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.[1] 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.[2][3] The act was introduced by Senator Wesley Jones. The law also defines certain seaman's rights.

Merchant Marine Act of 1920
Other short titlesJones Act
Long titleAn 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 bythe 66th United States Congress
EffectiveJune 5, 1920
Citations
Public lawPub.L. 66–261
Statutes at Large41 Stat. 988
Codification
Acts repealedEmergency 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

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.[4] Such laws served the same purpose as – and were loosely based on – England's Navigation Acts, which were finally repealed in 1849.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.[2] Some economists and other experts have argued for its repeal, while military and Department of Commerce officials have spoken in favor of the law.[5][6][7] Research shows that the Jones Act reduces domestic trade via waterways (relative to other forms of trade) and increases consumer prices.[8]

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 was to ensure a vibrant United States maritime industry and for national defense as stated in the preamble to the Merchant Marine Act of 1920.[9]

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".[10] 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; 80% of the UN’s member states with coastlines have cabotage law.[11]((sources needed))

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. [12] 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.[13] These provisions also require at least three-fourths (75 percent) of the crew members 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.[14] This restriction largely prevents Jones Act ship-owners from refurbishing their ships at overseas shipyards.

The Merchant Marine Act of 1936 is a United States federal law. Its purpose is "to further the development and maintenance of an adequate and well-balanced American merchant marine, to promote the commerce of the United States, to aid in the national defense, to repeal certain former legislation, and for other purposes."

Specifically, it established the United States Maritime Commission, and required a United States Merchant Marine that:

can carry all domestic water-borne commerce, can carry a substantial portion of foreign commerce, can serve as a naval auxiliary in time of war or national emergency, is owned and operated under the U.S. flag by U.S. citizens "insofar as may be practicable," is composed of the best-equipped, safest, and most suitable types of vessels, consists of vessels constructed in the United States, and consists of vessels manned with a trained and efficient citizen personnel. The Act restricted the number of aliens allowed to work on passenger ships, requiring that, by 1938, 90 percent of the crew members were U.S. citizens. Although about 4,000 Filipinos worked as merchant mariners on U.S. ships, most of these seamen were discharged in 1937 as a result of the law.[1] The Act also established federal subsidies for the construction and operation of merchant ships. Two years after the Act was passed, the U.S. Merchant Marine Cadet Corps, the forerunner to the United States Merchant Marine Academy, was established.

U.S. Representative Schyler O. Bland of Virginia was known as the "father of the Merchant Marine Act of 1936."

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.'[15]

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.[16] 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.[17] 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.[18]

Effects

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.[19] 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.

Puerto Rico

In June 2012, the Federal Reserve Bank of New York indicated that the Jones Act may hinder economic development in Puerto Rico, although the magnitude of the effect is unclear after a Government Accountability Office report debunked that study.[20][21]

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."[22]

U.S. shipbuilding

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.[23][24] Critics of the act describe it as protectionist, harming the overall economy for the sake of benefiting narrow interests.[25][26] 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.[27] A 2019 Congressional Research Service report stated that U.S. shipbuilding has declined in competitiveness since the law's passage.[28] The defense think tank CSBA came to the opposite conclusion in a 2020 study on the maritime industry, warning that without the Jones Act, the shipbuilding industry would face dire impacts, up to and including the inability of the government to purchase any auxiliary ships domestically.[29]

National security

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.

Mariners

It has been effective as the Jones Act fleet is the largest single source or merchant mariners for surge sealift operations: 3,830 mariners make up 29% of what MARAD needs to operate surge sealift during wartime. American crews frequently sail into war zones.  Foreign crews contracted by the U.S. government during Operation Desert Storm refused to sail into a war zone.

Shipbuilding

Shipyards that build Jones Act vessels are needed to build smaller but important government vessels like auxiliary ships, cutters, and research vessels. Jones Act requirements creates additional work for these shipyards in between government orders. Defense think tank CSBA found that “[w]ithout the Jones Act’s requirements … it is likely the U.S. government would have few, if any, shipyards available to episodically recapitalize its smaller vessels.” By keeping the industrial base working, the Jones Act ensures that the Navy and Marine Corps can spin up shipbuilding without relying on other nations.

