Merchant Marine Act of 1920
The Merchant Marine Act of 1920 is a United States federal statute that provides for the promotion and maintenance of the American merchant marine. Among other purposes, the law regulates maritime commerce in U.S. waters and between U.S. ports. Section 27 of the Merchant Marine Act is known as the Jones Act and deals with cabotage (coastwise trade) and 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. The act was introduced by Senator Wesley Jones. The law also defines certain seaman's rights.
|Other short titles||Jones Act|
|Long title||An act to provide for the promotion and maintenance of the American merchant marine, to repeal certain emergency legislation, and provide for the disposition, regulation, and use of property acquired thereunder, and for other purposes.|
|Enacted by||the 66th United States Congress|
|Effective||June 5, 1920|
|Acts repealed||Emergency Shipping Act, 1917; Rate Emergency Act, 1918; Shipping Act, 1916, § 5, 7, 8;|
Laws similar to the Jones Act date to the early days of the nation. In the First Congress, on September 1, 1789, Congress enacted Chapter XI, "An Act for Registering and Clearing Vessels, Regulating the Coasting Trade, and for other purposes", which limited domestic trades to American ships meeting certain requirements. Such laws served the same purpose as – and were loosely based on – England's Navigation Acts, which were finally repealed in 1849.
The Merchant Marine Act of 1920 has been revised a number of times; the most recent revision in 2006 included recodification in the U.S. Code. Some economists and other experts have argued for its repeal.
The Jones Act is not to be confused with the Death on the High Seas Act, another United States maritime law that does not apply to coastal and in-land navigable waters.
Objectives and purposeEdit
The intention of Congress to ensure a vibrant United States maritime industry and for national defense as stated in the preamble to the Merchant Marine Act of 1920.
It is necessary for the national defense and for the proper growth of its foreign and domestic commerce that the United States shall have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in time of war or national emergency, ultimately to be owned and operated privately by citizens of the United States; and it is declared to be the policy of the United States to do whatever may be necessary to develop and encourage the maintenance of such a merchant marine, and, in so far as may not be inconsistent with the express provisions of this Act, the Secretary of Transportation shall, in the disposition of vessels and shipping property as hereinafter provided, in the making of rules and regulations, and in the administration of the shipping laws keep always in view this purpose and object as the primary end to be attained.— Sec. 1. Purpose and policy of United States (46 App. U.S.C. 861 (2002)), MARAD
Cabotage is the transport of goods or passengers between two points in the same country, alongside coastal waters, by a vessel or an aircraft registered in another country. Originally a shipping term, cabotage now also covers aviation, railways, and road transport. Cabotage is "trade or navigation in coastal waters, or the exclusive right of a country to operate the air traffic within its territory". In the context of "cabotage rights", cabotage refers to the right of a company from one country to trade in another country. In aviation terms, for example, it is the right to operate within the domestic borders of another country. Most countries enact cabotage laws for reasons of economic protectionism or national security.
The cabotage provisions relating to the Jones Act restrict the carriage of goods or passengers between United States ports to U.S.-built and flagged vessels. It has been codified as portions of 46 U.S.C.  Generally, the Jones Act prohibits any foreign-built, foreign-owned or foreign-flagged vessel from engaging in coastwise trade within the United States. A number of other statutes affect coastwise trade and should be consulted along with the Jones Act. These include the Passenger Vessel Services Act, 46 U.S.C. § 289, which restricts coastwise transportation of passengers, and 46 U.S.C. § 12108, which restricts the use of foreign vessels to commercially catch or transport fish in U.S. waters. These provisions also require at least three-fourths (75 percent) of the crewmembers to be U.S. citizens or permanent residents. Moreover, the steel of foreign repair work on the hull and superstructure of a U.S.-flagged vessel is limited to ten percent by weight. This restriction largely prevents Jones Act ship-owners from refurbishing their ships at overseas shipyards.
The US Virgin Islands, although an unincorporated U.S. territory, is exempt from the Act as an addition to section 21 enacted in 1936 which states "And provided further, That the coastwise laws of the United States shall not extend to the Virgin Islands of the United States until the President of the United States shall, by proclamation, declare that such coastwise laws shall extend to the Virgin Islands and fix a date for the going into effect of same." This excludes the USVI from US Customs territory.
Requests for waivers of the Act and its provisions are reviewed by the Department of Homeland Security on a case-by-case basis, and can only be granted based on interest of national defense. Historically, waivers have only been granted in cases of national emergencies or upon the request of the Secretary of Defense.
In the wake of Hurricane Katrina, Homeland Security Secretary Michael Chertoff temporarily waived the coastwise laws for foreign vessels carrying oil and natural gas from September 1 to 19, 2005.
