Commerce of the Seas – Stupidity of the Jones Act

Go Lean Commentary

CU Blog - Commerce of the Seas - Stupidity of the Jones Act - Photo 1In the Caribbean, we are surrounded by water (straits, banks, Atlantic Ocean, Caribbean Sea, etc); if you stare upon the waters in the middle of a sunny day, you start to see a mirage – a distortion in reality. In the Caribbean, we are also surrounded by a lot of stupidity. Make no mistake, this is not a mirage; it is mercantilism*.

In a previous blog, this commentary asserted that the historicity of a lot of stupidity in society is due to Crony-Capitalism:

Someone is getting paid!

This applies in so many areas of American life that Caribbean people can learn lessons from this history and distortion in reality. This commentary is 1 of 4 in a series considering the Lessons in Economic History related to “Commerce of the Seas”, the Crony-Capitalism in laws and practices around the maritime eco-system in the United States … and other countries. The full series is as follows:

  1. Commerce of the Seas – Stupidity of the Jones Act
  2. Commerce of the Seas – Book Review: ‘Sea Power’
  3. Commerce of the Seas – Shipbuilding Model of Ingalls
  4. Commerce of the Seas – Lessons from Alang (India)

The reference to “Commerce” refers to the economic interests of the 30 member-states in the Caribbean region. There are so many Lessons in Economic History for us to glean:

Around the world, countries that had access to the “Sea” have a distinct advantage economically versus countries that were land-locked; i.e. England versus Austria.

Mercantilism dictated that empires force rules and laws to preserve commerce for their home countries. This was also the case for the United States. One prominent law that was instituted was the Jones Act; see more in Appendix B below.

The Jones Act mandates that for a ship to go from one US port to another US port it must be American-made and American flagged. Also, for foreign ships to trade in US Territories, they must first journey to a foreign port before they could journey to another American port to transport goods. This seems “stupid”; but the adherence to this law keeps American maritime commerce options afloat; this means someone is getting paid; see VIDEO in Appendix A below, highlighting a distortion in the reality of Puerto Rico-to US Mainland trade.

How about the Caribbean, do we have or need maritime “protectionism” in the laws of the member-states of our region? The answer is affirmative for the dysfunctional US Territories; there is a need for economic regionalism, not protectionism.

The US Territories of Puerto Rico and the US Virgin Islands are also regulated by the Jones Act. According to the encyclopedic reference (in Appendix B below), this is not good; it hinders economic development!

In March 2013, the Government Accountability Office (GAO) released a study of the effect of the Jones Act on Puerto Rico that noted “freight rates are set based on a host of supply and demand factors in the market, some of which are affected directly or indirectly by Jones Act requirements.” The report further concludes … [that] freight rates between the United States and Puerto Rico are affected by the Jones Act.” The report also addresses what would happen “under a full exemption from the Act, the rules and requirements that would apply to all carriers would need to be determined.” The report continues that “while proponents of this change expect increased competition and greater availability of vessels to suit shippers’ needs” …

The American territories in the Caribbean are in the middle of the Caribbean geography, rimming the Caribbean Sea. The “Laws of the Sea” need to reflect this reality and not just political alignments. This is the purpose of the book Go Lean … Caribbean, to help reform and transform the societal engines for the 30 member-states of the Caribbean region. The book specifically addresses customization to the “Laws of the Sea” to benefit the Caribbean region. The book serves as a roadmap for the introduction and implementation of the Caribbean Union Trade Federation (CU). This would be the governmental entity for a regional Single Market that covers the land territories of the 30 member-states, and their aligning seas; (including the 1,063,000 square miles of the Caribbean Sea in an Exclusive Economic Zone). The Go Lean/CU roadmap features this prime directive, as defined by these 3 statements:

  • Optimization of the economic engines to grow the regional economy to $800 Billion & create 2.2 million new jobs.
  • Establishment of a security apparatus to protect public safety and ensure the economic engines of the region, including the seas.
  • Improvement of Caribbean governance to support these engines in local governments and in the Exclusive Economic Zone, including a separation-of-powers between the member-states and CU federal agencies.

