Cargo Preference Requirements

"Cargo preference" is the reservation of government-financed or -sponsored oceangoing cargos specifically for U.S.-flag ships. Due to cargo preference requirements, the government has spent an additional $600 million during the past three years to transport food aid on U.S.-flag ships rather than on lower-cost foreign flag ships. The objective of the cargo preference is to help maintain a U.S. merchant marine (1) to serve as a naval and military auxiliary in times of war or national emergency and (2) to carry a substantial portion of U.S. domestic and foreign waterborne commerce. However, the U.S.-flag ships carrying the majority of the food aid tonnage are not viewed as militarily useful by the Defense Department. In addition, all domestic waterborne commerce, i.e., cargos shipped between U.S. ports, are required to be carried by U.S.-flag ships. As for foreign commerce, U.S.-flag ships now carry only about four percent of all cargo shipped into and out of the United States, and food aid cargos account for less than one-fourth of that four percent. GAO also found that cargo preference requirements harm the operations of the food aid programs.