U.S.-flag fleet participants in cargo preference food aid shipments comprise two general categories of carriers: charter service and liner service. The cargo preference and Maritime Security Programs are intended to support both as part of the U.S.-flag fleet. These programs are administered by MARAD, while the food aid programs are administered by USAID and USDA. Vessels in the privately owned U.S.-flag fleet engaged in international commerce can be placed into two general categories: charter service and liner service. While most non-MSF carriers provide charter service, most MSF carriers provide liner service, as shown in table 1 below. Most charter service vessels are operated by non-MSF carriers. Charter service means that vessels are hired to carry a cargo to specific ports at a specific time; these vessels do not provide regularly scheduled service on a fixed route but typically carry a shipload of cargo for only one or a few customers at a time. Charter service is primarily provided by bulk, break- bulk, and tug-barge vessels that can carry either bulk or bagged cargo. Bulk vessels are designed to carry dry bulk commodities, such as rice or wheat, in large interior holds. The benefit of bulk shipments is the economies of scale that can be gained from shipping large amounts of a single commodity. Figure 1 shows a photograph of a bulk vessel. Break-bulk vessels are general cargo ships that are designed to carry nonuniform items packaged as single parcels or assembled together on pallet boards. Bagged commodities are stacked and secured within interior holds of the ship. Tug- barge vessels have a tugboat or towboat that propels a separate barge by pushing or towing it. Barges generally carry bulk or break-bulk cargo, although some also carry containerized cargo. Most MSF vessels are liner service vessels. Liner service means that vessels have regularly scheduled sailings on fixed routes. These vessels typically carry small amounts of cargo for many customers at one time and will sail, even if not completely full. Liner service is primarily provided by containerships that carry bagged cargo; they do not carry bulk cargo. Containerships are designed to carry cargo in standard-size, preloaded containers that are stacked next to and on top of each other on the ship. The benefit of containers is that they permit rapid loading and unloading and efficient transportation of cargo to and from the port area. Containers facilitate intermodal transportation because they can be loaded by the supplier and sealed, taken by truck or railcar to the port, then loaded onto the containership without the cargo being handled. In the case of food aid, generally the suppliers do not load the containers but instead ship bagged commodities by rail or truck to the port of loading, where they are loaded into the containers. Figure 2 shows a photograph of a containership. Liner service is also provided by Lighter Aboard Ships (LASH), which are barge- carrying vessels that use barges like containers. They are also intermodal because the barges can use rivers and canals to pick up and drop off cargo at interior loading docks. The cargo preference and Maritime Security Programs are both intended to bolster the U.S.-flag market share in international commerce, as well as to ensure the availability of an adequate number of U.S.-flag ships and U.S.- citizen mariners in the event of a national defense need. The cargo preference laws are part of the overall statutory program to support the privately owned and operated U.S.-flag commercial fleet, or merchant marine. DOD and MARAD consider the merchant marine vital to U.S. national security, providing essential sealift capability in wartime. The ships that carry these cargoes also provide jobs for American seafarers who are available in time of national emergency to crew the sizable fleet of reserve government vessels. As an agency of the Department of Transportation, MARAD’s responsibilities include promoting the development and maintenance of the U.S. merchant marine. It administers both the cargo preference and Maritime Security Programs. The Maritime Security Program is more targeted than the cargo preference program in terms of the vessels that can participate. It is intended to guarantee that certain kinds of militarily useful ships and their crews will be available to DOD in a military contingency. Under the renewed program starting in 2005, DOD must approve the proposed vessels as militarily useful. The program’s main focus has been to enable globally competitive carriers that operate militarily useful vessels to enter or keep U.S.-flag status. Most MSF vessels are containerships, operated by some of the largest containership carriers in the world. For instance, MSF carriers Maersk Sealand, P&O Nedlloyd, and APL were ranked among the top four containership carriers by volume as of May 2001, according to the Bureau of Transportation Statistics. These containership carriers have intermodal systems that also come as part of the package, allowing DOD to benefit from private sector global transportation and communication networks. According to MARAD, these networks include not only vessels, but also logistics management services, infrastructure, terminals and equipment, communications and cargo-tracking networks, and thousands of trained, professional U.S.