Construction companies claim they're vulnerable to shipping prices, and at the mercy of only two shipping operators in the market -- Matson and Pasha.
"If you buy something, construction component or a service, you have multiple entities to buy it from, and if one is too high, you can get another one. But in Hawaii, that's not true. Because everything is imported to us," says Brett Hill, president and CEO of Brett Hill Construction. "So everything from the drywall to the screws to the wiring, even the concrete, even though it's mixed here."
Hill says those costs are absorbed or passed on to clients -- a big reason why construction budgets are about 25% higher than the rest of the country.
Case proposed three bills to reform the Jones Act, exempting Hawaii, putting in price controls, or increasing competition to break up the duopoly.
Matson sent this statement to KITV-4: "Hanging Hawaii’s higher costs of living on shipping ignores what local economists and journalists have consistently found over the years, which is that shipping costs are just one of many cost factors that go into local pricing of consumer goods and represent a small fraction of price differences between Hawaii and the mainland. The reason the Jones Act has had such strong bi-partisan support in every Congress and administration in modern times is because it is important to homeland security and national defense, as well as the security of service to remote communities like Hawaii and Alaska, from an economic standpoint. The importance of being able to rely on critical supply line transportation is easy to take for granted but hard to overstate. The Jones Act also supports more than 650,000 jobs in the U.S., including thousands here in Hawaii."
Case calls the justification of homeland security a farce.
Michael Hansen represents small to medium sized cargo shippers in Hawaii -- he says when companies like Matson are required to only buy American-built ships, the price is up to five times higher than it could be. For instance, Matson's newest ship "The Lurline" cost a reported $255 million.
"That same ship could have been purchased from the company, which designed it in South Korea, for about $50 million. So we're looking at a huge differential between foreign build and U.S. build costs," Hansen said, noting shipping operators have to take out loans or mortgages to buy the expensive vessels.
"Like you take out a house mortgage and that has to be paid off over time. And just like a homeowner has to have sufficient income to pay his mortgage, a shipping owner has to have enough freight money coming in to pay his ship mortgage," explains Hansen, adding that is why Hawaii consumers end up paying more for the same goods you can find in the rest of the country.
Supporters of Jones Act reform say Hawaii is subsidizing the cost of keeping alive a dying shipbuilding industry, which employs only about 2,000 people in the continental U.S. They say jobs in Hawaii will not be affected by the changes being proposed.