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Why Was a Waiver of the Jones Act Needed for U.S. America’s Cup Races?

I just ran across an online discussion of how the Jones Act and other maritime regulations might interfere with the running of the America’s Cup in San Francisco during 2013 and the America’s Cup World Series, which is coming to San Diego this month. I understand that a bill is working its way through Congress to circumvent those regulations. Can you explain how this all works? 

Last week, the U.S. House of Representatives and the Senate passed the “America’s Cup Act of 2011.” It was introduced in the House (as H.R. 3270) by Rep. Brian Bilbray of California’s 50th Congressional District, and in the Senate (as S. 1759) by Sen. Dianne Feinstein — and it passed both chambers of Congress with almost unanimous support.

According to Rep. Bilbray, the legislation “temporarily and narrowly waives the provisions set forth in the Merchant Marine Act of 1920, commonly known as the Jones Act, making it lawful to hold the sailing competition closer to the coastline and in U.S. bays and harbors.”

The Jones Act was passed in 1920 to protect the rights of killed and injured maritime workers and their families, and to protect U.S. maritime industries from foreign competition. The provisions of the Jones Act that are in question here require any vessel that carries cargo for hire to have been built in the United States, and to be U.S.-flagged and manned by an American crew. A companion law known as the “Passenger Services Act” provides similar restrictions for vessels that carry passengers for hire.

On the surface, this would seem to have no effect on a yacht race such as the America’s Cup, since a race boat generally does not carry passengers or cargo for hire.

Similarly, the commercial nature of this event does not, by itself, run afoul of the Jones Act, even if foreign-built boats are emblazoned with advertising. The Jones Act and the Passenger Services Act concern the hiring of a vessel to transport cargo or passengers. An advertisement is not a passenger, and it is not cargo.

The questionable nature of this current legislation is further supported by the fact that the America’s Cup competition has been held in the U.S. many times since the enactment of the Jones Act, with no need for a waiver of the law.

Nonetheless, several unique aspects of this America’s Cup may require a narrow waiver of the rules. The most significant feature of the current edition of the event is probably the inaugural running of the America’s Cup World Series as a preliminary competition before the actual event. The AC World Series is a traveling show that conducts races at venues throughout the world during the two-year period leading up to the 34th America’s Cup in San Francisco, in 2013. The teams that are entered in the America’s Cup compete in the AC World Series on 45-foot versions of the 72-foot catamarans that will be used in the America’s Cup races.

The AC World Series may run afoul of the Jones Act because the AC 45 catamarans will need to be transported around the world, with all of their related gear. That transportation will include a number of voyages that are between two U.S. ports — and, therefore, any ship that is hired for that purpose would need to comply with the Jones Act. In fact, whether due to necessity or oversight, a foreign ship called HR Constitution has been hired for that purpose, so the cargo transportation restrictions of the Jones Act have been brought into the picture.

The “big show” aspects of the 34th America’s Cup may also involve problems with carrying passengers for hire on foreign-built boats.

According to John Craig, principal race officer for America’s Cup 34, the race marks for both the AC World Series and America’s Cup 34 itself will be boats, rather than traditional race buoys. These boats were specially designed and built for their station-keeping and maneuverability characteristics — and, among other features, they will be carrying “VIP” passengers during the races. And similar to the merchant ship, whether due to necessity or oversight, these VIP mark-set boats were not built in the U.S.

The issues regarding foreign construction of these unique boats were recognized early in the planning stages for the America’s Cup. The Host and Venue Agreement between the America’s Cup Event Authority and the city of San Francisco expressly required the city to “explore the need for necessary federal legislative or regulatory actions” to allow the use of foreign-built vessels for activities related to the event.

As noted above, Rep. Bilbray and Sen. Feinstein have cast the America’s Cup Act of 2011 as a “jobs bill,” claiming that the bill makes it “lawful to hold the sailing competition closer to the coastline and in U.S. bays and harbors.” These enthusiastic claims are, frankly, a bit of a stretch.

The races themselves do not require a waiver of the law. The cargo probably could have been transported on a U.S.-flagged merchant ship, and the unique mark-set boats probably could have been built in the U.S. But, as noted, whether due to necessity or oversight, those decisions were made and the waivers of U.S. law are now required.

This discussion would not be complete without a cautionary note against any form of “sound-byte scrutiny” of the Jones Act in the media. We have seen a little of this in connection with the America’s Cup Act, and we saw a lot of it last year in connection with the Deepwater Horizon oil spill in the Gulf of Mexico.

In those reports, media pundits claimed that numerous foreign oil skimmers were prevented by the Jones Act from participating in the cleanup of the spill. In fact, since the Jones Act would only have applied to vessels operating within 3 miles of the coastline, Coast Guard Adm. Thad Allen stated that the Jones Act restrictions were never an issue.

Maritime regulations throughout the world are complex, and they seek to satisfy a lot of competing interests. The purpose of the Jones Act and other “protectionist” maritime regulations throughout the world is to help maintain a strong merchant marine fleet, both for economic and national security reasons.

In this country, the Jones Act is one of the few things standing in the way of our losing all of our U.S.-flagged commercial shipping capacity. This seems to me to be a legitimate goal.

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