# Understanding the Jones Act: Key Facts, History, and Economic Impact

![Jones Act: A federal law requiring that goods shipped between U.S. ports are transported on ships built, owned, and operated by U.S. citizens or permanent residents.](https://www.investopedia.com/thmb/6EEOFA21ZcyF0OM5YkYEk-X4TdU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/jonesact.asp-Final-1ef59e3412654783a30f1c6eb45722a5.png)

*— Investopedia / Dennis Madamba*

## What Is the Jones Act?

The Jones Act, a crucial component of U.S. [maritime](https://www.investopedia.com/articles/investing/123115/top-6-companies-crude-tanker-business.asp) law since 1920, mandates American-made, owned, and operated ships for transporting cargo between domestic ports. This protectionist legislation was introduced to strengthen the U.S. shipping industry post-World War I, but it also brings economic ramifications, especially for non-continental U.S. territories like Hawaii, Alaska, and Puerto Rico.

The Jones Act is Section 27 of the Merchant Marine Act of 1920, which provided for the maintenance of the American Merchant Marine.

### Key Takeaways

*   The Jones Act, part of the Merchant Marine Act of 1920, mandates the use of U.S.-built and operated ships for transporting goods between U.S. ports to support the domestic shipping industry.
*   The Act is considered protectionist and significantly increases shipping costs, especially impacting non-continental U.S. territories like Hawaii, Alaska, and Puerto Rico.
*   Critics argue that the Jones Act inflates costs for U.S. islands, with Puerto Rico facing substantial economic burdens due to the increased expense of transporting goods.
*   Waivers to the Jones Act can be granted in times of emergency, such as natural disasters, to alleviate supply issues, but are subject to strict scrutiny by the Secretary of Homeland Security.
*   Although the Jones Act primarily affects cargo transport, it has parallels in passenger transport through the Passenger Vessel Services Act, impacting the operations of foreign-flagged cruise ships.

## The History and Impact of the Jones Act

U.S. Senator Wesley Jones of Washington introduced the Act to give his state a shipping monopoly to Alaska. It was enacted by the United States Congress to stimulate the shipping industry in the wake of World War I.

As a protectionist law, the Jones Act addresses maritime trade, including cabotage, or domestic shipping.

The Act requires that goods shipped between [U.S. ports](https://www.investopedia.com/articles/investing/052715/west-coast-vs-east-coast-economy.asp) be transported on ships built, owned, and operated by United States citizens or permanent residents. These rules raise shipping costs to Hawaii, Alaska, Puerto Rico, and other non-continental U.S. areas reliant on imports.

> **Important**
>
> The Jones Act is a piece of protectionist legislation that considerably increases the costs of shipping goods between two U.S. ports.

## Objectives Behind the Jones Act

*   The Act aimed to revitalize the depleted U.S. maritime shipping industry post-World War I.
*   Support the shipping industry and prevent the United States from relying on foreign-built ships.
*   The Jones Act creates jobs and business revenue, supporting 650,000 American jobs and generating $150 billion annually..

## Key Requirements of the Jones Act

*   Ships transporting cargo between two U.S. ports must be owned by U.S.-based companies, with over 75% of the ownership stake held by U.S. citizens.
*   A ship's crew must consist of a majority of U.S. citizens.
*   The ships must be built and registered in the U.S.

## Conditions for Jones Act Waivers

*   In the wake of a natural disaster, such as a hurricane, the Act may be waived to increase the number of ships that can legally supply goods to an affected area.
*   The Secretary of Defense can request waivers in the "interest of national defense" and there is a separate procedure for non-defense entities. In both cases, the final authority for a waiver is the Secretary of Homeland Security.  
    

## Controversies and Criticisms Surrounding the Jones Act

The Jones Act has been cited as a factor affecting Puerto Rico's economic and budgetary troubles by affecting trade with the island. A 2019 report found that for Puerto Rico "the differentials between U.S. and foreign-flagged carriers range from about 41% to as high as 62% for bulk cargo and between 29% and 89% for containerized freight.” The additional costs caused by the Act for the island’s economy to be nearly $1.2 billion, which comes to roughly $374 per resident.

The waiver of the Act was implemented in 2022 only after Hurricane Fiona hit Puerto Rico. The Biden administration allowed a non-U.S. flagged ship to transport fuel to Puerto Rico, following pressure to waive the rule in the face of a fuel shortage to ensure that citizens could run generators needed for electricity and the functioning critical facilities.

Opponents hope that a repeal of the Act will result in decreased shipping costs, lower prices, and less strain on government budgets. Proponents of the act include states with owners of navy yards, defense firms, and shipping industries, as well as the longshoremen and other personnel who work in ports.