Homeland Security

The Jones Act includes dredging and salvage operations. Because the Jones Act creates a domestic dredging and salvage industry in the United States, it prevents the United States from depending on foreign companies to dredge naval facilities, which could create opportunities for sabotage or the depositing of underwater surveillance equipment.

Additionally, the requirement that ships in the domestic fleet be manned by crews of U.S. citizens or permanent residents reduces the likelihood foreign ships and mariners will illegally gain access to America’s inland waterways and associated infrastructure. 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."

Economic Security

The Jones Act’s requirements also apply to shipping between the contiguous United States and overseas territories and states.  The Jones Act reduces the ability of adversaries to interfere with commercial links to the Continental United States.

Importation of liquefied natural gas

Because of the lack of Jones Act-compliant liquefied natural gas tankers, the Northeast of the U.S. imported liquefied natural gas from Russia in order to avoid shortages in 2018.[30][31]

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. 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.[32]

According to the Lexington Institute, the Jones Act is also vital to national security and plays a role in safeguarding America's borders.[33][34] 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.[35]

Criticism

Protectionism

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.[36] Critics contend that the Act results in higher costs for moving cargo between U.S. ports, particularly for Americans living in Hawaii, Alaska, Guam, and Puerto Rico.[3][37]

A 2019 study by the OECD estimated that the economic gains to the U.S. economy from the repeal of Jones Act would range from an added $19 billion up to $64 billion.[38]

Efforts at repeal

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.[39]

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.[40][41]

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.[42]

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.[43]

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.[44][45] In the same month, the Act was waived, after two days of debate,[46] for Puerto Rico in the aftermath of Hurricane Maria.[47][48]

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.[49] 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.[50]

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.[50]

