Originally designed to support the shipping industry, the Jones Act has evolved into a cornerstone of the U.S. maritime industry, providing essential support to both the industry and its workers. It created a framework that would enable the maritime industry to become a foundational element of the world’s largest economy and continues to have a place and purpose in the maritime industry and beyond.
While criticisms of the requirements associated with the Jones Act have been around for decades, the Jones Act is facing renewed scrutiny in 2024 thanks to foreign competition, geopolitical rivalries and shipbuilding realities. In response to this scrutiny, advocates have reframed the core issues in a way that will enable growth for the entire industry. But how should any of these threats and opportunities define the way forward? A full exploration of these issues will take place at the International WorkBoat Show during the "State of the Jones Act in 2024" keynote address, which will provide a comprehensive understanding of the current Jones Act landscape and its implications for the maritime industry.
As a primer for that conversation, we connected with Aaron Smith, President and Chief Executive Officer of the Offshore Marine Service Association (OMSA), who is set to participate in the discussion. We talked with him about the role of the Jones Act in the nation’s economic stability and security, what it means to counter the international challenges, what he sees on the horizon for the maritime industry in 2025 and much more.
Workboat.com: OMSA works to ensure that American citizens have first crack at jobs in U.S. offshore energy by working with elected and government officials to ensure they understand the importance of the Jones Act, enforce it correctly, and ensure the U.S. maritime industry doesn’t face unfair competition so what can you tell us about the challenges associated with this work? Is it more about a lack of understanding? Or lack of resources? Or something else?
This starts with the Jones Act—which requires cargo shipped between two U.S. points to be carried by U.S.-built, crewed, and owned vessels—is the primary component of U.S. maritime policy and is extremely important to our national, homeland, and economic security. For this reason, the Jones Act – which carries the support of the U.S. Navy, Coast Guard, the Maritime Administration and bipartisan Members of Congress – is vital to maintain.
However, like many things at the intersect of policymaking and business, it really comes down to money. No one will ever pay more for something than they have to, and if developers—
As a result, our members are constantly coming up against that very powerful incentive and OMSA is working to shine a light on why foreign vessels and crews are hired and ensure that equally qualified U.S. mariners never lose another job to an equally or lesser trained foreign competitor just so someone can save a buck. When we talk to government officials, we want them to understand why and how developers are exploiting loopholes, and we want to hold them accountable by calling on the bureaucrats in charge to enforce the law to ensure that U.S. mariners, U.S. shipyard workers, and U.S. vessel owners have a level playing field to compete on.
Can you break out those specifics? What does that endeavor look like?
First, our efforts support economic security by protecting hundreds of thousands of good-paying American jobs. Think about it: we don’t let foreign nationals come into the Odessa oil fields of Texas or Kansas wind farms to make windfall profits and take American jobs. No, those projects are required to use American labor. Our offshore energy resources should be no different. U.S. oil, natural gas, and wind should produce U.S. jobs, first. Plain and simple.
Second, ensuring that U.S. energy produces U.S. jobs provides homeland security benefits. By law, U.S. mariners must have a Department of Homeland Security background check; the same is not required of foreign mariners working in our waters. Not only is this unfair, but think about this signal we are sending: an unknown foreign national is less of a security risk than a U.S. citizen? I don’t think so. Especially when considering that Russia and China are two of the five biggest sources of foreign mariners. And the homeland security ramifications extend beyond the workers themselves, putting out entire offshore energy infrastructure and national grid at risk.
Take this for example: Washington has recently recognized that the modems and electronic equipment in Chinese-built port cranes are a security risk because of the tracking and hacking opportunities Chinese companies can embed in them. Well, if the Chinese government—and that’s who Chinese companies are—are willing to embed these backdoors into the cranes, what do you think they’re putting into the Chinese-built vessels that are doing offshore energy work right off our coasts?
Finally, advocating for full enforcement of the Jones Act and a level-playing field for U.S. vessels provides a national security benefit. The same shipyards that build offshore energy vessels also build Naval and Coast Guard vessels.
By following the law and prioritizing the use of U.S. vessels, we are creating markets for U.S.-built energy vessels and developing a supply chain for the U.S. military. This isn’t just another Washington “here’s what we think will happen” that never actually happens. We have directly seen this process work to the benefit of our national defense.
In 2009, U.S. Customs and Border Protection (CBP) slightly improved their implementation of the Jones Act in the subsea construction market. This small change unleashed more than $2 billion in shipyard orders and that money recapitalized U.S. shipyards that are now building the Coast Guard’s Offshore Patrol Cutter, the Coast Guard’s Icebreaker, and the Navy’s Navajo class of vessels. If we replicate this trend on the pipe-lay, cable-lay, trenching, fall pipe, and other offshore energy markets, it will cause further shipyards and larger shipyards to be improved and expanded. In turn, these yards can build more and bigger Naval assets.