In early 2022, the Jones Act made headlines for its potential role in the U.S.-Russia oil business. Following Russia's invasion of Ukraine in late February, the U.S. banned Russian oil and gas imports on March 8.

The U.S. has traditionally relied on imports from Russia, especially Hawaii, which imports Russian crude oil per year, accounting for up to a quarter of all Russian oil shipments to the U.S. Critics of the Jones Act suggest that it limits the viability of shipping oil and gas to remote areas like Hawaii, forcing the state to rely on imports from Russia.

## How Does the Jones Act Affect Puerto Rico?

One consequence of the Jones Act is that it requires U.S. shipping for cargo between Puerto Rico and the U.S. mainland, increasing the cost of development for the island's economy.  

## How Does the Jones Act Affect Cruise Ships?

While the Jones Act does not cover passenger vessels, a related law has a similar effect on cruise ships. Under the 1886 Passenger Vessel Services Act, a foreign ship cannot transport passengers directly between two U.S. ports. This means that a foreign-flagged cruise ship (the vast majority of cruise ships) must include foreign ports in any itinerary that begins and ends in a U.S. port. This often results in confusion or even fines for passengers who disembark at ports that violate the Jones Act.

## How Long Can a Waiver of the Jones Act Be Implemented?

In 2020, Congress eliminated the federal government’s authority to issue long-term waivers, except in circumstances where a waiver is required to “address an immediate adverse effect on military operations.” Waivers that do not meet that standard must be reviewed on a case-by-case basis.

  

## The Bottom Line

The Jones Act, part of the Merchant Marine Act of 1920, regulates maritime commerce by mandating that goods transported between U.S. ports must be on U.S.-built, owned, and operated ships. It was enacted to boost the U.S. shipping industry post-World War I but has faced criticism for raising shipping costs, especially for U.S. islands like Puerto Rico and Hawaii. While supporters highlight its role in generating jobs and economic activity, critics argue it contributes to higher prices and economic challenges. Understanding its implications can aid in informed decision-making regarding maritime policies and commerce strategies.  

> **Article Sources**
>
> 1.  Congressional Research Service. "[Shipping Under the Jones Act: Legislative and Regulatory Background](https://sgp.fas.org/crs/misc/R45725.pdf)." Summary Page.
>     
> 2.  Congressional Research Service. "[Shipping Under the Jones Act: Legislative and Regulatory Background](https://fas.org/sgp/crs/misc/R45725.pdf)." Summary Page, Page 3.
>     
> 3.  Congressional Research Service. "[Shipping Under the Jones Act: Legislative and Regulatory Background](https://fas.org/sgp/crs/misc/R45725.pdf)." Summary Page, Page 5.
>     
> 4.  Transportation Institute. "[U.S. Maritime Workforce Grows to 650,000 Americans in Booming Jobs Economy](https://transportationinstitute.org/u-s-maritime-workforce-grows-to-650000/)."
>     
> 5.  Congressional Research Service. "[Shipping Under the Jones Act: Legislative and Regulatory Background](https://fas.org/sgp/crs/misc/R45725.pdf)." Page 5.
>     
> 6.  Congressional Research Service. "[Shipping Under the Jones Act: Legislative and Regulatory Background](https://fas.org/sgp/crs/misc/R45725.pdf)." Page 12.
>     
> 7.  Maritime Administration. "[Domestic Shipping](https://www.maritime.dot.gov/ports/domestic-shipping/domestic-shipping)."
>     
> 8.  John Dunham and Associates. "[The Jones Act: The Legacy of Economic Ruin For Puerto Rico](https://docs.wixstatic.com/ugd/5b4228_4e79040fd1b043a59df921358825334a.pdf)." Pages 27-28.
>     
> 9.  U.S. Department of Homeland Security. "[Statement By Secretary Mayorkas on the Approval of a Jones Act Waiver for Puerto Rico](https://www.dhs.gov/news/2022/10/16/statement-secretary-mayorkas-approval-jones-act-waiver-puerto-rico#:~:text=%E2%80%9CIn%20support%20of%20the%20Puerto,natural%20gas%20in%20Puerto%20Rico.)."
>     
> 10.  The White House: Biden Administration. "[FACT SHEET: United States Bans Imports of Russian Oil, Liquefied Natural Gas, and Coal](https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/08/fact-sheet-united-states-bans-imports-of-russian-oil-liquefied-natural-gas-and-coal/)."
>      
> 11.  The Wall Street Journal. "[Jonesing to Give Up Russian Oil](https://www.wsj.com/articles/jonesing-to-give-up-russian-oil-hawaii-jones-act-11646176174)."
>      
> 12.  U.S. Customs and Border Protection. "[The Passenger Vessel Services Act, September 2019](https://www.cbp.gov/sites/default/files/assets/documents/2019-Sep/PVSA-ICP.pdf)." Pages 6-7.