In order to conduct an emergency shipment of gasoline from Dutch Harbor, Alaska, to Nome in January 2012, Secretary of Homeland Security Janet Napolitano granted a waiver to the Russian ice class marine tanker Renda.
The Secretary of Homeland Security issued a temporary conditional waiver of the Jones Act for the shipment of petroleum products, blending stocks and additives from Gulf Coast Petroleum Administration for Defense District (PADD 3) to the New England and Central Atlantic Petroleum Administration for Defense Districts (PADDs 1 a and 1 b, respectively) for 12 days from November 2 to 13, 2012, following widespread fuel shortages caused by Hurricane Sandy.
On September 8, 2017, the Jones Act was simultaneously suspended for both Hurricane Harvey, which hit Texas fourteen days prior, and Hurricane Irma, which hit Florida on that day. In the same month, the Act was waived, after two days of debate, for Puerto Rico in the aftermath of Hurricane Maria.
Requests for waivers of certain provisions of the act are reviewed by the United States Maritime Administration (MARAD) on a case by case basis. Waivers have been granted for example, in cases of national emergencies or in cases of strategic interest. For example, in June, 2006, declining oil production prompted MARAD to grant a waiver to operators of the 512-foot Chinese vessel Tai An Kou to tow an oil rig from the Gulf of Mexico to Alaska. The jackup rig will be under a two-year contract to drill in the Alaska's Cook Inlet Basin. The waiver to the Chinese vessel is said to be the first of its kind granted to an independent oil-and-gas company.
Pressure exerted by 21 agriculture groups, including the American Farm Bureau Federation, failed to secure a Jones Act waiver following Hurricane Katrina in the Gulf of Mexico. The groups contended that farmers would be adversely affected without additional shipping options to transport grains and oilseeds.
The U.S. Congress adopted the Merchant Marine Act in early June 1920, formerly 46 U.S.C. § 688 and codified on October 6, 2006 as 46 U.S.C. § 30104. The act formalized the rights of seamen. The Jones Act formalized the rights of seaman that have been recognized for centuries.
From the very beginning of American civilization, courts have protected seaman whom the courts have described as 'unprotected and in need of counsel; because they are thoughtless and require indulgence; because they are credulous and complying; and are easily overreached. They are emphatically the wards of admiralty.'
The Jones Act allows injured sailors to make claims and obtain damages from their employers for the negligence of the ship owner, including many acts of the captain or fellow members of the crew. It operates simply by extending similar legislation already in place that allowed for recoveries by railroad workers and providing that this legislation also applies to sailors. Its operative provision is found at 46 U.S.C. § 30104, which provides:
Any sailor who shall suffer personal injury in the course of his employment may, at his election, maintain an action for damages at law, with the right to trial by jury, and in such action all statutes of the United States modifying or extending the common-law right or remedy in cases of personal injury to railway employees shall apply....
The law allows U.S. seamen to bring actions against ship owners based on claims of unseaworthiness or negligence, rights not afforded by common international maritime law.
The United States Supreme Court, in the case of Chandris, Inc., v. Latsis, 515 U.S. 347, 115 S.Ct. 2172 (1995), has set a benchmark for determining the status of any employee as a "Jones Act" seaman. Workers who spend less than 30 percent of their time in the service of a vessel on navigable waters are presumed not to be seaman under the Jones Act. The Court ruled that any worker who spends more than 30 percent of his time in the service of a vessel on navigable waters qualifies as a seaman under the act. Only maritime workers who qualify as a seaman can file a suit for damages under the Jones Act.
An action under the Jones Act may be brought either in a U.S. federal court or in a state court. The right to bring an action in state court is preserved by the "savings to suitors" clause, 28 U.S.C. § 1333. The seaman-plaintiff is entitled to a jury trial, a right which is not afforded in maritime law absent a statute authorizing it.
Seamen have three years from the time the accident occurred to file a lawsuit. Under the Jones Act, maritime law has a statute of limitations, of three years, meaning that seamen have three years from the time the injury occurred to file a lawsuit. If an injured seaman does not file a case within that three year period, the seaman's claim may be dismissed as time-barred.
The Jones Act prevents foreign-flagged ships from carrying cargo between the contiguous U.S. and certain noncontiguous parts of the U.S., such as Puerto Rico, Hawaii, Alaska, and Guam. Foreign ships inbound with goods cannot stop at any of these four locations, offload goods, load contiguous-bound goods, and continue to U.S. contiguous ports, although ships can offload cargo and proceed to the contiguous U.S. without picking up any additional cargo intended for delivery to another U.S. location.
