Court Dismisses Hawaii Jones Act Case

April 30th, 2013
From the gCaptain Staff:

A federal court in Hawaii has dismissed a lawsuit challenging the effectiveness of the Jones Act in the island state.

Plaintiffs Patrick Novak, Daniel Rocha, Larry Kenner, Ken Schoolland, Bjorn Arntzen, Philip R. Wilkerson, and William Akina, Ph.D, collectively filed the complaint in November 2012 seeking declaratory and injunctive relief, as well as monetary damages, in connection with the U.S. government’s enforcement of the Jones Act in Hawaii. The plaintiff’s argued that the enforcement of the Jones Act, as applied in the State of Hawaii, is an unlawful restraint of interstate trade and subsequently raises costs to consumers.

The court, however, determined that the plaintiff’s merely assert a generalized disagreement with the Jones Act and unsubstantiated claims of economic harm allegedly caused by it, and dismissed the complaint with prejudice.

Another victory for what’s left of the Merchant Marine!

A “protectionist anachronism”!? His mother is a protectionist anachronism!

By John Kemp

LONDON, May 2 (Reuters) – The U.S. Merchant Marine Act 1920, better known to most people as the Jones Act, may be a protectionist anachronism, but there is no prospect of meaningful reform in the next few years.

The law generally requires that the maritime transport of cargo between points in the United States be carried by U.S.-flagged vessels that are at least 75 percent owned and crewed by U.S. citizens, with U.S. officers and built in U.S. shipyards.

East Coast oil refiners have started to complain that U.S. crude is being shipped from the Gulf Coast to refineries in Canada, while they have to pay four times as much in shipping costs because of the Jones Act, according to a Reuters report.

“I hear there is talk in Washington about modifying the Jones Act,” Joe Petrowski, chief executive of oil retail and wholesale group Gulf Oil, said on CNBC last week. “If that happens, it would be very good news for the industry.”

He shouldn’t hold his breath. The Obama administration and congressional Democrats have no reason to do favours for the oil industry after it supported Republicans during the 2012 election campaign.

Even without this estrangement, advocates of reform cannot marshal enough lobbying muscle to overcome entrenched resistance from the shipping industry and elements of both Congress and the Executive Branch.

BAD PUBLIC POLICY

Jones Act restrictions apply to cargo shipping between the U.S. mainland and Alaska, Hawaii and Puerto Rico; along the Atlantic, Gulf and Pacific Coasts; down the St Lawrence Seaway; and between the East and West Coasts via the Panama Canal.

Passed in the wake of the First World War, the purpose is to provide the United States with a strong fleet of merchant ships capable of serving as a naval and military auxiliary in time of war or national emergency, an efficient shipbuilding capacity, and a pool of skilled mariners and shipbuilders who can be quickly and readily mobilised.

Critics blame the act for raising the cost of coastal shipping, pushing up the cost of living on islands such as Puerto Rio and Hawaii, creating periodic shortages of specialist vessels, distorting trade flows and even hampering cleanup and fuel movements after the Deepwater Horizon oil spill and Hurricane Sandy.

Jones Act restrictions have been assailed by both liberal and conservative sources. “Like other protectionist laws, it increases the price of goods and services to American consumers,” the Washington Post warned in a 2010 editorial, though the paper admitted “how much is a matter of debate”.

“If FedEx can move cargo across the country in European-made Airbuses, why can’t a boat built in, say, Canada, ship wheat from Los Angeles to Honolulu? The Jones Act lobby crushed the last attempt at reform back in the 1990s. May the next one meet with more success,” the newspaper hoped, forlornly.

Shippers in Puerto Rico and Hawaii have complained that freight rates on routes covered by the Jones Act are higher than for longer journeys between the United States and foreign ports.

Costs may cause trade diversion. Companies in Puerto Rico told congressional investigators they sometimes purchase products from foreign countries rather than the United States because transportation charges are cheaper.

“An oil and gas importer in Puerto Rico told us that the company makes purchasing decisions based on the total price of oil and gas …(It) generally does not purchase from U.S. suppliers because the total cost is higher as a result of the differential in transportation costs,” the Government Accountability Office (GAO) wrote in a report to Congress (“Puerto Rico: characteristics of the island’s maritime trade and potential effects of modifying the Jones Act” March 2013).

