Transportation of Public Law 480 Commodities--Efforts Needed To Eliminate Unnecessary Costs
NSIAD-85-74: Published: Jun 18, 1985. Publicly Released: Jun 18, 1985.
Additional Materials:
- Full Report:
Contact:
(202) 512-4812
contact@gao.gov
Office of Public Affairs
(202) 512-4800
youngc1@gao.gov
GAO assessed the Department of Agriculture's (USDA) and the Maritime Administration's (MARAD) management of the expenditure of U.S. funds for ocean transportation of agricultural commodities.
GAO found significant problems indicating that USDA may be paying higher ocean freight differentials than necessary. USDA control over the bidding and negotiation process for ocean transportation contracts was inadequate because foreign countries: (1) used closed bids which could be submitted late or were based on knowledge of submitted bids; (2) could negotiate with any preferred vessel owner, which did not ensure the lowest possible rates; and (3) could serve as vessel brokers, which could lead to favoritism in rate negotiations. USDA did not consistently follow the standard provision for calculating differentials, or applied the standard in a manner that reduced costs to foreign countries at the expense of higher USDA payments. GAO also found that MARAD did not verify data used in calculating guideline rates because it assumed that vessels returned to the United States without cargo. However, vessels may carry cargo on the return voyage, which allows them the potential to earn excessive profits. Additionally, since MARAD had not prepared guidelines for passenger liners because of the difficulty in separating revenues, it did not know whether transportation rates for liners represented cost plus a reasonable profit.
Recommendations for Executive Action
Status: Closed - Implemented
Comments: USDA announced, on April 10, 1989, a final rule requiring open and competitive contracting in the procurement of ocean transportation by importing countries when the Commodity Credit Corporation is financing the ocean freight under Title I, P.L. 480. May 25, 1989 is the effective date of this new rule.
Recommendation: The Secretary of Agriculture should require publicly opened transportation offers. The offered transportation rates must be firm and nonnegotiable, and awards should be consistent with open, competitive, and responsive bid procedures. USDA should provide an observer for transportation bid openings, as it does for commodity bids.
Agency Affected: Department of Agriculture
Status: Closed - Not Implemented
Comments: USDA stated that its policy is to minimize the cost of providing both commodity and transportation financing, consistent with the purposes of the P.L. 83-480, title I program and the requirements of the Cargo Preference Act.
Recommendation: The Secretary of Agriculture should establish a clear policy to minimize USDA transportation expenditures, consistent with cargo preference requirements.
Agency Affected: Department of Agriculture
Status: Closed - Not Implemented
Comments: In its comments and letter, September 11, 1985, USDA referred to changes made in purchase authorization requirements to address the cited problems. With respect to the identified problem areas, USDA has not indicated any intent to revise the program regulations to address these areas. However, on April 10, 1989, USDA announced a significant change in the regulations which will reduce costs.
Recommendation: The Secretary of Agriculture should direct the Administrator, Foreign Agricultural Service (FAS), to revise and implement program regulations on the basis of this policy. FAS should emphasize cost reductions in the problem areas identified by GAO, including: (1) computation of ocean freight differentials; (2) allocation of cargo; (3) shipment on the basis of lowest landed cost; (4) requirement for demurrage and despatch; and (5) elimination of unnecessarily restrictive tender terms.
Agency Affected: Department of Agriculture
Status: Closed - Implemented
Comments: The Department of Transportation (DOT): (1) requested that vessel owners provide a certified listing of actual costs of voyages; (2) established a final rule for calculating fair and reasonable rates for less-than-full ship-load dry bulk cargoes transported on U.S. flag liners; and (3) established a final rule for calculating rates for full-range shipments.
Recommendation: The Secretary of Transportation should direct the Administrator, MARAD, to devise and institute a method for assessing whether transportation rates for liners represent cost plus a reasonable profit. Also, vessel owners should be required to have their independent accountants semiannually certify that vessel costs and operating data are accurate.
Agency Affected: Department of Transportation
Status: Closed - Implemented
Comments: DOT: (1) finalized a rule for full cargo shipments which provides for recalculation of rates if a vessel is scrapped or sold overseas; (2) intends to recalculate rates if returning U.S. vessels carry other preference cargo; and (3) plans to analyze the feasibility of adjusting rates for commercial, nonpreference cargo.
Recommendation: The Secretary of Agriculture should issue regulations requiring certification that nonliner U.S. flag vessels do not scrap or carry cargo on a return voyage. The regulations should also provide that the guideline rate will be recalculated and the transportation rate adjusted if a vessel obtains backhaul cargo or is scrapped or sold overseas.
Agency Affected: Department of Agriculture
Explore the full database of GAO's Open Recommendations
»
Dec 9, 2020
-
International Trade:
Observations On Whether Women's Rights and Economic Interests Are Protected or Promoted by U.S. Trade Preference ProgramsGAO-21-190: Published: Dec 9, 2020. Publicly Released: Dec 9, 2020.
Dec 2, 2020
-
Foreign Assistance:
USAID Should Analyze Data on the Timeliness of ExpendituresGAO-21-51: Published: Dec 2, 2020. Publicly Released: Dec 2, 2020.
Nov 19, 2020
-
Global Food Security:
Information on Spending and Types of Assistance Provided by the United States and Other DonorsGAO-21-47R: Published: Nov 19, 2020. Publicly Released: Nov 19, 2020.
Nov 9, 2020
-
Human Trafficking:
Agencies Have Taken Steps to Strengthen International Anti-trafficking ProjectsGAO-21-53: Published: Nov 9, 2020. Publicly Released: Nov 9, 2020. -
Rule of Law Assistance:
State and USAID Could Improve Monitoring EffortsGAO-21-14: Published: Nov 9, 2020. Publicly Released: Nov 9, 2020.
Oct 27, 2020
-
Forced Labor Imports:
DHS Increased Resources and Enforcement Efforts, but Needs to Improve Workforce Planning and MonitoringGAO-21-106: Published: Oct 27, 2020. Publicly Released: Oct 27, 2020.
Oct 2, 2020
-
Combating Wildlife Trafficking:
Agencies Work to Address Human Rights Abuse Allegations in Overseas Conservation ProgramsGAO-21-139R: Published: Oct 2, 2020. Publicly Released: Oct 2, 2020.
Sep 22, 2020
-
Cyber Diplomacy:
State Has Not Involved Relevant Federal Agencies in the Development of Its Plan to Establish the Cyberspace Security and Emerging Technologies BureauGAO-20-607R: Published: Sep 22, 2020. Publicly Released: Sep 22, 2020.
Sep 15, 2020
-
Steel and Aluminum Tariffs:
Commerce Should Improve Its Exclusion Request Process and Economic Impact ReviewsGAO-20-517: Published: Sep 15, 2020. Publicly Released: Sep 15, 2020.
Sep 14, 2020
-
Conflict Minerals:
Actions Needed to Assess Progress Addressing Armed Groups' Exploitation of MineralsGAO-20-595: Published: Sep 14, 2020. Publicly Released: Sep 14, 2020.
Looking for more? Browse all our products here