Showing posts with label Jones Act. Show all posts
Showing posts with label Jones Act. Show all posts

Tuesday, September 23, 2014

The Jones Act Is Irrelevant to Merchant Marine Shipbuilding

A picture is worth a thousand words and in this case even more.

So much is being discussed about the value of the protection that the Jones Act offers to U.S. shipbuilding.  What shipbuilding?  U.S. shipbuilding is less than 1% of the world share!


This is clearly illustrated in the picture above from an article in The Economist. The graph clearly shows that after 1985, the U.S. shipyard merchant marine building supply is practically zero. Japan, South Korea and China provide almost the entire ship building supply.

U.S. shipyards are kept busy with U.S. Navy work and the occasional small order by a U.S. shipper.  Like the recent one by Matson Navigation who in order to comply with the U.S. built requirement of the Jones Act agreed to pay $418 million for two modest container ships that would have cost less than half this amount if they were built in S. Korea. As a direct result of the Jones Act, the people of Hawaii received a direct punishment in the order of $200 million on this transaction alone.

Wednesday, May 7, 2014

Hawaii State Task Force Recommends Jones Act Exemption

This is a very informative article written by Michael Hansen, Hawaii Shippers Council.

Debate in The U.S. over the Jones Act is very lively these days. For example, on April 25th, Mark Perry, a University of Michigan-Flint business professor wrote: Want energy independence? Waive the Jones Act.

To which a pro-Jones Act shippers lobby quickly responded: Missing the mark on the Jones Act.

In my opinion, the Jones Act, hurts all U.S. island and non-contiguous regions. At a minimum, non-contiguous U.S. states and territories, and the LNG trade must be exempted from Jones Act immediately!

Thursday, December 19, 2013

AIKEA FOR HONOLULU No. 32 – Here’s Wishing for a Helmet Law and Jones Act Repeal




The magic of Fibonacci numbers. Simple series. Fascinating creations!

Biologist Mohamed Hijri brings to light a farming crisis no one is talking about: We are running out of phosphorus. (TED talk in French, subtitled.)
 
As 2013 comes to a close it is worth remembering that Honolulu's $5.2 Billion rail project is a testament of the power of government and special interests to get their way.  The Honolulu Civil Beat's multiple polls over the years show that the rail project never had a public approval of over 35%. Here’s a link to a slideshow summary I presented at the ADC conference in Washington, D.C. in mid-October.

My first transportation wish for 2014: Hawaii needs a motorcycle helmet law. It’s a no brainer! Just read these few lines about the impact of injuries of motorcyclists without helmets: “The helmet-less are distinctive, says Dr. Lori Terryberry-Spohr: they suffer ‘diffuse’ internal bleeding and cell death across large areas. Such patients typically run up $1.3 million in direct medical costs. Fewer than a third work again. A study of helmet-less bikers admitted to one large hospital, cited by the Centers for Disease Control, found that taxpayers paid for 63% of their care.”

My second transportation wish for 2014: Hawaii gets an exemption from the Jones Act which artificially inflates the cost of living for all of us. BusinessWeek observes that “when large container ships filled with bicycles and sleeper sofas leave China for the U.S., they don’t stop in Hawaii to unload cargo bound for that state before continuing to Los Angeles or Seattle.” Unfortunately status quo politicians such as Hirono, Schatz and Hanabusa are strong supporters of the Jones Act. And fake energy solutions. They cost Hawaii dearly … expensive gas, expensive power, expensive groceries, and extra taxation on everything for the rail.  Other than that, Hawaii Democrats are all about support for the little guy ;)

Merry Christmas and Best Wishes for 2014!

Thursday, March 14, 2013

Could Repeal of the Jones Act Actually Happen?

Transportation analyst and presidential advisor Bob Poole of the Reason Foundation raises this question, which is critical to Hawaii.  Here is his analysis:. All highlights were added by me.

"I’m not sure how many readers are aware of the Merchant Marine Act of 1920, generally known as the Jones Act.  For 90 years, this piece of protectionist legislation has been a politically sacred cow. It requires that all water-borne shipping from one U.S. port to another—whether along inland waterways, along coastwise routes, or between the mainland and Alaska, Hawaii, Guam, and Puerto Rico—be provided only via U.S.-made vessels, owned by U.S. companies, and operated by U.S. crews. The original rationale for this was national defense—but post-World War II, the military has made voluntary deals with major U.S. airlines to make certain planes available in times of military need, and the same could be done for ocean vessels. Today, the Jones Act is supported mostly by the seafarers unions and the dwindling number of companies that own and operate Jones Act ships.

