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.

The Jones Act is Section 27 of the Merchant Marine Act of 1920, which provided for the maintenance of the American merchant marine.

Understanding the Jones Act

The Jones Act was introduced by Wesley Jones, the U.S. Senator from the state of Washington, who designed the legislation to give his state a monopoly on shipping to Alaska. It was enacted by the United States Congress to stimulate the shipping industry in the wake of World War I. Considered protectionist legislation, the Jones Act focuses on issues related to maritime commerce, including cabotage or the transport of people or goods between ports in the same country.

The Act requires that goods shipped between U.S. ports be transported on ships built, owned, and operated by United States citizens or permanent residents. This provision and its restrictions increase the cost of shipping to Hawaii, Alaska, Puerto Rico, and other non-continental U.S. lands that rely on imports.

Goals of the Jones Act

• Launched to revitalize the U.S. maritime shipping industry, which had been depleted after World War I.
• Support the shipping industry and prevent the United States from relying on foreign-built ships.
• Generate jobs and business revenue. The Jones Act supports 650,000 American jobs, generating $150 billion in economic activity each year.

Jones Act Requirements

• Ships transporting cargo between two U.S. ports must be owned by U.S.-based companies, with over 75% of the ownership stake held by U.S. citizens.
• A ship's crew must consist of a majority of U.S. citizens.
• The ships must be built and registered in the U.S.

Jones Act Waivers

• In the wake of a natural disaster, such as a hurricane, the Act may be waived to increase the number of ships that can legally supply goods to an affected area.
• The Secretary of Defense can request waivers in the "interest of national defense" and there is a separate procedure for non-defense entities. In both cases, the final authority for a waiver is the Secretary of Homeland Security.
  

Criticism of the Jones Act

The Jones Act has been cited as a factor affecting Puerto Rico's economic and budgetary troubles by affecting trade with the island. A 2019 report found that for Puerto Rico "the differentials between U.S. and foreign-flagged carriers range from about 41% to as high as 62% for bulk cargo and between 29% and 89% for containerized freight.” The additional costs caused by the Act for the island’s economy to be nearly $1.2 billion, which comes to roughly $374 per resident.

The waiver of the Act was implemented in 2022 only after Hurricane Fiona hit Puerto Rico. The Biden administration allowed a non-U.S. flagged ship to transport fuel to Puerto Rico, following pressure to waive the rule in the face of a fuel shortage to ensure that citizens could run generators needed for electricity and the functioning critical facilities.

Opponents hope that a repeal of the Act 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.

In early 2022, the Jones Act made headlines for its potential role in the U.S.-Russia oil business. Following Russia's invasion of Ukraine in late February, the U.S. banned Russian oil and gas imports on March 8.

The U.S. has traditionally relied on imports from Russia, especially Hawaii, which imports Russian crude oil per year, accounting for up to a quarter of all Russian oil shipments to the U.S. Critics of the Jones Act suggest that it limits the viability of shipping oil and gas to remote areas like Hawaii, forcing the state to rely on imports from Russia.

The Bottom Line

The Jones Act is a 1920 law that limits how cargo is transported by sea. It requires any cargo shipped between U.S. ports to be carried by U.S. ships, with American crews. Originally intended as a measure to support the strategically-important shipping industry, it is now considered a classic example of protectionism.