A pool of trained U.S. mariners is needed to crew the U.S.-flag fleet. Cargo preference requirements—In general, cargo preference  requirements specify that certain percentages of all U.S. government  cargo, military and otherwise, must be carried on U.S.-flag vessels, to  the extent the vessels are available at reasonable rates. U.S. Government Support for the U.S.- Flag Fleet Has Helped Meet National Defense Needs but Has Had a Negative Effect on Some Non- Defense Government Programs

U.S. government support for the internationally trading U.S.-flag fleet has  helped meet national defense needs. Specifically, financial support to  U.S.-flag vessels through both the MSP stipend and the cargo preference  requirements has helped ensure a sufficient number of internationally  trading U.S.-flag vessels are available to meet DOD’s most recently  stated cargo capacity needs from such vessels. In contrast, while cargo  preference requirements are a means of providing government support to  U.S.-flag vessels, these requirements have had a negative impact on  some non-defense programs. For example, the requirement that food aid  agencies send a certain percentage of food aid on U.S.-flag vessels has  resulted in higher shipping costs for these agencies, and USAID and  USDA officials stated that this has reduced the amount of funds the  agencies can spend on their mission to reduce hunger. Vessels in the MSP Rely on the Combination of MSP Stipend and Government Cargo Shipped Under Cargo Preference Requirements to Maintain Financial Viability

The MSP stipend provides a fixed financial incentive for vessel operators  to maintain vessels under the U.S. flag, but on its own is not sufficient to  support the higher costs of operating U.S.-flag vessels, according to  MARAD officials and 12 of the 14 MSP vessel operators we spoke to. According to Stakeholders, Maintaining the Financial Viability of Vessels Participating in the MSP Is a Challenge due to Increasing Costs and Decreasing Levels of Government Cargo

According to MARAD officials, the relative cost of operating a U.S.-flag  vessel compared to a foreign-flag vessel has increased in recent years,  making it increasingly challenging for vessel operators to remain  economically viable under the U.S. flag. At the same time, total government cargo volumes have fallen,  compounding the challenge for vessel operators to remain viable under  the U.S. flag. The corresponding  authorized stipend rose from $3.5 million to $4.99 million per vessel  annually. Figure 6 shows the authorized annual  stipend for MSP vessels from fiscal year 1996 through fiscal year 2021. According to MARAD officials, the recent increase in the MSP stipend to  the current level of $5 million in fiscal year 2018 has temporarily stabilized  the financial situation of MSP vessel operators. However, concerns  remain about the future of the U.S.-flag fleet. MARAD and Stakeholders Identified a Potential Shortage of U.S.-Citizen Mariners as a Challenge to Meeting National Defense Needs

According to MARAD and DOD officials, another challenge related to the  ability of the U.S.-flag fleet to meet national defense needs is a potential  shortage of U.S.-citizen mariners qualified to crew government-owned  reserve vessels. DOT Has Not Finalized Mandated National Strategies but Has Identified Various Options to Address Challenges to Sustaining U.S.- Flag Fleet for Defense Needs

Congress issued two separate mandates to DOT to develop strategies  related to challenges facing the U.S.-flag fleet, specifically:
The Secretary of Transportation was directed in 2014 to develop a  national maritime strategy with recommendations, among other  things, to increase U.S.-flag vessel competitiveness. Moreover, it further delays a response to a specific  statutory requirement that DOT make recommendations related to U.S.- flag vessel competitiveness and develop a strategy to ensure the long- term viability of U.S.-flag vessels and U.S.-citizen mariners. While DOT has been delayed in issuing the national strategy, MARAD  has in other agency reports or through discussions with stakeholders  identified some options to address the competitiveness of U.S.-flag  vessels and the long-term viability of the U.S. This challenge was identified  by stakeholders we spoke with and by the sealift strategy mandate’s call  for DOT to ensure the long-term viability of the U.S. Moreover, with a smaller  number of U.S. flag vessels in international trade than in previous years,  DOD and MARAD have raised concerns about the sufficiency of the pool  of U.S. citizen mariners the United States can count on to crew  government-owned reserve vessels activated for national defense needs. Recommendation for Executive Action:

