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Panel: Advocates for Jones Act Reform See Best Chance in Decades

Protester in New York Photo by Ashoka Jegroo via wikipedia

Hurricane Maria’s trail of destruction in Puerto Rico and the arrival of a new administration may provide the impetus to overhaul a century-old federal law restricting the movement of cargo between U.S. ports to vessels that are American-built, crewed, and owned and operated vessels, a panel of maritime experts said Friday.

Speaking at the Heritage Foundation, James Coleman, a law professor at Southern Methodist University, used the restarting of the Puerto Rican power grid as an example of the law’s restrictiveness in the wake of Maria.

Months after the hurricane, about 25 percent of the island’s residents remain without power in a system that is dependent upon oil to run its generators. Producers “notified the power utility they would be cutting back the fuel supply … until they could afford the fuel” coming from the mainland.

That translates into brownouts in areas where power had been restored and likely even more delays in restarting where service has been lost, he said.

In the immediate aftermath of Maria, President Donald Trump waived provisions of the Jones Act to provide shelter, fuel, food, water, and medicine to the island, an act that disturbed congressional supporters of the law, such as Rep. Duncan Hunter, (R-Calif.), chairman of a committee that has oversight of the Coast Guard and maritime affairs.

Coleman said in his opening remarks at the forum co-sponsored by the Federalist Society, “It is cheaper for U.S. producers to ship their oil and [natural] gas to Europe than it is to ship to U.S. consumers.”

Rob Quartel, a former member of the Federal Maritime Commission, said, “We didn’t have a global world like we have today” in calling for the repeal or reform of the Jones Act. He said it has outlived one of its major announced intents of providing a fleet of deep-draft merchant ships to the country in times of war, trained seamen and officers and steady business for American shipyards in peacetime.

As for the number of shipyards, seamen, size of the American deep-draft, ocean-going fleet under the Jones Act or otherwise, “the numbers just keep getting worse and worse,” he said.

“American business can buy foreign aircraft” and trains and still operate inside the United States, Quatrel said.

Noting that Hillary Clinton, as had most other presidential candidates, supported the law, Coleman said, “[Donald Trump] didn’t take a position on the Jones Act.” Because of that, “there is an opening for reform … an opening for repeal.” He said the argument inside the administration of what position to take could come down to adopt an “America First approach” or an “Energy Dominance approach” regarding the act.

Quartel said the issue of continuing the Jones Act as it is not a Democratic or Republican issue. It cuts across party lines and depends upon what industry or union is in a member’s district or important in a senator’s state. “Industry spends massive, massive, massive amounts of money” to keep the status quo.

The energy market is an example of the volatility of global trading, the changing trade routes to supply immediate demand and using foreign vessels for exploration and production. Jonathan Waldron, a partner at Blank Rome law firm, said the American offshore energy industry is heavily dependent on foreign-built and -operated vessels for drilling and pipe-laying, as well as transporting product. He added it is also subjected to at times inconsistent enforcement practices as to what is acceptable and what is not by Customs and Border Protection agents “in how you operate off-shore.”

As for waivers to the Jones Act provisions as happened with the disaster response to Hurricane Maria, he noted that the traditional path can be fast-tracked when the secretary of defense terms it of national security importance and applies directly to the secretary of homeland security, as happened in Puerto Rico. There was no formal notice sent to Homeland Security that “we use all U.S. capability first” had been met.

The direct waiver approach has been used in the past before the creation of the homeland security department to include bringing in oil skimmers from the Soviet Union to contain and clean-up the Exxon Valdez oil spill in 1989 and several times to restock the Strategic Petroleum Reserve.

Quartel and Waldron said there would be no increased terror threat by allowing foreign-crewed vessels into inland waterways. Members are already vetted by the State Department and the vessels are known and inspected by the Coast Guard, FBI and other federal and state agencies since they are in international trade with the United States.

“Ninety-nine percent of cargoes from overseas come in foreign-flagged ships,” Quartel said. Crew already undergo an increased vetting process before they are allowed into the United States, Waldron said.

Quartel said the national security argument by supporters of the law resonates, but does not stand up to scrutiny. Using the first Gulf War as an example, he said only one Jones Act ship vessel participated of the more than 480 vessels used to support the coalition. Of those ships, most were foreign-flagged. He added only 85 were American-flagged deep draft ships.

