What is the Jones Act?
The Jones Act, otherwise known as the Merchant Marine Act of 1920, regulates trade between United States ports and in United States waters and sets seamen’s rights between them and their employers. It supports the U.S. shipbuilding industry and national security, supporting hundreds of thousands of jobs and billions in trade. It also formalizes the rights of seamen. The Jones Act is not without its detractors, as opponents say it raises costs of shipping much needed goods to non-continuous states and territories, while proponents praise it for supporting and protecting the United States maritime industry. Let’s take a closer look at what it does, how it works, and the effects it has on trade.
“By U.S. Government - Extracted from PDF version of Our Flag, available here (direct PDF URL here.), Public Domain, https://commons.wikimedia.org/w/index.php?curid=41373752”. Image from Wikipedia.
What does the Jones Act actually do?
The Jones Act requires all vessels travelling from one United States point to another to be built, owned, crewed, and flagged in the United States of America. It provides stability for the American maritime industry and ensures we keep our shipbuilding and maritime industries alive and well. According to Defense News, it “helps to sustain 650,000 American jobs, resulting in $150 billion in economic benefits each year.” Although we have a significant network of railways and highways, numerous rivers and two oceans provide huge supply lines around the country. The Jones Act is also seen as an important asset to the military as we have the ability to move our own equipment and people without relying on other countries to provide military transport. In short, the Jones Act ensures that waterway trade within the United States supports our maritime industry and mariners.
“U.S. Navy Hull Maintenance Technician 2nd Class Michael Meneses uses a welder aboard the guided-missile destroyer Chung-Hoon. (MC2 Logan C. Kellums/U.S. Navy)”. Image from Defense News.
Why was the Jones Act put in place?
The Jones Act was put in place after World War I to help stimulate the shipping industry. The goal was to build a strong merchant marine, promote commerce, and aid in defense. It established the United States Maritime Commission and a requirement for a United States Merchant Marine. It has been in place since 1920.
What is cabotage?
“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”, according to Wikipedia. It covers water, air, rail, and road travel, but was originally used as a shipping term. Cabotage laws protect a nation’s economic and security interests. The Jones Act is a cabotage law as it does not allow for foreign built, owned, or flagged vessels to trade along the coast of the United States. Other statutes cover passenger transportation, fishing, and even the number of crew that must be U.S. citizens.
What else does the Jones Act cover?
The Jones Act also formalized the rights of seamen, allowing them to make claims and get damages from employers. This includes negligence from the captain, crew, or ship owner. The law is similar to one that was already in place for railway workers. Seamen can bring forth “actions against ship owners based on claims of unseaworthiness or negligence, rights not afforded by common international maritime law”, according to Wikipedia. Employees qualify as Jones Act seamen if they spend at least 30 percent of their time in service of a vessel on navigable waters. If they meet this requirement, then they can file suit under the act in U.S. federal or state court within three years of the incident.
“The GustoMSC NG-16000X-SJ offshore wind turbine installation jack-up vessel design for Dominion Energy will be constructed by Keppel AmFELS. It is the first Jones Act-compliant vessel of its kind. GustoMSC rendering”. Image from WorkBoat.
Pros and Cons of the Jones Act
As mentioned above, the maritime industry in the United States supports hundreds of thousands of jobs and many billions of dollars in revenue. Proponents love that it supports the shipbuilding industry in the U.S. while opponents argue that it reduces competitiveness and increases costs. Studies by The Heritage Foundation and a Congressional Research Service report showed that it was ineffective in promoting shipbuilding by reducing competition and stifling innovation. The defense think tank CSBA found in 2020 that without the Jones Act, the government may not have the ability to purchase any auxiliary ships domestically. This is of particular concern because the Jones Act was created after World War I when some countries withdrew their merchant fleets to help the war effort. The United States did not have enough vessels to continue normal trade, which impacted the economy. One of the goals is to prevent this from happening again in the future. Another benefit is the thriving domestic salvage and dredging industries, which provide U.S. flagged ships to perform these functions for naval facilities, reducing the chance of sabotage and spying.
One particular area of unintended effects of the Jones Act may be raising the cost of goods in Puerto Rico. Puerto Rico in particular is susceptible to this as the island has economic challenges like “incomes [that] are much lower on average than in the mainland US — the cost of living is far higher than it needs to be.” (Vox). The cost of shipping is estimated to be about double that of the standard international rate, placing additional burden on Puerto Rican citizens. The reverse is also true, that goods made there cost more to get to the mainland United States, reducing the attractiveness of making goods there. Similar problems exist for Hawaii and Alaska. In 2013, a Government Accountability Office (GAO) study showed that it was difficult to remove the Jones Act factor from other factors affecting shipping rates and show actual additional costs. Another complication with estimating the cost is that foreign flagged vessels “would still have to comply with U.S. laws, including wage, tax, immigration, and a host of other policies and regulations”, including passing those additional costs to customers, according to Defense News. Overall, it is difficult to estimate the additional costs, if any, including reliability in shipping. Opponents of the Jones Act would like a complete repeal of the law, while others call for an exemption for Puerto Rico or all non-contiguous areas of the U.S. to promote competition. For now and the foreseeable future, the Jones Act is in effect for all states and territories of the United States.
There are waivers and exemptions for the Jones Act during disasters, such as storms like Hurricane Katrina, Hurricane Sandy, and Hurricane Harvey. These waivers provide a safety valve to get needed fuel and emergency supplies to devastated areas quickly in times of great need, potentially saving lives. One of the most important times for this was September of 2017, right after Hurricane Harvey hit Texas, Hurricane Irma hit Florida, and Hurricane Maria hit Puerto Rico. On September 8, 2017, the Jones Act was suspended for Harvey (which had occurred 14 days prior) and Irma (which occurred on that day). Also in September, after two days of debate, it was waived for Hurricane Maria. Waivers can also be granted on a case-by-case basis by the United States Maritime Administration (MARAD).
“Image of Hurricane Maria and Tropical Storm Jose acquired by the Geostationary Operational Environmental Satellite 13 at 1:15 P.M. local time on September 19, 2017. IMAGE BY NOAA AND NASA.” Image from National Geographic.
Summary - Wind Farms
The Jones Act ensures a domestic maritime fleet and ability for the United States to have vessels built at home. The costs of this decision are hard to pinpoint, as are the security benefits of those vessels. The Jones Act has been making headlines recently due to the need for offshore wind turbine installation vessels, or WTIVs. With the increased focus on offshore wind, companies are scrambling to build WTIVs, feeder vessels that could bring parts to foreign flagged WTIVs, and altogether catch up on building ships to help create independent, clean energy for the U.S. In the next few years, we are sure to see quite a few of these new American-flagged vessels and a continued discussion on the pros and cons of the Jones Act.
Happy Fun Fact Friday!