TO RELEASE THE VESSELS FROM THE RESTRICTIVE REQUIREMENT FOR OPERATION EXCLUSIVELY IN THE FOREIGN TRADE AS PROVIDED IN SECTION 506 OF THE MERCHANT MARINE ACT, 1936, AS AMENDED, 46 U.S.C. 1156, UPON PREPAYMENT OF THE UNAMORTIZED BALANCE OF THE GOVERNMENT SUBSIDY IS PROPER IN VIEW OF THE LEGISLATIVE HISTORY OF THE SUBSIDY REPAYMENT PROVISION IN SECTION 506 WHICH SUPPORTS THE CONCLUSION THAT THE GOVERNMENT'S INTEREST IS PROTECTED WHEN THE OWNER REPAYS THE UNAMORTIZED BALANCE TO BE RELEASED FROM THE FOREIGN-TRADE RESTRICTION IN THE SAME WAY AS WHEN THE OWNER OPERATES THE SUBSIDY COVERED VESSEL IN THE FOREIGN TRADE FOR THE STATUTORY LIFE OF THE VESSEL.

TO THE SECRETARY OF COMMERCE, SEPTEMBER 30, 1964:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 21, 1964, REQUESTING TO BE ADVISED WHETHER WE CONCUR IN THE VIEW OF YOUR DEPARTMENT THAT THE MARITIME SUBSIDY BOARD HAS THE LEGAL AUTHORITY TO AMEND CONSTRUCTION DIFFERENTIAL SUBSIDY CONTRACTS NOS. FMB-89 AND FMB-90 WITH THE GRACE LINE, INCORPORATED, COVERING THE S.S. SANTA ELIANA AND THE S.S. SANTA LEONOR, SO AS TO FREE THE VESSELS FROM THE RESTRICTIVE PROVISIONS INCORPORATED THEREIN PURSUANT TO SECTION 506, MERCHANT MARINE ACT, 1936, AS AMENDED, 46 U.S.C. 1156. WE UNDERSTAND THAT THE CONTINUATION OF THE CONTRACT PROVISIONS REQUIRED BY SECTIONS 503 AND 802, 46 U.S.C. 1153 AND 1212, RESPECTIVELY, INVOLVING DOCUMENTATION UNDER THE LAWS OF THE UNITED STATES AND THE GOVERNMENT'S REQUISITIONING AUTHORITY ARE NOT INVOLVED.

IT IS REPORTED THAT IN 1958 THE FEDERAL MARITIME BOARD GRANTED TO GRACE LINE, INCORPORATED, CONSTRUCTION-DIFFERENTIAL SUBSIDY AID FOR THE CONVERSION OF THE TWO VESSELS FROM CARGO TO CONTAINER VESSELS; THAT CERTAIN DIFFICULTIES HAVE CAUSED THE GRACE LINE TO CONCLUDE THAT THESE VESSELS CANNOT BE OPERATED SUCCESSFULLY AS ORIGINALLY INTENDED; THAT THE GRACE LINE PROPOSES TO SELL THESE VESSELS TO A DOMESTIC OPERATOR FOR OPERATION IN THE DOMESTIC TRADE OF THE UNITED TATES; AND THAT THE GRACE LINE HAS REQUESTED THE AMENDMENT TO THE CONTRACTS TO REMOVE THE SECTION 506 (MERCHANT MARINE ACT, 1936, AS AMENDED) PROVISIONS REQUIRING EXCLUSIVE FOREIGN-TRADE OPERATION AS THEREIN PROVIDED. IF SUCH PERMISSION IS GRANTED THE GRACE LINE WILL REFUND TO THE GOVERNMENT THE UNAMORTIZED SUBSIDY PAID BY THE GOVERNMENT IN CONNECTION WITH THE CONVERSION OF THE VESSELS TO CONTAINER VESSELS.

