However, DOD’s most serious scenario requires a  full and prolonged—a period longer than 6 months—activation of the  reserve sealift fleet as well as the use of commercial vessels. Cargo Preference Requirements Increase Food Aid Shipping Costs, Especially for USDA

CPFA requirements increased the cost of shipping food aid for USAID  and USDA by about 23 percent, or $107 million, over what it would have  been had CPFA requirements not been applied during the time period  April 2011 through fiscal year 2014. The country-by-country basis is a more narrow  interpretation of the geographic area requirement associated with CPFA  than what USAID applies. Following the July 2012 reduction in the  minimum percentage of food aid to be carried on U.S.-flag vessels from  75 percent to 50 percent, USAID was able to substantially increase the  proportion of food aid awarded to foreign-flag vessels, helping to reduce  its average shipping rate. In contrast, USDA was only able to increase the  proportion of food aid awarded to foreign-flag vessels by a relatively small  amount such that it utilized foreign-flag vessels far below the 50 percent  allowed by the 2012 law, and its average shipping rate did not decrease. USAID and USDA continue to differ in how they implement CPFA, and  they, together with MARAD, have not fully updated guidance for or  agreed on a consistent method for agencies to implement CPFA based  on geographic area. Thus, USDA is required to meet the minimum percentage of food aid  carried on U.S.-flag vessels by individual country and for each of its food  assistance programs, which are Food for Progress and McGovern-Dole,  regardless of the price of U.S. shipping, according to USDA officials. CPFA’s Contribution to Sealift Capacity Is Uncertain, and MARAD Has Not Fully Considered Available Mariner Supply

Despite cargo preference, the number of vessels carrying food aid and  U.S. mariners required to crew them has declined. Furthermore, MARAD has not fully assessed the  sufficiency of mariners available under a full and prolonged activation. CPFA supports some sealift capability by ensuring that a portion of U.S.- flag vessels carry some food aid cargo. We found that without CPFA,  most food aid cargo would not be transported on U.S.-flag vessels. The Number of U.S. Mariners Qualified and Available to Serve DOD’s Needs under a Full and Prolonged Activation Is Uncertain

			Estimated Number of Mariners Needed

MARAD has estimated the number of mariners required to fully crew both  the reserve sealift fleet and commercial operations for shorter- and  longer-duration surge scenarios as required by DOD. MARAD officials expect all commercial vessels to continue operations  during the same period during which the reserve surge fleet is activated  and estimated that 9,148 mariners would be needed to crew such  vessels. Maritime industry stakeholders. Matter for Congressional Consideration

While recognizing that cargo preference serves policy goals established  by Congress with respect to the U.S. merchant marine, including  maintenance of a fleet capable of serving as a naval and military auxiliary  in time of war or national emergency, Congress should consider clarifying  cargo preference legislation regarding the definition of “geographic area”  to ensure that agencies can fully utilize the flexibility Congress granted to  them when it lowered the CPFA requirement. Recommendation for Executive Action

GAO recommends that the Secretary of Transportation direct the  Administrator of MARAD to study the potential availability of all qualified  mariners needed to meet a full and prolonged activation of the reserve  sealift fleet. In its written comments,  reproduced in appendix V, DOT concurred with our recommendation to  study the potential availability of all qualified mariners needed to meet a  full and prolonged activation of the reserve sealift fleet. Appendix I: Scope and Methodology

This report examines (1) cargo preference for food aid’s (CPFA) impact  on food aid shipping cost and U.S. agencies’ implementation of CPFA  requirements, (2) the extent to which the implementation of CPFA  requirements contributes to sufficient sealift capacity, and (3) stakeholder  views on options to improve the sustainability of the oceangoing U.S.-flag  fleet. To address our objectives, we analyzed cargo preference legislation as  well as documents, guidance, and data on CPFA provided by the U.S.  Agency for International Development (USAID), the U.S. Department of  Agriculture (USDA), and the Department of Transportation’s (DOT)  Maritime Administration (MARAD). The data covered USAID’s packaged food aid and all  of USDA’s food aid shipments from April 2011 through fiscal year 2014. For example, the overall commercial shipping rates could  have declined during the period of our data from April 2011 through fiscal  year 2014.
Why GAO Did This Study

