FAR 47.5—Subpart 47.5

Scope of subpart.

FAR 47.500 is the scope statement for FAR Subpart 47.5, which covers the policy and procedures for giving preference to U.S.-flag vessels when supplies must be transported by ocean vessel. In practical terms, this section tells contracting personnel and contractors when the U.S.-flag preference rules apply, what subject matter the subpart governs, and where to look for the separate rules that apply to the Department of Defense. Its purpose is to support the U.S.-flag shipping preference policy by directing agencies to use U.S.-flag vessels for ocean transport of supplies when required under the FAR framework. Just as importantly, it draws a clear boundary: this FAR subpart does not apply to DoD, because DoD follows DFARS Subpart 247.5 instead. For users of the FAR, this section is a gateway provision that identifies the applicable regime before any transportation planning, solicitation drafting, or shipping decision is made.

Definitions.

FAR 47.501 provides the definitions used in Subpart 47.5, which governs the use of U.S.-flag vessels in federal transportation and related shipping requirements. This section identifies the vessel categories that matter for compliance and preference determinations, including dry bulk carriers, dry cargo liners, foreign-flag vessels, Government vessels, privately owned U.S.-flag commercial vessels, tankers, and the meaning of the term U.S.-flag vessel when used by itself. In practice, these definitions determine how a contracting officer, transportation official, or contractor classifies a vessel for cargo movement, chartering, and statutory shipping preference purposes. The distinctions are important because the same vessel may be treated differently depending on registry, ownership, operation, charter status, and the type of cargo carried. The section exists to remove ambiguity in maritime procurement and transportation decisions, especially where U.S.-flag preference rules, Government carriage, and foreign-flag use may affect cost, availability, and compliance. For contractors and agencies, the practical significance is that vessel classification can change which shipping options are permissible and whether a proposed movement satisfies federal requirements.

Policy.

FAR 47.502 states the federal policy basis for using U.S.-flag vessels when the Government moves cargo or certain other property by ocean transportation. It ties together three major statutory sources: the Cargo Preference Act of 1904 for Department of Defense cargo, the Merchant Marine Act of 1936 as the broad national policy to support the U.S. merchant marine, and the Cargo Preference Act of 1954 for most Government-acquired supplies that may require ocean transport. The section explains when at least 50 percent of gross tonnage must move on privately owned U.S.-flag commercial vessels, how that tonnage is measured for dry bulk, dry cargo liner, and tanker cargoes, and the rate standard that applies—availability at fair and reasonable U.S.-flag rates. It also identifies related U.S.-flag preferences for official travel, personal effects, and Government-owned motor vehicles. Finally, it recognizes that the cargo preference rules can be temporarily waived in an emergency when Congress, the President, or the Secretary of Defense makes the required declaration and notification. In practice, this section is the policy foundation for cargo preference compliance, shipping planning, contract administration, and waiver decisions across civilian and defense transportation actions.

Applicability.

FAR 47.503 explains when the Cargo Preference Acts of 1904 and 1954 apply to shipments in federal contracting and foreign assistance, and it identifies the specific cargo categories covered. It addresses Government-owned supplies in the possession of the Government, contractors, or subcontractors at any tier; supplies for Government use that are contracted for but not yet owned by the Government at shipment; and certain supplies shipped for foreign assistance programs when they are not purchased with local currency funds. It also creates a special rule for Government-owned supplies shipped commercially for military departments, requiring exclusive use of privately owned U.S.-flag commercial vessels when such vessels are available at fair and reasonable rates. Finally, it clarifies that the 50-percent cargo preference requirement does not bar using U.S.-flag commercial vessels for up to 100 percent of the covered cargo. In practice, this section tells contracting personnel and shippers which cargoes are subject to cargo preference, when U.S.-flag vessels must be used, and where exceptions or broader use of U.S.-flag shipping are allowed.

Exceptions.

FAR 47.504 explains when the ocean transportation policy and procedures in this subpart do not apply. It covers several specific exceptions: shipments aboard vessels required or authorized by law or treaty, ocean transportation between foreign countries paid for with certain foreign-currency foreign assistance funds, shipments of classified supplies when security rules prohibit non-Government vessels, and certain subcontracts for commercial products, commercial components, and commercial services. It also spells out important carve-outs from the commercial-subcontract exception, including grants-in-aid shipments such as agricultural and food aid, shipments covered by 46 U.S.C. App. 1241-1 such as Export-Import Bank-related shipments, subcontracts under government ocean transportation service contracts or construction contracts, and shipments of commercial products that are merely resold or distributed without added value or that support contingency operations, exercises, or U.S. forces deployed for UN or NATO humanitarian or peacekeeping operations. In practice, this section tells contracting officers and contractors when the normal domestic preference and related ocean-shipping rules in this subpart do not control, and when they still do despite the commercial nature of the procurement. The practical significance is that misidentifying an exception can lead to improper shipping arrangements, noncompliance with statutory cargo preference requirements, or unnecessary cost and schedule impacts.

Construction contracts.

FAR 47.505 addresses when the ocean transportation policies in this subpart apply to construction work performed overseas and when an exception is available. It covers construction contractors, subcontractors, and suppliers engaged in overseas work, and it ties their obligations to the shipping and vessel-use rules in the subpart. The general rule is that these parties must comply with the subpart’s policies and regulations, which means they must plan overseas logistics with federal cargo preference and vessel-use requirements in mind. The section also creates a limited exception for military assistance, foreign aid, or similar U.S. Government projects when the recipient nation provides or pays for at least 50 percent of the transportation; in that case, foreign-flag vessels may be used for up to 50 percent of the project’s gross tonnage. In practice, this section matters because it determines whether overseas construction shipments must follow the normal U.S.-flag preference framework or whether a partial foreign-flag vessel allowance applies. Contractors and contracting officers must therefore evaluate both the nature of the project and who is paying for transportation before arranging ocean carriage.

Procedures.

FAR 47.506 explains the basic procedures contracting officers must follow when a procurement may involve ocean transportation of supplies subject to the Cargo Preference Act of 1954. It covers four main topics: getting transportation activity assistance when drafting shipping instructions and delivery terms, responding when a contractor says no privately owned U.S.-flag commercial vessel is available, determining whether U.S.-flag vessel rates are fair and reasonable, and complying with Maritime Administration reporting requirements under 46 CFR part 381. In practice, this section is about making sure cargo preference requirements are built into the solicitation and contract correctly, that vessel availability claims are handled through the proper transportation channels, and that rate reasonableness determinations are based on the right source. It also ensures agencies collect and furnish the ocean-shipment data required for federal reporting. For contracting officers and contractors, the practical significance is that ocean shipping issues are not handled ad hoc; they must be coordinated with transportation specialists and documented in accordance with agency and Maritime Administration procedures.

Contract clauses.

FAR 47.507 tells contracting officers when to include the ocean shipping preference clause at 52.247-64, Preference for Privately Owned U.S.-Flag Commercial Vessels, and when to use one of its alternates. It covers solicitations and contracts that may involve ocean transportation of supplies subject to the Cargo Preference Act of 1954, including situations where the law or agency procedures require exclusive use of privately owned U.S.-flag commercial vessels. It also addresses a special alternate for certain commercial products shipped in direct support of U.S. military contingency operations, exercises, or forces deployed for United Nations or NATO humanitarian or peacekeeping operations, while excluding ocean transportation services and construction contracts from that alternate. Finally, it allows agencies, under their procedures, to add other appropriate vessel-related clauses. In practice, this section ensures cargo preference requirements are built into the contract at the outset so shipping arrangements, pricing, and compliance obligations are clear before performance begins.