Long-standing U.S. policy has treated the U.S.-flag international fleet as a naval auxiliary to be available in times of war or national emergency. When the United States is involved in an extended military conflict overseas, 90% or more of military cargoes are typically carried by ship. Congress also has determined that for economic security reasons, the United States should have a commercial fleet active in international commerce. To support the U.S.-flag international fleet, Congress has required that "government-impelled" cargo sent overseas be carried on U.S.-flag ships. Government-impelled cargo is government-owned cargo such as military supplies, foreign aid such as food, and any privately owned cargo financed by the federal government, such as goods purchased with an Export-Import Bank loan. Regulations suggested, but not formally proposed, by the U.S. Maritime Administration (MARAD) would also require that some U.S.-bound cargo financed by the government be carried on U.S.-flag ships. Cargo reserved for U.S.-flag vessels is referred to as "preference cargo." Cargo preference requirements are highly controversial, particularly among shippers of civilian aid cargoes, because they significantly increase shipping costs and may delay shipments. However, preference cargo is critical to some U.S.-flag ship lines, as U.S.-flag ships are not price-competitive with foreign-flag ships in carrying the overwhelming bulk of exports and imports transacted in the private sector. This report explains the motivation behind cargo preference law, discusses issues concerning the cost-effectiveness of the program, and reviews attempts to apply cargo preference to the nation's oil trade. The report also identifies several disparate bills reflecting wide disagreement on the future direction of cargo preference policy. The United States has three separate U.S.-flag fleets capable of carrying commercial cargo. The U.S.-flag domestic fleet comprises ships and barges that carry cargo and passengers between U.S. ports, including most U.S. island territories. Under a 1920 law, the Jones Act, such activity may be conducted only by vessels under U.S. ownership, built in the United States, and crewed by U.S. citizens. The domestic fleet is often referred to as the "Jones Act" fleet. These vessels do not receive direct government subsidies, but benefit by having exclusive access to cargoes such as oil shipments from Texas to the Northeast and goods moving by containership from California to Hawaii. Jones Act ships are not affected by cargo preferences, because the services they provide cannot be offered by foreign-flag ships. The U.S.-flag international fleet comprises vessels registered under U.S. law that carry cargo and passengers between the United States and other countries. U.S.-flag ships in foreign trade must be owned and crewed by U.S. citizens, but need not be built in the United States. Unlike the Jones Act fleet, the U.S.-flag international fleet faces competition from vessels registered in other countries. The privately owned U.S.-flag international cargo fleet consists of roughly 80 ships, including 43 containerships and 18 ships with roll-on/roll-off ramps to transport vehicles, including military vehicles. The fleet is owned by 19 different ocean carriers and is crewed by a pool of approximately 3,200 private-sector merchant mariners. The Military Sealift Command (MSC) in the Department of Defense (DOD) operates a fleet of about 120 ships. Many of these resupply Navy combatant ships at sea (an activity called "unrep," for underway replenishment) or perform missions such as ocean surveillance and submarine tendering. Approximately 50 MSC vessels carry military cargoes in port-to-port voyages similar to those undertaken by commercial ships. The cargo component of the MSC fleet includes oil tankers, containerships, and ships designed to carry oversize cargo, but the most prevalent type is roll-on/roll-off ships. The MSC fleet is mostly crewed by about 6,000 licensed mariners, who are federal civilian employees. The vessels these civilian mariners (known as "CivMars") crew do not plan to sail in combat waters. The MSC does not receive a direct appropriation from Congress. It bills DOD for the ocean transportation services it provides, and its budget is delineated in "working capital funds." The government-owned fleet of cargo ships also includes a reserve fleet of inactive vessels available for military deployment. These vessels are on standby at various ports. The Ready Reserve Force (RRF) consists of 46 ships that can sail upon either five or 10 days' notice. The RRF has a skeleton crew of 460 commercial mariners (10 per ship), but would require an additional 1,200 mariners to sustain its operation once activated. The average age of the ships in the RRF is 40 years, about 20 years beyond the typical economic life of a foreign-flag commercial ship. The RRF consists mostly of roll-on/roll-off ships, and is a subset of a larger National Defense Reserve Fleet (NDRF), which also comprises vessels not expected to be activated on short notice and ships that are ready for scrapping. The NDRF is managed by MARAD, an agency of the U.S. Department of Transportation, in peacetime and the MSC when activated for military deployment. The reserve fleet is relevant to cargo preference because the U.S.