-CITE-

46 USC CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME

LIENS 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

-HEAD-

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

-MISC1-

SUBCHAPTER I - GENERAL

Sec.

31301. Definitions.

31302. Availability of instruments, copies, and information.

31303. Certain civil actions not authorized.

31304. Liability for noncompliance.

31305. Waiver of lien rights.

31306. Declaration of citizenship.

31307. State statutes superseded.

31308. Secretary of Commerce or Transportation as mortgagee.

31309. General civil penalty.

SUBCHAPTER II - COMMERCIAL INSTRUMENTS

31321. Filing, recording, and discharge.

31322. Preferred mortgages.

31323. Disclosing and incurring obligations before executing

preferred mortgages.

31324. Retention and examination of mortgages of vessels

covered by preferred mortgages.

31325. Preferred mortgage liens and enforcement.

31326. Court sales to enforce preferred mortgage liens and

maritime liens and priority of claims.

31327. Forfeiture of mortgagee interest.

[31328. Repealed.]

31329. Court sales of documented vessels.

31330. Penalties.

SUBCHAPTER III - MARITIME LIENS

31341. Persons presumed to have authority to procure

necessaries.

31342. Establishing maritime liens.

31343. Recording and discharging notices of claim of maritime

lien.

AMENDMENTS

2002 - Pub. L. 107-295, title II, Sec. 205(a)(2), Nov. 25, 2002,

116 Stat. 2096, substituted "notices of claim of maritime lien" for

"liens on preferred mortgage vessels" in item 31343.

1996 - Pub. L. 104-324, title XI, Sec. 1113(b)(3), Oct. 19, 1996,

110 Stat. 3970, struck out item 31328 "Limitations on parties

serving as trustees of mortgaged vessel interests".

-SECREF-

CHAPTER REFERRED TO IN OTHER SECTIONS

This chapter is referred to in section 12111 of this title;

section 1271 of Appendix to this title; title 42 section 9118;

title 49 section 11301.

-End-

-CITE-

46 USC SUBCHAPTER I - GENERAL 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER I - GENERAL

-HEAD-

SUBCHAPTER I - GENERAL

-End-

-CITE-

46 USC Sec. 31301 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER I - GENERAL

-HEAD-

Sec. 31301. Definitions

-STATUTE-

In this chapter -

(1) "acknowledge" means making -

(A) an acknowledgment or notarization before a notary public

or other official authorized by a law of the United States or a

State to take acknowledgments of deeds; or

(B) a certificate issued under the Hague Convention

Abolishing the Requirement of Legalisation for Foreign Public

Documents, 1961;

(2) "district court" means -

(A) a district court of the United States (as defined in

section 451 of title 28);

(B) the District Court of Guam;

(C) the District Court of the Virgin Islands;

(D) the District Court for the Northern Mariana Islands;

(E) the High Court of American Samoa; and

(F) any other court of original jurisdiction of a territory

or possession of the United States;

(3) "mortgagee" means -

(A) a person to whom property is mortgaged; or

(B) when a mortgage on a vessel involves a trust, the trustee

that is designated in the trust agreement;

(4) "necessaries" includes repairs, supplies, towage, and the

use of a dry dock or marine railway;

(5) "preferred maritime lien" means a maritime lien on a vessel

-

(A) arising before a preferred mortgage was filed under

section 31321 of this title;

(B) for damage arising out of maritime tort;

(C) for wages of a stevedore when employed directly by a

person listed in section 31341 of this title;

(D) for wages of the crew of the vessel;

(E) for general average; or

(F) for salvage, including contract salvage; and

(6) "preferred mortgage" -

(A) means a mortgage that is a preferred mortgage under

section 31322 of this title; and

(B) also means in sections 31325 and 31326 of this title, a

mortgage, hypothecation, or similar charge that is established

as a security on a foreign vessel if the mortgage,

hypothecation, or similar charge was executed under the laws of

the foreign country under whose laws the ownership of the

vessel is documented and has been registered under those laws

in a public register at the port of registry of the vessel or

at a central office.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4739.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31301(1), (2) New

31301(3) 46:911(5)

31301(4) Derived from 46:971-974

31301(5) 46:953(a)

31301(6)(A) 46:922(b)

31301(6)(B) 46:951 (2d par. less proviso)

--------------------------------------------------------------------

Section 31301(1) defines the term "acknowledge". This paragraph

makes a substantive change to law to expand the current law by

allowing a notarization under State law, a form prescribed by the

Secretary, as well as a certificate issued under the Hague

Convention Abolishing the Requirement of Legalisation for Foreign

Public Documents, 1961.

Section 31301(2) defines "district court". This paragraph makes a

substantive change to law by including the District Court of Guam,

the District Court of the Virgin Islands, the District Court of the

Northern Mariana Islands, the High Court of American Samoa, and

other Federal territorial courts as they are established. Under

current law, only the district courts of the United States have

jurisdiction under the Ship Mortgage Act, 1920.

Section 31301(3) defines "mortgagee" as a person to whom property

is mortgaged and the trustee authorized under section 31328 that is

designated in the trust agreement.

Section 31301(4) defines "necessaries" to include repairs,

supplies, towage, and the use of a drydock and marine railway for a

vessel. As in all codifications, the term "includes" means

"includes but is not limited to" and, therefore, is not intended to

be an exclusive listing of those items that a court has determined

or may determine as falling within the meaning of the term "other

necessaries" as contained in current law. The definition is new, is

based on 46 App. U.S.C. 971-974, and makes no substantive change to

law.

Section 31301(5) defines "preferred maritime lien" to mean a lien

on a vessel that arises before a preferred mortgage was filed under

section 31321 of this title for damages arising out of maritime

tort, stevedore wages, crew wages, general average, and salvage.

The definition is new and is based on 46 App. U.S.C. 953(a). The

only substantive change to law made by this paragraph is to change

the effective date from the day the preferred mortgage is recorded

and endorsed to when it is filed. This change is in keeping with

other changes with regard to filing. The term "duly and validly"

that is in existing law is not used because it is unnecessary. An

instrument that is not "duly and validly" executed is not executed

under the laws of the foreign country. This makes no substantive

change to law.

Section 31301(6)(A) defines "preferred mortgage" to mean a

mortgage that meets the requirements of section 31322. This clause

makes no substantive change to law.

Section 31301(6)(B) defines "preferred mortgage" to also mean a

mortgage on a documented foreign vessel that is preferred under

sections 31325 and 31326 for purposes of enforcement of the

outstanding mortgage indebtedness. Preference is only granted if

the mortgage is executed under the laws of a foreign country,

registered under those laws in a public register at the port of

registry or at a central office. The use of the word "established"

in place of "created" in the current law or "effective" as used in

the treaties is not intended to make any substantive change to law.

The only substantive changes to law made by this clause are the

elimination of the exemption of foreign vessels of less than 200

gross tons, and clarification of the rule of interpretation that if

a vessel is registered in one country, but is permitted to fly

temporarily the flag of another country (such as through a demise

charter), it is the law of the country in which the ownership of

the vessel is documented that is used to determine when a mortgage

attains preferred status.

EFFECTIVE DATE

Chapter effective Jan. 1, 1989, with certain exceptions and

qualifications, and not to affect any civil action filed before

that date, see section 107 of Pub. L. 100-710, set out as a note

under section 30101 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1271 of Appendix to this

title.

-End-

-CITE-

46 USC Sec. 31302 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER I - GENERAL

-HEAD-

Sec. 31302. Availability of instruments, copies, and information

-STATUTE-

The Secretary of Transportation shall -

(1) make any instrument filed or recorded with the Secretary

under this chapter available for public inspection;

(2) on request, provide a copy, including a certified copy, of

any instrument made available for public inspection under this

chapter; and

(3) on request, provide a certificate containing information

included in an instrument filed or recorded under this chapter.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4740.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31302(1) 46:927 (1st sentence)

31302(2) 46:927 (2d sentence)

31302(3) New

--------------------------------------------------------------------

Section 31302(1) makes all instruments filed for recording or

recorded with the Secretary of Transportation available for public

inspection. The only substantive change to law made by this

subsection is the inclusion of instruments filed for recording,

which is in keeping with the new requirements on filing of

instruments made in section 31321.

Section 31302(2) requires the Secretary to provide the public

with a certified copy of the material made available to the public

under subsection (a). This subsection makes no substantive change

to law.

Section 31302(3) requires the Secretary, on request, to issue a

certificate containing the information included in instruments on

file, such as certificates of ownership.

-End-

-CITE-

46 USC Sec. 31303 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER I - GENERAL

-HEAD-

Sec. 31303. Certain civil actions not authorized

-STATUTE-

If a mortgage covers a vessel and additional property that is not

a vessel, this chapter does not authorize a civil action in rem to

enforce the rights of the mortgagee under the mortgage against the

additional property.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4740.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31303 46:954(b)

--------------------------------------------------------------------

Section 31303 makes it clear that, if a mortgage covers a vessel

and additional property that is not a vessel, this chapter does not

authorize a civil action in rem in admiralty to enforce rights

against the additional property. This section makes no substantive

change to law.

-End-

-CITE-

46 USC Sec. 31304 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER I - GENERAL

-HEAD-

Sec. 31304. Liability for noncompliance

-STATUTE-

(a) If a person makes a contract secured by, or on the credit of,

a vessel covered by a mortgage filed or recorded under this chapter

and sustains a monetary loss because the mortgagor or the master or

other individual in charge of the vessel does not comply with a

requirement imposed on the mortgagor, master, or individual under

this chapter, the mortgagor is liable for the loss.

(b) A civil action may be brought to recover for losses referred

to in subsection (a) of this section. The district courts have

original jurisdiction of the action, regardless of the amount in

controversy or the citizenship of the parties. If the plaintiff

prevails, the court shall award costs and attorney fees to the

plaintiff.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4740.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31304 46:941(c)

--------------------------------------------------------------------

Section 31304 imposes liability on the mortgagor if the

mortgagor, master, or other individual in charge of the vessel does

not comply with the statutory requirements. A civil action may be

brought in a district court of the United States for losses

incurred. If the plaintiff prevails, the court shall award costs

and attorneys fees to the plaintiff. This section makes two

substantive changes to law. First, is the broadening of its

coverage from documented vessels covered by a preferred mortgage to

any vessel covered by a mortgage that is filed or recorded under

the chapter. The second substantive change repeals the liability on

the United States Government for losses caused because the

Secretary did not comply with statutory requirements. This is

covered by the Federal Tort Claims Act due to the nondiscretionary

responsibility of the Secretary.

