How Restrictive Is The Merchant Marine Act of 1920 (Jones Act)

[Rodent + 1,424]

@SLL, @Refman@Jouhou

Have at it!

 

[Refman + 207]

I'm in the middle on this one. While the Jones Act undeniably drives up the cost of transportation for goods between US ports, it's purpose is mainly for defense reasons. We need the capability to build and operate our own ships in times of war, without the Jones Act we would have no merchant marine at all. Hard to fight a war when you cannot move men or materials.

[Jan van Eck + 7,558]

5 hours ago, Refman said:

I'm in the middle on this one. While the Jones Act undeniably drives up the cost of transportation for goods between US ports, it's purpose is mainly for defense reasons. We need the capability to build and operate our own ships in times of war, without the Jones Act we would have no merchant marine at all. Hard to fight a war when you cannot move men or materials.

No chance.  The yards that could build the big stuff are all working for the military.  The smaller yards only build tugboats and PSV ships. What the Jones Act does is ensure that there will be no American domestic shipping. 

You can go out and set up a trucking company and run it with Volvo trucks.  You can start an airline and fill it with Airbus machines.  You can start a railroad and buy your locomotives and cars from France.  But if you want to run a ferry company you  have to buy an American-built ferry?  How does that compute?

At one time the Danes started a ferry service that ran from New York down to Florida, with drops at Cape Canaveral and Ft. Lauderdale.  So they have these seriously capable deep-water ferries that run the Baltic, the North Sea, the Bay of Biscay, out to Iceland, and in the Med.  They bring over a Danish ferry and it cannot run directly to Florida (thanks to your Jones Act) so instead they ran to the Bahamas, where all the passengers had to drive their cars off the ferry, sit in the cars, and then re-load onto two smaller ferries, one to Cape Canaveral and one to Ft. Lauderdale. All that extra cost has to be paid for by the passengers, and it is a huge hassle. Why?  If the Danes did not provide that service, nobody else was going to. You don't see some American stepping up and doing that with a US ship hull; it would be insanely expensive and nobody would pay the fare. The Danes eventually folded the run and pulled back their three ships (it took three to do the work of one).  Now there is NO service for anybody, and if you want to go to Florida, you can drive the 1400 miles.  Just lovely.

The Jones Act is a good example of bureaucracy run amok.  I predict it will be here for another century; old ideas die hard.

[Jouhou + 24]

In the particular thread this was spun off from, it was started from me stating that nat gas prices (and I'm thinking in peak cold season) would be lower in New England if we could actually get our lng shipped domestically. However, no US shipyard produces lng carriers nor are there any Jones act compliant vessels in service.

If the Jones act gets left in place, it needs to be amended to allow foreign built vessels where Jones act compliant versions do not exist to fill the role. This is also an issue with the offshore wind industry in the US- fortunately Jones act compliant jack-up rigs are already produced for the offshore oil industry and it only takes a few changes to repurpose one for the wind industry.

Then there's island states/territories that just simply get boned by the Jones act. I don't think I have to go into too much detail on this one because Puerto Rico has brought this issue into the spotlight again. 

Edited June 5, 2018 by Jouhou
Fixed wording

[SLL + 24]

I think it's an antiquated regulation.  I understand what it's purpose WAS, but I don't think it's been terribly successful.

[Jan van Eck + 7,558]

26 minutes ago, mthebold said:

Is there a political reason to keep these islands remote? 

Probably not.  The Islands, including Puerto Rico and the US Virgin Islands in the Caribbean and Guam and Wake Islands and the Marshalls in the Pacific, are historical anomalies, for the Atlantic end the left-overs from the War of 1898 with Spain. The local populations have nothing in common with US Mainlanders, and in the case of Puerto Rico at least the inhabitants ended up with both US Citizenship and US Nationality, so they can freely migrate back and forth to the US Mainland.  At one point there was an active guerrilla movement for Puerto Rican independence, the US authorities vigorously suppressed the Movement and jailed the leaders with very long jail terms. At this point the US Senate has no clue how to deal with what are in effect colonies of the USA, something the politicians would wish to have go away but nobody can figure out how to do it.  

The idea (unspoken, as it is politically incorrect) that Puerto Ricans should be kept off the Mainland, by instituting some kind of severance, is going nowhere, as the Puerto Ricans have for the last century been migrating onto the Mainland.  Possibly the Senate could unilaterally bestow independence upon the Island, but with all the natives now US citizens, there is no way to untie that Gordian Knot.  There is no logic to the USA hanging on to PR, but no logical way to disentangle either.  So, in the approved political solution, the problem gets kicked down the road for somebody else to go figure out later.  Which, of course, is never. 

[Rasmus Jorgensen + 1,169]

@mthebold 

The Jones is a piece of legislation that says that moving goods between American ports (or offshore installation) has to be done with American built and flagged vessels. 

In an oil & gas context this has created a protected market for American shipbuilders and offshore shipping and construction companies. Naturally, lack of competetion made American companies complacent and they lost their global competetive edge. What was a world leading cluster of the industry 50 years ago is now lacking behind in terms of economic and quality. This has lost America money. American companies could have competed internationally, there could be more offshore investment in the GoM etc... 

Due to recent business I have first hand knowledge of building prices and quality of American offshore shipyards. They are more expensive than Chinese and even European yards. And what is more surprising is the even the build quality is lacking behind chinese yards. All due to the Jones Act disabling the free market. 

