What is the Jones Act?

 

Economic Trading Restrictions in Shipping and Cabotage Jones Act:

Maritime nations maintain economic or national security-based restrictions on its maritime trades for a long time. For example, United States has domestic maritime-related Jones Act. Jones Act can be traced to the 3^rd act of the first United States Congress in 1789.

Generally, Jones Act is very little different from a federal law enacted in 1817. Jones Act is a cabotage law, in order to restrict United States domestic trade in certain ways. Jones Act has been sometimes criticized on the basis that Jones Act increase transportation costs. On the other hand, United States restricts all of its domestic commerce in some way. Jones Act function well to preserve a vital domestic United States maritime industry.

Cabotage means coastal maritime trade in French. Generally, cabotage laws restrict a maritime nation’s domestic transportation to people of that maritime nation. Almost all countries in the world, maintains cabotage laws with respect to its maritime commerce. For example, United States has Jones Act.

In United States, Jones Act is usually used as short-hand for two different sections of the Merchant Marine Act 1920.

1. Merchant Marine Act 1920 Section 27 is a cabotage law tracing its origins to laws enacted in 1789 and 1817.
2. Merchant Marine Act 1920 Section 33 is a marine-related workman’s compensation law described

Cabotage Jones Act restricts the carriage of goods between two points in the United States to:

3. S.-flag ships
4. Ships must be built in the United States
5. Ships must be owned and operated by qualified U.S. citizens

Most maritime nations around the world restrict their maritime cabotage trade to domestic ships. In 1789, United States Congress adopted tariffs that were much higher for foreign ships in United States domestic commerce than U.S.-flag ships. That was the origin of the Jones Act’s restrictions. Afterwards, in 1817, carriage of goods by foreign ships between United States ports was banned. Generally, 1817 law is regarded as a direct descendant of the present clay Jones Act.

Purpose of the Jones Act:

6. support a strong United States merchant marine that can serve as a naval auxiliary in times of war or national emergency
7. robust United States shipyard and repair industry

There are other United States cabotage laws like the Jones Act:

8. The Passenger Ship Services Act of 1886 restricts the carriage of passengers between points in the United States similarly to United States built ships owned and operated by qualified United States citizens.
9. The Dredging Act of 1906 and the Towing Act of 1940 similarly restrict dredging and ship towing, respectively, in United States waters.

In United States, there is also a Jones Act for fishing. There are some restrictions applicable to fishing in United States waters. In United States waters, fisheries endorsement to a ship’s Certificate of Documentation entitles a ship to engage in restricted fishing. Generally, citizenship requirements for large fishing ships are more restrictive than the requirements for Jones Act carriage of goods.

Penalties for violating the Jones Act can be severe, ranging from civil fines of up to $11,000 per day to potential forfeiture of goods and may include potential criminal penalties if the qualifications of a ship to trade were misrepresented to the United States Government.

Jones Act ship lose its eligibility

10. If a Jones Act ship that is sold foreign ship owners or operators
11. If a Jones Act ship is rebuilt outside of the United States

In these conditions, a Jones Act ship may permanently lose its Jones Act eligibility. United States Coast Guard has also considered permanently invalidating a ship’s coastwise eligibility.

Jones Act Regulating Agencies:

1. United States Coast Guard: regulates the eligibility of ships to be United States documented and have on their Certificate of Documentation a coastwise endorsement which entitles the ship to participate in United States domestic trade
2. Customs and Border Protection: enforces the Jones Act through cargo movements and issues rulings as to the applicability of the maritime cabotage laws to particular activities
3. United States Maritime Administration: which makes citizenship decisions bearing on Jones Act qualifications in its maritime promotional programs where United States citizenship is often a prerequisite to participation, citizenship decisions with respect to large fishing ships, and determinations relevant to whether a Jones Act administrative waiver can be issued.

United States Coast Guard and Customs and Border Protection are in the United States Department of Homeland Security. United States Maritime Administration is in the United States Department of Transportation.

In order to qualify for a coastwise endorsement and thereby be eligible to transport goods in United States domestic commerce, a ship must be built in the United States. A ship must be assembled entirely in the United States and all of its major structural components must be fabricated in United States. Furthermore, a ship can be considered United States built if it is made of foreign manufactured steel and has certain foreign parts, including its main engine.

There some exceptions to United States build requirement in the Jones Act. Some foreign built and assembled ships

12. captured in war
13. forfeited to the United States Government like in drug seizure
14. wrecked in United States seas and inland waters

can attain coastwise trading privileges and qualify for Jones Act.

In order to preserve United States built requirement, the Jones Act prohibits otherwise qualifying ships from being rebuilt outside the United States. Jones Act provides that a ship is deemed to have been rebuilt in the United States only if the entire rebuilding, including the construction of any major component of the hull or superstructure, was done in the United States.

If a Jones Act qualified ship is found to have been rebuilt abroad, ship forever loses its Jones Act trading privileges. United States Coast Guard review construction plans in advance and provide preliminary and final determinations whether such work will result in the ship being considered rebuilt abroad.

A ship only qualifies to participate in the Jones Act if ship is owned and operated by a qualified United States citizen. Ship owning company must be beneficially owned at least 75% by United States citizens.

There are two significant exceptions to the United States citizen ownership requirements in Jones Act:

• Foreign lessors: enacted in 1996 and significantly amended in 2004. Foreign lease exception permits certain banks, financial institutions and lessors to own qualified Jones Act ships through a United States entity qualified to document a ship in the United States so long as it is, among other things, bareboat-chartered for at least three years to a qualified United States citizen ship operator.
• Bowaters exception: enacted in 1956 expressly to assist the Bowater Southern Paper Corp. retain ownership of its United States tugs and barges after being acquired by a foreign company. Bowaters exception permits certain United States industrial, mining and similar companies who are largely based in the United States to own and operate Jones Act ships.

Jones Act does not prohibit foreign investment in United States maritime companies. U.S.-flag ships engaged solely in the United States foreign trade can be owned by foreign persons so long as the ship-owning entity qualifies for United States ship documentation. Furthermore, U.S.-flag ships engaged in domestic or Jones Act trade, foreign companies can invest subject to citizenship, equity and control restrictions.

Public company can qualify as a Jones Act United States citizen. Public companies qualify to own and operate Jones Act ships. On 26 November 2012, United States Coast Guard issued guidance, that addresses some of the practical difficulties that public companies face in complying with the 75% beneficial ownership requirement. United States Coast Guard guidance arose from an administrative penalty action proposed by United States Coast Guard against Trico Marine Services Inc., public Jones Act company, in 2011.

Jones Act can be waived pursuant to a law enacted in 1950. Jones Act Waivers can be granted in either of two ways:

• by the Secretary of Defense: Secretary of Defense finds it necessary in the interest of national defense.
• by the Secretary of the Department of Homeland Security (because Customs and Border Protection is responsible for administering navigation laws): Secretary of the Department of Homeland Security finds it is necessary in the interest of national defense and following a determination by United States Maritime Administration that qualified S.-flag ships are unavailable. Only a few voyage related waivers of the Jones Act have been granted over time, and Customs and Border Protection has indicated that waivers cannot be issued solely for economic reasons.

For example, Jones Act was waived for short periods of time following each of Hurricanes Katrina, Rita and Sandy and for a number of voyages relating to the release of crude oil from the Strategic Petroleum Reserve in 2011.

Jones Act can be waived for small passenger ships which carry no more than 12 passengers. United States Maritime Administration has authority to permit foreign built small passenger ships for hire to operate in the United States Jones Act restricted trade provided employment of the passenger ship that does not adversely affect United States shipyards or the business of a ship constructed in the United States.

Jones Act does extend offshore to certain places. United States Jones Act applies within United States territorial waters, 3 nm (nautical miles) from the shoreline, such that the movement of any goods between such waters and a United States port or other point in the United States is considered a Jones Act movement. For example, the recovery of spilled oil on the surface of the water within the territorial waters which is then brought to a United States port for disposal is a Jones Act movement.

Jones Act applies to anything temporarily or permanently affixed to the United States outer continental shelf within the meaning of the Outer Continental Shelf Lands Act of 1953 (OCSLA). Hence, United States Jones Act applies to the transportation of pipe, drilling mud, parts and other items from United States ports to drill rigs in the United States Gulf of Mexico.

United States Department of Homeland Security’s sub division Customs and Border Protection, maintains an active database government web page, relating to many customs and trade matters, including Jones Act matters. Customs and Border Protection rulings have limited precedential effect, but nevertheless provide guidance on the application of the Jones Act.

