International Food Assistance and Agricultural Cargo Preference

International Food Assistance and Agricultural Cargo Preference

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January 13, 2022
International Food Assistance and Agricultural Cargo
Preference
The United States is the largest provider of international
Cargo Preference Legislative Authority
food assistance globally. Approximately 40% of funding for
The Cargo Preference Act of 1954 (P.L. 83-664), as
such assistance in FY2020 (the most recent year for which
amended, mandates that at least 50% of the gross tonnage
comprehensive data are available) was used for the
of U.S. government-financed cargoes must ship on U.S.-
provision of food grown in the United States, referred to as
flag vessels. Since its passage, Congress has amended the
“U.S. in-kind assistance,” to countries in need. Such
Cargo Preference Act numerous times. The 1961
commodities are subject to U.S.-flag shipping requirements
amendment to the Merchant Marine Act (P.L. 87-266)
in the Cargo Preference Act of 1954 (P.L. 83-664), as
required that ships eligible to transport government food-
amended. Cargo preference requirements long have been
aid cargoes either must be built in the United States or, if
controversial and the subject of considerable debate, both in
built abroad, must have sailed under the U.S. flag for the
Congress and throughout the food assistance stakeholder
previous three years. Congress wanted to discourage
community.
foreign-flag ships from entering the U.S. cargo preference
trade only temporarily during periods when the world
International Food Assistance
shipping market was oversupplied.
U.S. international food assistance programs are
administered by the U.S. Department of Agriculture’s
In the Food Security Act of 1985 (P.L. 99-198), Congress
(USDA’s) Foreign Agricultural Service (FAS) or the U.S.
increased the requirement for the share of food-aid tonnage
Agency for International Development (USAID). Programs
shipped on U.S.-flag vessels from 50% to 75%. In 2012,
that provide U.S. in-kind food assistance include Food for
Congress reversed its action of 1985, lowering the required
Peace (FFP) Title II, Bill Emerson Humanitarian Trust,
share of food aid that must be carried on U.S.-flag vessels
Food for Progress, and McGovern-Dole International Food
from 75% back to 50% in the Moving Ahead for Progress
for Education and Child Nutrition. Table 1 lists each in-
in the 21st Century Act (P.L. 112-141).
kind international food assistance program, the statutory
authority, and the administering agency. USDA’s
The Merchant Marine Act of 1970 (P.L. 91-469)
Commodity Credit Corporation (CCC) procures
empowered the Maritime Administration (MARAD) to
commodities for all U.S. in-kind food assistance programs,
regulate how other federal agencies are to comply with the
regardless of which agency administers the program.
1954 Act in response to allegations that other agencies
intentionally did not fully comply with the law or
Table 1. In-Kind U.S. International Food Assistance
interpreted the law differently than MARAD.
Programs
U.S.-Flag International Fleet
Statutory
Administering
Cargo preference applies to government-impelled cargoes,
Program
Authority
Agency
including in-kind aid under international food assistance
Food For Peace
Food for Peace
USAID
programs transported via ocean freight. Qualifying U.S.-
Title II
Act (P.L. 83-
flag ships must be privately owned and employ a crew
480)
consisting of at least 75% U.S. citizens. The remaining
crew must be U.S. residents.
Bil Emerson
Agricultural
USDA
Humanitarian
Act of 1980
As of October 2021, there were 84 privately owned U.S.-
Trust (BEHT)
(P.L. 96-494)
flag ships. U.S. entities owned by foreign shipping lines
Food for Progress Food Security
USDA
control about 45 of the 84 ships in the fleet. Under U.S.
Act of 1985
shipping law, those entities qualify as “documentation
citizens,” which are companies located in the United States
(P.L. 99-198)
and operated by U.S. citizens but with a “foreign parent.”
McGovern-Dole
Farm Security
USDA
Obtaining status as a U.S. business entity gives carriers
International
and Rural
with foreign parents access to the Maritime Security
Food for
Investment Act
Program (MSP), which provides a flat per-ship operating
Education and
of 2002 (P.L.
subsidy intended to offset the higher cost of registering
Child Nutrition
107-171)
under the U.S. flag. In return for the subsidies, the MSP
Source: Compiled by CRS.
vessels are to be made available to the Department of
Defense (DOD) in times of war or national emergency.
These vessels are designated as “militarily useful” by
MARAD in consultation with DOD and are funded from
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International Food Assistance and Agricultural Cargo Preference
MARAD’s budget. Foreign parent companies own about 63
requires food safety measures, such as regular fumigation to
vessels of the U.S.-flag fleet participating in the MSP.
