AMP Sets Record Straight on Jones Act, Puerto Rico (7/16)


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The American Maritime Partnership (AMP) issued the following press release on July 14. The SIU is an AMP member.


American Maritime Partnership Calls Proposals to Disrupt Puerto Rican Maritime Trade ‘Misinformed’ – Corrects the Record


The American Maritime Partnership (AMP) – the voice of the domestic maritime industry – today released the following statement rebutting claims of a causal link between the costs associated with U.S. domestic maritime in the Puerto Rican trade and the pending debt crisis facing the Commonwealth. Recent news reports have included statements by both government surrogates and opponents of American maritime that have sought to capitalize on the debt crisis and undermine an industry that for decades has provided consistent and reliable transport of goods to and from the Puerto Rican people. Critics hinge their arguments on a government-commissioned “study” released earlier this month – known as the “Krueger Report” – which professes to set forth policy recommendations to address the debt crisis but falls short in substantiating its claims about the Puerto Rican maritime trade. AMP seeks to correct misinformed statements by providing facts developed by trusted, independent third-party sources, including a 2013 study of the Jones Act in Puerto Rico by the U.S. Government Accountability Office (GAO) – the most comprehensive review to date on this subject.


“America’s maritime workers and companies proudly serve as the bridge between the Commonwealth of Puerto Rico and the U.S. mainland, facilitating consistent, reliable, and cost-effective just-in-time delivery of goods in both directions,” said Mark Ruge, AMP counsel. “It is not uncommon in any crisis situation for facts and reality to quickly become overwhelmed by rumors and hyperbole. The debt crisis in Puerto Rico has proven no different, as opponents of the Puerto Rican maritime trade have seized on the crisis as an opportunity to promote their agenda. Unfortunately, their arguments are misinformed and unfounded in truth, and it is time to set the record straight.”


AMP seeks to set the record straight by providing the following facts outlined in a comprehensive and independent review of the Jones Act in Puerto Rico by the GAO:


The Jones Act ensures service between the United States and Puerto Rico that is consistent and reliable.

GAO outlines clear benefits to Puerto Rico from the Jones Act. GAO found that “the law has helped to ensure reliable, regular service between the United States and Puerto Rico – service that is important to the Puerto Rico economy.” Many goods imported by Puerto Rico are perishables requiring on-time delivery. Jones Act shippers meet the real-time demands of island import inventory managers who rely on prompt shipping to stock shelves and limit costly warehousing. According to the GAO study, “If the Jones Act were exempted, foreign carriers that currently serve Puerto Rico as part of multiple-stop trade route would likely continue this model to accommodate other shipping routes to and from other Caribbean destinations or world markets rather than provide dedicated service between the United States and Puerto Rico, as the current Jones Act carriers provide.” Longer multi-port trade routes make it difficult to ensure the reliability and consistency of scheduled service. International carriers are more likely to experience lengthy weather delays or delays at ports, and could even intentionally bypass ports on occasion to make up lost travel time.


Only goods transported between Puerto Rico and the mainland U.S. are subject to the Jones Act – with the majority of goods today coming to the island on foreign vessels.

The Port of San Juan is no different under the law than any other U.S. port. Merchandise can be imported and exported from anywhere in the world, and traded with anyone at any time. In 2011, GAO said, two-thirds of the ships serving Puerto Rico were foreign ships. 55 different foreign carriers provided imported cargo to Puerto Rico in a single month, as cited as an example by GAO. Foreign shipping companies compete directly with the American shipping companies in an intensely competitive transportation market.


Contrasting U.S.-flag Jones Act vessels and foreign-flag vessels is an “apples to oranges” comparison.

Most sophisticated trading nations have cabotage laws applied to aviation, maritime, rail, and trucking for their domestic commerce, and the U.S. is no different. The GAO study pointed out that foreign-flag ships are not subject to U.S. taxation, U.S. immigration, U.S. safety and other U.S. laws. Should the Jones Act be changed, foreign-flag vessels operating in the domestic trades would be subject to many of the same laws as U.S.-flag vessels, drastically affecting any perceived cost savings. The GAO found that, “Foreign carriers operating in the U.S. coastwise trade could be required to comply with other U.S. laws and regulations which could increase foreign carriers’ costs and may affect the rates they could charge.”


The Puerto Rican domestic shipping trade is among the most fiercely competitive in the United States, investing in new vessels to meet the growing demands of the Commonwealth.

GAO said the rates in the Puerto Rican shipping trades actually dropped between the years 2006 – 2010. The primary domestic shipping companies serving Puerto Rico are among the largest, most reliable in the United States. Those same companies are now investing hundreds of millions of dollars in American built, state-of-the-art vessels and freight infrastructure to better serve the Commonwealth. Puerto Rican businesses and citizens are the beneficiaries of this intense competition and commitment by American shipping companies.


GAO said it is not possible to estimate whether the cost of transportation under the Jones Act is higher than foreign flag vessels in Puerto Rico, and it is even more difficult to estimate the impact, if any, of the Jones Act on the ultimate price of goods in the Commonwealth.

The authors of the Krueger Report cite no basis for their statement that the Jones Act costs are “twice as high” as foreign ships, and there is no known study that supports it. The GAO study found that there were far too many factors impacting the cost of transportation and ultimately the cost of consumer goods in Puerto Rico to identify a specific cost of the Jones Act, if any.


Repeal or modification of the Jones Act could have a range of negative effects on Puerto Rico.

GAO indicates that modifications to the Jones Act would cause “uncertain” impacts, with some being highly negative, and could lead to the “loss of convenient and inexpensive backhaul service” from Puerto Rico to the mainland.


Aside from the clear economic benefits of the Puerto Rican maritime trade, the national security benefits of the Jones Act to the United States and its territories are undisputed. The Jones Act ensures that the United States maintains a robust shipyard industrial base and trained merchant mariners both of which support the U.S. military and protect our shores during times of peace and war. The most recent examples of the overwhelming support for the Jones Act can be found in the expressions of Congress, as well as our most prominent military leaders:


U.S. Coast Guard Commandant, Admiral Paul Zukunft, speaking before the Surface Navy Association’s National Symposium on January 15, 2015, and addressing the prospect of modifying the Jones Act: “If we have foreign-flag vessels doing coastalized trade, what are the safety standards, what are the maritime pollution . . . standards, how are they in compliance with the same standards that we apply to our U.S. fleet? I think, at the end of the day, it will put our entire U.S. fleet in jeopardy. And then in a time of crisis, who are we going to charter to carry our logistics? Very difficult if we don’t have a U.S.-flagged ship.”


General Paul J. Selva, Former Commander, U.S. Transportation Command (TRANSCOM), U.S. Air Force, and current Vice Chairman of the Joint Chiefs of Staff, speaking during the MTD Executive Board meeting on February 19, 2015: “I can stand before any group as a military leader and say without the contribution that the Jones Act brings to the support of our industry there is a direct threat to national defense, and I will not be bashful about saying it and I will not be silent.”


National Defense Authorization Act of 2014 (H.R. 3979), in which Congress noted that the national security benefits of the domestic maritime industry and the Jones Act are “The bill states that the Jones Act and the American domestic maritime industry are vital to “the national security and economic vitality of the United States and the efficient operation of the United States transportation system.”


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