[Congressional Record Volume 167, Number 8 (Wednesday, January 13, 2021)]
[Extensions of Remarks]
[Pages E37-E38]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             INTRODUCTION OF JONES ACT MODERNIZATION BILLS

                                 ______
                                 

                              HON. ED CASE

                               of hawaii

                    in the house of representatives

                      Wednesday, January 13, 2021

  Mr. CASE. Madam Speaker, today I introduce three bills to end a 
century of monopolistic closed market domestic cargo shipping to and 
from my isolated home state of Hawaii as well as the other island and 
separated jurisdictions of our country not part of the continental 
United States. In doing so, we will break the stranglehold on the 
peoples and economies of these exposed communities and their resulting 
sky-high costs of living which results from just a few domestic 
shipping companies controlling the lifeline of commerce upon which we 
absolutely depend.
  These bills all amend the Merchant Marine Act of 1920, also known as 
the Jones Act. That federal law 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.
  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, from and 
within our most isolated and exposed locales--our island and offshore 
states and territories--that have no alternative modes of 
transportation such as trucking or rail.
  My Hawaii is a classic example. Located almost 2,500 miles off the 
West Coast, we import well over 90 percent of our life necessities by 
ocean cargo. There are plenty of international cargo lines who could 
and would compete for a share of that market. Yet only two U.S. flag 
domestic cargo lines--Matson Navigation and Pasha Hawaii--operate a 
virtual duopoly over our lifeline.
  While they are nominally subject to federal regulation, the fact of 
the matter is that cargo prices have gone in only one direction--up, 
fast and repeatedly, despite a surplus of international shipping--and 
it is indisputable that there is no downward market pressure which 
would otherwise result from meaningful competition. These accelerating 
cargo prices are not absorbed by the shipping lines, but passed through 
all the way down the chain, to the transporters, wholesalers, 
retailers, small businesses, mom-n-pops and ultimately consumers, of 
all of the elementals of life, from food to medical supplies, clothes, 
housing and virtually all other goods. The result is a crippling drag 
on an already-challenged economy and the very quality of life in 
Hawaii.
  The broadest, deepest effects of the Jones Act on Hawaii result from 
its impact on westbound imports from the continental United States to 
Hawaii. But Hawaii is an export location as well, in key products such 
as agriculture and livestock. Here the Jones Act also effectively 
stifles meaningful competition in getting those products to their 
primary markets on the U.S. Mainland. Because the producers of these 
products and all that rely for their own livelihood on their successful 
export have to eat inflated shipping costs, these export industries, 
which any economist knows are the ultimate key to any economy's 
prosperity, are also crippled.
  Let's take a concrete example: Hawaii's once-prosperous ranching/
cattle industry, which is so key to the economic health and the very 
lifestyle of so much of areas like the rural Big Island, where I was 
born and raised. That industry depends on getting its product, young 
cattle, to West Coast pens and transportation hubs in a cost-efficient 
manner.
  There are foreign cargo carriers that specialize, through custom 
cattle ships and overall sensitivity and adjustment to rancher 
timetables and needs, in such transport, but the Jones Act outright 
excludes them from the Hawaii-Mainland market. As a result, Hawaii's 
ranchers are reduced to two crippling, cost magnifying options.
  The first is to ship their cargo by foreign carriers to Canada, where 
they have to go through a myriad of bureaucratic, cost-magnifying 
gyrations to get their product eventually to their U.S. markets. The 
second is to beg for the goodwill of the domestic carriers, to whom 
this is simply a hindrance rather than a major commitment, to ship 
directly to the West Coast.
  And it shows: most of the cattle are first shipped from Hawaii's 
Neighbor Islands, where the bulk of the cattle industry is located, to 
O`ahu, in small ``cow-tainers,'' where they sit for days in Honolulu 
Harbor awaiting the return to the Mainland of one of the massive cargo 
ships designed and utilized for quite another purpose. The result 
(besides associated higher costs) is in-harbor cattle waste disposal 
challenges, higher in-transit cattle mortality and lower-weight cattle 
delivery to market. That's what happens when you try to squeeze a 
square peg into a round hole.
  More broadly, there is much evidence about the direct impact of the 
Jones Act on shipping prices to noncontiguous areas. At a basic level, 
the everyday goods that we rely on in Hawaii cost much more than on the 
Mainland, a difference which largely cannot be attributed to anything 
other than shipping costs.
  Last year, the Grassroot Institute of Hawaii published a thorough and 
first-of-it-kind report, ``Quantifying the Cost of the Jones Act to 
Hawaii.'' The report found that:
  The median annual cost of the Jones Act to the Hawaii economy is $1.2 
billion.
  The annual cost of shipping to Hawaii is estimated to be $654 million 
higher and prices $916 million higher.
  The Jones Act annually costs each Hawaii resident more than $645.
  Thanks to the Jones Act, Hawaii has approximately 9,100 fewer jobs, 
representing $404 million in wages.
  Hawaii families across all income groups would benefit from Jones Act 
reform. In the absence of Jones Act restrictions, those making between 
$15,000 and $70,000 annually would see an annual across-the-board 
economic benefit ranging from $78 million to $154 million.
  Annual tax revenues would be $148.2 million higher.
  Focusing solely on the Jones Act requirement that vessels be built in 
the United States, they found that the build provision results in a 1.2 
percent shipping cost increase for Hawaii. This translates annually to 
an added cost of $531.7 million to the state's economy, or about $296 
per resident. It also means a loss of 3,860 jobs, and $30.8 million 
less in state and local tax revenues.
  In 2012, the Federal Reserve Bank of New York studied Puerto Rico's 
economy and found that ``the high cost of shipping is a substantial 
burden on the Island's productivity.'' The New York Fed found that, 
``[i]t costs an estimated $3,063 to ship a twenty-foot container of 
household and commercial goods from the East Coast of the United States 
to Puerto Rico; the same shipment costs $1,504 to nearby Santo Domingo 
(Dominican Republic) and $1,687 to Kingston (Jamaica)--destinations 
that are not subject to Jones Act restrictions.'' There is only one 
reason why costs

