---
kind: "section"
citation: "46 U.S.C. § 12119"
title: "46"
title_heading: "Shipping"
number: "12119"
heading: "Owners engaged primarily in leasing or financing transactions"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/46/12119"
units:
  - "Subtitle II — Vessels and Seamen"
  - "Part H — Identification of Vessels"
  - "Chapter 121 — Documentation of Vessels"
  - "Subchapter II — Endorsements and Special Documentation"
---

# §12119. Owners engaged primarily in leasing or financing transactions

- (a) **Definitions.—** In this section:
  - (1) **Affiliate.—** The term “affiliate” means, with respect to any [person](/usc/46/3701.md?p=3), any other [person](/usc/46/3701.md?p=3) that is—
    - (i) directly or indirectly controlled by, under common control with, or controlling that [person](/usc/46/3701.md?p=3); or
    - (ii) named as being part of the same consolidated group in any report or other document submitted to the United States Securities and Exchange Commission or the Internal Revenue Service.
  - (2) **Cargo.—** The term “cargo” does not include cargo to which title is held for non-commercial reasons and primarily for the purpose of evading the requirements of [subsection (c)(3)](#c-3).
  - (3) **Oil.—** The term “[oil](/usc/46/2101.md?p=28)” has the meaning given that term in [section 2101(28) of this title](/usc/46/2101.md?p=28).
  - (4) **Passive investment.—** The term “passive investment” means an investment in which neither the investor nor any affiliate of the investor is involved in, or has the power to be involved in, the formulation, determination, or direction of any activity or function concerning the management, use, or operation of the asset that is the subject of the investment.
  - (5) **Qualified proprietary cargo.—** The term “qualified proprietary cargo” means—
    - (A) [oil](/usc/46/2101.md?p=28), petroleum products, petrochemicals, or liquefied natural gas cargo that is beneficially owned by the [person](/usc/46/3701.md?p=3) that submits to the [Secretary](/usc/46/2101.md?p=46) an application or annual certification under [subsection (c)(3)](#c-3), or by an affiliate of that [person](/usc/46/3701.md?p=3), immediately before, during, or immediately after the cargo is carried in coastwise trade on a vessel owned by that [person](/usc/46/3701.md?p=3);
    - (B) [oil](/usc/46/2101.md?p=28), petroleum products, petrochemicals, or liquefied natural gas cargo not beneficially owned by the [person](/usc/46/3701.md?p=3) that submits to the [Secretary](/usc/46/2101.md?p=46) an application or an annual certification under [subsection (c)(3)](#c-3), or by an affiliate of that [person](/usc/46/3701.md?p=3), but which is carried in coastwise trade by a vessel owned by that [person](/usc/46/3701.md?p=3) and which is part of an arrangement in which vessels owned by that [person](/usc/46/3701.md?p=3) and at least one other [person](/usc/46/3701.md?p=3) are operated collectively as one fleet, to the extent that an equal amount of [oil](/usc/46/2101.md?p=28), petroleum products, petrochemicals, or liquefied natural gas cargo beneficially owned by that [person](/usc/46/3701.md?p=3), or by an affiliate of that [person](/usc/46/3701.md?p=3), is carried in coastwise trade on one or more other vessels, not owned by that [person](/usc/46/3701.md?p=3), or by an affiliate of that [person](/usc/46/3701.md?p=3), if the other vessel or vessels are also part of the same arrangement;
    - (C) in the case of a [towing vessel](/usc/46/2101.md?p=54) associated with a non-self-propelled [tank vessel](/usc/46/2101.md?p=53) where both vessels function as a single self-propelled vessel, [oil](/usc/46/2101.md?p=28), petroleum products, petrochemicals, or liquefied natural gas cargo that is beneficially owned by the [person](/usc/46/3701.md?p=3) that owns both the [towing vessel](/usc/46/2101.md?p=54) and the non-self-propelled [tank vessel](/usc/46/2101.md?p=53), or any United States affiliate of that [person](/usc/46/3701.md?p=3), immediately before, during, or immediately after the cargo is carried in coastwise trade on either of those vessels; or
    - (D) any [oil](/usc/46/2101.md?p=28), petroleum products, petrochemicals, or liquefied natural gas cargo carried on any vessel that is either a self-propelled [tank vessel](/usc/46/2101.md?p=53) having a length of at least 210 meters or a [tank vessel](/usc/46/2101.md?p=53) that is a liquefied natural gas carrier that—
      - (i) was delivered by the builder of the vessel to the [owner](/usc/46/10101.md?p=2) of the vessel after December 31, 1999; and
      - (ii) was purchased by a [person](/usc/46/3701.md?p=3) for the purpose, and with the reasonable expectation, of transporting on the vessel liquefied natural gas or unrefined petroleum beneficially owned by the [owner](/usc/46/10101.md?p=2) of the vessel, or an affiliate of the [owner](/usc/46/10101.md?p=2), from Alaska to the continental United States.
  - (6) **United states affiliate.—** The term “United States affiliate” means, with respect to any [person](/usc/46/3701.md?p=3), an affiliate the principal place of business of which is located in the United States.
