90 Years Ago, Congress Acted to Save Our Shipyards

Today, Everyone Ignores that Law

It is necessary for the national defense and for the proper growth of its foreign and domestic commerce that the United States shall have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in time of war or national emergency, ultimately to be owned and operated privately by citizens of the United States; and it is declared to be the policy of the United States to do whatever may be necessary to develop and encourage the maintenance of such a merchant marine, and, in so far as may not be inconsistent with the express provisions of this Act, the Secretary of Transportation shall, in the disposition of vessels and shipping property as hereinafter provided, in the making of rules and regulations, and in the administration of the shipping laws keep always in view this purpose and object as the primary end to be attained.

– Sec. 1. Purpose and policy of United States (46 App. U.S.C. 861 (2002)), MARAD

Enacted in 1920, the Jones Act says it straight out: All ships moving cargo between U.S. ports must be built in the U.S., owned and crewed by U.S. citizens. Violators can have their vessels and cargo seized and are subject to a fine. It is also a violation for ship owners to have Jones Act vessels repaired or refurbished by foreign shipyards, although foreign repair and rebuilding has become a common practice and the Coast Guard is complicit in this violation of the Jones Act.

The law is clear and straightforward. Interpreting the law, which falls to the Coast Guard takes some unusual twists and turns.

In 2006, when the Metal Trades challenged a deal between Aker Shipyard and Hyundai Mipo to take modules made in Korea and bolt them together in Philadelphia, the Coast Guard said: “No, that’s not a violation of the Jones Act.” Their logic? The imported parts—which included entire, prebuilt bulkheads, hull sections, even crew quarters—did not make up a “major component” of the completed vessel. When it served their purpose, the Coast Guard referred to the weight of the imported parts. When that didn’t fly, they reasoned that components “not integral to the hull of the vessel” could be foreign-built.

In 2009, the U.S. Court of Appeals upheld a Coast Guard determination that allowed a tanker company to rebuild one of its vessels in Communist China, inserting a new double hull and ballast tanks, even though a lower court had found that violated the Jones Act.

The Coast Guard has a convoluted formula for determining what constitutes “rebuilding” that is as flexible as a rubber band and, of course, favors foreign repairs. The courts grant “deference” to the Coast Guard’s regulatory authority in such cases, and typically cite “precedents” of earlier Coast Guard rulings that nobody challenged as reasons for not overturning these decisions.

That’s why Matson was able to dodge court suits when it essentially rebuilt one of its vessels in China and persuaded the Coast Guard to grant documentation for the rebuilt ship. * Click here to read selected provisions of the Jones Act. 

Who Cares?

The Coast Guard hands out waivers for foreign repair and rebuilding like so much confetti at a Super Bowl parade. Heck, even the Pentagon ignores the Jones Act, as it does the Oil Pollution Act of 1990 (that requires all vessels carrying oil must be double hulled to prevent spills—17 of the Navy’s oilers currently in service are single hull) and the Buy American Act (that requires the Military Sealift Command, the MSC, to use U.S. made vessels to position strategic military equipment to support U.S. military units). MSC has leased 11 foreign-built vessels instead of purchasing U.S. made ships for that job.

Creating the Conditions for a Revival in Shipbuilding

Given the right conditions, utilization, employment, productivity and output of the U.S. shipbuilding industry would all rise dramatically. Among the conditions that must be set “right”: Effective enforcement of the Jones Act to cover construction of all manner of domestically used vessels—including traditional cargo ships, oilrigs and construction barges. Enforcement should cover de-facto “re-construction” of […]

Merchant Marine Act of 1920 From Title 46 of the U.S. Code

SEC. 1. PURPOSE AND POLICY OF UNITED STATES (46 App. U.S.C. 861 (2002). It is necessary for the national defense and for the proper growth of its foreign and domestic commerce that the United States shall have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater […]

The Future of U.S. Shipbuilding

U.S. shipbuilding by first tier shipyards—there are only six such yards in the nation—is imperiled by: Failures of government to pursue effective policies and enforce existing laws; Inattention to the job creating potential of America’s last heavy manufacturing industry; Short-sighted management decisions by shipyard owners; and A bias on the part of the media and […]

US Commercial Ship Building: A Strategic National Asset

China, Brazil and now India have declared that their commercial shipyards are “Strategic National assets” “US-built coastal ships are the trucks of the US Marine Highway” Introduction The United States needs a fleet of modern coastal container and trailer ships and modern commercial shipyards that are up to the task.  This new fleet is essential […]
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