Bill exempting Puerto Rico from Jones Act ignites old battles
As published by Joseph Bonney in Journal of Commerce
Shipyard, maritime and labor interests have criticized an Alabama congressman’s proposal to exempt Puerto Rico from the Jones Act’s requirements for U.S.flag shipping between the island and the U.S. mainland.
Rep. Gary Palmer, R-Ala., called for the exemption in a proposed amendment to legislation (HR 5278) to resolve Puerto Rico’s long-running debt crisis, which has threatened the commonwealth with bankruptcy.
Palmer said opening the trade to non-U.S.flag carriers would help Puerto Rico consumers and the commonwealth’s economy. “If Congress wants to help Puerto Rico, we must provide them with opportunities to better their economy and lower their cost of living, not bail them out without any forward-thinking solutions,” he said.
U.S.-flag interests reacted quickly. The American Maritime Partnership, a coalition representing shipbuilders, vessel operators and other U.S.flag advocates, said Palmer’s amendment would jeopardize jobs, national security and investments by Jones Act carriers.
“Weakening the Jones Act would harm, not help, the Puerto Rican people and the commonwealth’s economy. In fact, a vote against the Jones Act is a vote to outsource American jobs, undermine national security and degrade homeland security,” said Tom Allegretti, the coalition’s chairman.
The Jones Act requires shipments between U.S. points to move in U.S.-flag ships built, owned and crewed by U.S. citizens. Repeated efforts to repeal or weaken the act have gone nowhere in Congress, where companies and unions that rely on the law for business and jobs have presented a united front to lawmakers.
Jones Act critics contend the law raises the costs of goods shipped to and from the U.S. mainland, forcing the island to rely on foreign sources for many goods. Palmer said shipping costs from the mainland to Puerto Rico are almost twice those to the U.S. Virgin Islands, which were exempted from the law in 1992.
“If exempted, Puerto Rico’s power companies would be able to replace foreign-sourced oil with cheaper, cleaner, U.S.-sourced natural gas,” Palmer said. “Manufacturers in Puerto Rico would also no longer be at a cost disadvantage relative to Asia and other Latin American countries when shipping goods to the U.S.”
The American Maritime Congress disputed those claims. It said studies haven’t proven a link between consumer costs and Jones Act requirements, that U.S.-flag carriers have pioneered LNG-powered ships in the trade, and that the U.S. Virgin Islands are outside U.S. customs territory and operate under different a legal structure than Puerto Rico.
The Jones Act also has been criticized for encouraging carriers to continue operating old ships such as TOTE Maritime’s 41-year-old El Faro, which sank last fall with the loss of 33 lives during a mainland-Puerto Rico voyage. Coast Guard investigators raised the issue during recent hearings on the sinking.
During the last several years, however, carriers including TOTE, Crowley, Matson and Pasha have invested heavily in new or upgraded U.S.-built ships for services between the mainland and Puerto Rico, Hawaii and Alaska. Jones Act supporters say exempting Puerto Rico from the act would undermine those investments.
“The Jones Act is not a cause for the island’s financial woes,” Allegretti said. “While other industries have fled the island, the domestic maritime industry has made significant capital investments to service the economy and support thousands of family-wage jobs for Puerto Ricans.”
Other U.S.-flag interests also weighed in against a Jones Act exemption for Puerto Rico.
Edward Wytkind, president of the AFL-CIO’s Transportation Trades Department, said the amendment was “part of a long-term plan by bad-faith actors to demonize the Jones Act and harm the American businesses and workers that rely on a strong U.S. maritime industry.”
“Instead of pushing serious measures that will help Puerto Rico fairly restructure its debt and provide much-needed aid for the 3.5 million U.S. citizens facing a humanitarian crisis, extremists are offering red meat attacks on the Jones Act to satisfy ideological grudges,” Wytkind said.
The Shipbuilders Council of America also weighed in, saying it was ironic that the amendment was proposed by a lawmaker from a shipbuilding state. Palmer represents a horseshoe-shaped district outside Birmingham.
The Jones Act supporters’ rapid response is similar to the one that scuttled an effort last year by Sen. John McCain, R-Ariz., a longtime critic of the law, to tie a Jones Act exemption for U.S. oil exports to a Senate bill authorizing construction of the Keystone XL pipeline.