Keeping Up With the Jones Act

The Jones Act is a federal law that governs maritime commerce in the U.S. Also known as the Merchant Marine Act of 1920, it was originally enacted to revive the country’s shipping industry after World War I. When used in the sense of maritime law, the Jones Act refers to 46 USC section 883, which requires goods and passengers shipped between American ports (“coastwise trade”) to be conveyed on vessels built, owned, and operated by citizens or permanent residents of the U.S.

Although the Jones Act prohibits foreign-built or flagged vessels from engaging in coastwise trade, questions have arisen regarding what exactly this trade consists of. The term generally refers to voyages that begin in any U.S. port and deliver commercial cargo to any other point within the country. Federal district district courts have ruled that certain cargo is technically not ‘merchandise’ because it has no value (e.g. transporting sewage sludge), but 46 USC section 316 specifies that even vessels carrying valueless commodities must be registered in the U.S.

Questions have also arisen over what constitutes a ‘passenger’. The definition applies to any person except the captain, a crew member, or party involved in the ship’s business. There must also be a consideration connecting the passenger to the vessel owner, agent, charterer, or anyone else involved in its operation. Strictly speaking, using a company yacht to develop goodwill with customers requires compliance with the Jones Act, as a consideration / benefit is involved.

Owners and operators of small vessels will be relieved to know that a newly introduced program is mitigating the strict Jones Act requirements. The Secretary of Transportation has been granted the ability to waive the U.S. build requirements for smaller vessels designed to carry a maximum of 12 passengers. The deciding factor is whether or not allowing a foreign-built or flagged boat to engage in coastwise trade will negatively affect American shipbuilders or those who employ ships built in the U.S.

Applying for a waiver requires the ship’s owner or an authorized representative to file certain documents with the Maritime Administration, submit reports on possible effects on other operators and builders in the specified geographic area, and publish in the Federal Registry. After considering any opposition to the waiver, the Secretary of Transportation makes the decision. If the waiver is granted, the boat must meet and comply with all USCG requirements for other ships working in the same trade.

Howard S Reeder Inc