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pricelesspearl

Cargo Preference Act of 1954

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We are currently a subcontractor on a DOD contract. We (both the prime and ourselves) are currently debating with MARAD about the applicability of the Cargo Preference Act of 1954 to the contract. By way of background, the dispute initially began with whether or not we were required by DFARS 252.247-7023 to ship subcontractor owned equipment and supplies not intended to be incorporated into the construction 100% on US flag vessels. MARAD and DOD initially said we were, but we pushed back arguing that the clause only applied to the those items meeting the definition of "supplies", and that subcontractor owned equipment and supplies did not meet that definition in the clause. We prevailed on that. Now they are claiming that the Cargo Preference Act of 1954 applies and that we are required to ship 50% of all cargo on US flag vessels.

The FAR clause implementing the Cargo Preference Act of 1954, FAR 52.247-64, is not included in either the Prime's contract with the government or in our contract with the Prime, presumably because FAR 47.500 clearly states " This subpart does not apply to the Department of Defense (DoD). Policy and procedures applicable to DoD appear in DFARS Subpart 247.5."

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What's more, the policy and procedures referred to in DFARS Subpart 247.5 also clearly and plainly exclude the implementation of the Cargo Preference Act of 1954 from DOD contracts at DFARS 247.570(B ).

Despite what appears to be clear and plain language that it does not apply, the PMO is supporting MARAD's position and is requiring us to report the ocean shipment of "non-end use items" to the DOD and MARAD to ensure the "at least 50%" U.S.-flag ocean shipping requirement is met. We recognize that pursuant to DFARS 252.247-7023, which is in the contract, that we are required to report the shipment of end use items and ship 100% US flag, but I don't get how they are justifying the requirement to report non-end use items under the 1954 Act, when it seems to be that the requirement was intentionally excluded from DOD contracts. Neither MARAD nor the CO is offering any explanation other than stating "It is our position that it applies".

Is there something we are missing that requires the application of the 1954 Act, and if not, any ideas on how to push back on this?

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It will cost us more money, but not the prime. We are shipping primarily subcontractor owned material and supplies, which should not have to be reported and don't have to be shipped US vessel. The prime is shipping most of the end items which would have to be shipped 100% US and reported anyway, so they are not as concerned about it as we are.

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If it will cost you more money, why will it not cost the prime more money? How is the subcontract priced, i.e., FFP, cost reimbursement, T&M?

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