Cargo preference laws require that a percentage of U.S. government cargo, including international food aid, be transported on U.S.-flag vessels according to geographic area of destination and vessel type. One intention is to ensure a merchant marine—both vessels and mariners—capable of providing sealift capacity in times of war or national emergency, including a full, prolonged activation of the reserve fleet. The CPFA percentage requirement has varied over the years, and was reduced from 75 to 50 percent in 2012. Among other objectives, this report examines (1) CPFA's impact on food aid shipping cost and U.S. agencies' implementation of CPFA requirements and (2) the extent to which the implementation of CPFA requirements contributes to sufficient sealift capacity. GAO analyzed agency documents and bid data from April 2011 (when the food procurement database was implemented) through fiscal year 2014, and interviewed agency officials as well as maritime industry stakeholders.

What GAO Found

Cargo preference for food aid (CPFA) requirements increased the overall cost of shipping food aid by an average of 23 percent, or $107 million, over what the cost would have been had CPFA requirements not been applied from April 2011 through fiscal year 2014. Moreover, differences in the implementation of CPFA requirements by the U.S. Agency for International Development (USAID) and U.S. Department of Agriculture (USDA) contributed to a higher shipping rate for USDA. Following the July 2012 reduction in the minimum percentage of food aid to be carried on U.S.-flag vessels, USAID was able to substantially increase the proportion of food aid awarded to foreign-flag vessels, which on average have lower rates, helping to reduce its average shipping rate. In contrast, USDA was able to increase the proportion of food aid awarded to foreign-flag vessels by only a relatively small amount because it is compelled by a court order to meet the minimum percentage of food aid carried on U.S.-flag vessels by individual country, a more narrow interpretation of the geographic area requirement than what USAID applies. Despite GAO's past recommendations, U.S. agencies have not fully updated guidance or agreed on a consistent method for agencies to implement CPFA, which would allow USDA to administer CPFA using a method other than country-by-country.
U.S. Agency for International Development's (USAID) and U.S. Department of Agriculture's (USDA) Cost of Cargo Preference for Food Aid (CPFA) Requirements, April 2011 through Fiscal Year 2014 (Dollars in millions)
CPFA's contribution to sealift capacity is uncertain, and available mariner supply has not been fully assessed. While CPFA has ensured that a portion of U.S.-flag vessels carry some food aid cargo, the number of vessels carrying food aid and U.S. mariners required to crew them has declined. The available pool of sealift capacity has always met all of the Department of Defense's (DOD) requirements, without the full activation of the reserve sealift fleet. DOD's most serious scenario would require a full and prolonged—a period longer than 6 months—activation of the reserve sealift fleet as well as the use of commercial vessels. The Maritime Administration (MARAD) estimated that 3,886 mariners would be needed to crew the reserve surge fleet and 9,148 mariners to crew commercial vessels. MARAD estimated that at least 1,378 additional mariners would be needed to satisfy a full and prolonged activation, including the crewing of commercial vessels. However, the actual number of U.S. mariners qualified and available to fulfill DOD's most serious scenario is unknown and MARAD has not fully assessed the potential availability of all qualified mariners to satisfy a full and prolonged activation.

What GAO Recommends

Recognizing that cargo preference serves statutory policy goals, Congress should consider clarifying CPFA legislation to define “geographic area” in a manner that ensures agencies can fully utilize the flexibility Congress granted to them when it lowered the CPFA requirement. The Secretary of Transportation should direct the Administrator of MARAD to study the potential availability of all qualified mariners needed to meet a full and prolonged activation of the reserve sealift fleet; DOT agreed with this recommendation.