OK, so we throw the shipyards under the bus now

Maritime News
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and then when will the day come to toss mariners under as well? Also, what about companies like TOTE who have invested hundreds of millions into US built ships and plans to invest more in the future? Do they also not get screwed here?

Jones Act reform for Hawaii needed
March 5, 2013

By Michael N. Hansen, President, Hawaii Shippers Council

In the December 2012 issue of WorkBoat, I read the “Jones Act Battles” article by Dale K. DuPont in which she mentioned several current challenges to the Jones Act.

In that regards, I would like to introduce you to our noncontiguous trades Jones Act reform. In 2010, the Hawaii Shippers Council (HSC) put forward a federal legislative proposal to reform the Jones Act, called the Noncontiguous Trades Jones Act Reform (NTJAR).

The NTJAR initiative would only exempt 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 merchant ships.

This proposal originated with the HSC and does not have a mainland counterpart as did previous reform efforts during the late 1990s led by Rob Quartel and the national Jones Act Reform Coalition (JARC). We are not proposing to repeal the Jones Act nor create a full exemption from the Jones Act for Hawaii, Alaska, Guam and Puerto Rico.

The NTJAR would not change the existing U.S.-flag, -owned and -crewed provisions of the Jones Act as they currently apply to the noncontiguous domestic trades. It would not allow foreign-flag ships, foreign seamen or foreign shipowners in any domestic trade where they are not currently allowed. Apply to the domestic tug and barge industry anywhere in the U.S. including in the Jones Act noncontiguous jurisdictions. If would not affect any domestic shipping along the coasts of the contiguous U.S. mainland, in the intercoastal trades, on the inland waterways, or on the Great Lakes. It would not negatively impact any maritime industry jobs in Hawaii and the other noncontiguous jurisdictions and it would not 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 U.S. mainland and the domestic noncontiguous jurisdictions that is currently subject to cabotage.

The NTJAR would allow U.S. shipowners to purchase large self-propelled merchant ships that meet U.S. Coast Guard standards from qualified shipbuilders in other industrial countries and renew their aging noncontiguous fleets with much lower cost, more available and efficient modern ships. It would substantially lower the acquisition cost of major capital ships by at least two thirds and materially increase access to new modern ships available to the noncontiguous trades. The NTJAR would also eliminate the artificial scarcity of major capital ships in the noncontiguous trades created by the U.S.-build requirement of the Jones Act.

The proposal would significantly reduce barriers to entry and increase competition in the Jones Act noncontiguous domestic trades through significantly less expensive and far more available ships. It would also 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.

The Jones Act reform proposal would also stop consumers in the affected noncontiguous jurisdictions from being forced to pay substantially higher freight rates to subsidize an inefficient, 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-1980s.

The proposal will also put 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. This includes aircraft, railroad cars and locomotives, trucks, buses, automobiles (for taxis) and mass transit vehicles.

Ed. Note: Honolulu-based Hawaii Shippers Council is a business league organization formed in 1997 to represent shippers who tender goods for shipment with the ocean carriers operating in the Hawaii trade.

I know full well that allowing foreign built ships into some coastwise trade would be good for the US flagged maritime industry but how to we separate the times when it helps from the times when it will cause harm?

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[QUOTE=c.captain;101756] …but how to we separate the times when it helps from the times when it will cause harm?[/QUOTE]

No member of congress will be harmed by this bill. There is more than enough lobbyist money to keep all of them financially healthy regardless of what happens to the USMM.

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This is BS. I cannot see why Hawaii needs this. Things are expensive in Hawaii due to price gouging, not shipping costs.

The cost of shipping tomatoes to Hawaii by water is a lot less than the cost of shipping tomatoes to Boston by truck. While it does cost more to build container ships in the US, and that has some upward effect on freight rates, the extra cost to consumers in Hawaii is trivial.

What’s next cheaper doctors from the Philippines? Cheaper school teachers from India? Cheaper truck drivers from Mexico? Cheaper bureaucrats from China?

