Hawaii Shipping: Unpacking Hawaii’s Maritime Supply Chain
GCaptain, October, 2024
… In the United States, the Jones Act is an explosive topic, drawing fierce debate between supporters in the U.S. Merchant Marine and well-funded lobbyists on one side, libertarian think tanks like the Cato Institute on the other, and many in-between calling for reform. We won’t dive into the Jones Act aspect of this video today, but we’re sharing it because it takes a deep dive into a topic that’s often overlooked: the complex logistics behind supplying Hawaii.
This well-produced video from Wendover Productions showcases the network of ships, barges and tugboats that service Hawaii, the most remote major population center on Earth, which rely heavily on imports for nearly everything. Despite its isolation, when you walk into a grocery store in Hawaii, it looks just like one on the mainland—until you notice the prices. For example, a gallon of milk can cost upwards of $10, a result of the intricate and costly supply chain required to keep the islands stocked.
The video highlights how Hawaii’s supply chain depends on just a few companies—mainly Matson, Young Brothers and Pasha Hawaii—using relatively small high-speed containerships to keep perishables fresh. But this comes at a cost, with shipping speeds of 20 knots driving up prices. Adding to the complexity, inter-island shipping is monopolized by Young Brothers, which further increases costs to move goods between islands….
read … Hawaii Shipping: Unpacking Hawaii’s Maritime Supply Chain
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Hawaii’s Logistics Problem; The Jones Act
by Michael Hansen, Hawaii Shippers Council, Oct, 2024
An interesting video describing the impact of the Jones Act on Hawaii was posted to YouTube on Tuesday, October 8, 2024, as follows:
Hawaii's Logistics Problem Sam Denby and Tristan Purdy Wendover Productions / GroundNews.com Ontario, Canada.
Just three days after posting, the video garnered an impressive audience presumably influencing many people. As of Noon, October 11, 2024, Hawaii Standard Time (HST,) the video had been viewed 695,440 times and received 1,336 comments.
The video provides a good overview of the logistical problems facing the State of Hawaii as an isolated island group in the Mid-Pacific and how that leads to a higher cost of living. However, it makes a number of errors with respect to technical shipping issues that detract from the video’s effectiveness.
In the second half, the video proposes possible solutions to the logistic problem. Its primary focus is on local food production and advocates a return to the pre-contact situation of large-scale fresh local food production. Proposing that would avoid the necessity to ship food stuffs to the Islands, eliminate the associated supply-chain costs and reduce local consumer costs.
It also discusses the political status of Hawaii. It describes the political status of Hawaii as anomalous among distant island dependencies worldwide and how it prohibits the use of far lower cost international (foreign-flag) shipping in domestic trade with the US. mainland. It concludes that native Hawaiians and Asian agricultural workers lacked agency, due to the overthrow of the Monarchy in 1893, U.S. annexation in 1898 and the repressive plantation system, to oppose adoption of the inappropriate statehood political status in 1959.
A discussion of the issues with the video include the following:
- Interisland Transshipment.
Video: The interisland barge carrier Young Brothers LLC (YB) carries most of the U.S. West Coast (USWC) transshipment cargo to the Neighbor Islands after its discharged from the mainland containerships in Honolulu Harbor under a monopoly arrangement.
Factcheck: Only Pasha Hawaii Transport Line LLC’s (“Pasha”) uses YB to carry all their Neighbor Island transshipment cargo. No monopoly of any kind applies to these transshipment cargoes, which are regulated by the federal Surface Transportation Board (STB), and not locally.
Factcheck: Matson Navigation Company Inc. (“Matson”) operates its own interisland container barge service with three barges, towed by a subcontractor Sause Brothers Ocean Towing Inc., which carries virtually all of Matson’s interisland cargo. Matson only uses YB for occasional overflow cargo to the main Neighbor Island ports and exclusively to Molokai and Lanai due to very small volumes.
- Hawaii Housing Cost.
Video: The cost of a single-family home in Hawaii is about $500,000.
Factcheck: The current median price is just over U.S. $1.0 million. The price of a two-bedroom condominium is around $500,000.
- Traditional Hawaiian Agricultural System.
Video: The overthrow of the Monarchy in 1893 and U.S. annexation in 1898 caused the destruction of the traditional Hawaiian agricultural system that provided food self-sufficiency for the Hawaiian Islands.
Factcheck: The change in the Hawaiian economy from subsistence to plantation agriculture was well underway by the second half of the 19th Century during the Hawaiian Kingdom period. It was encouraged by the Hawaiian Monarchs to generate revenue for the government and employment for the people.
- Hawaii Plantation System.
Video: The Hawaii plantation system – sugar and pineapple -- prioritized export crops, displaced local food production and lead to the importation of nearly all food stuffs to the islands.
