Jones Act

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?

The Jones Act, also known as the Merchant Marine Act of 1920, is a U.S. federal statute that provides for the promotion and maintenance of the American merchant marine.

Why was the Jones Act created?

The Jones Act was designed to protect the U.S. shipbuilding industry and the sea transportation of goods in the U.S. It also seeks to ensure that the country maintains a strong maritime industry, which is viewed as crucial for national security and economic stability.

What are the requirements dictated by the Jones Act?

The Jones Act requires that all goods shipped between U.S. ports be transported on ships that are built, owned, and operated by United States citizens or permanent residents.

How does the Jones Act impact the U.S economy?

Supporters of the Act state that it supports American job creation and contributes to domestic economic output. Critics, however, argue that it increases shipping costs, negatively impacting sectors like agriculture, manufacturing, and energy.

Can the Jones Act be waived?

Yes, the Act can be waived under certain circumstances. The U.S. government can temporarily suspend the act in the interest of national defense or in case of emergencies such as natural disasters.

How does the Jones Act affect Hawaii, Alaska, Puerto Rico, and Guam?

These areas are uniquely impacted by the Jones Act because they heavily rely on maritime shipping for goods. Critics of the Act argue that it significantly increases their cost of living, as importing goods becomes more expensive.

How does the Jones Act relate to seamen’s rights?

The Jones Act provides protection to seafarers. It allows seamen who are injured at sea to bring actions against employers for injury damages.

How does the Jones Act affect the U.S. shipbuilding industry?

The Jones Act helps to maintain a domestic shipbuilding industry by requiring that all commercially traded goods between U.S. ports be carried on U.S.-built ships.

Does the Jones Act affect international trade?

The Jones Act does not prevent foreign vessels from docking at U.S. ports. It only applies to shipping from one U.S. port to another.

Are there any efforts to repeal the Jones Act?

Over the years, there have been various calls to repeal or amend the Jones Act, often due to the potential for reduced freight costs. However, others argue that the Act’s national security benefits outweigh these concerns.

Related Finance Terms

Maritime Law
Cabotage
Merchant Marine Act of 1920
Domestic Shipping
U.S. Coastwise Trade

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