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Cargo Preference Laws and Regulations

This page provides more details about many Cargo Preference laws and regulations. It is not exhaustive and does not necessarily cover all scenarios and situations. For additional information, contact the Office of Cargo and Commercial Sealift.

Military Cargo

Military Cargo Preference Act of 1904. Codified at 10 U.S.C. §2631, all items procured for or owned by U.S. military departments and defense agencies must be carried exclusively (100%) on U.S.-flag vessels available at rates that are not excessive or otherwise unreasonable. These cargoes are generated primarily by Department of Defense (DOD) contracts with domestic and foreign contractors. Cargo preference applies to all components of the shipping process, not just the end product. Below are some of key regulations found in the Defense Federal Acquisition Regulations Supplement (DFARS): 

  • Transportation of Supplies at Sea, Clause 252.247-7023
  • Ocean Transportation By U.S.-Flag Vessels, Subpart 247.5

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Civilian Agencies Cargo

Cargo Preference Act of 1954. Per Section 901(b) of the Merchant Marine Act of 1936, as amended and codified in various subsequent documents (46 U.S.C. §55305, Title 46 CFR Part 381, P.L. 83-664), at least 50 percent of the gross tonnage of all Government generated cargo -- cargoes procured, furnished, or financed by the United States Government -- shall be transported on privately owned, U.S.-flag commercial vessels to the extent such vessels are available at fair and reasonable rates. The “at least 50 percent” requirement is applicable to the extent such vessels are available at fair and reasonable rates for commercial vessels of the United States as determined by the Maritime Administration.

  • The Cargo Preference Act of 1954 applies to all Federal Departments and Agencies (except DOD)
  • Each Department or Agency is responsible for ensuring compliance, including contractors. Including the appropriate Cargo Preference clauses in all program contracts and documentation is an effective measure to promote and ensure compliance. 

FAR 52.247-64 reporting requirements mandate that the contractor submit a copy of the rated master ocean bills of lading (MB/L) to our office within 20 working days from the date of loading on all shipments loaded from the United States, and 30 working days for shipments loaded outside the United States. The reporting requirement applies whether cargo moves on a non-U.S. or U.S.-flag vessel and is irrespective of cargo origin or destination (including foreign-to-foreign cargo movements). Submit documents to MARAD either electronically or physically (email is the preferred method or receiving submittals - Cargo.MARAD@dot.gov).

For additional information, see "The Cargo Preference Act of 1954 and Related Legislation”.

EXIM Cargo

Public Resolution (PR) 17. Per Public Resolution 17, passed by the 73rd Congress of the United States on March 26, 1934, and codified at 46 U.S.C. §55304, all cargoes generated by an instrumentality of the Government must be shipped exclusively (100%) on U.S.-flag vessels, unless the Maritime Administration issues a Determination of Non-Availability, and in accordance with the Maritime Administration U.S.-Flag Shipping Guidance for Shipments Financed by the Export-Import Bank of the United States.

  • Shipping on U.S.-flag vessels is required for the following EXIM Bank transactions:
  • Direct loans regardless of term or amount, and

Guarantees valued over USD 20,000,000 (excluding EXIM Bank exposure fee) or with repayment terms greater than seven years, unless the export qualifies for a longer repayment term under EXIM's Medical Equipment Initiative, Environmental Exports Program, or Transportation Security Program.

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Agricultural Cargo

Cargo Preference Act of 1954. Per Section 901(b) of the Merchant Marine Act of 1936, as amended and codified in various subsequent documents (46 U.S.C. §55305, Title 46 CFR Part 381, P.L. 83-664), at least 50 percent of the gross tonnage of all Government generated cargo, meaning cargo procured, furnished, or financed by the United States Government, shall be transported on privately-owned, U.S.-flag commercial vessels to the extent such vessels are available at fair and reasonable rates. The “at least 50 percent” requirement is applicable to the extent such vessels are available at fair and reasonable rates, as determined by the Maritime Administration.

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Questions?

For questions about any cargo preference law, regulation, or guiding document, contact the Office of Cargo and Commercial Sealift.

Last updated: Friday, February 5, 2021