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The Jones Act (U.S. Cabotage Law)

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Passenger Fleet

The U.S.-flag passenger fleet of deep-draft, oceangoing vessels, is now poised for an upswing after it underwent a precipitous and prolonged decline beginning in the 1960s and lasting well into the 1990s. Despite business setbacks resulting from the economic shock of September 11, 2001, legislative and other developments in recent years have sparked a renewed interest in building and operating U.S.-flag passenger ships. Currently, several companies, many of them formed only recently to take advantage of what are perceived to be growing opportunities in the U.S.-flag cruise market, have U.S.-flag passenger ships under construction, on order, or in the planning/design stages. In addition, two U.S.-flag cruise vessels in the control of the U.S. Maritime Administration are being examined by a number of existing and prospective operators for service in the U.S. domestic trades.

Cabotage Policy

U.S. cabotage laws cover both cargo and passenger vessels operating in the U.S. domestic trades. Basically speaking, the movement of merchandise in the domestic, waterborne trades is governed by Section 27 of the Merchant Marine Act of 1920 (46 U.S.C. 883; 19 CFR 4.80 and 4.80b), popularly known as the “Jones Act,” which requires that only U.S.-built, U.S.-owned, and U.S.-crewed vessels be used to transport merchandise in U.S. domestic trade; while the Passenger Vessel Services Act of 1886 (46 U.S.C. 289), when applied in conjunction with particular sections of the Merchant Marine Act, governs the U.S. domestic passenger trades, setting the standards for passenger vessels as the Merchant Marine Act does for cargo vessels. Provisions of U.S. cabotage law also cover mixed-use vessels carrying both cargo and passengers.

Concerning the U.S. domestic passenger trades, the Passenger Vessel Services Act states:

No foreign vessel shall transport passengers between ports or places in the United States, either directly or by way of a foreign port, under a penalty of $798 for each passenger transported and landed after November 2, 2015. (Issued to the vessel operator or carrier, not the passenger).

There are, however, certain exceptions to the prohibition on the use of foreign vessels to transport passengers in the U.S. domestic trades. For example, the Virgin Islands are exempt from U.S. cabotage laws until declared otherwise by presidential proclamation (46 App. U.S.C. 877). Foreign vessels may transport passengers between Puerto Rico and ports in the United States, provided that there is no eligible U.S. vessel offering such service (46 U.S.C. 289c). There is no violation of U.S. cabotage law in cases where passengers board a non-coastwise qualified vessel at one U.S. port and disembark (at the conclusion of the voyage) at another U.S. port, as long as the vessel makes an intermediate stop at a “distant foreign port” (19 CFR 4.80a).

U.S. Customs and Border Protection, the agency responsible for interpreting U.S. cabotage laws, has ruled that foreign-flag cruise vessels may carry passengers on so-called “cruises to nowhere” (cruises that begin and end at the same U.S. port and do not touch any other port, U.S. or foreign) without violating the Passenger Vessel Services Act, since such voyages do not entail transportation between U.S. ports or places. Taking advantage of this ruling, numerous foreign-flag gaming vessels are operating in the lucrative and expanding U.S. cruise-to-nowhere market.

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