The consequences of this legislation are many, and nearly all negative. My MIT classmate William Hockberger (naval architecture) described the impact on the U.S. marine industry to me this way:
“Our coastal and seagoing fleet is pathetic*, along with the marine industry that is supposed to provide and sustain it, as a result of the ‘protection’ that has prevailed for most of our country’s existence. If ship operating companies could buy ships on the open market, if shippers could use ship services provided by any company in the world (subject to some basic rules regarding human and environmental safety), if the money to buy the ships could come from anywhere, and crews didn’t have to be mainly U.S. citizens, we could have a marine industry much larger than it is and the economics would be very different. The cost of using a ship [versus some other mode] would be much lower, and in many cases a ship would be the preferred alternative.”
The very high costs resulting from the Jones Act have basically killed nearly all proposals for so-called “marine highway” shipping. Recent reports from the Maritime Administration, the Congressional Research Service, and the Center for Commercial Deployment of Transportation Technology have all blamed the high costs imposed by the Act for the lack of progress in coastwise shipping.

Other victims of the Jones Act are the people and industries of Alaska, Guam, Hawaii, and Puerto Rico, who pay what amount to monopoly prices for transportation of the food, consumer products, and energy that must be shipped in from the mainland. 

And then there are U.S. ports and waterways. The Jones Act also applies to all dredging vessels, ballooning the cost of maintenance dredging of inland waterways and deepening of major harbors.

Although the Jones Act has long been a sacred cow, there are several straws in the wind suggesting that change might be possible. Last November Honolulu attorney John Carroll filed a class action lawsuit against the federal government, arguing that the Act violates the Commerce Clause of the Constitution and subjects Hawaiians to a shared monopoly on shipments of imported goods. It seeks damages and a halt to enforcement of the Act.

Last month Americans for Tax Reform took up the cause, arguing that the Jones Act should be repealed because, among other things, it is driving up the cost (and reducing the extent) of shipping gasoline by water from the Gulf Coast to the Northeast.

And then there is the proposed free-trade agreement between the United States and the European Union. Among the items on the agenda for this proposed deal, according to The Economist, is to eliminate the protectionist restrictions on shipping imposed by the Jones Act.

As I noted in last month’s issue, Congress is planning to enact a new Water Resources & Development Act this year, dealing with both harbors and inland (as well as coastwise) waterways. This would be a good opportunity to tackle the reform or repeal of the Jones Act, a precondition for new investment in America’s maritime industry."

If you ever wondered why Senator Inouye and his followers are so successful in becoming "entrenched politicians" then the two words, Jones Act provide a big part of the answer. (All you have to do is check the campaign contributions for Hanabusa, Hirono, etc.)

(*) One of the main links of Hawaii to mainland US is Horizon Lines.The average age of Horizon’s fleet is 35 years as compared to 28 years for all Jones Act noncontiguous trade container ships, and 12 years in the international fleet. This is the picture of where US marine shipping is going with the Jones Act:

 

Tuesday, January 8, 2013

JONES ACT Hurts Hawaii (Alaska, Guam and Puerto Rico too)

Bloomberg indicates that U.S. islands such as Puerto Rico, Guam and Hawaii, along with the state of Alaska, feel the effects of the Jones Act more than most localities. Some of Hawaii’s political and business leaders have long complained that the restrictions mean all goods shipped from the U.S. mainland must go via the two carriers serving the state. By some estimates, Jones Act makes goods in Hawaii 33% more expensive than they could be.

For island territories the Jones Act is counterproductive and indeed hazardous. "Russian Icebreaker to Make History in Alaska" is an example of how the Jones Act endangered a community in Alaska. Even in a critical situation like this, the Russian ice breaker could not load oil from an Alaska port and take it to Nome, Alaska, but it had to backtrack to Korea to get the oil and back to Nome, Alaska.

