Jones Act 1920 or Merchant Marine Act
Introduction:
The Merchant Marine Act is a national protective law introduced by Sen. Wesley Jones (R-WA), enacted by the 66th U. S. Congress, and signed by President Woodrow Wilson on June 5, 1920. Originally the law was a legal resource to provide for the improvement and maintenance of the American merchant marine. However, the major concern was fixed in the protection of the shipbuilding industry and the compensation on work-related accidents for the workers within the maritime industry. The Jones Act as a protective law for the seaman and/or national defense has been controlled by limited shipowners, maritime unions, and marine transportation companies.
For many reasons the Merchant Marine Act has been modified considering the protectionist scope of the law. At the same time that protectionism has been the base for the criticism against the law. The economist Henry George (1839-1897) said: «Protectionism does to a country in peacetime what enemies do to it in wartime» (Protection of Free Trade, 1886). The effects of The Merchant Marine Act and its protectiveness have been criticized from this economic perspective of Henry George.
However, although the opponents against the Jones Act are growing, there are too many misunderstandings of the law and other implications that must be properly considered. The considerations about the pros and cons of the law are the base for an endless discussion about whether the law could be repealed or modified. Therefore, we need to develop an open spectrum of the law from the historical perspectives, the stakeholders, the changes, and how the law should be reviewed while facing the actual trends on globalization.
Base for a Merchant Marine Act
The Merchant Marine Act have three main conceptions or legal doctrines that are fundamental in the protectionist scope of the law, namely: 1) Maintenance and Cure, 2) Unseaworthiness, and 3) the Cabotage Law itself. The Jones Act is establishing the rules for the moves of any merchandise, equipment, foods, by alongside the coastal waters of the mainland, Hawaii, Alaska, Puerto Rico, and the territories (Virgin Islands, Guam, Samoa, and Islas Marianas). Nowadays, these territories have been excluded total or partially from the requirements of the Cabotage Law. Guam, is covered by the same requirements, but do not impose the U. S. build requirement.
The Cabotage Law is just the section 27 of the Merchant Marine Act. Meanwhile, section 33 is expressly dedicated to the compensation for work-related accidents. The rest of the Merchant Marine Act is dedicated to establishing penalties, and defining the costal borders. There is established the limits in nautical miles from the coastline.
We will start by looking within the concepts of Maintenance and Cure followed by Unseaworthiness.
Maintenance and Cure Doctrine
One of the most antique sea code in history is the Laws of Oléron. Oléron is a coastal island annexed to France today, but in the Middle Ages (12th century) was ruled by Eleanor of Aquitaine. She was the responsible of the Laws of Oléron, which read as follows:
- Art. Vll: If it happens that sickness seizes on any one of the mariners, while in the service of the ship, the master ought… likewise to afford him such diet as is usual in the ship; that is to say, so much as he had on shipboard in his health, and nothing more, unless it please the master to allow it him; and if he will have better diet, the master shall not be found to provide it for him, unless it be at the marine’s own cost and charges…» (as cited in Hudspeth v. Atlantic & Gulf Stevedores, Inc., 266 F. Supp. 937 E.D. La. 1967)
The Laws of Oléron has been the main doctrine ruling the merchant marine for centuries, with an obvious variants accordingly to the legal evolution and changes through the ages. This antique law still leading as the base for different interpretations of the law or court ruling through the years. Michael J. Rauworth is a recognized lawyer specialized in Jones Act. In his writings (Probing the Mysteries of the Jones Act Part 1. Sea History 159, Summer 2017. p.25) he stated that The Doctrine of Maintenance and Cure «is purely a creature borne out of the decisions of judges spanning hundreds of years…»
The terms of ‘maintenance and cure’ can be compared to the conception of ‘health maintenance organization’ or HMO, with the exception that the patient, or seaman, does not pay a premium and the shipowner (or insurer) serves as the HMO. Basically the concept of maintenance and cure is an obligation of the shipowners to provide and/or pay for the health services to the seaman when his health conditions is manifested on board, even if it is work related or not. Therefore, there is an undeniable responsibility of the shipowners to pay the medical expenses (cure) and a reasonable minimum daily payments as maintenance including unearned wages.
