46 U.S.C. § 53204 — Effectiveness of operating agreements

**(a) Effectiveness Generally.—** The Secretary may enter into an Operating Agreement under this chapter for fiscal year 2021. Except as provided in subsection (d), the agreement shall be effective only for one fiscal year, but shall be renewable, subject to available appropriations, for each subsequent year. **(b) Vessels Under Charter to the United States.—** Vessels under charter to the United States are eligible to receive payments pursuant to their Operating Agreements. **(c) Termination.—** (1) **Termination by the secretary.—** — If the Contractor with respect to an Operating Agreement materially fails to comply with the terms of the Agreement— (A) the Secretary shall notify the Contractor and provide a reasonable opportunity for it to comply with the Operating Agreement; (B) the Secretary shall terminate the Operating Agreement if the Contractor fails to achieve such compliance; and (C) upon such termination, any funds obligated by the Agreement shall be available to the Secretary to carry out this chapter. (2) **Early termination by a contractor.—** — An Operating Agreement under this chapter shall terminate on a date specified by the Contractor if the Contractor notifies the Secretary, not fewer than 60 days prior to the effective date of the termination, that the Contractor intends to terminate the Agreement. **(d) Nonrenewal for Lack of Funds.—** If, by the first day of a fiscal year, sufficient funds have not been appropriated under the authority provided by this chapter for that fiscal year for all Operating Agreements, then the Secretary shall notify the Committee on Armed Services and the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Armed Services of the House of Representatives that Operating Agreements authorized under this chapter for which sufficient funds are not available will not be renewed for that fiscal year if sufficient funds are not appropriated by the 60th day of that fiscal year. If only partial funding is appropriated by the 60th day of such fiscal year, then the Secretary, in consultation with the Operating Agency, shall select the vessels to retain under Operating Agreements, based on their determinations of which vessels are most useful for national security. In the event that no funds are appropriated, then no Operating Agreements shall be renewed and each Contractor shall be released from its obligations under the Operating Agreement. Final payments under an Operating Agreement that is not renewed shall be made in accordance with section 53206. To the extent that sufficient funds are appropriated in a subsequent fiscal year, an Operating Agreement that has not been renewed pursuant to this subsection may be reinstated if mutually acceptable to the Secretary, in consultation with the Operating Agency, and the Contractor, provided the vessel remains eligible for participation pursuant to section 53202, without regard to subsection 53202 (b)(3). **(e) Release of Vessels From Obligations.—** If funds are not appropriated for payments under an Operating Agreement under this chapter for any fiscal year by the 60th day of a fiscal year, and the Secretary, in consultation with the Operating Agency determines to not renew a Contractor’s Operating Agreement for a vessel, then— (1) each vessel covered by the Operating Agreement that is not renewed is thereby released from any further obligation under the Operating Agreement; (2) the owner or operator of the vessel whose Operating Agreement was not renewed may transfer and register such vessel under a foreign registry that is acceptable to the Secretary and the Operating Agency, notwithstanding [section 56101 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title46-section56101&num=0&edition=prelim); and (3) if chapter 563 of this title is applicable to such vessel after registration, then the vessel is available to be requisitioned by the Secretary pursuant to chapter 563.