Cargoes requiring ocean carriage that are funded, either directly or indirectly, with federal funds must be carried on U.S. flag vessels. U.S. flag vessels are vessels that are registered under the laws of the United States.

The statutes and regulations mandating U.S. flag ocean carriage of U.S. government financed cargoes are referred to as cargo preference requirements. U.S. government financing of cargoes can take the form of a federal grant, guaranty or other direct or indirect funding provided by U.S. government agencies, instrumentalities or programs.