Case Study: https://obryanlaw.net/13_Al%20Zawarki%20v%20American%20S.S..pdf
United States Court of Appeals,
Sixth Circuit.
Hizam AL-ZAWKARI, Plaintiff-Appellant
v.
AMERICAN STEAMSHIP COMPANY, Defend- and-Appellee.
Unseaworthiness
After the coverage for ‘cure and maintenance’, if the case may have other elements that may cause injuries, whereas the injured will consider an unsuitable facts, this may also claim for recovery under ‘unseaworthiness’. This doctrine within the merchant laws in U.S. exists from 1903.
The vessel and the owner are, both by English and American law, liable to an indemnity for injuries received by seamen in consequence of the unseaworthiness of the ship, or failure to supply and keep in order the proper appliances appurtenant to the ship.
Therefore, the shipowner should be «liable without fault for injuries that happen…by reason in any way in which the vessel is not reasonably fit for intended use.» (Sea History 159, Summer 2017. p.27) The vessel and it’s appurtenances is meaning the parts of the vessel or any other parts that is used in connection with the vessel, including an adequate crew.
Common types of unseaworthiness:
- Worn out equipment or fixtures (e.g. the rubber feet at the bottom of a ladder are missing or worn-through)
- Lack of proper equipment or fixtures (e.g. no fall protection or other safety equipment onboard when work is being done at a height)
- Improperly designed equipment or fixtures (e.g. a padeye fixed in the middle of a walkway)
- Tripping or slipping hazards (e.g. an oil slick on deck or a rope left in a pathway)
- Lack of safe access between the vessel and shore (e.g. an unsafe gangway or the lack of a gangway)
- Lack of proper warnings (e.g. no posted warning at the opening of a confined space)
- Excepted from: Marineinjurylaw.com/doctrine of unseaworthiness
- However, there are other extended unseaworthiness conditions related with the crew:
- Breach of safety rules (e.g. failure to comply with Coast Guard or OSHA regulations)
- Lack of a properly trained crew (a vessel can be unseaworthy if the vessel owner failed to properly train the injured seaman or other crewmembers in performance of their duties)
- Insufficient crew to perform the task at hand (e.g. only two crewmembers provided to perform a task that should have four crewmembers to be completed safely)
- Working excessive hours (e.g. a captain working in excess of 12 hours per day)
- Insufficient supervision (e.g. no oversight over a deckhand who is performing a task for the first time)
- The absence of safety procedures (e.g. no procedure in place to determine when fall protection equipment must be used)
Excepted from: Marineinjurylaw.com/doctrine of unseaworthiness
Case Study: http://floridamaritimeinjurylawcenter.com/seeking-el-faro-barge-victims/
Merchant Marine in History
The merchant marine laws has been present in the Americans history since the times of the colonial relationship with England. England Navigation Laws aimed at developing a self-sufficient empire. It was possible thanks to the merchant marines, and vessels built and manned on Massachusetts Bay or Casco Bay. At the time, those ships were qualified as an English ship with an English crew. By 1700 Boston was very well positioned among all English ports in the tonnage of its shipping. With the rupture caused by the American Revolution and the long Anglo-French conflict the American fleet expand its horizons and prospered. However, this prosperity was cut during the War of 1812, when it was affected by the British blockade and the American Embargo and Nonintercourse Act, forcing American to ship southern cotton and other goods by land. The U. S. Congress in 1789 imposed the first protection to the local maritime industry by the imposition of 50 cents per ton duty on foreign vessels versus 6 cents per ton on U. S. vessels. In 1817 a Navigation Act established the first prohibition of foreign vessels in U.S. domestic trade. Later in 1886 the Passenger Vessel Services Act bring a new protection to the carriage of passengers between U. S. points.