-End-

-CITE-

46 USC Sec. 31305 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER I - GENERAL

-HEAD-

Sec. 31305. Waiver of lien rights

-STATUTE-

This chapter does not prevent a mortgagee or other lien holder

from waiving or subordinating at any time by agreement or otherwise

the lien holder's right to a lien, the priority or, if a preferred

mortgage lien, the preferred status of the lien.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4741.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31305 46:974

--------------------------------------------------------------------

Section 31305 provides for the waiver of lien rights by the

mortgagee or a person performing or supplying necessaries. This

section makes no substantive change to law and is included only

because of a like provision in current law. Without this provision

the Committee believes these waivers would be permissible as a

matter of law as they do not violate any public policy and on their

face reflect an arms length transaction between the parties. The

inclusion of this provision should not raise the implication that a

similar provision is required for other matters that may be

waivable as a matter of law.

HOUSE FLOOR STATEMENT

Section 31305 has been changed to clarify that the chapter does

not prevent a mortgagee or other lien holder from waiving by

contract the right to a lien, or the priority of that lien.

-End-

-CITE-

46 USC Sec. 31306 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER I - GENERAL

-HEAD-

Sec. 31306. Declaration of citizenship

-STATUTE-

(a) Except as provided by the Secretary of Transportation, when

an instrument transferring an interest in a vessel is presented to

the Secretary for filing or recording, the transferee shall file

with the instrument a declaration, in the form the Secretary may

prescribe by regulation, stating information about citizenship and

other information the Secretary may require to show the transaction

involved does not violate section 9 or 37 of the Shipping Act, 1916

(46 App. U.S.C. 808, 835).

(b) A declaration under this section filed by a corporation must

be signed by its president, secretary, treasurer, or other official

authorized by the corporation to execute the declaration.

(c) Except as provided by the Secretary, an instrument

transferring an interest in a vessel is not valid against any

person until the declaration required by this section has been

filed.

(d) A person knowingly making a false statement of a material

fact in a declaration filed under this section shall be fined under

title 18, imprisoned for not more than 5 years, or both.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4741; Pub. L. 101-225, title III, Sec. 303(1), Dec. 12, 1989, 103

Stat. 1923.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31306 46:838

--------------------------------------------------------------------

Section 31306(a) requires that a person submitting an instrument

transferring interest in a vessel to the Secretary for recording is

also to file a declaration stating information about citizenship

and other information to show that the transfer is not in violation

of section 9 of the Shipping Act, or section 37 of that Act in a

national emergency. This section makes no substantive change to

law.

Section 31306(b) requires that a declaration filed by a

corporation must be signed by the president, secretary, treasurer,

or other official authorized by the corporation to execute the

declaration. This section makes no substantive change to law.

Section 31306(c) invalidates any instrument transferring an

interest until the declaration is filed. This section makes no

substantive change to law.

Section 31306(d) provides for a criminal penalty for a violation

of this section. The amount of the fine is prescribed under title

18, United States Code, and may include imprisonment for not more

than 5 years, or both. This section makes no substantive change to

law.

AMENDMENTS

1989 - Subsec. (a). Pub. L. 101-225, Sec. 303(1)(A), substituted

"Except as provided by the Secretary of Transportation, when" for

"When" and "Secretary for filing" for "Secretary of Transportation

for filing".

Subsec. (c). Pub. L. 101-225, Sec. 303(1)(B), substituted "Except

as provided by the Secretary, an" for "An".

-End-

-CITE-

46 USC Sec. 31307 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER I - GENERAL

-HEAD-

Sec. 31307. State statutes superseded

-STATUTE-

This chapter supersedes any State statute conferring a lien on a

vessel to the extent the statute establishes a claim to be enforced

by a civil action in rem against the vessel for necessaries.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4741.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31307 46:975

--------------------------------------------------------------------

Section 31307 provides for preemption of State laws to the extent

a claim for necessaries is enforced by a civil action in rem in

admiralty against the vessel.

-End-

-CITE-

46 USC Sec. 31308 01/06/03

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TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER I - GENERAL

-HEAD-

Sec. 31308. Secretary of Commerce or Transportation as mortgagee

-STATUTE-

When the Secretary of Commerce or Transportation is a mortgagee

under this chapter, the Secretary may foreclose on a lien arising

from a right established under a mortgage under title XI of the

Merchant Marine Act, 1936 (46 App. U.S.C. 1271 et seq.), subject to

section 362(b) of title 11.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4741; Pub. L. 101-595, title VI, Sec. 603(13), Nov. 16, 1990, 104

Stat. 2993.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31308 46:952 (last sentence)

--------------------------------------------------------------------

Section 31308 allows the Secretary of Commerce or Transportation

to foreclose on a lien arising from a right established under a

mortgage under title XI of the Merchant Marine Act, 1936. This

section makes no substantive change to law.

-REFTEXT-

REFERENCES IN TEXT

The Merchant Marine Act, 1936, referred to in text, is act June

29, 1936, ch. 858, 49 Stat. 1985, as amended. Title XI of the Act

is classified generally to subchapter XI (Sec. 1271 et seq.) of

chapter 27 of the Appendix to this title. For complete

classification of this Act to the Code, see section 1245 of the

Appendix to this title and Tables.

-MISC2-

AMENDMENTS

1990 - Pub. L. 101-595 substituted "(46 App. U.S.C. 1271 et

seq.)" for "(46 App. U.S.C. 1241 et seq.)".

-End-

-CITE-

46 USC Sec. 31309 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER I - GENERAL

-HEAD-

Sec. 31309. General civil penalty

-STATUTE-

Except as otherwise provided in this chapter, a person violating

this chapter or a regulation prescribed under this chapter is

liable to the United States Government for a civil penalty of not

more than $10,000.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4741.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31309 New

--------------------------------------------------------------------

Section 31309 provides for a civil penalty of not more than

$10,000 for a violation of this chapter or a regulation prescribed

under this chapter.

-End-

-CITE-

46 USC SUBCHAPTER II - COMMERCIAL INSTRUMENTS 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER II - COMMERCIAL INSTRUMENTS

-HEAD-

SUBCHAPTER II - COMMERCIAL INSTRUMENTS

-End-

-CITE-

46 USC Sec. 31321 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER II - COMMERCIAL INSTRUMENTS

-HEAD-

Sec. 31321. Filing, recording, and discharge

-STATUTE-

(a)(1) A bill of sale, conveyance, mortgage, assignment, or

related instrument, whenever made, that includes any part of a

documented vessel or a vessel for which an application for

documentation is filed, must be filed with the Secretary of

Transportation to be valid, to the extent the vessel is involved,

against any person except -

(A) the grantor, mortgagor, or assignor;

(B) the heir or devisee of the grantor, mortgagor, or assignor;

and

(C) a person having actual notice of the sale, conveyance,

mortgage, assignment, or related instrument.

(2) Each bill of sale, conveyance, mortgage, assignment, or

related instrument that is filed in substantial compliance with

this section is valid against any person from the time it is filed

with the Secretary.

(3) The parties to an instrument or an application for

documentation shall use diligence to ensure that the parts of the

instrument or application for which they are responsible are in

substantial compliance with the filing and documentation

requirements.

(4) A bill of sale, conveyance, mortgage, assignment, or related

instrument may be filed electronically under regulations prescribed

by the Secretary.

(b) To be filed, a bill of sale, conveyance, mortgage,

assignment, or related instrument must -

(1) identify the vessel;

(2) state the name and address of each party to the instrument;

(3) state, if a mortgage, the amount of the direct or

contingent obligations (in one or more units of account as agreed

to by the parties) that is or may become secured by the mortgage,

excluding interest, expenses, and fees;

(4) state the interest of the grantor, mortgagor, or assignor

in the vessel;

(5) state the interest sold, conveyed, mortgaged, or assigned;

and

(6) be signed and acknowledged.

(c) If a bill of sale, conveyance, mortgage, assignment, or

related document is filed that involves a vessel for which an

application for documentation is filed, and the Secretary decides

that the vessel cannot be documented by an applicant -

(1) the Secretary shall send notice of the Secretary's

decision, including reasons for the decision, to each interested

party to the instrument filed for recording; and

(2) 90 days after sending the notice as provided under clause

(1) of this subsection, the Secretary -

(A) may terminate the filing; and

(B) may return the instrument filed without recording it

under subsection (e) of this section.

(d) A person may withdraw an application for documentation of a

vessel for which a mortgage has been filed under this section only

if the mortgagee consents.

(e) The Secretary shall -

(1) record the bills of sale, conveyances, mortgages,

assignments, and related instruments of a documented vessel

complying with subsection (b) of this section in the order they

are filed; and

(2) maintain appropriate indexes, for use by the public, of

instruments filed or recorded, or both.

(f) On full and final discharge of the indebtedness under a

mortgage recorded under subsection (e)(1) of this section, a

mortgagee, on request of the Secretary or mortgagor, shall provide

the Secretary with an acknowledged certificate of discharge of the

indebtedness in a form prescribed by the Secretary. The Secretary

shall record the certificate.

(g) The mortgage or related instrument of a vessel covered by a

preferred mortgage under section 31322(d) of this title, that is

later filed under this section at the time an application for

documentation is filed, is valid under this section from the time

the mortgage or instrument representing financing became a

preferred mortgage under section 31322(d).