SECTION 506, AS ORIGINALLY ENACTED IN 1936 (49 STAT. 1999), READ AS FOLLOWS:

SEC. 506. IT SHALL BE UNLAWFUL TO OPERATE ANY VESSEL, FOR THE CONSTRUCTION OF WHICH ANY SUBSIDY HAS BEEN PAID PURSUANT TO THIS TITLE, OTHER THAN EXCLUSIVELY IN FOREIGN TRADE, OR ON A ROUND-THE-WORLD VOYAGE OR A ROUND VOYAGE FROM THE WEST COAST OF THE UNITED STATES TO A EUROPEAN PORT OR PORTS OR A ROUND VOYAGE FROM THE ATLANTIC COAST TO THE ORIENT WHICH INCLUDES INTERCOASTAL PORTS OF THE UNITED STATES, OR ON A VOYAGE IN FOREIGN TRADE ON WHICH THE VESSEL MAY STOP AT AN ISLAND POSSESSION OR ISLAND TERRITORY OF THE UNITED STATES, UNLESS THE OWNER OF SUCH VESSEL SHALL RECEIVE THE WRITTEN CONSENT OF THE COMMISSION SO TO OPERATE AND PRIOR TO SUCH OPERATION SHALL AGREE TO PAY TO THE COMMISSION, UPON SUCH TERMS AND CONDITIONS AS THE COMMISSION MAY PRESCRIBE AN AMOUNT WHICH BEARS THE SAME PROPORTION TO THE CONSTRUCTION SUBSIDY THERETOFORE PAID OR AGREED TO BE PAID (EXCLUDING COST OF NATIONAL-DEFENSE FEATURES AS HEREINBEFORE PROVIDED), AS THE REMAINING ECONOMIC LIFE OF THE VESSEL BEARS TO ITS ENTIRE ECONOMIC LIFE. IF AN EMERGENCY ARISES WHICH, IN THE OPINION OF THE COMMISSION, WARRANTS THE TEMPORARY TRANSFER OF A VESSEL, FOR THE CONSTRUCTION OF WHICH ANY SUBSIDY HAS BEEN PAID PURSUANT TO THIS TITLE, TO SERVICE OTHER THAN EXCLUSIVE OPERATION IN FOREIGN TRADE, THE COMMISSION MAY PERMIT SUCH TRANSFER: PROVIDED, THAT NO OPERATING DIFFERENTIAL SUBSIDY SHALL BE PAID DURING THE DURATION OF SUCH TEMPORARY OR EMERGENCY PERIOD, AND SUCH PERIOD SHALL NOT EXCEED THREE MONTHS. EVERY CONTRACTOR RECEIVING A CONTRACT FOR A CONSTRUCTION-DIFFERENTIAL SUBSIDY UNDER THE PROVISIONS OF THIS TITLE SHALL AGREE THAT IF THE SUBSIDIZED VESSEL ENGAGES IN DOMESTIC TRADE ON A ROUND-THE-WORLD VOYAGE OR A ROUND VOYAGE FROM THE WEST COAST OF THE UNITED STATES TO A EUROPEAN PORT OR PORTS OR LOADS OR DISCHARGES CARGO OR PASSENGERS AT AN ISLAND POSSESSION OR ISLAND TERRITORY AS PERMITTED BY THIS SECTION, THAT THE CONTRACTOR WILL REPAY ANNUALLY TO THE COMMISSION THAT PROPORTION OF ONE-TWENTIETH OF SUCH CONSTRUCTION SUBSIDY AS THE GROSS REVENUE OF SUCH PROTECTED TRADE BEARS TO THE GROSS REVENUE DERIVED FROM THE ENTIRE VOYAGES COMPLETED DURING THE PRECEDING YEAR.

IN THE 1958 AMENDMENTS TO THE MERCHANT MARINE ACT, 1936 (PUBLIC LAW 705, 75TH CONGRESS, 3D SESSION), SECTION 506 WAS COMPLETELY REWRITTEN AND AS MODIFIED BY PUBLIC LAW 86-3 (1959) TO ADD THE WORDS "THE STATE OF HAWAII" AND PUBLIC LAW 86-518 (1960) TO EXTEND THE "ECONOMIC LIFE" OF VESSELS FROM 20 TO 25 YEARS (EXCEPT FOR LIQUID BULK CARRIERS), READS AS FOLLOWS:

