GAO: Cargo Preference Policy Increases Food Aid Shipping Costs, Benefits Are Unclear - Global Trade Magazine
  October 2nd, 2015 | Written by

GAO: Cargo Preference Policy Increases Food Aid Shipping Costs, Benefits Are Unclear

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  • Cargo preference laws require that a percentage of U.S. government cargo be transported on U.S.-flag vessels.
  • GAO: Cargo preference for food aid increased the cost of shipping food aid by 23 percent, or $107 million.
  • Despite GAO’s recommendations, agencies have not agreed on a consistent method to implement CPFA.

The Government Accountability Office, an arm of the U.S. Congress, recently issued a report that calls United States cargo preference for food aid (CPFA) policies into question.

The GAO report definitively found that the use of U.S.-flag vessels for a defined proportion of CFPA shipments significantly increases the total transportation costs to the U.S. government. At the same time, the report questioned whether CFPA accomplishes its purported goals.

Cargo preference laws require that a percentage of U.S. government cargo, including international food aid, be transported on U.S.-flag vessels according to geographic area of destination and vessel type. One intention of the policy is to ensure a merchant marine—both vessels and mariners—capable of providing sealift capacity in times of war or national emergency. The CPFA percentage requirement has varied over the years, and was reduced from 75 to 50 percent in 2012.

“Cargo preference for food aid requirements increased the overall cost of shipping food aid by an average of 23 percent, or $107 million, over what the cost would have been had CPFA requirements not been applied from April 2011 through fiscal year 2014,” said the GAO report.

In addition, differences in the implementation of CPFA requirements by the U.S. Agency for International Development (USAID) and U.S. Department of Agriculture (USDA) contributed to a higher shipping rate for USDA. Following the July 2012 reduction in the minimum percentage of food aid to be carried on U.S.-flag vessels, USAID was able to substantially increase the proportion of food aid awarded to foreign-flag vessels, which on average have lower rates, helping to reduce its average shipping rate. USDA was able to increase the proportion of food aid awarded to foreign-flag vessels by only a relatively small amount.

Despite GAO’s past recommendations, U.S. agencies have not agreed on a consistent method to implement CPFA.

“CPFA’s contribution to sealift capacity is uncertain,” the GAO report also concluded. Available mariner supply has not been fully assessed and the Maritime Administration “has not fully assessed the potential availability of all qualified mariners to satisfy a full and prolonged activation.”

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