The Neglected Port Preference Clause and the Jones Act.

• Author: Heavenrich, Sam

NOTE CONTENTS INTRODUCTION 562 1. THE JONES ACT: "AN ARCHAIC, PROTECTIONIST BOONDOGGLE" 566 A. A Brief History of Cabotage 567 B. The Impact of the Jones Act 568 II. THE CONSTITUTION'S PORT PREFERENCE CLAUSE 574 A. The Port Preference Clause at the Founding 575 1. Adoption of the Port Preference Clause 575 2. Founding Era Fears of Large-State Domination 577 B. The Port Preference Clause Since the Founding 579 l. Wheeling: The Port Preference Clause's Leading Case 580 2. The Narrow Approach to the Port Preference Clause 581 3. The Broad Approach to the Port Preference Clause 582 a. Evidence from the Founding 583 b. The Broad Approach and Wheeling 584 c. Recognition of the Broad Approach 585 C. Reports of the Port Preference Clause's Death Are Greatly Exaggerated 587 D. The Port Preference Clause and the Courts 589 III. HOW THE JONES ACT VIOLATES THE PORT PREFERENCE CLAUSE 593 A. State Versus Port Discrimination 594 B. Crafting a Cabotage Policy at the Expense of Alaska and Hawaii 595 C. Evidence from Legislative History 598 IV. WHY A JONES ACT CHALLENGE CAN PREVAIL 601 A. An Originalist Approach 602 B. Looking Below the Load Line 603 V. ADDRESSING OBJECTIONS 604 A. Alaska and Hawaii's Territorial Status in 1920 604 B. The Enter and Clear Clause as an Alternative 606 C. Issuing Blanket Jones Act Waivers 609 CONCLUSION 610 INTRODUCTION

Suppose you want to order a cabinet for your home. The cabinet is made in Taiwan, let's say, and costs approximately $1,000. If you live in the forty-eight contiguous states, shipping adds another $200. But the situation is different if you live in Hawaii. As one native Hawaiian recently discovered to his chagrin, shipping the cabinet would cost him almost $1,000--just less than the cabinet itself. (1)

At first glance, this state of affairs might make sense. Hawaii is the most isolated population center on Earth. (2) But further consideration reveals something curious: Taiwan is much nearer to Hawaii than it is to California. Yet shipping from Taiwan to California is far less expensive than shipping from Taiwan to Hawaii, even though the former trip is over 1,400 miles longer. (3) How can this be?

The answer lies in what has been described as "one of the most poorly-designed laws in effect today," "universally reviled," and "an archaic, protectionist boondoggle": Section 27 of the Merchant Marine Act of 1920, also known as the Jones Act. (4) The Jones Act, which prohibits foreign vessels from transporting goods between U.S. ports, is a major cause of the exorbitantly high cost of living in Hawaii, Alaska, and Puerto Rico. (5)

In practice, the Jones Act protects the domestic shipping industry by making it economically unfeasible for foreign vessels to deliver cargo directly to Hawaii or Alaska. If someone in Hawaii orders an item from Taiwan, the most economical option would be to drop it off in Hawaii en route to the West Coast, where the Taiwanese carrier would eventually deliver the rest of its cargo. (6) But because the Jones Act prohibits unloading goods at multiple U.S. ports, the carrier is left with two unpalatable options. It can travel directly to Hawaii or Alaska and unload all of its goods there. But foreign carriers rarely choose that option, for good reason: the difficulty in loading a container ship entirely with Hawaii-or Alaska-bound goods is a money-losing proposition, given the comparably small sizes of these markets. (7) Instead, a foreign vessel will travel from Taiwan to a major U.S. port, like the Port of Seattle, unload all of its cargo there, then reload the Hawaii-destined cargo on a U.S.-owned vessel, which doubles back to (finally) unload the goods at the Port of Honolulu. (8) Taiwan to Washington, Washington to Hawaii. Thus, U.S. carriers--which can ship directly between U.S. ports--stay in business despite the prohibitively high costs of domestic vessel construction, maintenance, and labor that make them uncompetitive on the global maritime market. (9)

This protectionist statute comes at a steep cost. The cabinet with the $1,000 shipping fee is no anomaly: every good, from household items to industrial machinery, shipped between U.S. ports is subject to the Jones Act. (10) That is why prices are higher in Alaska, Hawaii, and Puerto Rico than virtually anywhere else in the country. (11) And to make matters worse, the Jones Act also costs these places hundreds of millions in lost wages annually. (12)

