FAR 52.247-64—Preference for Privately Owned U.S.-Flag Commercial Vessels.
Plain-English Summary
FAR 52.247-64 implements the Cargo Preference Act of 1954 and tells contractors when they must use privately owned U.S.-flag commercial vessels to move government-related cargo by ocean vessel. It covers the basic 50 percent U.S.-flag shipping preference, how the 50 percent is calculated by vessel class (dry bulk carriers, dry cargo liners, and tankers), and the conditions that trigger the rule for cargo acquired for a U.S. Government agency, furnished to or for a foreign nation without reimbursement, furnished for a foreign nation with U.S. advances or guarantees, or acquired with U.S. advances, loans, or guarantees. The clause also requires contractors to submit rated on-board ocean bills of lading to the Contracting Officer and the Maritime Administration, with specific deadlines and data elements, and to flow the clause down to subcontracts and purchase orders except where an exception applies. It identifies exceptions for cargo carried under law or treaty, certain foreign assistance shipments, classified supplies, and many commercial product/service subcontracts unless the contract is for ocean transportation services or construction, or the items are resold/distributed without added value or shipped in direct support of specified military operations. The clause also points users to Maritime Administration guidance on fair and reasonable rates and includes Alternate I, which is a stricter version for certain contracts requiring exclusive use of U.S.-flag vessels unless the contractor gets written authorization to use foreign-flag vessels and an equitable adjustment. In practice, this clause is a compliance and documentation requirement that affects shipping decisions, subcontract drafting, pricing, and contract administration for ocean shipments tied to federal procurement and assistance activities.
Key Rules
50 Percent U.S.-Flag Preference
For covered ocean shipments, at least 50 percent of the gross tonnage must move on privately owned U.S.-flag commercial vessels, calculated separately for dry bulk carriers, dry cargo liners, and tankers. The rule applies only when the cargo falls within the statutory categories listed in the clause.
Availability and Rate Standard
The contractor must use U.S.-flag vessels only to the extent they are available at rates that are fair and reasonable for privately owned U.S.-flag commercial vessels. The clause points contractors to Maritime Administration guidance for help determining whether rates are fair and reasonable.
Bill of Lading Reporting
The contractor must submit one legible copy of a rated on-board ocean bill of lading for each shipment to both the Contracting Officer and MARAD. The submission deadline is 20 working days after loading for U.S.-origin shipments and 30 working days for shipments originating outside the United States, and the bill must include specified shipment and freight data.
Flowdown to Subcontracts
The contractor must insert the substance of the clause, including the flowdown paragraph, in all subcontracts or purchase orders under the contract unless an exception in paragraph (e)(4) applies. This ensures downstream shippers and suppliers are bound by the same cargo preference requirements where applicable.
Core Exceptions
The 50 percent preference does not apply to cargoes carried as required or authorized by law or treaty, certain foreign-assistance shipments, or classified supplies when classification prohibits non-Government vessels. These exceptions remove the cargo from the clause’s shipping preference requirement.
Commercial Products and Services Exception
Most subcontracts or purchase orders for commercial products or commercial services are excluded, unless the prime contract is for ocean transportation services or construction, or the items are resold/distributed without added value, or the shipments directly support specified military contingency, exercise, or peacekeeping operations. This exception is important because it narrows the clause’s reach in ordinary commercial supply chains.
Alternate I Strict Shipping Rule
Under Alternate I, the contractor must use privately owned U.S.-flag commercial vessels, and no others, for ocean transportation of supplies unless the contractor cannot obtain timely shipment at fair and reasonable rates and receives written authorization from the Contracting Officer. If foreign-flag shipping is authorized, the contract price is equitably adjusted for the cost difference.
Alternate II Narrowed Exceptions
Alternate II replaces the basic exception paragraph with a narrower version, removing some of the basic clause’s exception language and retaining only the listed exceptions. Contracting officers use this alternate when prescribed, so contractors must read the specific clause version in the contract carefully.
Responsibilities
Contracting Officer
Include the correct version of the clause in the solicitation and contract, evaluate requests to use foreign-flag vessels when Alternate I applies, issue written authorization when appropriate, and receive bill of lading copies for oversight and compliance monitoring.
Contractor
Use privately owned U.S.-flag commercial vessels for covered shipments to the required extent, verify vessel availability and rate reasonableness, submit required bills of lading on time with all required data, and flow the clause down to applicable subcontracts and purchase orders.
Subcontractor / Lower-Tier Supplier
Comply with the flowed-down cargo preference requirements when the subcontract or purchase order is covered, provide shipment documentation needed for reporting, and coordinate with the prime contractor on vessel selection and bill of lading submission.
Maritime Administration (MARAD)
Receive bill of lading copies, provide guidance on fair and reasonable rates for privately owned U.S.-flag commercial vessels, and support administration and oversight of cargo preference compliance.
Agency / Sponsoring U.S. Government Agency
Track cargo preference compliance for shipments made for its account and ensure the transportation arrangement aligns with statutory cargo preference requirements and any applicable exceptions.
Practical Implications
Contractors must plan shipping early, because the rule is not just a preference in name; it can affect vessel selection, freight cost, and schedule if U.S.-flag capacity is limited.
The biggest compliance risk is failing to document why a foreign-flag vessel was used or missing the bill of lading submission deadline and required data elements.
The clause’s exceptions are narrower than many contractors assume, especially for commercial products and services, so teams should not assume ordinary commercial subcontracts are automatically exempt.
If Alternate I is in the contract, the contractor should treat U.S.-flag use as mandatory unless it gets written authorization; verbal approval or internal assumptions are not enough.
Prime contractors need a subcontract flowdown process, because downstream shipping arrangements can create compliance exposure even when the prime is not physically arranging the ocean transport.
