HAWAII SHIPPERS’ COUNCIL NONCONTIGUOUS TRADES JONES ACT REFORM (NTJAR) PROPOSAL OUTLINE
News Release from Hawaii Shippers Council April 12, 2012
The Hawaii Shippers Council (HSC) is a business league organization incorporated in 1997 to represent cargo interests – known as “shippers” – who tender goods for shipment in the Hawaii trade.
In 2010, the HSC put forward a federal legislative proposal to reform the Jones Act, which is known as the Noncontiguous Trades Jones Act Reform (NTJAR – the acronym is pronounced “Nit-Jar”).
The NTJAR initiative would exempt just the Jones Act noncontiguous domestic trades – Alaska, Guam, Hawaii and Puerto Rico – from the U.S.-Build requirement of the Jones Act and only for large self-propelled oceangoing ships.
This proposal originated with HSC and does not have a mainland counterpart as did previous reform efforts during the late 1990’s with Rob Quartel and the national Jones Act Reform Coalition (JARC).
The HSC is not proposing to repeal the Jones Act nor create a full exemption from the Jones Act for Hawaii, Alaska, Guam and Puerto Rico.
NTJAR Would NOT:
- Change the existing U.S.-Flag, US-Ownership and U.S.-Crew provisions of the Jones Act as they currently apply to the noncontiguous domestic trades.
- Allow Foreign-Flag ships, foreign-seamen or foreign-shipowners in any domestic trade where they are not currently allowed. (They are currently allowed in domestic trade with American Samoa, the Commonwealth of the Northern Mariana Is., and the U.S. Virgin Is.)
- Apply to the domestic tug and barge industry anywhere in the U.S. including in the Jones Act noncontiguous jurisdictions.
- Affect any shipping along the coasts of the contiguous U.S. mainland or on the inland waterways or the Great Lakes.
- Negatively impact any maritime industry jobs in Hawaii and the other noncontiguous jurisdictions.
- Have any material adverse effect on national security.
The NTJAR proposal is a limited and narrowly targeted reform of the Jones Act that would greatly improve the efficiency of the critical interstate oceanborne transportation between the US mainland and the domestic noncontiguous jurisdictions that is currently subject to cabotage.
NTJAR Would:
- Allow U.S. shipowners to purchase large self-propelled merchant ships meeting U.S. Coast Guard standards from qualified shipbuilders in other industrial countries and renew their ageing noncontiguous fleets (average age 28 years while the international norm is 12 years) with much lower cost, more efficient modern ships.
Note: If U.S. shipowners can’t afford new U.S.-Built ships, the noncontiguous trades will be saddled with inefficient old ships that are expensive to operate – or perhaps no ships at all.
- Substantially lower the cost and materially increase the access to major capital ships available to the Jones Act noncontiguous trades fleet; and, thus, eliminate the artificial scarcity of those vessels in the noncontiguous trades created by the U.S.-build requirement of the Jones Act.
- Significantly reduce barriers to entry and increase competition in the Jones Act noncontiguous domestic trades.
- Reduce freight rates – through lower capital costs and greater competition – to Hawaii, Alaska, Guam and Puerto Rico and lower the cost of living in those jurisdictions.
- Stop consumers in the affected noncontiguous jurisdictions from being forced to pay substantially higher freight rates to subsidize an Inefficient, extremely expensive and commercially uncompetitive U.S. major shipbuilding industry that has constructed on average fewer than three large merchant ships per year since the mid-1980’s.
Note: Why should the noncontiguous consumers subsidize a couple of inefficient mainland shipyards when international yards can offer high quality ships at a third or less the cost?
Note: Six million noncontiguous consumers pay high prices; but the high pay jobs they subsidize go to fewer than 1200 mainland shipyard workers.
- Puts the deep draft noncontiguous shipping industry on the same footing as other modes of domestic transportation where foreign manufactured equipment is permitted into the U.S. for commercial operation without restriction including aircraft, railroad cars and locomotives, trucks, buses, automobiles (for taxis) and mass transit vehicles.
Ninety years of Jones Act protection has resulted in the near complete collapse of the U.S. deep draft merchant shipbuilding industry, and continuing that protection for the noncontiguous trades will not save it. The Act has generally failed to achieve its intended goal to nurture the U.S. maritime industry, and commercial deep draft commercial shipbuilding in the United States is all but ended.
Enactment of the NTJAR proposal would revitalize the deepsea sector of the noncontiguous domestic trades, reduce the barriers to entry, increase competition and lower interstate freight rates between the US mainland and the noncontiguous jurisdictions. These positive changes would provide an important economic stimulus to Hawaii, Alaska, Guam and Puerto Rico.