The resident commissioner of Puerto Rico, the island’s representative in the U.S. House, is hoping to loosen the Jones Act requirements on his territory.
The resident commissioner of Puerto Rico, the island’s representative in the U.S. House, is hoping to loosen the Jones Act requirements on his territory.
Hawaii shipping officials are hoping the federal report on which Pedro Pierluisi is basing his proposed legislation could also support relaxing Jones Act conditions in Hawaii.
The Government Accountability Office report didn’t advocate for eliminating the act, and cautioned that the full impact of any changes were difficult to quantify. The Jones Act, authorized in the 1920s, requires carriers transporting goods between domestic ports be U.S.-owned companies using U.S.-built ships, flying under the American flag with American crews.
“The act may result in higher freight rates — particularly for certain goods — than would be the case if service by foreign carriers were allowed,” the report said. “Nevertheless, at the same time, the law has helped to ensure reliable, regular service between the United States and Puerto Rico — service that is important to the Puerto Rican economy.”
But Pierluisi said, after the report’s release, he wanted to see foreign ships carrying liquefied natural gas and other fuels from the U.S. mainland be able to stop in Puerto Rico, and he wanted an exemption for bulk agricultural cargo. Puerto Rico, like Hawaii, relies mainly upon imported oil to fuel its energy production, Pierliuisi said.
Allowing foreign carriers to deliver U.S. natural gas “will benefit energy producers in the states, who will gain access to an important new U.S. market and make a positive contribution to their local economies,” Pierluisi said. “It will also provide a direct benefit to consumers in Puerto Rico, who will see their electricity bills decrease.”
Hawaii Shipping Council President Michael Hansen said the businesses he represents — retailers and industrial clients who rely on cargo carriers to bring products to Hawaii — just want to see the requirement that the deep draft ships be built in the United States be lifted. The bulk of deep draft container ships — about 90 percent of such ships built around the world — are constructed in South Korea, Japan and China, Hansen said. Japan builds about 200 of the ocean-going vessels annually Hansen said, compared with about three a year built in the United States.
The high number of ships built in those countries allows those industries to achieve economies of scale, bringing the cost down from about $200 million per ship in the U.S. to about $40 to $50 million per ship from South Korea, Hansen said.
“Our proposal would be to exempt all the noncontiguous trades — Alaska, Hawaii, Guam and Puerto Rico,” Hansen said. “It would only apply to large, deep-draft ships.”
That exemption would reduce carrier companies’ costs substantially, he added, but he’s also heard opposition from some of those same companies.
“It would lower what economists call barriers to entry in the trade,” Hansen said, adding that might make it easier for new companies to come in and compete with existing ones. “We would like to see the cost lowered and perhaps some more competition.”
Hansen said he doesn’t argue in favor of a full exemption for Hawaii from the entire act.
“There would be enormous opposition to it,” he said.
Horizon Lines issued a statement last year in which officials described themselves and the company as “staunch supporters” of the act. An attempt to reach Matson Friday afternoon was unsuccessful.
Attempts to reach Hawaii’s two U.S. senators and Hawaii Island’s U.S. Representative, Tulsi Gabbard, were unsuccessful Friday. Gabbard and Sen. Mazie Hirono have gone on the record with their full support for the act.
Hirono last fall said the Jones Act is important from a national security standpoint, and is important because Jones Act ships comply with U.S. labor laws. The act leads to the employment of about 10,000 people in Hawaii, Hirono said, citing the Department of Labor.
Sen. Brian Schatz did issue a written statement expressing his ongoing support, saying the act is “is critical for our national and economic security. It is critical that America control its own shipping and maintain labor and environmental standards within the industry.”