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as I said companies like TOTE and Pasha can do this so why can’t Horizon and Matson? Especially Horizon…when the hell was the last time they ordered a new ship? The answer to that is of course, they NEVER have ordered a new vessel and I believe the last time SeaLand ordered new was the trio from Bay Shipbuilding in the Great Lakes for the Alaska trade…25 years ago! PATHETIC!

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[QUOTE=c.captain;101756]and then when will the day come to toss mariners under as well? Also, what about companies like TOTE who have invested hundreds of millions into US built ships and plans to invest more in the future? Do they also not get screwed here?
I know full well that allowing foreign built ships into some coastwise trade would be good for the US flagged maritime industry but how to we separate the times when it helps from the times when it will cause harm?[/QUOTE]

Good Lord, how freaken depressing.
Another nail in the coffin.

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This reminds me of when the car and truck Manufactures started building in Mexico. They said it was to lower costs. So, here is the question, did anyone see a saving in the cost. Answer, NO, the cost stayed the same the only people that made money on this were the share owners. I remember two men that bought identical trucks, one had a Made in the U.S.A. the other on was made in Mexico. The sticker price on each of these trucks was the same. So where was the savings???

This would be the end the the Jones Act and the Death of the Once Proud U.S. Merchant Mariner!!!

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Rather than amend the Jones Act, and I admit there was a time when I was in favor of doing that until I sat down and thought about it, what we should be doing to fix this problem is to find a way for it to make more business sense for shipping companies to build their ships here in the U.S. than it would for them to build ships in Korea, or Japan, or wherever, and not participate in the Jones Act trade. A huge portion of that price differential is the exponentially lower labor costs in the 3rd world countries that build much of today’s shipping, but that is by no means the whole story.

Why is it that 1st-world companies like Maersk can afford to build ships in 1st-world companies like Denmark? Obviously even having to pay those 1st-world wages there is still something that those European ship yards are doing better than our own or companies like Maersk would be building more in Asia and less in Europe than they already do. What needs to happen is for modern American ship-building to be brought out of the last century and cattle-whipped into ship-shape. I place most of the blame for the lack of Jones Act coastwise trade on shipyards that simply do not attempt to compete with foreign markets.

On a less thread-related matter, as far as any problems regarding the “contiguous” coastwise trade, which was also mentioned above, I blame the trucking lobby next most to the ship yards. It is absolutely cheaper and more efficient (i.e. better for the granola munching hippies who so proudly vote in the elections which bring about change in these matters) to ship ANY good up and down the coast than it is to drive it by 18-wheeler up and down I-95. The only reason so many more goods make that trek by truck than they do by boat is because of the extremely powerful trucking lobby, which works round the clock to keep its drivers fat, dumb, and happy.

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[QUOTE=PaddyWest2012;101815]

Why is it that 1st-world companies like Maersk can afford to build ships in 1st-world companies like Denmark?

[/QUOTE]

Not anymore. Maersk is building the Triple E in Korea.

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I advocate allowing the foreign built vessels in but ONLY temporarily and with the provision that an equivalent US built vessel will be constructed within 5 years using the net profits. Plus an importation duty of 25% up front for allowing the foreign hull in. No waivers to allow foreign built and flagged vessels ever be granted again for coastwise trade either!

Also, a US vessel gets to be depreciated over only 10 years whereas a foreign built vessel is on the standard 25 year schedule. That would be a huge incentive to not use a foreign hull. Begin funding Title IX again but not for start up or passenger operations anymore. It should be for established US corporations with long track records of successful operations. Make it so that financially, there is much more reason to like a US built ship.

Saving money for Hawaiian or Alaskan residents should not be a driving factor here. US jobs should be.

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[QUOTE=catherder;101864]Not anymore. Maersk is building the Triple E in Korea.[/QUOTE]

Germany, France, Finland, Italy, and Japan, all build cruise ships to very high standards in yards that are hardly 3rd world enterprises. Koreans are far from 3rd worlders these days, depending on the source, its standard of living exceeds several EU nations.

