Frequently Asked Questions (FAQs) - Cargo Preference

1. What is cargo preference?

The U.S. Cargo Preference (CP) laws require all or a portion of government-impelled cargo must be transported via a U.S.-flag vessel. Government-impelled is defined as cargo financed by the US government directly, indirectly (through a federal program) or a loan or guarantee provided by the federal government.

For your quick reference below are U.S.-flag vessel requirements listed by program:

Military Cargo = 100% (governed by Military Cargo Preference Act of 1904)
Export Import Bank Cargo = 100% (governed by Public Resolution 17)
Civilian Agencies Cargo = at least 50% (governed by Cargo Preference Act of 1954)
Agricultural Cargo = at least 50% (governed by the Cargo Preference Act of 1954)

2. What type of projects must comply with cargo preference?

Cargo preference laws apply to all ocean transported cargo financed in any way by the US government, whether directly or through state or local governments, including:

Federal contracts
Federal loans and loan guarantees
Federal grants

3. How do shippers (contractors, sub-contractors, loan and loan guarantee recipients, grant recipients) comply with cargo preference laws?

Shippers must comply with all contractual reporting requirements which normally includes submitting copies of all bills of lading (both foreign and US flag) to the contracting (or equivalent) officer. Shippers are also required to submit copies of the ocean carriers’ bills of lading to MARAD. The copies submitted to MARAD must be of the ocean carrier’s bill of lading, certified onboard, with rates and charges. Scanned copies may be emailed to cargo.marad@dot.gov.

More detailed descriptions of each programs reporting requirements can be found here:

4. Will the bill of lading freight (cost and rate) information submitted to MARAD be revealed to anyone?

No. Bill of lading freight information is treated as BUSINESS SENSITIVE and is not released. Aggregate data is used for statistical and reporting purposes.

Caution: If an Ocean Transportation Intermediary (OTI), such as a freight forwarder, is used, the mechanics of this reporting requirement (bill of lading submission) should be agreed upon in advance.

5. What is the difference between P1 and P2 service?

P1 service – the cargo is transported in one or more US-flag vessels (only) from load port to destination discharge port.
P2 service – the cargo is transported in at least two different vessels enroute to the destination discharge port. At least one US-flag vessel and one foreign flag vessel is used.

6. Do I need a Determination of Non-Availability prior to using P2 service or foreign flag vessel service?

Yes. Unless US-flag service is used for the entire voyage, from load port to destination discharge port, the appropriate authority must approve the use of either P2 service or foreign flag service. For Department of Defense (DOD) cargo, the contracting officer approves use of P2 service or foreign flag service. MARAD approves the use of P2 service or foreign flag service for most non-DOD shipments. Please contact MARAD’s Office of Cargo and Commercial Sealift with your questions or requests.

7. How do I apply for a Determination of Non-Availability (DNA) Letter? How long does it take to get a DNA?

If you are unable to identify US-flag service, contact MARAD’s Office of Cargo and Commercial Sealift for assistance. 202-366-4610, cargo.marad@dot.gov

8. When do I report my shipments to ensure compliance with the cargo preference laws?

Civilian Cargo: All documentation must be reported within 20 business days from date of loading from the United States and 30 business days for shipments loaded outside the United States. The reporting requirement applies to all ocean-borne cargo (U.S.-flag vessels and foreign-flag vessels).

Military Cargo: All documentation must be reported within 30 business days from date of loading from the United States and 30 business days for shipments loaded outside the United States. The reporting requirement applies to all ocean-borne cargo (U.S.-flag vessels and foreign-flag vessels).

9. Will submitting a rated house bill of lading suffice?

No, the law requires the rated house bills are submitted within 20 business days for civilian cargo and 30 business days for military cargo. For the purpose of computing compliance with cargo preference we are only reviewing the ocean freight rate.

10. Do I need to report shipments on non-US flag vessels?

Yes, in order to ensure compliance with cargo preference laws all government-impelled cargo moving on US-flag vessels and foreign-flag vessels must be reported to our office.

11. Does the Cargo Preference Act of 1904 (04 Act) cover US Military cargo movements only?

Yes, the 04 Act covers military cargo movements and movements by DOD contractors and subcontractors. Specifically, 10 U.S.C. §2631 states that “Only vessels of the United States or belonging to the United States may be used in the transportation by sea of supplies bought for the Army, Navy, Army, Air Force or Marine Corps.”

12. What is the definition of US Military (DOD) cargo?

DOD Cargo is cargo destined to or from, or routed by, the DOD with the cargo intended for use, or had been used, by the DOD.

The Cargo Preference Act of 1904 (04 Act) and Defense Federal Acquisition Regulations Supplement (DFARS) defines DOD Cargo as “supplies”. “Supplies” means all property, except land and interests in land, that is clearly identifiable for eventual use by or owned by the DoD at the time of transportation by sea. “Supplies” includes (but is not limited to) public works; buildings and facilities; ships; floating equipment and vessels of every character, type, and description, with parts, subassemblies, accessories, and equipment; machine tools; material; equipment; stores of all kinds; end items; construction materials; and components of the foregoing. (DFARS 252.247-7023 Transportation of Supplies by Sea).

13. Does US Military (DOD) cargo include Military Household Goods (HHGs) and service members Privately Owned Vehicles (POVs)?

Yes, Military HHGs and POV’s move under laws similar to the 1904 Act. For example, House Hold Goods (HHG’s) are covered under 46 U.S.C. §55302 requiring all government personnel to ship personal effects aboard U.S.-flag ships when available. POV’s are covered under the similar 46 U.S.C. §55303.

14. What percentage of US Military (DOD) cargo must be shipped on US Flag vessels?

Cargo Preference Act of 1904 cargo (military supplies) . . . 100%. This has also been extended to military HHGs and POVs, if U.S.-flag ships are available. The regulations implementing the 100% U.S.-flag requirements of the Cargo Preference Act of 1904 (10 U.S.C. §2631) can be found at DEFENSE FEDERAL ACQUISITION REGULATIONS SUPPLEMENT (DFARS) 247.5 (instructions for Contracting Officers) and at DFARS 252.247-7023 (instructions for contractors), which is made clause in every DOD contract in which transportation of supplies by sea may occur.

15. Can the U.S.-flag vessel requirement be waived?

Yes, however only the DOD contracting officer can waive the requirement for U.S.-flag vessels. The conditions under which a waiver can be granted are described in DFARS 252.247-7023. If you have questions on the waiver process, please contact the Maritime Administration at 202-366-4610, press 4 for the Department of Defense team.

16. What technical assistance is available to ensure compliance with cargo preference?

Link to cargo preference e-learning website link - https://maradcargotraining.com/
Outreach materials
Additional resources for your reference https://www.maritime.dot.gov/sites/marad.dot.gov/files/docs/outreach/7386/journ001.pdf

17. I have a question not answered here, whom do I contact?

Please submit your question or inquiry to cargo.marad@dot.gov or call 202-366-4610 or any trade compliance professional listed on our organizational chart.

202002-MARAD-CP FAQ

Last updated: Monday, November 30, 2020