Factcheck: Hawaii locally produced a good portion of its food throughout the plantation era until about Statehood 1959. Plantation employees for the most part lived in plantation housing and were allocated an acre of plantation land on which to grow their own food. Until World War II (WWII, 1941-1945, which changed the islands substantially), most fresh food consumed in Hawaii was locally produced including vegetables, milk, eggs and meats. In part, the dependency on local fresh food production was due to the shipping by breakbulk that was rough on the cargo especially refrigerated cargoes and time consuming. That changed with containerization in the 1960s. A good example of this local production is that prior to WWII, Hawaii was self-sufficient in rice production (manly by immigrant Chinese rice farmers to meet the demand of Asian immigrants – rice was unknown to the native Hawaiians before European contact), but after the War local rice production ended quickly and the residents came to rely on rice grown in the Sacramento River delta in California including those of all ethnic backgrounds.
- Ship Speed.
Video: The mainland to Hawaii ocean shipping carriers – Pasha and Matson – operate at significantly higher ship speeds – around 20 knots -- than the Transpacific containerships – around 15 knots. The Hawaii carriers use the speed to offer a faster transit times to support the just-in-time supply chain, ensure economic dependence on the incumbent carriers and avoid coopetition. This is accomplished at a higher coast, which is passed along to the island consumers.
Factcheck: The speed of the Matson and Pasha containerships between the USWC and Hawaii is due largely to the distance, scheduling and high cost of domestic ship construction. Operating at 15 instead of around 20 knots in the domestic Hawaii trade would require an additional ship per service / port pair to maintain a weekly service. Due to its unique characteristics of the domestic Hawaii trade, it’s far more efficient for the carriers to operate at the higher speeds than add an additional ship.
- Matson’s Transpacific Service.
Video: Matson’s transpacific service was only successful during the COVID lockdowns of 2020-2022 and West Coast Port Slowdown of 2023 when a substantial Matson advantage existed due to the port congestion impacting the other carriers.
Factcheck: Matson has been successful operating its Eastbound Transpacific service (from China to Long Beach) on an “expedited” basis for time-sensitive commodities including things like textiles and electronics since its acquisition from APL in 1995. These Matson containerships are basically full in both directions: Westbound -- coastwise to Hawaii, registry cabotage to Guam and military preference to Okinawa; Eastbound -- international expedited great circle China to Long Beach. Matson refers to this routing and its revenue generation as a “double head-haul.” Unlike the international (i.e. foreign-flag) transpacific containership operators who offer very low Westbound “backhaul” rates due to the directional cargo volume imbalance, while Matson’s Transpacific service operates virtually full at significantly higher freight rates in both directions.
- Local Food Production.
Video: Its possible for Hawaii to develop a system of local food production displacing most imports modeled after the one that existed prior to contact in 1778 and updated to current circumstances.
Factcheck: The problem for Hawaii agriculture like all other businesses in the state is the very high cost of doing business, and in particular for agriculture the high cost of land. These factors are the main impediments to locally produced food production. It doesn’t seem possible to fundamentally change that current situation regardless of what action State Government takes. Therefore, Hawaii is very likely to continue to importing most of its food from the U.S. mainland.
- Hawaii Beef Cattle Industry.
Video: The Hawaii beef cattle industry is in serious decline along with the other animal agricultural industries in the Islands.
Factcheck: The Hawaii beef cattle industry remains productive but Hawaii grown beef for the most part is no longer marketed in the islands, which leads some to assume the industry is in decline. Several issues came to a head in the 1990s impacting the beef cattle industry. Key parts of the Hawaii animal agriculture industry were lost primarily to government policies: closure of the cattle feed lot at Campbell Industrial Park, closure of the slaughterhouse on Middle Street in Honolulu, closure of the feed mill at Pier 23, Honolulu Harbor, and the increasing cost of Jones Act shipping, which made shipping grain in bulk from the USWC to Hawaii infeasible. (This was a very remarkable development as ocean shipment of bulk grains is considered in world trade to be very economical, but that’s not true under the Jones Act.) Today, the Hawaii Cattlemen ship their yearlings to the USWC for feeding out and processing using inefficient “cow-tainers,” which are modified 40-foot standard dry shipping containers. They are shipped on Matson containerships to the mainland and require a tender to accompany the shipment onboard ship. As the Hawaii Cattlemen say, “We used to ship the grain to the cattle (in Hawaii), now we ship the cattle to the grain (on the U.S. mainland).” The more efficient solution for shipping cattle to the mainland would be to use “livestock carriers,” which are highly-specialized ships to carry livestock and are all foreign flag. However, foreign-flag livestock carriers cannot be used in the domestic Hawaii trade due to the Jones Act restrictions. So, once again the Hawaii Cattlemen are adversely impacted by the Jones Act.