NO CHANCE OF CHANGE

Like most protectionist measures, the Jones Act is bad public policy. Its objectives could be achieved more efficiently through subsidies. But that would make the costs more apparent – one reason seafarers, domestic shipping companies, legislators and many officials in the federal government are united in preferring flagging restrictions.

Even if the Jones Act is costly, there is almost no chance that the law will be changed.

The act has powerful backing from a spectrum of vested interests including U.S. vessel owners, unions, shipyards, and elements of the Defense Department and the Department of Transportation’s Maritime Administration (MARAD).

It is a classic case where the benefits of the law are concentrated on a few, while costs are borne widely. Beneficiaries have strong incentives to lobby intensively, while the much larger number of individuals who bear the costs have less incentive to do anything about it.

The act has been supported by presidents from both parties. Every one of the last five presidents has supported it. (http://www.mctf.com/statements.html)

“You … can count on me to support the Jones Act and the continued exclusion of maritime services in international trade agreements,” Barack Obama promised in a letter to the Seafarers International Union when he was running for president in 2008.

President George W Bush was similarly unequivocal when he said in 2006: “It is important for presidents to embrace the Jones Act. I have for five-and-a-half years as the president supported the Jones Act and will continue to do so.”

“My administration … continues to support the Jones Act,” President Clinton said in 1997, “as essential to the maintenance of the nation’s commercial and maritime interests.”

Even Ronald Reagan, running in 1980, was clear: “I can assure you that a Reagan administration will not support legislation that would jeopardise this long-standing policy … or the jobs dependent on it.”

COSTS AND BENEFITS

The GAO concluded its recent study about the impact on Puerto Rico ambivalently.

“Modifying the Jones Act in Puerto Rico would have uncertain effects and may result in difficult tradeoffs,” which was hardly a clarion call for change.

Lifting some or all of the restrictions on routes to Puerto Rico might cut freight rates by introducing foreign competition, though foreign carriers choosing to enter U.S. markets would find themselves subject to U.S. laws, so the cost advantage might be small. In any event, it would probably set off a wave of consolidation and force higher-cost operators to exit from the market, so lower temporarily lower freight rates might not be sustained.

Repealing the restrictions would almost certainly harm domestic shipbuilders, with some impact on military preparedness, but the impact is difficult to quantify.

Beyond Puerto Rico, the GAO has not been asked to do a full study of the act since 1998, indicating just how far down the policy agenda modifying the Jones Act has slipped.

WAIVERS NOT REPEAL

In practice, there is strong support for maintaining the Jones Act, with the president issuing temporary waivers in the event of emergencies when there is not enough shipping to meet a sudden surge in demand.

President Bush waived the act for 19 days following Hurricane Katrina in 2005. The Obama administration issued waivers in 2011 to facilitate the release of emergency oil from the Strategic Petroleum Reserve (SPR); then again in 2012 to aid fuel transfers to the Northeast after Hurricane Sandy.

Shipowners and maritime unions have generally not opposed temporary, narrowly defined waivers, provided they are clearly a last resort.

The 2011 oil release provides the best case study. The initial invitation issued by the Department of Energy promised SPR buyers a blanket exemption from the Jones Act to allow them to carry crude away in foreign-flagged tankers. However, it was amended within 24 hours to remove references to the blanket waiver. Officials had forgotten to check with the White House, where the president’s advisers were reportedly furious.

A few days later, the administration published a special procedure allowing SPR purchasers to apply individually for waivers on an expedited basis and receive a decision within 48 hours, after checks that no U.S.-flagged vessels were available.

There is a revealing coda to this story. Most of the 30 million barrels of oil eventually sold was carried away by tanker, and in every case the buyer applied for and obtained an individual waiver.

East Coast refiners, traders, shippers and policy wonks may not like the law, but they do not have the lobbying muscle to repeal it. (editing by Jane Baird)

© 2013 Thomson Reuters, Click For Restrictions

Finally someone in the public eye says what I’ve been ranting about all along! To fix the Jones Act, fix the damn shipyards! Either that or throw out the U.S. construction mandate and keep everything else…

Dear Friends,

Reuters published on this second day of May 2013 an opinion column written by one of their market analysts in London, John Kemp. On the one hand, Kemp finds the Jones Act restrictions have an onerous effect on the U.S. economy, but on the other hand, can’t see any way the law might be repealed due to its highly concentrated political support.

