Jones Act Background
The U.S. cabotage laws, commonly referred to as the Jones Act, require all commercial vessels transporting merchandise between ports in the United States to be built, owned, operated and manned by U.S. citizens and to be registered under the U.S. flag. The law applies to any vessel operating between two U.S. ports, whether in the continental United States, or non-contiguous states of Hawaii and Alaska, and also Puerto Rico. It functions to as a barrier to entry for low-cost foreign carriers, which are not subject to the same wage, labor and environmental regulations faced by U.S. shipbuilders and operators.
The Jones Act industry accounts for:
- $14.0 Billion in annual economic output and 84,000 jobs in U.S. shipyards
- 70,000 jobs working on or with Jones Act vessels
- Over 39,000 vessels of all sizes representing an investment of $30 billion
The Jones Act is an essential feature of U.S. national security policy as it provides required capacity to support national security needs and avoid complete dependence on ships controlled by foreign nations. Since the U.S. maritime position in international trades has declined significantly in the last three decades, the Jones Act is the primary maritime market for U.S. shipyards and operators, and its maintenance is key to American Shipping Companys continued success.
Implementation of the Jones Act is the responsibility of the United States Coast Guard, which oversees ship construction, repair and rebuilding, as well as reviewing ownership structures to ensure compliance with the Jones Act.
- Like many nations around the world, the United States has sought to protect its domestic maritime industries since the founding of the nation. It was early recognized that the United States is an "island" nation, wholly dependent on ocean-going trade for its economic and national security. Thus, creation and support of a domestic industry was recognized as a critical national policy.
- While the first cabotage laws were enacted in the early 19th Century, Congress enacted the current statutory language in 1920, and has added a number of amendments since to strengthen and broaden its application.
- The Jones Act enjoys broad and consistent support in the Congress, primarily due to the combined advocacy efforts of the seagoing trade unions; shipyards; and vessel owners. A large lobbying organization, the Maritime Cabotage Task Force (www.mctf.com) was formed more than 10 years ago and has grown to represent not only those directly involved in the Jones Act, but many allied parties as well. It maintains an active effort to build support for the Jones Act among U.S. government officials and to discourage any attempts to weaken or modify the law.
- In addition, two shipbuilding organizations, the Shipbuilders Council of America (SCA) and the American Shipbuilding Association (ASA) maintain active advocacy efforts to build and maintain support for the Jones Act. Aker Philadelphia Shipyard, Inc. is on the board of the SCA, which is comprised of U.S. commercial shipyards, and participates in its lobbying activities as well as maintaining its own active lobbying presence in Washington.
- While the Jones Act has been criticized by economists, some in the shipping community, and other nations seeking to dominate the U.S. domestic maritime markets, no serious effort has been made in the U.S. Congress to amend or weaken the Jones Act. Since 9/11, the national security aspects of the Jones Act have served to strengthen the support it enjoys in the Congress.
- Evidence of the support for the Jones Act can be found in the explicit exemption granted to U.S. cabotage laws under the General Agreement on Tariffs and Trade (GATT) which sought to eliminate all barriers to trade. All subsequent trade agreements maintain this exclusion, despite continued complaints by other maritime nations.
- In recognition of the need to attract additional investment in new vessels, Congress enacted modifications to the Jones Act ownership requirements in 1996. The changes permitted ownership structures such as that created by American Shipping Company (AMSC) to own Jones Act vessels and lease them.