It is not clear whether the Jones Act applies to offshore alternative energy projects such as wind farms because Outer Continental Shelf Lands Act of 1953 (OCSLA) appears to be limited to oil and gas activity and Outer Continental Shelf Lands Act of 1953 (OCSLA) is the only statutory basis for considering places outside United States territorial waters to be points in the United States for purposes of the Jones Act.

Cruise to Nowhere is a term indicating a passenger cruise that begins and ends at the same point in the United States. Customs and Border Protection has determined that such a cruise is not covered by the Passenger Ship Services Act so long as the ship leaves United States territorial waters because the passengers embark and disembark at the same place in the United States.

Marine Highway is a term employed in statute and by the United States Maritime Administration to denote a domestic maritime route that parallels a landside highway. Movement of cargo by sea along the east coast of the United States is the marine highway equivalent of I95 (Interstate 95) which connects Maine to Florida. It has been promoted the adoption of measures to encourage marine highways as a way to alleviate landside congestion and for other policy reasons. Marine highways are an offshoot of a similar concept termed short sea shipping.

Fair Inference Rule is adopted by the United States Maritime Administration, but not adopted by the United States Coast Guard, to the effect that a ship owner can show compliance with the United States citizenship 75% beneficial ownership requirement by virtue of showing that at least 95% of the addresses of its shareholders are in the United States. Fair Inference Rule is derived from a 1936 Federal District Court Case (Collier Advertising Services v. Hudson River Day Line).

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What is the Jones Act?

The Jones Act, also known as the Merchant Marine Act of 1920, is a United States federal statute that provides for the promotion and maintenance of the American merchant marine. Here are some key provisions and implications of the Jones Act:

6. Cabotage: One of the most significant aspects of the Jones Act is its provision related to cabotage, which is the transport of goods or passengers between two places in the same country by a ship or an aircraft registered in another country. Under the Jones Act, all goods transported by water between U.S. ports must be carried on U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents.
7. Support for Domestic Shipping: By requiring that ships be U.S.-made and -operated, the Jones Act aims to support domestic shipbuilding and promote the American maritime industry. This has led to the development and maintenance of a fleet that can be called upon for defense and national emergency purposes.
8. Criticism and Controversy: The Jones Act has faced criticism for potentially increasing the costs of shipping goods between U.S. ports. Because it can be cheaper to build and operate ships in other countries, critics argue that the Act can lead to higher shipping costs, which could be passed on to consumers. There have been instances, especially during emergencies, where waivers have been given to the Jones Act to allow foreign-built or foreign-flagged ships to operate between U.S. ports temporarily.
9. Maritime Worker Protections: Another facet of the Jones Act is the protection it offers to sailors. If a sailor is injured on the job, the Jones Act provides them the right to sue their employers for personal injury damages, a right not typically available to offshore workers. This makes ship owners and operators more accountable for the safety and well-being of their crew.
10. National Security Implications: Proponents of the Jones Act often cite national security as a primary reason for maintaining it. They argue that the domestic shipbuilding industry and the mariners who work on U.S.-flagged ships are crucial to national defense and that the Jones Act ensures the U.S. maintains this capability.
11. Economic Impacts on Certain Territories and States: Some regions, particularly non-contiguous U.S. territories like Puerto Rico, Hawaii, and Alaska, have raised concerns about the Jones Act’s economic impact on their local economies. They argue that the Jones Act increases the cost of imported goods and materials due to the limited availability and higher operational costs of Jones Act-compliant ships. For island territories especially, where sea transport is essential, this can have a pronounced effect on the cost of living.
12. Environmental and Safety Concerns: Critics argue that by preventing competition from newer, more environmentally friendly foreign ships, the Jones Act might inadvertently encourage the use of older, less efficient ships, leading to potential environmental and safety risks.
13. Defense and Military Viewpoint: From a defense perspective, having a robust domestic maritime industry means the U.S. isn’t reliant on foreign shipbuilding capacities. This self-reliance can be crucial during times of international conflict or tension. The U.S. Navy, in particular, has been a vocal supporter of the Jones Act, emphasizing the strategic importance of domestic shipbuilding and maintaining a skilled pool of mariners.
14. Labor and Employment: U.S. maritime labor groups staunchly defend the Jones Act, viewing it as crucial to preserving American maritime jobs. They argue that without the Jones Act, many maritime jobs would be outsourced to foreign workers, leading to a decline in U.S. maritime skills and capabilities. This would not only affect the livelihoods of those directly employed in the industry but would also have ripple effects on other sectors connected to maritime activities.
15. Potential for Reform: While outright repeal of the Jones Act might be controversial, there has been discussion around potential reforms. These could involve modernizing certain provisions, allowing for limited exemptions, or providing incentives for upgrading and enhancing the U.S. maritime fleet.

11. Impact on International Relations and Trade: The Jones Act, while primarily domestic in its focus, does have implications for international trade. Foreign shipping entities, which might otherwise compete for routes between U.S. ports, are restricted by the Act. This can lead to scenarios where it’s cheaper for U.S. producers to ship goods to foreign markets than between domestic ports. Such anomalies can sometimes cause tension in trade discussions and negotiations.
12. Disaster Response and Waivers: There have been situations, especially during natural disasters, when the stringent requirements of the Jones Act were temporarily waived. For example, after significant hurricanes, there might be a need for rapid transportation of relief goods. If there aren’t enough compliant ships available, the U.S. government can grant temporary waivers to expedite aid. However, the process to approve these waivers can be bureaucratic, leading some to call for a more streamlined approach, especially in emergencies.
13. Technological Advancements and the Jones Act: With the maritime industry undergoing technological transformations, such as the development of autonomous ships, there’s a question of how the Jones Act will adapt. If ships become increasingly automated, the definition of “crewed by U.S. citizens” might require revisiting. The Act, being a product of the 1920s, didn’t anticipate such advancements, and legislative updates may be necessary.
14. Economic Justifications and Diversions: One of the counterarguments to the economic criticisms of the Jones Act is that while it might increase certain shipping costs, it also serves as an economic stimulus for the U.S. maritime industry. It ensures a steady demand for American-made ships and provides employment opportunities in shipyards, in the maritime service sector, and onboard ships themselves.
15. Public Perception and Awareness: A significant challenge in the discussions surrounding the Jones Act is public awareness. Many Americans might not be familiar with this legislation or its implications, despite its century-long presence. Maritime issues don’t often take center stage in broader political or economic discussions, making it challenging to have a comprehensive public debate.
16. Future of the Jones Act: As global trade patterns shift, climate concerns become more pronounced, and technological advancements reshape industries, the future of the Jones Act remains a subject of debate. While its core principles of promoting American maritime interests remain consistent, there’s a broader conversation to be had about how best to adapt this century-old legislation to a rapidly changing world.

The Jones Act serves as a testament to the complex interplay between economic interests, national security concerns, labor rights, and international relations. As with many longstanding policies, its continued relevance and impact need to be regularly assessed and debated, ensuring it meets the needs and challenges of the times. The Jones Act is more than just a piece of maritime legislation. It touches upon a range of issues from economics and labor to defense and environmental concerns. Like many complex policies, it has both staunch defenders and critics. As with any policy, it’s essential to consider its full range of impacts and potential unintended consequences when discussing reforms or changes.

 

What are the disadvantages of the Jones Act?

For a span nearing a century, the venerable federal statute termed the Jones Act has mandated that the aquatic conveyance of goods between American harbors be exclusively reserved for ships that boast U.S. ownership, registration, craftsmanship, and crew. Ostensibly advocated to fortify the American maritime sector on the pillars of national defense, this act has, in essence, levied considerable economic burdens with only a modicum of its pledged advantages materializing. The article delves deeply into the intricate tapestry of the Jones Act, elucidating its chronicle and the multifaceted encumbrances it foists upon both consumers and commercial enterprises. Beyond its overt ramifications of escalating freight costs—costs which cascade through commercial channels, culminating in amplified retail valuations—the act engenders profound peripheral repercussions. These include exacerbated degradation of national infrastructure, invaluable hours squandered amidst vehicular congestion, and the mounting ecological and health debits owing to superfluous carbon footprints and noxious cargo leaks from terrestrial conveyances. Upon meticulous inspection, the act’s defense-driven rationale appears increasingly misaligned with contemporary martial and technological paradigms.

