Overview
FAR 47.504 identifies specific circumstances and subcontract types that are exempt from the general requirement to use U.S.-flag vessels for ocean transportation of Government supplies. It primarily distinguishes between standard government procurement and specific foreign aid, classified, or commercial subcontracting scenarios.
Key Rules
- Legal and Security Exemptions: Requirements do not apply to shipments authorized by specific laws or treaties, or to classified cargo where security protocols prohibit the use of non-Government vessels.
- Foreign Assistance: Ocean transportation between foreign countries is exempt if funded via specific foreign currencies or funds under the Foreign Assistance Act of 1961.
- Commercial Subcontracts: Most subcontracts for commercial products or services are exempt, but there are significant exclusions to this exception (meaning U.S.-flag requirements still apply) for:
- Grants-in-aid (agricultural/food aid) and Export-Import Bank-related shipments.
- Subcontracts under construction contracts or Government ocean transportation agreements.
- Commercial items resold to the Government without adding value (e.g., f.o.b. destination shipments).
- Items shipped in direct support of U.S. military contingency operations, exercises, or UN/NATO peacekeeping missions.
Practical Implications
- Contractor Compliance: While commercial subcontractors are often exempt, prime contractors must be vigilant when supporting military operations or construction projects, as these roles trigger U.S.-flag requirements even for commercial items.
- Logistics Planning: Contractors providing "pass-through" commercial items (adding no value) must ensure their shipping subcontractors comply with Cargo Preference Act requirements, as these do not qualify for the commercial subcontract exception.