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Jones Act 101

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Maritime cabotage, or coastwise trade as it is referred to in many countries, may generally be defined as the movement of goods or passengers between two ports or places within the same state. While in some countries the definition has been expanded to include certain other related activities, the terms cabotage and coastwise trade are used interchangeably when referring to the domestic movements of cargo and passengers.



Restriction of access to cabotage trades is a protection measure that has traditionally been a policy choice of many maritime states. Its aim is to reserve to national-flag vessels those activities that involve domestic movements of goods and passengers. More recently, this aim has been expanded in certain instances to include commercial activities such as oil and gas exploration and development.



In Australia, these types of laws are titled as the Coastal Water Acts. In Canada, it is known as the Coasting Trade Act. For the European Union, it uses a different identifier, Regulation (EC) 3577/92.

For those yachts that call upon U.S. ports, they will be familiar with the Merchant Marine Act of 1920, more commonly known as the Jones Act.



Federal laws protecting U.S. shipping date back to the first Congress in 1789. American shipping in the United States — coastwise trade — has been protected from foreign competition in order to encourage the development and maintenance of an American merchant marine. This is done for both national defense and commercial purposes. As a result, all vessels engaged in the U.S. coastwise trade have been required to be American-built, American-owned and American-crewed.



The coastwise law governing the transportation of merchandise was first established by Section 27 of the Merchant Marine Act of 1920, sponsored by U.S. Sen. Wesley L. Jones (R-Washington), hence its nickname of the Jones Act. This act revamped U.S. shipping laws governing cabotage, shipping mortgages, seamen’s personal injury claims, and several other maritime topics.



The Jones Act provides that the transportation of merchandise between U.S. points is reserved for U.S.-built, -owned and -documented vessels. As stipulated in 46 U.S.C. section 55102, “a vessel may not provide any part of the transportation of merchandise by water, or by land and water, between points in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel (1) is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade; and (2) has been issued a certificate of documentation with a coastwise endorsement under chapter 121 of Title 46 or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement.”



Consequently, foreign-flag vessels are prohibited from engaging in the coastwise trade and the transporting of merchandise between U.S. coastwise points.



In addition, the same prohibitions apply to U.S.-flag vessels that do not have a coastwise endorsement on their document, i.e., are not coastwise qualified. In yachting, this is most commonly seen on foreign-built yachts or those yachts that were built in the U.S., registered under a foreign-flag, and then later returned to the U.S. registry. In the latter scenario, once a yacht leaves the U.S. flag, the coastwise endorsement is lost. If that yacht returns to a U.S. flag in the future, a waiver may be obtained to reinstate the coastwise endorsement, but it is not a guarantee. They are usually only granted for yachts less than 200 GT.

The Jones Act applies to the United States, including the island territories and possessions of the United States, including Puerto Rico. However, the coastwise laws generally do not apply to the following: 1) American Samoa; 2) the Northern Mariana Islands; 3) Canton Island; or 4) the Virgin Islands.



A vessel that is built in, documented under the laws of, and owned by citizens of the United States, and which obtains a coastwise endorsement from the U.S. Coast Guard (USCG), is referred to as “coastwise-qualified.” Specifically, the term “coastwise-qualified vessel” means a U.S.-flag vessel having a certificate of documentation with a coastwise endorsement. As stated above, simply being registered under the U.S. flag does not automatically permit coastwise trade.



The certificates of documentation issued by the USCG provide conclusive evidence of nationality for international purposes, which allow qualified vessels to engage in restricted coastwise trade. In order to engage in coastwise trade, a vessel must meet certain eligibility requirements to qualify for a certificate of documentation and coastwise endorsement. These requirements are solely within the purview of the USCG. They make determinations such as what constitutes a U.S.-built vessel.



For those of us in yachting that review the above summary and the restrictions related thereto, one may question how so many foreign-flagged yachts are permitted to charter in U.S. waters? Many of them are not owned by U.S. citizens, not built in the U.S., and most certainly not crewed by Americans.

For this answer, we must look to the federal agency responsible for enforcement of the Jones Act. That agency is U.S. Customs.



U.S. Customs has consistently held that when a yacht is chartered under a bona fide bareboat charter, the bareboat charterer is treated as the owner of the yacht for the period of the charter. Because the owners are not considered “passengers” for purposes of the coastwise laws, the charterer is not prohibited to use the yacht for pleasure purposes only.



A yacht chartered under an agreement other than a bareboat charter (e.g. a time or voyage charter) and used in coastwise transportation would be subject to penalties under the Jones Act. A yacht chartered under a bareboat charter would also be subject to penalties if the bareboat charterer used it in the coastwise trade and not for pleasure, such as to transport passengers between coastwise points or entirely within territorial waters.

 

Capt. Jake DesVergers is chief surveyor for International Yacht Bureau (IYB), an organization that provides flag-state inspection services to yachts on behalf of several administrations. A deck officer graduate of the U.S. Merchant Marine Academy at Kings Point, he previously sailed as master on merchant ships, acted as designated person for a shipping company, and served as regional manager for an international classification society. Contact him at +1 954-596-2728 or www.yachtbureau.org. Comments on this column are welcome at editorial@the-triton.com.

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