What do you think is driving the core fallacy that leads some to think that American shipping and shipbuilding industries are uncompetitive?
What we first need to understand is that we all agree that the Jones Act is the law, but opponents stand to gain considerable sums of money if the Jones Act is done away with and conversely, stand to lose considerably if the Jones Act is strengthened or correctly enforced. That’s why they spend so much money fighting the Jones Act. But it’s also worth noting that in correctly enforcing the Jones Act, the entities that are always speaking out in opposition are not going to become bankrupt, for them it’s merely the difference between great profits and really great profits. The Jones Act looks out for our nation—not bolstering their bottom line.
The biggest problem we face is combating lies. Jones Act opponents list “talking points” that are really just falsities. One of the lies that Jones Act opponents tell the most is that the U.S. industry can’t build this or that type of vessel, or cannot build at the same capacity as other nations. That’s simply false.
America is the most economically secure country in the world. We’ve put men on the moon, does anyone think we can’t build some boats? Think about it this way, we have the singular most powerful Navy of any nation in the world. If what Jones Act opponents said about the U.S. maritime industry was true, there would be no way we could have this sort of Navy. Any current shortcomings in the U.S. fleet are not because of a lack of ability, but because the other side cultivates market forces that undermine U.S. citizens and U.S. companies. Those who exploit foreign maritime industries to line their pockets are trying to create a self-fulfilling prophecy, where if they starve the U.S. maritime industry of contracts and commitments for long enough, the industry will die off and they’ll be able to exploit cheap foreign shipyards and cheap foreign mariners ever more. Not on our watch.
How are all of these efforts connected to your advocacy of the American Offshore Worker Fairness Act (AOWFA)? In what ways do you envision the passing of this act will positively impact the nation’s economic stability and security?
The efforts are one in the same. At the end of the day, Jones Act opponents want to import cheap foreign labor into the United States for their own profit and at the expense of American workers. The Jones Act is designed to protect this from happening. However, the Jones Act has holes created by a lack of enforcement by CBP, and in other limited aspects holes from a lack of statutory application.
Offshore energy developers are great at finding these holes. In doing so, they’re not only taking jobs from current U.S. workers and vessel operators, they’re salting the earth of the future U.S. maritime industry by preventing U.S. companies from making investments in U.S. offshore energy. U.S. operators know they cannot legally compete with the wages the foreign vessels owners charge and therefore it’s not that they don’t want to make investments, they can’t. There is no market.
It doesn’t have to be this way. In fact, when the offshore manning law was written in 1978, Congress attempted to design the system to maximize U.S. employment on the U.S. Outer Continental Shelf, while also ensuring that U.S. mariners did not lose out on international work. To meet both objectives Congress said clearly that only U.S. workers should work on U.S offshore energy, but Congress also put in what it intended to be a seldom used exception saying that if a vessel was foreign-owned, it could be foreign-crewed.
Again, this was supposed to be seldom used.
Instead, we now see that more than 75 foreign flagged vessels have been utilized in offshore wind since 2016, with more than 50 directly competing with U.S.-flagged vessels. Meanwhile, there are a limited number of U.S. vessels working overseas, and certainly none in the North Sea.
OMSA has worked with members of Congress to develop a simple solution. Our plan, called the American Offshore Worker Fairness Act, would require foreign vessels working in U.S. offshore energy projects play by the same set of rules that U.S. vessels are required to abide by—namely that they employ U.S. crew, or crew matching the flag of the vessel (just as U.S. vessels employ U.S. citizens—who’s citizenship matches the flag of our vessels).
This simple change would restore the intent of the original manning provision and—more importantly—require foreign vessels to compete on a level playing field with U.S. vessels.
In no other industry do we allow half of an industry to play by one set of labor laws and the other half to play by another set. There is no reason to give this advantage to foreign offshore vessel operators. Moreover, if anyone should have a benefit in the development of energy resources that belong to American citizens, it should be American citizens—not foreign nationals.
Fixing those inequities should be something that everyone can agree on, however, the energy developers that exploit cheap foreign labor to pad their bottom lines are fighting hard to maintain the status quo.
Can you provide more info about the current challenges associated with the trend of foreign operators using foreign crews? How prevalent is this, and what are the ramifications of this trend continuing?
It is unfortunately extremely prevalent. We’re currently working on a study of offshore wind vessel utilization and we have found that in the last eight years, 50 of the 75 foreign-flagged vessels used in U.S. offshore wind projects since 2016 were used at the expense of equally, if not superior, U.S. flagged vessels. The exclusive reason developers have chartered these foreign-flagged vessels—vessels that have the exact same capabilities as U.S.-flagged vessels—is because they cost less, and they cost less because foreign crews make less than American mariners, often far below the U.S. minimum wage.