Kemp mentions the problems facing oil refiners and other petroleum interests on the U.S. East Coast as the Jones Act limits the availability of suitable tankers. He also touches on the higher costs associated with noncontiguous jurisdictions of the United States – Alaska, Guam, Hawaii and Puerto Rico – due to the Jones Act.

At the Hawaii Shippers Council, we agree with Kemp that a full nationwide repeal of the Jones Act appears to be a virtual political impossibility for many reasons. However, we believe that the Jones Act can be modified to greatly lessen its currently negative impacts on the nation’s economy.

In respect of the noncontiguous domestic trades, we have put forward our proposal to exempt those trades from the U.S. build requirement. This is a critical issue because the cost of constructing large oceangoing ships – of the kind that service the noncontiguous trades – in the U.S. is now four to five times that in the major shipbuilding countries of Japan and South Korea.

Significantly reducing the capital costs of the shipping companies by allowing them to buy much lower cost ships will provide many benefits to the consumers in the noncontiguous jurisdictions. However, the Jones Act shipping companies continue to vigorously oppose our reform proposal because the domestic build requirement for their ships provides them with among other things greater protection from competition. And, its protectionism that the shipping companies do not have to pay for – the consumer pays the freight.

Best regards,

Michael N Hansen

President, Hawaii Shippers Council

John Kemp…A fucking Brit criticizing our American laws…
[B][I]
FUCK YOU!..YOU FUCKING POMPOUS ARROGANT BRITISH ASSHOLE![/I][/B]

Mind your own goddamned business on your side of the Atlantic and btw, I don’t see the Red Duster flying from thousands of ships anymore like it used to. The UK still seems to think it dominates the commercial seas of the world when all it does is provide thousands of maritime consultants and the bloody IMO (which btw, is becoming run more and more by Indians that Brits!) making more and more senseless regulations forced on shipowners to comply with at great cost to them and great profits to these same UK consultants. Pretty soon a shipowner will have to pay for some certificate to ensure that air on the inside of a ship is free from all flatus which will be called the IHAPP (International Human Air Pollution Prevention Certificate)! So fuck the useless IMO too!

sorry Rob but I have to let this guy have the full force of the pointy stick set to kill!

.

[QUOTE=c.captain;107910]John Kemp…A fucking Brit criticizing our American laws…[/SIZE][/QUOTE]

Sounds familiar.

What’s wrong with having American built Ships and Tugs with American crews moving goods from port to port? Nothing!!! We do need to protect the middle class in America, not in china or Korea …

[QUOTE=capbubba;107925]What’s wrong with having American built Ships and Tugs with American crews moving goods from port to port? Nothing!!! We do need to protect the middle class in America, not in china or Korea …[/QUOTE]

Congress, that is what is wrong. They have sold out, their actions should be defined as domestic economic terrorism.

The nations that now control virtually all shipbuilding capacity have that control because their governments declared shipbuilding to be a strategic industry. They recognize that shipbuilding and a strong merchant fleet is critical to their economic well being and their survival in the snake pit of international trade and commerce. They subsidize, support, promote, and defend their domestic industries.

Our government representatives have declared shipbuilding and the merchant marine a cash cow to be sold to lobbyists, bit by bit. The US government’s disregard for the American shipping industry is nothing short of treasonous. The current administration’s policy of neglect is far from benign, it is an active and concerted effort to remove the final struggling vestiges of America’s ability to participate in its own ocean trade and transportation.

American politicians and local yokels get their name in the papers and money in their campaign coffers by promoting efforts to undermine and further cripple American industry and the American worker (taxpayer in case anyone has forgotten) so they can save $2 on a T shirt made in a sweatshop in Bangladesh that was transported to American soil on a foreign government subsidized ship manned by slave labor.

Those who promote the end of the Jones Act aren’t in that business to make Americans strong and healthy, they don’t condemn American shipyards and American mariners because they want a more vibrant American industrial base … they want cheap goods to sell to people who can no longer afford to buy American goods because their jobs have gone to the lowest bidder in the global labor market. They are not satisfied with the trillions of dollars they have bled from the American economy by selling our industrial capacity for scrap.

This is a few years old but is very relevant. Too bad no one in the White House or Congress can be bothered to read it and the hundreds of similar reports.

http://www.hsdl.org/?view&did=451876

http://ec.europa.eu/enterprise/sectors/maritime/shipbuilding/

It is time for us to demand that the parasites in DC start serving American interests. This may be our last chance to write to the parasite who claims to represent you and make your views known. Don’t go down in silence.

