HONOLULU — Congressman Ed Case has introduced three bills in Congress to reform the century-old Merchant Marine Act of 1920 (commonly referred to as the “Jones Act”), which he said is widely credited with artificially inflating the cost of shipping goods to Hawai’i.
The Jones Act mandates that all cargo shipping between U.S. ports occur exclusively on U.S., not foreign, flagged vessels. Additionally, the law requires that these vessels are built in the U.S. and owned and crewed by U.S. citizens. Because Jones Act shipping has shrunken and international shipping has increased dramatically, especially in the last quarter-century, the Jones Act results in a very few carriers serving all domestic shipping needs.
“My three bills aim directly at one of the key drivers of our astronomically high cost of living in Hawai’i and other locations in our country that are not part of the continental U.S,” Case said.
Because the Jones Act limits the supply of shipping to and from Hawaii, he said “it has allowed a very few companies to control our very lifeline to the outside world and as a result command shipping rates way higher than the rest of the world.
“In the rest of our country, if shipping rates are too high then there are transportation alternatives like trucking and rail that act as a market check on the shipping companies,” Case said. “But that is not a choice in our noncontiguous jurisdictions, and if there are artificially limited numbers of shippers then the price of virtually everything we need is jacked up.”
Case points to Hawaii as a classic example.
Located almost 2,500 miles off the West Coast, the state imports over 90 percent of its life necessities, including food and other consumer goods, construction and housing supplies, and raw materials for Hawaii industries like agriculture, by ocean cargo only.
“At a basic level, the everyday goods that we rely on in Hawaii cost much more than on the Mainland,” he said
“There are plenty of international cargo lines who could and would compete for a share of that market. Yet in Hawaii’s case only two U.S. flag domestic cargo lines — Matson and Pasha — operate a virtual duopoly over our lifeline and they do not act as an effective market check on each other,” Case said.
Case’s three measures and their proposed amendments to the Jones Act are:
• the Noncontiguous Shipping Relief Act, which exempts all noncontiguous U.S. locations, including Hawai‘i, from the Jones Act;
• the Noncontiguous Shipping Reasonable Rate Act, which benchmarks the definition of a “reasonable rate” which domestic shippers can charge as no more than ten percent above international shipping rates for comparable routes; and
• the Noncontiguous Shipping Competition Act, which rescinds the Jones Act wherever monopolies or duopolies in noncontiguous Jones Act shipping develop.
Case said the Jones Act was enacted in a protectionist era under the guise of preserving a strong national merchant marine.
“But today it is just an anachronism: most of the world’s shipping is by way of an international merchant marine functioning in an open, competitive market. And those few U.S. flag cargo lines that remain have maneuvered the Jones Act to develop virtual monopolies over domestic cargo shipping to and from our most isolated and exposed locales: our island and offshore states, territories and possessions,” Case said.
Michael N. Hansen, president of the Hawai’i Shippers’ Council, said it welcomes Case’s introduction of Jones Act reform legislation.
“The Jones Act has made the domestic United States maritime industry the most expensive in the world and its burden falls most heavily on the noncontiguous jurisdictions embraced by the Act due to their complete reliance on ocean shipping for interstate surface transportation,” he said.