U.S. Senator McCain strikes again at the Jones Act

by Michael Hansen, Hawaii Shippers Council, July 17, 2017

U.S Senator John S. McCain issued a press release on Thursday, July 13, 2017, “Senator John McCain introduces legislation to repeal the Jones Act & promote free trade,” announcing his filing with the Secretary of the Senate the latest version of his “Open America’s Waters Act.”

The short title of the instant bill is “Open America’s Waters Act of 2017,” and the language is the same as his earlier legislation including “Open America’s Waters Act of 2010” and the amendment he offered in respect of the Key Stone XL Pipeline Authorization Act of 2015, with very limited non-substantive differences.

Although the bill would not repeal the “Jones Act” (specifically Section 27 of the Merchant Marine Act of 1920 as amended) as Sen. McCain claimed in his press release, it would eliminate the critical domestic U.S. ship build requirement for all commercial vessels employed in the domestic (coastwise) trades of the U.S. In addition, and the bill could affect the U.S. ownership requirement depending on how the proposed amendments to existing law would be interpreted.

The requirements that ship owners must register commercial vessels U.S. flag and employ U.S. citizen crew members (with up to 25% of the unlicensed crew permanent resident aliens – i.e., green card holders) to engage in domestic trade would not be changed by this legislation,

If the bill were to be enacted, it would create a sea change in the U.S. maritime industry. it would allow ship owners to acquire vessels constructed overseas where prices for comparable self-propelled seagoing ships over 1,000 gross tons are one-fifth the cost of construction in the U.S.

The domestic U.S. maritime industry – also known as the Jones Act industry – will oppose Sen. McCain’s instant bill as they have his past legislation of the same tenor. The Jones Act industry includes ship owners, ship operators, shipyards and the maritime unions especially those working in shipyards and on board ship.

They all have a vested interest in the domestic U.S. maritime industry as it is currently constituted and has been shaped by the Jones Act for nearly 100 years.

For the incumbent ship owners, the domestic U.S. ship build requirement of the Jones Act coupled with the extraordinary cost of U.S. ship construction creates a very high barrier to entry keeping new entrants out of the market. While it provides them with an economic environment in which they can recover their costs and earn a relatively large profit on a absolute basis.

The merchant cargo owners – known as shippers – pay the higher freight rates for these much more expensive ships and pass those costs along to the consumers.

The Hawaii Shippers' Council supports the intent of Sen. McCain's bill.

From News Release:

U.S. Senator John McCain (R-AZ) today introduced the Open America’s Waters Act of 2017, legislation that would repeal the Merchant Marine Act of 1920, or the Jones Act. The Jones Act requires that all goods shipped between waterborne ports of the United States be carried by vessels built in the United States and owned and operated by Americans.

“I have long advocated the repeal of the Jones Act, an archaic and burdensome law that hinders free trade, stifles the economy, and ultimately harms consumers,” said Senator McCain. “My legislation would eliminate this regulation, freeing American shippers from the requirement that they act against their own business interests. By allowing U.S. shippers to purchase affordable foreign-made carriers, this legislation would reduce shipping costs, make American farmers and businesses more competitive in the global marketplace, and bring down the cost of goods and services for American consumers.

“The protectionist mentality embodied by the Jones Act directly contradicts the lessons we have learned about the benefits of a free and open market. Free trade expands economic growth, creates jobs, and lowers costs for consumers. I urge my colleagues to support this bill and finally repeal the outdated and protectionist Jones Act.”

As a strong supporter of free trade, Senator McCain has been working for years to reform and repeal the Jones Act. He first introduced legislation to repeal the Jones Act in the Senate in the 111th Congress in 2010, and mostly recently introduced an amendment in the 114th Congress in January 2016 that would waive Jones Act requirements for oil and gasoline tankers.