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CANADA HAS A JONES ACT!

COASTING TRADE ACT BARS FOREIGN SHIPS FROM MOVING GOODS WITHIN CANADA

The Jones Act is a United States (“US”) statute barring foreign vessels from moving goods between two points in the US. The little-known Coasting Trade Act (the “CTA”), administered by Transport Canada, is Canada’s equivalent to the Jones Act.

In this International Trade Report, we compare the CTA with its US counterpart and explore how to navigate its complex rules.

The US Jones Act vs. Canada’s Coasting Trade Act

In general terms, the US Jones Act prohibits a vessel from providing “any part of the transportation of merchandise by water, or by land and water, between points in the United States” unless it is wholly owned by US citizens, was BUILT in the US, and satisfies a few other requirements.

Also in general terms, Canada's Coasting Trade Act prohibits all “foreign or non-duty paid ships” from engaging in “the coasting trade” – which is defined broadly to include “the carriage of goods by ship, or by ship and any other mode of transport” between two points in Canada “either directly or by way of a place outside Canada”. However, the CTA ALSO includes “engaging, by ship, in any other marine activity of a commercial nature in Canadian waters” in the broad definition of “the coasting trade”.

As might be expected, given the breadth of these legislative terms, one often sees these rules applying in fairly unexpected situations. For example, where a Canadian good (e.g., oil) is piped to a foreign location before returning to a Canadian domestic location by ship, the ship must be a Canadian ship, or be licensed under the CTA.

Other Key Differences

A few key differences between the US and Canadian rules can be seen in the application of the Jones Act to the transport of “merchandise”, and the CTA's application to both the transportation of goods AND to “any other marine activity of a commercial nature in Canadian waters.” This additional breadth also causes uncertainties which need to be resolved.

Another key difference is that the CTA allows for exemptions, where a foreign ship may be granted a licence, when no suitable Canadian ship can be found.

Other differences include a lack of symmetry between carve-outs and exemptions provided for by the Jones Act and the CTA.

These various differences make navigating the Canadian rules a more difficult exercise than anticipated, even for industry professionals who are fully acquainted with the Jones Act rules.

Takeaways

The Coasting Trading Act is Canada’s near-equivalent to the US Jones Act. It essentially prohibits foreign vessels from transporting goods between locations in Canada. With that said, it is often significantly different from its American counterpart in application.

Businesses are encouraged to contact Experienced International Trade Counsel to help navigate this complicated area of the law, and to obtain proper licensing where the CTA is found to apply.

help with the Coasting Trade Act, please click here.

Download a PDF copy of this Blog here.