What Is the Jones Act?
The Jones Act is 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. It is also known as the Merchant Marine Act of 1920.
Understanding the Jones Act
Considered protectionist legislation, the Jones Act 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 its most lasting effect is its requirement that goods shipped between U.S. ports be transported on ships built, owned, and operated by United States citizens or permanent residents.
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 passed 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 Jones Act is a piece of protectionist legislation that considerably increases the costs of shipping goods between two U.S. ports.
History of 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 World War I. The requirement about shipping cargo between American ports only on American ships benefited the constituents of Wesley Jones, the U.S. Senator from the state of Washington who introduced the act. Washington had a large shipping industry, and the act was designed to give the state a monopoly on shipping to Alaska. While the act benefited Jones’ constituents, it increased the shipping costs of other states and U.S. territories.
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.
Criticism of the Jones Act
The act has been criticized for restricting who can conduct trade with Puerto Rico, and it 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.
A 2019 report prepared by the New York City–based economic consulting firm John Dunham and Associates found that for Puerto Rico “the differentials between US- and foreign-flagged carriers range from about 41.0 percent, to as high as 62.0 percent for bulk cargo and between 29 percent and 89 percent for containerized freight.” It calculated the additional costs caused by the act for the island’s economy to be nearly $1.2 billion, which comes to just over $375 per resident.
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 lowering shipping costs.