Use of U.S. Flag Air Carriers for Foreign Air Transportation

GAO was asked to determine whether certain air freight shipments were in compliance with section 5 of Pub. L. 93-623 (codified at 49 U.S.C. 1517). GAO was told that freight shipments financed by foreign military sales credits to Korea and Taiwan have been transported by foreign air carriers. Other products, financed through the Export-Import Bank of the United States, have also been transported by foreign air carriers.

Although the Export-Import Bank is an agency of the United States (12 U.S.C. § 635(a)(l)), the payment in this case is not actually a payment by the Bank but a payment by the foreign purchaser with the Bank acting as an agent in physically disbursing the funds. This situation is analogous to a payment by a domestic National Bank, an instrumentality of the United States, lending a purchaser of products the money to pay a supplier in the form of a cashier's check payable at the Bank. Although the National Bank would physically disburse funds to the supplier, it is the purchaser's funds that are being disbursed, and the transaction is properly characterized as involving a payment made by the purchaser. Thus, where air freight shipments are financed by private parties through loans arranged through a U.S. bank, section 5 of Pub. L. 93-623 would not require the use of U.S.-flag air carriers.