Between 1815 to 1845, a successful steam navigation started by Robert Folton Clemens through Hudson River from New York to Albany set up an expansive period for the merchant marine industry. Steamboat navigation by the Mississippi and its tributaries also leads the traffic extended on western waters. A depresed period by 1857 and depredations from British-built Confederate naval sparked a panic disproportionate to the numbers of Union ships caught. Because the war-risk, insurance increased, shipowners started seeing foreign flags that called for no extra expenses. After the war, the shift of interests in the nation and the foreign capital investment contributed to the decline of American maritime industry.
The way to current Cabotage Law
Difficulties were higher by the effect of the cost of iron or steel on steamship building. Europe had taken advantage from lowering their expenditures thanks to its iron deposits and technological improvements on construction. To have an idea in numbers of what was meaning this to the American industry, between 1860 to 1910 the foreign commerce values rocket up from $762 million to $3 billion while the American interests shrank from 66% to 8%.
However, the domestic trade that had been protected from foreign competitors since 1817 was a different outcome. The enrolled and licensed shipping in 1860 reported a volume of 3,496,000 tons and increase to a double numbers of 6,726,000 in 1910 (almost 9 times the foreign trade total).
In the continuous protectionism of the maritime industry The Preference Cargo Act was enacted in 1904. This act was the response to a dramatic turndown of the US merchant marine after the Hispanic War. The purpose of this law is to secure the preferred participation of the U. S. Flagged fleet in the transportation of goods between foreign countries and United States. Since then the Preference Cargo Act has been reaffirmed by the Ú.S. Congress.
The Preference Cargo Act today is consistently applied in conjunction with the Merchant Marine Act as amended in 1936 (PL 835). In 1954 The Preference Cargo Act was amended (PL 664) to the effects of requires that at least 50% of any government-controlled cargo must be shipped on privately owned U. S. Flag vessels. In 1985 the Merchant Marine Act was amended again to require that 75% of certain foreign food aid be shipped on privately owned U. S. Flag vessels.
At the end of the Hispanic war and with the invasion of Puerto Rico by the U.S. Troops, Puerto Rico was given to United States as spoils of war by Spain among other agreements in The Treaty of Paris. Puerto Rico was included within the protective movement in the U.S. Congress as early as 1900 by the Foraker Act. By the subjection of Puerto Rico to the cabotage laws of the United States, it was mandatory that «the cabotage between the United States and Puerto Rico will be regulated according to the dispositions of law applicable to such traffic between any two of the great coastal territories of the United States» (Chapter 191, § 9 of the Act of April 12, 1900, 31 Stat. 77. Also known he Foraker Act).
Before WW1 close to a 92% of America’s foreign commerce was carried mostly by British and German flagged ships with few others that offered a satisfactory and less expensive service. In the years of war United States realized how serious it was to lack U.S. flagged ships. After the war a new traffics for commerce were opened in South America, Africa, Asia, and Australia. By the time American owned vessels, were navigating under foreign flags. However, for economic reasons and thanks to the changes in government policies, those foreign flagged vessels were glad to be admitted to neutral registry under the American flag.
An emergency building program was undertaken in 1917 to offset to the losses from Germany’s unrestricted maritime industry. With the new emergency building program financed by government, the American shipping industry had experience a big expansion. In 1916 the US. Congress had created The Shipping Board to help with the establishment of numerous new ship-yards. This move come to be the starting point for a new era within the American maritime industry during the WW1 and years after it. This leadership was zealously protected and strenghtens with the creation of the Merchant Marine Act of 1920 (Publicly known The Jones Act). By 1921 the United States had overtaken Great Britain leading in the world’s merchant fleet industry.