- (b) **Requirements.—** A coastwise endorsement may be issued for a vessel if—
  - (1) the vessel satisfies the requirements for a coastwise endorsement, except for the ownership requirement otherwise applicable without regard to this section;
  - (2) the [person](/usc/46/3701.md?p=3) that owns the vessel (or, if the vessel is owned by a trust or similar arrangement, the beneficiary of the trust or similar arrangement) meets the requirements of [subsection (c)](#c);
  - (3) the vessel is under a demise charter to a [person](/usc/46/3701.md?p=3) that certifies to the [Secretary](/usc/46/2101.md?p=46) that the [person](/usc/46/3701.md?p=3) is a citizen of the United States under [section 50501 of this title](/usc/46/50501.md) for engaging in the coastwise trade; and
  - (4) the demise charter is for a period of at least 3 years or a shorter period as may be prescribed by the [Secretary](/usc/46/2101.md?p=46).
- (c) **Ownership Certification.—**
  - (1) **In general.—** A [person](/usc/46/3701.md?p=3) meets the requirements of this subsection if the [person](/usc/46/3701.md?p=3) transmits to the [Secretary](/usc/46/2101.md?p=46) each year the certification required by paragraph [(2)](#c-2) or [(3)](#c-3) with respect to a vessel.
  - (2) **Investment certification.—** To meet the certification requirement of this paragraph, a [person](/usc/46/3701.md?p=3) shall certify that it—
    - (A) is a leasing company, bank, or financial institution;
    - (B) owns, or holds the beneficial interest in, the vessel solely as a passive investment;
    - (C) does not operate any vessel for hire and is not an affiliate of any [person](/usc/46/3701.md?p=3) that operates any vessel for hire; and
    - (D) is independent from, and not an affiliate of, any charterer of the vessel or any other [person](/usc/46/3701.md?p=3) that has the right, directly or indirectly, to control or direct the movement or use of the vessel.
  - (3) **Certain tank vessels.—**
    - (A) **In general.—** To meet the certification requirement of this paragraph, a [person](/usc/46/3701.md?p=3) shall certify that—
      - (i) the aggregate book value of the vessels owned by the [person](/usc/46/3701.md?p=3) and United States affiliates of the [person](/usc/46/3701.md?p=3) does not exceed 10 percent of the aggregate book value of all assets owned by the [person](/usc/46/3701.md?p=3) and its United States affiliates;
      - (ii) not more than 10 percent of the aggregate revenues of the [person](/usc/46/3701.md?p=3) and its United States affiliates is derived from the ownership, operation, or management of vessels;
      - (iii) at least 70 percent of the aggregate tonnage of all cargo carried by all vessels owned by the [person](/usc/46/3701.md?p=3) and its United States affiliates and documented with a coastwise endorsement is qualified proprietary cargo;
      - (iv) any cargo other than qualified proprietary cargo carried by all vessels owned by the [person](/usc/46/3701.md?p=3) and its United States affiliates and documented with a coastwise endorsement consists of [oil](/usc/46/2101.md?p=28), petroleum products, petrochemicals, or liquified natural gas;
      - (v) no vessel owned by the [person](/usc/46/3701.md?p=3) or any of its United States affiliates and documented with a coastwise endorsement carries molten sulphur; and
      - (vi) the [person](/usc/46/3701.md?p=3) owned one or more vessels documented under this section as of August 9, 2004.
    - (B) **Application only to certain vessels.—** A [person](/usc/46/3701.md?p=3) may make a certification under this paragraph only with respect to—
      - (i) a [tank vessel](/usc/46/2101.md?p=53) having a tonnage of at least 6,000 gross tons, as measured under [section 14502 of this title](/usc/46/14502.md) (or an alternative tonnage measured under [section 14302 of this title](/usc/46/14302.md) as prescribed by the [Secretary](/usc/46/2101.md?p=46) under [section 14104 of this title](/usc/46/14104.md)); or
      - (ii) a [towing vessel](/usc/46/2101.md?p=54) associated with a non-self-propelled [tank vessel](/usc/46/2101.md?p=53) that meets the requirements of [clause (i)](#c-3-B-i), where both vessels function as a single self-propelled vessel.
- (d) **Filing of Demise Charter.—** The demise charter and any amendments to the charter shall be filed with the certification required by [subsection (b)(3)](#b-3) or within 10 days after filing an amendment to the charter. The charter and amendments shall be made available to the public.
- (e) **Continuation of Endorsement After Termination of Charter.—** When a charter required by [subsection (b)(3)](#b-3) is terminated for default by the charterer, the [Secretary](/usc/46/2101.md?p=46) may continue the coastwise endorsement for not more than 6 months on terms and conditions the [Secretary](/usc/46/2101.md?p=46) may prescribe.
- (f) **Deemed Owned by Citizens.—** A vessel satisfying the requirements of this section is deemed to be owned only by citizens of the United States under sections [12103](/usc/46/12103.md) and [50501](/usc/46/50501.md) of this title.

