Jones Act

The Jones Act states that all goods between US ports must be transported through ships built, operated, and owned by United States citizens or permanent residents. It spreads over several aspects, from cargo shipping water projects to the crew consistency of the vessels.

The act was originally a subpart of Section 27 of the Merchant Marine Act of 1920. The act is regulated to protect and maintain the American Merchant Marine, and it prohibits the use of any ship that is not owned by an American citizen for cargo travel. In short, it was done to boost the nation's shipping industry.

• The Jones Act states that shipping goods and cargo transportation between two US ports must be done through ships only built, operated, and owned by American citizens or permanent residents.
• It is part of Section 27 of the Merchant Marine Act of 1920, a protectionist law on maritime shipping in the United States.
• The law provides the people of Puerto Rico with US citizenship and offers them individual civil rights.
• The act has certain requirements and exemptions, yet it is criticized for increasing US shipping costs.

The Jones Act mandates that shipping between US ports be exclusively handled by US-owned, US-built, and US-registered vessels. It is a protectionist law introduced during WWI to explore new opportunities for the American shipping industry. The law is definitive in terms of crew membership and ownership status, as well as shipping company laws.

The Jones Act typically prohibits foreign-flagged vessels but allows waivers granted by the US Department of Homeland Security for cases related to national defense interests. The Jones Act, enabling waterway transportation in US ports, faces criticism with proposed amendments for improvement. The law acts efficiently but raises costs for US citizens and shipping companies.

The requirements of the Jones Act claim are:

• US citizens or permanent residents must own the ships for cargo travel and transportation.
• If the ship belongs to a company, then the company’s 75% stake must belong to US citizens.
• Although people from other nationalities can be on board when traveling, the ship crew must be primarily American citizens.
• The vessels must be registered and authorized by the US authorities with proper documents and permission.
• The Jones Act specifies ships for specific uses, like those with wind turbines for offshore wind projects.

Let us take a quick look at some examples to understand the concept better:

Example #1

In December 2022, a new bill was passed to close the loopholes in the Jones Act. The congressman believes it will increase job opportunities for US mariners, domestic shipyard workers, and US-flagged vessels.

The new Jones Act bill prohibits commercial vessels from engaging in seismic blasting and pre-construction activities. Furthermore, the bill will shut down the decommission loophole, eventually preventing vessels from getting decommissioned on offshore platforms. Apart from other preventions, the bill will make border and customs protection penalize foreign-flagged vessels.

Example #2

The second example of the Jones Act narrates a different side of the story as to how it ruins the commute and elaborates on how the US shipping industry is one of the most restrictive shipping systems in the world.

As the law suggests, building a container ship in the US is five times more expensive than in any other nation abroad. It eventually forces people to waste finite resources like work, tax dollars, and environmental efforts that could be used elsewhere. Moreover, the US needs more specialized vessels with wind turbines that meet the Jones Act requirements.

The exemptions under the Jones Act are:

• This Act can allow foreign vessels to engage in trade only in rare circumstances in the interest of national defense.
• There are only two waiver processes, first requested by the Secretary of Defense and second by the non-department of Defense, also called discretionary waivers.
• The Maritime Administration (MARAD) has several programs that allow foreign vessels to operate domestically under several circumstances.
• MARAD may permit the use of a foreign-built launch barge for rare launches of large structures when no US-built alternatives are available.
• There is an Anchor Handling Exemption Program under which, if no US vessels are available, MARAD authorizes using foreign anchor handling vessels in certain ports only.
• The Coast Guard Authorization Act of 2010 is present under which, to protect the aquaculture fish from diseases, parasites, and infestation, discretionary authority is offered to foreign vessels to be used in operations to protect aquaculture fish.
• The Small Vessel Coastwise Endorsement Eligibility Determination grants administrative exemption to foreign-built small passenger vessels that carry 12 passengers or less for domestic passenger transport.

The criticisms of the Jones Act are as follows:

• Economists criticize it for increasing shipping costs for the US authorities and many US islands like Alaska and Puerto Rico.
• When other internationally flagged vessels are prohibited from entering US ports, it works like a trade barrier.
• Countries, including the US, can introduce restrictions to avoid cheap foreign shipping, which automatically raises the price.
• It serves the short-term goal but could be better able to achieve the long-term objective of creating permanent high shipping prices.
• It leaves traders with no other options but to choose from US-owned ships and facilities.
• The shipping costs are so high that people unaware of the Jones Act will find it unrealistic and bizarre.

This article has been a guide to what is Jones Act. Here, we explain the concept along with its exemptions, requirements, examples, and criticisms. You may also find some useful articles here -

• Regional Trade Agreements
• New York Board Of Trade
• World Trade Organization