However, the Jones Act was criticized from the beginning. Mr Ernest Gruening, by that time Governor of Alaska, stated that the purpose of Senator Wesley Jones (R. WA) in proposing the Merchant Marine Act of 1920 was «to subject Alaska to steamship service owned in the city of Seattle. Senator Jones no doubt assumed that this would be most helpful to some of his constituents there, as indeed it proved to be, but at the expense, «the heavy expense (from that time on) of our voteless citizens of Alaska» (as stated by the Gobernor of Alaska). Unfortunately, and for the sake of million of U.S citizens, for more than a century and thanks to the Merchant Marine Act, the most expensive maritime still domaining the coastal shipments, but this time at the expense of the Alaskans and Hawaiians taxpayers, and our voteless citizens of Puerto Rico.
According with James Michener (Alaska, 1988), the Merchant Marine Act was rushed through the Congress with a short argument of Senator Jones. The act was enacted to prevent the foreign shipping among U.S. ports, not from competing with American ships, but with rail monopoly that ran then from Seattle to the colony of Alaska. That was a clear political favoritism and intrigue in favor of the political establishment in Washington.
Moreover, in the beginning the new commercial lines were operated by the Federal Shipping Board, which absorbed the initial deficit. «However, as soon as they were on a paying basis, the ships were auctioned off at bargain rates to private operators who agreed to maintain regular services for a period of years» (Dictionary of American History). By 1929 the ‘Jones Act’ had provided profitable contracts in the form of grants to those approved lines that agreed to build new ships. This was one of the must controversial moves addressing the nation to a deep economic depression of 1930, because of competition against cheaper foreign operations and construction costs.
In 1936 Merchant Marine Act was revised to pass the supervisory functions of The Federal Shipping Board to The Maritime Commission. In 1950, this Commission gave a way to a two new agencies; the Federal Maritime Board for policy, and the Maritime Administration for operations. To glorify the competitiveness of American flagged ships, the U.S. Congresss established the terms «operating-differential» and «construction-differential» to justify the difference in costs between American and foreign merchant maritime. However, between 1948-1960, thanks to an effective pressure of the American maritime unions, the daily wage cost increase about four times the costs of the principal foreign merchant marines. Positioning the U.S. Merchant Maritime industry as the most expensive of the world. About half of the construction differentials were absorbed by construction in foreign yards instead of be domestically as intended from the beginning.
During the World War II the government found another reason to request a new emergency building program, with the production of 5,777 vessels, known slow «Liberty ships». One more time taxpayers’ money were used to subsidize the private maritime industry in the sake of national defense. However, foreign trades continued even after war time, and some other were benefited with congressional stipulation of 50-50, whereas half of the cargo sent abroad in the foreign-aid programs were carried in U.S. Flag vessels. When the domestic shipping fell off in the coastal and intercostal trades, the railroad and Interstate Commerce Commission were blamed. However, part of the cause was the mounting wages of marines and longshoremen, and the competition with truck transportation companies.
Jones Act Section 27 or Cabotage Law detailed
The Section 27 of The Merchant Marine Act of 1920 (The Jones Act) is exclusively dedicated to draft the U. S. Cabotage Law.
The country have by nature a deep dependence on the protection for the network of rivers, lakes, and canals as a natural resource for transportation of food and manufactured goods between state and ultimately to the world market. There is also a legitimate right for National defense. This protection is granted by the Cabotage Law within the Jones Act or Merchant Marine Act. This legislation imposes the following requirements to all vessels carrying goods between U.S. ports:
- Must be owned by U.S. companies that are controlled by U.S. citizens with at least 75 percent U.S. ownership.
- At least 75 percent of the crew must be U.S. citizens.
- Vessels must be built or rebuilt in United States.
- Must be registered in United States.
These requirements apply to al trade between ports in along the coasts of U.S. mainland, Alaska, Hawaii, and Puerto Rico. However, these requirements can be waived by the Secretary of Homeland Security during times of national emergency or in the interest of national defense. According to a survey issued by the Maritime Administration (MARAD) there are 47 other nations with laws restricting the foreign access to domestic trade (March, 2013). Those 47 nations represent a 22 percent of the 195 countries recognized under the organization of United Nations (UN). This is the generally known as the law of cabotage.