Both Presidents George W. Bush and Barack Obama resorted to temporary Jones Act waivers so Foreign-Flag crude tankers could transport the government’s crude oil from the Strategic Petroleum Reserve (SPR) to the refineries because no Jones Act tankers were available.  The Bush waiver occurred in September 2005 following Hurricane Katrina and Obama’s from July through September 2010 in response to the loss of Libyan oil on the world market. (The Jones Act is a Critical Energy Issue)

Prophetically in the same March 2012 article Michael Hansen predicted this: "The Jones Act may now result in the closure of Tesoro’s Hawaii refinery."  It happened less than a year later: "Tesoro Corp.’s Hawaii refinery in Kapolei, the largest of the two oil refineries in the state with a capacity of 94,000 barrels a day, is closing its refining operations in April." (PBN, Jan. 8, 2013)

With this introduction in mind, here is a sample of articles asking to ban or modify Jones Act for Alaska, Guam, Hawaii, Puerto Rico and other U.S. Territories:
  • The influential maritime publication Lloyd’s List endorsed an exemption from the U.S. build requirement for Hawaii, Alaska and Puerto Rico. The editorial published on Friday January 4, 2013, was written by Tom Leander, Editor-in-Chief, Asia, Lloyd’s List, based in Hong Kong. Leander writes that "many critics of the Jones Act, including Lloyd’s List, hope that the GAO will provide evidence that can be used to persuade Congress to scuttle the US-built requirement of the Jones Act as it applies to Puerto Rico — and further to Hawaii and Alaska – under a so-called sunset waiver."
  • The Secretary of the U.S. Department Homeland Security, Janet Napolitano, issued a Jones Act waiver this morning to allow foreign-flag clean products tankers carry refined petroleum products from domestic coastwise ports to the North East which is suffering from shortages of motor gasoline and diesel fuel due to Hurricane Sandy.  The waiver expires on November 13.
  • Hawaii Shippers Council Outlines Jones Act Reform Proposals: The Council's press release observes that "90 years of Jones Act protection has resulted in the near complete collapse of the U.S. deep draft merchant shipbuilding industry, and continuing that protection for the noncontiguous trades will not save it. The Act has generally failed to achieve its intended goal to nurture the U.S. maritime industry, and commercial deep draft commercial shipbuilding in the United States is all but ended."
  • Honolulu Star-Advertiser's Guard asea on aged craft reveals Coast Guard issues with aging cutters it cannot afford to replace: “The Coast Guard in Hono­lulu faces a dilemma with its two biggest ships, the aging 378-foot cutters Jarvis and Rush, which the service wants to retire but can't because it has no replacements.” 
  • Senator-candiate (at the time) Mazie Hirono provided a container load of untruths to justify her baseless support for the Jones Act: "In Hawaii especially, the maritime industry is an essential economic mover, generating more than $4.7 billion annually into Hawaii’s economy and providing more than $1.1 billion in wages and benefits for our people."
  • Sen. Hirono position is diametrically opposed to Representative Pedro Pierluisi's, Puerto Rico member of the U.S. House of Representatives. “I am pleased that the GAO is actively working on my request to determine, once and for all, the economic impact that the cabotage laws have on Puerto Rico. This study should put an end to all of the speculation that surrounds this subject and, if the study concludes that the Jones Act is having a negative impact on our economy, could provide the basis for potential legislative action in Congress,” said Pierluisi. The U.S. Government Accountability Office (GAO) is preparing a report “to provide policymakers with a comprehensive, descriptive summary of information on the Puerto Rican and Caribbean Basin trade markets, and how the Jones Act potentially affects these markets.” 
Endnote: These U.S. territories are exempt from the Jones Act: American Samoa, The U.S. Virgin Islands (USVI) and The Commonwealth of the Northern Mariana Islands (CNMI) due to the international treaties associated with their annexation by the U.S.

Sunday, December 11, 2011

Jones Act Hurts Alaska and Hawaii

Here is an example of how the Jones Act endangered a community in Alaska. Even in a critical situation like this, the Russian ice breaker could not load oil from an Alaska port and take it to Nome, Alaska, but it had to backtrack to Korea to get the oil and back to Nome, Alaska.

Russian Icebreaker to Make History in Alaska

While Jones Act in general protects the shipping interests of the United States, it has huge implications for states that are dependent heavily on marine transportation, Alaska and Hawaii, and particularly the later. Special shipping interests must be protected even when the health and safety of populations are in jeopardy.

Hawaii's Congressional delegation has been fully unwilling to entertain any modifications to the Jones Act for Hawaii.