The Jones Act

DEFINITION of 'The Jones Act'

A federal law that regulates maritime commerce in the United States. The Jones Act requires goods shipped between U.S. ports to be transported on ships that are built, owned, and operated by United States citizens or permanent residents.

Also known as The Merchant Marine Act of 1920.

BREAKING DOWN 'The Jones Act'

The Jones Act was enacted by the United States Congress in order to stimulate the shipping industry in the wake of the First World War. It is considered a protectionist legislation. The law focuses on issues related to maritime commerce, including cabotage, which is the transport of people or goods between ports in the same country. It also provides sailors with additional rights, including the ability to seek damages from the crew, captain or ship owner in the case of injury.

Perhaps the most lasting effect of the Jones Act was its requirement that goods shipped between U.S. ports be transported on ships built, owned, and operated by United States citizens or permanent residents. This requirement benefited the constituents of Wesley Jones, the U.S. Senator who introduced the act and who represented the state of Washington. Since Washington State had a large shipping industry, the act was designed to give it a monopoly on shipping to Alaska. While the act benefited his constituents, it increased the shipping costs of other states and U.S. territories.

The Jones Act increases the cost of shipping to Hawaii, Alaska, Puerto Rico, and other non-continental U.S. lands that rely on imports by restricting the number of vessels that can legally deliver goods. The supply of American built, owned, and operated vessels is relatively small compared to the global supply of ships, while the demand for basic goods tends to remain constant or grow. This creates a scenario in which shipping companies can charge higher rates because of a lack of competition, with the increased costs pass on to consumers. This may lead to consumers taking on more debt in order to finance purchases, which can have a negative effect on government finances.

The Act has been criticized for restricting who can conduct trade with Puerto Rico, and has been cited as a factor leading to the island’s economic and budgetary troubles. A study released by the New York Federal Reserve in 2012 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.

Opponents of the act want it repealed, hoping that this will result in decreased shipping costs, lower prices, and less strain on government budgets. Proponents of the act include states with owners of navy yards, defense firms, and shipping industries, as well as the longshoremen and other personnel who work in ports. Scrapping the law will likely reduce the number of U.S. maritime jobs, while reducing shipping costs.

On several occasions, the U.S. government has granted temporary waivers on Jones Act requirements. This is typically done in the wake of a natural disaster, such as a hurricane, in order to increase the number of ships that can legally supply goods to an affected area.