Trump Waives Jones Act for Puerto Rico for 10 Days. That's Good, but It's Not Enough.

Congress needs to vote to stop protecting shipping cartel from market competition.

Ingram Publishing/Newscom

The White House this morning announced it is waiving part of the Merchant Marine Act of 1920 (commonly referred to as the Jones Act) to make it easier and cheaper for Puerto Rico to import goods to recover from Hurricane Maria. From CNN:

Acting Department of Homeland Security Secretary Elaine Duke said the waiver will be in effect for 10 days and will cover all products being shipped to Puerto Rico, according to a release from the department.

The waiver will guarantee the needed equipment to repair infrastructure damaged by the storm and restore emergency services, Duke said in a news release.

Puerto Rico Gov. Ricardo Rosello said he had formally asked for a waiver, but yesterday President Donald Trump was unwilling to do so, he said, because people in the shipping industry didn't want him to.

That's because the Jones Act shields them from competition from foreign shippers so they can make more money. It therefore drives up the cost of shipping goods to isolated and faraway places like Puerto Rico and Hawaii.

The Jones Act requires any ship traveling from port to port in the United States and its territories be built, owned, and crewed by Americans. Foreign ships can dock once in a U.S. port and cannot bounce from port to port delivering (or picking up) goods.

Studies show that the Jones Act is partly to blame for the significant increases in costs to ship goods to Puerto Rico and Hawaii, doubling them in some cases.

Waiving the Jones Act will for the next 10 days allow Puerto Rico to more readily accept assistance or goods delivered on foreign-owned ships. While the waiver is wonderful, that's just the tip of a logistical iceberg and may be of limited assistance so early in the crisis response. The extensive damage to Puerto Rico's infrastructure has made it difficult to distribute the cargo they've been receiving in their ports to react to the crisis.

The financial impacts of the Jones Act will be much more painful moving forward, when distribution gets figured out. It's going to take much, much longer than 10 days for the island to import everything it needs to restore itself from the damage caused by Hurricane Maria. After those 10 days, the Jones Act will kick back in and the island will again have to be paying much more for imports of goods than it should.

But the Trump Administration's ability to waive the Jones Act is limited to times of crisis. It cannot simply wave its hands and decide the law does not apply for as long as the administration chooses. So it's up to Congress to act and remove the part of the law that cartelizes the American shipping industry and shields it from market pressures that lower prices.

Read more about the awfulness of the law here. Or watch this ReasonTV video about its impacts on Hawaii:

Comments

[loveconstitution1789]

I'm jonesing for some Jones Act repeal action.

[ziyow]

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[Citizen X - #6]

Hang on. I have it on good authority that everyone at Reason should be humbled and abashed by the fact that Trump waived the Jones Act at all.

[Unlabelable MJGreen]

He truly is the king of kings.

[Unicorn Abattoir]

It's almost as if Trump was reading about the Jones Act on Reason...

[Fist of Etiquette]

So it's up to Congress to act and remove the part of the law that cartelizes the American shipping industry and shields it from market pressures that lower prices.

Or, better yet, Congress should do something about Climate Change so we don't have these once-in-a-century storms showing up several times a month.

[Don't look at me.]

Yes, pass some sort of law banning hurricanes.

[colorblindkid]

There has been no statistical increase in the intensity or frequency of Atlantic hurricanes, yet. The last ten, years, including this year, has been less active than the previous 10. The only chance we had to stop climate change was to continue switch to nuclear 30 years ago, but environmentalists have been waging a science-free fearmongering campaign against it.

The US could switch to 100% CO2-free energy tomorrow, and it would have almost no effect on the climate, and would prevent like .1 degree of warming over the next 100 years.

[Scarecrow Repair & Chippering]

Or, duh, one could just lighten up and observe that if global warming is responsible for these two cat 5 hurricanes, it is also responsible for the record-breaking 12 year lull in cat 4 and 5 hurricanes.

[Unicorn Abattoir]

it is also responsible for the record-breaking 12 year lull in cat 4 and 5 hurricanes

At least until they revise the data.

[shamrock]

Sounds like it just costs more to ship goods from the mainland USA, they can still receive ships from Japan, China, etc, at free market rate, but with the restriction that the ship could not continue on to New York I guess.

[Scarecrow Repair & Chippering]

Ain't enough business with Puerto Rico to make such long hauls profitable. To stop at every Caribbean island wouldn't improve matters. To stop at every Caribbean island but Puerto Rico on te way to US ports, then transship from one of those islands to Puerto Rico, would be as expensive as using a Jones Act ship.

[MikeP2]

That argument sounds nice, but ignores that shipping costs are so negligibly small to the cost of goods that they are largely irrelevant compared to taxes and tariffs.

Good are expensive on Islands for a large variety of reasons and for PR, the Jones act just doesn't rank high enough to justify the endless harping about it in Reason.

[Scarecrow Repair & Chippering]

Turn your argument right back at ya: if the Jones Act makes so little difference, then why enact it?

