Merchant Marine Act of 1920

The Merchant Marine Act of 1920 (P.L. 66-261) is a United States Federal statute that regulates maritime commerce in U.S. waters and between U.S. ports.

Section 27, better known as the Jones Act, deals with cabotage (i.e., coastal shipping) and requires that all goods transported by water between U.S. ports be carried in 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 purpose of the law is to support the U.S. maritime industry.^[1]

In addition, amendments to the Jones Act, known as the Cargo Preference Act (P.L. 83-644), provide permanent legislation for the transportation of waterborne cargoes in U.S.-flag vessels. The Merchant Marine Act of 1920 has been revised a number of times, the most recent and thorough revision was the re-codified version of 2006.^[2]

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

The cabotage provisions restrict the carriage of goods or passengers between United States ports to U.S. built and flagged vessels. Since 2006 it has been codified as portions of 46 U.S.C. ch.551 (Coastwise Trade). At least 75 percent of the crewmembers must be U.S. citizens. Moreover, the steel of foreign repair work on the hull and superstructure of a U.S.-flagged vessel is limited to 10 percent by weight.^[3] This restriction largely prevents American shipowners from refurbishing their ships at overseas shipyards.

Seaman'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 seaman (see: Seaman (Admiralty Law))

It allows injured sailors to make claims and collect from their employers for the negligence of the ship owner,^[4] 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. § 688(a), 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..."

This allows seamen to bring actions against ship owners based on claims of unseaworthiness or negligence. These are 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." Any worker who spends less than 30 percent of his time in the service of a vessel on navigable waters is presumed not to be a seaman under the Jones Act. An action under the Act may be brought either in a U.S. federal court or in a state court. The seaman/Plaintiff is entitled to a jury trial, a right which is not afforded in maritime law absent a statute authorizing it.

Criticism

Critics note that the legislation results in costs for moving cargoes between U.S. ports that are far higher than if such restrictions did not apply. In essence, they argue, the act is protectionism.^[5]

Critics also contend the Jones Act has caused the U.S.shipbuilding industry to build vessels in the U.S. which are more expensive than those built elsewhere. Consequently, U.S. shipbuilders are priced out of the international market for merchant ships. A 2001 U.S. Department of Commerce study indicates that U.S. shipyards build only 1 percent of the world's large commercial ships. Few ships are ordered from U.S. shipyards except for cabotage. U.S. operators of ships in cabotage have an economic incentive to continue operating old vessels rather than replace them with relatively high cost vessels built in the U.S. The report concluded that the lack of United States competitiveness stemmed from foreign subsidies, unfair trade practices, and lack of U.S. productivity.^[6]

Moreover, critics point to the lack of a U.S.-flagged international shipping fleet. They claim that it is 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.

In June 2010 in an unsuccessful effort to garner support to repeal the Jones Act. Sen. John McCain said that this law restricts shipping and raises costs to consumers in Hawaii, Alaska, Puerto Rico and Guam.^[7] His proposed legislation to fully repeal the Jones Act of 1920,^[8] co-sponsored by Senator Jim Risch, was introduced to Congress as the Open America's Water Act on June 25, 2010^[9][10]

"The legislation that would fully repeal the Jones Act, a 1920s law that hinders free trade and favors labor unions over consumers. Specifically, the Jones Act requires that all goods shipped between waterborne ports of the United States be carried by vessels built in the United States and owned and operated by Americans. This restriction only serves to raise shipping costs, thereby making U.S. farmers less competitive and increasing costs for American consumers".

"This was highlighted by a 1999 U.S. International Trade Commission economic study, which suggested that a repeal of the Jones Act would lower shipping costs by approximately 22 percent. Also, a 2002 economic study from the same Commission found that repealing the Jones Act would have an annual positive welfare effect of $656 million on the overall U.S. economy. Since these studies are the most recent statistics available, imagine the impact a repeal of the Jones Act would have today: far more than a $656 million annual positive welfare impact – maybe closer to $1 billion. These statistics demonstrate that a repeal of the Jones Act could prove to be a true stimulus to our economy in the midst of such difficult economic times.

"The Jones Act also adds a real, direct cost to consumers – particularly consumers in Hawaii and Alaska. A 1988 GAO report found that the Jones Act was costing Alaskan families between $1,921 and $4,821 annually for increased prices paid on goods shipped from the mainland. In 1997, a Hawaii government official named Gene Ward asserted that Hawaii residents pay an additional $1 billion per year in higher prices because of the Jones Act. This amounts to approximately $3,000 for every household in Hawaii.’” The previous paragraph should raise red flags as it comes from Rob Quartels widely discredited independent consultants who claim that the Jones Act costs families in Hawaii $3,000 annually. Curiously, he avoids mention of the University of Hawaii study released Nov. 19,1997 that found serious errors (such as triple counting) in Quartel's analysis and that concluded the repeal of the Jones Act would mean an annual loss per Hawaii household of $611 to $3,563, and the loss of up to 17,025 jobs. ^[9][10]

Support

If we did not have the Jones Act, cargo preference, the MSP program and Voluntary Intermodal Sealift Agreement (VISA) programs, I can assure you that it is unlikely that ships would remain under the U.S. flag. And the U.S.-citizen mariner pool needed for the Department of Defense in times of national emergency or war would simply disappear.

