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Statement of Need: On September 4, 2009, the USDA, MARAD, and USAID entered into a MOU regarding the proper implementation of the Cargo Preference Act. The MOU establishes procedures and standards by which owners and operators of oceangoing cargo ships may seek to designate each of their vessels as either a dry bulk carrier or a dry cargo liner, according to specified service-based criteria. With the help of OMB, these agencies are negotiating updates to the comprehensive Cargo Preference rule, which has not been significantly changed since 1971. The statutory changes will be the subject of either a separate rulemaking or as part of the comprehensive rulemaking.

Summary of the Legal Basis: The Cargo Preference Act requires that Federal agencies take necessary and practicable steps to ensure that privately-owned US flag vessels transport at least 50 percent of the gross tonnage of cargo sponsored under Federal programs to the extent such vessels are available at fair and reasonable rates for commercial vessels of the US, in a manner that will ensure a fair and reasonable participation of commercial vessels of the US in those cargoes by geographic areas. 46 USC 55305(b). An additional 25 percent of gross tonnage of certain food assistance programs is to be transported in accordance with the requirements of 46 USC 55314. P.L 110-417 gave MARAD the authority for assessing civil penalties and make-up cargoes for non-compliance with the cargo preference laws.

Alternatives: TBD

Anticipated Costs and Benefits: TBD

Risks: TBD