Merchant Marine Act of 1920
The Merchant Marine Act of 1920 (P.L. 66-261), also known as the Jones Act, 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 Jones Act, deals with cabotage (i.e., coastal shipping) 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 (R-WA).
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.
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.
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 purpose
The intention of congress to ensure a vibrant United States maritime industry is clearly stated in the Preamble to the Merchant Marine Act of 1920. The following is from the most recent revision of United States Code:
"46 USC § 50101 – Objectives and policy (a) Objectives.— It is necessary for the national defense and the development of the domestic and foreign commerce of the United States that the United States have a merchant marine— (1) sufficient to carry the waterborne domestic commerce and a substantial part of the waterborne export and import foreign commerce of the United States and to provide shipping service essential for maintaining the flow of the waterborne domestic and foreign commerce at all times; (2) capable of serving as a naval and military auxiliary in time of war or national emergency; (3) owned and operated as vessels of the United States by citizens of the United States; (4) composed of the best-equipped, safest, and most suitable types of vessels constructed in the United States and manned with a trained and efficient citizen personnel; and (5) supplemented by efficient facilities for building and repairing vessels. (b) Policy.— It is the policy of the United States to encourage and aid the development and maintenance of a merchant marine satisfying the objectives described in subsection (a)."
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, national security, or public safety. Renowned economist Adam Smith noted in chapter two of An Inquiry into the Nature and Causes of the Wealth of Nations that “when some particular sort of industry is necessary for the defence of the country” then it will “generally be advantageous to lay some burden upon foreign, for the encouragement of domestic industry,” citing specifically to England’s acts of navigation, which “very properly endeavour to give the sailors and shipping of Great Britain the monopoly of the trade of their own country.” “As defence, however, is of much more importance than opulence, the act of navigation is, perhaps, the wisest of all the commercial regulations in England,” said Smith in Wealth of Nations.
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 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 Services Act, 46 USC section 289 which restricts coastwise transportation of passengers and 46 USC section 12108 restricts the use of foreign vessel to commercially catch or transport fish in U.S. waters. These provisions also require at least three-fourths of the crewmembers to be U.S. citizens. 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.
It allows injured sailors to make claims and collect from their employers for the negligence of the ship owner, 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..."
This allows seamen to bring actions against ship owners based on claims of unseaworthiness or negligence. These are 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. Any worker who spends less than 30 percent of his time in the service of a vessel on navigable waters is presumed not to be a seaman under the Jones Act. An action under the Act may be brought either in a U.S. federal court or in a state court. The seaman/plaintiff is entitled to a jury trial, a right which is not afforded in maritime law absent a statute authorizing it.
In a March 2013 study, the Government Accountability Office (GAO) released a comprehensive study on the Jones Act and 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.”
Nevertheless, studies by the World Economic Forum and Federal Reserve Bank in New York have concluded that the Jones Act hinders economic development in the commonwealth.
In 2013, the federal Maritime Administration (MARAD) released a report that states the nation’s shipyards support $36 billion in Gross Domestic Product (GDP). MARAD notes the U.S. shipbuilding industry has run a trade surplus in six out of the last ten years, with a cumulative trade surplus of $410 million over this period. The report also shows that from 2010 to 2012, deliveries of vessels of all types, including tugs and towboats, passenger vessels, commercial and fishing vessels, and oceangoing and inland barges, exceeded 1,200 vessels per year, reaching 1,457 vessels in 2011.
The MARAD report notes that although most shipbuilders are located in coastal areas, the direct and indirect economic benefits reach all 50 states. In 2011, the nation’s more than 300 shipyards directly provided more than 107,000 jobs, $7.9 billion in labor income to the national economy and contributed $9.8 billion in Gross Domestic Product. In addition, the average income for these industry jobs, $73,000, is 45 percent higher than the national average. On a nationwide basis, including direct, indirect, and induced impacts, the industry supported 402,010 jobs, $23.9 billion of labor income and $36 billion in GDP. Ships built to satisfy the Jones Act may cost 3-4 times more than ships built in Korean or Japanese yards, and the most expensive Jones Act ship is the tanker Liberty Bay.
Critics describe the Jones act as a protectionist law, which harms the shipping industry. While some critics point to higher shipping costs – the recent GAO report on the Jones Act concludes "that previous estimates of the so-called ‘cost’ of the Jones Act are not verifiable and cannot be proven.”  Critics also say the Jones Act hurts the domestic shipbuilding industry, but recent news shows that USA shipbuilding is in the middle of a construction boom as evidenced by recent news stories in Bloomberg News, CNBC and NPR.
Requests for waivers of certain provisions of the act are reviewed by the United States Maritime Administration on a case-by-case basis. Waivers have been granted in cases of national emergencies or in cases of strategic interest.
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. Renda was originally scheduled to onload gasoline in Northern Japan for shipment but was unable due to a gale.
The Department of Homeland Security issued a temporary blanket waiver of the Jones Act for the shipment of petroleum products 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. see Waiver of Compliance with Navigation Law, Dept. of Homeland Security (Nov. 2, 2012)
- Flag of convenience
- Passenger Vessel Services Act of 1886 similar law concerning passenger transportation between US ports.
- Seaman status in United States admiralty law
- Pub. L. No. 66-261, 41 Stat. 988 (1920).
- 46. U.S.C. § 50101 et seq. (2006).
- First Cong., sess. 1, ch. 11, §1 (1789).
- 46 U.S.C. § 50101 et seq. (2006).
- “Cabotage,” definition, the Free Dictionary, available at http://www.thefreedictionary.com/Cabotage+trade.
- http://www.law.cornell.edu/uscode/html/uscode46/usc_sup_01_46_06_V_08_D_10_551.html ch.551 Coastwise Trade.
- jones act
- "The Most Expensive Tanker" Maritime Executive, 21 August 2014. Accessed: 11 September 2014.
- "Jones Act is set to stay". Reuters. Retrieved 25 May 2014.
- "DHS: Update: United States Government Response to the Aftermath of Hurricane Katrina". Dhs.gov. September 15, 2005. Retrieved July 6, 2010.
- Homeland Security grants waiver of Jones Act for Nome fuel delivery from Alaska Business Monthly
- Sethi, Arjun, The Merchant Marine Act of 1920: The Impact on American Labor (2005).
- Congressional Research Service Report RS21566 The Jones Act: An Overview.