A Jones Act debate: Admiral versus Attorney

by Michael Hansen, Hawaii Shippers Council, July 19, 2020

Honolulu, Hawaii, resident, Admiral Paul Frederick Zukunft, U.S. Coast Guard, Retired, posted on July 18, 2020, to his LinkedIn page, a statement supporting the Jones Act (i.e., The Merchant Marine Act of 1920) in recognition of its 100th anniversary on June 5th.

San Francisco, California-based, corporate and maritime attorney, Wayne A. Parker, responded to Admiral Zukunft by posting the following day two effective rebuttals on the Admiral’s LinkedIn page.

The Admiral and the Attorney are well matched for this debate in terms of their education and experience, and their exchange is instructive of how the Jones Act debate is typically conducted.

ADM Zukunft (born 1955) is a graduate of the U.S. Coast Guard Academy and served as a USCG officer for 41 years (1977 – 2018). His postings included: Chief of Staff, at the Fourteenth Coast Guard District in Honolulu, Hawaii; Commander, Coast Guard Pacific Area (2012 – 2014); and 25th Commandant of the U.S. Coast Guard (2014 – 2018). He is currently: a Honolulu resident; Board Member, Navy League of the United States, Honolulu Council; Member Of The Board Of Advisors, Military Affairs Council, Honolulu; and, Principal, Paul Zukunft Worldwide Maritime Consulting, LLC.

Attorney Parker is a graduate of the U.S. Naval Academy (1986 – 1990) and the University of Southern California, Gould School of Law (2000 – 2003). His employment experience includes: Associate General Counsel, Horizon Lines, Inc., Charlotte, North Carolina (2011 – 2015); and, Assistant General Counsel, Matson, Inc. (2015 – 2018).

ADM Zukunft posted on July 18, 2020:

June 5th marked the 100th anniversary of the Merchant Marine Act, otherwise known as the Jones Act. It’s passage was visionary, yet there are members of Congress who are short-sighted to seek its repeal.

So let’s talk numbers - 650K jobs with the top 3 in LA, FL and TX. $154b contribution to the US economy.

And now let’s think strategic. Foreign flagged vessels and crews would displace US flagged vessels and merchant mariners. Our 5 Jones Act deep water shipyards would close down, and the US technical expertise would go down with them. Our inland rivers would be serviced by foreign flagged line boats and crews, while dredging operations in our military strategic ports would also be foreign crewed and subject to sabotage. Offshore oil industry?

A repeal would deprive the US commercial fleet and mariners who service that industry. Who fills this void? China!

To those members of Congress seeking to repeal the Jones Act, read John Pomfret’s book, “The Beautiful Country and the Middle Kingdom” and start playing chess instead of checkers!

Attorney Parker posted his first rebuttal the next day:

During my time with Horizon Lines and Matson, I provided legal advice on every aspect of operating these companies in their Jones Act trades, as well as their foreign trade with customers in China and the Southwest Pacific.

I was the attorney primarily charged with advising senior executive management on all Jones Act-related issues, including vessel and corporate financing, vessel repairs and upgrades, compliance, safety/quality/environmental issues, accounting matters, etc. I worked with the USCG and MARAD on a frequent basis.

What I learned in that time was the Jones Act has been an abysmal policy failure. It has not saved US mariner and shipbuilding jobs. US shipyards capable of building ocean going vessels are almost entirely reliant on DoD contracts.

Jones Act carriers rarely buy new vessels built in US shipyards; instead, they refurbish or repair them in foreign (often Chinese) yards to the fullest extent permitted by the Jones Act and related regulations. I know because I negotiated such agreements and worked with our engineering, tax and customs groups to make these things happen.

The tiny number of Jones Act commercial vessels is insufficient and could never support the relatively small US shipyard industry.

Attorney Parker’s second post on the same day:

As I explain in my [first] response, I served seven plus years with Horizon Lines and Matson and saw how the Jones Act really is a policy failure. Anyone who actually does their homework and researches the size of the US commercial vessel fleet, its market share, the size of the workforce and its demand for US-built vessels cannot help see the slow but unmistakable decline of the last fifty years.

At best, the statute props up inefficient ocean carriers while also hamstringing them with regulations regarding vessel purchase and repair options, manning, etc. It also speaks volumes that anyone who reads the financial statements for Horizon Lines (now a Matson subsidiary), Matson, Pasha, and TOTE will see all these carriers depend heavily on US government carriage contracts. Take those away and these carriers would be faced with severe revenue declines.