(h) On full and final discharge of the indebtedness under a

mortgage deemed to be a preferred mortgage under section 31322(d)

of this title, a mortgagee, on request of the Secretary, a State,

or mortgagor, shall provide the Secretary or the State, as

appropriate, with an acknowledged certificate of discharge of the

indebtedness in a form prescribed by the Secretary or the State, as

applicable. If filed with the Secretary, the Secretary shall enter

that information in the vessel identification system under chapter

125 of this title.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4741; Pub. L. 101-225, title III, Sec. 303(2), Dec. 12, 1989, 103

Stat. 1923; Pub. L. 104-324, title III, Sec. 305, Oct. 19, 1996,

110 Stat. 3918; Pub. L. 107-295, title IV, Sec. 420, Nov. 25, 2002,

116 Stat. 2124.)

-MISC1-

HISTORICAL AND REVISION NOTES

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Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31321(a)(1) 46:921(a)

31321(a)(2) 46:1012

31321(a)(3) New

31321(b) 46:926(a), (b)

31321(c), (d) New

31321(e) 46:921(b)

31321(f) 46:925(b)

31321(g) New

31321(h) 46:925(b)

--------------------------------------------------------------------

Section 31321(a)(1) provides for the filing of a bill of sale,

conveyance, mortgage, assignment, or related instrument of a

vessel. This subsection makes substantive changes to law. The bill

would allow a bill of sale, conveyance, mortgage, assignment, or

related instrument to be filed at the same time an application for

documentation under chapter 121 is filed. The Committee intends

that the types of related instruments required to be filed be

defined by regulations prescribed by the Secretary of

Transportation. A major change the bill makes is that the

instrument needs only be filed with the Secretary of Transportation

to be valid. It is not necessary that it be recorded. This change

is being made to eliminate a problem under existing law that

prevents a person from recording an instrument when the vessel has

not been yet documented. When filed with the Secretary, it is valid

(to the extent the vessel is involved) against any person except

the grantor, mortgagor, or assignor, their heirs or devisees, and a

person having actual notice of that instrument. Clauses (A)-(C)

make no substantive change to law.

Paragraph (2) provides that each bill of sale, conveyance,

mortgage, assignment, or related instrument that is filed in

substantial compliance with the requirements of this section is

valid against any person from the time it is filed with the

Secretary.

Paragraph (3) provides that it is the responsibility of the

parties to an instrument to use diligence to ensure that the

particulars of a filed instrument for which they are responsible

are in substantial compliance. It is not the responsibility of the

Secretary to validate the information in the instrument. If an

instrument is later found to be invalid because it is not in

substantial compliance, and the parties lose the benefits of a

preferred mortgage, it is their fault, not the Secretary's.

Section 31321(b) sets out the requirements that an instrument

must meet to be properly filed. To be filed the instruments must:

(1) identify the vessel; (2) state the name and address of each

party to the instrument; (3) state, if a mortgage, the amount of

the direct or contingent obligations (in one or more units of

account as agreed to by the parties) that is or may become secured

by the mortgage, excluding interest, expenses, and fees; (4) state

the interest of the grantor, mortgagor, or assignor; (5) state the

interest sold, conveyed, mortgaged, or assigned; and (6) be signed

and acknowledged. While most of these items are required under

current law to be included in the index, and therefore required to

be submitted to the Secretary to be recorded, this subsection makes

a number of substantive changes to law. First, while vessel names

are currently required to be submitted, this requirement has been

broadened so that hull identification numbers and official numbers

can be used to more specifically identify a vessel (since many

vessels have the same name). Second, it requires the mortgage to

state the maximum amount of the obligation, including principal,

interest, fees, etc., that are secured by the mortgage. It also

clarifies that the mortgage obligation may be payable in more than

one unit of account, such as yen, franc, or special drawing right.

Third, it recognizes that under some modern financing practices an

instrument may not have a date of maturity. The requirement for

supplying the date of maturity has been eliminated.

Section 31321(c) provides that if an instrument filed involves a

vessel that has not yet been documented, and the Secretary decides

that the vessel cannot be documented by the applicant, then the

Secretary shall send notice of that denial to the parties,

including the reasons for the Secretary's decision. If the parties

have not corrected the deficiencies within 90 days, the Secretary

may terminate the filing and return the instruments. This

invalidates the instruments.

Section 31321(d) prohibits a person from withdrawing an

application for documentation of a vessel for which a mortgage has

been filed unless the mortgagee consents. Since the withdrawal will

invalidate the mortgage, the mortgagee should be allowed to

prohibit the withdrawal.

Section 31321(e) makes a substantive change to law. It requires

the Secretary to record instruments in the order they are received

for filing, not in the order in which they were received for

recording. It also makes a substantive change by eliminating the

specific indexes required under the law and substituting a general

requirement for the Secretary to maintain indexes of instruments

filed or recorded, or both, for use by the public. These indexes,

prescribed by regulations, must be in keeping with U.S. obligations

under treaties to which the United States is a party. Since section

104 [105] of this Act makes the existing rules and regulations

applicable under this subsection, the current indexing system will

be maintained that includes the names of the vessels; names of the

parties to the instruments; time and date each instrument was

received; the interest in the vessel that was sold, conveyed,

mortgaged, or assigned; and the date of the maturity of the

mortgage, if any. However, it allows the Secretary by regulation to

automate the system with computers, as long as the new system

provides the public with an adequate method of finding and

examining these public records.

Section 31321(f) makes a substantive change to law by eliminating

the requirement that a partial discharge of indebtedness be filed

with the Secretary. The bill requires that on the full and final

discharge of indebtedness the mortgagee, on request of the

Secretary or mortgagor, shall provide the Secretary with a written,

acknowledged certificate of discharge of the indebtedness. This

subsection also makes a substantive change by requiring that the

mortgagee, not the mortgagor, provide the certificate of discharge.

The Secretary shall then record the certificate. However, this does

not prohibit a person from submitting a certificate of discharge

under subsection (a) since it is a related instrument. This

subsection also makes a substantive change to law by eliminating

the requirement that the discharge be endorsed on the vessel's

certificate of documentation, and that the Customs Service only may

clear a vessel after an endorsement has been made. This change is

made because of the elimination of endorsements under section

31322.

HOUSE FLOOR STATEMENT

Section 31321 has been changed to clarify that a mortgage,

whenever made, must be filed to be valid against third parties.

This clarification allows mortgage closings to occur previous to

filing of an instrument, and to eliminate the need for a fictional

simultaneous closing and filing.

Subsection (g) clarifies that if an application for documentation

is filed for a vessel covered by a preferred mortgage under section

31322(d) (as enacted by this Act), the preferred mortgage must be

filed with the Secretary at the same time the application for

documentation is filed to be valid against third parties. If the

preferred mortgage is filed with the Secretary at the time the

documentation application is filed, it is valid from the time it

became a preferred mortgage under section 31322(d).

When a State preferred mortgage under section 31322(d) is finally

discharged, subsection (h) of this section requires the mortgagee

to provide upon request to the Secretary or a State, whichever is

more appropriate, an acknowledged certificate of discharge of

indebtedness. This is necessary when a vessel in the system moves

from a participating titling State and is not retitled in another

participating State. In this case, there is no way to update the

status of the indebtedness through the original titling State. The

Secretary is required to accept this information to be maintained

in the vessel identification system under section 12503(c) of title

46 (as enacted by this Act).

AMENDMENTS

2002 - Subsec. (a)(4) Pub. L. 107-295 struck out subpar. (A)

designation before "A bill of sale" and subpar. (B) which read as

follows: "A filing made electronically under subparagraph (A) shall

not be effective after the 10-day period beginning on the date of

the filing unless the original instrument is provided to the

Secretary within that 10-day period."

1996 - Subsec. (a). Pub. L. 104-324 added par. (4).

1989 - Subsec. (c). Pub. L. 101-225 substituted "for which an

application for documentation is filed" for "that has not yet been

documented" in introductory provisions and "interested party to"

for "party whose name and address is stated on" in par. (1).

EFFECTIVE DATE

Section effective Jan. 1, 1989, not to affect any civil action

filed before that date, and, insofar as applicable to vessels for

which an application for documentation has been filed, effective

Jan. 1, 1990, with further provision for an instrument filed before

Jan. 1, 1989, but not recorded before that date, and with other

qualifications, see section 107 of Pub. L. 100-710, set out as a

note under section 30101 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 12111, 12503, 31301,

31322, 31325, 31330, 31343 of this title.

-End-

-CITE-

46 USC Sec. 31322 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER II - COMMERCIAL INSTRUMENTS

-HEAD-

Sec. 31322. Preferred mortgages

-STATUTE-

(a) A preferred mortgage is a mortgage, whenever made, that -

(1) includes the whole of the vessel;

(2) is filed in substantial compliance with section 31321 of

this title; and

(3)(A) covers a documented vessel; or

(B) covers a vessel for which an application for documentation

is filed that is in substantial compliance with the requirements

of chapter 121 of this title and the regulations prescribed under

that chapter.

(b) Any indebtedness secured by a preferred mortgage that is

filed or recorded under this chapter, or that is subject to a

mortgage, security agreement, or instruments granting a security

interest that is deemed to be a preferred mortgage under subsection

(d) of this section, may have any rate of interest to which the

parties agree.

(c)(1) If a preferred mortgage includes more than one vessel or

property that is not a vessel, the mortgage may provide for the

separate discharge of each vessel and all property not a vessel by

the payment of a part of the mortgage indebtedness.

(2) If a vessel covered by a preferred mortgage that includes

more than one vessel or property that is not a vessel is to be sold

on the order of a district court in a civil action in rem, and the

mortgage does not provide for separate discharge as provided under

paragraph (1) of this subsection -

(A) the mortgage constitutes a lien on that vessel in the full

amount of the outstanding mortgage indebtedness; and

(B) an allocation of mortgage indebtedness for purposes of

separate discharge may not be made among the vessel and other

property covered by the mortgage.

(d)(1) A mortgage, security agreement, or instrument granting a

security interest perfected under State law covering the whole of a

vessel titled in a State is deemed to be a preferred mortgage if -

(A) the Secretary certifies that the State titling system

complies with the Secretary's guidelines for a titling system

under section 13106(b)(8) of this title; and

(B) information on the vessel covered by the mortgage, security

agreement, or instrument is made available to the Secretary under

chapter 125 of this title.

