Before Hurricane Maria tore across the island of Puerto Rico in September 2017, few Americans had heard of the Jones Act. If you 1) don’t work in the shipping industry or 2) don’t live in a destination impacted by this law, you might not think much about this sub-section of the Merchant Marine Act of 1920.
The Jones Act requires that all ships carrying goods between two U.S. destinations be built, owned, and operated by U.S. citizens or permanent residents.
During Puerto Rico’s recovery from Hurricane Maria, the Jones Act made headlines nationwide as President Donald Trump issued a temporary waiver for the territory. The goal? To expedite relief, aid, and supplies to the people of Puerto Rico. The temporary waiver also reignited a long debate over the act, which has both fierce advocates and critics.
If you’re currently shipping to a Jones Act destination—or opening a new line of business to an area regulated by the Jones Act—we’ll give you a run-down on everything you need to know about this federal statute.
Where Did the Jones Act Come From?
Before we dive into the implications of the Jones Act, we’ll start with a little history. Congress passed the Merchant Marine Act of 1920—which includes the section known as the Jones Act—in response to German attacks on the U.S. fleet during World War I.
The act was designed to ensure a robust U.S. fleet in case of future global conflict. By reserving the movement of goods for U.S. built, owned, and operated vessels, the Jones Act promotes continued investment in American shipbuilding and shipping lines. It also protects the United States in case of international disputes. By maintaining its own fleet, the U.S. can remain independent of hostile nations, who might, for example, refuse to deliver goods to U.S. ports or attempt to cut off supplies.
How Does the Jones Act Affect Shippers?
Today, the Jones Act has implications for both U.S. states and territories who receive their goods via ocean freight, including:
- Puerto Rico
Note: The U.S. Virgin Islands, America Samoa, and the Northern Mariana Islands are all exempt from the Jones Act.
If you’re shipping goods to one of these areas, there can be some complexities involved. Choosing a company who has significant familiarity with Jones Act destinations can help you navigate with greater ease. First and foremost, you’ll need to move your cargo on a qualified vessel. An experienced company will have relationships with eligible carriers, so they can connect you quickly and easily. Spaces on these vessels can get tight since a limited number of operators are allowed in these lanes. A knowledgeable forwarder can leverage existing relationships to help you find capacity in tight times.
Finally, your 3PL or freight forwarder is crucial in navigating requirements. U.S. territories like Puerto Rico and Guam have their own paperwork, procedures, and customs/duties regulations. An experienced forwarder can make it much simpler for you.
As you might imagine, the Jones Act has both its supporters and its detractors. We’ll run you through a few of the common points of view so you can get a lay of the land.
Criticisms of the Jones Act
There are many who argue for the repeal of the Jones Act. One of its fiercest critics was former Senator John McCain, who called for the abolishment and amendment of the act during his time in office. Opponents of the act contend that:
- It stifles competition resulting in higher prices for residents of Alaska, Hawaii, Puerto Rico, and other Jones Act destinations.
- The act harms exporters in Jones Act destinations by creating significantly higher export costs. In fact, a report from the Hawaii Shippers Council suggests it might depress Hawaii’s GDP by as much as 3.1% a year. i
- The Jones Act is costing steamship lines significantly. If they were able to purchase vessels from other friendly nations, shipping companies would have access to a greater variety of ships at significantly lower cost. ii
Points in Favor of the Jones Act
The Jones Act also has a significant number of advocates, including Hawaii Senator Mazie Hirono. She believes that the Jones Act ensures stability for Hawaii’s shipping lanes, which are a vital lifeline for the state’s residents. For example, estimates from a University of Hawaii suggest that the state has no more than a 10-day supply of fresh produce at any given time. iii A disruption in ocean freight would quickly impact the availability of fresh food in the Aloha State.
Other supporters of the Jones Act cite the law’s impacts on the U.S. economy and infrastructure, including:
- Supporting the U.S. maritime industry to the tune of 650,000 American jobs and $150 billion in economic benefits, according to estimates from a group of U.S. members of Congress who serve on the Senate Committee on Commerce, Science, and Transportation and the House Transportation and Infrastructure Committee. iv
- Encouraging investments by shipping companies who can confidently purchase and maintain vessels that are guaranteed to operate in Jones Act shipping lanes.
- Underwriting continued development of ports and surrounding infrastructure that supply U.S. destinations.
- Maintaining our national security by ensuring a fleet of American-controlled vessels that can be mobilized in case of global conflict and can’t be restricted by outside influences or interests.
Doing Business Within a Jones Act Destination
No matter which side of the Jones Act debate you fall on, the reality is that the Jones Act is here to stay—for the time being. However, by understanding the provisions of the act and working with an experienced freight partner, you can take advantage of the numerous business opportunities within Jones Act destinations.
Looking for a partner to assist with your Jones Act destination freight? We’ve been working in Jones Act lanes since 1991, with extensive experience in Guam, Hawaii, Alaska, and Puerto Rico. We’d be happy to assist you. Just get in touch with us for a complimentary consultation.
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