Jones Act: the U.S. shipping market that foreigners love to hate

Most countries with coastal line have enacted laws that mandate special rules for vessels that trade in territorial waters and flying their national flag (cabotage laws). Typically, cabotage laws offer certain degree of protection from vessels flagged under foreign regimes in exchange of commitment to operate and crew the vessels locally. Most often than not, cabotage shipping pertains to vessels that are engaged in local, specialized trades (such as ferries, tugs, push boats, etc), and by the volatility standards of international shipping, typically cabotage shipping is considered a backwater business of interest to a few local investors and shipowners.

The cabotage law for the United States’ territorial waters (Merchant Marine Act of 1920, better known as the “Jones Act”) could easily fit the mould,  most of the time; the market is stable over the long term, varying normally around the historic average with a commanding majority of the assets not even capable of international trade (such tug and push boats, harbor tugs, and plenty of OSVs for coastal trade). However, the Jones Act market is probably the most talked about cabotage market, since vessels suitable for international trade, where comparables exist, typically can have exorbitant economics such as charter rates of $120,000 pd for a year’s charter by an investment grade oil company. Many people, mostly shipowners form abroad, have been calling for an un-competitive or inefficient market.

Recently, Basil M Karatzas penned an article at the request of the Editors of the Shipping Network, the magazine for the UK-based Institute of Chartered Shipbrokers, titled “Jones’s American dream divides opinion”. A copy of the article, courtesy of the Shipping Network, can be accessed by clicking here!


LNG-ready Jones Act chemical / products tanker MT ‘Ohio’ (2015 built) has been valued at $150 mil; high quality international-flagged tankers (sans LNG-ready) cost $35 mil. Some people fail to see the value. Image credit: Karatzas Photographie Maritime

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2015 12DEC Jones’ American dream divides opinions – Shipping Network – December 2015