prevent contamination from pests, mold, or other forms of
spoilage. Although prepositioning in-kind aid shortens
Potential Issues for Congress
delivery times, the Government Accountability Office
From its origins in the 1950s, U.S. international food
concluded in 2014 that doing this could involve additional
assistance relied predominantly on in-kind aid, but over the
costs due to increased storage and shipping expenses.
past decade, the United States has diversified its food
assistance to include what USAID refers to as “market-
In some instances, to meet cargo preference requirements,
based assistance” (e.g., locally and regionally procured
USDA and USAID have shipped food aid on vessels that
commodities, cash assistance, and food vouchers). As of
are not meant to carry bulk food cargo and are not
FY2020, in-kind aid accounted for approximately 40% of
compatible with equipment typically used to load and
U.S. funding for international food assistance, with market-
unload bulk grains. According to USDA, this results in
based assistance making up about 60%. Many other major
increased costs and delays in delivering food assistance.
donors—such as Canada, the United Kingdom, and the
European Union—have converted primarily to cash-based
National Security Considerations
assistance. The U.S. decision to continue to provide in-kind
According to MARAD, cargo preference laws serve to
aid remains a subject of debate due to its generally higher
protect U.S. ocean commerce from foreign control by
cost compared with market-based approaches. Some
sustaining a privately owned U.S.-flag merchant marine. In
Members of Congress, MARAD, and certain interest
wartime and during national emergencies, the U.S.-flag
groups contend that cargo preference requirements facilitate
merchant marine provides additional sealift capability to the
U.S. military readiness by supporting the U.S.-flag fleet.
Military Sealift Command (MSC). USA Maritime—an
Other Members, USDA, USAID, and many
organization representing carriers and maritime unions—
nongovernmental organizations assert that cargo preference
asserts that maintaining a U.S.-flag fleet and availability of
requirements reduce purchases of U.S. commodities due to
U.S. mariners through cargo preference is a cost-effective
higher shipping costs and contribute to delayed shipments,
alternative to the U.S. government building ships and hiring
among other challenges.
employees to maintain sealift capacity. Some opponents of
cargo preference question its contributions to U.S. sealift
Cost
capacity. They assert that few U.S.-flag ships depend on
Shipping on U.S.-flag vessels typically costs more than
food aid shipments, and only some of those ships are
shipping on foreign-flag vessels. A 2011 study by MARAD
capable of carrying military cargo. They also argue that
(the most recent available) found that average daily
cargo preference often benefits foreign shipping companies
operating costs for U.S.-flag vessels were 2.7 times higher
with U.S. subsidiaries rather than shipping companies with
than for foreign-flag vessels. Higher shipping costs on U.S.-
parent organizations based in the United States.
flag ships raise the cost of providing in-kind food aid. The
2019 USAID International Food Assistance Report to
MARAD’s 2017 Maritime Workforce Working Group
Congress states that 11% of Title II funding was used to
stated that the number of qualified U.S. mariners was
ship commodities from the United States to a foreign port.
sufficient to crew the fleet of government and privately
owned U.S.-flag ships necessary during an initial activation
The higher cost of shipping on U.S.-flag vessels reduces the
(for example, during wartime or a national emergency).
volume of food aid that can be provided, the number of
However, it concluded the number of U.S. mariners was
people who receive the aid, and the amount of food
insufficient to support a sustained activation of this fleet for
purchased from American farmers and food processors. In a
more than 180 days.
2019 hearing, the administrator of FAS stated that
competition for U.S. vessels is limited, and shipping food
More Information
aid on U.S.-flag ships costs roughly 200% more than on
For more information, see CRS Report R45422, U.S.
foreign-flag ships, reducing the amount of food aid
International Food Assistance: An Overview; CRS Report
commodities USDA is able to supply and the amount of
R44254, Cargo Preferences for U.S.-Flag Shipping; and
commodities purchased from American farmers.
CRS Report R41072, U.S. International Food Aid
Programs: Background and Issues.
Timeliness of Delivery and Appropriateness of
Vessels
Amber D. Nair, Analyst in Agricultural Policy
In-kind food shipments take an average of four to six
months to reach their destination. Transporting food aid
IF12018

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International Food Assistance and Agricultural Cargo Preference

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