The Go Lean roadmap allows for the regional stewardship and administration of the commerce on the Caribbean Seas in collaboration, conjunction and cooperation with US legal jurisdiction and foreign entities. The legal premise for this strategy is an Interstate Compact & Treaty – see details in the Go Lean book (Page 278) or the photo-excerpt in Appendix IA below  – legislated by the US Congress, independent Caribbean governments (17) and the colonial masters for the existing overseas territories:

  • France (Guadeloupe, Martinique, St. Martin, St. Barthélemy)
  • The Netherlands (Aruba, Bonaire, Curaçao, Saba, Sint Eustatius, Sint Maarten)
  • United Kingdom (Anguilla, Bermuda, Cayman Islands, Montserrat, Turks & Caicos and the British Virgin Islands)

Such a wide-ranging, fully-encompassing Compact-Treaty was an original intent of the Go Lean book – economic regionalism. The publication (published in November 2013) commenced with a Declaration of Interdependence, pronouncing the need for regional coordination and integration so as to reform and transform Caribbean society. See a sample of relevant stanzas here (Page 11 – 13):

v. Whereas the natural formation of our landmass and coastlines entail a large portion of waterscapes, the reality of management of our interior calls for extended oversight of the waterways between the islands. The internationally accepted 12-mile limits for national borders must be extended by International Tribunals to encompass the areas in between islands. The individual states must maintain their 12-mile borders while the sovereignty of this expanded area, the Exclusive Economic Zone, must be vested in the accedence of this Federation.

vi. Whereas the finite nature of the landmass of our lands limits the populations and markets of commerce, by extending the bonds of brotherhood to our geographic neighbors allows for extended opportunities and better execution of the kinetics of our economies through trade. This regional focus must foster and promote diverse economic stimuli.

xi. Whereas all men are entitled to the benefits of good governance in a free society, “new guards” must be enacted to dissuade the emergence of incompetence, corruption, nepotism and cronyism at the peril of the people’s best interest. The Federation must guarantee the executions of a social contract between government and the governed.

xxiii. Whereas many countries in our region are dependent Overseas Territory of imperial powers, the systems of governance can be instituted on a regional and local basis, rather than requiring oversight or accountability from distant masters far removed from their subjects of administration. The Federation must facilitate success in autonomous rule by sharing tools, systems and teamwork within the geographical region.

The foregoing Jones Act is an American legislation that probably needs to be repealed or revised to reflect the actuality of a globalized economy; (there are some good provisions related to injury of seamen). Consider this recent experience recorded by a commentator on a news site, below an article regarding the efforts to repeal the Jones Act:

John David Oct 25, 2016 at 7:38 pm

The Act does not Protect the Ports and Waterways, that task is left to the US Navy and US Coast Guard. We have Significant Ports on the US Mainland. None of them have had any security issues with Foreign Flagged Vessels. Trade is restrictive to and from places like Puerto Rico, Hawaii, Guam Etc.

Therefore business that could be entertained and cultivated providing a boost in their respective economies, those areas economically are suppressed. The United States has a significant Naval and Coast Guard presence in each of these areas. An example of how this stifles the economy would be to take a guitar manufacturer located on the Big Island of Hawaii. The Big Island has an abundance of Koa wood, a highly sought after wood for the manufacture of wooden guitars. However if they wanted to ship their guitars to a distributor in Australia, they have to first ship it to the USA mainland. They then Offload it and re-ship it to Australia, The interesting part of this story is that many times the costs for shipping it to Australia are less than it was to ship it to the US Mainland on the initial leg. So as you can see this stifles any possible USA productivity. And maybe that is why no one in Hawaii is Mfg guitars, or hardly anything else for that matter.

Original News Article: The Triton – Nautical News – Published January 26, 2015; retrieved June 8, 2017 from:

CU Blog - Commerce of the Seas - Stupidity of the Jones Act - Photo 3

Reforming America is out-of-scope for the Go Lean movement, notwithstanding Puerto Rico and the US Virgin Islands. Our quest is to reform and transform the Caribbean … only. The Go Lean book provides 370-pages of turn-by-turn instructions on “how” to adopt new community ethos for economic regionalism, plus the strategies, tactics, implementations and advocacies to execute so as to reboot, reform and transform the maritime commerce to benefit Caribbean society.

