Are Jones Act ships really 'made in the USA'? Well, sort of

by Bryan Riley, Senior Trade Policy Analyst in the Heritage Foundation's Center for Trade and Economics, The Hill, June 7, 2016

The Merchant Marine Act of 1920 (aka the Jones Act) requires ships transporting goods within the United States to be U.S.-built, U.S.-owned and at least 75 percent U.S.-crewed. According to the American Maritime Partnership, "The Jones Act ensures a strong and vibrant maritime industry, which helps ensure the United States maintains its expertise in shipbuilding and waterborne transportation."

It's a good sound bite. But in reality, U.S. companies that assemble oceangoing vessels rely heavily on foreign parts, foreign investment and foreign shipbuilding expertise. According to Michael Hansen, president of the Hawaii Shippers Council, "The only thing American about an oceangoing ship assembled in the U.S. today is the extraordinarily high price; foreign shipyards provide the design, main engines and other equipment."

That holds for all three companies that assemble oceangoing commercial ships in the United States: General Dynamics NASSCO, Philly Shipyard and VT Halter.

General Dynamics NASSCO

According to NASSCO's website, "For its commercial work, NASSCO partners with South Korean shipbuilding power, DSME (Daewoo Shipbuilding & Marine Engineering), for access to state-of-the-art ship design and shipbuilding technologies."

When it announced plans to assemble five fuel efficient "ECO" tankers, NASSCO reported: "The ships will be designed by DSEC, a subsidiary of Daewoo Shipbuilding & Marine Engineering (DSME) of Busan, South Korea."

Philly Shipyard

Philly Shipyard, formerly known as Aker Philadelphia Shipyard, is a subsidiary of Norway's Aker ASA, which is traded on the Oslo stock exchange. According to the company website, "Since delivering its first vessel in 2003, Philly Shipyard has delivered more than 50% of all Jones Act ocean-going merchant ships including containerships, product tankers, and large crude oil tankers." The shipyard was founded as Kvaerner Philadelphia Shipyard in 1997 with $429 million in taxpayer subsidies.

Most Philly Shipyard oceangoing vessels are designed in Korea. In 2004, the company signed a contract with Hyundai Mipo Dockyards (HMD) for 10 tankers. According to a company executive, "They gave us the design; they gave us the computer model; they gave us all of the drawings."

More recently, the company based its 2015 Eagle Bay and 2014 Liberty Bay tankers on a Samsung Heavy Industries design.

VT Halter

VT Halter Marine describes itself as "the largest designer and builder of small to medium sized ocean-going vessels in the United States." The company is owned by ST Engineering. ST Engineering's largest shareholder is the government of Singapore.

Croatia's Uljanik Shipyard provided the design for the company's Marjorie C Jones Act cargo vessel, assembled in 2015

Moving forward

The oceangoing ships assembled by NASSCO, Philly Shipyards and VT Halter couldn't leave the dock without imported parts. Each of the aforementioned vessels relies on foreign-made engines along with a variety of additional imported components.

Companies that assemble ships in the United States benefit from the freedom to buy the best designs and the best, most cost-effective parts from across the globe. In contrast, the Jones Act deprives companies that transport goods in the United States of the freedom to use the best, most cost-effective ships from across the globe.

Congress should fix the Jones Act so that U.S. shipbuilders and ship users can all buy the best-made products at the best prices, regardless of where they are made. That commonsense approach works for the rail transport, air transport and highway transport sectors, each of which is characterized by low U.S. trade barriers and a thriving domestic manufacturing base. It would work for water transport, too.

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