The treatise further probes the enigma of such an antiquated and oppressive statute’s resilient endurance through the annals of time. The revelation surfaces that, akin to myriad instances of vested interests, there exists a profound motivational imbalance between the beneficiaries of the Jones Act’s safeguards and the overwhelming majority who shoulder its financial yoke. The shielded domestic naval construction sector, reveling in its monopolized market, vehemently champions the act, peddling illusory narratives of its indispensability to homeland security. Conversely, the prodigious expenses permeate the economy, manifesting as inflated costs, systemic inefficiencies, and forfeited prospects that elude direct attribution to their origin. The act’s fragmented oversight by multiple federal bodies and legislative panels further elucidates its persistent relevance. Concluding, the article outlines a compendium of potential pathways to rejuvenate this dated legislation and alleviate its onerous impositions.

 

Costs of Jones Act

The 1920 Merchant Marine Act, colloquially termed the “Jones Act,” stands as an enduring testament to U.S. legislative history, shadowing the nation’s economic landscape for nearly a century. This act, originally conceived to bolster domestic shipbuilding prowess and ensure a ready reservoir of merchant mariners during national exigencies, mandates the exclusive use of ships that are U.S.-crafted, U.S.-owned, U.S.-flagged, and U.S.-manned for domestic shipping. A century’s worth of analysis unequivocally indicates that, rather than fulfilling its ambitious objectives, the Jones Act has been a financial albatross.

The restrictions this Act imposes cause the American economy to grapple with inflated shipping costs. The law bars foreign competitors from participating in the cargo transport between U.S. ports and its expansive inland waterways, thereby forcing domestic shipping enterprises to shoulder exorbitant prices for their maritime assets. While these escalated shipping rates manifest as the most evident financial burden, they merely herald a torrent of economic repercussions wrought by the law.

Such exorbitant rates for maritime transportation invariably diminish the allure of shipping services. Consequently, with reduced cargo movement via waterways, shipping magnates are compelled to invest in fewer ships. This dwindling demand invariably means shipbuilders craft fewer ships, which in turn results in limited job prospects for aspiring merchant mariners. Furthermore, the inflated costs of maritime transport prompt businesses to seek alternative conveyance mediums such as trucks, railways, and pipelines, thus elevating the rates of these alternatives and exacerbating costs across the entire logistical spectrum. These transportation outlays, essential for the movement of raw materials and finished goods, constitute a pivotal component of production costs. Such augmented costs reverberate through almost every commercial sector, constricting profit margins, stymieing business ventures, placing American firms at a disadvantage on the global stage, and robbing households of potential financial reserves.

This increased dependence on terrestrial transport mediums not only elevates infrastructural maintenance costs due to the strain on roads and bridges but also amplifies environmental liabilities. Land-based transportation emits more carbon than its maritime counterpart, and its augmented use heightens the risks of vehicular mishaps and railway catastrophes involving perilous substances. The mounting traffic snarls, particularly on highways paralleling U.S. marine routes, usher in staggering opportunity costs stemming from foregone earnings and reduced productivity. There are also palpable opportunity costs when, say, a hog farmer from North Carolina opts for Canadian corn feed over an Iowan variant, purely because prohibitive delivery charges render the latter financially unviable. Even as certain overseas suppliers occasionally profit from this skewed dynamic, the Jones Act continually nettles some of America’s pivotal trading allies, impeding optimal market access for U.S. exports.

Yet, amidst this litany of fiscal and economic burdens and a stark lack of discernible benefits, the Jones Act remains unyielding. The underlying reasons are intricate, but largely trace back to entrenched rent-seeking behaviors. The Act’s handful of beneficiaries, predominantly domestic dockyards and specific labor factions, have a vested interest in upholding the status quo, overpowering the muted voices of the vast majority who bear the brunt of its adverse effects.

Proponents of the prevailing system assert that the associated costs are offset by the merits of the Jones Act, particularly the safeguarding of a dynamic and competitive domestic shipbuilding sector crucial for U.S. national defense. Yet, such arguments are sheerly laughable. With time, the vigor of the U.S. shipbuilding sector has waned, our ships have grown antiquated — occasionally descending into irrelevance — and the count of merchant sailors has diminished.

Moreover, the scenario is further complicated by the presence of a “bootleggers and Baptists” dynamic. This term alludes to an economic paradigm where two diametrically opposed factions both desire an identical regulatory result. Advocates of the Jones Act have adeptly masked their motives behind the facade of national defense. When all other justifications crumble, revealing that the Jones Act’s constraints inflict multifaceted detriments upon the economy, they resolutely cling to a defense-related argument, albeit baseless. Detractors of the Act — including those suggesting minor reforms — are depicted as oblivious to such issues, a perspective sufficient for certain legislators to disregard arguments grounded in reason and evidence.

The Jones Act has been an albatross around the neck of the U.S. economy. Having borne its weight for close to a century, the hour has come to abrogate this legislation. Naturally, revocation is a daunting task. A century provides ample time for entrenched interests, regulatory bodies, and political figures to grow accustomed to a regime that enriches a select few. Dismantling these political entanglements will also mean confronting resistance from supervisory bodies and committees deeply vested in preserving their territorial dominion. An astounding sixteen congressional committees and six federal agencies exercise some degree of supervisory power.

The ramifications of the Jones Act on the U.S. financial landscape have been calamitous. After withstanding its shackles for almost a hundred years, it is imperative to annul this act.

Barring a complete revocation, significant strides toward an eventual repeal would encompass easing the U.S. manufacturing prerequisite, enabling the economy to gain from a broader array of modern, safer, and superior ships. Furthermore, bestowing permanent Jones Act exemptions to regions like Alaska, Hawaii, Puerto Rico, and other distant U.S. territories, given their heavy reliance on maritime transit, would signify progress. Should these reforms remain intangible, another worthwhile step would be to streamline and clarify the process of procuring Jones Act exemptions, ensuring transparency and predictability.

 

 

Jones Act Exemptions

The Jones Act, also known as the Merchant Marine Act of 1920, is a U.S. federal statute that regulates maritime commerce between U.S. ports. One of the most controversial and debated provisions of the Jones Act requires that all goods transported by water between U.S. ports be carried on U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents.

There are, however, some specific exemptions and waivers to the Jones Act, which include:

1. Strategic Waivers: In the interest of national defense, the Secretary of Defense can request a waiver.
2. Short Supply Waivers: The Administrator of the Maritime Administration may waive the Jones Act requirements if the Administrator, in consultation with the Secretary of Defense, determines that such a waiver is necessary in the interest of national defense and if there are no U.S.-flag ships available.
3. Humanitarian Waivers: In very rare instances, the Jones Act can be temporarily waived for humanitarian relief efforts.
4. Ship Exemptions: Some ships are exempt from the Jones Act, such as fishing ships, certain dredges, and military ships.
5. Non-Contiguous Territories and Possessions: There are some nuanced applications of the Jones Act in non-contiguous territories and possessions of the U.S. For example, while Puerto Rico is subject to the Jones Act, the U.S. Virgin Islands is not.
6. Waters Outside the First Three Nautical Miles: The Jones Act doesn’t apply to transportation that is entirely outside of the territorial waters of the U.S. (beyond the first three nautical miles from the coastline).

In practice, Jones Act waivers are rare and typically only granted in exceptional circumstances. For instance, after major natural disasters, such as hurricanes, where there’s a need to facilitate the movement of emergency supplies, temporary waivers have occasionally been issued.

It’s important to note that while there are calls from various sectors to reform or even repeal the Jones Act due to the argument that it increases costs for consumers and businesses, supporters believe it is essential for national security, protecting the domestic shipping industry, and maintaining maritime jobs.

 

How the Jones Act Curtails Maritime Movement?

The Jones Act imposes strict limitations, barring non-compliant ships from navigating domestic waters and preventing the transfer of goods between two American ports, a process termed as “cabotage.” While numerous nations enforce their own versions of cabotage limitations, only Gambia, Dominica, Guatemala, and Belize remain free of such constraints.

The Organisation for Economic Co-operation and Development (OECD) differentiates cabotage restrictions into two categories: those which wholly prohibit foreign-flagged ships from any form of cabotage, and those which grant certain exceptions either through expansive trade agreements or limited cabotage provisions. The United States stands as one among 11 nations that universally ban foreign ships. The World Economic Forum identifies the Jones Act as the epitome of stringent global cabotage regulations.