The difference in crew costs will be double for a U.S.-flagged vessel when compared to a foreign-flagged vessel. That difference dictates which vessel goes to work, and which vessel’s crew goes home to wait for a call and a paycheck. But while the difference in crew costs benefits the developer, it is budget dust in the cost of these overall projects. Studies have shown that vessel costs are only eight percent of a wind project’s costs. For most OMSA members, crew costs are between 45 to 60 percent of their operating expenses, so we’re talking about 45 percent of eight percent that is attributable to crew—that’s less than four percent of the overall project budget. That is a tiny percentage of the total cost of a wind project—a project I remind you that is offset by a 30 percent tax credit from U.S. taxpayers. In a big picture, these are small costs to developers but result in a big opportunity loss for U.S. mariners to gain fair employment.
Besides AOWFA, what do you think needs to be done to improve the U.S. maritime industry?
There is a lot that we can change, but first we’ll need to jettison some outdated ideas about how we improve the industry.
First and foremost, we need to fully enforce the Jones Act. Since the 1970s, CBP bureaucrats have fallen for the lies peddled by Jones Act opponents looking to line their own pockets, instead of following the law. As a result, the activities effectively covered by the Jones Act have decreased more and more over time, weakening investments in the U.S. maritime industry. Returning enforcement of the Jones Act to its original intent would unlock billions of investments in new vessels and bring new mariners to this industry. In turn, these mariners would be part of the Ready Reserve Force, and shipyards could build vessels for our military.
We also need U.S. law to provide opportunities for the U.S. maritime industry. Strengthening the Jones Act through the measures outlined in the American Offshore Worker Fairness Act would drive investment and jobs. But the two go hand and hand: enforcement of the Jones Act, and the strengthening of the Jones Act. It doesn’t matter how many U.S. mariners we have if foreign flagged vessels are allowed to play by a different set of rules. We must level the playing field so that American jobs go to Americans, first.
The issue is that there’s no one way to level that playing field. Given the complexity, is OMSA's approach adequate to level the maritime playing field and grow our maritime industry? What additional strategies are needed to counter the international challenges the U.S. is facing?
There are numerous things that we need to do to increase the U.S. maritime industry to where it should be and needs to be for our security. For me, the simplest solution starts at home. Yes, we need to go after international shipping markets so that we can put the Chinese shipbuilding markets in check and develop our industrial base, but that will be a long process.
While we get started on that long-term goal, the quickest way to get the U.S. maritime industry moving is to protect and expand the Jones Act. Imagine how much the industry could expand if we first ensured that the vast majority of vessels operating in the U.S. were U.S.-built and U.S. crewed. This would be an amazing starting point that would give us a springboard to taking over more of the international shipping markets.
As simple as that seems, much of the industry is paralyzed with fear of a toothless United Nations body and therefore unwilling to take the actions necessary to protect our own.
Here is what’s going on: the United States is party to the Global Agreement on Tariffs and Trade (GATT). Under this treaty, if any nation expands their cabotage law another party to GATT can raise a complaint against that nation in the World Trade Organization (WTO), and if they are successful that nation’s cabotage law can be thrown out by the WTO.
I think anyone that has been paying attention knows that other nations have never abided by these international “laws.” Further, the Trump and Biden Administrations have shown that the 1990s “free trade” dogma is no longer what it once was. Instead, most realize that completely free trade means the outsourcing of our supply chains and security, causing less of a concern about what the WTO thinks of our trade laws.
Even if we were worried about what the WTO thinks, we could always fight whatever charges are brought to the WTO by another nation. We have a very capable U.S. Trade Representative (USTR) that can effectively defend U.S. laws at the WTO. But even if we didn’t have a capable USTR, the WTO has been rendered powerless. Challenges made to the WTO are sent to the WTO Appellate Body. However, the Appellate Body currently does not have a quorum because the United States is blocking the appointment of Appellate Body Members. As such, the WTO has been neutered by our own government.
Therefore, there is literally zero chance the WTO can harm the Jones Act in the foreseeable future. Zero. Despite this reality, many in the Washington maritime world are still living with the WTO bogeyman under their bed and are afraid to stand up for the U.S. maritime industry lest a completely implausible threat materializes. This situation is no longer tolerable. We have lost too many jobs and ceded too much of our maritime industry because of what was once an outside threat (if five different things happen each in exactly the wrong way). Now, that completely unlikely threat is now a not-even-possible threat.
We should be following the path blazed by other nations and feverously promote our own maritime industry to get back the jobs we have lost and prepare our national security apparatus for any possible conflicts.
