Transportation and Delivery · 4 of 5
Cargo preference is a shipping rule attached to American money, not to American equipment. Agencies are to take the steps "necessary and practicable to ensure that at least 50 percent of the gross tonnage" of equipment, materials or commodities furnished for the account of a foreign country moves on privately owned commercial vessels of the United States. That applies to the extent such vessels are available at fair and reasonable rates (46 U.S.C. 55305(a)).
The manual restates the same requirement in the terms a shipper works in. It applies to at least 50 percent of the gross tonnage, "computed separately for dry bulk carriers, dry cargo liners, and tankers", of grant, credit or guarantee funded cargo carried in ocean vessels, with availability at fair and reasonable rates determined by the Maritime Administration (SAMM C7.9.1.1).
Two features of that sentence decide who is caught. The test is tonnage rather than value, and it is applied by vessel class rather than across a whole consignment.
The floor is 50 percent. The practice is not. "DSCA, in support of the U.S. maritime industry, requires 100 percent of applicable cargo to be carried by U.S. Flag vessels unless a Determination of Non-Availability (DNA) is granted by DSCA, in coordination with MARAD" (SAMM C7.9.1.2).
The manual then sets out what applicable means. The rules cover materiel procured with grant funding under the Arms Export Control Act and the Foreign Assistance Act, including shipments of excess defense articles and articles provided by loan or lease (SAMM C7.9.1.2). The treatment of excess articles more generally is in who pays for an excess defense articles transfer.
Building Partner Capacity shipments are handled differently again. Articles moving under the listed Title 10 and Title 22 authorities that use the capacity building case process must be shipped through the Defense Transportation System (SAMM C7.9.1.2). That program is described in what Building Partner Capacity is and who the customer is.
The manual names the options by code. Service on United States flag vessels from origin port to destination port is called P1, and it "is the default mechanism for meeting the requirements" of the policy above. P2 is a combination of flag and non-flag vessels. P3 is entirely foreign flag service (SAMM C7.9.1.3).
The other two are conditional. P2 and P3 services are to be used only when P1 is not available and a determination has been granted (SAMM C7.9.1.3).
The financial consequence of getting this wrong is stated plainly. "In general, USG-appropriated funds cannot be used to pay for any portion of the shipment that is not occurring on a U.S. Flagged-vessel, unless a DNA is granted or some other provision of U.S. law applies" (SAMM C7.9.1.4). A cheaper foreign booking made without the determination is not merely irregular. It is unfunded.
Determinations are requested by the partner country, case by case, and the Defense Security Cooperation Agency coordinates with the Maritime Administration before issuing one (SAMM C7.9.1.4).
There is a deadline, and it is short relative to a sailing schedule. The manual asks for requests to go in "at least 21 days before the shipping date", with a copy to the Maritime Administration (SAMM C7.9.1.4).
The evidential test is what most applications turn on. "DNA applications must demonstrate that a reasonable, timely, and bona fide effort to arrange P1 service has been made and such vessels are not available", and applications must also show all comparative rates (SAMM C7.9.1.4.1). Applications are made shipment by shipment, and the required content runs to the vessel name, its registry, the load and discharge ports and dates, the commodity, the cargo value and the freight cost for each leg.
A second kind of waiver exists for reasons that have nothing to do with availability. "Security waivers may be requested to avoid unsafe or unsecure transportation conditions, such as the transshipment of classified and/or sensitive materiel, or Arms, Ammunition, and Explosives (AA&E)" (SAMM C7.9.1.4.2).
The burden sits with the requesting country, which must provide a justification demonstrating that the waiver is necessary, using the same application content as an availability request (SAMM C7.9.1.4.2). What else attaches to that class of cargo is covered in transportation plans for classified, sensitive and explosive cargo.
Compliance is checked after delivery, not before. The recipient country is responsible for reporting to the Defense Security Cooperation Agency and the Maritime Administration (SAMM C7.9.1.6).
Two clocks apply, depending on where the cargo was loaded. The information goes in "within 20 working days following the date of loading in Continental United States (CONUS) or within 30 working days following the date of loading for shipments originating Outside the Continental United States (OCONUS)" (SAMM C7.9.1.6).
The report identifies the case, the commodity, the ports and the date of loading. It also gives the type of vessel, the vessel name and flag of registry, any waiver document, the freight forwarder, the weight and the ocean freight cost (SAMM C7.9.1.6).
The obligation does not fall away when the answer is inconvenient. It applies whether the cargo moved on a flag vessel or not, and regardless of origin or destination, including cargo moving between two foreign ports (SAMM C7.9.1.6).
Air movement has its own preference rule. "The Fly America Act (49 U.S.C. 40118) requires first preference for airlift of grant, credit, or guarantee-funded cargo be given to U.S. flag air carriers" (SAMM C7.9.2). The statute directs agencies to take necessary steps to ensure transportation is provided by an air carrier holding a certificate under the named section (49 U.S.C. 40118(a)).
The exception is lighter than the maritime one, but it is written. Before using a foreign flag carrier, a shipper or exporter must provide a written explanation to the implementing agency as to why an American carrier should not be used (SAMM C7.9.2).
One common arrangement is settled expressly. "If a U.S. carrier codeshares with a foreign carrier to deliver a shipment to an overseas airport, it is still considered carriage by a U.S. flagged carrier" (SAMM C7.9.2).
| Cargo preference | The requirement that a share of government funded cargo move on United States flag vessels. 46 U.S.C. 55305. |
|---|---|
| DNA | Determination of non-availability, the waiver allowing non-flag service. SAMM C7.9.1.4. |
| P1, P2, P3 | Flag service throughout, mixed service, and entirely foreign flag service. SAMM C7.9.1.3. |
| MARAD | Maritime Administration, which determines availability and receives the compliance report. |
| Fly America Act | The equivalent first preference rule for air carriage. 49 U.S.C. 40118. |
Every statement above links to the document behind it. The full source list for this piece is on the sources page.
This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.
Flag rules decide the ocean leg. They say nothing about the road at the far end. Sentfore provides secure movement, protective security and site support once cargo has landed in a difficult country, and its principals have worked on overseas defense and security programs. Requirements can be sent through the contact page.