Jones Act

The Jones Act, formally known as the Merchant Marine Act of 1920, is a federal law that regulates maritime commerce within the United States. Under Section 27 of the act, any goods shipped between two U.S. ports must be transported on vessels that are built in the United States, owned by U.S. citizens, flagged under the U.S. registry, and crewed by at least 75% U.S. citizens or permanent residents. This requirement, known as cabotage, has significant implications for domestic shipping costs, vessel availability, and supply chain planning.

How the Jones Act Affects Domestic Shipping

For importers and FBA sellers moving goods between U.S. locations, the Jones Act matters most when ocean transport is involved. Shipping a container from Los Angeles to Honolulu, from Houston to San Juan (Puerto Rico), or from Charleston to a port in Alaska must comply with Jones Act requirements. Because the pool of qualifying vessels is limited (roughly 90 large oceangoing ships as of recent counts, compared to thousands in the global fleet), rates on these routes tend to run significantly higher than comparable international legs.

A container move from Shanghai to Long Beach might cost $3,000 to $5,000 on the spot market during a normal period. A Jones Act compliant move of similar distance between two U.S. ports can run two to four times higher, depending on the route, vessel availability, and season. This price premium is driven by the higher construction costs of U.S.-built vessels (often 5x to 8x the cost of a ship built in a South Korean or Chinese yard), higher crew wages meeting U.S. labor standards, and the limited competition on these routes.

Routes and Regions Most Affected

The Jones Act has the greatest impact on noncontiguous U.S. territories and states:

Hawaii: All consumer goods, building materials, and commercial freight arriving from the mainland by sea must move on Jones Act vessels. Matson Navigation and Pines (formerly Horizon Lines) dominate this lane. Sellers fulfilling orders to Hawaiian customers often find ocean freight prohibitively expensive and default to air shipment for lighter parcels.

Puerto Rico: Crowley Maritime, TOTE Maritime, and Trailer Bridge serve the Jacksonville-to-San Juan corridor. Studies commissioned by the Puerto Rico government have estimated that Jones Act compliance adds between $1.1 billion and $1.5 billion annually in extra costs to the island’s economy.

Alaska: Freight from Tacoma or Seattle to Anchorage or Dutch Harbor moves on Jones Act carriers. The limited frequency of sailings (sometimes weekly or less to remote Alaskan ports) adds transit time and inventory planning challenges.

Guam and U.S. Virgin Islands: These territories also fall under Jones Act provisions, though cargo volumes are smaller.

Workarounds and Planning Strategies

Businesses that regularly ship between U.S. ports have developed several strategies to manage Jones Act costs. One common approach is to consolidate shipments to maximize container utilization, since per-unit freight cost drops sharply when a 40-foot container is loaded to capacity rather than shipped half-empty. Another strategy involves positioning inventory at a warehouse near the destination market and replenishing in bulk on longer cycles rather than shipping small quantities frequently.

Some sellers use foreign-flagged vessels for the international leg of a journey and then transload at a mainland port for domestic distribution by truck or rail, avoiding the Jones Act entirely by not using water transport for the domestic segment. For example, a seller importing goods from Asia to serve the Hawaiian market might land containers in Long Beach, prep and label inventory at a facility like MeisterPrep’s Long Beach warehouse, and then ship finished units via a Jones Act carrier to Honolulu, or alternatively fly smaller batches via air cargo.

Ongoing Debate and Potential Changes

The Jones Act has been debated for decades. Proponents argue it maintains a domestic shipbuilding base, supports maritime jobs, and ensures vessel availability for national defense. Critics point to inflated shipping costs, reduced competition, and disproportionate economic burden on island and remote communities. Various reform proposals have surfaced in Congress, ranging from full repeal to targeted waivers for specific routes or cargo types. After natural disasters, temporary Jones Act waivers have been issued (as occurred briefly after Hurricane Maria in 2017), but permanent changes have not passed.

For supply chain professionals, the practical takeaway is straightforward: any logistics plan involving waterborne movement between U.S. ports needs to account for Jones Act vessel requirements, limited carrier options, and higher rates. Ignoring this can lead to unexpected costs that erode product margins, particularly for e-commerce sellers shipping to Hawaii, Puerto Rico, or Alaska.