In March 2013, the Government Accountability Office (GAO) released a study of the effect of the Jones Act on Puerto Rico that noted "[f]reight rates are set based on a host of supply and demand factors in the market, some of which are affected directly or indirectly by Jones Act requirements." The report further concludes, however, that "because so many other factors besides the Jones Act affect rates, it is difficult to isolate the exact extent to which freight rates between the United States and Puerto Rico are affected by the Jones Act." The report also addresses what would happen "under a full exemption from the Act, the rules and requirements that would apply to all carriers would need to be determined." The report continues that "[w]hile proponents of this change expect increased competition and greater availability of vessels to suit shippers' needs, it is also possible that the reliability and other beneficial aspects of the current service could be affected." The report concludes that "GAO's report confirmed that previous estimates of the so-called 'cost' of the Jones Act are not verifiable and cannot be proven."
The Jones Act has significant economic consequences for Puerto Rico. The Act makes U.S. goods much more expensive for the people of the island. For instance, CNN Money reported that “cars cost about 40% more in Puerto Rico than on the contiguous U.S., and that it also affects other necessities such as foods that had to be transported to the island partly because of the Act.” . Due to the dependence to the U.S., Puerto Ricans pay more for any goods that have to be shipped on the island compared to the mainland of the U.S. This is due to the particular goal of the Jones Act which is to ensure the existence of a thriving U.S.-owned commercial shipping industry. On that issue, the Federal Reserve Bank of New York claims that “shipping a container from the US East Coast to Puerto Rico costs $3,063, but shipping the same container to nearby Santo Domingo, Dominican Republic, costs only $1,504, and to Kingston, Jamaica, only $1,607.” .
As a result, Puerto Ricans often import goods from foreign countries instead of the U.S. Additionally, “a 2010 study by the University of Puerto Rico found that the Jones Act cost the island $537 million per year.” . Seeing the territory’s poor economic health, its recession for years, and crippling debt crisis, one can argue that the Jones Act contributes to the current Puerto Rican poor economic situation as reported by the Federal Reserve Bank of New York. The bank argues that “the Jones Act contributes to the current economic disaster in Puerto Rico contributing to the territory debt default.” . In a sense, The Jones Act hinders the U.S. economy as a whole, due to its cost. As a reference in order to improve Puerto Rican economy, advocates who seek relief from the Jones Act “point to the nearby American Virgin Islands, which have beneﬁted from exemption from the Jones Act since 1922.” . Furthermore, the cost of electricity plays a vital role in the Puerto Rican Economy. While trying to understand how to create economic growth in Puerto Rico, the U.S. Congress finds out that “the price of electricity in Puerto Rico is higher than in any of the contiguous 48 states. A price which rises or falls based on the shifting price of crude oil in the world market, whereas the price of electricity in the United States is relatively stable.” .
It is clear that the Jones Act does not foster the Puerto Rican economy due to its cost, and therefore, limits its ability to become a regional trading center. This statement of the Federal Reserve Bank of New York sheds light on the economic limits of the Island. The bank says that “between 2000 and 2010, the volume of 20-foot containers shipped through Puerto Rico declined by more than 20 percent, while volume more than doubled in nearby and smaller Jamaica, which is not constrained by the Jones Act.” . To emphasize that point that the Jones Act is not helping Puerto Rico, Michael Hansen, a reported at Hawaii Free Press claims in his article, Jones Act Shackles Puerto Rico writes that “the island falling behind Jamaica in its attempt to become a regional logistics hub in anticipation of the expanded Panama Canal, which opened in June 2016.” . Additionally, “The World Economic Forum recently concluded that the Jones Act hinders Puerto Rico’s economic development.”. That statement once again proves that being subject to U.S. laws is harmful to the Puerto Rican economy. Finally, according to the World Bank, “the GNI per capita in Puerto Rico ($21,100) is only about one-third that of the mainland United States ($62,850).”. The massive outmigration to the contiguous U.S. is now understandable because these unfavorable costs imposed on an island that is much poorer than the rest of the United States would always result to an economic crisis and the impoverishment of the average inhabitants.
In the aftermath of Hurricanes Irma and Maria in September 2017, the entire island of Puerto Rico was left without power. On September 28, 2017, the Department of Homeland Security suspended the Jones Act for ten days to facilitate recovery efforts. A week later, DHS claimed there is no need for further Jones Act waivers, as sufficient Jones-Act-compliant vessels are available to move cargo.
Because the Jones Act requires all transport between U.S. ports be carried on U.S.-built ships, proponents of the Jones Act claim that it supports the domestic U.S. shipbuilding industry. Critics of the act describe it as protectionist, harming the overall economy for the sake of benefiting narrow interests. A 2014 report by The Heritage Foundation argues that the Jones Act is an ineffective way to promote U.S. shipbuilding, claiming it drives up shipping costs, increases energy costs, stifles competition, and hampers innovation in the U.S. shipping industry. A 2019 Congressional Research Service report stated that U.S. shipbuilding has declined in competitiveness since the law's passage.