It is rather intriguing—or perhaps anticipated, considering the United States’ limitations on foreign involvement in cabotage—that a mere 2 percent of American freight voyages via water. In stark contrast, the European Union, where inter-member cabotage is sanctioned, boasts a 40 percent figure. Similarly, Australia, which doesn’t mandate domestic construction of ships for cabotage operations, witnesses coastal shipments comprising 15 percent of its national freight. Post liberalization of its cabotage policies in 1994, New Zealand observed a 20-25 percent reduction in its coastal freight rates over the subsequent half a decade.

The Organisation for Economic Co-operation and Development’s (OECD’s) Services Trade Restrictiveness Index evaluates and ranks the facets of nations’ service trade barriers. This index places nations on a spectrum from 0 (minimally restrictive) to 1 (maximally restrictive). As per the 2017 data for maritime freight transport services, out of 29 OECD nations and 9 non-OECD countries, the United States emerges as the third most stringent and tops the list among the Organisation for Economic Co-operation and Development (OECD) Nations.

The composite metric encompasses more than mere cabotage restrictions, considering the constraints on ship ownership or registration under the national emblem, port-associated services, and cargo-sharing arrangements. Though this metric doesn’t account for domestic shipbuilding stipulations, the stipulation for ships to be constructed domestically, as mandated by the Jones Act, is notably stringent. Among 56 nations assessed by the U.S. Maritime Administration, solely Brazil, Egypt, Indonesia, Peru, Spain, and the United States maintain domestic construction prerequisites.

While geographical and additional determinants contribute to the variances observed in maritime capacities and tariffs, protectionist cabotage, inland waterway limitations, and domestic manufacturing and proprietorship prerequisites largely elucidate these discrepancies. If American trade is to perpetually grapple with these constraints, there ought to be a compelling public policy justification for the Jones Act.”

 

Is the Jones Act Bolstering American Security?

While staunch advocates argue that the Jones Act is pivotal for American national defense, it seems increasingly misaligned with this lofty goal. The attributes and state of the Jones Act fleet scarcely meet the military’s evolving requirements, and the tenets of contemporary warfare cast doubt on the Act’s relevance.

Considering the decrepit state of the Jones Act fleet, its minimal contribution to foreign military operations becomes comprehensible. Intended to stimulate a robust maritime sector and preclude dependency on foreign ships during conflicts, the Jones Act has paradoxically facilitated the opposite. During Operations Desert Shield and Desert Storm, foreign ships bore a substantial 26.6% of equipment and provisions, whereas American ships shouldered a mere 12.7%. Notably, only one American ship adhered to the Jones Act’s standards. The dire need for ships was palpable, leading to two unsuccessful requests for transport from the Soviet Union. A scarcity of merchant mariners even necessitated the recruitment of two individuals in their 80s and another aged 92.

Vice Admiral Paul Butcher, then-deputy commander of the U.S. Transportation Command, emphasized the indispensability of foreign ships, stating that their absence would have delayed the operation by three additional months.

Post-Gulf War, the Jones Act fleet’s relevance has further waned. During the 2002-2003 military deployment to the Persian Gulf, American commercial ships transported a paltry 6.3% of deployment cargo, with foreign ships carrying 16%. Advocates of the Jones Act occasionally highlight the solitary contribution of a Jones Act ship, the Northern Lights, in 2003, but the fleet’s overall involvement seems minuscule.

From 2003 onwards, the Jones Act fleet has diminished from 151 ships to 99. The Pentagon has voiced concerns over this decline. General McDew prompted a reevaluation of strategies to ensure America retains its essential surge sealift capabilities and suggested revisiting past policies to prepare for an increasingly competitive horizon.

Contrary to Jones Act ships, foreign-manufactured ships have been instrumental to the U.S. military’s sealift prowess. Thirty out of 46 ships in the Maritime Administration’s Ready Reserve Force, tasked with swiftly transporting military supplies and equipment, are foreign-made. Although eligible for defense duties, these ships can’t partake in coastwise trade.

The widening gap between the Jones Act fleet’s features and military needs underscores its dwindling relevance. Modern military preferences gravitate towards swift, versatile ships adept at unloading varied cargo in shallow ports sans cranes. Jones Act shippers, meanwhile, favor slower, cargo-specific ships fit for contemporary ports. The increased specialization in commercial shipping further diminishes the Jones Act fleet’s aptness for military operations.

Current military dynamics further accentuate this divide. Traditional troopships have been replaced by rapid jet aircraft for troop transport. Given the brevity of contemporary wars, constructing new ships becomes almost redundant. The concept of ensuring domestic shipyards can swiftly produce new ships during warfare now seems outdated. Barring smaller ships lost in the Korean War, America hasn’t suffered ship losses in enemy combat since WWII. The logic behind imposing economic burdens for potential shipbuilding during elongated, traditional wars appears increasingly tenuous.

National security also encompasses prompt, efficient disaster response capabilities, another realm where the Jones Act falters. Instead of being a boon during crises, the Act often obstructs relief efforts by excluding ships. Presidential waivers could theoretically alleviate this, yet vested interests frequently lobby against such waivers, even for humanitarian causes. After the 2005 Hurricane Katrina, maritime sectors lobbied the Bush administration against waivers. Similarly, post-Hurricane Maria in 2017, President Trump’s hesitation in granting a Jones Act waiver was influenced by opposition from the shipping sector. When he eventually conceded a brief 10-day waiver, it proved insufficient for foreign ships to deliver aid to Puerto Rico.

 

Enumerating the Expenditures of the Jones Act:

1. Logistical Expenditures
2. Ecological Implications
3. Infrastructure Liabilities
4. Missed Domestic Returns
5. Elusive Foreign Proceeds
6. Forgone Earnings and Production

 

1- Logistical Expenditures

The conspicuous consequence of the Jones Act chiefly affects waterborne freight rates. By circumscribing the involvement in the U.S. maritime and riverine transport domain to ships that are U.S.-constructed, U.S.-owned, U.S.-flagged, and operated by U.S. crews, the expenses associated with water-based cargo transportation are artfully augmented. Such consequences emerge from the rudimentary principles of supply and demand.

Devoid of genuine competition to moderate rates, coupled with scant motivation to maintain judicious operating costs, the Jones Act fleet resembles an expansive maritime courier system precariously navigating. An assessment by the Maritime Administration illuminated that, in 2010, the operational costs of U.S.-flagged ships in international trade were a staggering 2.7 times that of their international counterparts. Daily expenditures, which encompass crew salaries, equipment, provisions, upkeep, insurance, and administrative overheads, amounted to $7,454 for international ships, in stark contrast to the hefty $20,053 for U.S. ships. A significant 68% ($13,655) of the U.S. figure was attributed to crew remunerations, juxtaposed against 35% for international ships. It’s hardly astonishing then that labor unions stand as staunch advocates of the Jones Act. Additionally, the Tariff Act of 1922, championed by Senator Jones, mandates a 50% ad valorem tax on repairs conducted in overseas docks. Furthermore, any substantial refurbishment of a ship overseas can lead to its disqualification from the Jones Act provisions.

Such exorbitant expenses, paired with the absence of international rivalry, notably surge waterborne freight rates, serving as a substantial economic imposition on a nation richly endowed with expansive coastlines and riverine networks. However, these escalated freight rates are merely a fraction of the overall transport premium engendered by the Jones Act. For regions such as Hawaii, Alaska, Puerto Rico, and Guam, where waterborne shipping remains indispensable, the cost differential could be quantified by contrasting U.S. rates with international standards, adjusted for average distance and cargo weight. Yet, within the mainland U.S., businesses possess alternatives to marine transportation. Empirical evidence reveals that the U.S. cargo transported along the Atlantic seaboard, Pacific front, and Great Lakes currently stands at roughly half its 1960 volume, notwithstanding significant economic expansion since. Concurrently, rail freight witnessed a surge of approximately 50%, while interstate trucks observed a whopping 200% increment. Reaffirming the allure of competitively priced marine transport, waterborne ships connecting the U.S. to Canada and Mexico registered a remarkable 300% growth in freight tonnage within the same timeframe.

The Jones Act, while curtailing ship availability and amplifying waterborne freight costs, inadvertently bolstered the demand for terrestrial transportation, ostensibly elevating the financial demands of trucking and rail sectors.