(2) This subsection applies to mortgages, security agreements, or

instruments covering vessels titled in a State after -

(A) the Secretary's certification under paragraph (1)(A) of

this subsection; and

(B) the State begins making information available to the

Secretary under chapter 125 of this title.

(3) A preferred mortgage under this subsection continues to be a

preferred mortgage even if the vessel is no longer titled in the

State where the mortgage, security agreement, or instrument

granting a security interest became a preferred mortgage under this

subsection.

(e) If a vessel is already covered by a preferred mortgage when

an application for titling or documentation is filed -

(1) the status of the preferred mortgage covering the vessel to

be titled in the State is determined by the law of the

jurisdiction where the vessel is currently titled or documented;

and

(2) the status of the preferred mortgage covering the vessel to

be documented under chapter 121 is determined by subsection (a)

of this section.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4743; Pub. L. 101-225, title III, Sec. 303(3), Dec. 12, 1989, 103

Stat. 1923; Pub. L. 104-324, title XI, Sec. 1113(a), Oct. 19, 1996,

110 Stat. 3970; Pub. L. 105-277, div. C, title II, Sec. 202(b),

Oct. 21, 1998, 112 Stat. 2681-618; Pub. L. 105-383, title IV, Sec.

401(c)(1)-(4), Nov. 13, 1998, 112 Stat. 3425; Pub. L. 106-31, title

III, Sec. 3027(a)(1), May 21, 1999, 113 Stat. 101; Pub. L. 107-20,

title II, Sec. 2202(b), (c), July 24, 2001, 115 Stat. 168, 169.)

-STATAMEND-

ENACTMENT OF SUBSECTION (A)(4)

Pub. L. 105-277, div. C, title II, Secs. 202(b), 203(a), Oct. 21,

1998, 112 Stat. 2681-618, 2681-619, as amended by Pub. L. 106-31,

title III, Sec. 3027(a)(1), May 21, 1999, 113 Stat. 101; Pub. L.

107-20, title II, Sec. 2202(b), (d), July 24, 2001, 115 Stat. 168,

170, provided that, not effective until Apr. 1, 2003, subsection

(a) of this section is amended as follows:

(1) by striking "and" at the end of paragraph (2);

(2) by striking the period at the end of paragraph (3)(B) and

inserting in lieu thereof a semicolon and "and"; and

(3) by inserting at the end the following new paragraph:

(4) with respect to a vessel with a fishery endorsement that is

100 feet or greater in registered length, has as the mortgagee -

(A) a person eligible to own a vessel with a fishery

endorsement under section 12102(c) of this title;

(B) a state or federally chartered financial institution that

is insured by the Federal Deposit Insurance Corporation;

(C) a farm credit lender established under title 12, chapter

23 of the United States Code;

(D) a commercial fishing and agriculture bank established

pursuant to State law;

(E) a commercial lender organized under the laws of the

United States or of a State and eligible to own a vessel under

section 12102(a) of this title; or

(F) a mortgage trustee under subsection (f) of this section.

ENACTMENT OF SUBSECTIONS (F) TO (H)

Pub. L. 107-20, title II, Sec. 2202(c), (d), July 24, 2001, 115

Stat. 169, 170, provided that, not effective until Apr. 1, 2003,

this section is amended by adding at the end the following new

subsections:

(f)(1) A mortgage trustee may hold in trust, for an individual or

entity, an instrument or evidence of indebtedness, secured by a

mortgage of the vessel to the mortgage trustee, provided that the

mortgage trustee -

(A) is eligible to be a preferred mortgagee under subsection

(a)(4), subparagraphs (A)-(E) of this section;

(B) is organized as a corporation, and is doing business, under

the laws of the United States or of a State;

(C) is authorized under those laws to exercise corporate trust

powers;

(D) is subject to supervision or examination by an official of

the United States Government or a State;

(E) has a combined capital and surplus (as stated in its most

recent published report of condition) of at least $3,000,000; and

(F) meets any other requirements prescribed by the Secretary.

(2) If the beneficiary under the trust arrangement is not a

commercial lender, a lender syndicate or eligible to be a preferred

mortgagee under subsection (a)(4), subparagraphs (A)-(E) of this

section, the Secretary must determine that the issuance,

assignment, transfer, or trust arrangement does not result in an

impermissible transfer of control of the vessel to a person not

eligible to own a vessel with a fishery endorsement under section

12102(c) of this title.

(3) A vessel with a fishery endorsement may be operated by a

mortgage trustee only with the approval of the Secretary.

(4) A right under a mortgage of a vessel with a fishery

endorsement may be issued, assigned, or transferred to a person not

eligible to be a mortgagee of that vessel under this section only

with the approval of the Secretary.

(5) The issuance, assignment, or transfer of an instrument or

evidence of indebtedness contrary to this subsection is voidable by

the Secretary.

(g) For purposes of this section a "commercial lender" means an

entity primarily engaged in the business of lending and other

financing transactions with a loan portfolio in excess of

$100,000,000, of which not more than 50 per centum in dollar amount

consists of loans to borrowers in the commercial fishing industry,

as certified to the Secretary by such lender.

(h) For purposes of this section a "lender syndicate" means an

arrangement established for the combined extension of credit of not

less than $20,000,000 made up of four or more entities that each

have a beneficial interest, held through an agent, under a trust

arrangement established pursuant to subsection (f), no one of which

may exercise powers thereunder without the concurrence of at least

one other unaffiliated beneficiary.

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31322(a)(1) 46:922(a), (b)

31322(a)(2) New

31322(b) 46:926(d)

31322(c)(1) 46:922(e)

31322(c)(2) 46:922(f)

31322(d), (e) New

--------------------------------------------------------------------

Section 31322 sets out the conditions that must be met for a

mortgage to be considered a preferred mortgage, and the types of

endorsements that the Secretary must make on any certificate of

documentation of a vessel that is to be covered by a preferred

mortgage.

Subsection (a)(1) makes many substantive changes to law. While a

preferred mortgage must still include the whole of a vessel, this

subsection eliminates the exception of certain vessels under 25

gross tons. It allows a vessel for which an application for

documentation has been filed to have a preferred mortgage. It

allows a mortgage to be a preferred mortgage from the time all four

conditions are met, rather than from when the vessel is finally

documented. Therefore, a mortgage will usually attain its preferred

status when the application for documentation and the instrument

have been filed. This subsection changes the requirement that all

documented vessels have as a mortgagee a person that is a citizen

of the United States, as defined in section 2 of the Shipping Act,

1916, and allows a State, the United States Government, a federally

insured depository institution, or any other person approved by the

Secretary to be a mortgagee.

Subsection (a)(2) makes a substantive change to law exempting

fishing, fish processing, and fish tender vessels, and vessels

operated only for pleasure from the mortgagee restrictions, since

these vessels do not have significant national defense use.

Subsection (b) permits a preferred mortgage to have any rate of

interest that is agreeable to the parties to the mortgage. This

subsection makes no substantive change to law.

Subsection (c)(1) applies to a mortgage that covers more than one

vessel or additional property that is not a vessel. This subsection

allows a preferred mortgage to include a separate discharge of the

additional vessels and property.

Subsection (c)(2) applies when a preferred mortgage covers more

than one vessel, does not provide for the separate discharge of a

vessel, and is to be sold by court order. The amount of the

mortgage indebtedness attributable to a vessel is that part of the

indebtedness, increased by 20 percent, that the court determines

approximates the value that the particular vessel bears to the

value of all the vessels and property covered by the mortgage. In

other words, the amount to be set by the court is the estimated

value of the one vessel plus 20 percent of that value to assure

sufficiency of collateral.

This section also makes a substantive change by eliminating the

requirement that a vessel's certificate of documentation be

endorsed with information from the mortgage. This change is made

since most of the information is out of date when examined, and

since a mortgage must be carried on self-propelled vessels under

section 31324(b). This section also eliminates the requirement for

the inclusion of an affidavit of good faith. However, both criminal

and civil penalties have been added [in section 31330] to help

ensure that there is not fraud. This section also eliminates the

requirement that a preferred mortgage include a separate discharge

for additional property that is not a vessel, the requirement that

the mortgage does not stipulate that the mortgagee waives the

mortgage's preferred status; and the requirement for clearing

vessels with endorsed documents through Customs.

-MISC1-

HOUSE FLOOR STATEMENT

Under section 31322(a)(2) a "vessel operated only for pleasure"

is exempt from any restrictions on who can be a mortgagee. This

standard is the same as used for the documentation of a

recreational vessel under section 12109 of title 46. The Committee

intends that vessels that have a recreational vessel license, or

combined fisheries and recreational license, fall under this

exemption. However, if the vessel has a Coastwise License, Great

Lakes License, or Registry combined with a Recreational License,

the vessel would not fall under this exemption.

Under subsection (c)(2), if a vessel covered by a preferred

mortgage that includes more than one vessel or property that is not

a vessel is to be sold on the order of a district court in rem, and

there is not a separate discharge, then the mortgage constitutes a

lien on that vessel in the full amount of the outstanding mortgage

indebtedness, and an allocation of mortgage indebtedness for

purposes of a separate discharge may not be made. This change is

made to eliminate the formula that did not work and to allow the

vessel to be sold free and clear, regardless of the amount of the

sale.

Under subsection (d) of section 31322, a mortgage or other

instrument representing financing of a vessel under State law that

is made under applicable State law and covers the whole of a vessel

titled in a State is deemed to be a preferred mortgage if two

conditions are fulfilled. The first condition is that the Secretary

must certify that the State in which the vessel is titled has a

titling system that complies with the Secretary's vessel titling

guidelines established under section 13106(b)(8) of title 46.

Congress mandated the promulgation of these guidelines in the

Recreational Boating Safety Act of 1986, Public Law 99-626. The

second condition is that the State in which the vessel is titled

must make information available to the Secretary for the vessel

identification system established under chapter 125 of title 46 (as

enacted by this Act) on the vessel covered by the mortgage or other

instrument. This status only applies to vessels titled in the State

after those two conditions are met. The phrase "instrument

representing financing of a vessel under State law" is used in

addition to "mortgage" because State laws do not always use the

term mortgage when referring to financing. It is intended, however,

that the financing covered by this phrase would be the same as that

covered by the concept of a mortgage under other Federal law.