-citizen mariners and shoreside employees located throughout the world. The Maritime Security Program also results in the reflagging of new and more efficient vessels to U.S. registry for participation in MSF. The program requires that vessels be less than 15 years old to participate (except that LASH vessels can be 25 years old). From its implementation in 1996 through 2002, a total of 18 modern commercial liner vessels, with an average age of less than 9 years, were reflagged to U.S. registry for participation in MSF, according to MARAD. USAID and USDA’s Foreign Agricultural Service are responsible for administering the food aid programs that provide humanitarian food assistance to countries in need. The food aid programs had an annual average budget of $1.97 billion during fiscal years 1999 to 2003, according to USDA. The primary mechanism through which the U.S. government implements its international food assistance initiatives is P.L. 480. Food assistance provided under P.L. 480 is delivered to foreign countries through three separate programs: Titles I, II, and III. USDA administers Title I, which provides for government-to-government sales of agricultural commodities to developing countries on credit terms or for local currencies. USAID administers Titles II and III. Title II provides for donation of U.S. agricultural commodities to meet emergency and nonemergency food needs in other countries, and it is by far the largest of the food aid programs. Title III provides for government-to-government grants to support long-term growth in the least developed countries but has been inactive in recent years. In addition to P.L. 480, food aid is provided through three smaller programs administered by USDA’s Foreign Agricultural Service: Food for Progress, section 416(b), and the McGovern- Dole International Food for Education and Child Nutrition Program. The cargo preference and Maritime Security Programs both provide incentives to retain privately owned U.S.-flag ships and their U.S.-citizen mariners for commercial and national defense purposes. Cargo preference makes available a protected market that provides the economic incentive for vessel owners to pay the higher costs associated with the U.S. flag and employ U.S.-citizen crews. We found that a total of 190 privately owned U.S.-flag vessels carried cargo preference food aid shipments at some point during the fiscal year 1999 to 2003 period. In addition, the Maritime Security Program provides a subsidy for MSF carriers with particular militarily useful vessels. MSF currently has 47 ships, of which 37 have participated in cargo preference food aid shipments. DOD strongly supports both programs and said it has benefited from both during the recent wars in Afghanistan and Iraq. Preference cargoes are intended to provide the economic incentive for vessel owners to pay the higher costs associated with U.S.-flag registry and employ U.S.-citizen crews. According to MARAD, due to high U.S. labor costs; safety, health, and environmental regulations; and taxes, it is more expensive for vessels to be U.S.-flagged. For instance, U.S.-flag vessels generally incur higher labor costs due to higher manning level requirements, as well as higher wages and benefits for U.S.-citizen mariners. The cargo preference laws, by guaranteeing the availability of cargo to U.S.- flag ships, contribute to the financial viability of U.S.-flag vessel operating companies, thereby helping to ensure that the vessels, trained crews, and vessel service industries continue to exist, according to MARAD. The cargo preference program provides this incentive by reserving a portion of the U.S. market for U.S.-flag vessels, despite the higher prices they typically charge. In the food aid transportation market, a minimum of 75 percent of food aid shipments must be shipped on U.S.-flag vessels. The U.S.-flag vessels (both MSF and non-MSF) participating in cargo preference food aid shipments during fiscal years 1999 to 2003 comprised a variety of vessel types. According to our analysis of USDA data, a total of 190 individual vessels participated in food aid shipments at some point between 1999 and 2003. This included 111 bulk, break-bulk, tug-barge, and tanker vessels that provided charter service and 79 containership, LASH, and other vessels that provided liner service. These vessels were operated by 38 carrier companies. We found that the level of dependence on food aid varied significantly among carriers. We interviewed representatives of 15 of the top carriers that participated in U.S.-flag cargo preference food aid shipments during 1999 to 2003, comprising 77 percent of food aid revenues.