‘Shipping security’ more Jones Act shibai

by Jonathan Helton, Grassroot Institute, March 28, 2022

You probably have heard that the Jones Act ensures Hawaii’s “shipping security,” regardless of whatever else might be going on in the world.[1]

This isn’t true.

Most recently, Jones Act supporters have tried to buttress their “shipping security” claim by pointing to the recent port congestion along the U.S. West Coast, where scores of ships were idling offshore, in some cases for weeks, waiting to unload their cargoes.[2]

By contrast, they say, shipping between the West Coast and Hawaii, which is governed by the Jones Act, has been mostly smooth sailing.

Obviously, these supporters claim, the Jones Act has proven essential to providing Hawaii with reliable cargo service. So, yes, they say, let’s continue to restrict shipping competition between U.S. ports to only ships that are U.S. flagged and built, and mostly owned and crewed by Americans.

Comparing the Hawaii-mainland trade to the Asia-West Coast trade, however, is not an apples-to-apples comparison, and the Jones Act’s cheering section might want to put the cork back in the Champagne bottle before getting too carried away.

Hawaii and the U.S. West Coast have two very different port systems. For example, the ports of Los Angeles and Long Beach last year hit their highest-ever cargo volumes.[3] In 2021, LA and Long Beach each received more than 900 containerships, while only 248 visited Hawaii.[4]

Further, the containerships visiting LA and Long Beach were much larger on average than those stopping in Hawaii: 75,899 and 82,925 gross tons, respectively, versus about half that size, 41,500 gross tons, for Hawaii.[5]

In terms of demand, LA and Long Beach were slammed with increased demand during 2021 as Americans bought more goods from Asia. LA and Long Beach handle about 40% of the country’s freight,[6] while Honolulu accounts for only a tiny fraction. In addition, Hawaii’s import volumes actually fell during the year due to the drop in tourism.[7]

Meanwhile, West Coast harbors have complained of inadequate harbor staffing and shortages of trucking and rail capacity to move out the cargo that has already been offloaded.[8]

Also, thanks to the Jones Act — and the Dredging Act of 1906, which is similar to the Jones Act but applies to ships that remove silt from harbors — it has been slower and more expensive to expand West Coast harbors to accommodate larger ships, contributing further to the supply chain breakdown.[9]

Hawaii, meanwhile, has avoided most of the supply chain logjam, but that has nothing to do with the Jones Act. Hawaii is simply a different market than the West Coast.

The ‘dedicated terminals’ distraction

A second argument supposedly supporting the “shipping security” claim is that the two primary Jones Act carriers that supply Hawaii, Matson and Pasha, have “dedicated terminals” in Honolulu and the West Coast.[10]

These “dedicated” port terminals, we have been told, have protected Hawaii from shipping delays and logistics hurdles.[11] Such terminals, however, have nothing to do with the Jones Act. Foreign shipping lines own several terminals across the country. At the Port of Los Angeles, for example, Danish shipping giant Maersk owns APM Terminals’ Pier 400.[12]

Terminal leases are also known to change hands, depending on carriers’ needs.[13] This played out in Hawaii in 2015 when Pasha bought out Hawaii Stevedores from bankrupt Horizon Lines.[14] In 2017, TOTE tried to lease terminal space in Honolulu Harbor but couldn’t afford the bid, in part because of the high cost of building new Jones Act ships.[15]

The illusion of ‘shipping security’

Part of the “shipping security” argument includes the claim that Jones Act ships serving Hawaii “never, never get delayed,” as a top executive with the Hawaii Pilots Association recently stated.[16]

But how could this be true? Shipping schedules and supply issues are affected by all sorts of variables — mechanical, environmental, political. For example:

>> In July 2021, freight forwarder Dependable Hawaiian Express wrote its customers apologizing for a goods shortage and shipment delays. The company said: “A chassis shortage has developed in Honolulu, and a 40-foot container shortage is currently being experienced in Seattle.”[17]

>> Matson’s ships were delayed in 2019 due to “bad weather and mechanical problems on ships.” Weather, repairs and other unforeseen circumstances cause problems for all shipowners, U.S. and foreign.[18]

>> In the 1970s, a long strike by U.S. dockworkers led to many product shortages in Hawaii. Rice and toilet paper were high on the list of items in short supply.[19]

>> A similar strike occurred in 2002, but the striking unions exempted Jones Act vessels, as well as cruise ships and military vessels, causing only “minimal delays for perhaps a half day or day,” according to a Matson official.[20]

In the near future, there’s the possibility of another maritime labor disruption, since the International Longshore and Warehouse Union’s contract with the Pacific Maritime Association, a maritime employer representative, ends in July 2022.[21]

The last time these two groups negotiated a contract, in 2014, the deal-making dragged on for a year and slowed port efficiency. In the end, Hawaii was given an exemption then, too.[22] However, if the union does go on strike and includes Hawaii, the Jones Act will have no say in how the negotiations turn out.

Hawaii relies on foreign-flagged vessels all the time

Finally, amid all the debate over the reliability of Jones Act carriers, it is important to remember that Hawaii is heavily dependent on international ocean carriers as well. In fact, foreign-flagged vessels account for the majority of tonnage brought to Hawaii,[23] including more than 23 million barrels of crude oil.[24]

If these foreign ships were so unreliable, why would Hawaii businesses ever use them?

By some metrics, their service is superior to that of Jones Act carriers, as foreign ships are often newer and offer lower shipping costs.[25]

Moreover, as international events have recently emphasized, the Jones Act is actually a threat to Hawaii’s energy security, since the added costs of using Jones Act carriers to ship crude to Hawaii from U.S. sources have incentivized the state to become almost wholly dependent on foreign oil imports.

In particular, Hawaii has long relied on Russia for about a quarter to a third of its oil imports. But then, in early March, in response to the Russia-Ukraine crisis, Hawaii’s sole oil refinery, Par Hawaii, suspended those imports[26]— an act that President Joe Biden reinforced a few days later with a ban on Russian fuel imports for the entire nation.[27]

If for some reason, Par Hawaii’s planned alternative foreign sources for Hawaii — purportedly from “North and South America”[28] — don’t come through, the Jones Act will be useless in providing “shipping security” for Hawaii’s oil needs. If anything, it will be a major stumbling block.

‘Shipping security’ just another Jones Act myth

Ultimately, the Jones Act has nothing to do with Hawaii’s “shipping security,” nor the “dedicated terminals” of its primary Jones Act carriers.

Instead, blocking foreign-flagged vessels from transporting goods to Hawaii from other U.S. points is serving only to pad the pocketbooks of the Jones Act carriers while causing expensive headaches and significant inconvenience for Hawaii businesses and consumers.

Like so many other claims in favor of the Jones Act — that it provides 650,000 American jobs,[29] protects national security and U.S. shipbuilding,[30] contributes to economic growth,[31] provides benefits without affecting consumer prices,[32] keeps foreign ships from traversing America’s inland waterways,[33] protects America against terrorism,[34] is a bulwark against China,[35] and so on — this argument about the Jones Act providing Hawaii with “shipping security” is just another myth that needs to be sent to Davy Jones’ Locker.

---30---

LINK: Footnotes