Cabotage is a word from the French «caboter» that means to sail coastwise or «by the capes». The law of cabotage is driven by a common protective principle of a guaranteed participation of a country’s citizens within its own domestic trade. These laws is also fostering the development of the national industry and gives a preference to a local labor. However, it is important to highlight here that by this legalized system our national security and domestic economy is controlled by private companies. The Secretary of Homeland Security can waive the Jones Act requirements on a case-by-case basis during times of national emergency or in the interest of national defense. Meanwhile the protection from emergencies and the interest of national defense are contingent upon the controls and dominion of empowered private companies entitled by this antiquated law, The Jones Act.
The emergency caused by Hurricanes Harvey in Texas, Irma in Florida, and Maria in Puerto Rico have shown that the U. S. Congress should be seriously considering if a law that must be waived on a regular basis in order to save lives, should be on the books at all.
Furthermore, powerful companies are protecting their own interest while making profits based on national defense. It’s not sound like a policy of a country, in which the economy is an example of a free market…
According to the Transportation Institute, there are at least five important benefits of the Jones Act:
- The Jone Act assures the U.S. mainland and its offshore communities continue to have reliable domestic water transportation service subject to national control in times of emergency.
- Jones Act vessels construction and repair in U.S. shipyards assures the availability of the skilled professionals and the modern facilities needed in times of war or national emergency.
- Freight revenues earned by domestic carriers, shipyards, and repair yards are subject to taxes. Foreign owned carriers and shipyards are not.
- Because of these requirements for the U.S. manned vessels, the American merchant mariner is kept employed and trained, while at the same time maintaining readiness to man essential vessels in times of war or national emergency.
- Environmental standards, liability, safety, and enforcement are assuredly improved by having American owned vessels and U.S. citizens crews responsible for safety delivering the goods along our nation’s waterways.
(Escepted from Transportation Institute)
These same points are the main reasons for the more expensive mode of transportation that cost to the American citizens a higher cost of living and more money in the pockets of Maritime Corporations. With these conceptions the U.S. Merchant Maritime industry is founded in a national dependency for protection among our communities in mainland and U.S. territories. Protection leaded by a privately owned and highly expensive industry.
After the emergency caused by the strike of Hurricanes Irma and Maria in Puerto Rico, President Trump has issued a waiver of Jones Act for only 10 days. Therefore, the U.S. Merchant Maritime has been the main responsible for the transportation of goods, provisions, assisting the 3.5 million of U.S. Citizens in Puerto Rico. However, the same protectionist Jones Act impeded the humanitarian assistance provenient from foreign countries. The ship Artic Sunrise from the Greenpeace organization was impeded by the Jones Act to have access to the Island and to gives the assistance needed to Puertorricans. (https://www.metro.pr/pr/noticias/2017/11/20/asi-uce-el-barco-de-greenpeace-que-no-pudo-traer-ayuda-a-la-isla.html ).
Moreover, according to the ARMY College of Engineers Assessment, who was leading the recovery efforts in Puerto Rico, there were needed about 60,000 poles to rebuild the electrical rids in Puerto Rico. Because the dependency on the U.S. Merchants Maritime companies, only 2500 poles can be shipped per week from the mainland to Puerto Rico. This lack of service can delay the recuperation of Puerto Rico for more than six months without power. No more waiver of Jones Act has been issued during the recuperation stage of Puerto Rico.
This protectionism has been historically used by the big maritime organizations to control the international market of goods and provisions exported or imported. The Department of Justice (DOJ) Antitrust Division found that between 2002 and 2008, Jones Act shipping firms SeaStar and Horizon conspired to fix prices on commercial cargo shipped to Puerto Rico. The investigation led to the conviction of the former president of Sea Star Line, who was sentenced to serve five years in prison for engaging in the conspiracy, one of the longest prison terms for an antitrust violation. In a separate case, both Sea Star and Horizon paid 3.4 million to settle claims arising from the whistleblower, who claim the firms’ conspiracy.