  • airider

    Rather than use protectionism policies, how about we actually compete? The Jones Act is more than just this, but the reality is the rest of the world has moved on and the Jones Act has literally priced the U.S. out of the shipyard, shipbuilding and transport services areas we used to dominate….except for the U.S. Military.

    If we’re ever going to get manufacturing back in the U.S. at a reasonable level, which in my opinion is a national security priority, we’ve got to create the opportunities to do so. The Jones act either needs a serious revision or replacement.

    • SvD

      “the Jones Act has literally priced the U.S. out of the shipyard, shipbuilding and transport services areas we used to dominate….except for the U.S. Military.”

      Well, the export success in the military market is rather slim. Some Frankenstein LCS thing for Saudi Arabia.
      No newly built corvette, frigate, destroyer or sub was exported within 4 decades.

      I can just think of one design transfer, the Spanish Santa María-class frigate, which is modified OHP frigate.
      The frigate version of the NSC might be a good ship for certain navies, but the price is way too high.

      Keeping shipbuilding competitive needs knowledge and investments. There is always the danger to cut investment, make more profit and let the company sink.

      Technology transfer and consulting for shipyard modernization is something money can buy. A lot of smaller European shipyard offer this, cause they cannot compete in building with the bigger yards. They also offer complete designs.
      The ones, who won’t help out are the bigger yards fighting for a market share and the world leaders in their market.

      So this,
      ” the American offshore energy industry is heavily dependent on foreign-built and -operated vessels for drilling and pipe-laying, as well as transporting product.”

      Kinda makes sense, cause a company which invested in these technologies for decades won’t just give it away. Simpler workboats designs are on offer, but not the top notch stuff.

  • Gillard Strong

    We need a lot of rule changes, why do we still have two ABs plus one OS and a mate on watch when the ship can get its self across the ocean on auto pilot? The engine roon crew was cut back long a go, we need the same with deck crew. And yes, build ship where ever you can as long as they can meet safety standards. It’s the regulations and taxes that have killed the MM.

    • Mark Hunter

      It is not. It’s greed that’s killing it.

  • Bryan

    This is a poorly written article. Puerto Rico’s problems do not stem from the Jones Act. Changing the Act could help them a bit at the expense of the rest of the nation.

    For decades, perhaps longer, Puerto Rico has consistently shunned full ties with the U.S. They want welfare but no military on their land. They want free travel for tourism but unlimited debt.

    The citizens of Puerto Rico are an independent lot.

    We need to help them get on their feet. We do not need to change the Jone Act. Any ship will be able to sail to Puerto Rico when they are a fully independent nation. Don’t change the Act. Change the status of Puerto Rico.

    As far as boat building, how about looking at wages and taxes. Hum… me thinks I’m old enough to remember why our building is in the toilet. We can’t compete with low wages from Asian competitors and we put a luxury tax on many boats we built. Changing the Jones Act will not change our ship industry.

  • Zorcon, Fidei Defensor

    There are dozens upon dozens of early 1900 and Depression Era laws that need to be scrapped. In the 1920’s most farms were private and small, family concerns. Now many, if not most, are large production facilities. The Depression Era laws regarding milk, produce, cattle, distributions, etc all are anachronisms that cripple innovation in the industry.

    I won’t even address paying farmers to not grow their land or paying for Ethanol subsidizes to farm belt states.

    All these obsolete acts need to be revisited modified or struck from he books.

  • Ed L

    I was thinking of the number of small companies operating the smaller shallow draft vessels that could move from port to port. Like sailing excursions to up and down the coast.

  • Mark Hunter

    Garbage. 1st, the Jones act isn’t what kept Puerto Rico from recovering, it was Puerto Rico. Secondly, this is just more dirty politicians trying to rid the country of middle class jobs.

  • Ed L

    Since the hurricanes. I discovered quite a few private citizens loaded there own boats with cases of water and medical supplies an made runs from the states and other countries that border the Caribbean to the islands. And at least one boater I know of took water makers to the islands. While these were off the shelve models that could only do 100 to 500 gallons a day. They helped out. Many sailboats with water makers aboard that survived the hurricanes. Were able to give there excess away Diesel was a problem but people in those areas were taking fuel from wreck boats.

  • JohnQTaxPayer66

    While I have a more mixed opinion of the Jones Act, the Puerto Rico government failed it’s people pure and simple. Weak arguements.

