Cabotage Laws in the Maritime Industry: Has it Met its Intended Effects?

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Originally derived from the French word caboter, which means ‘to sail along a coast’, Cabotage is referred to the transport of goods and passangers, navigation and trade in coastal areas.

Section 27 of the Merchant Marine Act of 1920 (P.L. 66-261), a United States Federal statute that modulates maritime mercantilism in between U.S. ports, also commonly known as Jones Act, deals with cabotage to support the U.S. Maritime industry and postulates that all goods transported by water between U.S. ports should be carried in U.S.-flag ships, constructed in the U.S, possessed by U.S. citizens, and crewed by U.S. citizens (75% at least)

Proposed Effects of the Cabotage Act:

Cabotage Act  was enacted for the betterment of the local shpping industry. Its intended effects include:

  • Restricting the use of foreign vessels in domestic coastal transportation of goods
  • Promoting development of indigenous tonnage
  • Radically  enhancing  native capital  formation  in maritime industry
  • Improving  practitioners’ management skills
  • Creating more employment opportunities for fellow Americans in the industry
  • Establishing a cabotage vessel financing fund
  • Amending national  finances, especially in regards  to foreign exchange conservation
  • Enablinge greater control over national maritime security.
  • Protecting mariners from deplorable living and working conditions often found on foreign-flagged ships.

 

For the past few years it has been found that many countries are strengthening and enforcing Cabotage laws as it is recognized as an important act in:

  • Pursuing a vibrant shipbuilding and vessel operating maritime industry,
  • Protecting maritime support structure for naval defense,
  • Reducing the probable security risks posed by foreign vessels operating in domestic coastal waters
  • Ensuring welfare of domestic economic flow in the local population.

 

The Cabotage Law is a legislation reserving exclusively for the regulation of domestic trade and is completely in accordance with free trade access towards international commerce. Besides covering up the cargo that is moved on ships and the transportation of goods, the Cabotage act also regulates transportation of passengers onboard, towing activities, dredging and port services in domestic waters.

 

Unfavorable Judgments:

Despite of its suggested consequences the Cabotage law has to a certain extent failed itself to be proved beyond criticism. According to some, it is one obstruction for free trade and favors labor unions over consumers as requires transpotation of goods shipped between waterborne ports of the U.S. be carried by U.S. flagged vessels constructed in the U.S; owned and operated by U.S. citizens. This restriction in the legislation results in increased shipping costs, which leads the U.S. farmers being less competitive and raising costs for American consumers. In a report, economics’ studies determine that repealing the Cabotage Act would have an annual profit of $656 million on the overall U.S. economy.

The Cabotage law is also believed to have caused job-losses in the marine industry as U.S. built vessels are more expensive than those built elsewhere, thereby U.S. shipbuilders are usually pretermitted off the international market for merchant ships. Also lack of U.S. productivity induces less competitiveness in trade practices.

 

The Alternate Solution:

Instead of countermand the Cabotage law some countries have come up with a solution of relaxing or liberalizing the law.

For example in India, a revision of the Cabotage act allows foreign shipping lines to consolidate export containers at domestic ports and transship them to a foreign port and run feeder services to reach import containers at various ports. It has also been in the consideration to allow foreign ships to operate services along domestic coasts without restrictions.

In some countries like Malaysia, the Cabotage Law permits foreign-flagged vessels to be licensed by an authorized organization to carry on coastal trading and traspotation of goods when there are no domestic ships available.

The Cabotage Law indeed can serve well the commerce,the economy and the nation, at a larger extent, if adapted with some modifications that countenance cheaper expenses for moving cargoes between ports without much of confinements.

 

You may also like to read-Is Maritime Lien an Important Aspect of Maritime Law? &  What is UNCLOS?

References:

offshoremarine

wisegeek

mikeigbokwe

Image Credits:

docstoc

japanfs

 

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