FAR 47.502—Policy.
Plain-English Summary
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.
Key Rules
DoD cargo must use U.S.-flag vessels
Under the Cargo Preference Act of 1904, the Department of Defense must use only U.S.-flag vessels for ocean transportation of supplies for the Army, Navy, Air Force, or Marine Corps unless those vessels are unavailable at fair and reasonable rates. This is a stricter rule than the general 50 percent requirement and applies specifically to DoD military cargo.
Merchant marine policy supports U.S.-flag use
The Merchant Marine Act of 1936 establishes the national policy to foster and maintain the U.S. merchant marine. In practice, this policy underpins cargo preference requirements and signals that agencies should favor U.S.-flag shipping where the law requires or permits it.
At least 50 percent of covered cargo
For supplies covered by the Cargo Preference Act of 1954, agencies must ensure that at least 50 percent of the gross tonnage is transported on privately owned U.S.-flag commercial vessels, to the extent such vessels are available at fair and reasonable rates. The 50 percent calculation is made separately for dry bulk carriers, dry cargo liners, and tankers.
Covered cargo categories are broad
The 50 percent rule applies when supplies are acquired for the account of the United States; furnished to or for the account of a foreign nation without reimbursement; furnished for a foreign nation with U.S. advances, credits, or currency convertibility guarantees; or acquired with U.S.-backed advances, loans, or guaranties. These categories capture both direct U.S. procurements and certain foreign assistance or financing arrangements.
Other U.S.-flag preferences exist
Separate statutory preferences apply to official business travel by U.S. officers and employees, transportation of their personal effects, and transportation of Government personnel-owned motor vehicles when the transportation is at Government expense or otherwise authorized by law. These are distinct from cargo preference for supplies but reflect the same policy favoring U.S.-flag vessels.
Emergency waivers are possible
The Cargo Preference Act of 1954 may be temporarily waived when Congress, the President, or the Secretary of Defense declares that an emergency justifying a temporary waiver exists and notifies the appropriate agency or agencies. A waiver is not automatic; it requires the specified declaration and notice.
Responsibilities
Contracting Officer
Identify whether the acquisition or shipment is subject to cargo preference, ensure solicitation and contract terms reflect the applicable U.S.-flag requirements, verify the correct tonnage calculation category, and coordinate any waiver or exception documentation before authorizing noncompliant shipping.
Agency Program/Shipping Officials
Plan shipments to comply with the applicable U.S.-flag preference, track cargo tonnage and vessel usage, and ensure that covered supplies are booked on U.S.-flag commercial vessels when available at fair and reasonable rates.
Contractor
Arrange transportation in accordance with the contract and applicable cargo preference rules, use U.S.-flag vessels when required, and provide shipping information needed to demonstrate compliance, including vessel nationality and tonnage data.
Department of Defense
For military supplies covered by the 1904 Act, use only U.S.-flag vessels unless they are unavailable at fair and reasonable rates, and document the basis for any deviation from that requirement.
Congress, President, or Secretary of Defense
When an emergency justifies temporary relief from the Cargo Preference Act of 1954, make the required declaration and notify the appropriate agencies so the waiver can be implemented lawfully.
Practical Implications
Cargo preference is a planning issue, not just a shipping issue: agencies and contractors need to know early whether ocean transport is likely so they can secure U.S.-flag capacity and avoid schedule delays.
The 50 percent rule is not a single pooled calculation; it is computed separately for dry bulk, dry cargo liner, and tanker cargo, which can change compliance results and reporting.
Fair and reasonable rate availability matters. If U.S.-flag vessels are available only at rates that do not meet the statutory standard, the agency may have a basis to use other vessels, but that determination should be documented carefully.
DoD cargo is subject to a stricter rule than general civilian cargo, so users should not assume the 50 percent standard applies to all shipments.
Waivers are exceptional and temporary. Contractors and contracting officers should not treat emergency waiver authority as a routine workaround; they should confirm that a valid declaration and notice exist before relying on non-U.S.-flag transportation.
Official Regulatory Text
(a) The policy of the United States regarding the use of U.S.-flag vessels is stated in the following acts: (1) The Cargo Preference Act of 1904 ( 10 U.S.C. 2631 ), which requires the Department of Defense to use only U.S.-flag vessels for ocean transportation of supplies for the Army, Navy, Air Force, or Marine Corps unless those vessels are not available at fair and reasonable rates. (2) The Merchant Marine Act of 1936 ( 46 U.S.C. 1101 ), which declares it is the policy of the United States to foster the development and encourage the maintenance of its merchant marine. (3) The Cargo Preference Act of 1954 ( 46 U.S.C. 1241(b) , which is Section 901(b) of the Merchant Marine Act). Under this Act, Government agencies acquiring, either within or outside the United States, supplies that may require ocean transportation shall ensure that at least 50 percent of the gross tonnage of these supplies (computed separately for dry bulk carriers, dry cargo liners, and tankers) is transported on privately owned U.S.-flag commercial vessels to the extent that such vessels are available at rates that are fair and reasonable for U.S.-flag commercial vessels. This applies when the supplies are- (i) Acquired for the account of the United States; (ii) Furnished to, or for the account of, a foreign nation without provision for reimbursement; (iii) Furnished for the account of a foreign nation in connection with which the United States advances funds or credits, or guarantees the convertibility of foreign currencies; or (iv) Acquired with advance of funds, loans, or guaranties made by or on behalf of the United States. (b) Additional policies providing preference for the use of U.S.-flag vessels are contained in- (1) 46 U.S.C. 1241(a) for official business travel by officers and employees of the United States and for the transportation of their personal effects; and (2) 46 U.S.C. 1241(e) for the transportation of motor vehicles owned by Government personnel when transportation is at Government expense or otherwise authorized by law. (c) The provisions of the Cargo Preference Act of 1954 may be temporarily waived when the Congress, the President, or the Secretary of Defense declares that an emergency justifying a temporary waiver exists and so notifies the appropriate agency or agencies.