Overview:
Claims that commodities trader Marc Rich helped create the U.S. Jones Act are historically inaccurate, but the confusion reveals a deeper truth about modern shipping. The Jones Act, passed in 1920, imposed strict U.S.-built, U.S.-owned, and U.S.-crewed requirements on domestic maritime trade, reshaping incentives across the industry. Over time, those costs pushed global shipowners toward foreign registries with friendlier laws, leaving the United States with a fraction of the world’s commercial fleet. Marc Rich’s rise—and his controversial presidential pardon—symbolize the offshore legal and financial structures that now dominate global maritime commerce.
Marc Rich did not create the Jones Act — but his era explains it
The Jones Act is formally known as Section 27 of the Merchant Marine Act of 1920. It was authored by Senator Wesley Jones of Washington State and signed into law by President Woodrow Wilson on June 5, 1920. Its purpose was to ensure that goods transported between U.S. ports would move on vessels that were American-built, American-owned, American-flagged, and primarily crewed by U.S. citizens.
Marc Rich, born in 1934, entered the global commodities world more than half a century later. He played no role in the drafting or passage of the Jones Act. However, the way Rich structured his business empire—leveraging offshore jurisdictions, regulatory arbitrage, and global loopholes—mirrors how today’s shipping industry responds to the law’s economic pressures.
Why critics argue the Jones Act crippled U.S. shipping
Supporters of the Jones Act argue it protects national security, shipbuilding capacity, and American maritime labor. Critics counter that the law has had the opposite effect economically.
U.S.-built ships can cost three to five times more than comparable vessels built in Asia or Europe. U.S. labor, insurance, and compliance costs are also significantly higher. As a result, only a small number of vessels operate in the Jones Act–compliant domestic trade. This scenario limits competition and drives up shipping costs for consumers and businesses alike.
Over decades, these pressures helped push the broader commercial shipping industry toward foreign registries. In those registries, taxes, labor rules, and compliance obligations are far more favorable.
The uncomfortable reality: the U.S. flag is nearly absent globally
The United States today controls well under 1% of the world’s commercial shipping fleet by tonnage. Depending on the year and metric, the U.S.-flag fleet represents roughly 0.5%–0.7% of global shipping capacity.
While Jones Act vessels must be U.S.-flagged to operate domestically, most international shipping companies avoid U.S. registration entirely. Instead, ships are overwhelmingly registered in countries such as Panama, Liberia, and the Marshall Islands—jurisdictions known as “flags of convenience.”
This means that roughly 99% of global commercial vessels operate under non-U.S. registries, even when they service American trade routes. Only a small subset of U.S.-flag ships are maintained primarily for military logistics and national security programs, not commercial competitiveness.
Marc Rich and the offshore system
Marc Rich became one of the most powerful commodities traders in history. He achieved this by mastering offshore finance and jurisdictional flexibility. Indicted in the United States on charges including tax evasion and sanctions violations, Rich lived abroad for years while his firm thrived globally.
In January 2001, President Bill Clinton issued a full pardon to Marc Rich, sparking bipartisan backlash and congressional investigations. The pardon cemented Rich’s legacy as a symbol of how wealth, political influence, and international legal systems intersect.
In many ways, modern shipping follows the same logic Rich perfected. When domestic regulations become too costly, capital and operations flow offshore—legally, efficiently, and at massive scale.
The bottom line
Marc Rich did not write the Jones Act, but his story illustrates the consequences of rigid national regulations in a globalized economy. The Jones Act remains one of the most restrictive cabotage laws in the world. Moreover, its economic impact is visible in the near-absence of U.S.-flagged ships from global commerce.
As policymakers debate national security, maritime readiness, and economic competitiveness, the uncomfortable truth remains. The system designed to protect American shipping helped push it offshore.
Sources
- Congressional Research Service – Shipping Under the Jones Act: Legislative and Regulatory Background
https://crsreports.congress.gov/product/pdf/R/R45725 - U.S. Bureau of Transportation Statistics – U.S.-Flag Merchant Fleet and Share of World Fleet
https://www.bts.gov/content/us-flag-merchant-fleet-and-share-world-fleet - Cato Institute – Rust Buckets: How the Jones Act Undermines U.S. Shipbuilding and National Security
https://www.cato.org/policy-analysis/rust-buckets-how-jones-act-undermines-us-shipbuilding-national-security - Competitive Enterprise Institute – The Grim Reality of the Jones Act (PDF)
https://cei.org/wp-content/uploads/2019/10/GrimRealityJonesAct.pdf - Reuters – U.S. considers new ship registry to expand fleet
https://www.reuters.com/world/us/us-considers-new-ship-registry-expand-fleet-2025-05-08/ - TIME Magazine – The Marc Rich Pardon Explained
https://time.com/3676010/marc-rich-pardon/ - Brookings Institution – Clinton’s Controversial Marc Rich Pardon
https://www.brookings.edu/articles/clintons-controversial-pardon-of-marc-rich/
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