dramatic decline in the demand for tramp shipping 
and, as a consequence, pressures began to emerge for 
a greater reservation of Government cargoes for 
private U.S.-flag vessels to aid this segment of the U.S. 
fleet. Although prior to 1954 a number of laws had 
been enacted which contained U.S. preference provi- 
sions for various Government cargoes, legislation was 
now sought which would yield a more comprehensive 
preference program covering all Government-spon- 
sored cargoes. The result of this effort was enactment, 
in 1954, of a new preteen: as as an amendment 
to the Merchant Marine Act 0 6. Under this pro 
gram, SC percent of virtually all Government-spon 
sored shipments must now be made aboard privat 
U.S.-flag vessels to the extent such vessels are avail 
able at fair and reasonable freight rates. 
Two of the pre-1954 preference programs, still 
retain special significance, because they impose prefer- 
ence requirements beyond those contained in the 1954 
law. Under the Military Transportation Act of 1904 
all supplies moved by sea for the U.S. armed forces 
must be carried by U.S. vessels if freight rates are not 
“", . excessive or otherwise unreasonable.” However, 
since this law does not specify that such carriage be 
performed by private vessels, compliance before 1954 
could be achieved by carriage exclusively aboard 
government-owned vessels. The joint application today 
of both the 1904 and 1954 preference statutes means 
that 100 percent of military cargoes must be carried 
aboard U.S. vessels and that 50 percent of this require- 
ment must be met by carriage aboard vessels owned 
by private operators. 
The second pre-1954 preference program still in 
effect stems from Public Resolution 17, which was 
passed in 1934 and expressed “the sense of Congress” 
that cargoes exported from the United States as a 
result of loans made to foreign purchasers should be 
shipped exclusively in U.S. vessels if available at 
reasonable rates. After World War II, as a part of the 
U.S. reconstruction program, a general policy was 
adopted under whic vaiver of up to 50 percent of 
the U.S. carriage reservation would be granted in 
favor of vessels of the recipient nation if that nation 
did not discriminate against U.S. vessels in its foreign 
trade. This policy remains in effect, and foreign recipi- 
ents of Export-Import Bank credits regularly apply 
to the Maritime Administration for such “general 
waivers.” 
Fa OED Se 
ence Act was passed which raised an important _bar- 
er to documentation of foreign vessels in_the 
United States. Under the terms of this amendment, 
foreign vessels transferred to U.S. registry are excluded 
for.a period of 3 years from participation in the pre- 
ference trade established by the 1954 Act. Hence, 
while foreign vessels may still be imported on a duty- 
free basis, they are precluded for 3 years from carry- 
ing the preference cargoes upon which many non- 
subsidized U.S. vessels are heavily dependent. (Such 
foreign-built vessels, of course, are also ineligible for 
operating subsidy as well as for participation in the 
carriage of U.S. domestic commerce.) 
Ultimate responsibility for compliance with U.S. 
cargo preference laws extends directly to each indi- 
vidual Government agency, although the U.S. Mari- 
time Commission and its successors have served as 
general coordinators of this program. Today, the 
Maritime Administration is authorized to establish 
administrative provisions governing cargo preference 
implementation with which shipper agencies must 
comply. 
Since the cargo preference statutes require only 
that the preference share be carried by U-.S.-regis- 
tered vessels, it has frequently been argued that when 
subsidized U.S. vessels carry these cargoes they are 
in effect receiving a “double subsidy.” In 1970, this 
issue was addressed by the Maritime Subsidy Board 
under Docket S-244. As a result of its ruling in this 
case, which was subsequently sustained on appeal, 
the Subsidy Board established a procedure for op- 
erating subsidy reduction in cases where subsidized 
liner operators become excessively dependent on 
preference cargoes. Under this ruling liner recipients 
of operating differential subsidy (ODS) are allowed 
to participate int the-cartiage of preference cargoes 
with no reduction of ODS so long as receipts from 
this preference carriage do not exceed 50 percent 
of total revenues. If they should exceed 50 percent 
of total revenues, ODS is reduced by a percentage 
that is tied to the amount of revenue in excess of the 
50 percent ceiling. 
Although the 1970 ruling pertained only to liner 
operations, bulk carriers, which today receive ODS 
under the provisions of the Merchant Marine Act of 
1970, are generally precluded, under the terms of 
their subsidy contracts, from participating in the 
carriage of the preference share of preference ship- 
ments. They are, however, free to compete with all 
other carriers (both U.S. and foreign) for carriage 
of the non-preference share of such cargoes. It 
should be noted that there are currently no restric- 
tions with respect to the carriage of preference car- 
goes imposed on any U.S. vessels that have been 
built with construction-differential subsidy. 
Before World War II and in the early postwar 
period, the Government did not hesitate to use the 
provisions of Title VII of the Merchant Marine Act 
to build and sell or charter vessels in order to accom- 
plish the purposes of the 1936 Act. In the postwar 
period, the most significant title VII construction 
program was the program begun in 1951 under 
which 35 “Mariner” class vessels were built for 
Government account. These 20-knot, 13,000-ton, 
general cargo ships were specifically designed to be 
highly adaptable to military use in the event of a 
national emergency. Ultimately, 29 of these vessels 
V-36 
