Hardberger on the Jones Act

by Michael Hansen, Hawaii Shippers Council

Nationally recognized maritime expert, Captain Max Hardberger, has again weighed in on efforts to reform the Jones Act from his independent point-of-view in another column “The Jones Act: Road to repeal”, published August 13, 2013, in the Workboat Magazine.  In this column, Capt. Hardberger notes the active Jones Act debate in Hawaii, Alaska and Puerto Rico, and thinks reforms limited to just those trades is too restrictive, but warns against attempting wholesale repeal.

Capt. Hardberger draws an interesting comparison between the Internal Revenue Service (IRS) tax code and the Jones Act and other cabotage laws, both in terms of their pervasiveness and complexity, and the degree of difficulty to make any changes in those laws.

His previous column “Don’t limit Jones Act reform” from April 2, 2013, was also published in the Workboat, Capt. Hardberger addressed the Hawaii Shippers Council’s noncontiguous trades Jones Act reform, which proposes a limited exemption from the U.S. build requirement of the Jones Act for Alaska, Guam, Hawaii and Puerto Rico.  In that previous column, Capt. Hardberger chided the Shippers Council for proposing to carve out such a narrow exemption, and not providing a broader nationwide solution.

Capt. Hardberger among other things is a master mariner, maritime attorney and ship repossession man to the World.  He has chronicled his adventures as a ship repo man in his book “Seized”, and his career as a ship captain in “Freighter Captain.”  

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The Hawaii Shippers Council (HSC) is a business league organization incorporated in 1997 to represent cargo interests – known as “shippers” – who tender goods for shipment with the ocean carriers operating the Hawaii trade.

Please contact the HSC at email pacmar@hawaiiantel.net if you wish to be placed on our email list.

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The Jones Act: Road to repeal

by Capt. Max Hardberger, August 13, 2013

The argument over whether the Jones Act should be repealed or at least constrained will continue for a long time, but it could be useful if we begin to envision how such a thing could happen.

Even daydreamers don’t foresee a wholesale repeal. The Jones Act is so complex and favors so many special interests that any credible assault would engender a massive and vicious response that would probably doom the effort from the outset. However, any law or set of laws that work against the public interest will give rise to chink-in-the-armor attacks by other, competing special interests.

Recently, a spate of articles in U.S. West Coast/Hawaii shipping publications and in Pacific-oriented political blogs have proposed an exception to the Jones Act for vessels trading between the mainland U.S. and Hawaii. Blind to the unfairness of exempting trade between Hawaii and the mainland while maintaining Jones Act strictures on other domestic trade, the articles argue that “carving out” a specific exemption while maintaining the system as a whole was an argument for the Act.

Similar pressures exist to exempt specific trade routes between the lower 48 and Alaska and the mainland and Puerto Rico, but all to naught so far. There is no constitutional or historical basis for carving out exemptions, and even our activist Supreme Court is not yet ready to take on the Jones Act en globo. Interestingly, the court did dip a toe in the water in a case decided this year, Lozman v. City of Riviera Beach, Florida, in which the court significantly limited the application of the Jones Act by exempting “non-boats” like houseboats from its coverage.

Now, additional pressure on the Jones Act is coming from international waters in the Gulf of Mexico. In the U.S. Gulf, foreign-flag drilling rigs are free to operate, and the supply vessels that go between the rigs and their U.S. support bases have to go through the charade of customs clearance on every trip. Even with these impediments, it must curl the toes of Jones Act stalwarts that these foreign-flag “vessels” (which is what a deepwater platform is) can operate with impunity a couple of hundred miles from our coast, and an effort to expand Jones Act coverage to them may come soon.

Even dredges aren’t immune from Jones Act controversy. In June, according to a posting by Charlie Papavizas of the law firm Winston & Strawn LLP, U.S. Customs and Border Protection ruled that “a dredge is a vessel under applicable Supreme Court precedents, that harvesting marine vegetation constitutes ‘fishing,’ and the lifting of objects on board a vessel by a vessel’s crane constitutes a ‘lading’ for [Jones Act] purposes.” The “lifting of objects” refers to vegetation scooped up during dredging. This is apparently the distance to which government agencies will go to expand the Jones Act without resorting to the legislative process.

Such a ruling is ludicrous on its face and will probably be enjoined soon, but it’s no less ludicrous than the only surviving justification for the special treatment of “seamen” under the Jones Act, which is that they are, or should be, “wards of the court.” That phrase became common among legal writers and in some courts after the 1840 publication of Richard Henry Dana’s Two Years Before the Mast, and the feeling that seamen needed special protection from greedy shipowners was still current when the Jones Act was enacted 80 years later.

That may well have been the case then, but the rise of the seamen’s unions in the years since, along with enforcement of international standards on all oceangoing ships, has tipped the scale in the other direction. Now, the application of Jones Act provisions to a personal injury case tips the scales unfairly in the plaintiff’s direction. Fairness would dictate that maritime employees sue under the same laws every other worker must sue under. There can be little modern justification for a law that prevents an employer from introducing evidence that an employee’s drunkenness at his place of work contributed to his injury.

Special interests like to point to rising stock prices for U.S. shipbuilders and increasing truck traffic revenues, but the fact is that the U.S. is so short of U.S.-flagged ships that during the first Gulf War, the government waived some of the Jones Act and desperately begged foreign-flag owners to charter their ships to the U.S. for the war effort.

Any effort to repeal the Jones Act has to realize that resistance to getting rid of it is closely related to the resistance to abolish or simplify the income-tax code. Both the Jones Act and the tax code are, at heart, mechanisms for social engineering. With the tax code, marriage is favored, and home ownership, solar energy, contributing to charities, and saving for retirement are all favored. Soon, when the Affordable Care Act kicks in, going without health insurance will be disfavored.

In the same way, the Jones Act favors U.S. shipyards, tug and barge owners, and other U.S. maritime interests at the expense of their competitors and, more importantly, taxpayers. Ultimately, the taxpayer is subsidizing the inefficiencies and favoritism of the Jones Act by paying exorbitant transportation rates.

There’s nothing unconstitutional about the Jones Act, but the hand of time lies heavily on this 100-year-old legislation. If the electorate wishes to continue paying more at the pump and checkout counter to continue fattening special interests, then it has every right to do so. However, they should do so knowingly.

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