towerconference 2010 1st Texas Offshore Wind Energy Roundtable Conference & Offshore Wind Law (OWL) Conference October 19-22, 2010 Houston, Texas John J. Reilly
WHAT IS THE JONES ACT? Important pieces of maritime legislation are: • The Shipping Act of 1916 (46 App. U.S.C. § 802). • The Merchant Marine Act of 1920 (1920 Act) (46 App. U.S.C. § 876). • The Merchant Marine Act of 1936. • These pieces of legislation have been supplemented by amendments to cargo preference laws and the Maritime Security Act of 1996 (P.L. 104-239). A brief legislative history is provided below.
HISTORY OF MARITIME POLICY IN THE UNITED STATES • The foundation of maritime policy in the United States is legislation that Congress enacted to ensure sufficient sealift capacity to carry U.S. commercial and military cargo during World War I (1914-1918) and legislation that was largely a response to the economic conditions of the Great Depression.
SHIPPING ACT OF 1916 Congress reacted to the threats posed to U.S. shipping by World War I by enacting the Shipping Act of 1916, which, among other things: • Established the U.S. merchant marine as a naval auxiliary, and • reserved certain government cargoes for U.S.-citizen ship owners. When World War I ended, the U.S. government controlled a large merchant fleet built through a significant ship construction program undertaken by the U.S. during that war. • However, while the U.S. fleet was largely committed to the war relief effort, European allies placed their ships back into commercial trades. • The result was reduced commercial cargoes for the over-sized U.S.- flagged commercial fleet. • In response to this situation, the Congress passed the 1920 Act.
THE MERCHANT MARINE ACT OF 1920 • The Merchant Marine Act of 1920 created government support for the U.S.-flagged merchant marine. • The preamble to the 1920 Act established goals that are supposed to drive U.S. maritime policy today, albeit these goals have been modified by subsequent legislation: … 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 hereby declared to be the policy of the United States to do whatever is necessary to develop and encourage the maintenance of such a merchant marine.
THE MERCHANT MARINE ACT OF 1920 • Key elements of the 1920 Act included the establishment of cabotage as a fundamental component of U.S. maritime policy and the creation of a construction loan program to aid U.S. operators in constructing ships in U.S. shipyards. • In the 1930s, the Great Depression, combined with economic policies that had the effect of limiting U.S. foreign trade, nearly caused the collapse of the U.S. merchant marine. Congress responded to this circumstance and sought to prepare for possible military conflict with the enactment of the Merchant Marine Act of 1936.
THE MERCHANT MARINE ACT OF 1936 • The Merchant Marine Act of 1936 fully acknowledged U.S. operators’ dependence on strong government support and included a mix of direct and indirect subsidies and market- oriented programs to promote the U.S. flag. • The Merchant Marine Act of 1936 also provided an indirect subsidy in the form of the Capital Construction Fund (CCF). The CCF enables U.S. operators of U.S.-flagged merchant ships to set aside tax deferred earnings into a special account for the purpose of building ships in U.S. shipyards. • The Merchant Marine Act of 1936 retreated from the commitment made in the 1920 Act to develop a U.S. merchant fleet capable of carrying the “greater portion” of U.S. foreign commerce in favor of the vague objective of maintaining a U.S. merchant fleet capable of carrying a “substantial portion” of U.S. foreign commerce.
