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The Jones Act

The Jones Act when used in the sense of maritime law refers to federal statute 46 USC section 883. This is the act that controls coastwise trade within the United States and determines which ships may lawfully engage in that trade and the rules under which they must operate.

Generally, the Jones Act prohibits any foreign built or foreign flagged vessel from engaging in coastwise trade within the United States. A number of other statutes affect coastwise trade and should be consulted along with the Jones Act. These include the Passenger Services Act, 46 USC section 289 which restricts coastwise transportation of passengers, and 46 USC section 12108 restricts the use of foreign vessel to commercially catch or transport fish in U.S. waters.

The essential term that has given rise to various interpretations of what constitutes "coastwise trade". The federal courts have given a very wide interpretation of the term. Essentially the term applies to a voyage that beginning at any point within the United States and delivering a type of commercial cargo to any other point within the United States.

Various cases have extended the definition of merchandise to include anything of a commercial value including dredged materials used for land fill. The federal district courts have ruled that the transportation of sewage sludge is not "merchandise" because it is a valueless commodity.

However, under the terms of 46 USC section 316 tow boats used to tow, even valueless commodities must be U.S. registered vessels and met all the terms and rules of the statute.

The Passenger Services Act provides the legislation that controls the operation of passenger vessels in coastwise trade. The difficult issue has always been what constitutes a "passenger". The general definition has been any person other than the ship's master, a crew member or any person engaged in the ship's business. The "for hire" issue involves any consideration flowing from the passenger to the ship owner, charterer, agent or any person involved in the ship. The consideration has been construed to be using a company yacht for entertaining customers or clients to develop "business goodwill". Carried to its logical conclusion would require any vessel unless used solely for personal pleasure to be registered for coastwise trade and inspected.

It does not appear to be the Coast Guard's policy to go to this extreme. It is reasonable to assume that any vessel that transport passengers on a regular or irregular basis must be inspected and licensed for coastwise trade.

Please note that under new regulations, there are different categories of vessels subject to inspection, which include: "passenger vessels"; "small passenger vessel"; "offshore vessels"; and "uninspected passenger vessels".

Part II

The discussion in last month's article center around application of the Jones Act to vessels. The Jones Act encompasses much more.

Bareboat charters of foreign built or owned vessels are permitted under the fiction that a true "bare boat charter" is not a commercial application and the Jones Act applies only to commercial applications. Traditionally the issue has involved the chartering of pleasure boats or yachts and whether the charter has violated the terms of the Passenger Services Act.

The term passenger for hire means any transportation aboard a vessel in which some consideration, i.e., benefit, flows from the passenger, his agent or representative to the owner, his agent or representative. Consequently, business guest may be considered a "paying" passenger because of the flow of business good will to the owner. Consequently, where a group or organization charters a vessel and members contribute to the cost of the charter, the organization may be found to have passengers for hire. The underlying purpose is to create a distinct line between commercial or business use and pleasure use. No matter how we describe the conduct of the parties there will always be a gray area of discretionary enforcement. Legally, if a guest aboard a vessel provides fuel, food or beverage for the voyage that is consumed by the owner, we have a passenger for hire situation. Realistically, this will probably not be enforced unless other factors are involved.

The use of foreign owned or foreign built yachts in a commercial application is strictly prohibited. However, foreign built and owned yachts may operate in U.S. waters for pleasure and non-commercial purposes. These vessels may also be chartered in U.S. waters, as well, but only for non-commercial purposes. If a businessman charters a foreign built yacht to entertain his clients, he and the owner are in violation of the Passenger Services Act.

The true bare boat charter must be non-commercial and the owner must relinquish the custody and control of the vessel, entirely. If the owner skippers the vessels or controls the choice of the skipper, then the charter is not a true bare boat charter and will be considered carrying passengers for hire.

