For hurricane-ravaged Puerto Rico, getting access to much-needed fuel and supplies in the immediate aftermath of the storm was a debilitating challenge. The island’s unnecessary troubles once again demonstrate that it is past time to reform an obscure 1920 law governing fuel and other shipments between U.S. ports.
The Merchant Marine Act of 1920, commonly known as the Jones Act, requires that marine shipments between U.S. ports be made on U.S.-built, -flagged and -crewed ships. Intended to ensure the viability of a U.S. shipbuilding industry after World War I, and the availability of U.S. ships in a national emergency, the law substantially increases the cost of shipping — including for fuel — between U.S. ports. That burden disproportionately falls on U.S. island states and territories. While this problem garners the attention of lawmakers after catastrophic events, when the need to deliver fuel and emergency supplies quickly is critical, it exists every day for residents of these areas.
The Jones Act increases the cost of fuel and other goods and reduces the ease of shipping between U.S. ports for several reasons. Being manufactured in the United States, Jones Act-approved ships cost more to build. Likewise, being crewed by U.S. citizens and flying a U.S. flag, they cost more to operate. As a result, it is typically cheaper to ship fuel from the U.S. Gulf Coast to Europe than to the U.S. East Coast because shipments to Europe use foreign vessels that are less expensive than Jones Act ships.
There is also a limited supply of oceangoing Jones Act ships, with fewer than 100 ships in the fleet, over half of them tankers. Jones Act ships are typically built to meet specific shipping requirements, leaving little excess capacity in the Jones Act fleet and making shipping more expensive. Along with increasing costs, this has meant that they are often unavailable when needed in emergency situations. For instance, when the Northeast was experiencing extremely cold temperatures back in 2014, there was a shortage of heating oil because so much of the domestic supply was being sent overseas.
Because U.S. island states and territories receive most fuel and other goods by oceangoing marine vessel, and those vessels generally must be Jones Act ships, the costs of fuel and other goods on those islands are often substantially higher than elsewhere in the nation. Mainlanders who have filled up their rental cars while visiting Puerto Rico or Hawaii would have certainly noticed the higher price tag. After a natural disaster, as we saw in Puerto Rico in the immediate aftermath of Hurricane Maria, the shortage of Jones Act ships often complicates recovery efforts, exacerbating the tragedy. (After Hurricane Maria hit Puerto Rico on Sept. 20, the Trump administration waived the Jones Act for the island on Sept. 28 before letting the waiver expire on Oct. 8.)
Further, supporting U.S. shipbuilding through the Jones Act slightly increases the cost of all goods across the United States because of higher domestic shipping costs. So while islanders see the direct costs of the law, all Americans experience them in the hidden costs of their goods spread among everything they buy.
For these reasons, Congress should repeal the Jones Act. If the need to continue to support U.S. shipbuilding still exists, Congress could do so more transparently through direct subsidies or tax credits, the cost of which are clear and subject to public debate. This would be better than a mandate like the Jones Act, where the costs are both hidden and nearly incalculable.
Concerns that a repeal of the Jones Act would undermine security are overblown. Although the military moves cargo by sea in times of war, foreign ships are capable of moving cargo safely, and unless we are at war against the whole world, there is sure to be capacity available if we are willing to pay for it.
Moreover, with fewer than 100 ships in the oceangoing Jones Act fleet, many of them required for domestic trade, it is not as if the Jones Act fleet has significant excess capacity at any given moment. Concerns that foreign ships would take over critical infrastructure, erode safety standards or create security concerns overlook the fact that a substantial portion of marine trade in U.S. ports is already provided by foreign ships, which operate safely and securely in moving goods to and from the United States.
If Congress will not repeal the Jones Act, it should amend it in one of two ways. First, Congress could exclude island states and territories from its scope, because unlike the mainland economy, they have little alternative to marine shipping. If Congress deems it appropriate to impose costs on the shipment of goods around the United States in order to support the U.S. shipbuilding industry, it should at least ensure the direct costs aren’t concentrated on the economies of our more remote and distant territories. They should not disproportionately bear the burden of supporting a shipbuilding industry on behalf of the entire nation, especially when most of our fellow citizens who are residents of our island states and territories cannot exercise the full benefits of their U.S. citizenship (i.e., they can’t vote for president).
In the alternative, Congress could exclude oceangoing ships from its scope. Oceangoing ships are not used in inland trade, and the fleet of fewer than 100 ships is less than 1% of the Jones Act fleet, which is composed primarily of tugs and barges. These are the ships that typically serve island or distant states and territories, or ship large volumes of fuel between domestic coastal ports. This would assist those states and territories and rationalize domestic trade of fuel and crude oil.
Finally, Congress should permanently waive the requirements of the Jones Act for the shipment of fuel released from the Strategic Petroleum Reserve in the event of an energy supply emergency, or goods shipped to a region after an emergency declaration. In such cases, it is critical that the cargo be shipped by the quickest and least expensive means possible without the need to negotiate further waivers. Such negotiations take up precious time when in a crisis.
In the 100 years since the Jones Act was passed, our economy has grown and changed in unimaginable ways. Maintaining a U.S. industrial capacity, and the jobs associated with it, is a reasonable national goal. But doing so in a manner that raises costs and confines access to needed fuel and other goods for a concentrated segment of our nation is not.
Ron Minsk contributed to this piece.