 

2- Ecological Implications

The Jones Act inadvertently advances higher carbon-emitting surface transportation, thereby escalating unnecessary environmental tolls. The World Shipping Council has opined that maritime shipping stands as the epitome of carbon efficiency in goods transportation, surpassing both road and air conveyances. Maritime transit emits a mere 10–40 grams of CO2 to ferry a ton of cargo across one kilometer. In juxtaposition, rail systems discharge 20–150 grams, while trucks—anticipated to witness a 44% tonnage surge by 2045 as per the Department of Transportation—release 60–150 grams. INRIX, a notable transportation analysis enterprise, estimates the financial burden of carbon emissions from stationary vehicles in traffic was a staggering $300 million in 2013, projected to climb to $538 million by 2030—a cumulative of $7.6 billion over this 17-year span.

In 2015, the lion’s share of freight movement in the United States was shouldered by trucks, transporting 11.5 billion tons. This dwarfs the slightly over one billion tons transported by Jones Act ships. Diverting even a modest fraction of this freight from road to coastal shipping could reap profound economic and ecological dividends. The World Economic Forum points out that keeping the “excess of 500,000 qualifying international containers that journeyed over highways and railways” in 2012 on water could have injected an economic boon surpassing $200 million. Despite 38 states, along with the District of Columbia, being laced with navigable water channels and nearly 40% of America’s populace residing in coastal regions, a meager 2% of domestic freight is attributed to coastal shipping. Adding weight to the environmental argument against the Jones Act, the Congressional Research Service states that major trucking arteries like the Interstate 95 and Interstate 5, which align with coastal shipping routes, have the potential to alleviate the strain on pivotal highways, pipelines, and railways in the heartland.

Furthermore, the Jones Act places impediments in the path of burgeoning alternative energy ventures. A case in point: offshore wind entity Deepwater Wind found itself ensnared by the Act’s clauses. Their specialized ship, essential for wind turbine installation and of European origin, was barred from approaching Rhode Island’s coast, lest it transgress the Act’s provisions. This was enforced even in the absence of a comparable domestic ship, compelling the utilization of less apt U.S. ships, resulting in project delays and escalating costs.

To procure ships in accordance with the Jones Act specifications, the offshore wind sector would be burdened both temporally and financially. Research commissioned by the Department of Energy unveiled that a U.S.-fabricated wind turbine installation ship could be priced between 60% to 200% higher than its Asian counterpart. Another estimation posits a colossal $222 million price tag on such a ship, with a lengthy construction duration of 34 months.

3- Infrastructure Liabilities

When large vehicles and trains replace water-based shipping, they induce wear on our highways, bridges, and rail infrastructure. A 2014 report from the Congressional Budget Office reveals federal expenses for highways reached $165 billion. From this, capital expenditure absorbed $92 billion, while operations and maintenance consumed $73 billion. Even though trucks represent a mere 10 percent of total mileage on U.S. roads, they incur over three-quarters of all road maintenance charges. The infrastructure of U.S. railways and roads is strained to its breaking point. The Society of Civil Engineers posits that the refurbishment of our transport infrastructure demands an annual investment of $155 billion, equating to about 23% of 2017’s governmental deficit of $666 billion.

The Jones Act imposes limitations on other vital maritime activities, encompassing oil spill mitigation, offshore wind energy ventures, and harbor and river dredging. Beyond exacerbating the cost and complexity of disaster relief and renewable energy, such constraints heighten taxpayers’ financial burdens for infrastructure endeavors, including harbor expansions for accommodating grander ships and regular seaport and river upkeep.

The decade-long endeavor to expand the Panama Canal to welcome heightened traffic and new colossal container ships has culminated. These “Post-Panamax” ships can reduce shipping expenses by 15–20%, necessitating harbors with a depth of at least 47 feet. However, in 2015, the U.S. Army Corps of Engineers disclosed that a mere seven out of the 44 primary U.S. Gulf Coast and Atlantic ports could host such ships due to limited domestic dredging capabilities. This dearth of accommodating harbors culminates in scarcer yet costlier infrastructure and commercial projects. Consequently, Post-Panamax ships predominantly dock at West Coast ports, transferring their cargo to trucks and trains for the journey to the U.S. East and Midwest, a method both protracted and pricey. Samuels International Associates’ experts suggest that should European dredgers be granted market access, they could yield a savings of $1 billion annually for U.S. taxpayers on extant projects.

Viewed holistically, the Jones Act’s economic and missed opportunities have a profounder impact than generally recognized. When one considers the escalated transportation and infrastructure expenses, the wages and production lost, the diminished domestic and international commercial income, and the quantifiable environmental cost, the annual price tag of the Jones Act escalates to tens of billions. This estimation doesn’t even encompass the yearly administrative and regulatory oversight of the legislation.

 

4- Missed Domestic Returns

The Jones Act’s detrimental implications on U.S. maritime activities not only escalate transportation expenses for businesses across the American economy but also diminish revenues in numerous instances. This double-edged effect compresses profitability. Take, for instance, the agricultural realm. Grain and soybean cultivators in the heartland are constrained to a mere pair of dry-bulk, seafaring Jones Act ships for their commodity transport. A 2013 report from the Government Accountability Office highlighted that Puerto Rican farmers and ranchers frequently source animal feed and fertilizers from overseas rather than domestically. Though the commodities are comparably priced, the disparity in rates between Jones Act and international carriers renders overseas sourcing more alluring—even if it necessitates a more extended journey.

In a similar vein, airlines in Puerto Rico generally procure jet fuel from foreign nations like Venezuela, bypassing Gulf Coast refineries. This trend emerges due to the challenges in procuring Jones Act ships for fuel transportation and the prohibitive costs encountered when such ships are available. To provide context, within the U.S., conveying crude oil from the Gulf Coast to the Northeast on a Jones Act tanker is priced at $5-$6 per barrel. In contrast, it costs merely $2 per barrel to transport from the Gulf Coast to Eastern Canada aboard a foreign-flagged ship. Astonishingly, a 1999 study discerned that shipping oil from Alaska’s North Slope to the U.S. Virgin Islands (exempt from the Jones Act) was approximately one-third the cost of shipping to the Gulf Coast—even though the route around South America’s Cape Horn is doubly protracted. The heightened pricing of American-built tanker ships, nearly quadruple that of foreign equivalents, further exacerbates this situation. Furthermore, the Jones Act elucidates some seemingly perplexing sourcing choices for commodities, such as rock salt. States like Maryland and Virginia source this winter essential from far-flung Chile, despite the U.S. holding the distinction of being the globe’s premier rock salt producer.

 

5- Elusive Foreign Proceeds

Ever since the inception of the Jones Act, global shipping magnates and numerous foreign governments have ardently sought either its waivers or have championed for its abolition or modification. With the dawn of service sector trade liberalization in the recent eras, such foreign powers have distinctly earmarked the Jones Act as a contentious point in trade deliberations. The Europeans, to illustrate, are eager to delve into the American maritime realm. And, as underscored by this exposition, it would be judicious for the vast majority of Americans to endorse their endeavors. Yet, the U.S. administration has consistently declined to introduce the Jones Act into these discussions. Every U.S. free trade accord unambiguously safeguards the Jones Act. Consequently, in reprisal for Washington’s steadfast stance on the Jones Act, U.S. trade allies have limited their market accessibility more than what could have been anticipated. Such obstinacy carries a tangible fiscal burden, manifesting as diminished trade prospects in overseas markets for American enterprises. Quantifying the lost prospects for U.S. exporters remains a challenge, but it undoubtedly spans billions.

 

6- Forgone Earnings and Production

The overabundance of trucks crowding our highways doesn’t merely squander petrol and diesel; it further aggravates pollution and squelches precious time. Such hindrance wreaks no insignificant havoc on our economy. The Maritime Administration reveals that the nation’s transportation gridlock exacts a toll of $200 billion annually on the American populace, devouring 4.2 billion hours mired in traffic and consuming a staggering 2.9 billion gallons of idle fuel. In a study from 2013, INRIX projected the economic toll of traffic congestion in terms of forfeited salaries and productivity for the U.S. economy at a hefty $124 billion, a figure poised to ascend to $186 billion by 2030, barring any profound interventions to mitigate the snarl-ups. Analyzed on a household scale, the yearly financial strain imposed by traffic stands at $1,700 presently, with projections suggesting a surge of roughly 33 percent, elevating it to $2,300 by 2030. Should the repeal of the Jones Act manage to pare down these astronomical costs by even a modest fraction, the fiscal boon to the national economy would be counted in the multibillions.

 

Modifications to Jones Act 

Barring a full revocation, three pivotal modifications to alleviate the strains imposed by the Jones Act on the American economic landscape.

