How the Jones Act Restricts U.S. Maritime Commerce and Shipping

A 1920 Law That Costs American Consumers Billions

Section 27 of the Merchant Marine Act of 1920—universally known as the Jones Act—requires that all goods shipped by water between U.S. ports travel on vessels that are built in the United States, owned by U.S. citizens, flagged under the U.S. registry, and crewed by American citizens or permanent residents. A century after its passage, the law affects everything from the price of groceries in Hawaii to the cost of hurricane relief in Puerto Rico, while the U.S.-flagged fleet has shrunk from over 2,000 vessels in the 1950s to fewer than 100 today.

What the Jones Act Requires

The law imposes four simultaneous requirements on any vessel transporting merchandise between two U.S. points—a restriction known as cabotage.

The combined effect: operating a Jones Act vessel costs roughly three to five times more per ton-mile than a comparable foreign-flagged ship.

Who Pays the Price

The economic burden falls disproportionately on communities that depend on waterborne shipping from the U.S. mainland. Hawaii, Puerto Rico, Alaska, and Guam have no rail connections and limited trucking alternatives. They must ship virtually everything by sea.

• Hawaii: shipping a 40-foot container from the mainland to Honolulu costs roughly twice as much as shipping the same container from the mainland to Shanghai—five times farther away
• Puerto Rico: a 2012 Federal Reserve Bank of New York study found the Jones Act adds $1.1 billion annually to the island's costs
• Alaska: the cost of living in rural Alaskan communities is 30%–50% above the national average, with shipping costs a major contributor
• Guam: imported goods cost 2–3 times mainland prices for identical products

A 2019 OECD study estimated the Jones Act's annual cost to the U.S. economy at $1.8 billion. Other estimates range from $656 million (Cato Institute, focused on shipping cost differentials alone) to $9.8 billion (when including broader supply chain inefficiencies).

The National Security Argument

Supporters defend the Jones Act as essential to national defense. The argument has two prongs. First, the law maintains a domestic shipbuilding industrial base that the military could mobilize in wartime. Second, it ensures a pool of trained American merchant mariners who could crew military sealift vessels during a conflict.

The Defense Department has historically supported the Jones Act, though with growing reservations. The U.S. Military Sealift Command relies on commercial mariners to crew its surge fleet. Without the Jones Act, advocates argue, the American merchant marine would effectively disappear—as has happened in other developed nations that relaxed cabotage laws.

• The U.S. Jones Act fleet has shrunk from 2,332 vessels in 1950 to fewer than 100 in 2024
• The U.S. share of global shipbuilding fell from 13% in 1975 to less than 0.3% today
• South Korea, China, and Japan collectively build over 90% of the world's commercial vessels
• The average age of Jones Act cargo ships exceeds 30 years—far older than the global fleet average

Emergency Waivers Reveal the Law's Burden

The Jones Act can be temporarily waived when the president determines that national defense requires it. These waivers—typically issued during natural disasters—inadvertently demonstrate how much the law constrains ordinary commerce.

The delayed waiver during Hurricane Maria became a flashpoint. Puerto Rico was devastated, ports were functional, but foreign-flagged vessels carrying relief supplies from U.S. ports were initially prohibited from docking. The eight-day delay drew bipartisan criticism and renewed calls for permanent reform.

The Reform Debate

Reform proposals range from full repeal to targeted modifications. Each faces fierce political opposition from a coalition of domestic shipbuilders, maritime unions, and defense contractors.

• Full repeal: introduced repeatedly by Senator John McCain (now carried by Senator Mike Lee) but has never received a floor vote
• Exemptions for noncontiguous territories: would exempt Hawaii, Puerto Rico, Alaska, and Guam while maintaining cabotage for mainland routes
• Build requirement waiver: allow foreign-built vessels if they meet flag, ownership, and crew requirements—this alone would reduce vessel costs by 60%
• Reciprocal cabotage: allow vessels from countries that grant U.S. ships cabotage access in return

Other Countries' Cabotage Laws

The United States is not the only country with cabotage restrictions, but its requirements are among the strictest. Most nations impose flag and crew requirements without demanding domestic construction.

The build requirement is the outlier. It is the single provision most responsible for the high cost of Jones Act vessels and the one that most economists recommend eliminating first.

An Aging Fleet With No Easy Replacement

Building a Jones Act-compliant container ship in an American shipyard costs approximately $500 million, compared to $50–$80 million at a Korean yard. The economics are so unfavorable that few new vessels are ordered. The existing fleet ages, efficiency drops, and the law that was meant to preserve American maritime power has instead presided over its decline. Whether the law's security benefits justify its economic costs remains one of the most durable debates in American trade policy.

This article is for informational purposes only and does not constitute legal advice.