Paragraph (2) of subsection (d) clarifies that mortgages or other

financing instruments may obtain preferred status under subsection

(d) if they cover vessels titled in a State after the Secretary

certifies the compliance of the State's titling system, and the

State begins making vessel identification information available to

the Secretary. Preferred mortgage status can only be attained when

these two conditions are in effect. Mortgages or financing

instruments made prior to that are not preferred and, if these two

conditions cease to exist, new mortgages or forecasting instruments

made after that time cannot attain preferred status.

The law of the titling State controls the making of the preferred

mortgage or financing instrument under this subsection. No

additional Federal recording requirements may be imposed for the

mortgage or instrument to obtain preferred status under this

subsection.

Paragraph (3) of this subsection ensures that a preferred

mortgage under this subsection retains that status if the vessel

covered by the mortgage later relinquishes its title. If the vessel

is subsequently documented, the continuing validity of the mortgage

is determined by section 31321(g) (as enacted by this Act).

Subsection (e) of section 31322 clarifies the validity of

preferred mortgages made under subsection (d). In the case of a

State titled vessel covered by a preferred mortgage for which a new

titling application is filed, the validity of the mortgage is

governed by the law of the titling State in which the mortgage

became preferred. In the case of a documented vessel covered by a

preferred mortgage for which an application for a State title is

filed, or a State titled vessel covered by a preferred mortgage for

which an application for documentation is filed, the validity of

the preferred mortgage is governed by section 31322(a) of title 46

(as enacted by this Act).

Information on vessels with preferred mortgages made under State

law will be available to creditors from the vessel identification

system under chapter 125 of title 46 (as enacted by this Act).

AMENDMENTS

1998 - Subsec. (b). Pub. L. 105-383, Sec. 401(c)(1), added

subsec. (b) and struck out former subsec. (b) which read as

follows: "A preferred mortgage filed or recorded under this chapter

may have any rate of interest that the parties to the mortgage

agree to."

Subsec. (d)(1). Pub. L. 105-383, Sec. 401(c)(2), substituted

"mortgage, security agreement, or instrument" for "mortgage or

instrument" in introductory provisions and subpar. (B).

Subsec. (d)(2). Pub. L. 105-383, Sec. 401(c)(4), substituted

"mortgages, security agreements, or instruments" for "mortgages or

instruments" in introductory provisions.

Subsec. (d)(3). Pub. L. 105-383, Sec. 401(c)(3), added par. (3)

and struck out former par. (3) which read as follows: "A preferred

mortgage under this subsection continues to be a preferred mortgage

if the vessel is no longer titled in the State where the mortgage

was made."

1996 - Subsec. (a). Pub. L. 104-324 amended subsec. (a)

generally. Prior to amendment, subsec. (a) consisted of 2 pars.

with substantially similar provisions defining a preferred mortgage

except that it included a mortgage with a State, the United States

Government, a federally insured depository institution, or

specified individual as mortgagee.

1989 - Subsec. (a)(2). Pub. L. 101-225, Sec. 303(3)(A), amended

par. (2) generally. Prior to amendment, par. (2) read as follows:

"Paragraph (1)(D) of this subsection does not apply to a vessel

operated only as a fishing vessel, fish processing vessel, or a

fish tender vessel (as defined in section 2101 of this title) or to

a vessel operated only for pleasure."

Subsec. (d)(1). Pub. L. 101-225, Sec. 303(3)(B), substituted

"granting a security interest perfected under State law" for

"representing financing of a vessel under State law that is made

under applicable State law".

Subsec. (e). Pub. L. 101-225, Sec. 303(3)(C), substituted "the

status of the preferred mortgage" for "the validity of the

preferred mortgage" in pars. (1) and (2).

EFFECTIVE DATE OF 2001 AMENDMENT

This section, as amended by Pub. L. 107-20, not effective until

Apr. 1, 2003, see section 2202(d) of Pub. L. 107-20, set out as a

note under section 12102 of this title.

EFFECTIVE DATE OF 1998 AMENDMENT

This section, as amended by Pub. L. 105-277, not effective until

Apr. 1, 2003, see section 2202(d) of Pub. L. 107-20, set out as a

note under section 12102 of this title.

EFFECTIVE DATE

Section effective Jan. 1, 1989, not to affect any civil action

filed before that date, and, insofar as applicable to vessels for

which an application for documentation has been filed, effective

Jan. 1, 1990, with other exceptions and qualifications, see section

107 of Pub. L. 100-710, set out as a note under section 30101 of

this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 12102, 12124, 12503,

31301, 31321, 31327, 31343 of this title; section 808 of Appendix

to this title; title 10 section 2218.

-End-

-CITE-

46 USC Sec. 31323 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER II - COMMERCIAL INSTRUMENTS

-HEAD-

Sec. 31323. Disclosing and incurring obligations before executing

preferred mortgages

-STATUTE-

(a) On request of the mortgagee and before executing a preferred

mortgage, the mortgagor shall disclose in writing to the mortgagee

the existence of any obligation known to the mortgagor on the

vessel to be mortgaged.

(b) After executing a preferred mortgage and before the mortgagee

has had a reasonable time to file the mortgage, the mortgagor may

not incur, without the consent of the mortgagee, any contractual

obligation establishing a lien on the vessel except a lien for -

(1) wages of a stevedore when employed directly by a person

listed in section 31341 of this title;

(2) wages for the crew of the vessel;

(3) general average; or

(4) salvage, including contract salvage.

(c) On conviction of a mortgagor under section 31330(a)(1)(A) or

(B) of this title for violating this section, the mortgage

indebtedness, at the option of the mortgagee, is payable

immediately.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4744.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31323(a) 46:924(1)

31323(b) 46:924(2)

31323(c) 46:941(b) (last sentence)

--------------------------------------------------------------------

Section 31323(a) requires the mortgagor to disclose any

obligations on the vessel before executing a preferred mortgage.

This subsection makes no substantive change to law.

Section 31323(b) provides that, after executing a preferred

mortgage, the mortgagor may not incur, without consent of the

mortgagee, any contractual obligations establishing a lien on the

vessel - except a lien for stevedore wages, crew wages, general

average, and salvage. The only substantive change to law made by

this subsection is that the reasonable time to record a mortgage is

changed to a reasonable time to file the mortgage, and the

elimination of the reference to endorsements. These changes are in

keeping with the changes made in section 31322.

Section 31323(c) provides that if a mortgagor is convicted of a

violation of this section, then the mortgage indebtedness, at the

option of the mortgagee, is payable immediately. This subsection

makes no substantive change to law.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 31330 of this title.

-End-

-CITE-

46 USC Sec. 31324 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER II - COMMERCIAL INSTRUMENTS

-HEAD-

Sec. 31324. Retention and examination of mortgages of vessels

covered by preferred mortgages

-STATUTE-

(a) On request, the owner, master, or individual in charge of a

vessel covered by a preferred mortgage shall permit a person to

examine the mortgage if the person has business with the vessel

that may give rise to a maritime lien or the sale, conveyance,

mortgage, or assignment of a mortgage of the vessel.

(b) A mortgagor of a preferred mortgage covering a self-propelled

vessel shall use diligence in keeping a certified copy of the

mortgage on the vessel.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4744.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31324 46:923

--------------------------------------------------------------------

Section 31324(a) provides for examination of mortgages of a

vessel that is covered by a preferred mortgage by persons that have

business with the vessel that may give rise to a maritime lien or

the sale, conveyance, mortgage, or assignment of the mortgage. This

subsection makes no substantive change to law.

Section 31324(b) requires that a certified copy of the mortgage

must be on board a self-propelled vessel. This subsection makes no

substantive change to law.

-End-

-CITE-

46 USC Sec. 31325 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER II - COMMERCIAL INSTRUMENTS

-HEAD-

Sec. 31325. Preferred mortgage liens and enforcement

-STATUTE-

(a) A preferred mortgage is a lien on the mortgaged vessel in the

amount of the outstanding mortgage indebtedness secured by the

vessel.

(b) On default of any term of the preferred mortgage, the

mortgagee may -

(1) enforce the preferred mortgage lien in a civil action in

rem for a documented vessel, a vessel to be documented under

chapter 121 of this title, a vessel titled in a State, or a

foreign vessel;

(2) enforce a claim for the outstanding indebtedness secured by

the mortgaged vessel in -

(A) a civil action in personam in admiralty against the

mortgagor, maker, comaker, or guarantor for the amount of the

outstanding indebtedness or any deficiency in full payment of

that indebtedness; and

(B) a civil action against the mortgagor, maker, comaker, or

guarantor for the amount of the outstanding indebtedness or any

deficiency in full payment of that indebtedness; and

(3) enforce the preferred mortgage lien or a claim for the

outstanding indebtedness secured by the mortgaged vessel, or

both, by exercising any other remedy (including an extrajudicial

remedy) against a documented vessel, a vessel for which an

application for documentation is filed under chapter 121 of this

title, a vessel titled in a State, a foreign vessel, or a

mortgagor, maker, comaker, or guarantor for the amount of the

outstanding indebtedness or any deficiency in full payment of

that indebtedness, if -

(A) the remedy is allowed under applicable law; and

(B) the exercise of the remedy will not result in a violation

of section 9 or 37 of the Shipping Act, 1916 (46 App. U.S.C.

808, 835).

(c) The district courts have original jurisdiction of a civil

action brought under subsection (b)(1) or (2) of this section.

However, for a documented vessel, a vessel to be documented under

chapter 121 of this title, a vessel titled in a State, or a foreign

vessel, this jurisdiction is exclusive of the courts of the States

for a civil action brought under subsection (b)(1) of this section.

(d)(1) Actual notice of a civil action brought under subsection

(b)(1) of this section, or to enforce a maritime lien, must be

given in the manner directed by the court to -

(A) the master or individual in charge of the vessel;

(B) any person that recorded under section 31343(a) or (d) of

this title an unexpired notice of a claim of an undischarged lien

on the vessel; and

(C) a mortgagee of a mortgage filed or recorded under section

31321 of this title that is an undischarged mortgage on the

vessel.

