Modify Jones Act to assist Hawaii

For nearly a century, foreign-built ships have been blocked from carrying cargo directly from the mainland to Hawaii, resulting in higher prices for consumers.

Two Republicans and three Democrats in the state Legislature are calling for Congress to create a narrow exemption from the Jones Act that would allow foreign-built ships to be used on the route — a change that likely would lower cargo costs for island consumers.

Republican Rep. Gene Ward has long called for reforming the Jones Act, otherwise known as the federal 1920 Merchant Marine Act, which requires that cargo shipped between two U.S. ports must be carried on U.S. ships built by U.S. citizens, among other requirements.

The old law has resulted in monopoly shipping markets for interstate transportation, notes Ward and four other representatives, co-sponsors of a resolution urging Congress for the limited, modest exemption to the Jones Act to let foreign-built ships bring cargo to Hawaii from the mainland.

The law’s effects are large. The U.S. International Trade Commission estimated in a 2002 study that the Jones Act costs the nation’s economy between $119 million to $9.8 billion a year by denying access to lower-cost shipping. Ward maintained in 1997 that Hawaii residents pay $1 billion a year — $3,000 per household — in higher prices because of shipping costs. Those figures can only have increased since then.

In the past, Ed Case was the sole Democrat who shared that concern, proposing an exemption of Hawaii when he was U.S. representative from 2002 to 2007.

Case called for exempting Hawaii from the Jones Act, requiring only that shippers comply with other U.S. laws, including labor and environmental requirements. He said the Jones Act had sheltered the "virtual duopoly" of Matson and SeaLand in their domestic cargo lines.

The proposed resolution spearheaded by Ward points out that Gov. Neil Abercrombie has urged the Legislature to "move forward" with allowing import of liquefied natural gas from the mainland.

It asserts that none of the "special tank ships" that transport LNG have been built in the United States since the 1970s, and that buying such U.S.-built ships now "would be cost prohibitive."

It says that U.S.-built ships cost five times as much as foreign-built ships. Purchasing foreign-built ships for carrying LNG makes economic sense.

Abercrombie has been flexible on the issue in the past. As a U.S. House member in 2003, Abercrombie and the late U.S. Sen. Daniel K. Inouye won a narrow exemption from the 1886 Passenger Vessel Services Act, similar for cruise lines to the Jones Act’s rules for cargo shipments. That allowed Norwegian Cruise Line to use three foreign-built ships for interisland cruises.

Since building LNG tank ships in the U.S. is regarded as too expensive, the exemption of Hawaii, Alaska and Puerto Rico from the Jones Act — as long as foreign-built ships be used — would "revitalize" shipping to those destinations.

The resolution calls for maintaining the Jones Act requirements that those ships be U.S.-flagged, -owned and -crewed, so the proposal is narrow compared with past exemption proposals.

Our Legislature should pass this resolution to push the limited-exemption issue in front of Congress, where Hawaii’s delegation can then work toward its enactment.