USA Maritime warns of direct threat to cargo preference laws

The USA Maritime coalition has warned of a direct, immediate threat to U.S.-flag cargo preference laws - Senate Concurrent Resolutions 37 and 38, which target humanitarian exports but could be applied in other transactions.

Enacted in 1904 and 1954, these laws set aside specific shares of government cargoes for privately owned and operated U.S.-flagged merchant ships. The first statute holds 100 percent of defense cargoes for U.S. bottoms, while the second sets 50 percent of all other government exports and imports for American vessels.

A third law, enacted in 1985 as a compromise between maritime and agricultural interests, held 75 percent of U.S. food aid exports for U.S. ships, but this law was rendered moot when a sequestration budget bill in 2011 pared the U.S. cargo preference amount of grain, soybeans and other commodities back to 50 percent.

One of the pending Senate resolutions would exempt forthcoming aid to Ukraine from cargo preference requirements, while the other would waive the 1954 statute as applied to PL-480 "Food for Peace" and McGovern-Dole food exported for school meals.

Each would undermine U.S. ability to provide strategic sealift and other military support services during national security emergencies, USA Maritime advised.

"Today's environment of rising peer nation competition from Russia and China and a global supply chain crisis is not the time to cede our U.S.-flag shipping capacity to foreign interests," the coalition said. "We need to be prepared to support our allies in Europe and elsewhere with American sealift ships and mariners who have never failed our nation."

USA Maritime said the pending proposals are "overbroad" and "not limited to supplies for Ukraine." Each measure would "waive 'Ship American' rules globally - hurting American workers."

The U.S. Agency for International Development and the Defense Logistics Agency are among the Executive Branch units skilled at dodging cargo preference requirements - indeed, USAID now has what the coalition explained as "the ability to self-grant waivers of 'Ship American' rules anytime U.S.-flag ships are not available at 'fair and reasonable' rates."

USAID "already has waived 'Ship American' rules for 40 percent of the Food for Peace program and, consequently, U.S.-flag ships carry less than a third of the cargoes under that program," USA Maritime noted.

The coalition said food aid exports account for a "minority" of the agency's program costs, adding that ocean shipping has little impact on the USAID budget.

"All ocean shipping - U.S. and foreign-flag costs combined - are only eight percent of program costs," the coalition said. "The premium for hiring U.S.-flag ships is less than one percent of program costs."

USA Maritime added: "The U.S.-flag ships, American businesses and American mariners that would be hurt by the waivers have not been part of the surge in prices affecting the foreign-flag container shipping markets - we should grow the U.S.-flag fleet to prevent the next supply chain crisis.

"The resolutions would hurt our strategic U.S.-flag shipping industry but provide no off-setting benefit to the federal agencies shipping humanitarian supplies because they already have and use their existing waiver authorities.

"American taxpayer dollars should support American workers, American mariners and the U.S.-flag fleet."

A persistent back story surfaces in connection with these pending resolutions. In 2008, Hawaii Democrat Senator Daniel Inouye secured a law designating the Department of Transportation and its Maritime Administration as the exclusive enforcement authority over cargo preference laws, including the sole right to determine when U.S.-flag ships are not available at "fair and reasonable" rates. However, the required conforming regulations were never set in place.