SEC. 506. EVERY OWNER OF A VESSEL FOR WHICH A CONSTRUCTION DIFFERENTIAL SUBSIDY HAS BEEN PAID SHALL AGREE THAT THE VESSEL SHALL BE OPERATED EXCLUSIVELY IN FOREIGN TRADE, OR ON A ROUND-THE-WORLD VOYAGE, OR ON A ROUND VOYAGE FROM THE WEST COAST OF THE UNITED STATES TO A EUROPEAN PORT OR PORTS WHICH INCLUDES INTERCOASTAL PORTS OF THE UNITED STATES, OR A ROUND VOYAGE FROM THE ATLANTIC COAST OF THE UNITED STATES TO THE ORIENT WHICH INCLUDES INTERCOASTAL PORTS OF THE UNITED STATES, OR ON A VOYAGE IN FOREIGN TRADE ON WHICH THE VESSEL MAY STOP AT THE STATE OF HAWAII, OR AN ISLAND POSSESSION OR ISLAND TERRITORY OF THE UNITED STATES, AND THAT IF THE VESSEL IS OPERATED IN THE DOMESTIC TRADE ON ANY OF THE ABOVE- ENUMERATED SERVICES, HE WILL PAY ANNUALLY TO THE COMMISSION THAT PROPORTION OF ONE TWENTY-FIFTH OF THE CONSTRUCTION DIFFERENTIAL SUBSIDY PAID FOR SUCH VESSEL AS THE GROSS REVENUE DERIVED FROM THE DOMESTIC TRADE BEARS TO THE GROSS REVENUE DERIVED FROM THE ENTIRE VOYAGES COMPLETED DURING THE PRECEDING YEAR. THE COMMISSION MAY CONSENT IN WRITING TO THE TEMPORARY TRANSFER OF SUCH VESSEL TO SERVICE OTHER THAN THE SERVICE COVERED BY SUCH AGREEMENT FOR PERIODS NOT EXCEEDING SIX MONTHS IN ANY YEAR, WHENEVER THE COMMISSION MAY DETERMINE THAT SUCH TRANSFER IS NECESSARY OR APPROPRIATE TO CARRY OUT THE PURPOSES OF THIS ACT. SUCH CONSENT SHALL BE CONDITIONED UPON THE AGREEMENT BY THE OWNER TO PAY TO THE COMMISSION, UPON SUCH TERMS AND CONDITIONS AS IT MAY PRESCRIBE, 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.

IN EXPLAINING THE 1958 AMENDMENT, THE HOUSE COMMITTEE ON MERCHANT MARINE AND FISHERIES IN H.REPT.NO. 2168 STATED:

SECTION 506 DEALS WITH THE SERVICES UPON WHICH VESSELS WHICH HAVE BEEN BUILT WITH A CONSTRUCTION-DIFFERENTIAL SUBSIDY MAY OPERATE AND PROVIDES FOR THE REPAYMENT OF PROPORTIONS OF THE SUBSIDY IN CASE THE VESSEL IS USED OTHERWISE. THE SECTION HAS BEEN ENTIRELY REWRITTEN IN ORDER TO REMOVE AMBIGUITIES ARISING FROM THE METHOD OF DESCRIBING THE SERVICES OTHER THAN FOREIGN. AS REWRITTEN THE SECTION CLEARLY SETS FORTH THE OBLIGATION OF THE OWNER TO USE THE VESSEL IN FOREIGN TRADE, AND, IF THE VESSEL IS OPERATED IN THE DOMESTIC TRADE ON CERTAIN DEFINITELY STATED SERVICES, TO REPAY CERTAIN PROPORTIONS OF THE SUBSIDY. IF THE VESSEL IS USED, WITH THE CONSENT OF THE COMMISSION, IN THE DOMESTIC TRADE IN SERVICES OTHER THAN THOSE ENUMERATED, THE OBLIGATIONS OF THE OWNER TO REPAY PART OF THE SUBSIDY ARE CLEARLY DEFINED.

NO FUNDAMENTAL CHANGE IN THE ORIGINAL PURPOSE OF THE SECTION HAS BEEN EFFECTED.

THE COMMITTEE ON COMMERCE IN REPORTING ON THE AMENDED LANGUAGE OF SECTION 506, STATED (S.REPT.NO. 1618-75TH CONGRESS, 3D SESSION):

SECTION 506 HAS BEEN ENTIRELY REWRITTEN TO REMOVE AMBIGUITIES AND CONFUSION.