## Source credit

(Pub. L. 109–304, § 5, Oct. 6, 2006, 120 Stat. 1501; Pub. L. 115–232, div. C, title XXXV, § 3541(b)(15), Aug. 13, 2018, 132 Stat. 2324; Pub. L. 119–60, div. G, title LXXIII, § 7301(k)(1)(F), Dec. 18, 2025, 139 Stat. 1759.)

## Notes

| Historical and Revision Notes |  |  |
| --- | --- | --- |
| Revised<br>Section | Source (U.S. Code) | Source (Statutes at Large) |
| 12119(a) | 46:12106(f)(4). |  |
| 12119(b) | 46:12106(e)(1). |  |
| 12119(c) | 46:12106(f)(1)–(3). |  |
| 12119(d) | 46:12106(e)(2). |  |
| 12119(e) | 46:12106(e)(3). |  |
| 12119(f) | 46:12106(e)(4). |  |

In subsection (b), in paragraph (1), the words “satisfies the requirements for a coastwise endorsement, except for the ownership requirement otherwise applicable without regard to this section” are substituted for “otherwise eligible for documentation under this section” in 46 U.S.C. 12106(e)(1)(E) for clarity. Subparagraph (A) of 46 U.S.C. 12106(e)(1) is omitted as redundant to the general requirements in revised section 12112 on coastwise endorsements.

In subsection (c)(3), the words “documented with a coastwise endorsement” are substituted for “documented under this section” because former section 12106 is being divided into multiple sections.

Subsection (e) is substituted for “(3) Upon termination by a demise charterer required under paragraph (1)(C), the coastwise endorsement of the vessel may, in the sole discretion of the Secretary, be continued after the termination for default of the demise charter for a period not to exceed 6 months on such terms and conditions as the Secretary may prescribe” for clarity and to eliminate unnecessary words.

### Editorial Notes

### Prior Provisions

A prior section 12119, Pub. L. 98–89, Aug. 26, 1983, 97 Stat. 589; Pub. L. 100–710, title I, § 104(a)(4), Nov. 23, 1988, 102 Stat. 4750, originally derived from sections 65s and 881 of former Title 46, Shipping, related to list of documented vessels, prior to the general amendment of this chapter by Pub. L. 109–304. See section 12138 of this title.

### Amendments

2025—Subsec. (a)(3). Pub. L. 119–60 substituted “section 2101(28)” for “section 2101(26)”.

2018—Subsec. (a)(3). Pub. L. 115–232 substituted “section 2101(26)” for “section 2101(20)”.

### Statutory Notes and Related Subsidiaries

### Application to Certain Certificates

Pub. L. 108–293, title VI, § 608(c), Aug. 9, 2004, 118 Stat. 1057, provided that: In general.—The amendments made by this section [amending provisions from which this section was derived], and any regulations published after February 4, 2004, with respect to coastwise endorsements, shall not apply to a certificate of documentation, or renewal thereof, endorsed with a coastwise endorsement for a vessel under section 12106(e) [now section 12119(b), (d)–(f)] of title 46, United States Code, or a replacement vessel of a similar size and function, that was issued prior to the date of enactment of this Act [Aug. 9, 2004] as long as the vessel is owned by the person named therein, or by a subsidiary or affiliate of that person, and the controlling interest in such owner has not been transferred to a person that was not an affiliate of such owner as of the date of enactment of this Act. Notwithstanding the preceding sentence, however, the amendments made by this section shall apply, beginning 3 years after the date of enactment of this Act, with respect to offshore supply vessels (as defined in section 2101(19) [now 2101(27)] of title 46, United States Code, as that section was in effect on the date of enactment of this Act) with a certificate of documentation endorsed with a coastwise endorsement as of the date of enactment of this Act, and the Secretary of the Department in which the Coast Guard is operating shall revoke any such certificate if the vessel does not by then meet the requirements of section 12106(e) of title 46, United States Code, as amended by this section. Replacement Vessel.—For the purposes of this subsection, ‘replacement vessel’ means— a temporary replacement vessel for a period of not to exceed 180 days if the vessel described in paragraph (1) is unavailable due to an act of God or a marine casualty; or a permanent replacement vessel if— the vessel described in paragraph (1) is unavailable for more than 180 days due to an act of God or a marine casualty; or a contract to purchase or construct such replacement vessel is executed not later than December 31, 2004.”

### Waiver of Qualified Proprietary Cargo Requirement

Pub. L. 108–293, title VI, § 608(d), Aug. 9, 2004, 118 Stat. 1057, provided that: “The Secretary of Transportation shall waive or reduce the qualified proprietary cargo requirement of section 12106(f)(3)(A)(iii) [now section 12119(c)(3)(A)(iii)] of title 46, United States Code, for a vessel if the person that owns the vessel (or, if the vessel is owned by a trust or similar arrangement, the beneficiary of the trust or similar arrangement) notifies the Secretary that circumstances beyond the direct control of such person or its affiliates prevent, or reasonably threaten to prevent, such person from satisfying such requirement, and the Secretary does not, with good cause, determine otherwise. The waiver or reduction shall apply during the period of time that such circumstances exist.”