The issue of rebooting maritime commerce has been a frequent subject for previous blog-commentaries; consider this list of sample entries: Forging Change in the Cruise Industry with Collective Bargaining Cruise Ship Commerce – Getting Ready for Change Tobago: A Model for Cruise Tourism One mission for Maritime Commerce: Expanding Shipbuilding Better Fisheries Management for Queen Conch Where the Jobs Are in Maritime Commerce? Consider Shipbreaking Ghost ships – Autonomous cargo vessels without a crew

All Caribbean members are islands or coastal territories. There is a need to reform maritime commerce for the Caribbean region; we can get more economic activity from this sector; the Go Lean book projects 15,000 new direct jobs in the shipbuilding industry, 4000 in fisheries and 800 jobs by reforming payment systems for cruise passengers. The possibility of new jobs are positive economic fruitage from considering a reboot of maritime eco-system; it would be stupid not to try.

Previous generations in the Caribbean lived off the sea; we can again; it would be stupid not to try. This plan is conceivable, believable and achievable. We urge all Caribbean stakeholders – seafarers and land-lovers – to lean-in to this roadmap for economic empowerment. We can make the Caribbean homeland and seas better places to live, work and play. 🙂

Download the free e-book of Go Lean … Caribbean – now!

Sign the petition to lean-in for this roadmap for the Caribbean Union Trade Federation. 


Appendix A VIDEO – The Jones Act And The Debt Crisis

Published on Sep 27, 2016 – Nelson Denis talks about the Jones Act.

In addition, see the FULL Documentary on the Jones Act Explanation:


Appendix B: Merchant Marine Act of 1920 aka Jones Act

The Merchant Marine Act of 1920 (P.L. 66-261), also known as the Jones Act, is a United States federal statute that provides for the promotion and maintenance of the American merchant marine.[1] Among other purposes, the law regulates maritime commerce in U.S. waters and between U.S. ports. Section 27 of the Jones Act deals with cabotage and requires that all goods transported by water between U.S. ports be carried on U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents.[2] The act was introduced by Senator Wesley Jones.

Laws similar to the Jones Act date to the early days of the nation. In the First Congress, on September 1, 1789, Congress enacted Chapter XI, “An Act for Registering and Clearing Vessels, Regulating the Coasting Trade, and for other purposes”, which limited domestic trades to American ships meeting certain requirements.[3]

The Merchant Marine Act of 1920 has been revised a number of times; the most recent revision in 2006 included recodification in the U.S. Code.[2] In early 2015 Senator John McCain filed for an amendment that would essentially annul the Act.[4] [The amendment failed].

The Jones Act is not to be confused with the Death on the High Seas Act, another United States maritime law that does not apply to coastal and in-land navigable waters.

Objectives and purpose
The intention of Congress to ensure a vibrant United States maritime industry is stated in the preamble to the Merchant Marine Act of 1920.[5]

Cabotage is the transport of goods or passengers between two points in the same country, alongside coastal waters, by a vessel or an aircraft registered in another country. Originally a shipping term, cabotage now also covers aviation, railways, and road transport. Cabotage is “trade or navigation in coastal waters, or the exclusive right of a country to operate the air traffic within its territory”.[6] In the context of “cabotage rights”, cabotage refers to the right of a company from one country to trade in another country. In aviation terms, for example, it is the right to operate within the domestic borders of another country. Most countries enact cabotage laws for reasons of economic protectionism or national security.[citation needed]

The cabotage provisions relating to the Jones Act restrict the carriage of goods or passengers between United States ports to U.S.-built and flagged vessels. It has been codified as portions of 46 U.S.C. [7] Generally, the Jones Act prohibits any foreign-built, foreign-owned or foreign-flagged vessel from engaging in coastwise trade within the United States. A number of other statutes affect coastwise trade and should be consulted along with the Jones Act. These include the Passenger Vessel Services Act, 46 USC section 289 which restricts coastwise transportation of passengers and 46 USC section 12108 restricts the use of foreign vessel to commercially catch or transport fish in U.S. waters.[8] These provisions also require at least three-fourths of the crewmembers to be U.S. citizens. Moreover, the steel of foreign repair work on the hull and superstructure of a U.S.-flagged vessel is limited to ten percent by weight.