Protectionist nationalist agendas always loses in the long run. 

[Rasmus Jorgensen + 1,169]

27 minutes ago, mthebold said:

I.e. everyone has to play by the same rules for it to be "free".

Agree. See my post under the Brazil thread. I just disagree with how Trump goes about leveling the playing field. 

[Rasmus Jorgensen + 1,169]

45 minutes ago, mthebold said:

I gather you'd like to level the playing field through international agreements.  E.g. the TPP and... whatever Europe had in mind.  Would those agreements have addressed the imbalances between America & our "allies" though?  

Honestly don't know. But that could have been negotiated if they didn't. Too late to find out I guess. 

[Andrew Butter + 2]

We do lift-boats, steel is done in China with the systems...rack, jacking, engines, generators, electronics, largely sourced in USA, but the Chinese are learning, and if the rig is there it's simpler to buy locally, if the quality is there, which increasingly it is. Those rigs cost 75% of what they would cost made in USA, so US lift-boats are old and antiquated, not fit for modern requirements; which means US offshore suffers, and also US suppliers of systems will increasingly lose business. I used to go to Houston twice a year, these days I just go to China; but if we could build rigs in US, we would.

[Rasmus Jorgensen + 1,169]

3 hours ago, Andrew Butter said:

We do lift-boats, steel is done in China with the systems...rack, jacking, engines, generators, electronics, largely sourced in USA, but the Chinese are learning, and if the rig is there it's simpler to buy locally, if the quality is there, which increasingly it is. Those rigs cost 75% of what they would cost made in USA, so US lift-boats are old and antiquated, not fit for modern requirements; which means US offshore suffers, and also US suppliers of systems will increasingly lose business. I used to go to Houston twice a year, these days I just go to China; but if we could build rigs in US, we would.

Great example of economic protectionist agenda consequences. Short term people are happy, because of job security - longterm they lose... 

[Rasmus Jorgensen + 1,169]

On 6/5/2018 at 6:07 AM, Jouhou said:

This is also an issue with the offshore wind industry in the US- fortunately Jones act compliant jack-up rigs are already produced for the offshore oil industry and it only takes a few changes to repurpose one for the wind industry.

Existing Jones Act compliant vessels cannot build windfarms or service them. It needs to be newbuilds. I know with 100 % certainty. The problem with newbuilds is

1) Quality from American yards just isn't there. Why? Because they haven't had any competetion for 100 years... 

2) To build vessels specifically for a few projects does not make a good investment case. As a result project costs become unncessary high. 

Obviously if you don't want or believe in offshore windfarms this is not a problem. On the contrary. 

Edited November 8, 2018 by Rasmus Jorgensen

[Jan van Eck + 7,558]

11 hours ago, Rasmus Jorgensen said:

@mthebold 

The Jones is a piece of legislation that says that moving goods between American ports (or offshore installation) has to be done with American built and flagged vessels. 

 

Although the statement is correct, it should be noted that it is possible to obtain a "waiver" from the Jones Act prohibitions.  Waivers allow a shipowner to import a foreign vessel and re-flag it as an American one.  There are some examples of waivers.  On the US West Coast, the entity that provides Inland Passage service between Seattle and Haines, Alaska, with stops along the way in Juneau, Ketchikan, and the Canadian ports of Skagway (Yukon), Prince Rupert, and perhaps some other uses a ferryboat built offshore, purchased used, and then waivered.  Waivers are a function of the political clout of the local congressional delegation to Washington, and in the past were issued in exchange for some Vote on some favorite program of the President of Senate Leader. 

On the US East Coast, a waiver was issued to the Port Jefferson Steamship Company for at least one ferryboat used in service across Long Island Sound.  The ferry was built in Halifax (Canada) and bought used and a but tired, and granted a waiver on the commitment of the Port Jefferson Steamship Authority to do the overhaul in a US shipyard.  These old boats still clunk along today, tired and worn, but serviceable in the calm waters of the Sound. 

Will this practice, of granting waivers, continue?  Probably not.  The use of Congressional "Earmarks," where some local project gets funded in exchange for votes on some "national" issue, is gone.  So there is no incentive for waivers, other than perhaps if the local State votes for the same party as the National winners.  As ideology has replaced pragmatism and deal-making, waivers are the casualty.

The result: perfectly good ferryboats, built in Italy, and Norway, and Denmark, and Germany, are left idle, and there is zero ferry service along the US Eastern Seaboard, or to Puerto Rico.  And such is the folly of the United States Government. 

[Rasmus Jorgensen + 1,169]

55 minutes ago, Jan van Eck said:

Although the statement is correct, it should be noted that it is possible to obtain a "waiver" from the Jones Act prohibitions. 

I know. I just simplified my statement as waivers are not widely used. Additionally, my understanding is (atleast this is the case in offshore) that waivers can only be granted if there is no US vessel that can do an equivalent job, even if the foreign built vessel can do the job cheaper and better. The result : American cosumers lose. 

[Jan van Eck + 7,558]

5 minutes ago, Rasmus Jorgensen said:

I know. I just simplified my statement as waivers are not widely used. Additionally, my understanding is (atleast this is the case in offshore) that waivers can only be granted if there is no US vessel that can do an equivalent job, even if the foreign built vessel can do the job cheaper and better. The result : American cosumers lose. 

Your analysis is correct. 

Cheers, Jan