AWO
WEAKENING
THE JONES ACT
— A Threat To Our Competitive Position —
Joseph A. Farrell, President
American Waterways Operators, Inc.
botage, to reserve domestic freight
to domestic carriers is not unique
to the United States. Nearly every
major maritime country adheres
to this principle today, recognizing
the absolute necessity to national
security of a merchant marine
built, owned and manned by its
own citizens. Two fundamental
national interests are served by
cabotage laws: first, the necessity
of having a merchant marine of
the best-equipped and most suita-
ble types of vessels owned and op-
erated by U.S. citizens sufficient to
carry the greater portion of its for-
eign and domestic commerce; and
second, the necessity of having a
strong merchant fleet, both domes-
tic and international, to serve as
an adjunct to national security
forces.
The declaration of these pur-
poses was made in the Merchant
Marine Act of 1920. The principle
of cabotage as we know it today is
set forth in Section 27 of that Act.
commonly referred to as the Jones
Act, which provides:
No merchandise shall be
transported by water or by
land and water, on penalty of
forfeiture thereof, between
points in the United States,
including Districts, Territo-
ries, and possessions thereof
embraced within the coast-
wise laws either directly or
via a foreign port, or any part
of the transportation, in any
other vessel than a vessel built
in and documented under the
laws of the United States and
owned by persons who are cit-
izens of the United States.
The Congressional aim in man-
dating this section of the Act re-
mains compelling today: to ensure
that control of the shipment of
—Ij-JLa-aiate
that are built in the U.S. can move
merchandise from one point or
port in the U.S. to another, or to a
vessel anchored in U.S. waters.
Waivers for the Jones Act may be
granted only on grounds of na-
tional security. CSL's first claim
was that its topping-off services
are important to U.S. security,
and its second was that American
coal destined ultimately for Eu-
rope and Japan cannot be re-
garded as U.S. domestic trade.
Even a cursory look at the Jones
Act reveals that both these points
are not valid grounds for excep-
tion. However, along the same
lines as Cunard, CSL argues that
U.S. shipping companies cannot
offer topping-off service, and in
the event they could, would not be
able to do so as economically as
CSL. At least two American ship-
ping companies are currently on
their way to providing topping-off
services: American Steamship in
Buffalo, N.Y., and Energy Termi-
nals in New York. That the Amer-
ican companies may not be able to
do so as cheaply as the Canadian
line is debatable at this time.
However, it is not the economics,
but the principle of cabotage that
is being threatened here.
An Administration proposal
would allow U.S. subsidy-built
tankers to trade coastwise upon
subsidy refund. While this is not a
direct threat to the Jones Act, it
flies in the face of Congressional
intent as mandated in the Mer-
chant Marine Act of 1936, which
set up subsidy programs for U.S.-
built ships in the foreign trade.
The 1936 Act recognizes the eco-
nomic handicap under which U.S.
ship construction operated in com-
petition with foreign construction.
It offered subsidies only to U.S.-
(continued on page 8)
Joseph A. Farrell
Most of us in the water freight
transportation industry do not often
think of the Jones Act and related
cabotage laws as having much to
do with the inland segment of the
barge and towing industry, al-
though clearly the protection af-
forded by the Act is an integral
part not only of the coastal but
also the inland operations. The
American Waterways Operators,
Inc. (AWO) represents the inter-
ests of both the inland and coastal
segments of the barge and towing
industry, nationwide. In carrying
out the AWO objectives, we have
been giving an ever-increasing
amount of attention to the effect
various recent efforts to dilute the
Jones Act will have on the barge
and towing industry as a whole. If
the Jones Act is breached in the
coastal trade, it isn't much of a
leap to have foreign vessels plying
the rivers.
The sovereign right of every na-
tion to reserve its domestic trade
to its own nationals has been rec-
ognized for centuries by interna-
tional custom. The principle of ca-
American goods lies in American
hands for the sake of our national
security, and our general welfare.
Due to the recent worldwide
recession, however, resulting in
hundreds of idle tankers, bulk car-
riers and dry cargo ships around
the world, there has been a great
deal of interest on the part of var-
ious foreign-owned companies to
enter the lucrative U.S. market.
And, in addition, there is some in-
terest on the part of various Amer-
ican factions to allow foreign op-
erators into the domestic trade. It
is argued that the short-term ben-
efits of such a change in policy
might be able to stimulate certain
segments of the shipping industry
here. But, the long-term damage
that would occur by such weaken-
ing of the Jones Act principle
would far outweigh the small value
received now.
Perhaps the most highly publi-
cized initiative in that direction is
the Cunard bill, introduced in the
last two Congresses, which would
permit foreign-built vessels to en-
ter the domestic passenger trade.
Proponents of the bill argue that
the U.S. maritime industry does
not now offer and is not capable of
offering U.S. cruiseship passenger
service. Contrary to this claim,
however, two shipping companies
. . . Contessa Cruise Lines of Hous-
ton and American Flagships of
New York . . . are making plans to
build in U.S. shipyards large pas-
senger vessels for the coastwise
domestic cruise trade, rendering
Cunard's argument invalid.
Another breach of the Jones Act
is being proposed by Canadian
Steamship Lines (CSL), which
wants to top off colliers in Dela-
ware Bay and other locations with
foreign-built, self-unloading ships.
Under the Jones Act, only vessels
18 Maritime Reporter/Engineering News
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