Going even broader, we talked with Michael Roberts about the most significant challenges with current maritime policies that are specific to China’s geopolitical position. At that same broad level, what can you say about the state of Chinese influence in U.S. waters?
I can’t believe I have to say this, but here it goes: Chinese-built vessels should not be operating in U.S. offshore energy projects. Yet, we see multiple Chinese-built vessels in our waters, many of them doing work that could be done by existing U.S. vessels, never mind that every Chinese-built vessel that operates here represents a chilling effect on the U.S. maritime industry.
It is unbelievable to me that so many people who are worried about the undue influence of the Chinese maritime industry and Chinese shipbuilding, yet seem to shrug their shoulders about Chinese-built vessels operating in our waters. If the Chinese shipbuilding industry is a threat to our national security, then U.S. energy should not be providing a market for this industry. What is even worse is that many of these Chinese-built vessels are working in U.S. offshore wind projects. These projects are made possible by a 30 percent tax credit that is provided to the developer. As such, U.S. taxpayers are paying for Chinese vessels to come into our waters, degrading our economic and national security.
Many have talked about offshore wind driving a renewal in shipbuilding. What are your thoughts on that promise and the groups that are highlighting U.S. vessels constructed for offshore wind?
Have you ever noticed that the wind developers constantly cite the same four vessels as proof that they are investing in U.S. equipment? Do you wonder why they’re only citing those vessels? While I’m certainly glad to see that U.S. vessels are being constructed, anyone who thinks the size of the U.S. offshore wind fleet is enough is either ill-informed or trying to make you believe something that isn’t true.
There are far too few U.S.-flagged offshore wind vessels being constructed or retrofitted. The highest number I have seen for U.S. wind vessels is 40, that includes retrofits and 29 crew transfer vessels (CTVs). Let’s unpack that: the CTV is a great market, but each CTV only employs a crew of around four mariners and costs around $8 million to build. They’re not the high-end investments that create hundreds of jobs the industry was promised.
These numbers also include subsea construction vessels that were not purpose-built for the offshore wind industry, but instead have been converted for work in offshore wind and now move back and forth between industries. And while this shows the amazing adaptability of U.S. vessels, it is not the new construction and job creation we were promised.
On the other side, there are again 75 foreign-flagged vessels that have worked in U.S. offshore wind, with more than 50 of which performing work that U.S. vessels could be used for with little-to-no modifications, others performing work that U.S. vessels could have been retrofitted to do, and the rest were vessels that the U.S. could have built. This happened because the wind developers and foreign contractors knew they could save a buck so they hired foreign instead.
Trust me, I cheer every time a U.S.-flagged vessel is built, be it a CTV, an SOV, or a WTIV, but I’m not happy with the size of the U.S.-flagged wind industry. We’re losing far too many opportunities to foreign mariners and foreign shipbuilders.
We'll have clarification around the political landscape by the time of the WorkBoat Show, but regardless of who wins, what are you hoping to see advanced in the maritime industry from the White House in 2025 and beyond?
I’m glad to see that 90’s-era “free trade” dogma has lost its political luster within both parties. Too many lawmakers have now seen what happens when you outsource manufacturing; it means you also outsource your supply chain, your national security apparatus, your economic security, and—most importantly—your constituents’ jobs. As someone that represents domestic companies and domestic workers, this is a very good bipartisan trend.
I also think lawmakers of both parties are realizing that a vote against the Jones Act—or a vote against the Jones Act’s application to offshore energy—is a vote against their own mariners and shipyard workers. Russian mariners don’t vote. Chinese shipyard workers don’t vote. Foreign wind developers and foreign wind contractors don’t vote. But American mariners do. Fortunately, more and more lawmakers understand that fact and that bodes well for us regardless of who wins.
What advice would you have for anyone who wants to better support the efforts of OMSA specifically or with protection of the Jones Act in a bigger way? Is that a matter of getting in touch with their representative from Congress? Or speaking up to their networks? Or something else?
Come get involved any way you can: join us in Washington to participate in OMSA meetings with candidates and lawmakers, engage on social media, and most importantly just tell your story. It’s really that simple. The men and women that make up our industry each have a story to tell, whether it’s one of making your own way, working from the bottom to the top, or changing your life – or the lives of others - for the better. These are all experiences lawmakers can get behind. And while I can relay that story, and truth be told I think I relay that story well, it’s not my story. I am not a mariner. I am not a vessel owner. I am not an operations manager. I don’t have those stories, but you do, and they should be heard.
I think that is what I have loved so much about the @OffshoreAmerica Instagram channel. It has allowed us to directly share all of these great stories. I hope to see more of the offshore community participating in these activities so we can show our fellow Americans more about what makes this industry so great.