U.S. Maritime Administrator, Capt. William Schubert^[11]

Supporters of the Shipping 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 say that it also protects seafarers from deplorable living and working conditions often found on foreign-flagged ships.^[6]

Some proponents make the case that allowing foreign-flagged ships to engage in commerce in American domestic 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.^[12]

“America needs a strong and vibrant U.S.-Flag Merchant Marine. That is why you … can continue to count on me to support the Jones Act (which also includes the Passenger Vessel Services Act) and the continued exclusion of maritime services in international trade agreements.” Barack Obama, August 28, 2008 ^[13]

“I can assure you that a Reagan Administration will not support legislation that would jeopardize this long-standing policy ... embodied in the Jones Act ... or the jobs dependent on it.” President Ronald Reagan, 1980

The [Jones Act trailership] SS NORTHERN LIGHTS made 25 voyages and 49 port calls [to the Iraqi war zone]. She carried 12,200 pieces of military gear totaling 81,000 short tons and covering over 2,000,000 square feet (190,000 m²). Those statistics clearly demonstrate the value that the U.S.-flag shipping industry brings to the Defense Transportation System.” General Norton A. Schwartz, USAF, Commander in Chief, U. S. Transportation Command, 2005

The Jones Act has been supported politically by Presidents Obama, Clinton, Bush, Reagan, Carter and Ford for starters, all the way back to Woodrow Wilson who originally signed it into law in 1920. It is supported by American military leaders, most recently in a statement by Lt. Gen. Roger Thompson, deputy commander in chief, U.S. Transportation Command. There also are 239 co-sponsors of a pro-Jones Act Resolution in the U.S. House of Representatives.

The Shipping Act also has support from the domestic airline, trucking, and rail industries. "Reduced to its essential terms, the Jones Act simply requires companies operating in the domestic commerce of the United States to comply with U.S. laws. This requirement includes corporate taxes, the National Labor Relations Act, the Fair Labor Standards Act, Coast Guard standards, employing American citizens, etc. American ships are subject to these laws and foreign ships are not. This same fundamental principle applies to every other company doing business in the United States, from agriculture to retail." (Quote from R.J. Pfeiffer 1997. Maritime expert former CEO Alexander Baldwin.)

Waivers of Shipping 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 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 (156 m) 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 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.^[14]

In the wake of Hurricane Katrina, Homeland Security Secretary Michael Chertoff temporarily waived the U.S. Shipping Act for foreign vessels carrying oil and natural gas from September 1 to September 19, 2005.^[9][10]

Guam, American Samoa, and the Northern Marianas in the Pacific and the U.S. Virgin Islands in the Caribbean are exempt from provisions of the Jones Act because so little shipping goes to those ports that requiring American cabotage would cause hardship.^{[citation needed]}

See also

• Flag of convenience
• Passenger Vessel Services Act of 1886
• Seaman status in United States admiralty law

References

1. ^ CRS Report for Congress: Agriculture: A Glossary of Terms, Programs, and Laws, 2005 Edition – Order Code 97-905
2. ^ [1]
3. ^ "Cabotage laws put the Act in frame: Push to tighten legislation may spark WTO review," Lloyd's List International. September 13, 2006.Lloyd's List (subscription required for news content)
4. ^ jones act
5. ^ "Congressional Record E1593 Thursday, July 24, 2003." Congressman Ed Case of Hawaii introducing the Shipping Open Market Act of 2003.
6. ^ ^{a b} "Maritime law tough to navigate," Portland Press Herald/Maine Sunday Telegram. October 3, 2006.
7. ^ McCain Seeks Jones Act Repeal
8. ^ Open America’s Waters Act Bill
9. ^ ^{a b c} "DHS: Update: United States Government Response to the Aftermath of Hurricane Katrina". Dhs.gov. September 15, 2005. http://www.dhs.gov/xnews/releases/press_release_0730.shtm. Retrieved July 6, 2010. 
10. ^ ^{a b c} http://npga.org/files/public/Jones_Act_Waver_9-05.pdf
11. ^ United States House Committee on Armed Services (June 13, 2002). "HASC No. 107-42, Vessel Operations Under Flags of Convenience". United States House of Representatives. http://commdocs.house.gov/committees/security/has164220.000/has164220_0.HTM. Retrieved May 4, 2007. 
12. ^ "Reform has spurred debate,"^{[dead link]} The Virginian-Pilot. November 19, 1995.
13. ^ "Obama Reaches Out to SIU and Michael Sacco in a Letter After SIU Endorsement"
14. ^ "Coast wise: the U.S. marine Jeff Ownz is keeping a close watch on Maritime Act assaults," Workboat. January 1, 2007

Further reading

• Ogletree, Bill, Jones Act – Maritime Law for the Injured Worker (2007). Online Version
• Sethi, Arjun, The Merchant Marine Act of 1920: The Impact on American Labor (2005).

External links

• The full text of the Merchant Marine Act of 1920 with 2006 Re-Codification
• Summary of contents of Merchant Marine Act of 1920
• Testimony by Deputy Maritime Administrator on September 15, 1998 in Support
• Maritime Cabotage Task Force a Jones Act political action committee
• Congressional Research Service Report RS21566 The Jones Act: An Overview.