(2) Notice under paragraph (1) of this subsection is not required

if, after search satisfactory to the court, the person entitled to

the notice has not been found in the United States.

(3) Failure to give notice required by this subsection does not

affect the jurisdiction of the court in which the civil action is

brought. However, unless notice is not required under paragraph (2)

of this subsection, the party required to give notice is liable to

the person not notified for damages in the amount of that person's

interest in the vessel terminated by the action brought under

subsection (b)(1) of this section. A civil action may be brought to

recover the amount of the terminated interest. The district courts

have original jurisdiction of the action, regardless of the amount

in controversy or the citizenship of the parties. If the plaintiff

prevails, the court may award costs and attorney fees to the

plaintiff.

(e) In a civil action brought under subsection (b)(1) of this

section -

(1) the court may appoint a receiver and authorize the receiver

to operate the mortgaged vessel and shall retain in rem

jurisdiction over the vessel even if the receiver operates the

vessel outside the district in which the court is located; and

(2) when directed by the court, a United States marshal may

take possession of a mortgaged vessel even if the vessel is in

the possession or under the control of a person claiming a

possessory common law lien.

(f)(1) Before title to the documented vessel or vessel for which

an application for documentation is filed under chapter 121 is

transferred by an extrajudicial remedy, the person exercising the

remedy shall give notice of the proposed transfer to the Secretary,

to the mortgagee of any mortgage on the vessel filed in substantial

compliance with section 31321 of this title before notice of the

proposed transfer is given to the Secretary, and to any person that

recorded an unexpired notice of a claim of an undischarged lien on

the vessel under section 31343(a) or (d) of this title before

notice of the proposed transfer is given to the Secretary.

(2) Failure to give notice as required by this subsection shall

not affect the transfer of title to a vessel. However, the rights

of any holder of a maritime lien or a preferred mortgage on the

vessel shall not be affected by a transfer of title by an

extrajudicial remedy exercised under this section, regardless of

whether notice is required by this subsection or given.

(3) The Secretary shall prescribe regulations establishing the

time and manner for providing notice under this subsection.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4745; Pub. L. 101-225, title III, Sec. 303(4), Dec. 12, 1989, 103

Stat. 1923; Pub. L. 104-324, title XI, Sec. 1124(a), (b), Oct. 19,

1996, 110 Stat. 3980; Pub. L. 105-383, title IV, Sec.

401(c)(5)-(7), Nov. 13, 1998, 112 Stat. 3425; Pub. L. 107-295,

title II, Sec. 205(b), Nov. 25, 2002, 116 Stat. 2096.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31325(a) 46:951 (1st sentence)

31325(b)(1) 46:951 (2d sentence)

31325(b)(2) 46:954(a)

31325(b)(3) New

31325(c) 46:951 (3d sentence)

31325(d) 46:951 (4th to 6th sentences)

31325(e) 46:952 (1st, 2d sentences)

--------------------------------------------------------------------

Section 31325 provides for the enforcement of a preferred

mortgage lien.

Section 31325(a) makes a "preferred mortgage" a lien on the

vessel in the amount of the mortgage indebtedness secured by the

vessel outstanding at foreclosure. This subsection makes no

substantive change to law.

Section 31325(b) provides that, on default of any term, the

mortgagee may enforce the preferred mortgage lien in a civil action

in rem, or in personam in admiralty against the mortgagor, comaker,

or guarantor for the amount of the outstanding indebtedness secured

by the vessel or any deficiency in paying off that indebtedness.

This subsection makes a substantive change to law by allowing a

nonadmiralty civil action to be brought against the mortgagor,

comaker, or guarantor for the amount of the outstanding

indebtedness secured by the vessel or any deficiency in paying off

that indebtedness. This change allows an action to be brought even

when the vessel is outside U.S. jurisdiction. This section will

also allow the action to be brought against the comaker or

guarantor of the mortgage.

Section 31325(c) provides for original and exclusive jurisdiction

by a district court, to the exclusion of the courts of a State for

civil actions brought in rem. It also provides for original

jurisdiction for civil actions brought in personam in admiralty and

civil actions brought under subsection (b)(3). This subsection

makes a substantive change to law by broadening the jurisdiction to

courts in the territories, as defined in section 31301, as well as

giving original jurisdiction to the district courts in nonadmiralty

civil actions brought to enforce the preferred mortgage lien.

Subsection (d) provides that actual notice of a civil action in

rem to enforce a maritime lien must be given in a manner directed

by the court to the master, individual in charge of the vessel, to

any person that recorded a notice of a claim of an undischarged

lien, and, for the first time, to the mortgagee of a mortgage filed

with the Secretary. This notice is not required if, after a search

is made that is satisfactory to the court, the person entitled to

notice is not found in the United States. Failure to give notice

does not affect the court's jurisdiction. However, the mortgagor is

still liable to the person not notified for damages in the amount

of that person's interest in the vessel that was terminated by the

civil action in rem, and a civil action may still be brought to

recover the amount of the terminated interest. The district courts

have original jurisdiction of the action, regardless of the amount

in controversy or the citizenship of the parties. If plaintiff

prevails, the court shall award costs and attorneys fees to the

plaintiff.

Subsection (e) provides that, in a civil action in rem, the court

may appoint a receiver and authorize operation of the vessel. When

directed by the court, a United States marshal may take possession

- even if the vessel is in the possession of or under the control

of a person claiming a possessory common law lien. This subsection

makes a substantive change to law by allowing the court to retain

in rem jurisdiction over the vessel even if the receiver operates

the vessel outside the district in which the court is located.

HOUSE FLOOR STATEMENT

Subsection (c) of this section clarifies that the district courts

have original jurisdiction for a civil action under subsection (b)

of this section, and exclusive jurisdiction in the case of vessels

documented or to be documented under chapter 121 of title 46.

AMENDMENTS

2002 - Subsec. (d)(1)(B). Pub. L. 107-295, Sec. 205(b)(1),

substituted "an unexpired notice of a claim" for "a notice of a

claim".

Subsec. (f)(1). Pub. L. 107-295, Sec. 205(b)(2), substituted "an

unexpired notice of a claim" for "a notice of a claim".

1998 - Subsecs. (b)(1), (3), (c). Pub. L. 105-383 inserted "a

vessel titled in a State," after "chapter 121 of this title,".

1996 - Subsec. (b). Pub. L. 104-324, Sec. 1124(a)(1), substituted

"mortgagee may" for "mortgage may" in introductory provisions.

Subsec. (b)(1). Pub. L. 104-324, Sec. 1124(a)(2)(A), substituted

"preferred" for "perferred".

Subsec. (b)(3). Pub. L. 104-324, Sec. 1124(a)(2)(B), (3), added

par. (3).

Subsec. (f). Pub. L. 104-324, Sec. 1124(b), added subsec. (f).

1989 - Subsecs. (b), (c). Pub. L. 101-225 amended subsecs. (b)

and (c) generally. Prior to amendment, subsecs. (b) and (c) read as

follows:

"(b) On default of any term of the preferred mortgage, the

mortgagee may enforce the preferred mortgage lien in -

"(1) a civil action in rem for a documented vessel or a vessel

to be documented under chapter 121 of this title;

"(2) a civil action in personam in admiralty against the

mortgagor, comaker, or guarantor for the amount of the

outstanding indebtedness secured by the mortgaged vessel or any

deficiency in full payment of that indebtedness; and

"(3) a civil action against the mortgagor, comaker, or

guarantor for the amount of the outstanding indebtedness secured

by the mortgaged vessel or any deficiency in full payment of that

indebtedness.

"(c) The district courts have original jurisdiction of a civil

action brought under subsection (b) of this section. However, for

documented vessels or vessels to be documented under chapter 121 of

this title, this jurisdiction is exclusive of the courts of the

States for a civil action under subsection (b)(1) of this section."

EFFECTIVE DATE OF 2002 AMENDMENT

Amendment by Pub. L. 107-295 effective Jan. 1, 2003, see section

205(e) of Pub. L. 107-295, set out as a note under section 12111 of

this title.

CONSTRUCTION OF 1996 AMENDMENTS

Section 1124(c) of Pub. L. 104-324 provided that: "The amendments

made by subsections (a) and (b) [amending this section] may not be

construed to imply that remedies other than judicial remedies were

not available before the date of enactment of this section [Oct.

19, 1996] to enforce claims for outstanding indebtedness secured by

mortgaged vessels."

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 31301, 31326 of this

title; title 11 section 362.

-End-

-CITE-

46 USC Sec. 31326 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER II - COMMERCIAL INSTRUMENTS

-HEAD-

Sec. 31326. Court sales to enforce preferred mortgage liens and

maritime liens and priority of claims

-STATUTE-

(a) When a vessel is sold by order of a district court in a civil

action in rem brought to enforce a preferred mortgage lien or a

maritime lien, any claim in the vessel existing on the date of sale

is terminated, including a possessory common law lien of which a

person is deprived under section 31325(e)(2) of this title, and the

vessel is sold free of all those claims.

(b) Each of the claims terminated under subsection (a) of this

section attaches, in the same amount and in accordance with their

priorities to the proceeds of the sale, except that -

(1) the preferred mortgage lien, including a preferred mortgage

lien on a foreign vessel whose mortgage has been guaranteed under

title XI of the Merchant Marine Act, 1936 (46 App. U.S.C. 1101 et

seq.) (!1) has priority over all claims against the vessel

(except for expenses and fees allowed by the court, costs imposed

by the court, and preferred maritime liens); and

(2) for a foreign vessel whose mortgage has not been guaranteed

under title XI of that Act, the preferred mortgage lien is

subordinate to a maritime lien for necessaries provided in the

United States.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4746; Pub. L. 103-160, div. A, title XIII, Sec. 1360, Nov. 30,

1993, 107 Stat. 1816.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31326(a) 46:953(b), 961(c)

31326(b)(1) 46:953(b)

31326(b)(2) 46:951 (2d par. proviso)

--------------------------------------------------------------------

Section 31326(a) provides for a court-ordered sale to enforce a

preferred mortgage lien or a maritime lien and the priority of

claims. When a mortgaged vessel is sold by court order in a civil

action in rem, any prior claim in the vessel is terminated -

including any possessory common law lien. This subsection makes a

substantive change to law by making the process the same for

maritime liens as was provided for preferred mortgage liens. This

eliminates the requirement for making a new mortgagee for a court

sale to enforce a maritime lien. This section also broadens the

jurisdiction to courts in the territories, as defined in section

31301.