THIS SECTION NOW MAKES IT UNLAWFUL FOR THE OWNER OF ANY VESSEL ON WHICH A CONSTRUCTION-DIFFERENTIAL SUBSIDY HAS BEEN PAID TO OPERATE IT, WITHOUT THE WRITTEN CONSENT OF THE COMMISSION OTHER THAN EXCLUSIVELY IN FOREIGN TRADE OR IN OTHER ENUMERATED VOYAGES TO FOREIGN PORTS WHICH MAY INCLUDE DOMESTIC PORTS. WHEN AN EMERGENCY ARISES WHICH, IN THE OPINION OF THE COMMISSION, WARRANTS THE TEMPORARY TRANSFER OF SUCH A VESSEL TO DOMESTIC TRADE, THE COMMISSION MAY PERMIT THE TRANSFER. NO OPERATING-DIFFERENTIAL SUBSIDY SHALL BE PAID DURING AN EMERGENCY PERIOD, WHICH SHALL NOT EXCEED 3 MONTHS. THESE PROVISIONS ARE DEFINITE. THE SECTION FURTHER PROVIDES, HOWEVER, THAT IN THE EVENT THE OWNER OPERATES A VESSEL ON WHICH A CONSTRUCTION-DIFFERENTIAL SUBSIDY HAS BEEN PAID IN SERVICES OTHER THAN THOSE WHICH ARE NOT UNLAWFUL, HE SHALL REPAY TO THE COMMISSION A PRESCRIBED PORTION OF THE CONSTRUCTION DIFFERENTIAL SUBSIDY. IT IS VERY DIFFICULT TO DETERMINE WHETHER OR NOT THESE INSTANCES IN WHICH REPAYMENT IS REQUIRED ARE RESTRICTED TO THE CASES OF EMERGENCY AND TO PERIODS OF 3 MONTHS.

AS THE SECTION IS REWRITTEN, IT IS PERFECTLY CLEAR THAT UNLESS THE OWNER OPERATES EXCLUSIVELY IN FOREIGN TRADE, HE MUST REPAY A PORTION OF THE CONSTRUCTION-DIFFERENTIAL SUBSIDY FOR ANY SERVICE IN WHICH THE VESSEL IS ENGAGED WHICH INCLUDES DOMESTIC PORTS ENROUTE TO OR FROM FOREIGN PORTS, AS SPECIFICALLY DESCRIBED. IT IS FURTHER PROVIDED THAT THE COMMISSION MAY CONSENT IN WRITING TO THE TEMPORARY TRANSFER OF SUCH A VESSEL TO SERVICES OTHER THAN THOSE ENUMERATED FOR PERIODS NOT EXCEEDING 6 MONTHS IN ANY YEAR WHENEVER THE COMMISSION MAY DETERMINE THAT SUCH TRANSFER IS NECESSARY. WHEN SUCH CONSENT IS GIVEN, IT MUST BE CONDITIONED UPON THE OWNER'S AGREEMENT TO REPAY A SPECIFIED PORTION OF THE CONSTRUCTION-DIFFERENTIAL SUBSIDY. NO OPERATING-DIFFERENTIAL SUBSIDY SHALL BE PAID DURING THE TEMPORARY PERIOD.

IT IS BELIEVED THAT THE SECTION, AS REWRITTEN, WILL RESULT IN IMPROVED ADMINISTRATION AND WILL PROTECT THE INTERESTS OF THE GOVERNMENT AND THOSE OF THE CARRIERS, BOTH FOREIGN AND DOMESTIC.

SECTION 506 WAS FURTHER AMENDED BY PUBLIC LAW 88-225 (1963) TO ADD THE FOLLOWING CONTRACT AMENDMENT PROVISION:

PROVISIONS IN SUCH CONTRACTS AFFECTING VESSELS COVERED BY THIS ACT PROVIDING FOR REFUND OF CONSTRUCTION-DIFFERENTIAL SUBSIDY FOR DOMESTIC OPERATIONS UNDER SECTION 506 OF THE MERCHANT MARINE ACT, 1936, AND COSTS OF NATIONAL DEFENSE FEATURES FOR COMMERCIAL USE SHALL BE AMENDED SO THAT FOR SUCH REFUND PAYMENTS MADE FOR THE PERIOD AFTER DECEMBER 31, 1959, THE BASE UPON WHICH SUCH REFUND PAYMENTS ARE COMPUTED ANNUALLY THEREAFTER SHALL BE THE UNDEPRECIATED AMOUNT OF SUBSIDY OR THE NATIONAL DEFENSE FEATURE, AS THE CASE MAY BE, AS AT DECEMBER 31, 1959, DIVIDED BY THE YEARS OF LIFE OF THE VESSELS AS PROVIDED UNDER THIS ACT, REMAINING AFTER DECEMBER 31, 1959.