One of the primary impetuses for the law was the situation that occurred during World War I when the belligerent countries withdrew their merchant fleets from commercial service to aid in the war effort. This left the US with insufficient vessels to conduct normal trade impacting the economy. Later when the U.S. joined the war there were insufficient vessels to transport war supplies, materials, and ultimately soldiers to Europe resulting in the creation of the United States Shipping Board. The U.S. engaged in a massive ship building effort including building concrete ships to make up for the lack of U.S. tonnage. The Jones Act was passed in order to prevent the U.S. from having insufficient maritime capacity in future wars.
A 2011 study by the Government Accountability Office (GAO) found there are approximately 5 million maritime crew entries into the United States each year, and "the overwhelming majority of seafarers entering U.S. ports are aliens." The study also showed that 80% of those seafarer aliens are working on passenger ships that are covered by the Passenger Vessel Services Act of 1886 rather than the Jones Act. The GAO said that while there are no known examples of foreign seafarer involvement in terrorist attacks and no definitive evidence of extremists infiltrating the United States on seafarer visas, "the Department of Homeland Security (DHS) considers the illegal entry of an alien through a U.S. seaport by exploitation of maritime industry practices to be a key concern."
Importation of liquefied natural gasEdit
Supporters of the Jones Act maintain that the legislation is of strategic economic and wartime interest to the United States. The act, they say, protects the nation's sealift capability and its ability to produce commercial ships. In addition, the act is seen as a vital factor in helping maintain a viable workforce of trained merchant mariners for commerce and national emergencies. Supporters also argue that allowing foreign-flagged ships to engage in commerce in domestic American sea lanes would undermine U.S. wage, tax, safety, and environmental standards.
According to the Lexington Institute, the Jones Act is also vital to national security and plays a role in safeguarding America's borders. The Lexington Institute stated in a June 2016 study that the Jones Act plays a role in strengthening U.S. border security and helping to prevent international terrorism.
Critics claim the Jones Act is protectionist, and point to a 2002 report by the United States International Trade Commission that estimated the savings for the U.S. economy that would result from the repeal or amendment of the Jones Act. Critics contend that the Act results in higher costs for moving cargo between U.S. ports. For example, some critics have alleged that the Jones Act makes shipping between U.S. ports so expensive that some Hawaiian ranchers fly cattle to the mainland rather than having them loaded and shipped on boats.
Uncompetitive shipbuilding in the U.S.Edit
Critics such as the Grassroot Institute contend that the U.S. shipbuilding industry has suffered as a result. It gives ship operators an incentive to maintain veteran U.S.-built vessels rather than replace them with new ships. In addition, U.S. shipyards have adapted to building only those ships that are needed by Jones Act operators, with price tags that reflect their all-American workforce. As a result, it is claimed that U.S. shipbuilders have long since priced themselves out of the international market for merchant ships. The Grassroot Institute has also pointed out that the Jones Act has led to U.S. shipbuilders building no liquefied natural gas tankers that could transport gas from domestic sources like Louisiana. This, in turn, has forced the Northeast of the U.S. to import Russian liquefied natural gas to avoid winter shortages. Such importation, it is argued, has the effect of undermining the spirit of United States sanctions against Russia.
Moreover, critics point to the lack of a U.S.-flagged international shipping fleet such as a 2001 United States Department of Commerce study indicating that U.S. shipyards built only 1 percent of the world's large commercial ships. The Jones Act, they claim, makes it economically impossible for U.S.-flagged, -built, and -crewed ships to compete internationally with vessels built and registered in other nations with crews willing to work for wages that are a fraction of what their U.S. counterparts earn.
Critics also point to the fact that the U.S. military is exempt from the Jones Act to undercut its supporters' claims of the Act's national security function. The only time the military used a Jones Act ship in an overseas operation was during Operation Iraqi Freedom in 2003 when Northern Lights, a Jones Act ship, carried Marine Corps vehicles and other cargoes directly to Iraq shortly after ground combat was over, according to Michael Hokana, senior trade specialist at MARAD’s Office of Cargo and Commercial Sealift.
Traffic congestion and added pollution around coastal port citiesEdit
A 2008 study by the Institute for Global Maritime Studies claimed that the Jones Act results in increased traffic jams around coastal port cities due to heightened use of trucking in place of more efficient maritime shipping. Modification of the Jones Act to allow U.S. companies to purchase foreign-built ships could reduce vehicle traffic on coastal highways, with shipping being more efficient, safer and less polluting than transporting the same cargo by truck.
Efforts at repealEdit
Legislative efforts to repeal the Jones Act have been repeatedly introduced in Congress since 2010 in the form of the Open America's Waters Act, championed by the late Senator John McCain and by Utah Senator Mike Lee, but have not passed to become law.
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