Legislation Would Exempt Puerto Rico From the Jones Act | Global Trade Magazine
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  June 15th, 2016 | Written by

Legislation Would Exempt Puerto Rico From the Jones Act

Opponents Say it Puts National Security, U.S. Jobs at Risk

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  • The Jones Act provides that any internal cargo deliveries between US ports must use on U.S. vessels.
  • Jones Act critics say it inflates prices of consumer goods and inhibits economic growth outside the 48 states.
  • Supporters of the Jones Act say that it is necessary for national security and creates jobs for U.S. citizens.

An Alabama congressman has offered an amendment to the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), currently pending in the U.S. House of Representatives, which would exempt shipping to and from Puerto Rico from the Jones Act.

Representative Gary Palmer (R-Alabama) said that the measure would provide the island commonwealth some relief from its current economic woes.

The Jones Act, which dates back to 1920, provides that any internal cargo deliveries on U.S. waters and between US ports must use vessels that are made in the USA, fly the United States flag, and be owned by U.S. parties. They must also employ crews that are U.S. citizens or permanent residents.

Jones Act critics say it inflates the price of consumer goods and inhibits economic growth in states and territories not part of the contiguous 48 states. Supporters of the law say that it is necessary for national security—by ensuring a ready reserve of U.S. capacity in case of war or emergency—and creates jobs for U.S. citizens.

“We need to act in a way that frees Puerto Rico from economy stifling regulations to the maximum extent possible to allow them to rebuild their economy,” said Palmer. “The Jones Act exemption helps Puerto Rico, a U.S. territory with limited access to cheaper transportation such as trains or trucks, by reducing prices for goods transported by water.”

According to Palmer two Puerto Rican economists found that between 1991 and 2010, the Jones Act cost Puerto Rican residents $16.4 billion. “A vehicle costs $6,000 more in Puerto Rico than on the mainland, and food is twice as expensive as in Florida,” said Palmer.

Current U.S.-flag providers of maritime services to Puerto Rico are dead set against Palmer’s amendment. “Such a change would put at risk the reliable, efficient service the island currently receives, as well as hundreds of private sector jobs on the island, with no offsetting gains,” said Michael Roberts, senior vice president and general counsel of Crowley Maritime Corporation, at a congressional hearing a few weeks ago. “It would also send a chilling message that would bring further investment in vessels built in U.S. shipyards to a standstill.”

“Exempting Puerto Rico from the Jones Act would do nothing to address island’s debt crisis,” said

Matthew Paxton, president of the Shipbuilders Council of America, “and would actually jeopardize the more than $1 billion the U.S. maritime industry has invested in the Puerto Rican shipping trade, as well as the thousands of good-paying jobs on the island.”

Edward Wytkind, president of the Transportation Trades Department, AFL-CIO, said that exempting Puerto Rico from the Jones Act “is an old, tired idea that should be rejected by responsible lawmakers.”

“Instead of pushing serious measures that will help Puerto Rico fairly restructure its debt and provide much-needed aid for the 3.5 million U.S. citizens facing a humanitarian crisis, extremists are offering red meat attacks on the Jones Act to satisfy ideological grudges,” he added. ““The Jones Act has served as an indispensable role in promoting American economic and national security since 1920. Exempting Puerto Rico from the Jones Act not only threatens our military sealift capabilities and thousands of domestic seafaring and shipbuilding jobs, but potentially further damages Puerto Rico’s already fragile economy.”

It is interesting to note that exempting territories from the Jones Act is nothing new. Three U.S. territories are currently exempt from the Jones Act, including the U.S. Virgin Islands, which were exempted in 1992.

“Today shipping costs from the mainland [to U.S. Virgin Islands],” said Palmer, “are nearly half that of Puerto Rico.”

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