THE EFFECT OF THIS AMENDMENT WAS TO PROVIDE THE SAME FORMULA FOR REFUND OF SUBSIDY UNDER SECTION 506 THAT HAD PREVIOUSLY BEEN PROVIDED FOR UNDER OTHER SECTIONS OF THE 1936 ACT.

DURING THE HEARINGS BEFORE THE MERCHANT MARINE AND FISHERIES SUBCOMMITTEE OF THE SENATE COMMERCE COMMITTEE AND THE MERCHANT MARINE SUBCOMMITTEE OF THE HOUSE MERCHANT MARINE AND FISHERIES COMMITTEE ON IDENTICAL BILLS S. 1172 AND H.R. 6813 (WHICH BECAME PUBLIC LAW 88-225) THE MARITIME ADMINISTRATOR, MR. ALEXANDER, STATED (P. 59 OF SENATE HEARING AND P. 118 OF THE HOUSE HEARINGS):

WE ALSO BELIEVE THAT THE OBLIGATION TO REPAY CONSTRUCTION DIFFERENTIAL SUBSIDY FOR OPERATION IN DOMESTIC TRADE WAS INTENDED TO BE, AND SHOULD BE, TERMINATED AT THE END OF THE ECONOMIC LIVES OF THE VESSELS.

AS INTRODUCED S. 1172 AND H.R. 6813 CONTAINED A SECTION 2 WHICH WOULD HAVE EXPRESSLY PROVIDED FOR THE TERMINATION OF THE OBLIGATION TO REPAY CONSTRUCTION-DIFFERENTIAL SUBSIDY FOR OPERATION IN DOMESTIC TRADE AT THE END OF THE VESSEL'S STATUTORY LIFE. ON AUGUST 30, 1963, THE SENATE COMMERCE COMMITTEE FAVORABLY REPORTED S. 1172 TO THE SENATE WITH AN AMENDMENT THAT WOULD DELETE SECTION 2 OF THE BILL. THE SENATE AGREED TO THIS AMENDMENT AND ON OCTOBER 7, 1963, ENACTED THE BILL SO AMENDED. THE DEBATE ON THE BILL SENATOR MAGNUSON GAVE THE FOLLOWING EXPLANATION OF COMMITTEE AMENDMENTS (109 CONG.REC. 18752):

LET ME SAY FURTHER THAT THE REPORT LANGUAGE ON PAGE 3 AS TO THE ELIMINATION OF SECTION 2 OF THE BILL HAS REFERENCE TO THE FACT THAT THE COMMITTEE UNDERSTANDS THAT THE FORMULA PRESCRIBED IN SECTION I OF THE BILL WOULD BY ITS APPLICATION COMPLETE THE STATUTORY LIFE CYCLE OF THE VESSEL AND THERE WOULD BE NO MORE REFUNDS OF CONSTRUCTION SUBSIDY FOR DOMESTIC OPERATION AFTER THAT CYCLE IS COMPLETED.

IN A REPORT DATED DECEMBER 10, 1963, TO THE HOUSE MERCHANT MARINE AND FISHERIES COMMITTEE ON S. 1172 AS IT PASSED THE SENATE, THE DEPARTMENT OF COMMERCE RECITED THE FOREGOING LEGISLATIVE HISTORY OF S. 1172 IN THE SENATE. ON DECEMBER 12, 1963, THE HOUSE MARINE AND FISHERIES COMMITTEE FAVORABLY REPORTED S. 1172 TO THE HOUSE WITHOUT MENTIONING THE LEGISLATIVE HISTORY OF THE BILL IN THE SENATE BUT INCLUDED THE DEPARTMENT OF COMMERCE REPORT OF DECEMBER 10, 1963, TO THE COMMITTEE ON S. 1172 AS IT PASSED THE SENATE. THE HOUSE PASSED THE BILL ON DECEMBER 17, 1963.

