The British Shipping (Assistance) Act of 1935 aimed to subsidize the British shipping industry in the context of the economic depression of the 1930s. While one of its purposes was to safeguard seamen’s jobs, it did so only for white British seamen, thus discriminating on the grounds of race. One of the requirements for payment of the subsidy was that the ship employed only ‘British seamen’. Thus, in the wake of the Act, many ship-owners sacked all but their white employees, and numerous Indian lascars found themselves suddenly without employment.

This discriminatory Act was met with considerable resistance. The Colonial Seamen’s Association, which brought South Asian seamen together with their black, Arab and Chinese counterparts, was formed in reaction to the Act, in order to better mobilize against it. They held numerous meetings in which the Act was denounced. In May 1935, Shapurji Saklatvala gave a speech decrying the Act at the Coloured National Mutual Social Club in South Shields. Opposition to the Act was also voiced in India where there were even threats of retaliation against white workers there. With protest against the Act coming from the India Office and Colonial Office as well as the CSA and other organizations, the discrimination was removed in March 1936.

The Special Restriction (Coloured Alien Seamen's) Order is described by Laura Tabili as 'the first instance of state-sanctioned race discrimination inside Britain to come to widespread notice' (p. 56). The work of the Home Office Aliens Department, the Order was issued under Article II of the Aliens Order of 1920 and stated that 'coloured' seamen who did not possess documentary proof of their status as British must register as 'aliens' in Britain 'whether or not they have been in the United Kingdom for more than two months'. Police were to apprehend 'coloured' men disembarking from ships and report them to the police if they failed to show their documentation. In practice, it was not easy for 'coloured' seamen to prove that they were British subjects because sailors were not required to carry passports and, unlike those of their white counterparts, 'coloured' seamen's discharge certificates were not considered proof of their nationality because of allegations of trafficking in these papers.

Reasons for the issue of the Order are various and debated. In a letter dated 14 August 1926, the Under-Secretary of State cites the demands made at the end of the First World War by the National Sailor and Fireman's Union that 'steps should be taken to restrict the admission to this country of coloured seamen who could not establish that they were British subjects, since they competed in the overstocked labour market for seamen and were a source of grave discontent among British sailors', and claims that the accumulation of 'coloured seamen' in certain ports 'was a continual source of irritation and...likely to lead to a breach of the peace' (HO 45/12314). However, by the mid-1920s, employment in the shipping industry was beginning to pick up, which calls these reasons into question. Further, historians have recently questioned the role of the Union in pushing forward this piece of legislation, arguing that it was the state that played a more significant role.

State officials, determined to deport 'coloured' seamen, interpreted and enforced the rules rigidly, depriving these men of their citizenship. The India Office and Colonial Office received numerous protests from seamen who claimed that police were using the order to target men who were obviously British subjects. Further, officials erroneously applied the rules to non-seamen, for example registering 63 Glasgow-based Indians, most of whom worked as peddlers and labourers, as 'aliens'. Indians in Liverpool protested in the form of a public rally and through founding the Indian Seamen's Union, led by N. J. Upadhyaya. The India Office, fearful of the public outcry triggered by the Order in India, reprimanded the Home Office, even suggesting that all Indians should be issued with passports - a suggestion that was not received favourably by the Home Office. Finally, it was agreed that Indian seamen registered as 'aliens' could apply to the Home Office to have their British nationality verified. They would then be issued with a Special Certificate of Identity and Nationality which would enable their registration to be cancelled. The Order was finally revoked in 1942.

In the wake of the First World War and demobilization, the surplus of labour led to dissatisfaction among Britain’s workers, in particular seamen. This was arguably the key factor that led to the outbreak of rioting between white and minority workers in Britain’s major seaports, from January to August 1919. Along with African, Afro-Caribbean, Chinese and Arab sailors, South Asians were targeted because of the highly competitive nature of the job market and the perception that these minorities were ‘stealing’ the jobs that should belong to white indigenous British workers. The housing shortage due to a lack of materials and labour during the war exacerbated the situation. The issue of ‘aliens’ taking jobs and houses from white workers was raised in the House of Commons. Further, as Indian seamen were hired at a considerably lower rate than their white counterparts and had to tolerate much poor working and living conditions, they were blamed by unions for undercutting the wages of white workers. Of course, racism, and specifically the fear of miscegenation, also motivated the hostility towards these settlers.

During the months of racially motivated violence in 1919 there were violent attacks on minority workers, resulting in five fatalities, as well as vandalization of their homes and properties. South Asians suffered somewhat less than black or Chinese workers as they were not regarded as such direct competition for jobs and housing; most remained within the navy and within their subsidized accommodation rather than seeking alternative employment and accommodation. However, a number of incidents involving South Asians have been traced. In May 1919, the Strangers’ Home for Asiatic Seamen in West India Dock Road was surrounded by a hostile crowd and ‘any coloured man who appeared was greeted with abuse and had to be escorted by the police. It was necessary at times to bar the doors of the Home’ (The Times, 30 May 1919). Newspapers of the time also report the devastation of a Malay boarding house and the shop of one Abdul Satar in Cardiff (Visram, p. 199).