Transportation of Public Law 480 Commodities--Efforts Needed To Eliminate Unnecessary Costs

GAO assessed the Department of Agriculture's (USDA) and the Maritime Administration's (MARAD) management of the expenditure of U.S. funds for ocean transportation of agricultural commodities.

GAO found significant problems indicating that USDA may be paying higher ocean freight differentials than necessary. USDA control over the bidding and negotiation process for ocean transportation contracts was inadequate because foreign countries: (1) used closed bids which could be submitted late or were based on knowledge of submitted bids; (2) could negotiate with any preferred vessel owner, which did not ensure the lowest possible rates; and (3) could serve as vessel brokers, which could lead to favoritism in rate negotiations. USDA did not consistently follow the standard provision for calculating differentials, or applied the standard in a manner that reduced costs to foreign countries at the expense of higher USDA payments. GAO also found that MARAD did not verify data used in calculating guideline rates because it assumed that vessels returned to the United States without cargo. However, vessels may carry cargo on the return voyage, which allows them the potential to earn excessive profits. Additionally, since MARAD had not prepared guidelines for passenger liners because of the difficulty in separating revenues, it did not know whether transportation rates for liners represented cost plus a reasonable profit.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Allan I. Mendelowitz Team: General Accounting Office: National Security and International Affairs Division Phone: (202) 512-4812