Maritime Industry:

Cargo Preference Laws--Estimated Costs and Effects

RCED-95-34: Published: Nov 30, 1994. Publicly Released: Dec 13, 1994.

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Pursuant to a congressional request, GAO provided information on cargo preference laws, focusing on their effect on: (1) federal transportation costs; and (2) the U.S. merchant marine industry.

GAO found that: (1) cargo preference laws have increased federal agencies' transportation costs by an average of $578 million per year; (2) cargo preference laws increase agencies' transportation costs because U.S.-flag vessels generally charge more than foreign vessels to carry cargo; (3) although some agencies paid an estimated $3.5 billion in additional transportation costs to ship cargo on U.S.-flag vessels, DOD estimated that $659 million of those costs were related to the Persian Gulf War; (4) the effect of cargo preference laws on the U.S. merchant marine industry has been mixed; (5) the share of oceanborne cargo carried aboard U.S.-flag vessels has declined because most internationally shipped cargo is exempt from cargo preference laws; (6) in 1992, foreign-flag vessels carried about 96 percent of international cargo; and (7) although eliminating cargo preference laws could cause two-thirds of the U.S.-flag vessels to leave the U.S. fleet and result in the elimination of about 6,000 U.S. shipboard jobs, it would have a minimal impact on the U.S. shipbuilding industry.

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