FAR 47.505—Construction contracts.
Plain-English Summary
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.
Key Rules
General overseas compliance
Construction contractors, including subcontractors and suppliers, engaged in overseas work must comply with the policies and regulations in this subpart. This means the shipping and vessel-selection rules apply broadly to the construction supply chain, not just to the prime contractor.
Applies to construction supply chain
The rule expressly includes subcontractors and suppliers, so responsibility for compliance extends to all parties involved in moving materials for overseas construction work. Contractors should flow these requirements down and coordinate logistics accordingly.
Exception for aid projects
The requirements do not apply to military assistance, foreign aid, or similar projects carried out under the auspices of the U.S. Government when the recipient nation furnishes or pays for at least 50 percent of the transportation. This is a narrow exception tied to the funding arrangement for transportation.
Foreign-flag vessel allowance
When the exception applies, foreign-flag vessels may be used for a portion not to exceed 50 percent of the gross tonnage for the project. The allowance is limited and does not authorize unrestricted foreign-flag use.
Transportation cost threshold
The key trigger for the exception is whether the recipient nation furnishes or pays for at least half of the transportation. Parties must verify the transportation funding split before relying on the exception.
Responsibilities
Contracting Officer
Determine whether the overseas construction effort falls under the general rule or the exception, and ensure solicitation and contract requirements reflect the applicable vessel-use and transportation rules. The contracting officer should also confirm that any claimed exception is supported by the project’s transportation funding arrangement.
Contractor
Comply with the subpart’s policies and regulations for overseas construction shipments, including planning vessel use and transportation arrangements consistent with the applicable rule. The contractor must also identify whether the project qualifies for the exception and document the basis before using foreign-flag vessels.
Subcontractors
Follow the same overseas transportation and vessel-use requirements that apply to the prime contract when performing construction-related work. Subcontractors must coordinate with the prime contractor to avoid noncompliant shipping arrangements.
Suppliers
Provide materials and shipments in a manner consistent with the applicable overseas transportation rules. Suppliers should understand whether the project is subject to the general compliance rule or the limited foreign-flag vessel exception.
Recipient Nation
If the project is a military assistance, foreign aid, or similar U.S. Government project, furnish or pay for at least 50 percent of the transportation to qualify for the exception. The recipient nation’s transportation contribution is the condition that allows limited foreign-flag vessel use.
Practical Implications
Overseas construction logistics must be checked early, because vessel selection can affect cost, schedule, and compliance before materials are shipped.
Do not assume all foreign-aid or military-assistance projects are exempt; the exception depends on the recipient nation paying or furnishing at least 50 percent of transportation.
The 50 percent gross tonnage limit is a ceiling, not a target, so contractors should track cargo volumes carefully to avoid exceeding the allowed foreign-flag share.
Because subcontractors and suppliers are included, primes should flow down requirements and verify shipping plans across the entire supply chain.
A common pitfall is relying on the exception without documenting the transportation funding split or miscalculating gross tonnage for the project.
Official Regulatory Text
(a) Except as stated in paragraph (b) of this section, construction contractors, including subcontractors and suppliers, engaged in overseas work shall comply with the policies and regulations in this subpart. (b) These requirements shall not apply to military assistance, foreign aid, or similar projects under the auspices of the U.S. Government when the recipient nation furnishes, or pays for, at least 50 percent of the transportation, in which event foreign-flag vessels may be used for a portion not to exceed 50 percent of the gross tonnage for the project.