[MikeP2]

It's already enacted as of roughly a century ago.

Do you mean to say, why continue it? Take that up with Congress. All I've been saying is that the impact on the cost of goods in PR is vastly overrated and in no way justifies the excessive harping about it in Reason.

[Tionico]

Taxes on goods moving between states/territories are illegal.... READ your Constitution. Tariffs on goods moving between states/territories are specifically prohibited per Constitution. Again, READ it. Shipping costs on such short voyages on US bottoms are insanely high.. partly because US shipping KNOW the benefits to them of Jones.

Consider Hawaii: it is far cheaper to move goods on foreign flagged vessels 7000 miles from Japan than to move the same goods 2200 miles from LA or SF on US bottoms.
ever compared FedEx/UPS rates to Hawaii/Alaska to LA to NY, half again as far? USPS can do it because they are subsidised by OUR tax dollars.

Reason are in the mark harping on Jones and the burden it places on PR.

[MikeP2]

Caps don't make your comment any less dumb. I never said nor implied PR pays tariffs on goods from the US mainland. Look at a map, who are PR's closest trading partners?

Goods are expensive on PR due to economy of scale. Warehousing and distribution are always a far higher cost-per-good than shipping, regardless of the flag of the vessel.
Are you arguing that the PR cost-of-living is due to the extra freight cost for goods coming in from Europe? How much French wine and cheese does PR consume?

Or are you arguing that the short container ships that ply the Caribbean are vastly different costs depending on what flag they fly? If so, then the issue is the cost of regulation. If US flagged vessels are significantly more expensive to operate solely due the flag, then that is not in any way a Jones act issue.

[Tionico]

and THERE'S the rub. PR get so little freight (small, not so wealthy) a decent sized ship cannot load entirely for Puerto Rico. If she leaves any US port bound for PR, she MUST be US flagged, per Jones. Same with an inbound vessel with only part of her load consigned to PR, either that vessel MUST be US flagged and crewed or she cannot continue on to the mainland.

That means most goods inbound to the US from offshore in foreign flagged ships will be unloaded in the US then reloaded onto smaller US flagged vessels outbound to PR. Bear in mind, nearly ALL goods inbound to the US will be on foreign bottoms..... far cheaper.

I suspect someone could make a solid case that Jones is a violation of the Interstate Commerce clause in the Constitution. Prevents trade from being "reguar" between US states/territories.

[MikeP2]

The free market says that your arguments are bunk.

If there was a significant cost incurred by PR due to the Jones act, then there would be a market incentive for more US flagged vessels carrying goods between US/PR ports. The free market would erase the cost differentiation to fill the market need. If the free market has not done so, then the cost impact on shipping is so small as to be not worthy of a solution. Isn't the free market grand? The Jones act is not a tax or tariff that can't be bypassed.

And from a historical perspective, the Jones act was solely implemented to force the maintaining of a domestic merchant marine industry capable of meeting US shipping needs. Has that need gone away? Of all the responsibilities of the Feds, maintaining national security needs is the least offensive of what they do. It's strange to rant so much about the Jones act when tariffs on goods coming into PR are a far higher cost impact to daily life than the shipping costs.

[Scarecrow Repair & Chippering]

Bunk. You sure don't understand markets and prices and reality.

There is almost no Jones Act shipping because they are too expensive to make a profit anywhere except between US ports, and there is very little shipping done that way except Seattle-Alaska cruise ships. Huge container ships do stop at various US ports, but only to unload foreign containers or to load containers for foreign ports. Because there is so little incentive to pay through the nose to ship containers between US ports, most of it goes by rail or truck and therefore costs more.

The Jones Act has effectively segregated shipping into US-only and everybody else, and turned US-only shipping into a ghetto.

[MikeP2]

you apparently don't understand the Jones act. There is nothing that prevents a foreign ship from offloading in another non-US nearby island and a small entrepreneurial PR based shipper from barging it to PR.
There is nothing stopping a foreign ship from routing to avoid sequential US ports. There are plenty of ports around PR that can be waypoints to void Jones act violations.

Hawaii has legitimate complaints about the Jones act because of its unique isolation. Large coastal US ports also can make a good argument. PR, no, it is an excuse that too many here are buying into without thought. Tariffs are a far far bigger cost impact to goods in PR than the Jones act. There are so many ways around it that the free market would quickly invalidate the cost it causes.

and shackleford is sadly harping on this issue with repeated articles that use cyclic references to prior Reason articles so far back as to be utterly irrelevant.

[Scarecrow Repair & Chippering]

There is nothing that prevents a foreign ship from offloading in another non-US nearby island and a small entrepreneurial PR based shipper from barging it to PR.

Yes there is -- cost. You apparently can't read either.

[loveconstitution1789]

The Jones Act increases costs and regulation and serves no valid purpose.

Hurricane Irma shortages show why the law should be repealed. If a law needs to be waived because Americans would probably die without the waiver, its a bad law.