SPECIFIC PROVISIONS OF THE JONES ACT Generally, the Jones Act requires that any vessel operating in the coastwise trade between two U.S. ports be U.S.-built (1) Owned by a documentation citizen (2) And operated by a crew of U.S. citizens (3) For purposes of owning a U.S.-flag vessel, an company must be organized in such a way that it qualifies as a documentation citizen (4) If it is organized as a U.S. corporation, a company must be at least seventy-five percent owned by U.S. citizens (5) Its chief executive officer and chairman of the board of directors must be U.S. citizens, and no more of its directors than a minority of the number necessary to constitute a quorum may be non-citizens
SPECIFIC PROVISIONS OF THE JONES ACT (6) The corporate citizenship requirements apply to all levels of a company's organization, so the seventy-five percent ownership requirement applies to a parent corporation that has a subsidiary company operating the service (7) An operator that meets these citizenship requirements may own qualified U.S.-flag vessels that were built in a U.S. shipyard (8) And apply for a coastwise endorsement to be issued to the vessel by the United States Coast Guard (9) Any vessel engaged in transportation of passengers or merchandise between U.S. ports must be issued a coastwise endorsement (10) Thus, operators that wish to expand their fleet in order to accommodate increased demand for domestic marine transportation will be restricted to purchasing vessels constructed in U.S. shipyards.
OTHER RELEVANT STATUTORY PROVISIONS Act of Sept. 1, 1789, ch. xi, § 1, 1 Stat. 55. Coast Guard Authorization Act of 1996, Pub. L. No. 104-324, § 1113(d), 110 Stat. 3901, 3970 (1996), Coast Guard and Maritime Transportation Act of 2004, Pub. L. No. 108-293, § 608, 118 Stat. 1028, 1054 (2004). Coast Guard and Maritime Transportation Act of 2006, Pub. L. No. 109-241, § 308, 120 Stat. 516, 528 (2006). An Act To Complete the Codification of Title 46, Pub. L. No. 109- 304, 120 Stat. 1485 (2006). 46 U.S.C.A. § 12103(a)-(b) (West 2007). "A vessel and its equipment are liable to seizure by and forfeiture to the Government if... the vessel is employed in a trade without an appropriate endorsement." 46 U.S.C.A. § 12151(b)(4).
PASSENGER VESSEL SERVICES ACT OF 1886 The Passenger Vessel Services Act of 1886 provides that “a vessel may not transport passengers between ports or places in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel” is a qualified US-flagged vessel. Regarding the US OCS, the CBP has also carefully limited the application of the Passenger Act consistent with OCSLA Section 4(a).
TOWING STATUTE OF 1940 The Towing Statute of 1940 provides that a US vessel must be used for towage “between ports or places in the United States to which the coastwise laws apply, either directly or via a foreign port or place” and “from point to point within the harbors of ports or places to which the coastwise laws apply” unless a vessel is in distress. The CBP “has taken the position that the statute is to be construed consistently with the Jones Act” so under this rational “places in the United States to which the coastwise laws apply” would also encompass points on the US OCS as defined in OCSLA.
DREDGING ACT OF 1906 • The Dredging Act of 1906 restricts “dredging,” which includes certain pipe or cable laying activities as well as foundation excavations, “in the navigable waters of the United States” to qualified US-flagged vessels. • The CBP “has long-held that ‘dredging’ . . . is the use of a vessel equipped with excavating machinery in digging up or otherwise removing submarine material.” • The CBP reasons that “[w]ith respect to the applicability of [the Dredging Act] to the OCS, we [CBP] have held that statute to apply only to dredging on the OCS for the purposes described in Section 4 of the OCSLA, and not to dredging done to prepare the seabed of the OCS for the laying of trans-oceanic cable.” • The Dredging Act does not apply because dredging for a transoceanic cable on the US OCS was not within the purposes outlined in OCSLA Section 4(a). • Analogously, dredging to lay or bury in the seabed the undersea cable infrastructure of an offshore wind farm would not implicate the Dredging Act.
U.S. MARITIME CABOTAGE LAWS The United States maritime cabotage laws apply to US territorial waters (navigable waters). The US territorial seas limit applicable to these laws is three nautical miles. These laws consist primarily of the Jones Act (Merchant Marine Act of 1920), the Passenger Vessel Services Act of 18863, the Dredging Act of 19064, and the Towing Statute of 19405. Outside of three nautical miles, the application of these laws likely limited because the Outer Continental Shelf Lands Act of 19537, that extends certain federal laws to the Outer Continental Shelf (OCS), appears likely restricted (OCSLA) to mining, gas and oil activities.
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