Section 31326(b)(1) provides that each of these terminated claims

attaches, in the same amount and priority, to the proceeds of sale

- except that the preferred mortgage lien always has priority over

these other claims. However, the preferred mortgage lien is still

subordinated to expenses and fees allowed by the court, costs

imposed by the court, and any preferred maritime liens. This may

include statutory fees such as the fee of the United States Marshal

under 28 U.S.C. 1921. Except for broadening its coverage under

subsection (a), this makes no substantive change to law.

Section 31326(b)(2) provides in the case of a foreign vessel, the

preferred mortgage lien is also subordinated to a maritime lien for

necessaries performed or supplied for the vessel in the United

States. "Provided" has been substituted for "provided or supplied"

for consistency in usage. Except for broadening its coverage under

subsection (a), this paragraph makes no substantive change to law.

-REFTEXT-

REFERENCES IN TEXT

The Merchant Marine Act, 1936, referred to in subsec. (b), is act

June 29, 1936, ch. 858, 49 Stat. 1985, as amended. Title XI of the

Act is classified generally to subchapter XI (Sec. 1271 et seq.) of

chapter 27 of the Appendix to this title. For complete

classification of this Act to the Code, see section 1245 of the

Appendix to this title and Tables.

-MISC2-

AMENDMENTS

1993 - Subsec. (b)(1). Pub. L. 103-160, Sec. 1260(1), inserted ",

including a preferred mortgage lien on a foreign vessel whose

mortgage has been guaranteed under title XI of the Merchant Marine

Act, 1936 (46 App. U.S.C. 1101 et seq.)" after "preferred mortgage

lien".

Subsec. (b)(2). Pub. L. 103-160, Sec. 1360(2), inserted "whose

mortgage has not been guaranteed under title XI of that Act" after

"foreign vessel".

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 31301 of this title.

-FOOTNOTE-

(!1) So in original. Probably should be followed by a comma.

-End-

-CITE-

46 USC Sec. 31327 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER II - COMMERCIAL INSTRUMENTS

-HEAD-

Sec. 31327. Forfeiture of mortgagee interest

-STATUTE-

The interest of a mortgagee in a documented vessel or a vessel

covered by a preferred mortgage under section 31322(d) of this

title may be terminated by a forfeiture of the vessel for a

violation of a law of the United States only if the mortgagee

authorized, consented, or conspired to do the act, failure, or

omission that is the basis of the violation.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4746.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31327 46:961(b)

--------------------------------------------------------------------

Section 31327 provides for forfeiture of the mortgagee's interest

if the mortgagee authorized, consented, or conspired to do the act,

failure, or omission that is the basis of the violation that caused

forfeiture of the vessel. This section makes no substantive change

to law.

-End-

-CITE-

46 USC Sec. 31328 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER II - COMMERCIAL INSTRUMENTS

-HEAD-

[Sec. 31328. Repealed. Pub. L. 104-324, title XI, Sec. 1113(b)(1),

Oct. 19, 1996, 110 Stat. 3970]

-MISC1-

Section, Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988,

102 Stat. 4746, related to limitations on parties serving as

trustees of mortgaged vessel interests.

-End-

-CITE-

46 USC Sec. 31329 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER II - COMMERCIAL INSTRUMENTS

-HEAD-

Sec. 31329. Court sales of documented vessels

-STATUTE-

(a) A documented vessel may be sold by order of a district court

only to -

(1) a person eligible to own a documented vessel under section

12102 of this title; or

(2) a mortgagee of that vessel.

(b) When a vessel is sold to a mortgagee not eligible to own a

documented vessel -

(1) the vessel must be held by the mortgagee for resale;

(2) the vessel held by the mortgagee is subject to section 902

of the Merchant Marine Act, 1936 (46 App. U.S.C. 1242); and

(3) the sale of the vessel to the mortgagee is not a sale

foreign within the terms of the first proviso of section 27 of

the Merchant Marine Act, 1920 (46 App. U.S.C. 883).

(c) Unless waived by the Secretary of Transportation, a person

purchasing a vessel by court order under subsection (a)(1) of this

section or from a mortgagee under subsection (a)(2) of this section

must document the vessel under chapter 121 of this title.

(d) The vessel may be operated by the mortgagee not eligible to

own a documented vessel only with the approval of the Secretary.

(e) A sale of a vessel contrary to this section is void.

(f) This section does not apply to a documented vessel that has

been operated only for pleasure.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4747; Pub. L. 104-324, title XI, Sec. 1118, Oct. 19, 1996, 110

Stat. 3973.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31329 46:961(f)

--------------------------------------------------------------------

Section 31329 sets out certain restrictions on the court sale of

a documented vessel.

Section 31329(a) restricts the sale only to a person eligible to

own a documented vessel under section 12102 of title 46 or to the

mortgagee, which may be a trustee acting as a holder of a preferred

mortgage on a documented vessel for the benefit of a person not

eligible to be the holder of a preferred mortgage on that vessel.

Section 31329(b) sets out conditions on the sale to a trustee

acting as a holder of a preferred mortgage on a documented vessel

for the benefit of a person not eligible to be the holder of a

preferred mortgage on that vessel. First, the vessel must be held

by the trustee for resale. Second, while being held for resale, the

vessel is subject to requisition or purchase during a national

emergency under section 902 of the Merchant Marine Act, 1936 (46

App. U.S.C. 1242). And third, the sale of the vessel to the trustee

is not a sale foreign within the terms of the First Proviso of

section 27 of the Merchant Marine Act, 1920 (46 App. U.S.C. 883).

Section 31329(c) requires a person that is eligible to document

the vessel that purchases a vessel from the court to document the

vessel. This subsection also requires the person purchasing the

vessel from the trustee to document it, thereby restricting to whom

the trustee can sell the vessel. Many documented vessels have no

national defense utility, such as recreational vessels and fishing

vessels. Therefore, both of these restrictions can be waived by the

Secretary. As previously discussed, these waivers can be on a

case-by-case basis or with a blanket waiver.

Section 31329(d) prohibits a trustee from operating the vessel

without the approval of the Secretary.

Section 31329(e) voids any sale that is done contrary to this

section.

HOUSE FLOOR STATEMENT

Under section 31329(d) a vessel may be operated by the trustee

only with the approval of the Secretary. Under current law a vessel

may be documented by a trust if all of the members of the trust are

citizens of the United States. If the trust buying the vessel at

the court sale includes foreign investors, the vessel cannot be

documented. The Committee intends in this section that the vessel

will only be "operated" in a maintenance manner, but not in a

commercial service.

AMENDMENTS

1996 - Subsec. (f). Pub. L. 104-324 added subsec. (f).

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 31330 of this title.

-End-

-CITE-

46 USC Sec. 31330 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER II - COMMERCIAL INSTRUMENTS

-HEAD-

Sec. 31330. Penalties

-STATUTE-

(a)(1) A mortgagor shall be fined under title 18, imprisoned for

not more than 2 years, or both, if the mortgagor -

(A) with intent to defraud, does not disclose an obligation on

a vessel as required by section 31323(a) of this title;

(B) with intent to defraud, incurs a contractual obligation in

violation of section 31323(b) of this title;

(C) with intent to hinder or defraud an existing or future

creditor of the mortgagor or a lienor of the vessel, files a

mortgage with the Secretary of Transportation; or

(D) with intent to defraud, does not comply with section

31321(h) of this title.

(2) A mortgagor is liable to the United States Government for a

civil penalty of not more than $10,000 if the mortgagor -

(A) does not disclose an obligation on a vessel as required by

section 31323(a) of this title;

(B) incurs a contractual obligation in violation of section

31323(b) of this title;

(C) files with the Secretary a mortgage made not in good faith;

or

(D) does not comply with section 31321(h) of this title.

(b)(1) A person that knowingly violates section 31329 of this

title shall be fined under title 18, imprisoned for not more than 3

years, or both.

(2) A person violating section 31329 of this title is liable to

the Government for a civil penalty of not more than $25,000.

(3) A vessel involved in a violation under section 31329 of this

title and its equipment may be seized by, and forfeited to, the

Government.

(c) If a person not an individual violates this section, the

president or chief executive of the person also is subject to any

penalty provided under this section.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4747; Pub. L. 104-324, title XI, Sec. 1113(b)(2), Oct. 19, 1996,

110 Stat. 3970.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31330(a) 46:941(b) (1st sentence)

31330(b) New

31330(c) 46:941(b) (1st sentence)

--------------------------------------------------------------------

Section 31330(a) provides for criminal penalties for not

disclosing obligations, incurring contractual obligations in

violation of section 31323(b), and filing a mortgage made not in

good faith. This subsection makes a substantive change to law by

adding civil penalties and by making it a crime to record with the

Secretary of Transportation a mortgage made not in good faith with

the intent to hinder an existing or future creditor of the

mortgagor or a lienor of the vessel. This is done since the

affidavit of good faith has been eliminated from the elements of a

preferred mortgage.

Section 31330(b) adds criminal and civil penalties for violating

the sale and trust requirements under sections 31328 and 31329. It

also makes a vessel and its equipment involved in those violations

subject to seizure by the Government.

Section 31330(c) makes the president or chief executive officer

of a corporation or association liable as a mortgagor for the

penalties under this section.

HOUSE FLOOR STATEMENT

Subsection (a) of this section adds criminal and civil penalties

for a preferred mortgagor's failure to carry out certain

requirements under chapter 313 of title 46 (as enacted by this

Act).

AMENDMENTS

1996 - Subsec. (b). Pub. L. 104-324 struck out "31328 or" before

"31329" in pars. (1) to (3).

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 31323 of this title.