THE FOREGOING PORTION OF THE LEGISLATIVE HISTORY OF SECTION 506 DEMONSTRATES THAT THE CONGRESS INTENDED TO CLARIFY THE DOMESTIC SERVICES WHICH WERE AUTHORIZED AND TO REMOVE ANY QUESTION OF AUTHORITY FOR TEMPORARY PERIODS OF DOMESTIC OPERATIONS, ALL OF WHICH WOULD REQUIRE REPAYMENT OF SUBSIDY. FURTHERMORE, IT APPEARS CLEAR THAT THE REQUIREMENT FOR REPAYMENT OF CONSTRUCTION-DIFFERENTIAL SUBSIDY FOR DOMESTIC OPERATION WOULD CEASE WHEN A VESSEL REACHES THE END OF ITS STATUTORY LIFE PERIOD. THE QUESTION THEN ARISES WHETHER AN OWNER MAY ACCELERATE HIS VESSEL'S RELEASE FROM THE SECTION 506 RESTRICTIONS BY PREPAYMENT OF THE UNAMORTIZED BALANCE OF THE GOVERNMENT'S SUBSIDY CONTRIBUTION. UNDER THE LAW AN AMERICAN OPERATOR IN THE DOMESTIC SERVICE IS REQUIRED TO BUILD HIS SHIP IN AN AMERICAN SHIPYARD AND IS REQUIRED TO PAY THE FULL DOMESTIC PRICE OF HIS SHIP. AN OPERATOR, AIDED WITH A TITLE V (46 U.S.C. 1151), CONSTRUCTION- DIFFERENTIAL SUBSIDY, SECURES HIS SHIP AT A COST EQUIVALENT TO A FOREIGN PRICE (DOMESTIC PRICE LESS THE SUBSIDY GRANTED BY THE GOVERNMENT) AND, AS A RESULT THEREOF THE OPERATOR IS REQUIRED BY SECTION 506 TO, IN EFFECT, PAY THE DOMESTIC PRICE IF THE SHIP IS OPERATED IN THE DOMESTIC TRADE. THIS IS ACCOMPLISHED BY A REPAYMENT TO THE GOVERNMENT OF THE SUBSIDY APPLICABLE TO THAT PROPORTION OF THE VESSEL'S STATUTORY LIFE DURING WHICH IT IS OPERATED IN THE DOMESTIC TRADES. UPON THE BASIS OF THE RATIONALE FOR THE REPAYMENT OF SUBSIDY, IT APPEARS THAT IF THE GOVERNMENT RECEIVES THE FULL BENEFIT OF ITS SUBSIDY BY THE OWNER'S OPERATIONS IN THE FOREIGN TRADE AND THE COMPLIANCE WITH THE OTHER CONSTRUCTION-DIFFERENTIAL SUBSIDY CONTRACT OBLIGATIONS FOR THE STATUTORY LIFE OF THE VESSEL, OR IF, IN THE CASE OF A VESSEL WHICH HAS NOT REACHED THE END OF ITS STATUTORY LIFE, THE UNAMORTIZED SUBSIDY IS REPAID TO THE GOVERNMENT, THE OWNER SHOULD BE IN THE SAME POSITION AS IF HE HAD PAID THE FULL DOMESTIC PRICE OF THE VESSEL; THAT IS, HE SHOULD NOT BE REQUIRED TO MAKE FURTHER REPAYMENTS AND SHOULD NOT BE BOUND TO OPERATE THE VESSEL EXCLUSIVELY IN FOREIGN TRADE. THIS CONCLUSION APPEARS AMPLY SUPPORTED BY THE ABOVE-QUOTED PORTIONS OF S.REPT.NO. 1618, 75TH CONGRESS, 3D SESSION, AND THAT THE REPAYMENT OF UNAMORTIZED SUBSIDY "WILL PROTECT THE INTERESTS OF THE GOVERNMENT AND THOSE OF THE CARRIERS, BOTH FOREIGN AND DOMESTIC.'

IN VIEW OF THE FOREGOING, WE CONCUR IN THE VIEW OF YOUR DEPARTMENT THAT THE MARITIME SUBSIDY BOARD HAS THE LEGAL AUTHORITY TO AMEND THE TWO CONTRACTS INVOLVED TO REMOVE THEREFROM THE SECTION 506 PROVISIONS AS REQUESTED BY GRACE LINE, INCORPORATED, UPON REPAYMENT TO THE GOVERNMENT OF THE UNAMORTIZED CONSTRUCTION-DIFFERENTIAL SUBSIDY PAID BY THE GOVERNMENT FOR THE RECONVERSION OF THE TWO VESSELS.