WORLD TRADE
ORGANIZATIONWT/GC/W/397
10 February 2000
(00-0498)
Original:  English
FIVE-YEAR REVIEW OF THE EXEMPTION PROVIDED
UNDER PARAGRAPH 3 OF THE GATT 1994
Response by the United States to Questions Posed Concerning Jones Act
The following communication dated 7 February 2000 has been received from the Permanent
Mission of the United States with the request it be circulated to Members.
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QUESTIONS FROM PANAMA
1. Citing relevant sections of the notified legislation, please indicate how it complies with
the requirements of para 3(a) of the GATT.
Response:
Paragraph 3(a) of the GATT 1994 provides for an exemption from Part II of the
GATT for measures taken by a Member under specific mandatory legislation, enacted
by that Member before it became a contracting party to GATT 1947, that prohibits
the use, sale or lease of foreign-built or foreign-reconstructed vessels in commercialapplications between points in national waters or the waters of an exclusive economic
zone, as well as for the continuation or prompt renewal of a non-conforming
provision of such legislation, and for amendments to a non-conforming provision of
such legislation to the extent that such amendments do not decrease the conformity of
the provision with Part II of GATT 1947.  The notified legislation is such specificmandatory legislation and therefore complies with the requirements of paragraph 3(a)
of the GATT 1994.
2. Also indicate if the US believes the standa rds and regulations of the notified law comply
with 3(a).  Pls. indicate if the US considers th at the standards and regulations will be equally
sheltered by the exemption in 3(a).
Response:
Yes.WT/GC/W/397
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3. Citing the relevant sections, please indicate if the law, standards or regulations of the
notified law offer exceptions or discretion in th eir application.  In cases where exceptions or
discretion was exercised, please indicate the circumstances and the instruments and the legal
basis used to do so.
Response:
The notified laws offer no discretion in their enforcement.
4. The exemption under 3(a) only provides, in certain commercial circumstances, a
prohibition of the utilization, sale or rental of  ships that have been built or reconstructed
overseas.  Pls. indicate if in order to use ship s under the commercial applications referred to in
para 3(a), that the notified legislation, regula tions or standards impose additional limitations.
Please cite the relevant sections.  Please indica te if exceptions exist or have been granted and
describe these situations, the instruments and legal basis to do.
Response:
There are no additional limitations imposed by the notified laws.
5. Please indicate if the laws, regulations, or standards offer the possibility of suspension in
their application.  Please cite the relevant sectio ns.  If suspensions have been made or granted
please describe the situation, the instruments and legal basis to do so.
Response:
The only possibility for “suspension” of the notified laws is offered in a statutory waiver
provision. Waivers are granted and are based on a National Defense or National Security
justification. Requests for waivers are routed through the Department of Defense. The statute
is may be cited as the Act of December 27, 1950, chapter 1155, sections 1 and 2 of 64 Stat.
1120. It is found codified in the Historical Note that precedes section 1 of title 46, United
States Code Appendix.
6. Citing relevant sections, please indicate how the law, standards or regulations define the
concept of national waters, exclusive economic zones, and waters of an exclusive economic zone.
Response:
Presidential Proclamation 5030, of March 10,1983, defines the concept of the exclusive
economic zone for purposes of the statutes notified in the United States’ submission to the
WTO pursuant to para 3 of the GATT.
Presidential Proclamation 5928, of December 27, 1988, defines the concept of the territorial
sea for purposes of the statutes notified in the United States ’ submission to the WTO
pursuant to para 3 of the GATT.
7. Please indicate if the notified legislation has been subject to changes or amendments,
describe the origins of the same, and provide the corresponding texts.
Response:
Although the notified legislation has been subject to changes since 1994,  these changes have
not decreased the conformity of the notified legislation with Part II of GATT 1947.WT/GC/W/397
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8. Citing relevant sections, please indicate how the notified legislation, standards or
regulations define the varying commercial uses (or situations) between points within national
waters.
Response:
See response to question 9.
9. Citing relevant sections, please indicate how the notified legislation, standards or
regulations define the varying commercial uses (or situations) within national waters of an
exclusive economic zone.
Response:
The specific examples and definitions used by the United States Customs Service in cases
involving transportation are found in U.S.C. 1401 (defining “vessel” and “merchandise”),
19CFR 4.50(b) (defining “passenger”), and 19CFR 4.80a, and 4.80b (discussing coastwise
trade and providing specific examples of coastwise trade).
QUESTIONS FROM JAPAN (WT/GC/W/344)
1. What is the current situation of the U.S. indus try's capability of producing ships, which
has been protected by the relevant legislation under exemption through Paragraph 3 of the
GATT 1994.  Please explain precisely how such le gislation meets the U.S. national defense
purposes.
Response:
Because the legislation in question is specific mandatory legislation that falls within the scope
of paragraph 3 of the GATT 1994, the conditions that created the need for that exemptioncontinue to prevail.  A response to this question is therefore not necessary for the discussion
to be undertaken in this review.