The Jones Act prevents foreign-flagged ships from carrying cargo between the US mainland and noncontiguous parts of the US, such as Puerto Rico, Hawaii, Alaska, and Guam.[11] Foreign ships inbound with goods cannot stop any of these four locations, offload goods, load mainland-bound goods, and continue to US mainland ports. Instead, they must proceed directly to US mainland ports, where distributors break bulk and then send goods to US places off the mainland by US-flagged ships.[11] Jones Act restrictions can be circumvented by making a stop in a foreign country between two US ports, e.g., Anchorage–Vancouver–Seattle.

Puerto Rico
Studies by the World Economic Forum and Federal Reserve Bank of New York have concluded that the Jones Act hinders economic development in Puerto Rico.[12]

In March 2013, the Government Accountability Office (GAO) released a study of the effect of the Jones Act on Puerto Rico that noted “[f]reight rates are set based on a host of supply and demand factors in the market, some of which are affected directly or indirectly by Jones Act requirements.” The report further concludes, however, that “because so many other factors besides the Jones Act affect rates, it is difficult to isolate the exact extent to which freight rates between the United States and Puerto Rico are affected by the Jones Act.” The report also addresses what would happen “under a full exemption from the Act, the rules and requirements that would apply to all carriers would need to be determined.” The report continues that “[w]hile proponents of this change expect increased competition and greater availability of vessels to suit shippers’ needs, it is also possible that the reliability and other beneficial aspects of the current service could be affected.” The report concludes that “GAO’s report confirmed that previous estimates of the so-called ‘cost’ of the Jones Act are not verifiable and cannot be proven.”[13]

In the Washington Times, Rep. Duncan Hunter spoke to the need for the Jones Act and why it is not to blame for the island’s debt crisis. “With or without such an effort, it’s imperative not to conflate the unrelated issues of Puerto Rico’s debt and the Jones Act, and to fully grasp the importance of ensuring the safe transport of goods between American ports. There must also be acknowledgment of the dire consequences of exposing ports and waterways to foreign seafarers.”[14]

[See VIDEO in Appendix A above].

US shipbuilding
Because the Jones Act requires all transport between US ports be carried on US-built ships, the Jones Act supports the domestic US shipbuilding industry.[15][16]Critics of the act describe it as protectionist, harming the overall economy for the sake of benefiting narrow interests.[17][18] Other criticism argues that the Jones Act is an ineffective way to achieve this goal, claiming it drives up shipping costs, increases energy costs, stifles competition, and hampers innovation in the U.S. shipping industry[19] – however, multiple GAO reports have disputed these claims.[20]

Source: Retrieved June 8, 2017 from:

[See the FULL Documentary on the Jones Act Explanation:]


Appendix IA – Interstate Compacts

Since Puerto Rico and the Virgin Islands are US Territories, their implementation of the provisions of the Caribbean Union Trade Federation must legally be construed as an Interstate Compact.

An Interstate Compact is an agreement between two or more states of the US. Article I, Section 10 of the US Constitution provides that “no state shall enter into an agreement or compact with another state” without the consent of Congress. Frequently, these agreements create a new governmental agency which is responsible for administering or improving some shared resource such as a seaport or public transportation infrastructure. In some cases, a compact serves simply as a coordination mechanism between independent authorities in the member states.

CU Blog - Commerce of the Seas - Stupidity of the Jones Act - Photo 2

Click on photo to enlarge


Footnote Reference – * Mercantilism

A system of political and economic policy, evolving with the modern national state and seeking to secure a nation’s political and economic supremacy in its rivalry with other states. According to this system, money was regarded as a store of wealth, and the goal of a state was the accumulation of precious metals, by exporting the largest possible quantity of its products and importing as little as possible, thus establishing a favorable balance of trade.
Source: Retrieved June 8, 2017 from:

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