  • Salvatore Mercogliano

    I have not yet heard the full discussion, but I can say that Quartel’s fact about only one Jones Act ship being used out of 480 is inaccurate. There were a total of 459 shiploads delivered to the Persian Gulf between August 1990 and March 1991. Of the 13 Maritime Prepositioning Ships, eight were Jones Act compliant, and many of these ships made multiple voyages. The vast majority of the ships in the Ready Reserve Force, were ships withdrawn from the commercial American merchant marine and therefore were Jones Act compliant.

    The issue at large is whether the American-built requirement is still viable but the need for American-flagged and American-crewed is vital for the nation to maintain the commercial aspect of sea power. Without these crews and ships, the nation would not be able to man the LMSRs and vessels laid up in the RRF for a potential new conflict around the world or rely on the existing merchant fleet to handle the shipment of containers.

  • Salvatore Mercogliano

    Following up on his 480 vessels, and of those, only 85 were American flagged. Examining the records from the war, there were a total of 314 ships that transported over the unit equipment in the prepositioning and surge stages of the sealift operation.

    Of these ships, 8 were Fast Sealift Ships (although one did breakdown), 13 MPS, 12 carrying other prepositioning equipment (all American flagged), 72 Ready Reserve Force ships, 32 US merchant ships (many of them Jones Act compliant) and 177 foreign-flag ships. The the latter, they transported 26.6 percent of the total cargo over.

    For the sustainment phase, Military Sealift Command contracted with American President Lines, Central Gulf, Farrell, Lykes, Sea-Land, and Waterman to use their commercial services and contracts to transport over the sustainment for the force, approximately 37,000 containers.

    For the most recent conflict, they should look at Herberger’s Global Reach, published by USNI.

    • USNVO

      Yeah, the last bit was probably the worst case of lying with statistics I have ever seen. It wasn’t just that it was intentionally deceptive, but Mr. Quartel had to have known better.

      First, since Jones Act ships sail between US ports, they are tankers or coastal vessels and largely not useful for military movement.

      Second, but that is irrelevant because without the ships in the coastal traffic there is no trained pool of officers and crew to actually man the MARAD RRF ships.

      Third, as you pointed out, the number of ships means nothing compared to the amount of cargo they carry. While only 85 US flagged ships were used, they carried the lions share of the cargo including virtually all the fighting vehicles and rolling stock.

  • USNVO

    “Coleman said in his opening remarks at the forum co-sponsored by the Federalist Society, “It is cheaper for U.S. producers to ship their oil and [natural] gas to Europe than it is to ship to U.S. consumers.””

    Comparing Apples to Oranges here. Product going to Europe leaves on large tankers while the vast majority of US trade is conducted with pipelines. The few places not reached by pipelines like New England are served by smaller ships and tug/barge units that are inherently less efficient. Even then, the cost of transportation is so low as to be insignificant regardless if the ship is Jones Act or not.

  • Marc Apter

    So the MAGA Group wants to help destroy what is left of the American Merchant Marine! Makes so much sense, NOT!

    • redgriffin

      Just how much of the US Merchant Marine is left these days?

    • Ed L

      We still have a merchant marine academy Graduates can choose to work five years in the United States maritime industry with eight years of service as an officer in any reserve unit of the armed forces.
      Or five years active duty in any of the nation’s armed forces. About a 175 vessels over a thousand gross tons but there are over 800 American owned vessels flag under other countries

    • Ako89

      Wall Street is destroying the United States

      The financialization of the American economy

      American De-Industrialization
      Continues Unabated

      America’s economic elite has long argued that the country does not need
      an industrial base. The economies in states such as California and
      Michigan that have lost their industrial base, however, belie that
      claim. Without an industrial base, an increase in consumer spending,
      which pulled the country out of past recessions, will not put Americans
      back to work. Without an industrial base, the nation’s trade deficit
      will continue to grow. Without an industrial base, stranded in
      low-paying service-sector jobs. Without an industrial base, the United
      States will be increasingly dependent on foreign manufacturers even for
      its key military technology.

      Deindustrialization led to rising costs for weapons development

  • Leonard Pinth Garnell

    Give Puerto Rico independence and get out from under the rest of us (including Jones Act employees) from having to subsidize that useless little island and its drain on the U.S. Welfare System. Puerto Rico is a boondoggle and serves no purpose. Rather than statehood and permanent Welfare, they can shove off and experience the pros and cons of independence in the Free Market.