See also

References
  1. Pub. L. No. 66-261, 41 Stat. 988 (1920).
  2. 46. U.S.C. § 50101 et seq. (2006).
  3. Lin, Tom C.W., Americans, Almost and Forgotten, 107 California Law Review (2019)
  4. First Cong., sess. 1, ch. 11, §1 (1789).
  5. "On The Record". October 15, 2019.
  6. "How protectionism sank America's entire merchant fleet". The Economist. October 5, 2017. ISSN 0013-0613. Retrieved April 20, 2019.
  7. Krueger, Anne O. (April 19, 2019). "Mayday for American Protectionism | by Anne O. Krueger". Project Syndicate. Retrieved April 20, 2019.
  8. Olney, William W. (August 29, 2020). "Cabotage sabotage? The curious case of the Jones Act". Journal of International Economics: 103378. doi:10.1016/j.jinteco.2020.103378. ISSN 0022-1996.
  9. "46 U.S. Code § 50101 - Objectives and policy". LII / Legal Information Institute.
  10. "Cabotage," definition, the Free Dictionary, available at http://www.thefreedictionary.com/Cabotage+trade.
  11. "Cabotage Laws of the World".
  12. 46 U.S.C. §55102 et seq.
  13. ch.551 Coastwise Trade Cornell Law School
  14. "Cabotage laws put Jones Act in frame: Push to tighten legislation may spark WTO review," Lloyd's List International. September 13, 2006. Lloyd's List (subscription required)
  15. Capitol Hill Hearing Testimony, Coast Guard and Maritime Transportation Subcommittee; Testimony by John Hickley, attorney at law. Congressional Quarterly. March 27, 2007.
  16. Larson, Aaron. "The Jones Act and Compensation for Injured Seamen". ExpertLaw.com. ExpertLaw. Retrieved May 6, 2017.
  17. Dupin, Chris. "Decision preserves 'savings to suitors'". American Shipper. Howard Publications, Inc. Retrieved May 6, 2017.
  18. "Crisman v. Odeco, Inc., 932 F. 2d 413 (5th Cir. 1991)". Google Scholar. Retrieved September 10, 2018.
  19. Yuen, Stacy (August 22, 2012). "Keeping up with the Jones Act". Hawaii Business. Retrieved September 12, 2015.
  20. "Characteristics of the Island's Maritime Trade and Potential Effects of Modifying the Jones Act". gCaptain (GAO-13-260). March 21, 2013. Retrieved February 27, 2020.
  21. "Report on the Competitiveness of Puerto Rico's Economy" (PDF). New York Fed. April 29, 2017.
  22. http://www.gao.gov/assets/660/653046.pdf
  23. Murtaugh, Dan (May 29, 2014). "Birthplace of USS New Jersey Saved by Shale Production". Bloomberg.
  24. Quick, Brad (October 25, 2013). "Made-in-USA shipbuilding finds an unlikely ally". CNBC. Retrieved July 25, 2016.
  25. Kemp, John (May 2, 2013). "Jones Act is set to stay". Reuters.
  26. Northam, Jacki (March 14, 2014). "A Boom In Oil Is A Boon For U.S. Shipbuilding Industry". Morning Edition. NPR.
  27. Slattery, Brian; Riley, Bryan; Loris, Nicolas (May 22, 2014). "Sink the Jones Act: Restoring America's Competitive Advantage in Maritime-Related Industries". The Heritage Foundation.
  28. Frittelli, John (May 17, 2019). "Shipping Under the Jones Act: Legislative and Regulatory Background". Congressional Research Service.
  29. Clark, Bryan. "Strengthening the US Defense Maritime Industrial Base". Center for Strategic and Budgetary Assessments. Retrieved March 3, 2020.
  30. Malik, Naureen (January 3, 2019). "Why the U.S. Imports LNG Despite Its Gas-Export Boom". Bloomberg News. Archived from the original on January 3, 2019. Retrieved May 11, 2019.
  31. Buxbaum, Peter (January 24, 2018). "Jones Act Forces New England to Import Gas From Russia". Global Trade Magazine. Archived from the original on January 15, 2019. Retrieved May 11, 2019.
  32. Clark, Bryan. "Strengthening the US Defense Maritime Industrial Base". CSBA. Retrieved March 2, 2020.
  33. "Lexington Institute". March 24, 2016. Retrieved June 24, 2016.
  34. "The Importance of the Jones Act Fleet to U.S. Homeland Security". Retrieved June 24, 2016.
  35. "Lexington Institute". June 23, 2016. Retrieved June 24, 2016.
  36. Olsen, Erik (August 7, 2017). "An arcane American law protected by powerful interests is causing insane traffic jams". Quartz. Archived from the original on August 7, 2017. Retrieved May 11, 2019.
  37. "Cato Institute Project on Jones Act Reform". Cato Institute. Archived from the original on June 28, 2018. Retrieved May 11, 2019.
  38. Guilhoto, Joaquim; Gourdon, Karin (April 12, 2019). "Local content requirements and their economic effect on shipbuilding". OECD Science, Technology and Industry Policy Papers. OECD. doi:10.1787/90316781-en. Cite journal requires |journal= (help)
  39. Cavanaugh, J. Michael (August 30, 2017). "Sen. McCain's New Jones Act Repeal Effort Not Likely to Progress". Holland & Knight. Archived from the original on September 14, 2017. Retrieved May 11, 2019.
  40. "DHS: Update: United States Government Response to the Aftermath of Hurricane Katrina". Dhs.gov. September 15, 2005. Archived from the original on June 29, 2010. Retrieved July 6, 2010.
  41. Waiver of Compliance with Navigation and Inspection Laws U.S. Department of Homeland Security, September 1, 2005
  42. Homeland Security grants waiver of Jones Act for Nome fuel delivery from Alaska Business Monthly
  43. See Waiver of Compliance with Navigation Law Archived November 13, 2013, at the Wayback Machine, Dept. of Homeland Security (Nov. 2, 2012)
  44. "DHS Signs Jones Act Waiver". September 8, 2017.
  45. "America denies Puerto Rico request for waiver to bring vital fuel and supplies to island". September 27, 2017.
  46. Bowden, John (September 26, 2017). "US won't waive shipping restrictions for Puerto Rico relief". The Hill. The Hill. Retrieved September 28, 2017.
  47. Choksi, Niraj. "Jones Act Waived for Puerto Rico, Easing Aid Shipment". New York Times. Retrieved September 28, 2017.
  48. Diaz, Daniella. "Trump authorizes waiver to loosen shipping regulations for Puerto Rico". CNN News. CNN News. Retrieved September 28, 2017.
  49. "The Well". Houston Chronicle. August 20, 2006. Retrieved March 8, 2019.
  50. "Coast wise: the U.S. marine industry is keeping a close watch on Jones Act assaults," Workboat. January 1, 2007

Further reading
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