Author: Pilar Castillo – Chair of the Transportation and Logistics Committee / Partner – ARIFA
The Jones Act (Merchant Marine Act of 1920) is a federal law that regulates cabotage activities – the transportation of goods or passengers between ports of the same country – in the United States, and sets strong restrictions on the conditions of the vessels that carry out such activities in its navigable waters. Under this rule, a vessel may carry out cabotage activities in that country provided the ship was built in the United States, is registered (flag or nationality) in that country and its crew members are, for the most part, American citizens.
In exceptional circumstances, the government of the United States may adopt temporary waivers of the restrictions under the Jones Act, allowing foreign fleets access to cabotage activities in U.S. waters. This type of opening seeks to reduce logistics costs by allowing a broader and more competitive supply, thereby gaining operational flexibility in the face of any potential disruption in maritime transportation caused by the pressures of a closed market, and therefore enabling economic efficiency in the supply chain.
On March 19, the Department of Homeland Security issued a temporary waiver allowing foreign-flagged vessels to operate in the navigable waters of the United States for the transportation of at least 659 types of goods, including oil, gas and fertilizers. This measure is expected to remain in effect until May 17, 2026.
Despite being a temporary measure, if action is taken in a timely manner, opportunities could be generated for the Panamanian maritime sector. As a flag registry, Panama could benefit by adopting expedited, digital and temporary registrations for vessels seeking to enter the
temporary market of the United States, positioning our country as a competitive jurisdiction for international shipowners, indirectly increasing the fleet linked to trade with the United States.
On the other hand, given our geographic position, the access of international shipowners to the temporary cabotage market of the United States could represent greater regional transit, thereby increasing the route through the Panama Canal and the use of the Panamanian port system, as well as of the auxiliary maritime services provided to the vessel, passengers and cargo.
Panama should remain attentive to these possible opportunities for the local maritime sector and strengthen its competitiveness vis-à-vis the international maritime industry.
