When does cargo have to be shipped on U.S.-flagged vessels?
Cargoes that are directly or indirectly funded in any way by the U.S. government and that also require ocean carriage must be carried on U.S.-flag vessels. U.S.-flag vessels are vessels that are registered under the laws of the United States. 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.
What are cargo preference requirements?
The statutes and regulations mandating U.S. flag ocean carriage of U.S. government-financed cargoes are referred to as cargo preference requirements.
The cargo preference statutes include:
- CARGO PREFERENCE ACT OF 1954 (amended in 2008). 46 U.S.C. §55305
- MILITARY CARGO PREFERENCE ACT OF 1904. 10 U.S.C. §2631 et seq.
- PUBLIC RESOLUTION (PR)-17: Exports Financed by the United States. PR-17 has been codified in the US Code at 46 U.S.C. §55304
Cargo preference requirements are administered by the United States Maritime Administration’s (MARAD) Office. Congress designated MARAD as the federal authority for cargo preference compliance and has authorized civil penalties for non-compliance with cargo preference laws.
Who must comply with cargo preference requirements?
Any associated governmental body—such as departments, agencies, or contractors—as well as any company operating along the product supply chain for goods transported on ocean vessels must comply with cargo preference requirements. Per the cargo preference statutes listed above, certain percentages of cargo must be carried on U.S.-flagged vessels:
- Military cargo: 100%
- Export import bank cargo: 100%
- Civilian agencies cargo: at least 50%
- Agricultural cargo: at least 50%
In addition, compliance is further segmented into service levels:
- P1 service: Cargo is transported solely on U.S.-flagged vessels from load port to destination discharge port
- P2 service: Cargo is transported on at least two different vessels, with at least one U.S.-flagged vessel and one non-U.S.-flagged vessel
- P3 – internationally flagged vessel
