The coalition USA Maritime recently posted a rebuttal to comments that were made during a Senate hearing about the PL 480 Food for Peace Program.
USA Maritime’s members include the SIU, other maritime unions and American-flag carriers. The organization is dedicated to promoting and protecting the U.S. maritime industry.
In its detailed response to testimony given to the Senate Foreign Relations Committee, USA Maritime addressed several assertions by a representative of the Office of Food for Peace. One such declaration by that individual claimed that the program’s budget is hurt by the cost of shipping aid cargoes on U.S.-flag vessels.
But the coalition pointed out, “The requirement to ship U.S.- flag only applies when such vessels are ‘offered at fair and reasonable rates.’ Therefore, if the rates are not fair and reasonable, a resort may be to use foreign-flag carriers, which USAID (the United States Agency for International Development) does often. Shipping on U.S.-flag vessels instead of foreign competitors costs Food for Peace less than one percent of the program budget. In fact, all of Food for Peace’s expenditures on ocean freight – foreign and U.S.-flag shipping combined – consume only 8.2 percent of the Food for Peace program budget, compared with the 60.2 percent of the program that USAID spends on overhead items other than commodities, ocean freight, and inland transportation. Owners have repeatedly approached USAID’s Division Chief of Transportation with great concern to discuss the additional unnecessary clauses now being placed in freight tenders, which significantly increase the cost per ton to the U.S. Government. These clauses place an open-ended financial liability onto the Owner for situations which are completely outside of their control and they must include this risk in the form of an increased freight rate to cover their liability.
“If these restrictions were removed, USAID would realize significant savings on ocean transportation for both U.S.- and foreign-flag vessels,” USA Maritime continued. “The statement completely ignores the much larger savings to the U.S. taxpayer because the Department of Defense can rely upon the commercial fleet supported by cargo preference requirements. The cost to replicate this capacity is approximately $13 billion in vessel capital costs and over $1 billion annually in operating costs. The statement also ignores the leadership role that the U.S.-flag community takes in advocating for and supporting the Food for Peace budget before Congress and the additional funds available to USAID, a result which more than compensates for any cargo preference premium needed to support our national defense sealift fleet.”
Another statement by the office representative indicated that cargo preference laws are meant to address the “desire to have a U.S.-flag commercial fleet with enough vessels and qualified mariners to meet our military sealift requirements.”
USA Maritime responded, “The statement is only partially accurate. Cargo preference is not just a policy, but a collection of federal laws applicable to all federal government cargo shipments. The purpose of the Merchant Marine Act and related statutes is to provide national security, firstly by supporting U.S. commerce, and secondly by providing sealift capacity for use in wars or emergencies such as the recent wars and hurricane relief efforts. The need for a national merchant marine goes beyond just carrying military supplies to the battlefront. It contemplates that American commerce, which is deeply dependent upon imported goods and exports overseas, must never be held hostage to foreign interests or global politics (as happened, for example, during World War I).”
The entire USA Maritime statement is available on the coalition’s website: usamaritime.org
Cargo preference requires shippers to use U.S.-flag vessels to transport certain government-impelled, ocean-borne cargoes. References to cargo preference often pertain to the 1954 Food for Peace initiative, specifically governing the shipment of domestically grown agricultural goods and government aid programs. However, it also includes the Cargo Preference Act of 1904, which dictates that 100 percent of military cargoes be shipped under the Stars and Stripes. And, it includes Public Resolution 17 (enacted in 1934), which requires all cargo generated by the U.S. Export-Import Bank be moved via U.S.-flag vessels unless granted a waiver by the U.S. Maritime Administration.
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