Violations of the Passenger Services Act or the Jones Act may, but do not necessarily result in forfeiture of the vessel to the United States Government. In the event of forfeiture, the vessel is deemed to have become the property of the United States at the instant of violation and allows immediate seizure. There are provisions for remission of the vessel and payment of fine and penalties. Also, mortgagor holders and lien holders may petition the government for remission to protect their interests in the vessel.

The Jones Act also governs the relationship between the employer and crew aboard a United States vessel. Prior to the Jones Act, seamen were very limited as to their ability to recover for injuries aboard ship. The Jones Act made the Federal Employers Liability Act applicable to seamen. Under admiralty law, seamen are entitled to somewhat more liberal interpretation of the concepts of negligence and the employer has a somewhat higher degree of care. Under the Jones Act, the employer if liable for "any injury" arising in whole or in part from the negligence of any of the officers, agents or employees of the employer, or by reason of any defect or insufficiency of equipment due to negligence of the employer. The employee must prove negligence. The negligent act is not required to be the sole proximate cause of the injury.

An interesting side point which is not uncommon in some areas, is that if the master and crew are in a joint venture, that is they share the control of the project and share the rewards, the employer-employee relationship does not exist and these provisions of the Jones Act will not apply. Also, it does not apply to volunteer, unpaid crew members on yachts. However, paid crew members on pleasure yacht still are covered.

Injuries that are covered are not only work related, but also if the injury occurred during his living aboard the vessel or in his coming or leaving the vessel. Interestingly, if the master has a policy of allowing drunken seamen to return to the ship in an inebriated condition, he will be held liable for any injury that may occur during their ingress and egress even in a drunken condition.

Negligence of the owner/master have been determined to be such things as failure to maintain safe equipment and appliances; care in selecting a competent master and fellow crewmen; assaults by fellow crewmen within scope of work; negligent orders; requiring overtime; failure to avoid heavy weather; failure to provide medical treatment; failure to rescue; and failure to supervise, among others.

Damages permitted under the Jones Act include: Medical expense, pain and suffering;
loss of wages; loss of support to the seaman's widow or dependents; Loss of value of
household services, nurture etc.; funeral expenses; loss of fringe benefits; and mental
anguishes. In survival or wrongful death actions, pain and suffering occurring prior to
death are recoverable; as well as medical expenses and wages. The act requires that a legal
action be brought within three years of the date of the incident.

Generally, liability arising from claims under the Jones Act do not create a maritime lien for injury to a seaman. The liability is a personal obligation of the employer.

For a complete reading of the Jones Act, read 46 United States Code, section 883.

Small Vessel Jones Act Waiver Program

A relatively new program has been introduced that mitigates the strict requirements of the Jones Act. As you may know, the Jones Act requires that all commercial vessels carrying cargo or passengers for hire must be built in the United States, owned by US citizens, crewed by US crew members and operated under strict USCG regulations.

However, now under very specific terms and regulations, it is possible to operate a foreign-built, foreign flagged vessel or a former US-flagged vessel under certain conditions that previously required a Jones Act Vessel.

The Secretary of Transportation has been authorized to waive the domestic build requirements for foreign-built or rebuilt small passenger vessels authorized to carry no more than 12 passengers.

The program allows vessel owners to request a waiver of the US build requirement of the coastwise trade laws for a vessel eligible to carry limited (12 pax) passengers in a specific area.

In order to grant such waivers, the Secretary must determine that employment of the vessel in coastwise trade will not adversely affect US vessel builders or the coastwise trade business of any person who employs vessels built in the United States.

Once this waiver is obtained, the vessel must then meet all requirements imposed by USCG for other vessels working in that trade. Since the 6 passenger and 12 passenger requirements are fairly minimal, this will allow many owners of foreign-built vessels to put their boats into commercial service.

The process requires filings with the Maritime Administration, certain reports in effect on other builders and operators in the required geographic area and publication in the Federal Registry. The Secretary then evaluates any opposition to the waive and makes an administrative decision.

END