by Michael Hansen, Hawaii Shippers Council
Appearing on the Rick Hamada Show August 8th, Congresswoman Colleen Hanabusa affirmed, “I’ve always been somebody who supports the Jones Act.”
The Jones Act requires that a vessel be U.S.-built, -flag, -owned and -crewed in order to transport cargo between two domestic points within the United States.
The origins of the Jones Act, formally Section 27 of the Merchant Marine Act of 1920, are widely misunderstood including by Hanabusa, who told Hamada “It’s really something that started to help our military. It’s a merchant marine statute.” In fact U.S. Senator Wesley Livisey Jones (R-WA) introduced his eponymous legislation to exclude Canadian ships and merchants from the Alaska trade, and protect that trade for his domestic merchant constituents in Seattle. As such, the Jones Act was conceived as purely commercial protectionist legislation. It wasn’t until later that the Jones Act industry began to wrap itself in the flag to justify its protections and high costs on the basis of national security.
Interestingly, Cong. Hanabusa went on to say, “And, as we look, the one thing that troubles me the most, is you talk about an industrial base – we have lost our presence in terms of shipping and the ability to build ships.” The Congresswoman is correct to say that the United States is no longer competitive in shipping and shipbuilding especially in respect of the kinds of large, self-propelled ships that Hawaii and the other noncontiguous jurisdictions – Alaska, Guam and Puerto Rico – depend upon for interstate surface transportation.
The Hawaii Shippers Council has put forward a very moderate Jones Act reform proposal that would address this “troubling” problem identified by Cong Hanabusa in its most critical aspects for the noncontiguous jurisdictions. We have proposed that the noncontiguous trades be exempted from U.S.-build requirement of the Jones Act for large, self-propelled oceangoing ships, which would allow Foreign-built U.S.-flag ships to be used in the Alaska, Guam, Hawaii and Puerto Rico trades. This targeted reform would not negatively affect any jobs, maritime or otherwise, in the noncontiguous jurisdictions.
Former Republican Cong Charles Djou (HI CD-1) who is challenging Cong Hanabusa in the November 6th general election, declared his Jones Act position in a candidate survey conducted by the Honolulu Star-Advertiser in advance of the August 11th Hawaii State primary election, stating, “I favor exempting Hawaii from the Jones Act, as most agree this protectionist law increases the cost of goods sold in Hawaii.”
Disingenuously, Cong Hanabusa justified her pro Jones Act stance by saying that Ka Lei Eggs, one of Hawaii's very few remaining egg producers, is not affected by shipping costs. Ka Lei’s third generation owners are constituents of Cong Hanabusa’s former State Senate district.
Cong Hanabusa said, “I tell people one thing when they talk about the Jones Act and high costs. Look at the cost of eggs in Hawaii. I grew up in Waianae; Mikilua that’s where Ka Lei Eggs is from. Look at that cost, compare that cost to Safeway’s eggs or someone else’s eggs. You will find the local eggs which have no shipping is still more expensive.” Essentially, she asserted that because Ka Lei is a local producer they have no shipping costs, while mainland eggs, which are significantly cheaper, do incur shipping costs, therefore shipping is not a cost an issue for Hawaii producers and consumers."
Ka Lei's owners have a very different story to tell. Co-owner Lois Shimabukuro, appeared December 12, 2011, on Hawaii Reporter TV to discuss the “Jones Act Impact on Hawaii Business.” Ms. Shimabukuro described in no uncertain terms how domestic shipping “impacts the cost of our ability to do business and provide food for the state” and said “it’s come to the point where we are wondering whether it’s worth continuing the business.” She noted that Hawaii has already lost its dairy, pork and fresh chicken industries.
Ms. Shimabukuro relates how they once relied upon lost local manufacturers who conveniently provided cost effective products for their operations: from the Weyerhaeuser plant in Iwilei that produced cartons and egg trays to the Carnation Corporation feed mill at Pier 23 in Honolulu Harbor that once manufactured finished feeds from bulk grains. Today Ka Lei must import feed in containers and egg trays from North Carolina which makes the cost of the trays “less than the cost of the freight.”
The largest impact on animal agriculture in Hawaii has been the loss of the local feed mill that once shipped in bulk feed grains and manufactured finished feeds. Bulk handling and transport is much less costly than container shipping, which is better suited for finished merchandise, and local milling provides fresher feed that can be ordered on short notice as opposed to arranging shipments of finished feeds in containers from a mainland source.
Carnation sold their operation to Fred L. Waldron & Co. Ltd. in the mid-1990’s and Waldron failed a couple of years later ending the local milling of feeds. The owners of HFM First in Foods / Hawaiian Flour Mills, Kerr Pacific Corporation, looked seriously in the late 1990’s at building a smaller feed mill alongside the grain silos at Pier 23, but decided against it because of the lack of Jones Act bulk carrier service on which to bring in the feed grains. Closure of the Carnation feed mill led directly to the demise of the dairy, pork, fresh chicken and beef cattle feed lot industries in Hawaii.
Today HFM continues to mill flour at its Pier 23 facility using wheat imported from Canada on foreign flag bulk carriers operating in a parcel trade between the West coast of North America and New Zealand and Australia. Those ships are prohibited by the Jones Act from carrying cargo from the U.S. West Coast to Hawaii. As the kinds of grains needed to produce animal feed are largely grown in the United States and not Canada, the foreign flag bulk carrier option is not available for this purpose.
The owners of Kerr Pacific have said that they could not operate their HFM flour mill if they had to pay Jones Act freights to ship grain to Honolulu.
Our very modest reform of the Jones Act that would provide so much real relief for the residents of the noncontiguous jurisdictions. Our proposal is a doable reform if done in conjunction with the other noncontiguous jurisdictions, and our next representative should provide much needed Congressional leadership to achieve that goal.