Feds dodging US-flag ship cargo rules, GAO reveals

The General Accounting Office (GAO), the branch of the US government that audits agencies, has found that the US Maritime Administration (MARAD) has not been following the Jones Act rules for cabotage.

Cabotage is a type of regulation that mandates that cargo to or from domestic destinations should be carried in the ships flagged in that nation.

There are lots of cabotage rules around the world. Air is one place we see them worldwide, where foreign airlines cannot fly do=mestic US routes, for instance. Most countries have cabotage rules for air traffic. Many nations also have maritime cabotage rules.

In the US the cabotage law is known as the Jones Act. Among other things, it says that cargo being carried for the US government, the army or navy for instance, or for NGOs and other organizations carrying US government-owned goods (like soybeans for hunger relief), must use a certain proportion of US-flagged and US-built ships.

Apparently MARAD has not been monitoring this kind of traffic, and abuses have followed. The article outlines the claims and MARAD’s response.

Cabotage also came up just a few weeks ago when gas and oil prices were rocketing skyward. Some, such as the Cato Institute, claimed that US cabotage which prohibited transport between domestic ports of oil and gas by foreign-flagged ships was responsible for a part of the price rise. The Cato Institute suggested doing away with cabotage for this trade. Puerto Rico was one of the main places the pain might be felt, since foreign ships could easily do the job there. There are students of the situation on the other side in this dispute with Cato, though.

The long-term justification for the Jones Act and cabotage, in general, is to preserve a nation’s capability in logistics, in terms of vessels, manpower, construction capability, and infrastructure, so as not to be dependent on foreign powers in case of disagreement or conflict. One could argue that we have already compromised the US ability to mount a strong seafaring merchant force in case of war, with shortages of captains and seafarers.

But it certainly would help if MARAD could enforce the existing law more closely. The Ukraine war has made us think about disruptions of military supply lines, and how we might respond to them.

John Gallagher Monday, September 12, 2022

Feds dodging US-flag ship cargo rules, GAO reveals – FreightWaves