The Secretary of the Department of Transportation should complete the  national maritime strategy and establish and provide to Congress a  timeline by which the strategy document will be issued. DOT agreed with our recommendation that DOT should  complete the national maritime strategy and provide a timeline to  Congress by which the document will be issued. DOD and EXIM Bank  provided technical comments, which we incorporated as appropriate.
Why GAO Did This Study

The U.S. government relies on U.S.-flag vessels that trade internationally to transport cargo and to provide a pool of U.S. mariners who could be called upon in times of crisis for DOD's reserve fleet. Through financial support and cargo preferences, the United States has supported the viability of the U.S.-flag fleet. However, in recent years concern has grown about the sustainability of the U.S.-flag fleet, and in 2014, Congress statutorily mandated that DOT develop national strategies related to the sustainability of the U.S.-flag fleet including recommendations for the future.
GAO was asked to review U.S. government support for these U.S.-flag vessels that trade internationally. This report discusses: (1) the effect the U.S. government's support for the U.S.-flag fleet has had on national defense needs and other government programs; (2) the challenges identified by stakeholders in sustaining the U.S.-flag fleet for defense needs; and (3) the status of the mandated national strategies related to the U.S.-flag fleet.
GAO reviewed relevant laws and analyzed DOT and DOD documents and government cargo data for fiscal years 2012–2017. GAO also interviewed officials from DOT, DOD, and other federal agencies subject to cargo preference; MSP vessel operators; and other stakeholders.

What GAO Found

U.S. government support for the U.S.-registered (U.S.-flag) fleet has helped meet national defense needs, but it has had a negative effect on some non-defense government programs. Specifically, the U.S. government supports U.S.-flag vessels through: (1) an annual stipend provided through the Maritime Security Program (MSP) and (2) cargo preferences that require federal agencies to transport certain percentages of government cargo on U.S.-flag vessels. These supports have helped ensure that a sufficient number of U.S.-flag vessels are available to meet the Department of Defense's (DOD) cargo capacity needs. Although cargo preference requirements have helped support the financial viability of U.S.-flag vessels that participate in the MSP, they have had a negative impact on some non-defense programs. For example, the requirement pursuant to which food-aid agencies send a certain percentage of food aid on U.S.-flag vessels has resulted in higher shipping costs for these agencies and has negatively affected their missions, according to officials at these agencies.
Stakeholders GAO spoke to identified two primary challenges in sustaining the internationally trading U.S.-flag fleet for national defense needs.
First, even with the annual MSP stipend, maintaining the financial viability of U.S.-flag vessels is a challenge. This challenge largely results from the higher costs of operating a U.S.-flag vessel. According to U.S. Maritime Administration (MARAD) officials, the additional cost of operating a U.S. flag vessel compared to a foreign-flag vessel has increased—from about $4.8 million annually in 2009 and 2010 to about $6.2 to $6.5 million currently—making it harder for such vessels to remain financially viable. In addition, government cargo volumes have fallen in recent years. In response to this challenge, Congress increased the MSP stipend from $3.5 million per vessel for fiscal year 2016 to $4.99 million per vessel for fiscal year 2017. MARAD officials said this increase has temporarily stabilized the financial situation of MSP vessel operators. However, MARAD officials stated trends in operating costs and government cargo suggest this will remain an ongoing challenge.
Second, a potential shortage of U.S.-citizen mariners available to crew the government-owned reserve fleet during a crisis is a challenge. DOD counts on mariners working on U.S.-flag vessels to crew this fleet when activated. A MARAD working group recently estimated a shortage of over 1,800 mariners in the case of a drawn-out military effort, although it also recommended data improvements to increase the accuracy of the count of available mariners.
The Department of Transportation (DOT) has drafted but not issued the national maritime strategies mandated by Congress. The strategies are intended to address U.S.-flag vessels' competitiveness and ensure the long-term viability of U.S.-flag vessels and U.S.-citizen mariners. According to DOT officials, a combined draft strategy was developed under the previous administration but is now being reviewed by the current administration. DOT has not established a timeline for finalizing the strategy even though it was to be completed by 2015. Without establishing a timeline to complete this required strategy, DOT continues to delay providing decision-makers the information they need to determine how best to address the challenges facing the U.S.-flag fleet.

What GAO Recommends

GAO recommends that DOT complete the national maritime strategy and establish time frames for its issuance. DOT concurred with our recommendation and provided technical comments, which we incorporated as appropriate.