Cargo Preference Act applies to FHWA-funded projects

FHWA has interpreted recent changes in the federal Cargo Preference Act as applying to federal-aid highway contracts. The Act, which has been around since 1954, requires that “at least 50 percent of any equipment, materials or commodities” procured with federal funds, and which may be shipped by ocean vessel, must be transported on privately owned United States-flagged commercial vessels. For example, aggregates that are shipped for a specific project to meet a state spec, when being barged from one location to another, and are required to go into the ocean, must be on US flagged ships.

The requirements apply to materials or equipment that are acquired for a specific Federal-aid highway project. In general, the requirements are not applicable to goods or materials that come into inventories independent of an FHWA funded-contract. For example, the requirements would not apply to shipments of Portland cement, asphalt cement, or aggregates, as industry suppliers and contractors use these materials to replenish existing inventories. In general, most of the materials used for highway construction originate from existing inventories and are not acquired solely for a specific Federal-aid project. However, if materials or equipment are acquired solely for a Federal-aid project, then the Cargo Preference Act requirements apply.

The requirement would also apply, for example, to construction equipment acquired for a specific Federal-aid project or items such as precast concrete structural members, fabricated structural steel, tunnel boring machines, or large-capacity cranes.

FHWA has informed state DOTs to insert the appropriate contract provisions in all Federal-aid contracts awarded after February 15, 2016. FHWA is drafting language that state DOTs will be required to include in their federal-aid highway contracts in the future to comply with this requirement and revising its 1273 form that prime contractors are required to include in their subcontracts. Further information is available on FHWA’s website.