[[Page E38]]

are double to ship from the continental United States to a domestic 
port in Puerto Rico as compared to foreign ports in the Dominican 
Republic and Jamaica: there is international competition on the latter 
routes, none on the domestic route and the shipping companies take full 
advantage of that lack of competition.
  The three bills I introduce today say: enough is enough. If the 
continental U.S., wants to continue the Jones Act as to shipping 
between their locations, that's their business. But don't penalize us 
island and other noncontiguous locations by throwing us to the monopoly 
wolves you've created.
  The first bill, the Noncontiguous Shipping Relief Act, exempts all 
noncontiguous U.S. locations, including Hawaii, from the Jones Act. The 
second, the Noncontiguous Shipping Reasonable Rate Act, benchmarks the 
definition of a ``reasonable rate'' that Jones Act shipping can charge 
to within ten percent of analogous international shipping rates. And 
the third, the Noncontiguous Shipping Competition Act, prevents 
monopolies or duopolies in noncontiguous Jones Act shipping. 
Essentially, the bills are intended to lay out options for providing 
relief for our U.S. noncontiguous areas. We can resolve the issue in 
many ways, but we must change the status quo which has had such a deep, 
broad and negative impact on my state and the other jurisdictions 
beholden to the Jones Act.
  The Noncontiguous Shipping Relief Act would allow the noncontiguous 
jurisdictions to be serviced by non-Jones Act vessels and increase, or 
in some cases create any, competition in these critical shipping lanes. 
Again, this is a small portion of the total national Jones Act shipping 
where it is particularly destructive in application.
  Let me address directly the argument offered up by the domestic 
shippers in defense of the Jones Act: that it contains important labor 
and environmental protections that would be lost upon repeal. My bill 
would retain these important protections. Specifically, it provides 
that all foreign shippers operating under the bill's Jones Act 
exemptions must comply with the same labor, environmental, tax, 
documentation, U.S. locus and other laws as are applicable to non-U.S. 
flag ships and shippers transiting U.S. waters today.
  The Noncontiguous Shipping Reasonable Rate Act would define a 
``reasonable rate'' for the noncontiguous domestic ocean trade as no 
more than ten percent above the rate set by a comparable international 
rate recognized by the Federal Maritime Commission. Currently, the 
Surface Transportation Board technically has the authority to 
adjudicate and set precedent on what a ``reasonable rate'' is for Jones 
Act shipping, but it has almost never been used and never to a clear 
conclusion on what is a reasonable rate. My bill would define 
reasonable to remove uncertainty. Current Jones Act shipping rates vary 
widely and there is no central compilation of these rates. The ten 
percent benchmark would allow for variance but also ensure that 
Americans in our noncontiguous areas are not forced to pay exorbitant 
rates way above shipping rates which would otherwise be provided 
through international competition were the Jones Act not applicable.
  The Noncontiguous Shipping Competition Act would exempt shipping 
routes to noncontiguous jurisdictions from the Jones Act requirements 
if a monopoly or duopoly exists on those routes. The Jones Act has 
resulted in the blossoming of monopolies and duopolies in our 
noncontiguous jurisdictions. To ensure that these communities, which 
are the most reliant in the country on shipping to receive necessities, 
are not held hostage to these dominant companies, my bill would give 
Jones Act exemptions to routes that are not serviced by at least three 
companies with separate ownership. In short, if a domestic route is in 
fact in a competitive environment, the Jones Act is less of a problem, 
but if there is no competition, then the route should be opened up to 
international competition by rescinding the Jones Act.
  Madam Speaker, these long-overdue bills are of the utmost importance 
to the localities which have long borne the unfair brunt of the Jones 
Act. It is often difficult to pierce the veil of longstanding custom 
and understanding to see the real negative impacts of a law and what 
should instead be. It is even more difficult to change a law which 
provides a federally-created and endorsed monopoly under which no 
competition exists to hold down prices. Yet clearly the time for these 
measures is overdue. I urge their passage.

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