Cargo Preference
Cargo preference requires that U.S. government-impelled (or government-financed) cargoes be shipped on U.S.-flag vessels, provided that such vessels are available at fair and reasonable rates. Preference cargoes are the single most important incentive for U.S.-flag operators* in the international trades to remain under U.S. registry. The cargo preference laws provide a vital base of cargo to help offset foreign-flag advantages.
The Cargo Preference Act of 1954 requires that at least 50 percent of civilian agency cargoes be transported on U.S.-flag vessels. However, the law was changed in 1985, as part of an agriculture/maritime compromise put together by then Senator Bentsen (D-TX) and Senator Cochran (R-MS), to require that 75 percent of certain agricultural commodities be carried on U.S.-vessels.
The Military Cargo Preference Act of 1904 requires 100 percent of items purchased for or owned by U.S. military departments and defense agencies be carried exclusively on U.S.-flag vessels at fair and reasonable rates.
Public Resolution 17 requires that 100 percent of cargoes generated by Export Import Bank loans and guarantees be shipped on U.S.-flag vessels unless a waiver is granted.
The Maritime Administration within the Department of Transportation administers the cargo preference laws.
In recent years, the base of government-generated cargoes has declined significantly for most civilian agency cargoes, and even defense-related cargoes. In addition, contracting officers in most "shipper" agencies, such as the Department of Agriculture (USDA) and the Agency for International Development (USAID), are under enormous institutional pressures to reduce budgets, with transportation costs often a target. Further, there are instances in which government-generated cargoes are carried on foreign-registered (and foreign-crewed) vessels because there are not enough appropriate vessels in the U.S.-flag fleet.
AGRICULTURAL CARGOES:
The statutory sources of agricultural goods covered by cargo preference programs are principally Titles I, II, and III of P.L. 480, Section 4 16(b); and the Food for Progress Act of 1985. In addition, the McGovern-Dole International Food for Education and Child Nutrition Program is subject to the 75 percent U.S.-flag requirement.
Title I of P.L. 480 provides for U.S. government financing of sales of U.S. agricultural commodities to developing countries on concessional credit terms.
Title II is a donation program for least development countries.
Title III is a grant program under which agricultural commodities are donated to least developed countries; in the recent past, Congress has not appropriated funding for this program.
Section 416(b) is a donation program primarily for surplus commodities.
Food for Progress provides agricultural commodities to developing countries on a grant basis in exchange for policy reforms.
The McGovern-Dole International Food for Education and Child Nutrition Program helps support education, child development, and food security for some of the world’s neediest children.
It cannot be emphasized too strongly the importance of these food aid programs to the U.S.-flag fleet.
But since cargo preference laws are of little value if the U.S. government does not have food aid to send to begin with, the maritime industry, in concert with a broad-based coalition for food aid (including agriculture groups, humanitarian groups, food processing groups, and commodity groups), works to maintain and increase, where possible, funding for P.L. 480 "Food for Peace" and the other food aid programs described above, in both agriculture authorization and appropriations legislation.