2. Statistic shows that 70% of ships built in the U.S., that is 20% of the gross tonnage,
cover the small-sized fishery ships.  Please explain the linkage with national defence.
Response:
See response to question A.
3. Please provide information on how ships can be considered as U.S.-built under the Jones
Act and what kind of rules of origin are used for that purpose?
Response:
To be considered built in the United States a vessel must meet both of the following criteria:
(a) all major components of its hull and superstructure are fabricated in the United States; and
(b) the vessel is assembled entirely in the United States.  No “rules of origin” apply.WT/GC/W/397
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4. Are ships that are built by a foreign capi tal company in the U.S. considered as a
"U.S.-built"?
Response:
Yes.
5. Please provide a list of the number of comp anies producing "U.S.- built ships" in the
U.S. and the total amount of production per year.
Response:
Information on orders and deliveries is provided annually in the notification required under
paragraph 3(c) of the GATT 1994.  To the extent information is available on ship buildingcompanies, that information is also provided in the annual notification.
6. The paper (WT/GC/W/228) states, "The domestic-build requirement provides an
essential element of [the] US maritime policy by assuring the maintenance of an industrial
shipbuilding base for national defense purposes".  Does the US have any quantitative figures ofindustrial shipbuilding (and maintenance) capabilities which are "essential" to meet naval
requirements?
Response:
See response to question A.
7. Please provide the information on the amount  of ships which have been delivered to U.S.
Navy in recent years.
Response:
See response to question A.
8. Please indicate the statistics showing a decline in the budget of U.S. Navy.
Response:
See response to question A.
9. What is the percentage of ships purchased by U.S. Navy out of the total domestic
demand per year?
Response:
See response to question A.
10. Has the U.S. ever considered any alternativ e options which are less trade restrictive,
such as subsidy measures, to take over the existing  legislation that strictly ban the ship imports
to the U.S.?WT/GC/W/397
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Response:
There have been proposals in Congress to change U.S. cabotage laws (also referred to
collectively as the “Jones Act”). None of these proposals have been enacted into law. The
Administration supports U.S. cabotage laws, in their present form, as an essential part of U.S.maritime policy.
QUESTIONS FROM THE EU
1. According to the paragraph 3(c) of the GATT 1994, the USA shall provide a detailed
report on the operation of the Jones Act.  Consequently, and as a matter of transparency, theEC would like to know how many vessels (number and tonnage) have been build during the five
year period under the Jones Act exemption.  Could you indicate the figures for 1998 compared
with 1994, when the U.S. requested this exemption?
Response:
The United States has provided detailed statistical information, including vessels and tonnage,
on an annual basis, as required by paragraph 3(c) of GATT 1994.  These notifications can be
found in documents WT/L/341, WT/L/293, WT/L/257, WT/L/201, and WT/L/112.  This
information covers all vessels constructed in the United States, including vessels eligible to
engage in cabotage services.
2. On the basis of the increase of the tonnage built under the Jones Act during this period,
does the U.S. consider that the conditions wh ich created the need for the Jones Act exemption
still prevail?   Does the U.S. think that this evolution has not modified conformity with Part II of
GATT 1994 and therefore would still qualify for coverage under paragraph 3(a)?
Response:
Yes, we believe the conditions which created the need for the exemption still prevail and that
no change in eligibility for coverage under paragraph 3(a) has occurred.
3. Could the U.S. inform the members of any mo dification of the scope of the Jones Act
since 1994?  Was an legislation passed during this  period that relates to the Jones Act, in
particular on the possible extension of the Jones Act coverage (types of vessels or cargo
reservations)?
Response:
See response to Panama question 7.
4. One argument raised by the U.S. to justify th e existence of such protection is the need to
maintain a naval capability for security reasons.  However, the bulk of the Jones Act orders are
of a commercial nature, and these types of vessels are essentially built in commercial shipyards,
around the world.  Naval and commercial shipbuilding activity are very different in substance.Could the U.S. explain the specificity of the US  naval industry compared to those of other
members which could justify such an exception?
Response:
See response to Japan question A.WT/GC/W/397
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5. In the framework of the OECD agreement on shipbuilding, signed by the U.S. in 1994,
but not yet ratified by Congress, the USA acce pted to limit the operation of the Jones Act
(200,000 GT/year, possible responsive measures if deliveries exceed this limit), recognizing that
a permanent derogation could undermine the balance of rights of the Parties to the OECD
Agreement.  Does the US envisage such limitations in the future?
Response:
The Administration supports U.S. cabotage laws in their present form. The OECD
Shipbuilding Agreement, signed by the United States, but not yet ratified by the Congress,
represents a carefully negotiated balance of obligations among major shipbuilding nations to
eliminate shipbuilding subsidies. Outside of the context of that agreement, the U.S. would not
be prepared to accept any such limitations.
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