The Jones Act's unique combination of protectionist trade inefficiency and disproportionate impact on formerly colonized states and territories with significant nonwhite and Indigenous populations--Alaska, Hawaii, and Puerto Rico--has made for unlikely bedfellows calling for its repeal. The conservative-libertarian Cato Institute has called it "a burden America can no longer bear," while writers for left-leaning publications like Vox and the New York Times deride the statute as "[p]otectionism and exploitation at its worst" and an instance of "crony capitalism." (13)

But powerful special interests continue to thwart efforts to repeal the Jones Act, claiming that its protectionist effects are necessary for the U.S. shipbuilding industry. The affected areas' lack of congressional clout--in the case of Alaska and Hawaii, due to their small populations, and in the case of Puerto Rico, because it has no voting congressional representation--exacerbates the current legislative stagnation. (14) In 2017, three Republican Senators cosponsored a bill to repeal the Act. (15) In the same year, a group of House Democrats proposed amending the Jones Act to make it easier to waive its requirements following natural disasters. (16) Both efforts failed. And given that President Biden has signaled his "unwavering support" for the Jones Act, a veto will likely meet attempts to repeal it or water it down, at least in the near term. (17)

This Note argues that advocates may have been looking in the wrong place for a way to finally sink the Jones Act. The key lies not in Congress or the executive branch but rather in one of the most neglected provisions of the Constitution: the Port Preference Clause. (18) The Port Preference Clause--Article I, Section 9, Clause 6-prohibits Congress from giving preference to one state's ports over another's. And that is exactly what the Jones Act does. Washington's and California's ports thrive, while Hawaii's and Alaska's ports suffer.

In the handful of times the Port Preference Clause has arisen in court, it has been interpreted not to apply to federal statutes with merely incidental effects on states. But the Jones Act's discriminatory effects are not incidental. As this Note shows, they are intentional and instrumental to accomplishing its purpose.

There are several compelling reasons that a Port Preference Clause challenge to the Jones Act would succeed. First, the circumstances of the Port Preference Clause's adoption, in which fears of large-state oppression of small states figured prominently, support the view that the Founders intended the Clause to bar statutes precisely like the Jones Act. Second, a more expansive conception of the Port Preference Clause accords with the federal courts' unwillingness to interpret any provision of the Constitution as mere surplusage. Finally, the Supreme Court has signaled its interest in reining in the scope of the Commerce Clause, and the Port Preference Clause is one of the few constitutional provisions that restrict the Commerce Clause.

Part I of this Note offers a detailed examination of the Jones Act--its key provisions, the context of its passage, and its economic impact. Part II introduces the Port Preference Clause, including an account of its adoption at the Founding and what I argue are the two strands of jurisprudence that have emerged from the few cases that examine the Clause in detail. Part III explains how the Jones Act violates the Port Preference Clause, and Part IV explains why the federal courts will likely receive such a challenge favorably. Part V responds to possible objections.

1. THE JONES ACT: "AN ARCHAIC, PROTECTIONIST BOONDOGGLE" (19)

   Congress passed the Jones Act as Section 27 of the Merchant Marine Act of 1920. (20) The Jones Act prohibits foreign vessels from conducting coastwise trade--that is, transporting cargo from one location in the United States to another. (21) The relevant provision in its current form reads as follows:

   (b)... [A] vessel may not provide any part of the transportation of merchandise by water, or by land and water, between points in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel- (1) is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade; and (2) has been issued a certificate of documentation with a coastwise endorsement under chapter 121 or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement. (22) Section (b)(2)'s mention of a "coastwise endorsement" refers to certification of a vessel as a domestic one: that is, not only that the vessel was built and is owned by U.S. citizens, but that it is crewed by U.S. citizens as well. (23) Section (b)(2) also permits Congress to exempt specific ships from these requirements, which it does on rare occasions. (24) But by and large, the provision prevents vessels that are not U.S.-owned, U.S.-operated, and U.S.-built from shipping goods unless they are traveling directly between a foreign port and a U.S. one. (25) The statute is one of the United States's two main laws governing cabotage (domestic trade and passenger transport). (26) Many other countries also have cabotage laws that limit who can conduct domestic commerce, but the Jones Act is the most restrictive. (27)

   1. A Brief History of Cabotage

      The Jones Act did not appear out of nowhere. Protectionist efforts to favor domestic carriers over foreign ones long preceded America's Founding...