The Jones Act Debate

Posted by PortVision

The recent onslaught of stormsjones act in the US East Coast highlighted a near century-old law that has been debated for quite a while. The Jones Act specifies that only US owned and flagged vessels with US citizen/permanent resident crews and that were built in the US can travel directly from US port to US port.

Due to storm after storm this winter, the New Jersey Transportation Department’s supply of road salt became so low that officials were considering closing down roads and public bus routes for safety. When they located a supply of this salt in Searsport, Maine, they thought their problems were solved. As reported in the New York Times, however, an appropriate vessel was not available to transport the salt from Maine to New Jersey, and they were left out in the cold.

Waivers to the Jones Act rules must be requested of the US Department of Homeland Security. During the Gulf Oil Spill disaster in 2005 and Hurricane Katrina in 2010, the Jones Act was front and center in the news. A waiver was given in the Gulf Oil Spill disaster for a limited period of time to accept foreign aid to deal with the spill and to provide needed fuel. Emergency gas supplies were delivered to New York after a waiver was granted.

A little history: Otherwise known as the Merchant Marine Act of 1920, the Jones Act was passed to regulate maritime commerce in US waters and between US ports in order to promote and maintain a loyal American merchant marine. It has been revised several times, but has not been substanially changed; in 2006, it was recoded. A result of World War I foreign actions off the US East Coast, one of the more telling points in the policy is this item from the Objectives and Policy section (§50101.a.2): “It is necessary for the national defense...to have a merchant marine...capable of serving as a naval and military auxiliary in time of war or national emergency.”

The Jones Act also deals with seamen’s rights to formalize the responsibility of the ship owner, captain or crew members in cases of personal injury and to sue for remedy. In 1995, a seaman was defined by the US Supreme Court as an employee who spends more than 30 percent of his time in the service of a vessel on navigable waters (Chandris v. Latsis).

The Jones Act is enforced by the US Coast Guard.

Opponents of the Jones Act:

Opponents of the Jones Act feel that shutting out foreign competition limits shipping capacity, thus inflating US freight rates. In 2013, Bloomberg.com quoted an analyst who estimated that shipping oil from the Gulf Coast to the US Northeast coast would lower the per barrel price from $4 to $1.20 if foreign vessels were involved.

A 1999 US International Trade Commission study estimates that ending the act would save more than $1.3 billion annually, although this number is somewhat unclear due to a variety of flexible variables.

Hawaii, in particular, must rely on a limited number of ocean carriers for its needed goods, driving the prices up in that state by at least 30%. Late last year, a group of businesses in Hawaii sued to overturn the law because it interferes with the normal functioning of the marketplace. Alaska, Guam and Puerto Rico also oppose continuation of the Jones Act for similar reasons.

Finally, as reported in the Hawaii Free Press, opponents say that US shipbuilders charge more than double the rates for ship construction than overseas builders. These high rates negatively affect replacement of US-built ships, further limiting level of service between US ports. Bloomberg.com states that domestic cargo carriers are less efficient and twice as old as international vessels.

Proponents of the Jones Act:

Proponents of the Jones Act include President Obama and many representatives in Congress. The American Maritime Partnership, a consortium that includes vessel owners and operators, unions, shipbuilders and repair yards, equipment manufacturers, dredging and other marine contractors, and trade associations, was formed to lobby and build support for the law.

Other supporters include airline, rail and trucking companies, because the Act shifts freight transport from waterways to land, promising more business for them.

Proponents of the Jones Act state that US ships must abide by US laws; it would be unfair to open up trade to foreign ships which would not have to do the same. The law functions as a barrier to entry for foreign carriers. Foreign vessels are not subject to the same wage, labor and environmental regulations that US shipbuilders and managers must abide by. Thousands of jobs would hang in the balance if the Jones Act were repealed.

Defenders of the law also claim that it is necessary for security reasons despite the fact that thousands of foreign flagged ships enter US ports annually without security breaches.

So where do we go from here?

US government and trade organizations have been using PortVision and AIS ship tracking to monitor Jones Act vessel activity since 2007.  Whether for national security or nationalism, the Jones Act is here to stay – at least for now.  How each maritime stakeholder adapts could be the key to profitability and survivability in the coming years.  In an age of increased US domestic shale and petrochemical production, Jones Act vessel activity is increasing, bringing many collateral players with it (shipbuilders, etc.). 

Have an interesting perspective on the Jones Act?  Then we would like to know.

PortVision 360 AIS Vessel Tracking

Posted on May 5, 2014, 6:19:00 PM

Topics: Blog