1- Abrogate the stipulation demanding U.S. construction

A ship is deemed compliant with the U.S.-build mandate if it is constructed within the country, with “the entirety of its hull and superstructure’s primary components being domestically fabricated.” This clause of the Jones Act imposes significant immediate industrial hindrances, amplifying the financial implications of shipbuilding domestically, thus compromising our global competitive edge. Moreover, this stipulation appears incongruous with the nuances of global commerce and notably deviates from prevalent U.S. shipbuilding conventions. It’s becoming evident that American firms involved in constructing seafaring ships are increasingly dependent on foreign components, investments, and maritime construction expertise, often entrusting primary design aspects to renowned South Korean enterprises. Beyond mere design, these ships integrate foreign-made engines and electronic apparatus, thereby challenging the notion of them being genuinely “American-made.” Given the prevalent reliance on global resources, it’s imperative to cease penalizing our shipyards, allowing them to capitalize on technological strides that could realign the American shipbuilding sector with contemporary global standards.

2- Confer selective cabotage privileges to ships not adhering to the Jones Act

The national administration should permit non-Jones Act ships to convey commodities between American ports, contingent upon the ship’s origin being international, and its subsequent voyage leading to another foreign harbor after delivering its domestic American freight at an American port. For instance, a ship commencing its journey from Rotterdam might ferry goods from New Jersey to Miami, under the condition that its next stop is another international port — perhaps Kingston, Jamaica. This initiative could potentially bolster competition within the nation’s shipping sector, augmenting operational efficiency and diminishing the financial strains of maritime services.

2- Endorse a perpetual Jones Act exemption for Alaska, Hawaii, Puerto Rico, and Guam

Given the vast distances separating Alaska, Hawaii, and other American territories from the continental U.S., the constraints of the Jones Act become disproportionately burdensome. Obliged to depend on Jones Act compliant ships for interstate commerce, these regions grapple with unjustly escalated transport expenditures and a hindered capacity to fully exploit global trade arteries. For perspective, a ship, not adhering to the Jones Act, traversing from Japan to Los Angeles would find it prohibitive to make a stopover in Hawaii either to or from. Bestowing exemptions upon these geographically distant states and territories not only alleviates their undue strains but also paves the way for a pragmatic experiment, potentially highlighting the fiscal and operational advantages of liberalizing the Jones Act, possibly inspiring nationwide reforms in the future.

In conclusion, a comprehensive overhaul of the Jones Act hinges on Congress’s determination to champion the economic welfare of its citizens. Historically, legislative apathy has prevailed as the economic implications have intensified. Nearly a century of consistent shortcomings underscores the compelling need for reform. The moment for decisive action has unmistakably arrived.

 

Delving into the Intricacies of the Jones Act

The Jones Act, formally known as the Merchant Marine Act of 1920, stands as a pivotal federal edict, steering the course of maritime commerce within the United States. Legislated by Congress, its inception was primarily to fortify the nation with a proficient merchant marine—a civilian armada not only essential for transporting commodities during peaceful epochs but also poised to rally behind the armed forces when called upon. This legislation mandates that any merchandise conveyed between the ports of the US be ferried on vessels predominantly under American command. The Jones Act, in its essence, is a protectionist ordinance, curbing foreign incursions into domestic waters and inherently promoting indigenous enterprises. Furthermore, it bestows mariners with certain entitlements, most notably the prerogative to pursue remunerative recompense following injuries.

Illustrative Scenario

Visualize a hypothetical enterprise, ABC International Shipping, engaged in the importation of European wares. Employing a vessel bearing the Singaporean ensign, constructed in South Korea, and predominantly manned by Philippine nationals, the company facilitates the transfer of commodities from the Rotterdam to the bustling port of New Jersey, this operation seamlessly aligns with the stipulations of the Jones Act.

However, the narrative shifts when ABC International Shipping contemplates transporting goods from New Jersey to Texas. The aforementioned vessel’s foreign provenance and crew composition render it incompatible with the Jones Act’s stringent guidelines for inter-US port trade.

Thus, ABC International Shipping pivots, deploying a vessel forged in the fires of American shipyards, the proud possession of a native enterprise, sailing under the star-spangled banner. Ensuring compliance, all key personnel, alongside a minimum of three-quarters of the crew, pledge allegiance to the American ethos. Such a ship impeccably aligns with the Jones Act’s criteria for the maritime transit of goods between domestic harbors.

 

What exactly is the Jones Act?

Enshrined in the annals of American legislation as the Merchant Marine Act of 1920, colloquially termed the Jones Act, this imperative federal edict presides over maritime commerce within the United States boundaries.

The act dictates that for intra-American port transfers, enterprises must employ vessels both conceived and registered upon American shores. Moreover, these marine assets ought to be under the aegis of American enterprises wherein not less than 75 percent of its equity holders are of American lineage. Furthermore, a significant majority, being three-quarters of the onboard crew, along with the entirety of the officers, should pledge allegiance to the American flag.

While foreign vessels are by no means barred from delivering products from their respective countries to the American mainland or vice versa, their operations within domestic waters are restricted. For instance, a British liner could navigate trade channels from Spain to New Jersey, yet it stands forbidden from embarking on a voyage from New Jersey to the sun-kissed shores of Florida. Senator Wesley R. Jones, whose name graces this act, was its stalwart champion. His allegiance to the state of Washington, renowned for its flourishing maritime sphere, ensured that the state stood poised to commandeer substantial trade interactions between the mainland and the distant terrains of Alaska.

Classified under the banner of cabotage laws, the term “cabotage” is a linguistic homage to the French “caboter”, painting the image of a vessel tracing the coastline. Such laws govern the maritime proceedings along coastal dominions and national waterways. This Act does not cast its protective net over all, but rather focuses on vessels ferrying commodities of tangible worth. This encompasses a vast array of items, from commercial merchandise to treasured natural reservoirs like petroleum. The act’s protective embrace, however, turns a blind eye to the carriage of inconsequential cargo, such as sewage effluent.

 

What purpose does the Jones Act serve?

Crafted with the noble intent of bolstering the American maritime domain and its Merchant Marine, the Jones Act fosters an environment conducive to the growth of indigenous shipping undertakings. By mandating the exclusive use of American vessels, owned and operated by American entities and largely crewed by its citizens, it creates an unwavering demand for domestic shipyards and mariners. During tumultuous times, as witnessed in World War II, the military could requisition the services of this robust domestic fleet. It was this very fleet that courageously transported battalions and vital provisions to distant shores in Europe and the vast expanses of Asia. Tragically, the war claimed the lives of nearly 10,000 valiant civilians from the US Merchant Marine.

Apart from its widely acknowledged trade restrictions, the Jones Act also encompasses a myriad of other clauses. One such provision canonized the rights of sailors, bestowing upon them the prerogative to seek legal recourse against employers for occupational maladies. However, only those donning the official mantle of a “seaman” are eligible to claim under the aegis of the Jones Act. Typically, such an individual should be dedicating a minimum of 30 percent of their professional endeavors aboard vessels that traverse navigable waters.

Furthermore, the Jones Act conferred substantial powers upon federal custodians to oversee the domestic maritime trade. It vested, for instance, the transportation secretary with the authority to appraise the sale price of domestic vessels to overseas investors and the mandate to initiate and oversee steam routes connecting ports.

 

History of the Jones Act

In the annals of maritime history, the Jones Act occupies a pivotal position. Prior to the advent of the Merchant Marine Act, American shipwrights found themselves grappling with intense international competition, principally due to elevated labor and registration expenses. Britain, wielding its preeminent iron and steel prowess, was a formidable force in the shipbuilding arena.

The tumultuous landscape of World War I catalyzed a rapid surge in the US shipbuilding domain, answering the pressing call for vessels to ferry troops and essential commodities from the New World to European battlefields. However, the post-war landscape was rife with uncertainties. With exorbitant labor expenses, the sustainability of American maritime excellence seemed tenuous.

To fortify the shipbuilding sector and to ascertain the merchant marine’s capacity to serve as a naval adjunct, Senator Wesley Jones championed the Merchant Marine Act of 1920. This statute not only safeguarded the flourishing shipbuilding interests of Washington but also granted it the prerogative to oversee Alaskan commerce, a boon to Jones’ electorate. The senator’s proposition garnered substantial legislative backing, especially in light of the First World War’s revelation of the indispensability of a robust domestic merchant armada.

Owing to the provisions of the Jones Act, the US shipbuilding industry flourished, with the federal echelons further bolstering its growth through assorted financial aids. However, with the cessation of subsidies under the Reagan leadership in 1981, the industry underwent a contraction.

