Definition
The Jones Act, also known as the Merchant Marine Act of 1920, is a United States federal law that promotes and maintains the American merchant marine industry. It mandates that all goods shipped between U.S. ports must be transported on ships that are built, owned, and operated by United States citizens or permanent residents. The Act also provides rights and protections to sailors, including the ability to seek damage from employers in case of injury.
Phonetic
The phonetic transcription of “Jones Act” is: /ˈdʒoʊnz ækt/
Key Takeaways
- The Jones Act, formally known as the Merchant Marine Act of 1920, is a federal law that regulates maritime commerce in U.S. waters and between U.S. ports, stating that any goods shipped by water between U.S. ports must be transported on a U.S.-flagged ship constructed in the United States, owned by U.S. residents, and crewed by U.S. citizens or permanent residents.
- The Act’s main aim is to support the U.S. maritime industry by protecting it from foreign competition. This, in theory, ensures there’s a strong merchant marine that can be called upon in times of war or national emergency.
- However, critics of the Jones Act argue that it contributes to high transportation costs, and in some cases, hinders disaster relief efforts. The requirement for U.S.-built ships raises costs and leads to higher prices for consumers, particularly in non-contiguous regions like Hawaii and Puerto Rico.
Importance
The Jones Act, officially known as the Merchant Marine Act of 1920, holds significant importance in the field of business and finance, especially in relation to maritime and shipping industries. This U.S. federal statute regulates maritime commerce in U.S. waters and between U.S. ports. It mandates that goods shipped between U.S. ports must be transported on ships that are built, owned, and operated by United States citizens or permanent residents. Economically, this law supports the U.S. shipbuilding industry and maritime labor, providing them a monopoly over domestic shipping routes. However, it can also increase shipping costs, impacting sectors like agriculture and other industries that heavily rely on transported goods. Furthermore, it plays a role in national security, helping maintain a strong merchant marine that can support the country’s defense and commercial needs.
Explanation
The Jones Act, officially known as the Merchant Marine Act of 1920, serves a crucial role in promoting and maintaining the American maritime industry, thus protecting the nation’s commerce and defense capabilities. The primary purpose of this act is to support a sustainable domestic maritime industry, which is vital for national security. It bolsters the U.S. economy by safeguarding American maritime jobs and promoting marine transportation, which is a crucial aspect of the nation’s transportation system. By mandating that goods transported between two U.S ports must be carried on ships that are built, owned, and operated by American citizens, the Jones Act is used to fortify American maritime commerce. Additionally, these vessels must also be registered in the United States. These provisions establish a significant degree of economic protectionism for the American shipping industry, aimed at deterring foreign competition on domestic routes. The Jones Act is thus strategically used to uphold the country’s ability to build and maintain a fleet of commercial ships, thereby contributing to national security during times of war or other emergencies.
Examples
1. Puerto Rico’s Economical Impact: One notable real world implication of the Jones Act is its effect on Puerto Rico’s economy. The Jones Act mandates that ships transporting goods between two U.S. ports must be U.S-made, U.S-owned and U.S-crewed. This results in higher shipping costs for goods sent to Puerto Rico from the mainland U.S., which has contributed to the region’s economic struggles. Puerto Ricans often end up paying twice as much for U.S goods compared to their other Caribbean neighbors, driving up costs for consumers and businesses. 2. The 2010 Deepwater Horizon Oil Spill: After the 2010 oil spill in the Gulf of Mexico, foreign countries offered assistance to help clean up the disaster. However, due to the Jones Act, these offers were initially declined because the law prohibited foreign-owned ships from moving between U.S. ports. The Jones Act was eventually waived in this case but it caused significant delays in the clean-up process. 3. The Impact on Hawaii’s Economy: Similar to Puerto Rico, Hawaii also suffers from the monopolistic shipping industry resulting from the Jones Act. The cost of living in Hawaii is significantly higher than that of the majority of the U.S., largely due to the inflated transportation costs of importing goods from the U.S mainland. The Jones Act has been blamed for inflated prices of goods and reduced economic competitiveness in Hawaii.
Frequently Asked Questions(FAQ)
What is the Jones Act?
Why was the Jones Act created?
What are the requirements dictated by the Jones Act?
How does the Jones Act impact the U.S economy?
Can the Jones Act be waived?
How does the Jones Act affect Hawaii, Alaska, Puerto Rico, and Guam?
How does the Jones Act relate to seamen’s rights?
How does the Jones Act affect the U.S. shipbuilding industry?
Does the Jones Act affect international trade?
Are there any efforts to repeal the Jones Act?
Related Finance Terms
- Maritime Law
- Cabotage
- Merchant Marine Act of 1920
- Domestic Shipping
- U.S. Coastwise Trade
Sources for More Information
