Why the Jones Act’s U.S. Citizenship Quota Should Be Repealed

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The Jones Act has restricted competition in the domestic waterborne shipping business for almost a century. Known formally as Section 27 of the Merchant Marine Act of 1920, the Jones Act imposes four requirements on all ships transporting goods by water between locations inside U.S. customs territory: The ships must be U.S.-built, U.S.-owned and U.S.-flagged, and 75 percent of the crew must be comprised of U.S. citizens.

Much has been written about the first three provisions, especially the U.S.-build requirement, but the mandate for the crew also impacts the U.S. economy and shipping industry. This requirement drives up the cost of U.S. shipping, especially to locations outside the continental United States. It also discriminates unfairly against U.S. residents who are non-citizens but otherwise authorized to work in the United States, all while doing nothing to protect the security of the American homeland or enhance the capability of the U.S. military. Any conversation about reforming the Jones Act to better serve America's national interest must include a reasonable relaxation of the crew requirement.

Discriminating against Non-citizen U.S. Workers

The strongest argument against the U.S. citizenship requirement for the crew is that it is needlessly discriminatory. There is no reason why non-U.S. citizens authorized to work in the United States should face discrimination when applying to work on a Jones Act ship.

U.S. citizenship is a requirement for many jobs in the U.S. government, especially those requiring a security clearance and directly tied to national security. But in the private sector, citizenship is not typically required for employment. In fact, U.S. employment law specifically prohibits private employers from requiring U.S. citizenship as a condition of employment. U.S. law requires all private sector jobs to be open to all legally authorized U.S. workers, defined as not only citizens but also permanent residents, asylees, and refugees. On its website, the U.S. Equal Employment Opportunity Commission declares, "Most employers should not ask whether or not a job applicant is a United States citizen before making an offer of employment."i

A U.S.-citizenship requirement is not imposed on other forms of domestic transportation, such as trucking, passenger and freight rail, and domestic air travel. Like domestic waterborne shipping, U.S. commercial air service is subject to cabotage laws that forbid foreign-owned companies from competing on domestic routes. Yet unlike Jones Act shippers, U.S. airlines that operate between U.S. locations are not required to crew their flights with a certain quota of U.S. citizens. To work for a U.S. airline serving the domestic market, a potential cabin crew member must have the right to work in the United States and possess a valid passport, U.S. or foreign. Potential employees are also subject to background screening by the Transportation Security Administration (TSA) to obtain a security clearance pass, but they do not need to be a U.S. citizen.ii

Security remains a major concern in an industry that suffered the catastrophe of the September 11, 2001, terrorist attacks. But imposing a quota of U.S. citizens on the hiring process has been wisely rejected in favor of other more appropriate security steps. It's difficult to argue that the citizenship status of the crew of an airliner is less important from a national security perspective than the citizenship status of the crew of a tugboat or an inter-coastal transport ship.

For shipping solely within U.S. coastal waterways or interior waterborne routes, the U.S. government could maintain the requirement that all merchant marine personnel be legally authorized to work in the United States, but the 75 percent quota for U.S. citizens should be repealed.

Artificially Inflating the Cost of Ocean-born Shipping

The 75 percent citizenship requirement for the crewing of Jones Act vessels is also costly for the shipping sector and the U.S. economy. This is especially true for shipping routes beyond the U.S. Mainland—specifically to Hawaii, Alaska, and Puerto Rico—that cross international waters where internationally competitive alternatives are widely available.

A number of studies have concluded that the U.S.-citizen requirement adds substantially to the cost of serving destinations beyond the U.S. Mainland. A 2002 analysis by the U.S. International Trade Commission (USITC) concluded that, because of the Jones Act, the crew cost alone for a U.S.-flagged vessel was more than four times higher for a typical oil tanker and more than six times higher for a container ship compared to a foreign-flagged vessel. The USITC further concluded: "U.S. crew costs generally account for most of the differences in operating costs between U.S.- and foreign-flag vessels. For example, manning costs account for over 50 percent of the operating cost differential for a typical oil tanker, and nearly 80 percent of the cost differential for a typical containership."iii

A more recent study by the Alliance for Innovation and Infrastructure concluded that the average daily cost to crew a Jones Act tanker is $11,500, nearly six times the daily cost of $2,000 to crew a foreign-flagged vessel. "This six-fold daily rate adds to the transportation cost, which is ultimately incorporated into the cost per barrel of the product," the study concluded.iv

For ships serving points beyond the U.S. Mainland, the entire Jones Act, including the crewing requirements, should be repealed and international shipping companies and international crews allowed to serve those destinations.

How the Jones Act Crew Requirement Weakens National Security

Advocates of the Jones Act argue that the crewing requirement makes America more secure by protecting us from potential intrusion by foreign-born terrorists and by maintaining a standing reserve of potential merchant marine seafarers should the nation need them in time of emergency.