[MikeP2]

"There is almost no Jones Act shipping because they are too expensive to make a profit anywhere except between US ports, and there is very little shipping done that way except Seattle-Alaska cruise ships"

And that is nonsense. The Jones Act doesn't make port-to-port shipping unviable. Rail is just so much cheaper that port-to-port shipping is not cost effective. Why use shipping, when the US has an incredible cheap and efficient rail transit network.

[Scarecrow Repair & Chippering]

As I said elsewhere, if the Jones Act has so little effect, why enact it? Why keep it up?

You can't have it both ways.

[WoodChipperBob]

Why enact it?
Post WWI protectionism

Why keep it up?
When was the last time you saw Congress repeal a century-old law because it was obsolete or ineffectual?

[Tionico]

ever seen a train running out to Puerto Rico? No? I haven't either...... nor have I heard of it.

Large can ships DO move between US ports... IF they are US flagged and crewed. One move is to unload in LA for West Coast consignments, then hop down to Nicaragua, where cans are sent by train to the Caribbean side, reloaded into a second ship for east coast ports, then Europe. But those foreign flagged ships, operating at a FAR lower cost/container can ONLY call in one US port before calling at a second.

[Unlabelable MJGreen]

Good lord.

[Tionico]

there can be NO TARIFFS on goods moving from mainland to PR. READ your Cosntitution.

Further, you fail to comprehend WHY US flagged vessels cost so much more to operate: minimum wages, duty hour regulations,. unions, extra Coast Guard requirements BECAUSE she is US flagged, taxes on the vessel itself and on wages for crew (pensions and on profits realised from her operation, FICA, income tax, workmen's comp, NONE of which need be paid to foreign bottoms.

Same reasons coffee grown in Hawaii, a STATE, costs five times as much as lousier coffee grown offshore. Its pretty simple... the added costs of doing business here in the US is insanely high, and a good part of why we have such an outrageous trade deficit. No "free market" manipulation or outsmarting can change the added costs when operating in the US. FedGov have made it so, and Jones is only one way they've done it. Fact is, were it not for the unavoidable extra costs operating a US bottom, there'd be no need for Jones. Think about THAT for a while.....

[MikeP2]

"Further, you fail to comprehend WHY US flagged vessels cost so much more to operate: minimum wages, duty hour regulations,. unions, extra Coast Guard requirements BECAUSE she is US flagged, taxes on the vessel itself and on wages for crew (pensions and on profits realised from her operation, FICA, income tax, workmen's comp, NONE of which need be paid to foreign bottoms."

I don't fail to comprehend any of that. But none of that is related to the Jones Act. If you're complaining that the cost of US flagged shipping is artificial higher due to US regulations and this has a direct add-on cost to do business, then yeh, that's correct. But perhaps you should learn what the Jones Act is before arguing that any of that is a cause of the Jones Act. Get rid of the costly regulation on US flagged shipping, then the Jones Act is irrevelant to the cost of business.

One would think Reason should be penning articles about reducing the regulations that directly add cost, instead of a completely indirect issue like the Jones Act that only adds cost due to other overriding regulations.

[James Rivington]

The Jones Act is why all Alaska ocean liner cruises start or end in Victoria BC, or Vancouver BC. Extremely inconvenient and unnecessarily complex. And more expensive than a normal, sensible, round trip.

For example, per the Jones Act, foreign-flagged cruise ships (i.e., all of them) may not travel directly from Anchorage AK to Seattle WA. So what? Vancouver is only 150 miles from Seattle. Yes, but it's in a foreign country so you have two additional border crossings to make; one entering Canada from Alaska, and the other departing Canada back to Seattle, in the good old USA. Border crossings are always risky. And you thought the TSA was scary. Oh, and the last day of your first class cruise experience is spent on a bus. Classy.

Hawaii is even worse. Foreign-flagged cruise ships cannot cruise around Hawaii starting and ending in Hawaii. If you start in Hawaii, you can start with a wonderful five day cruise and see all the sights, and then you spend the last two days at sea, pedal to the metal, and get dumped in Ensenada Mexico. And another wonderful bus trip home. Imagine: the ships dumps 2000+ people on the docks and they all have to get on buses, then they have to go through the US border crossing in San Diego before they can head home.

Anyway, as others have commented, just because it would be economically intelligent to repeal the Jones Act completely, that will never happen. We operate under a different form of "intelligence".

[Sanjuro Tsubaki]

Yep, 10 days is chicken shit.

[Walt Peterson]

Does the Jones Act apply to Micronesia? If not, perhaps Puerto Rico ought to consider changing its status to associated state.

[AD-RtR/OS!]

The US has a shipping cartel?
Who Knew?
It's time to face reality, and kill the Jones Act because it's irrelevant.

[eBay Wordpress Theme]

Shipping controlled use goods like IT equipment across borders is challenging even for the most knowledgeable logistics personnel.