Puerto Rico’s Jones Act

After reading my column, “Puerto Rico, the forgotten,” Mr. Richard Berkowitz, operations director of the Transportation Institute, was kind enough to send me this message:

“The Jones Act only requires all cargo moving from one US port to another US port (including the Commonwealth of Puerto Rico) be borne in a US-flag vessel whose crew is at least made up of 75 percent US citizens, whose vessel is built in a US shipyard, is registered in the US, is managed by US citizens, and is majority (at least 75 percent) owned by US citizens. This cabotage law is similar to those in other maritime nations, which seek to reserve commerce within its jurisdiction to its own national interests. A common method of cabotage involves domestic air travel that is most often reserved to national carriers within the confines of a nation.

“Cargo destined for Puerto Rico directly from foreign entities can be transported without such restrictions/preferences. In fact, over 70 percent of all vessels frequenting Puerto Rico’s ports fly the flags of other nations and have full access to Puerto Rican consumers and ports. Nearly all of PR’s energy imports are sourced outside of the US and shipped on foreign tank vessels.”

Soon after, another reader, Ms. Ann Stallmann, vice president of Nahigian Strategies, Inc., sent me her instructive comments:

“The Jones Act by no means prohibits foreign ships from delivering goods to the island. In fact, according to a GAO study, two-thirds of the ships serving Puerto Rico in 2013 were foreign and 55 different foreign carriers provided imported cargo to Puerto Rico in a single month (Pg. 11). The Jones Act only impacts goods transported between Puerto Rico and the mainland. Cargo from anywhere in the world can be imported into or exported directly from Puerto Rico. The Jones Act only applies to the transportation of goods between two domestic points (not a foreign and domestic point).”

Apparently, every time hurricanes wreak havoc on Puerto Rico, the Jones Act, also known as the Maritime Law of 1920, has to be waived, at least briefly, to facilitate the entry of relief goods and infrastructure equipment and services. It is a cumbersome situation clearly depicted in a Bloomberg article dated 14 September: “Circumstances did indeed demand a new stay on this dumb law — but it would be better to get rid of it altogether….” Two GOP senators, John McCaie of Arizona and Mike Lee of Utah are taking the lead in the abrogation of the century-old “dumb law”; they have authored a bill to repeal it immediately.

In the same article, Bloomberg expounded that the Jones Act of 1920 was designed “to ensure that the US has a reliable merchant marine during times of national emergency.” Unfortunately, it has devolved into “a classic protectionist racket that benefits a handful of shipbuilders and a dwindling number of US mariners…” The article continued to say that the Jones Act has resulted in higher shipping costs, “that percolate throughout the economy, especially penalizing the people of Alaska, Guam, Hawaii, and Puerto Rico…The Act distorts trade flow, giving imports carried by foreign ships an edge over goods shipped from within the USA.”

Mr. Jacob Pramuk of CNBC reported that Sen McCaine, an inveterate critic of POTUS, lamented the Trump administration’s initial refusal to waive the Jones Act to expedite relief efforts in Puerto Rico, after it was devastated by hurricane Maria. He wrote to the acting secretary of the Department of Homeland Security, Elaine Duke, to say that, “It is unacceptableto force the people of Puerto Rico to pay at least twice as much for food, clean drinking water, supplies and infrastructure due to Jones Act requirements as they work to recover from this disaster. “

Happily, Pres. Trump did not turn a deaf ear to the governor of Puerto Rico’ s plea. His administration waived the Jones Act for 10 days after the 4-category hurricane that devastated the colony on 20 September. Will the US eventually do away with that anachronistic devise?