DC Court Dismisses High-Profile Legal Challenge to the Jones Act

A high-profile legal challenge to the constitutionality of the Jones Act has been shot down in federal court, bringing a close to a rare challenge to the century-old cabotage law.

On Tuesday, Chief Judge James Boasberg of the DC Circuit found against plaintiff Koloa Rum Company, which had filed suit last year in an attempt to overturn the Act. Koloa argued that U.S. cabotage law discriminates against seaports located in Hawaii, thereby violating the little-known Port Preference Clause of the constitution, which forbids Congress from enacting laws that favor one port over another.

To ship its product to the mainland and thence overseas via transshipment, Koloa has to book high-cost space on a Jones Act vessel, as the Act forbids the use of foreign tonnage for the Hawaii-to-mainland leg of the journey. Koloa's counsel - provided by the Pacific Legal Foundation - argued that this is an additional and discriminatory cost burden for non-contiguous U.S. states (Hawaii and Alaska). The contiguous lower 48 states can directly access road, rail, and (for foreign trade) inexpensive foreign-flag cargo transport. In Koloa's view, the Jones Act "strangles Hawaii’s economy by forbidding businesses like Koloa Rum Company from using more efficient, affordable shipping options," unfairly forcing Hawaiian firms to use American tonnage in order to "subsidize" the U.S. shipping industry. Using statistics from an anti-cabotage think tank, the firm estimated that the extra shipping cost for Hawaiian businesses and consumers comes to about $1.2 billion annually.

The Trump administration successfully defended the Act, backed by Matson Navigation, the American Maritime Partnership and the AFL-CIO as intervenors. In a ruling released Tuesday, Judge Boasberg dismissed Koloa's case on statute of limitations grounds, and on the merits as well.

The decision was not entirely flattering: Boasberg concluded that Koloa was probably correct about its expenses, finding it likely that "the Jones Act is a substantial factor behind Koloa Rum’s steep operational costs." However, the company should have filed the suit sooner, he found. The date of filing was more than 16 years after Koloa began operations. The statute of limitations for civil actions against the federal government limits the filing to no later than six years after the alleged harm begins. "The limitations period ran in 2015. [Koloa's] claim has already sailed," Boasberg wrote.

He also found against Koloa on the merits of the claim. Hawaii is non-contiguous and remote, and must therefore use shipping in ways that the lower 48 states do not; that does not mean that Congress discriminated against Hawaiian ports in particular by requiring Jones Act tonnage to move cargo between U.S. points, he ruled.

"Plaintiff's grievance is, at bottom, a policy dispute of the sort that is best brought to Congress, not this Court. . . . the Jones Act is a facially neutral statute with a nondiscriminatory purpose: promoting the American merchant marine for commerce and national defense. It emerged from a centuries-old tradition of cabotage laws dating to the First Congress in 1789," he concluded. "Congress enacted the legislation to advance American shipbuilding, employment, and national security, not to discriminate against particular ports."

In a statement, the American Maritime Partnership celebrated the ruling and thanked the Justice Department for its role in the outcome.

"We commend the Trump Administration for vigorously defending the Jones Act in court and defending the men and women who serve America’s national security, homeland security and economic security,” said Jennifer Carpenter, President of the American Maritime Partnership. "This decision reaffirms not only the constitutionality but also the critical importance of the Jones Act to every American."