What is the Jones Act?
The Jones Act is a federal law that regulates maritime commerce in the United States. The Jones Act requires that goods shipped between American ports be transported on ships built, owned and operated by American citizens or permanent residents. The Jones Act is section 27 of the Merchant Marine Act of 1920, which provided for the maintenance of the United States Merchant Navy.
Understanding the Jones Act
Considered protectionist law, the Jones Act focuses on matters related to maritime trade, including cabotage, which is the transportation of people or goods between ports in the same country. It also provides seafarers with additional rights, including the possibility of claiming damages from the crew, master or owner of the ship in the event of injury. Perhaps its most lasting effect is its requirement that goods shipped between American ports be transported on ships built, owned and operated by American citizens or permanent residents.
The Jones Act increases the cost of shipping to Hawaii, Alaska, Puerto Rico, and other non-mainland United States dependent on imports by limiting the number of vessels that can legally deliver goods. The supply of ships built, owned and operated by the United States is relatively small compared to the global supply of ships, while demand for commodities tends to remain constant or increase. This creates a scenario in which shipping companies can charge higher rates due to lack of competition, with the increased costs passed on to consumers. This can lead consumers to take on more debt to finance their purchases, which can have a negative effect on public finances.
The Jones Act is protectionist law that dramatically increases the costs of shipping goods between two US ports.
History of the Jones Act
The Jones Act was enacted by the United States Congress to stimulate the shipping industry in the aftermath of the First World War. The requirement to ship cargo between U.S. ports only on U.S. ships benefited the constituents of Wesley Jones, the U.S. senator from Washington State who introduced the law. Washington had a large shipping industry, and the law was designed to give the state a monopoly on shipping to Alaska. Although the law has benefited Jones’ voters, it has increased shipping costs to other states and territories in the United States.
The United States government has repeatedly granted temporary exemptions from the requirements of the Jones Act. This is usually done following a natural disaster, such as a hurricane, in order to increase the number of ships that can legally supply goods in an affected area.
Jones Act Review
The law has been criticized for limiting who is allowed to trade with Puerto Rico, and has been cited as a factor leading to the island’s economic and fiscal problems. A study published by the Federal Reserve of New York in 2020 found that the cost of transporting a shipping container to Puerto Rico from the mainland was twice as high as shipping the same container from a foreign port.
A 2019 report prepared by New York-based economic consultancy John Dunham and Associates found that for Puerto Rico, “the gaps between US and foreign carriers range from approximately 41.0% to 62.0% for bulk cargo and between 29 percent and 89 percent for containerized cargo. “He calculated the additional costs caused by the law to the economy of the island at nearly $ 1.2 billion, or just over $ 375 per capita.
Opponents of the law want it repealed, hoping it will translate into lower shipping costs, lower prices, and less pressure on government budgets. Supporters of the law include states with shipyard owners, defense companies, and shipping industries, as well as longshoremen and other staff working in ports. The removal of the law is likely to reduce the number of maritime jobs in the United States while reducing shipping costs.