Merchant Marine Act of 1920

Merchant Marine Act of 1920

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
Citations
Public law	66–261
Codification
Acts repealed	Emergency Shipping Act, 1917; Rate Emergency Act, 1918; Shipping Act, 1916, § 5, 7, 8;
Legislative history
Introduced in the Senate by Wesley Jones (R–WA) Reported by the joint conference committee on June 4, 1920; agreed to by the House on June 4, 1920 (145–120) and by the Senate on June 4, 1920 (40–11) Signed into law by President Woodrow Wilson on June 5, 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.

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 Such laws served the same purpose as – and were loosely based on – England's Navigation Acts, which were finally repealed in 1849.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.

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 and for national defense as stated in the preamble to the Merchant Marine Act of 1920.

Preamble

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

Main article: 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. 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.

Seamen's rights

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.

Effects

The Jones Act prevents foreign-flagged ships from carrying cargo between the US mainland and certain noncontiguous parts of the US, such as Puerto Rico, Hawaii, Alaska, and Guam. Foreign ships inbound with goods cannot stop at any of these four locations, offload goods, load mainland-bound goods, and continue to US mainland ports, although ships can offload cargo and proceed to the US mainland without picking up any additional cargo intended for delivery to another US location. Usually, they proceed directly to US mainland ports, where distributors break bulk and then send goods to US places off the mainland by US-flagged ships.

Arizona Sen. John McCain called it "an antiquated law that has for too long hindered free trade, made US industry less competitive and raised prices for American consumers." Nevertheless, Congress has consistently supported the Jones Act as vital to national security.

Some critics of the Jones Act have alleged that the Jones Act makes shipping between US ports so expensive that some Hawaiian ranchers fly cattle to the mainland rather than having them loaded and shipped on boats.

It has been argued that 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 considerably more efficient, safer and less polluting than transporting the same cargo by truck.

Puerto Rico

Studies by the Federal Reserve Bank of New York indicated that the Jones Act may hinder economic development in Puerto Rico.

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."

In May 2016 in the Washington Times, Rep. Duncan Hunter spoke to the need for the Jones Act and why it is not to blame for the island's debt crisis. "With or without such an effort, it's imperative not to conflate the unrelated issues of Puerto Rico's debt and the Jones Act, and to fully grasp the importance of ensuring the safe transport of goods between American ports. There must also be acknowledgment of the dire consequences of exposing ports and waterways to foreign seafarers."

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.

A 2018 study by economists at Boston-based Reeve & Associates and Puerto Rico-based Estudios Tecnicos, sponsored by the American Maritime Partnership, has concluded that the Jones Act has no impact on either retail prices or the cost of livings on Puerto Rico. The study found that Puerto Rico received very similar or lower shipping freight rates when compared to neighboring islands, and that the transportation costs have no impact on retail prices on the island. The study was based in part on actual comparison of consumer goods at retail stores in San Juan, PR and Jacksonville, FL, finding: no significant difference in the prices of either grocery items or durable goods between the two locations.

US shipbuilding

Because the Jones Act requires all transport between US ports be carried on US-built ships, the Jones Act supports the domestic US shipbuilding industry. Critics of the act describe it as protectionist, harming the overall economy for the sake of benefiting narrow interests. Other criticism argues that the Jones Act is an ineffective way to achieve this goal, claiming it drives up shipping costs, increases energy costs, stifles competition, and hampers innovation in the U.S. shipping industry—however, multiple GAO reports have disputed these claims.

National security

According to one defense contractor-funded think tank and a shipping trade group, the Jones Act is vital to national security and plays a vital role in safeguarding America's borders. The Lexington Institute stated in its June 2016 study that the Jones Act plays a significant role in strengthening U.S. border security and helping to prevent international terrorism. Rep. Duncan Hunter (R-CA), who has been lauded by the U.S. shipbuilding industry for his consistent support of their economic interests, has written that the Jones Act is important to protect America's national security.

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."

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 US 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 US engaged in a massive ship building effort including building concrete ships to make up for the lack of US tonnage. The Jones Act was passed in order to prevent the US from having insufficient maritime capacity in future wars.

Exemptions

The US Virgin Islands, although a US 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.

Similarly, the territory of American Samoa and the commonwealth of Northern Mariana Islands are excluded from US customs territory and thus exempt.

The coastal town of Hyder, Alaska is also partially exempt from the Act after a revision in 1947, as Canadian-flagged vessels (but not vessels of other countries) are exempt.

The territory of Guam is partially exempt from the Act as certain foreign built ships (overriding the US-built requirements in the Act) are allowed to trade freely.

Criticism

Opponents claim the Jones Act is protectionist, and results in far higher costs for moving cargoes between U.S. ports.

Opponents of the Jones Act 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 workforces. As a result, it is claimed that U.S. shipbuilders have long since priced themselves out of the international market for merchant ships.

A 2001 U.S. Department of Commerce study indicates that U.S. shipyards built only 1 percent of the world's large commercial ships. The report concluded that the lack of United States competitiveness stemmed from foreign subsidies, unfair trade practices, and lack of U.S. productivity.

Moreover, critics point to the lack of a U.S.-flagged international shipping fleet. 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 military is exempt from the Jones Act. The only time the military used a Jones Act ship in an overseas operation was during Operation Iraqi Freedom in 2003. 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.

The Jones Act steals jobs from American seamen who could be working on coastwise freighters and feeders.

— Rob Quartel, president of the Jones Act Reform Coalition.

Support

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. Further the Jones Act, say supporters, protects seafarers from deplorable living and working conditions often found on foreign-flagged ships.

Some proponents make the case that allowing foreign-flagged ships to engage in commerce in domestic American sea lanes would be like letting a foreign automaker establish a plant in the U.S. which doesn't have to pay U.S. wages, taxes, or meet national safety or environmental standards.

Waivers

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.

Waivers of Jones Act provisions

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 for example, in cases of national emergencies or in cases of strategic interest. For instance, 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.

See also

• Flag of convenience
• Passenger Vessel Services Act of 1886 similar law concerning passenger transportation between US ports.
• Seaman status in United States admiralty law

Further reading

• Congressional Research Service Report RS21566 The Jones Act: An Overview.
• Sethi, Arjun, The Merchant Marine Act of 1920: The Impact on American Labor (2005).Online Version

External links

• Text of the Merchant Marine Act of 1920 (Jones Act)
• University of Virginia Law Library, The Shipping Act and Merchant Marine Act 1920
• Testimony by Deputy Maritime Administrator on September 15, 1998 in Support of the Jones Act