MARAD Proposes Modernizing US-Fleet Funding Rules, Boosting Investment

The US Maritime Administration (MARAD) has proposed an overhaul of funding rules for US-flag international ocean carriers, aiming to modernize a 40-year-old regulatory framework. The changes, outlined in a Notice of Proposed Rulemaking (NPRM), would update the Capital Construction Fund (CCF) Program, offering carriers new opportunities to restructure capital while imposing strict compliance timelines.

Easing Restrictions, Encouraging Investment

Under the proposed rule, carriers would gain the ability to reallocate funds from outdated projects to modern vessel builds, secondhand asset acquisitions, or corporate mergers and acquisitions without facing hefty tax penalties. This shift addresses the issue of $2.56 billion in idle funds across 129 CCF accounts, which were previously tied to now-unviable projects.

International operators would also benefit from a new multi-vessel aggregation mechanism, allowing fleet managers to pool capital expenditure across multiple hulls to meet program thresholds. This change provides greater flexibility for mid-life fleet overhauls, engine repowering, and decarbonization retrofits.

Strict Compliance Deadlines

To prevent capital stagnation, the proposed rule introduces strict compliance deadlines. Reconstruction or construction projects must be completed within 36 months of commencement, while funds earmarked for specific objectives can accumulate for a maximum of 25 years. Accounts will face automatic termination if project objectives fail to commence within 10 years or if account balances remain at zero for a decade.

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The revisions also formalize statutory expansion enacted under the National Defense Authorization Act in 2023, benefiting domestic trades by eliminating historical geographic trade restrictions. This opens full CCF tax-deferral benefits to U.S.-built Jones Act vessels, inland waterways tugs, and domestic feeder operators.

Domestic Fleet Expansion and Administrative Efficiencies

MARAD affirms that the revisions will not impose new compliance requirements or costs, instead resulting in administrative efficiencies and clarity in applicant and vessel eligibility requirements. The proposed rule is open for 60 days of public comment.

This overhaul reflects a broader trend in the maritime industry, where regulatory bodies are re-evaluating decades-old frameworks to accommodate modern operational needs and technological advancements. By providing greater flexibility and removing administrative hurdles, MARAD’s proposal aims to stimulate investment in the US maritime sector while ensuring efficient use of capital.