 

How many vessels adhere to the stipulations of the Jones Act?

Currently, approximately 40,000 vessels satisfying the Jones Act criteria navigate domestic waterways at any given moment. By 2019, a mere 99 vessels with the capacity to bear 1,000 gross tons or more qualified under this legislation.

Absent the Jones Act, the esteemed American shipbuilding sector would teeter on the brink of utter dissolution. Nations including South Korea, China, and Japan boast expansive and more efficient shipbuilding enterprises. The competitive global stage would pose formidable challenges for American shipwrights devoid of such backing.

 

How does the Jones Act influence Puerto Rico?

The Jones Act stipulates that any merchandise transported from a US port to Puerto Rico must adhere to its provisions. Given its diminutive size, Puerto Rico heavily relies on imports, procuring most of its sustenance and provisions either from the US mainland or overseas.

Should there be a sudden surge in Puerto Rico’s shipping needs, this could culminate in logjams. In September 2017, Hurricane Maria unleashed its fury on the island, wreaking havoc. Essentials like food, water, construction materials, and various other necessities became critically sought after. While the continental US teemed with these supplies, conveying them to the island proved challenging due to the constraints on the number of vessels permitted under the Jones Act.

To address this, President Donald Trump granted a dispensation to the Jones Act, allowing foreign vessels to ferry goods from the US mainland to Puerto Rico. This facilitated a more expedient and cost-effective delivery, mitigating the prevalent deficits. Detractors of the Jones Act contend that it elevates the expenditure of transporting goods to Puerto Rico. This escalation in costs is invariably transferred to the populace as inflated prices. A meticulous analysis by the Puerto Rican firm, Advantage Business Consulting, deduced that the Jones Act augmented the island’s food and beverage prices by an annual $367M.

The investigation further discerned that freight charges governed by the Jones Act were an exorbitant 2.5 times that of overseas ports, taking into account container dimensions and voyage distance. The research surmised that the Jones Act effectively imposes a tacit 7.2 percent levy. Opponents also highlight that the Jones Act inadvertently elevates the freight costs to regions like Hawaii and Alaska.

 

How does the Jones Act influence Hawaii?

The Jones Act, formally known as the Merchant Marine Act of 1920, has a significant influence on Hawaii and its economy. Here’s how:

1. Shipping Restrictions: One of the primary provisions of the Jones Act requires that goods shipped between two U.S. ports be transported on ships that are built in the U.S., owned by U.S. citizens, and crewed by U.S. citizens or permanent residents. Because Hawaii is an island state located about 2,400 miles from the mainland U.S., nearly all goods that come to Hawaii are shipped. These restrictions limit the number of vessels that can participate in this trade.
2. Higher Shipping Costs: Because of the aforementioned restrictions, there’s less competition among shipping companies, which can lead to higher costs. These increased shipping costs are then often passed on to consumers in the form of higher prices for goods in Hawaii.
3. Increased Cost of Living: Hawaii has one of the highest costs of living in the U.S., and the Jones Act is often cited as one of the contributing factors. Everything from food to fuel tends to be more expensive in Hawaii compared to many places on the mainland, in part because of the added shipping costs.
4. Impact on Energy: Hawaii has had to rely heavily on imported oil for its energy needs, and the Jones Act influences the cost and sourcing of this oil. Some argue that the Act makes it more expensive for Hawaii to import oil from closer and potentially cheaper sources outside the U.S., such as Asia, because they’d have to switch to Jones Act-compliant ships for the journey between a U.S. west coast port and Hawaii.
5. Economic Dependency: The Jones Act can also influence which industries thrive in Hawaii. Industries which rely heavily on imports or exports can find it more challenging to operate profitably in Hawaii due to the added transportation costs.
6. Support for the Act: While there’s criticism of the Jones Act for increasing costs, supporters argue that it ensures the U.S. maintains a viable shipbuilding industry and merchant marine, which are crucial for national defense. They also contend that it safeguards American maritime jobs.
7. Environmental and Safety Standards: Ships under the U.S. flag, as mandated by the Jones Act, must adhere to the country’s environmental and safety standards, which can be stricter than those of other nations. This might help ensure that goods transported to and from Hawaii meet these standards.
8. Potential for Reform: Over the years, there have been various calls to reform or exempt Hawaii from certain provisions of the Jones Act, given its unique geographical position and dependence on shipping. While some believe an exemption would help reduce the cost of living, others argue that it might weaken national security or lead to job losses in the maritime industry.

While the Jones Act ensures that the U.S. retains domestic control over its maritime activities and potentially upholds higher safety and environmental standards, it does come with trade-offs, especially for remote locations like Hawaii. The Act significantly influences the cost structure, economic decisions, and daily lives of those living in Hawaii.

 

How does the Jones Act influence Alaska?

The Jones Act, formally known as the Merchant Marine Act of 1920, is a significant piece of U.S. legislation that primarily affects domestic shipping. The Jones Act mandates that all goods transported by water between U.S. ports be carried in U.S.-flagged ships, constructed in the U.S., owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents.

Here’s how the Jones Act influences Alaska:

1. Higher Costs: One of the primary criticisms of the Jones Act as it pertains to Alaska is that it can lead to higher costs for goods. Since foreign-built or foreign-flagged vessels cannot transport goods between U.S. ports, this limitation reduces competition and can lead to higher shipping rates. Alaska, being geographically separated from the contiguous 48 states, relies heavily on maritime shipping. Thus, higher shipping costs can translate into higher prices for consumer goods.
2. Energy and Fuel Prices: Alaska is rich in energy resources. However, the Jones Act has been cited as a reason why transporting crude oil or natural gas from Alaska to other parts of the U.S. might be more expensive. For instance, transporting oil from Alaska to the U.S. East Coast is often more costly on Jones Act-compliant ships than sourcing oil from foreign producers.
3. Economic Impact on the Maritime Industry: On the positive side, the Jones Act supports the U.S. maritime industry, which includes shipyards, vessels, and maritime jobs. By requiring ships to be U.S.-made and -crewed, it promotes jobs and economic activity in sectors tied to shipbuilding and maritime operations. Alaska, with its extensive coastline and reliance on maritime transport, can benefit from these economic activities.
4. National Security Considerations: Proponents of the Jones Act argue that it is crucial for national security. The act ensures that the U.S. maintains a vibrant maritime industry, which would be vital during times of war or national emergencies. Alaska, given its strategic position close to Asia and Russia, is a pivotal region in U.S. defense considerations.
5. Limited Flexibility: In situations where specific ships or maritime services are needed but are not readily available among Jones Act-compliant vessels, Alaska could face challenges. This lack of flexibility can limit the options available to the state in certain circumstances.
6. Tourism and Cruising: The Jones Act, combined with the Passenger Vessel Services Act (PVSA), affects the cruise industry. Many cruise ships that visit Alaska are foreign-flagged. Due to these regulations, such ships cannot embark and disembark passengers at two different U.S. ports without stopping at a foreign port in between. This is why many Alaska cruises either start or end in Canada.

The Jones Act has a multifaceted influence on Alaska, with both positive and negative implications. On one hand, it supports the U.S. maritime industry and is seen as a pillar of national security. On the other, it can lead to higher costs and reduced flexibility in transportation options for the state.

What is a Jones Act violation?

The Jones Act, formally known as the Merchant Marine Act of 1920, is a significant piece of maritime law in the United States. At its core, the Jones Act serves two main purposes:

1. Protection of Maritime Workers: It allows seamen who have been injured on the job to seek compensation from their employers for the negligence of the ship owner, the captain, or fellow members of the crew. If a seaman’s injury can be traced back to the unseaworthiness of the vessel or the negligence of other crew members or employers, they may be entitled to damages. A “Jones Act violation” in this context refers to situations where the employer or ship owner did not uphold their duty of care to the seaman, resulting in injury.
2. Cabotage: The Jones Act also contains provisions related to the transportation of goods between U.S. ports. Specifically, it requires that goods shipped between U.S. ports be carried on ships that are:
   • Built in the United States.
   • Owned by U.S. citizens.
   • Registered (or “flagged”) in the U.S.
   • Crewed primarily by U.S. citizens or permanent residents.

   A “Jones Act violation” in this context would refer to non-compliance with these shipping requirements. For example, transporting goods between two U.S. ports on a foreign-built or foreign-flagged vessel without an exemption would be a violation.

Violations of the Jones Act can result in significant legal and financial penalties. Over the years, there have been debates about the benefits and drawbacks of the Act, especially in terms of its economic impact. But regardless of these discussions, the Act remains a cornerstone of U.S. maritime law.