In a recent article posted by The National Interest, the author argued, "The requirement that all the officers and 75 percent of the crews engaged in cabotagev be U.S. citizens goes a long way to reducing the risk that terrorists could get onboard or execute an attack on a U.S. target. In effect, there is a system of self-policing that reduces the burden on law enforcement and homeland security organizations."vi

This argument is made despite the lack of any evidence that U.S. security has been compromised by the presence of non-U.S. citizen seafarers in U.S. waters. According to a 2011 report to Congress by the U.S. Government Accountability Office, seafarers—the overwhelming majority of which are foreign—made about 5 million entries into U.S. ports on commercial cargo and cruise ship vessels in FY 2009. Yet according to the same report, "to date there have been no terrorist attacks involving seafarers on vessels transiting to U.S. ports and no definitive information to indicate that extremists have entered the United States as seafarer non-immigrant visa holders."vii

The U.S. military itself does not require U.S. citizenship to serve in the enlisted ranks. According to the National Immigration Forum, about 24,000 non-citizens were on active duty in 2012, with 5,000 legal permanent residents joining the U.S. military force each year.viii

It's also worth noting that U.S. citizenship is no guarantee against terrorist intentions. Since 2014, more than half of the individuals charged with ISIS-related terrorist offences have been U.S. citizens, according to the Program on Extremism at George Washington University.ix

Another national security argument from Jones Act supporters is that the U.S. military needs a reserve of trained merchant seafarers to transport U.S. troops and equipment during a national emergency. As Loren Thompson of the Lexington Institute noted in a 2017 column, nine out of ten "trained mariners" in the United States work on trade routes covered by the Jones Act. "In the absence of Jones Act protections, this workforce likely would not exist, forcing the Navy to rely on mariners who are not trained to a similar level of proficiency and/or are foreign nationals," he concludes.x

Yet the Jones Act has notably failed to maintain a viable fleet of ships and sufficient crew suitable to serve the U.S. military in time of need. The Jones Act fleet has been in long-term decline for decades, because of its uncompetitive costs and declining demand for waterborne transportation despite a growing U.S. economy. According to a recent report from the Grassroot Institute of Hawaii:

Between 2006 and 2011, the Jones Act-eligible fleet shrank by just over 17 percent, with the number of each vessel type in that category falling, sometimes by a significant amount. If the Jones Act is intended to maintain the health of the commercial shipbuilding industry, then the shrinking U.S. merchant fleet demonstrates that the Act has been a failure in that regard.xi

In recent testimony before Congress, a senior union official acknowledged that "the pool of licensed and unlicensed mariners has shrunk to a critical level" and, absent government action, "the military will no longer be able to rely on the all-volunteer U.S. Merchant Marine as our nation's fourth arm of defense."xii

If the U.S. government foresees a need for merchant marine personnel to meet its future demands in time of emergency, it should develop a plan to meet that need that does not require the United States to maintain an aging, shrinking, and economically uncompetitive fleet of protected Jones Act ships. National security is important, but it should not be pursued in a way that unnecessarily discriminates against lawful U.S. residents and damages the U.S. economy and the long-term health of the domestic waterborne shipping industry.

Notes

i U.S. Equal Opportunity Employment Commission, "Pre-Employment Inquiries and Citizenship," https://www.eeoc.gov/laws/practices/inquiries_citizenship.cfm.

ii See "Flight Attendant Requirements at American Airlines," Cabin Crew HQ, http://cabincrewhq.com/american-airlines-flight-attendant-requirements/; and "Flight Attendant Requirements: What You'll Need in 2016," Age and Citizenship Requirements, The SpotRunner Team, February 7, 2016, http://www.spotrunner.com/flight-attendant-requirements/.

iii U.S. International Trade Commission, "The Economic Effects of Significant U.S. Import Restraints," Third Update 2002, Investigation No. 332-325, June 2002, p. 121.

iv "The Jones Act: Protectionism V Global Trade," Alliance for Innovation and Infrastructure (2016) https://www.aii.org/wp-content/uploads/2016/01/JonesActFormatted-1.pdf.

v "Cabotage" is defined as the right to operate sea, air, or other transport services within a particular territory. Cabotage laws, such as the Jones Act, restrict the provision of such services within a particular country to that country's own transport services.

vi Dan Goure, "The Jones Act is Needed Now More Than Ever," The National Interest, March 6, 2018, https://nationalinterest.org/print/blog/the-buzz/the-jones-act-needed-n….

vii U.S. Government Accountability Office, "Maritime Security: Federal Agencies Have Taken Actions to Address Risks Posed by Seafarers, but Efforts Can Be Strengthened," January 14, 2011, p. 12, https://www.gao.gov/products/GAO-11-195.

viii National Immigration Forum, "New Americans in the U.S. Armed Forces Fact Sheet," November 22, 2016, https://immigrationforum.org/article/new-americans-u-s-armed-forces-fac….

ix Quoted in Uri Friedman, "Where America's Terrorists Actually Come From," The Atlantic, January 30, 2017. https://www.theatlantic.com/international/archive/2017/01/trump-immigra….

x Loren Thompson, "Why Repealing The Jones Act Could Be A Disaster For The U.S.," Forbes.com, Oct 17, 2017, https://www.forbes.com/sites/lorenthompson/2017/10/17/maritime-security….

xi Russ Kashian, Jeff Pagel, and Ike Brannon, "The Jones Act in Perspective: A survey of the costs and effects of the 1920 Merchant Marine Act," Grassroot Institute of Hawaii, April 9, 2017.

xii Quoted in Colin Grabow, Inu Manak, and Daniel J. Ikenson, "The Jones Act: A Burden America Can No Longer Bear," Policy Analysis no. 845, The Cato Institute, June 28, 2018.

The opinions expressed here are solely those of the author and do not necessarily reflect the views of the Cato Institute. This essay was prepared as part of a special Cato online forum on The Jones Act: Charting a New Course after a Century of Failure.

Daniel Griswold

Daniel Griswold is a senior research fellow and co-director of the trade and immigration project at the Mercatus Center at George Mason University.