Under the terms of Title III of the 1936 Act, 
strict U.S. crewing requirements were imposed on 
all vessels built or operated with Federal subsidy 
assistance. All subsidized cargo vessels were required 
to be manned entirely with native-born or fully 
naturalized citizens. Some limited noncitizen man- 
ning was authorized on subsidized passenger vessels, 
but only in the steward’s department. Citizenship 
requirements for non-subsidized U.S.-registered ves- 
sels were also strengthened in 1936 with enactment 
of companion legislation requiring licensed officers 
and pilots on all U.S.-flag vessels to be citizens and 
requiring 75 percent of the crew on such vessels to 
be U.S. citizens. Both of these pieces of legislation 
also included other standards relating to seagoing 
working conditions, and together these laws greatly 
expanded Federal responsibility for overseeing con- 
ditions of employment aboard all U.S.-registered 
vessels, particularly subsidized vessels. 
As originally drawn, the 1936 Act was primarily 
devoted to providing Federal aid to the liner segment 
of the U.S. fleet although it did authorize a study of 
the need for subsidy assistance for U.S. tramp ship- 
ping. Under the terms of the Act, subsidy was to be 
provided only for vessels operated on routes and in 
services which the Maritime Commission determined 
to be essential to the promotion of U.S. foreign com- 
merce. This essential trade route concept, which to- 
day remains a major factor in assessing subsidy 
eligibility for liner vessels, had been first elaborated 
in the Merchant Marine Act of 1920 in conjunction 
with efforts to determine where commercial services 
should be established after World War I. 
In addition to the trade route essentiality require- 
ment associated with the new subsidy programs, the 
1936 Act also included a variety of other eligibility, 
monitoring, and reporting requirements which were 
imposed as a condition for receiving a subsidy. For 
example, subsidy recipients were required to file 
detailed reports specifying the nature of their cor- 
porate structure, the nature of any interests in 
foreign-flag shipping, information regarding domestic 
carriage activities, and other information. Such in- 
formation was required to assure compliance with 
restrictions and prohibitions relating to interests held 
in foreign-flag and domestic trade shipping opera- 
tions. 
Another provision of the 1936 Act precluded the 
payment of subsidy in support of any service in 
competition with another U.S. carrier except in cases 
where service inadequacy could be demonstrated. 
Another required that all operating subsidy recipients 
establish capital reserve funds to be used for vessel 
replacement. Annual contributions to such funds 
were required. And finally, the 1936 law included 
subsidy recapture provisions under which certain 
excess profits from subsidized operation or construc- 
tion were required to be returned to the Government. 
For subsidized ship operations the amount required 
to be recapture was one-half of any profit in excess 
to be recaptured was one-half of any profit in excess 
the subsidized operation and, for subsidized construc- 
tion, one-half of any profit in excess of 10 percent 
of the construction contract price. The recapture 
provisions of the construction subsidy program were 
subsequently supplanted by contract renegotiation 
procedures established to cover all Government work 
at a particular shipyard and the recapture provisions 
of the operating subsidy program were repealed by 
the Merchant Marine Act of 1970. 
In addition to direct subsidy aids provided through 
the operating-differential subsidy and construction- 
differential subsidy programs, the 1936 Act included 
two other indirect assistance programs designed to 
encourage U.S. fleet expansion. First, earnings set 
aside in capital reserve funds for new vessel con- 
struction were relieved of income tax liability. 
Second, the Government lending program for ship 
construction, which had been first authorized under 
the Merchant Marine Act of 1920, was retained, 
although new restrictions were included on the allow- 
able interest rates for such loans. This latter provi- 
sion is a direct lending authority that remains in 
force, but has not been used for many years. Loan 
assistance is, today, provided through the Title XI 
Federal Ship Financing program, the basic authority 
for which was added to the Merchant Marine Act 
in 1938. 
In recognition of the national security role of the 
U.S. merchant marine, a variety_of defense and 
security provisions were also incorporated in_the 
1936-Act.. The U.S. Maritime Commission, in ap- 
proving subsidized vessel designs, was required to 
coordinate such designs with the Navy. Any special 
noncommercial national defense features recom- 
mended by the Navy were to be included and fully 
funded by the Maritime Commission. Vessels con- 
structed with subsidy assistance were made subject 
to repurchase by the Government at cost-less-accu- 
mulated-depreciation, and power was provided to 
requisition_other private U.S.-owned vessels under 
certain national_emergency conditions, with provi- 
sions included for “just compensation.” (In 1954, 
similar authority to requisition foreign-owned vessels 
was extended under the provisions of the Emergency 
Foreign Vessels Acquisition Act.) Finally, under the 
provisions of Section 503(f) of the Act, the Com- 
mission was required to undertake an annual survey 
of U.S. shipbuilding capacity in coordination with 
the Navy in order to assure the adequacy of the 
shipbuilding mobilization base in light of the Na- 
tion’s security needs. 
In implementing the new Merchant Marine Act, 
the first order of business was to terminate existing 
claims associated with the mail contract program. 
Under the terms of Title TV of ‘te Act, a June 30, 
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