In the new globalist world, trade is essential to any country’s advancement-be it technological, developmental or social. Our planet is unique, in the sense that 70% of it is covered by water bodies primarily oceans. It doesn’t take a genius to figure out the importance of shipping and maritime trade. Human beings have used the oceans for travel and trade for centuries.
India’s maritime sector is an important and basic aspect of the country’s economy, contributing heavily to domestic trade and commerce. The Ministry of Shipping reports that maritime transport accounts for 70% of India’s value and 95% of its commerce volume. The sector serves as the main means of shipping a variety of necessities across international borders. The Ministry of Shipping, the highest authority for establishing and implementing shipping-related laws and regulations, is in charge of the shipping sector. The former Ministry of Shipping, Road Transport, and Highways was divided into two separate organizations in 2009, giving rise to this new organization.
What is Cabotage?
‘Cabotage’ refers to a foreign shipping/transport operator transporting products or persons between two ports/locations inside the same nation. Cabotage rules are developed by all international governments to safeguard their own national ships while also promoting local growth. The Ministry of maritime enacted the cabotage law to safeguard the domestic maritime sector in coastal transit. Cabotage also involves the right to operate sea, air, or other transport services within a particular territory, region or country (the European Union as a whole has its own cabotage laws whereas even singular countries such as the US, Brazil and India have their own iterations). In the maritime context, it specifically involves the transportation of goods or passengers between ports within the same country. Cabotage laws restrict these domestic shipping activities to vessels that meet certain criteria related to ownership, construction, registration, and crewing.
The Jones Act
The Jones Act, which was formally known as the Merchant Marine Act of 1920, is a United States federal statute that provides for the promotion and maintenance of the American merchant marine and shipping industry. From a legal perspective, the Act has several key provisions:
1. Cabotage Laws: The primary focus and most significant component of the Jones Act is its cabotage provisions, which restrict the transportation of goods between U.S. ports to vessels that are only American-built, American-owned, and American-crewed. This means that only vessels that meet these criteria can engage in domestic shipping within the territory of the United States.
2. Maritime Commerce: The Act ensures that maritime commerce within the U.S. is conducted by U.S. vessels, which helps to maintain a strong domestic shipping industry. It is intended to support national security and integrity by ensuring that the U.S. has a robust merchant marine that can be used in times of war or emergency.
3. Seamen’s Rights: The Jones Act also includes provisions that protect the rights of seamen. It allows injured sailors to make claims and collect compensation from their employers for the negligence of the ship owner, captain, or fellow members of the crew. This aspect of the Act is similar to workers’ compensation laws for land-based workers. It is important to note that the US, however, is not a signatory to the Maritime Labour Convention,2006.
4. Economic Impact and Controversies: Legally, the Jones Act has been the subject of much debate. Supporters argue that it is essential for national security and the protection of American jobs. Critics, however, claim that it leads to higher shipping costs, inefficiencies, and a lack of competition.
The Jones Act remains a cornerstone of U.S. maritime law, embodying a complex interplay of economic protectionism, labour rights, and national security considerations.
Indian Cabotage Laws
Indian cabotage laws, anchored in the Merchant Shipping Act, 1958, and supplemented by various guidelines and circulars from the Directorate General of Shipping, play a crucial role in promoting the domestic maritime industry, ensuring national security, and fostering economic growth. These laws prioritize the use of Indian-flagged vessels for coastal trade while allowing for regulated participation of foreign-flagged vessels under specific conditions.
Objectives of Cabotage Laws
- Promotion of Indian Shipping Industry:
- Cabotage laws are designed to support the domestic shipping industry by ensuring that Indian-flagged vessels are given preference for coastal trade. This helps in maintaining a robust and self-reliant maritime sector.
- National Security:
- By regulating the use of foreign-flagged vessels in domestic waters, cabotage laws enhance national security. They ensure that a significant portion of coastal trade is handled by vessels under Indian control, which can be crucial during emergencies.
- Economic Growth:
- Encouraging the use of Indian-flagged vessels stimulates the local economy, generates employment, and supports ancillary industries such as shipbuilding, maintenance, and logistics.
Recent Developments
Cabotage Relaxation for cargo vessels:
Foreign flag vessels have been allowed to operate at Indian coast, without license from DGS, for:
(i) Carriage of transhipment containers, and empty containers at Indian coast.
(ii) Carriage of agriculture, horticulture, fisheries and animal husbandries commodities and fertilizers, if these constitutes at least 50% of the cargo on board ships.
Cabotage relaxation for foreign flag passenger (cruise) vessels:
Foreign flag passenger (cruise) vessels have been permitted to visit more than one Indian ports up-to 2029 without license from Directorate General of Shipping (DGS), GoI.
Cabotage relaxation for foreign flag passenger (cruise) vessels:
Foreign flag passenger (cruise) vessels have been permitted to visit more than one Indian ports up-to 2029 without license from Directorate General of Shipping (DGS), GoI.
The future of cabotage laws in both countries will likely involve ongoing debates and adjustments. For the U.S., discussions around the Jones Act’s economic impact and potential reforms may continue, especially in light of global competition and technological advancements in shipping. In India, the trend towards balancing protectionism with efficiency suggests a path of continuous refinement and stakeholder engagement to adapt to evolving economic and strategic needs.
In conclusion, cabotage laws in India and the U.S. reflect each nation’s priorities in protecting and promoting their maritime industries, ensuring national security, and managing economic impacts. While their approaches differ in stringency and flexibility, both aim to achieve a sustainable and competitive maritime sector. Understanding these laws provides valuable insights into the complexities and strategic importance of maritime policy in the global context.
Common FAQ’s
- What were the recent changes in India’s cabotage laws?
In 2018, the Indian government relaxed cabotage restrictions for foreign-flagged vessels carrying EXIM (export-import) containers and empty containers. This was aimed at reducing logistics costs and promoting coastal shipping.
- What is the statutory framework governing cabotage in India?
Cabotage in India is primarily regulated under the Merchant Shipping Act, 1958, supplemented by notifications and guidelines issued by the Directorate General of Shipping (DGS). The Act mandates that coastal trade within India’s territorial waters can only be undertaken by Indian-registered vessels, subject to licensing provisions under Section 406 and Section 407 of the Act.
- How do cabotage laws impact foreign shipping companies?
Foreign shipping companies often view cabotage restrictions as barriers to entry in India’s coastal shipping market. Relaxation of these laws can open up new opportunities for them to operate within the country.
- Are cabotage laws applicable to aviation or other transport sectors in India?
Yes, cabotage principles apply to other sectors like aviation, where foreign airlines are prohibited from operating domestic flights within India without specific permissions.
- How do cabotage laws in India compare with other countries?
Many countries, like the United States (under the Jones Act), also have strict cabotage laws to protect their domestic industries. India’s approach is comparatively moderate, with recent relaxations to promote economic growth.
- Are cabotage restrictions absolute, or do they allow for derogation?
Cabotage restrictions are not absolute under Indian law. The Directorate General of Shipping has the statutory authority to allow derogation by issuing licenses or exemptions, provided that such derogation does not contravene public policy or national interests.
- How do cabotage laws interact with international maritime conventions?
India’s cabotage regime aligns with its obligations under the United Nations Convention on the Law of the Sea (UNCLOS), which grants sovereignty over coastal waters. However, cabotage laws are an exercise of domestic legislative sovereignty, reflecting India’s prerogative to prioritize its domestic shipping industry over foreign competitors.
Author: Sohrab Vazifdar, a Student at NMIMS Kirit P. Mehta School of Law