- Hawaii Animal Agriculture.
Video: The Hawaii dairy, egg and chicken production have been all but lost to mainland imports.
Factcheck: The same Government policies negatively impacting the beef cattle industry decimated the other animal agriculture industries that once thrived in Hawaii including dairies, piggeries, chicken and egg production.
- Remove the Jones Act.
Video: A “grand solution,” meaning a change in Hawaii’s political status, would be required to remove the Jones Act restrictions and allow low cost foreign-flag ships to legally carry cargo between the U.S. mainland and Hawaii. Although, this would significantly lower the cost of living in the Islands, it’s not realistic to remove the Jones Act from Hawaii.
Factcheck: Although this assertion is true, the video doesn’t mention Jones Act reforms can be made without a change in political status through devolution. There is a relatively straightforward way (though not uncontroversial and without opposition) to substantially reduce the negative economic impact of the Jones Act on Hawaii and the other noncontiguous jurisdictions of the U.S. currently embraced by the coastwise laws (viz: Alaska, Hawaii and Puerto Rico) within their existing political statuses. That reform would be eliminating the domestic build requirement for oceangoing ships in domestic (coastwise) trade with those jurisdictions. This solution has been the public position of the Hawaii Shippers Council since 2010, and is known as the “Noncontiguous Trade Jones Act Reform” (NTJAR) proposal. It would leave in place the U.S.-flag and U.S.-crew requirements of the current law preserving those local jobs.
- Application of the Coastwise Laws.
Video: Hawaii and other U.S. noncontiguous jurisdictions have been impacted by the Jones Act since 1929.
Factcheck: The Merchant Marine Act of 1929 is commonly known as the “Jones Act.” Its Section 27 is one of the statutes known in American jurisprudence as a coastwise law, which are collectively a body of domestic shipping laws. Hawaii has been subject to the coastwise laws (which essentially contained the basic restrictions characterized by the Jones Act since 1817) with passage of the Hawaii Organic Act in 1900 (which politically organized the Territory of Hawaii after annexation). In fact, imposition of the coastwise laws to Hawaii in 1900 created a good deal of local surprise and consternation due to the significantly higher costs it imposed on ocean shipping, but despite local political opposition at the time little could be or was done about it.
- Hawaii Political Status.
Video: The world’s noncontiguous island jurisdictions, particularly those distant from the metropole (or mainland state to which it belongs politically), typically have a different political status from their mainland provincial counterparts. The political status of Statehood, is a straightjacket that doesn’t accommodate the unique circumstances of noncontiguous island jurisdictions such as the application of cabotage. Further, there is no “grand solution” for Hawaii to achieve a favorable change in political status given the rigidity U.S. Constitutional system. It asserts that the residents of Hawaii, largely native Hawaiians and Asian agricultural workers, were disenfranchised by the overthrow of the Hawaiian Monarchy, U.S. annexation and plantation system, and lacked the agency to choose an outcome other than Statehood.
Factcheck: Although Hawaii’s statehood status is not absolutely fixed forever, it would certainly be very difficult to change. However, the residents of the Territory of Hawaii were given the opportunity 65 years ago in 1959 in the form of plebiscite on Statehood to determine their political future. At the time, there was a political party formed by very prominent persons known as the “Commonwealth for Hawaii Organization,” which advocated for Hawaii to become a commonwealth similar to Puerto Rico instead of a State. (Puerto Rico became a commonwealth in 1952 after a referendum in 1951 and remains unincorporated and retains its constitutional option to choose political status alternatives.) However, the 1959 Hawaii referendum was voted on over 90% for statehood, certified incorporation in the U.S. Constitutional system (or, integration under the U.N. charter), and delisted Hawaii from the U.N. list of non-self-governing territories extinguishing its self-determination options. There are existing political status options within the U.S, constitutional system, which Hawaii could have chosen. There are several island dependencies of the U.S. with varying degrees of autonomy (all of which retain the right for self-determination) and with the exception of Puerto Rico are exempt from the Jones Act (defined as the coastwise trade). The unincorporated U.S. dependencies are: Puerto Roco, the U.S. Virgin Islands (USVI), American Samoa., Guam and the Commonwealth of the Northern Mariana Islands (CNMI). Also, there are three Micronesian nations in free association with the U.S.: The Republic of the Marshall Islands (RMI), Federated States of Micronesia (FSM) and the Republic of Palau. Free association in the modern context is similar to a 19th Century “protectorate.” So, there are many examples of political autonomy in the US. constitutional system, and there was a plebiscite in 1959 which the people of Hawaii could have chosen a future different from Statehood, but didn’t. The video should have explored this aspect rather than portraying the Hawaii residents as being without agency to determine their political future.
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File Ref: HSC-1406 (HI logistics problems analyzed 10-10-2024)