Back to Hawaii

[video=youtube_share;UhQ4d8g3tHc]http://youtu.be/UhQ4d8g3tHc[/video]

Wait… did that guy just say middle of the Atlantic? 2:20

Good comments especially from Steamer. It’s all about selling cheap crap and cheap commodities to a poorer and poorer American public. I get exhausted just trying to wrap my head around it anymore. Hell they get away with JA violations every single day anyway including foreign crews who enter US ports without a visa so the camel’s nose is under the tent already.

[QUOTE=Mikey;107950]Back to Hawaii

Wait… did that guy just say middle of the Atlantic? 2:20[/QUOTE]

There is not one single thing this clown says that make any sense whatsoever…he speaks as if Hawaii was suffering a stage of siege by US shipowners and was suffering the privations of a war! Last time I checked, Hawaii had excellent regular shipping service from the US mainland and get everything it needs from the ConUS just fine. The only problem I see is that Hawaiians have to pay a certain percentage more for those good shipped from the mainland on US ships which is what is really burning their butts! Too effing bad for them is what I say! Too bad for Alaskans and Puerto Ricans as well that maybe the cost for a can of stewed beans might be 2% higher that it might otherwise be if a Chinese flagged ship brought it from the mainland. To say that Honolulu could be Singapore if only foreign ships could transport cargo from the mainland is more that simply laughable on its face…it is asinine and ludicrous and shows someone without a whole lot of understanding of much of anything, especially geography. Speaking of which you’re right Mike, this cretin thinks Hawaii is in the Atlantic! WHAT A BLOODY BOOB!

Now, the only thing that can be said is that with bozo companies like Horizon Lines (at to a lesser extent Matson) not replacing their 1960’s and 70’s built steam powered tonnage with modern diesel powered vessels makes that shipping cost higher than it might otherwise be but I remain in favor of the US build requirement in the Jones Act because why should mariners be protected and not yard workers or manufacturers of ship components in the US?

[QUOTE=Mikey;107950]Back to Hawaii

[video=youtube_share;UhQ4d8g3tHc]http://youtu.be/UhQ4d8g3tHc[/video]

Wait… did that guy just say middle of the Atlantic? 2:20[/QUOTE]

Reason.com is usually a great website, and I actively post there. The actual writers and editors have their pet-peeve issues, such as their love of cheap, subsidized foreign labor.

However, the U.S needs to make regulations and taxes fairer (as in less) so that it is actually attractive to build and flag ships in the U.S.

What regulations and taxes would you eliminate?

[QUOTE=c.captain;107970]Now, the only thing that can be said is that with bozo companies like Horizon Lines (at to a lesser extent Matson) not replacing their 1960’s and 70’s built steam powered tonnage with modern diesel powered vessels makes that shipping cost higher than it might otherwise be but I remain in favor of the US build requirement in the Jones Act because why should mariners be protected and not yard workers or manufacturers of ship components in the US?[/QUOTE]

I do not exaggerate when I say that these are exactly the things that keep me awake at night. It is as if there is no right answer and no way out. Shame on Horizon and Matson for not getting better equipment and keeping their costs down, but then who can blame them when American ships cost 4 to 5 times as much as what everyone else is buying? So let’s throw out the American build requirement! But wait, ship yard workers are no different than us merchant mariners… How can we throw them under the bus to save our own skins? There’s no way out… The only thing I can think of is an entire strip down and reboot of the entire ship-building industry in this country. Keep the yard workers in their jobs but completely revitalize the way things are done. Out with the old, in with the new!

But then, how do we accomplish such a Herculean task? Who is going to manage it? Certainly no one in the Obama administration… The only thing plaguing the shipyards more than antiquated processes and equipment are the damn unions! Throw them out and then maybe we’ll see some change…

[QUOTE=PaddyWest2012;107995]The only thing I can think of is an entire strip down and reboot of the entire ship-building industry in this country. Keep the yard workers in their jobs but completely revitalize the way things are done. Out with the old, in with the new!

