While the Jones Act is seen as a pillar by many industry and government officials, it’s under heavy attack by some legislators and interests.
Speaking Tuesday at a discussion about the U.S. Maritime Administration’s effort to develop a national maritime strategy at the Navy League’s Sea Air Space Expo, Maritime Administrator Paul ‘Chip’ Jaenichen said the U.S.-flag merchant marine carrying foreign trade is in “serious decline,” limiting the country’s ability to project power.
Speakers at the event highlighted the challenges faced by the U.S.-flag fleet in international trades. While the domestic shipping has had a renaissance in recent years because of construction of new ships for the oil industry and orders for new containerships, it is also under attack by some shippers and legislators.
Jaenichen said changes to Jones Act could also result in the elimination of jobs building and repairing vessels.
On Monday, a forum broadcast over the Internet brought together shippers and legislators from Puerto Rico, Hawaii, Guam, and Alaska, who gave a very different perspective. They are seeking to reform the requirement under Jones Act that ships be built in U.S. shipyards, highlighting how the law is increasing the cost of living in those parts of country.
Jaenichen said, since January 2010, 54 U.S.-crewed merchant vessels have been scrapped or laid up, resulting in a loss of employment for U.S. merchant seamen of about 20 percent. He noted last year that U.S.-flag ships accounted for only 2 percent of the 68,000-plus vessel calls at U.S. ports.
He also drew attention to future need to use inland waterways and coastal routes for domestic transportation, adding that 80 percent of domestic cargo moves occur on just 10 percent of landside corridors.
“We know over the next 30 years there is going to be a 45 percent increase in the required domestic freight that has to be moved,” Jaenichen said. “The question as we move forward is: are we going to depend on American maritime services or foreign maritime services. There are in these days members of Congress, state and local officials who are pushing for elimination or modification of the Jones Act to allow the use or foreign crews and/or foreign-built vessels on our rivers, our waterways that stretch into America’s heartland and also along our coasts.”
Jaenichen warned outsourcing defense capabilities is a “slippery slope,” stating “the question is where does it stop?”
Rep. Joe Courtney, D-Conn., said bolstering commercial shipbuilding could help stabilize the industrial base of the nation.
“If we have the courage to overcome inertia, we can actually rebuild our maritime industry,” said Rep. John Garamendi, D-Calif.
He said tens of thousands of jobs could be created if there was a requirement that liquefied natural gas or crude oil exported from the United States must be carried in ships built in U.S. shipyards and crewed by Americans.
In an article this week in Foreign Policy, three Republican senators–Lisa Murkowski, John McCain, and Bob Corker–called for ending the ban on U.S. crude oil exports. McCain has long been an outspoken critic of the Jones Act.
Garamendi said revitalizing shipyards would also create better competition among shipyards for Navy ships.
“Are we willing to take that step? I hope we are,” he said.
Gen. Paul J. Selva, commander of the U.S. Transportation Command, said the most important near-term threat to the military’s transportation and logistics network is the decline in the country’s overall capacity to deploy soldiers overseas because of threats to militarily useful, commercially viable ships that are on contract to the military through the the Voluntary Intermodal Sealift Agreement and Maritime Security Program that support to support it in the event of a national crisis.
Without the 60 ships and 11,000 seafarers in those programs, “we could be held at risk,” he said.
Selva noted that many government-owned roll-on/roll-off ships—about 1.6 million square feet of capacity — will “age out.”
Russell Bruner, president and chief executive officer of Maersk Line Limited, the U.S.-flag arm of the A.P. Moller-Maersk Group, said a national maritime strategy is “long overdue.” His company operates 43 U.S.-flag ships, including modern container and ro/ro vessels and also operates other ships for the Navy’s Military Sealift Command.
“It’s important to understand it’s not the ships alone, it’s the ability to tap the global intermodal network, vast amounts of specialized equipment, IT and communications infrastructure, and global transportation professionals that allow the military logistics planners tremendous flexibility,” he said.
While obvious during war, the strategic value of the commercial U.S. merchant marine for national defense is sometimes forgotten during peacetime, Brunner noted.
He highlighted the fact that it can take years for seamen to develop the skills they need to operate ships, skills that might be needed when ships, including those in the ready reserve fleet, need to be activate.
The United States must find a way to become competitive in the international markets to attract and maintain a supply of trained merchant mariners, he said.
While seaborne trade has quadrupled during the past 40 years, Bruner added that U.S.-flag shipping has “missed the boat.”
The numbers of ships on the high seas, as opposed to those operating in the Jones Act trades that have protection from foreign competition, has declined precipitously.
Bruner said there were more than 1,200 such ships just after World War II. That fleet had fallen to about 200 in the 1980s, to 100 a year ago and to about 80 today, including the 60 in the Maritime Security Program, which gives a subsidy to shipowners that partially offsets the higher cost of operating U.S. flag ships in international trade.
U.S.-flag ships are three-times more costly than international vessels, Bruner said. While U.S.-flag carriers receive support in the form of cargo preference and an MSP stipend, he said the economics are not enough for U.S.-flag carriers to grow their fleet.
“The current MSP stipend and declining preference cargo are no longer making the math work, leaving our U.S. flag fleet vulnerable during peacetime,” he explained.
Bruner said preference cargo is down 60 percent from its peak.
He said the industry, labor, and military are working with MarAd to reform the MSP program.
“Without a cohesive maritime strategy there is no economic justification to invest in U.S. flag ships for non-protected international trades,” he said, adding the need for such a strategy has never been greater.
Thomas Crowley, chairman and chief executive officer of Crowley Maritime, noted the importance of the Jones Act to his company, which requires ships move cargo between points in the United States to be built in U.S. shipyards, crewed by Americans, and owned by U.S. companies.
Those trades provide the majority of jobs in the maritime sector for Americans, he said, and should make it the “central pillar” of the U.S. maritime strategy.
“This is the last place of defense we have,” he said. He said Crowley has invested over $2 billion in the past decade in Jones Act vessels, and that it was essential that it have a
“It’s essential we are given a level playing field and a platform to deploy these vessels in the future and critical that the investments we have already made and investments that need to be made have stable footing,” Crowley said.
He pointed out that Crowley is building state-of-the-art vessels, having built 24 tankers in recent years and has plans to build two containerships for use in the trade between the mainland and Puerto Rico.
One of Crowley’s competitors, TOTE, will hold a ceremony this Saturday at General Dynamic’s NASSCO shipyard to mark launch the first of its two LNG-powered containerships, which will be used by Sea Star Line in the trade between Florida and Puerto Rico.
Crowley said that even talk about removing the requirement to build Jones Act ships in America can make raising funds difficult for his company.
Such a discussion took place just this past Monday, during a video conference featuring speakers from Puerto Rico, Hawaii, Alaska and Guam who are seeking reform of the build-America provision of the Jones Act.
“While there may be some disagreement as to the actual cost the Jones Act adds to the cost of living in Puerto Rico and Alaska and Guam and Hawaii, we know it is substantial,” said Hawaii State Sen. Sam Slom. “The rates range anywhere form 15 percent to 60 percent and, while there may be a difference of interpretation, there is no difference in knowing this is a major part of adding to our cost while lessening standards of living and reducing competition.”
Hawaii State Rep. Gene Ward said, “We have ships coming by from Asia going directly to the mainland not stopping in Hawaii because of the Jones Act or returning to Asia empty without any stops in Hawaii which would be very, very inexpensive.”
“As elected leaders we owe it to our constituents to fully explore the impact of the Jones Act on our economies and communities,” said Sen. Rory Respicio, the majority leader in Guam’s Senate.
U.S. Merchant Marine in serious decline
