FAR 47.506—Procedures.
Plain-English Summary
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.
Key Rules
Use transportation activity support
When a solicitation or contract may involve ocean transportation of supplies covered by the Cargo Preference Act, the contracting officer must obtain assistance from the transportation activity in developing shipping instructions and delivery terms. This helps ensure the contract language properly addresses cargo preference and shipping requirements before award.
Address vessel unavailability claims
If the contractor notifies the contracting officer that a privately owned U.S.-flag commercial vessel is not available, the contracting officer must seek assistance from the transportation activity. The claim should not be handled solely at the contracting level without transportation expertise.
Accept published tariff rates
For determining whether privately owned U.S.-flag commercial vessels are available at fair and reasonable rates, rates filed and published under Federal Maritime Commission requirements may be accepted as fair and reasonable. This provides a standard source for evaluating rate reasonableness when published tariffs exist.
Obtain MARAD rate determinations when needed
If applicable charter cargo rates are not in published tariffs, the contracting officer must obtain a determination from the Maritime Administration on whether the rates are fair and reasonable. This ensures a proper government determination where tariff data is unavailable.
Follow ocean shipment reporting rules
The Maritime Administration’s regulations at 46 CFR 381 require agencies to submit reports on ocean shipments. Contracting officers must follow agency procedures when preparing or providing information for these reports so the agency can meet its reporting obligations.
Responsibilities
Contracting Officer
Obtain transportation activity assistance when drafting shipping instructions and delivery terms for covered ocean shipments; seek transportation activity assistance when a contractor reports that no privately owned U.S.-flag commercial vessel is available; use the proper source for fair-and-reasonable rate determinations; and follow agency procedures when preparing or furnishing information for Maritime Administration ocean-shipment reports.
Transportation Activity
Assist the contracting officer in developing shipping instructions and delivery terms, and provide support when vessel unavailability is reported by the contractor. The transportation activity helps evaluate shipping options and cargo preference-related issues.
Contractor
Notify the contracting officer if a privately owned U.S.-flag commercial vessel is not available. The contractor must provide this notice so the government can evaluate the situation through the proper transportation channels.
Maritime Administration
Provide determinations on whether charter cargo rates are fair and reasonable when those rates are not available in published tariffs, and establish reporting requirements for ocean shipments through 46 CFR part 381.
Agency
Follow its own procedures for preparing and furnishing information needed for Maritime Administration ocean-shipment reports, and ensure contracting personnel comply with those internal reporting processes.
Practical Implications
Contracting officers should involve transportation specialists early whenever a procurement may require ocean shipment, because shipping terms and cargo preference issues need to be built into the solicitation and contract before award.
A contractor’s statement that no U.S.-flag vessel is available is not the end of the analysis; the contracting officer should route the issue through the transportation activity and document the basis for any decision.
If published FMC tariff rates exist, they can be used as the benchmark for fair and reasonable rates, but charter cargoes without published tariffs require a MARAD determination, which can add time to the process.
Agencies need a reliable internal process for collecting ocean-shipment data, because contracting officers may be asked to prepare or provide information for required reports under 46 CFR 381.
A common pitfall is treating cargo preference and shipping instructions as routine contract administration matters; in reality, they require coordination, documentation, and the correct government transportation and maritime authorities.
Official Regulatory Text
(a) The contracting officer shall obtain assistance from the transportation activity (see 47.105 ) in developing appropriate shipping instructions and delivery terms for inclusion in solicitations and contracts that may involve ocean transportation of supplies subject to the requirements of the Cargo Preference Act of1954 (see 47.502 (a)(3)). (b) When the contractor notifies the contracting officer that a privately owned U.S.-flag commercial vessel is not available, the contracting officer shall seek assistance from the transportation activity. (c) For purposes of determining the availability of privately owned U.S.-flag commercial vessels at fair and reasonable rates, rates filed and published in accordance with the requirements of the Federal Maritime Commission may be accepted as fair and reasonable. When applicable rates for charter cargoes are not in published tariffs, a determination as to whether the rates are fair and reasonable shall be obtained from the Maritime Administration. (d) The Maritime Administration has issued regulations (46 CFR381) that require agencies to submit reports regarding ocean shipments. Contracting officers shall follow agency regulations when preparing, or furnishing information for, these reports.