(Read the pronunciation from DOJ here: https://www.justice.gov/archive/atr/public/press_releases/2007/237849.htm )
The Cabotage Law in Studies- What they say?
The U.S. Government Accountability Office (GAO) has issued a report to the U. S. Congress in March 2013 (the report can be retrieved from: https://www.gao.gov/assets/660/653046.pdf). What they found?
1) «Some vessels are operating beyond their expected useful service life, many have been reconstructed or refurbished.»
2) «Some shippers report that qualified bulk-cargo vessels may not always be available to meet their needs.»
3) «Freight rates are determined by a number of factors, including the supply of vessels and consumer demand in the market, as well as costs that carriers face to operate, some of which (e.g., crew costs) are affected by Jones Act requirements.»
4) «Foreign-flag carriers serving Puerto Rico from foreign ports operate under different rules, regulations, and supply and demand conditions and generally have lower costs to operate than Jones Act carriers have.»
5) «Shippers doing business in Puerto Rico that GAO contacted reported that the freight rates are often–although not always–lower for foreign carriers going to and from Puerto Rico and foreign locations than the rates shippers pay to ship similar cargo to and from the United States, despite longer distances.»
6) «According to these shippers, lower rates, as well as the limited availability of qualified vessels in some cases, can lead companies to source products from foreign countries rather than the United States.»
What about the proposed modification of the ways how Jones Act is applied to Puerto Rico? Some stakeholders advocate for an exemption from the U.S.-build requirement for vessels, instead a full exception of Jones Act in PR. According to the proponents of this change, the availability of lower-cost, foreign-built vessels could encourage existing carriers to recapitalize their aging fleets, and could encourage new carriers to enter the market.
What GAO says? «Because of cost advantages, unrestricted competition from foreign-flag vessels could result in the disappearance of most U.S.-flag vessels in this trade, having a negative impact on the U.S. merchant marine and the shipyard industrial base that the Act was meant to protect.» There is not implied the protection of 3.5 million of U. S. Citizens from Puerto Rico, but the protection of the big corporations in control of the maritime industry.
Final thoughts
The Jones Act as a protection of national security have been a clearly and necessary law enacted. However, a few private organizations had taken this protection as a guarantee for their own advantageous, and out of control enrichment. The same law enacted to protect the industry is damaging the development of the protected. Without the open competition to the world in a globalize commerce and industrialization, our maritime industry have felt in disadvantage before other countries. And this is not only because the high cost of operations, but because the lack of modern fleets, and scarcely ship building industry.
Moreover, the most expensive merchant marine is hurting the economy, not only of Puerto Rico, Hawaii, and Alaska. The citizens in the mainland are suffering the extended effects of high cost of merchandise for other industries, goods, etc. The big companies, protected under the shadow of The Jones Act, have extended tentacles across our highways and road for transportation of products that can’t be unloaded out of ports designated by them; adding cost, risks, and contamination to our environment. These effects are doubled in Puerto Rico, Hawaii, and Alaska.
After almost 100 years of protectionism and facing the new trends of globalization, it is the time for review of the purpose of this old fashioned and anachronistic law.
Other Reference:
Dictionary of American History
http://www.encyclopedia.com/social-sciences-and-law/political-science-and-government/naval-and-nautical-affairs/merchant-marine
Transportation Institute
Jones Act
Shipbuilders Councils of America
https://shipbuilders.org/resources
Cargo Preference Laws–Estimated Costs and Effects
RCED-95-34: Published: Nov 30, 1994. Publicly Released: Dec 13, 1994.
https://www.gao.gov/products/RCED-95-34
Characteristics of the Island’s Maritime Trade and Potential Effects of Modifying the Jones Act
GAO-13-260: Published: Mar 14, 2013. Publicly Released: Mar 20, 2013.
https://www.gao.gov/products/GAO-13-260
Note: This paper was previously published at Criminal Justice Issues blog site by the same author.
Soy Puerto Rico 