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Senator: Cargo preference for U.S. food aid ‘ridiculous’

Sen. Bob Corker, chairman of the U.S. Senate Finance Committee, said it’s time to dismantle the longtime regulation that requires at least 50 percent of the nation’s overseas-bound food aid to be transported by U.S.-flag ships.

   Sen. Bob Corker, chairman of the U.S. Senate Finance Committee, said its time to dismantle the longtime regulation that requires at least 50 percent of the nation’s overseas-bound food aid to be transported by U.S.-flag ships.
   The requirement, known more commonly as “cargo preference,” has committed a significant portion of bulk and bagged food aid shipments under the Title II Food for Peace program to be transported on U.S.-flag ships for the past 60 years.
   Corker, a Republican lawmaker from Tennessee, started the Thursday committee hearing by calling cargo preference “ridiculous,” and noted that due to this requirement that 35 to 40 cents of each dollar is spent on transportation rather than on the food aid itself.
   Getting rid of the cargo preference requirement would save more than $300 million in taxes annually and could be used to feed another 9.5 million starving people worldwide each year, he said. The United States spends more than $2 billion a year on food aid, making it the largest supplier in the world.
   The argument from U.S.-flag maritime companies and unions was that cargo preference ensures a ready fleet of ships and crews to the U.S. military in times of war and national emergency. However, the four to five U.S.-flag ships, which are regularly offered primarily by two companies, to transport the majority of cargo preference food aid are incapable of moving military cargoes, Corker said.
   In addition, these U.S.-flag vessels aren’t always available when needed by the U.S. Agency for International Development (USAID). which along with the U.S. Department of Agriculture administers the Food for Peace program.
   Matthew Nims, acting director of USAID’s Office of Food for Peace, explained to the Senate Finance Committee how during fiscal year 2017 the agency received no offer from a U.S.-flag vessel to transport a food aid shipment of more than 253,620 metric tons. 
   Another problem with U.S.-flag vessel operators, he cited, is the lack of regular direct shipping services to certain regions of the world. “Food for Peace destinations and U.S.-flag vessel routes are not always well-matched, as regular U.S.-flag services do not exist to most of our destination ports directly, which requires that USAID rely on a hub and spoke system to deliver our food aid,” Nims said.
   He also stated that cargo preference requirements require USAID to spend millions of dollars more for ocean freight.
   “In fiscal year 2017, we made a number of food shipments to Ethiopia on U.S.-flag vessels, at an average cost of $100 per metric ton,” Nims explained in his testimony. “Towards the end of the fiscal year, however, we were informed that prices had gone up to $135 per metric ton, though there had not been any significant market changes. We had no choice but to accept the offer, given the incredible need in Ethiopia, but it cost an additional $2 million in U.S. taxpayer dollars.”
   Nims said comparable foreign-flag ships are offering shipping rates of $65 per metric ton on average.
   Christopher Barrett, a Cornell University professor, said his research showed in fiscal year 2016 that 13 U.S.-flag vessels from three companies accounted for 83 percent of U.S.-food aid cargo transported. “Such a concentration would excite antitrust concerns in most sectors of the economy,” he said.
   Barrett said the $300 million to $400 million spent annually on meeting the U.S. cargo preference requirement effectively contributed to the deaths of 40,000 children overseas.
   “The extra money paid on shipping means the less we can spend on feeding hungry people,” said Bill O’Keefe, vice president of government relations and advocacy for Baltimore-based Catholic Relief Services, one of the largest foreign aid providers. “If U.S.-flag carriers matched foreign-flag carriers’ rates in each of these years [2013-2015], we would have spent $23.8 million less on shipping…helping about another half-million food aid recipients.”
   USAID and the largest private-voluntary organizations (PVOs), such as Catholic Relief Services, want to take more of that money spent on transporting food aid from the United States and place it more directly in the hands of those who need it to make local and regional food purchases. These include the use of vouchers and debit cards. By further automating the process, PVOs say they’re better able to track in real time the use of food aid money.
   Corker said he intends to press his colleagues in the Senate Agriculture Committee to eliminate cargo preference in the next Farm Bill. Congress last lowered the minimum percentage of food aid to be carried on U.S.-flag vessels from 75 percent to 50 percent in 2012.

Chris Gillis

Located in the Washington, D.C. area, Chris Gillis primarily reports on regulatory and legislative topics that impact cross-border trade. He joined American Shipper in 1994, shortly after graduating from Mount St. Mary’s College in Emmitsburg, Md., with a degree in international business and economics.