But then, how do we accomplish such a Herculean task? Who is going to manage it? Certainly no one in the Obama administration… The only thing plaguing the shipyards more than antiquated processes and equipment are the damn unions! Throw them out and then maybe we’ll see some change…[/QUOTE]

So there are three yards in the US which actively build unlimited tonnage merchant vessels these days. NASSCO, Aker Philadelphia and Halter so the question is how do the real costs to build in these yards in fact compare to Hyundai, Samsung or DSME? Is it really 4 to 5 times the cost or is that a wee bit inflated for propaganda purposes? Mind 2 to 3 times is steep enough but over the course of the life of a ship, that capital investment gets recovered and if MarAd got its head out of its ass and started granting Title XI loan guarantees to established cargo companies with infrastructure and sales like Matson or (cringe) Horizon, then the cost of the money will be very reasonable. Also all that is needed to give a serious shot into the arm of commercial merchant shipbuilding in the US is to simply change the depreciation schedule a shipowner can use to 10 years from the current 25 and they’ll all beat feet to the nearest yard to place orders.

Gents,

It’s not all about how much it costs to build a ship here. Operating costs are a biggie.

I did some quick searching and found that MarAd has crunched the numbers re: operating costs US vs. foreign. I haven’t read the entire document yet but they estimate US flagged vessels cost approx. 2.7 times more to operate. http://www.marad.dot.gov/documents/Comparison_of_US_and_Foreign_Flag_Operating_Costs.pdf

Now what do they propose to do about that? I have a feeling, not much.

[QUOTE=c.captain;107996]So there are three yards in the US which actively build unlimited tonnage merchant vessels these days. NASSCO, Aker Philadelphia and Halter so the question is how do the real costs to build in these yards in fact compare to Hyundai, Samsung or DSME? Is it really 4 to 5 times the cost or is that a wee bit inflated for propaganda purposes? Mind 2 to 3 times is steep enough but over the course of the life of a ship, that capital investment gets recovered and if MarAd got its head out of its ass and started granting Title XI loan guarantees to established cargo companies with infrastructure and sales like Matson or (cringe) Horizon, then the cost of the money will be very reasonable. Also all that is needed to give a serious shot into the arm of commercial merchant shipbuilding in the US is to simply change the depreciation schedule a shipowner can use to 10 years from the current 25 and they’ll all beat feet to the nearest yard to place orders.[/QUOTE]

Sounds good to me, when do we start!? I thought these commie bastards like Comrade Obama were suppose to understand this industrial crap? Isn’t that what they’re all about? The glorious American worker striving for the collective success and prosperity of the proletariat through each citizen’s back-breaking labor and the “intelligent” distribution of resources and the labor force? Some marxist he turned out to be…

[QUOTE=catherder;107998]Gents,

It’s not all about how much it costs to build a ship here. Operating costs are a biggie.

I did some quick searching and found that MarAd has crunched the numbers re: operating costs US vs. foreign. I haven’t read the entire document yet but they estimate US flagged vessels cost approx. 2.7 times more to operate. http://www.marad.dot.gov/documents/Comparison_of_US_and_Foreign_Flag_Operating_Costs. pdf

Now what do they propose to do about that? I have a feeling, not much.[/QUOTE]

Nothing is over until we decide it is!

//youtu.be/V8lT1o0sDwI

Let’s march on MARAD!

With pitchforks, torches and wrenches! Maybe even wenches with wrenches!

[QUOTE=PaddyWest2012;107995]… The only thing plaguing the shipyards more than antiquated processes and equipment are the damn unions! Throw them out and then maybe we’ll see some change…[/QUOTE]

Oh, yeah … the measly 10 percent who belong to unions are a real threat to Daddy Warbucks and his political hacks.

Heaven forbid a yard bird should make enough money off a defense contractor to buy an American made boiler suit.

[QUOTE=Steamer;108009]Oh, yeah … the measly 10 percent who belong to unions are a real threat to Daddy Warbucks and his political hacks.

Heaven forbid a yard bird should make enough money off a defense contractor to buy an American made boiler suit.[/QUOTE]

I know, right? I worked for several of the Hampton Roads area shipyards all through the 90’s and mid 00’s and the most I ever made was 18.75 per hour, as an electrician, and with lots of experience. And the work conditions can be brutal, heat, cold, noise, dust, and these places watch you like a hawk too. I remember when Newport News hired these college interns to do job analyses and they’d time us in the restrooms. I am not kidding. So to be a skilled tradesman and not even break 40k is hardly a detriment to anyone’s business especially if the employee is good at what they do.

Looking at my old pay stubs from when I worked at NN…I made 13.25 an hour in 1996. And I was in the Steelworkers Union.