What is 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 Act of 1954 requires that at least 50 percent of civilian agency cargoes be transported on U.S.-flag vessels. The law was changed in 1985, as part of an agriculture and 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. 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.
The statutory sources of agricultural goods covered by cargo preference are principally Titles I, II, and III of P.L. 480, Section 416(b), the Food for Progress Act of 1985, and the McGovern-Dole International Food for Education and Child Nutrition Program. Because 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 works with a broad-based coalition of agriculture, humanitarian, food processing, and commodity groups to maintain and increase funding for P.L. 480 Food for Peace and the other food aid programs, in both agriculture authorization and appropriations legislation.
The Cargo Preference Act of 1954 covers civilian agency shipments
Certain agricultural commodities under the 1985 agriculture and maritime compromise
The Military Cargo Preference Act of 1904 covers all defense agency shipments
Public Resolution 17 covers cargoes financed by Export-Import Bank loans and guarantees
Why cargo preference matters.
A U.S.-Flag Lifeline
Preference cargoes are the single most important incentive for U.S.-flag operators in the international trades to remain under U.S. registry. They provide a vital base of cargo that helps offset foreign-flag advantages.
National Defense
The mariners and vessels sustained by preference cargoes are the same ones the military counts on for sealift. When MAP-21 cut the food aid requirement from 75 to 50 percent in 2012, the U.S.-flag fleet shrank by 26 percent.
Food Aid Partnership
Food aid cargoes are the single greatest source of preference cargoes. The maritime industry works with agriculture, humanitarian, and commodity groups to maintain and grow funding for Food for Peace and related programs.
Support Cargo Preference!
Government-impelled preference cargoes are essential to the maintenance of the U.S. Merchant Marine, and their decline is the primary reason the U.S.-flag fleet has shrunk. Since MAP-21 slashed the food aid requirement from 75 to 50 percent in 2012, the fleet has plummeted by 26 percent, more than triple the impact initially forecast.
The nation is already short of the mariners needed to meet defense sealift requirements. Restoring the 75 percent food aid requirement and enforcing existing U.S.-flag shipping rules would protect national defense, American jobs, and the taxpayer.