-flag privately owned fleet provides employment for mariners who would be drawn upon to sail reserve fleet ships when activated. The existence of both a privately owned deep-sea U.S.-flag fleet and a government-owned fleet capable of carrying similar types of military cargo overseas is a key motivation behind cargo preference laws. In the Military Transportation Act of 1904 (P.L. 58-198), Congress required that all U.S. military supplies be transported on U.S. vessels but did not specify whether government-owned or privately owned U.S.-flag vessels had to be used. In 1949, the Army's Transport Service, including 241 ships, was consolidated with the Navy's cargo (noncombatant) fleet of 94 ships to form the Military Sea Transportation Service (MSTS), with a total fleet of 335 ships. The MSTS fleet carried not only strictly military personnel and cargo, but also significant amounts of military-related cargo such as the dependents and personal property of military personnel and employees of military contractors. Foreigners with government grants to study at U.S. universities, civilian employees of other federal agencies, and refugees and displaced persons also traveled aboard MSTS ships. Moreover, MSTS ships often sailed to and from busy ports that also were served by commercial carriers. The MSTS found that it could transport passengers and cargo in government-owned vessels for 80% or less of the cost of using private U.S.-flag shipping space. According to a 2004 study, the privately owned U.S.-flag carriers were not competitive vis-à-vis foreign-flag carriers in carrying commercial U.S. imports and exports after World War II, and therefore "lobbied strenuously for the military's business." They sought to limit the size of the MSTS fleet, fearing that its expansion could ultimately result in the nationalization of the U.S.-flag fleet. Carriage of military cargoes was also important for private U.S.-flag operators as a basis for claiming political support, as it allowed them to point to their role in providing sealift in wartime. In a 1950 Senate hearing, the MSTS commander revealed that it was MSTS policy to maximize the use of its own ships before cargo was offered to commercial carriers. In 1951, the Department of Commerce, then the parent agency of MARAD, signed a memorandum of understanding with DOD identifying the priority MSTS was to follow in obtaining additional shipping capacity. First, it would purchase space on privately owned U.S.-flag liner services; second, it would charter privately owned U.S.-flag vessels; third, it would activate government-owned vessels held in the military reserve fleet. Only after all those options were exhausted would MSTS buy space on or charter foreign-flag ships. In 1954, the two departments signed another memorandum of understanding that severely restricted the size of the MSTS fleet to 151 ships and required approval of both secretaries for nonemergency expansion of the fleet. The objective of restricting the size of the MSTS fleet was to commit more military cargo to the privately owned U.S.-flag fleet. The "Wilson-Weeks" agreement, named after the two secretaries, remains substantively in effect today. Competition between the government-owned and privately owned fleets in carrying military-related cargo gave impetus to the Cargo Preference Act of 1954 (P.L. 83-644). As originally introduced, the act would have eliminated the MSTS entirely, requiring that 100% of government-impelled cargoes be carried in privately owned U.S.-flag vessels. Due to opposition from the Eisenhower Administration, which favored repealing cargo preference requirements in favor of direct subsidies to U.S.-flag operators, the 100% requirement was reduced to 50%, the Commerce Department was relieved of direct responsibility for administering the law, and a provision was added requiring that U.S.-flag commercial vessels charge the government "fair and reasonable rates." The clear intent of the legislation was to encourage greater use of U.S.-flag private operators and reduce the role of the MSTS as a vessel operator. Since passage of the 1954 act, Congress has amended the Cargo Preference Act numerous times, generally in favor of private U.S.-flag carriers. U.S. foreign-aid cargo was a substantial share of total U.S. exports in the 1950s, and many of the amendments concerned carriage of food aid. In 1961 (P.L.