We are rapidly becoming a 3rd world nation as far as workers are concerned. American shipyards will be busy again when the American worker is grateful to receive less than what a Vietnamese laborer makes today. Shipping company executive compensation will soar when health insurance and retirement is something a worker remembers his grandfather talking about. Foreign seamen will man American built ships trading between American ports under FoC flags. Congressmen will fatten from the campaign contributions that make this happen.

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The sales tax in Seattle is 9.5%. It costs a lot less than 9.5% to ship goods to Anchorage. The sales tax in Anchorage is ZERO. So the total cost of goods (including sales tax) should be cheaper in Anchorage than they are in Seattle.

If you can buy it COSTCO, it will only cost a little more (except milk and eggs are double) in Anchorage than in would cost in Seattle. If you buy it most other places in Anchorage, expect to pay about 25% more than in Seattle. That is price gouging than has nothing to do with transportation costs. Transportation costs are just a convenient and completely false excuse that they often give for charging higher prices.

If shipping to Hawaii and Alaska became FREE, consumers would not see one penny in cost savings.

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[QUOTE=tugsailor;101894]The sales tax in Seattle is 9.5%. It costs a lot less than 9.5% to ship goods to Anchorage. The sales tax in Anchorage is ZERO. So the total cost of goods (including sales tax) should be cheaper in Anchorage than they are in Seattle.

If you can buy it COSTCO, it will only cost a little more (except milk and eggs are double) in Anchorage than in would cost in Seattle. If you buy it most other places in Anchorage, expect to pay about 25% more than in Seattle. That is price gouging than has nothing to do with transportation costs. Transportation costs are just a convenient and completely false excuse that they often give for charging higher prices.

If shipping to Hawaii and Alaska became FREE, consumers would not see one penny in cost savings.[/QUOTE]

I’m glad you brought up taxes because that issue kept the wheels turning in my head last night. What can be said of tax reasons that companies don’t want to build ships here in the U.S. for Jones Act trade? Is there some tax burden that could be removed by the U.S. Government in order to incentivize companies to build here? I was just thinking last night that if a company had to pay a sort of “sales tax” on new vessel delivery, even if it were a measly 5%, this could potentially amount to millions of dollars.

Since no one is building here now anyway the government is already missing out on that revenue. If they were to remove that burden all together, and still not miss what they never had, I have a sneaking suspicion that that might bring a few (or perhaps even more than a few…) contracts to U.S. shipyards and Jones Act fleets all over the country. But alas, one can only dream sometimes…

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If a ship were built in Canada or Mexico, under NAFTA it should come into the US duty free, but there are import duties on foreign made goods coming in from most other countries.

As I recall, there is about a 25% duty on foreign repairs to a Jones Act trade vessel.

There are no state sales taxes on ships, railcars, interstate trucks, or airliners.

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[QUOTE=Steamer;101877]Germany, France, Finland, Italy, and Japan, all build cruise ships to very high standards in yards that are hardly 3rd world enterprises. Koreans are far from 3rd worlders these days, depending on the source, its standard of living exceeds several EU nations.

We are rapidly becoming a 3rd world nation as far as workers are concerned. American shipyards will be busy again when the American worker is grateful to receive less than what a Vietnamese laborer makes today. Shipping company executive compensation will soar when health insurance and retirement is something a worker remembers his grandfather talking about. Foreign seamen will man American built ships trading between American ports under FoC flags. Congressmen will fatten from the campaign contributions that make this happen.[/QUOTE]

I just want to crawl back into my warm bed, pull the quilt over my head, with a tumbler of Scotch on the nightstand. Because you are right.

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I looked for this thread after reading an article in The National Review "No we really don’t need the Jones act."
http://www.nationalreview.com/corner/342441/no-we-really-don-t-need-jones-act-eftychis-john-gregos-mourginakis
It is the second such article in a week by the same author, and is gaining traction with its readers. Yes, the US Merchant Mariner is next.