Official Regulatory Text
As prescribed in 47.507 (a) , insert the following clause: Preference for Privately Owned U.S.-Flag Commercial Vessels (Nov 2021) (a) Except as provided in paragraph (e) of this clause, the Cargo Preference Act of1954 (46 U.S.C.App.1241(b)) requires that Federal departments and agencies shall transport in privately owned U.S.-flag commercial vessels at least 50 percent of the gross tonnage of equipment, materials, or commodities that may be transported in ocean vessels (computed separately for dry bulk carriers, dry cargo liners, and tankers). Such transportation shall be accomplished when any equipment, materials, or commodities, located within or outside the United States, that may be transported by ocean vessel are- (1) Acquired for a U.S. Government agency account; (2) Furnished to, or for the account of, any foreign nation without provision for reimbursement; (3) 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 (4) Acquired with advance of funds, loans, or guaranties made by or on behalf of the United States. (b) The Contractor shall use privately owned U.S.-flag commercial vessels to ship at least 50 percent of the gross tonnage involved under this contract (computed separately for dry bulk carriers, dry cargo liners, and tankers) whenever shipping any equipment, materials, or commodities under the conditions set forth in paragraph (a) of this clause, to the extent that such vessels are available at rates that are fair and reasonable for privately owned U.S.-flag commercial vessels. (c) (1) The Contractor shall submit one legible copy of a rated on-board ocean bill of lading for each shipment to both- (i) The Contracting Officer, and (ii) The: Office of Cargo Preference Maritime Administration (MAR-590) 400 Seventh Street, SW Washington DC 20590. Subcontractor bills of lading shall be submitted through the Prime Contractor. (2) The Contractor shall furnish these bill of lading copies (i) within 20 working days of the date of loading for shipments originating in the United States, or (ii) within 30 working days for shipments originating outside the United States. Each bill of lading copy shall contain the following information: (A) Sponsoring U.S. Government agency. (B) Name of vessel. (C) Vessel flag of registry. (D) Date of loading. (E) Port of loading. (F) Port of final discharge. (G) Description of commodity. (H) Gross weight in pounds and cubic feet if available. (I) Total ocean freight revenue in U.S. dollars. (d) The Contractor shall insert the substance of this clause, including this paragraph (d), in all subcontracts or purchase orders under this contract, except those described in paragraph (e)(4). (e) The requirement in paragraph (a) does not apply to- (1) Cargoes carried in vessels as required or authorized by law or treaty; (2) Ocean transportation between foreign countries of supplies purchased with foreign currencies made available, or derived from funds that are made available, under the Foreign Assistance Act of1961 ( 22 U.S.C. 2353 ); (3) Shipments of classified supplies when the classification prohibits the use of non-Government vessels; and (4) Subcontracts or purchase orders for the acquisition of commercial products or commercial services unless- (i) This contract is- (A) A contract or agreement for ocean transportation services; or (B) A construction contract; or (ii) The supplies being transported are- (A) Items the Contractor is reselling or distributing to the Government without adding value. (Generally, the Contractor does not add value to the items when it subcontracts items for f.o.b. destination shipment); or (B) Shipped in direct support of U.S. military- (1) Contingency operations; (2) Exercises; or (3) Forces deployed in connection with United Nations or North Atlantic Treaty Organization humanitarian or peacekeeping operations. (f) Guidance regarding fair and reasonable rates for privately owned U.S.-flag commercial vessels may be obtained from the: Office of Costs and Rates Maritime Administration 400 Seventh Street, SW Washington DC 20590 Phone: (202) 366-4610. (End of clause) Alternate I (Apr 2003) . As prescribed in 47.507 (a)(2), substitute the following paragraphs (a) and (b) for paragraphs (a) and (b) of the basic clause: (a) Except as provided in paragraphs (b) and (e) of this clause, the Contractor shall use privately owned U.S.-flag commercial vessels, and no others, in the ocean transportation of any supplies to be furnished under this contract. (b) If such vessels are not available for timely shipment at rates that are fair and reasonable for privately owned U.S.-flag commercial vessels, the Contractor shall notify the Contracting Officer and request (1) authorization to ship in foreign-flag vessels or (2) designation of available U.S.-flag vessels. If the Contractor is authorized in writing by the Contracting Officer to ship the supplies in foreign-flag vessels, the contract price shall be equitably adjusted to reflect the difference in costs of shipping the supplies in privately owned U.S.-flag commercial vessels and in foreign-flag vessels. Alternate II (Nov 2021) . As prescribed in 47.507 (a)(3), substitute the following paragraph (e) for paragraph (e) of the basic clause: (e) The requirement in paragraph (a) does not apply to- (1) Cargoes carried in vessels as required or authorized by law or treaty; (2) Ocean transportation between foreign countries of supplies purchased with foreign currencies made available, or derived from funds that are made available, under the Foreign Assistance Act of1961 ( 22 U.S.C. 2353 ); and (3) Shipments of classified supplies when the classification prohibits the use of non-Government vessels. (4) Subcontracts or purchase orders under this contract for the acquisition of commercial products or commercial services unless the supplies being transported are- (i) Items the Contractor is reselling or distributing to the Government without adding value. (Generally, the Contractor does not add value to the items when it subcontracts items for f.o.b. destination shipment); or (ii) Shipments in direct support of U.S. military- (A) Contingency operations; (B) Exercises; or (C) Forces deployed in connection with United Nations or North Atlantic Treaty Organization humanitarian or peacekeeping operations. ( Note : This contract requires shipment of commercial products in direct support of U.S. military contingency operations, exercises, or forces deployed in connection with United Nations or North Atlantic Treaty Organization humanitarian or peacekeeping operations.)