-End-

-CITE-

46 USC SUBCHAPTER III - MARITIME LIENS 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER III - MARITIME LIENS

-HEAD-

SUBCHAPTER III - MARITIME LIENS

-End-

-CITE-

46 USC Sec. 31341 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER III - MARITIME LIENS

-HEAD-

Sec. 31341. Persons presumed to have authority to procure

necessaries

-STATUTE-

(a) The following persons are presumed to have authority to

procure necessaries for a vessel:

(1) the owner;

(2) the master;

(3) a person entrusted with the management of the vessel at the

port of supply; or

(4) an officer or agent appointed by -

(A) the owner;

(B) a charterer;

(C) an owner pro hac vice; or

(D) an agreed buyer in possession of the vessel.

(b) A person tortiously or unlawfully in possession or charge of

a vessel has no authority to procure necessaries for the vessel.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4748; Pub. L. 101-225, title III, Sec. 303(5), Dec. 12, 1989, 103

Stat. 1924.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31341(a) 46:972 (1st sentence), 973

31341(b) 46:972 (2d sentence)

--------------------------------------------------------------------

Section 31341(a) lists those persons who are presumed to have

authority to procure necessaries for a vessel. These include the

owner, master, or a manager at the port of supply; and an officer

or agent appointed by the owner, charterer, owner pro hac vice, or

buyer in possession of the vessel. This subsection makes no

substantive change to law.

Section 31341(b) provides that any person that is tortiously or

unlawfully in possession of or in charge of a vessel has no

authority to procure necessaries. This subsection makes no

substantive change to law.

AMENDMENTS

1989 - Subsec. (a)(3). Pub. L. 101-225 substituted "management"

for "mangement".

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 31301, 31323 of this

title.

-End-

-CITE-

46 USC Sec. 31342 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER III - MARITIME LIENS

-HEAD-

Sec. 31342. Establishing maritime liens

-STATUTE-

(a) Except as provided in subsection (b) of this section, a

person providing necessaries to a vessel on the order of the owner

or a person authorized by the owner -

(1) has a maritime lien on the vessel;

(2) may bring a civil action in rem to enforce the lien; and

(3) is not required to allege or prove in the action that

credit was given to the vessel.

(b) This section does not apply to a public vessel.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4748; Pub. L. 101-225, title III, Sec. 303(6), Dec. 12, 1989, 103

Stat. 1924.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31342 46:971

--------------------------------------------------------------------

Section 31342 provides that any authorized person providing

necessaries for a vessel has a maritime lien on the vessel, may

bring a civil action in rem in admiralty to enforce the lien, and

is not required to allege or prove that credit was given to the

vessel. "Providing" has been substituted for "furnishing" for

consistency with other laws. This section makes no substantive

change to law. This section does not supersede the prohibition

under the Public Vessels Act, the Foreign Sovereign Immunities Act,

or the Suits in Admiralty Act, on bringing an in rem action against

a public vessel.

AMENDMENTS

1989 - Pub. L. 101-225 designated existing provisions as subsec.

(a), substituted "Except as provided in subsection (b) of this

section, a person providing necessaries to a vessel on the order of

the owner" for "A person providing necessaries to a vessel (except

a public vessel) on the order of a person listed in section 31341

of this title", and added subsec. (b).

-End-

-CITE-

46 USC Sec. 31343 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

CHAPTER 313 - COMMERCIAL INSTRUMENTS AND MARITIME LIENS

SUBCHAPTER III - MARITIME LIENS

-HEAD-

Sec. 31343. Recording and discharging notices of claim of maritime

lien

-STATUTE-

(a) Except as provided under subsection (d) of this section, a

person claiming a lien on a vessel documented, or for which an

application for documentation has been filed, under chapter 121 may

record with the Secretary of Transportation a notice of that

person's lien claim on the vessel. To be recordable, the notice

must -

(1) state the nature of the lien;

(2) state the date the lien was established;

(3) state the amount of the lien;

(4) state the name and address of the person; and

(5) be signed and acknowledged.

(b)(1) The Secretary shall record a notice complying with

subsection (a) of this section if, when the notice is presented to

the Secretary for recording, the person having the claim files with

the notice a declaration stating the following:

(A) The information in the notice is true and correct to the

best of the knowledge, information, and belief of the individual

who signed it.

(B) A copy of the notice, as presented for recordation, has

been sent to each of the following:

(i) The owner of the vessel.

(ii) Each person that recorded under subsection (a) of this

section an unexpired notice of a claim of an undischarged lien

on the vessel.

(iii) The mortgagee of each mortgage filed or recorded under

section 31321 of this title that is an undischarged mortgage on

the vessel.

(2) A declaration under this subsection filed by a person that is

not an individual must be signed by the president, member, partner,

trustee, or other individual authorized to execute the declaration

on behalf of the person.

(c)(1) On full and final discharge of the indebtedness that is

the basis for a notice of claim of lien recorded under subsection

(b) of this section, the person having the claim shall provide the

Secretary with an acknowledged certificate of discharge of the

indebtedness. The Secretary shall record the certificate.

(2) The district courts of the United States shall have

jurisdiction over a civil action in Admiralty to declare that a

vessel is not subject to a lien claimed under subsection (b) of

this section, or that the vessel is not subject to the notice of

claim of lien, or both, regardless of the amount in controversy or

the citizenship of the parties. Venue in such an action shall be in

the district where the vessel is found or where the claimant

resides or where the notice of claim of lien is recorded. The court

may award costs and attorneys fees to the prevailing party, unless

the court finds that the position of the other party was

substantially justified or other circumstances make an award of

costs and attorneys fees unjust. The Secretary shall record any

such declaratory order.

(d) A person claiming a lien on a vessel covered by a preferred

mortgage under section 31322(d) of this title must record and

discharge the lien as provided by the law of the State in which the

vessel is titled.

(e) A notice of claim of lien recorded under subsection (b) of

this section shall expire 3 years after the date the lien was

established, as such date is stated in the notice under subsection

(a) of this section.

(f) This section does not alter in any respect the law pertaining

to the establishment of a maritime lien, the remedy provided by

such a lien, or the defenses thereto, including any defense under

the doctrine of laches.

-SOURCE-

(Pub. L. 100-710, title I, Sec. 102(c), Nov. 23, 1988, 102 Stat.

4748; Pub. L. 107-295, title II, Sec. 205(a)(1), Nov. 25, 2002, 116

Stat. 2095.)

-MISC1-

HISTORICAL AND REVISION NOTES

--------------------------------------------------------------------

Revised section Source section (U.S. Code)

--------------------------------------------------------------------

31343 46:925

--------------------------------------------------------------------

Section 31343 provides that any person claiming a lien on a

vessel covered by a preferred mortgage may record a notice of lien.

This notice must state the nature of the lien, date it was

established; the amount; and the name and address of the person

claiming a lien, and it must be acknowledged. The Secretary must

record a notice of lien if it complies with these requirements.

When any part of the indebtedness is discharged, the claimant shall

provide the Secretary with a written, acknowledged certificate of

discharge of the indebtedness, and the Secretary shall record the

certificate. This section makes no substantive change to law.

Section 31343(c) provides that, on the full and final discharge

of an indebtedness that is the basis for a claim, the person having

the claim shall provide the Secretary with an acknowledged

certificate of discharge on the request of the Secretary or owner

of the vessel. This subsection makes a substantive change to law by

not requiring partial discharges to be filed, as well as making the

filing of discharge certificates only at the request of the

Secretary or owner of the vessel.

HOUSE FLOOR STATEMENT

Subsection (d) of this section requires a person claiming a lien

on a vessel covered by a preferred mortgage under section 31322(d)

to record and discharge the lien as provided by the law of the

State in which the vessel is titled.

AMENDMENTS

2002 - Pub. L. 107-295, Sec. 205(a)(1)(A), substituted "notices

of claim of maritime lien" for "liens on preferred mortgage

vessels" in section catchline.

Subsec. (a). Pub. L. 107-295, Sec. 205(a)(1)(B), substituted

"documented, or for which an application for documentation has been

filed, under chapter 121" for "covered by a preferred mortgage

filed or recorded under this chapter" in introductory provisions.

Subsec. (b). Pub. L. 107-295, Sec. 205(a)(1)(C), amended subsec.

(b) generally. Prior to amendment, subsec. (b) read as follows:

"The Secretary shall record a notice complying with subsection (a)

of this section."

Subsec. (c). Pub. L. 107-295, Sec. 205(a)(1)(D), amended subsec.

(c) generally. Prior to amendment, subsec. (c) read as follows: "On

full and final discharge of the indebtedness that is the basis for

a claim recorded under subsection (b) of this section, on request

of the Secretary or owner, the person having the claim shall

provide the Secretary with an acknowledged certificate of discharge

of the indebtedness. The Secretary shall record the certificate."

Subsecs. (e), (f). Pub. L. 107-295, Sec. 205(a)(1)(E), added

subsecs. (e) and (f).

EFFECTIVE DATE OF 2002 AMENDMENT

Amendment by Pub. L. 107-295 effective Jan. 1, 2003, see section

205(e) of Pub. L. 107-295, set out as a note under section 12111 of

this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 12111, 31325 of this

title.

-End-

-CITE-

46 USC [CHAPTER 315 - RESERVED] 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle III - Maritime Liability

[CHAPTER 315 - RESERVED]

-HEAD-

[CHAPTER 315 - RESERVED]

-SECREF-

CHAPTER REFERRED TO IN OTHER SECTIONS

This chapter is referred to in section 30101 of this title.

-End-

-CITE-

46 USC [Subtitle IV - Reserved] 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

[Subtitle IV - Reserved]

-HEAD-

[Subtitle IV - Reserved]

-End-

-CITE-

46 USC [Subtitle V - Reserved] 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

[Subtitle V - Reserved]

-HEAD-

[Subtitle V - Reserved]

-End-

-CITE-

46 USC Subtitle VI - Miscellaneous 01/06/03

-EXPCITE-

TITLE 46 - SHIPPING

Subtitle VI - Miscellaneous

-HEAD-

Subtitle VI - Miscellaneous

-MISC1-

Chap. Sec.

701. Port Security 70101

-End-