A transgression of the Jones Act materializes when an international vessel conveys merchandise between American harbors without the requisite sanction or dispensation. The guardians of the Customs and Border Protection have the authority to impose penalties upon entities infringing upon this statute, the magnitude of which could mirror the value of the commodities transported.

In the annum 2011, Furie Operating Alaska, an enterprise specializing in natural gas and petroleum exploration, incurred a penalty of $15M for commissioning a Chinese maritime service to relocate a jack-up drill apparatus from the Gulf of Mexico to Alaska’s shores. Following a legal dispute, the establishment reconciled with the Department of Justice for a sum of $10,000,000.

The stipulations of the Jones Act also encompass passengers aboard ocean liners, subjecting them to a potential fine of $762 for each passenger in breach. Certain cruise operators stipulate within their contractual obligations that travelers bear responsibility for such financial recompense.

Should a cruise vessel’s voyage plan incorporate a sojourn to a remote international port, like Aruba, it’s permissible to embark or disembark passengers at two disparate American harbors. Within the confines of the Jones Act, destinations like the US Virgin Islands and Puerto Rico do not fall under the classification of American harbors in the context of passenger transportation.

 

What critiques have been levied against the Jones Act?

The Jones Act, officially known as the Merchant Marine Act of 1920, has been a central piece of U.S. maritime law for over a century. While it has been praised for supporting the U.S. maritime industry and protecting domestic jobs, there are also various critiques that have been levied against it. Some of the main criticisms include:

1. Higher Shipping Costs: The Jones Act requires that goods transported by water between U.S. ports be carried on U.S.-flag ships, constructed in the U.S., owned by U.S. citizens, and crewed by U.S. citizens and permanent residents. This often leads to higher shipping costs, as U.S.-built and operated ships tend to be more expensive than their foreign counterparts.
2. Economic Impact on Certain Territories: Some U.S. territories, like Puerto Rico, have argued that the Jones Act results in higher costs for imported goods, contributing to economic struggles. Without the Jones Act, these territories might be able to import goods more cheaply from neighboring countries.
3. Lack of Competitive Pressure: Critics argue that the protection offered by the Jones Act reduces competitive pressures on U.S. shipping companies, potentially leading to inefficiencies in the industry.
4. Aging Fleet: Due to the high cost of building ships in the U.S., many Jones Act-compliant ships are older, which can lead to concerns about environmental sustainability and safety.
5. Impact on Energy Markets: The Jones Act can make it more costly to transport energy products between U.S. ports. For example, shipping oil from the Gulf Coast to the East Coast might be more expensive on a Jones Act-compliant ship than importing it from a foreign country.
6. National Security Argument: Some defenders of the Jones Act claim it is crucial for national security because it ensures a fleet of domestic ships and trained mariners that can be called upon in times of war or emergency. Critics, however, argue that the act’s restrictions don’t effectively serve this purpose, pointing out that many Jones Act-compliant ships may not be suitable for military use.
7. Limited Shipbuilding: Some contend that the Jones Act has actually harmed the U.S. shipbuilding industry in the long run. By insulating the industry from international competition, critics say the U.S. has fallen behind in shipbuilding innovation and technology.
8. Environmental and Safety Concerns: As mentioned, the Jones Act fleet is older, and older ships can be less environmentally friendly and may not have the latest safety features found in more modern vessels.

In recent years, there have been calls to reform or repeal the Jones Act, particularly following natural disasters or economic crises when shipping constraints became more apparent. However, the act remains in place due to its support among various stakeholders, including maritime unions, shipbuilders, and certain segments of the shipping industry.

Naysayers contend that the Jones Act artificially skews competition, inhibiting the organic workings of an open market. Such distortions potentially escalate prices and cultivate inefficiencies. Indications suggest that domestic maritime transportation costs in the US have surged owing to the Jones Act. In an unfettered marketplace, burgeoning competition and abundant supply might naturally drive prices downward.

Moreover, detractors posit that the Jones Act fosters an undue dependence on less ecologically viable transport modalities. Given the mandate for solely American vessels to convey goods between domestic harbors, numerous enterprises predominantly turn to road and rail networks for their logistical needs. These alternatives, unfortunately, emit a higher quantum of carbon, thereby implying that the Jones Act might inadvertently be exacerbating global warming.

Additionally, the Jones Act appears to falter in its foundational objective of bolstering a robust American shipbuilding sector. The American maritime industry perennially trails stalwarts such as South Korea and Japan, among other maritime powerhouses.

Furthermore, the Jones Act seemingly propels American maritime firms towards a reliance on antiquated, sub-optimal vessels. Even vessels under American ownership are prohibited from employing foreign ships for domestic freight, compelling them to depend on the more scarce and costly American vessels.

This legislative framework could also unintentionally incentivize corporations to prolong the operational life of their American-crafted vessels. Such aged vessels often exhibit diminished fuel economy and necessitate intensified upkeep.

 

Should the Jones Act be repealed?

The Merchant Marine Act of 1920, commonly referred to as the Jones Act, is a significant piece of legislation in the United States that governs maritime commerce. The question of whether it should be repealed is a matter of debate and involves various arguments both for and against it. Below, I’ll outline the primary arguments on both sides:

Arguments in Favor of Repealing the Jones Act:

1. Lower Costs for Consumers: Critics argue that the Jones Act increases the cost of shipping between U.S. ports, which can lead to higher prices for consumers. By repealing the act, shipping costs might decrease, potentially leading to lower prices for goods.
2. Enhanced Competition: Allowing foreign-flagged ships to engage in domestic trade could increase competition, which might drive efficiency and innovation in the shipping industry.
3. Outdated Protectionism: Some view the Jones Act as an outdated form of protectionism that isn’t relevant in today’s globalized economy.
4. Economic Concerns: Hawaii, Puerto Rico, and other U.S. territories and states that rely heavily on maritime shipping have voiced concerns that the Jones Act increases their cost of living by making goods more expensive.
5. Disaster Response: In times of natural disasters, there have been instances where the U.S. government has temporarily waived the Jones Act. Critics argue that repealing it altogether could facilitate faster and more efficient disaster response by allowing more ships to deliver supplies.

Arguments Against Repealing the Jones Act:

1. National Security: One of the primary reasons for the Jones Act is to ensure that the U.S. maintains a strong maritime industry, which is considered vital for national security. By ensuring a fleet of U.S.-built, -owned, and -operated vessels, the U.S. has ships and mariners ready in times of war or national emergency.
2. Protecting American Jobs: The Jones Act protects jobs in the U.S. maritime industry, including shipbuilding, shipping, and related sectors. Repealing the act might put many of these jobs at risk.
3. Maritime Safety and Environmental Standards: U.S.-flagged ships are subject to strict safety and environmental regulations. Critics of repeal argue that allowing foreign-flagged ships with potentially lower standards could increase the risk of accidents or environmental incidents.
4. Economic Independence: Maintaining a robust domestic shipping industry ensures that the U.S. isn’t overly reliant on foreign shipping, which can be crucial during geopolitical tensions.
5. Fair Playing Field: Advocates argue that foreign ships often operate under flags of convenience, which allows them to sidestep many of the regulations and standards U.S. ships must adhere to, giving them an unfair advantage.

The question of whether the Jones Act should be repealed is complex, and the answer depends on weighing the perceived benefits against the drawbacks. It requires a consideration of economic, security, and geopolitical factors. As with many policy debates, the decision should be based on an informed understanding of the potential consequences and trade-offs.

Several connoisseurs of policy critique the continued existence of the Jones Act, proposing its abrogation. The dissolution of this statute could potentially render the maritime transport of commodities between American harbors more economical, conferring significant financial benefits to both enterprises and the general populace.

Eliminating the Jones Act might also be beneficial to the environment, fostering an increased reliance on maritime transportation over terrestrial conveyance. Numerous detractors further posit that aquatic transit poses a diminished risk, leading to a reduced incidence of mishaps and environmental transgressions.

Conversely, proponents of the Jones Act contend that its revocation would inevitably precipitate the decline of the American shipbuilding sector. Such an eventuality could result in the loss of countless jobs and a substantial financial downturn for domestic enterprises, making the US wholly dependent on foreign vessels.

Additionally, advocates emphasize the legislation’s indispensable role in preserving national security. In its absence, the Merchant Marine might dwindle, thus undermining its capacity to bolster military endeavors during times of conflict.