US-flag international ocean carriers could gain significantly more flexibility in managing capital under proposed changes from the US Maritime Administration (MARAD), although the new framework would also introduce strict deadlines for projects and account balances.
A Notice of Proposed Rulemaking (NPRM) published by MARAD on Monday would overhaul the administrative framework governing the Capital Construction Fund (CCF) Program. The proposal is designed to make it easier for operators to restructure existing projects while removing certain restrictions affecting domestic operators.
MARAD said a comprehensive revision is needed because the implementing regulations have remained largely unchanged for four decades.
The agency currently administers approximately $2.56 billion held across 129 CCF accounts. According to the NPRM, many of those accounts were established years ago for projects that are no longer viable. Under the previous framework, owners seeking to redirect those funds could face severe tax penalties on non-qualified withdrawals.
The proposed rule would establish a formal process allowing operators to amend outdated project schedules. Once finalised, the changes would allow carriers to redirect unused tax-deferred reserves toward new vessel construction, secondhand vessel acquisitions or corporate mergers and acquisitions without triggering the high marginal tax penalties associated with non-qualified withdrawals.
International operators would also receive additional flexibility through a proposed multi-vessel aggregation mechanism. Instead of maintaining the current $1 million minimum reconstruction threshold on an individual-vessel basis, fleet operators would be able to combine capital expenditures across several ships to meet programme requirements.
That change could allow companies to use tax-deferred CCF funds for a broader range of fleet investments, including mid-life vessel overhauls, engine repowering, decarbonisation retrofits and equipment standardisation across multiple ships. Operators would therefore not necessarily have to undertake an expensive newbuild programme to make use of the available capital.
The additional flexibility would, however, come with clear deadlines designed to prevent funds from remaining unused indefinitely.
Under the proposal, reconstruction or construction projects would have to be completed within 36 months of work beginning. Funds allocated to specific project objectives could be accumulated for no more than 25 years.
CCF accounts could also face automatic termination under certain circumstances. Accounts would be terminated if the relevant project objectives had not started within 10 years, or if an account balance remained at zero for a period of 10 years.
Domestic fleet expansion formalised
The proposed changes would also formalise statutory amendments enacted under the National Defense Authorization Act in 2023 aimed at supporting expansion of the US domestic fleet.
Historical geographic trade restrictions would be removed, extending the full tax-deferral benefits of the CCF programme to US-built Jones Act vessels, inland-waterway tugs and domestic feeder operators.
Operators deploying vessels in coastwise domestic trades would also no longer face the previous administrative trade restrictions or liquidated-damages provisions.
MARAD said the revisions would not introduce new or additional compliance requirements or costs. Instead, the agency expects the changes to improve administrative efficiency and provide greater clarity over applicant and vessel eligibility requirements.
Comments on the proposed rule will remain open for 60 days.
