Posted:
August 19, 2015
When there is a problem, people often seek someone or something to blame.
Business interests with a stake in opening U.S. domestic markets to foreign shipping, along with political opportunists who have an ideological hand to play, are working overtime to capitalize on this truism by heaping false blame for Puerto Rico's debt crisis on the Jones Act and the U.S. maritime industry.
The persistently shrinking tax base in Puerto Rico and the Commonwealth's inability to pay more than $70 billion in pubic debt have many causes, but the Jones Act is not one of them.
The U.S. Government Accountability Office (GAO) in an extensive study of the Jones Act and Puerto Rico's maritime trade found, among other things, the Jones Act "has helped to ensure reliable, regular service between the United States and Puerto Rico - service that is important to the Puerto Rican economy."
Faced with this fact, Jones Act critics are injecting false assertions and baseless claims into the public discussion of Puerto Rico's debt crisis, cynically seizing a new platform from which to attack the time-tested statute that is vital to U.S. commerce, national security and defense.
In an op-ed published August 6 by The New York Times, Nelson Denis stated: "The most unfair law of all is the Merchant Marine Act of 1920, also known as the Jones Act, which requires that every product that enters or leaves Puerto Rico - cars from Japan, engines from Germany, food from South America, medicine from Canada - must be carried on a United States ship."
In this context, the Jones Act only affects cargo transported directly between the continental U.S. and Puerto Rico, requiring that vessels serving in this specific trade be owned and operated by U.S. companies, built by U.S. shipyards, registered in the U.S., and manned by U.S. mariners.
The Jones Act has no influence whatsoever over the ability of foreign-flagged ships carrying "cars from Japan, engines from Germany, food from South America, medicine from Canada" or any cargo or commodity from any foreign port to deliver their cargo to Puerto Rico. The Jones Act has no bearing whatsoever on the ability of foreign-flagged ships to carry export cargo from Puerto Rico to any foreign port.
As noted by the American Maritime Partnership (AMP) in a report published online in July regarding the Jones Act and Puerto Rico: "Merchandise can be imported and exported from anywhere in the world, and traded with anyone at any time." In 2011, the GAO concluded two-thirds of the ships serving Puerto Rico are foreign ships, and 55 different foreign carriers provided imported cargo to Puerto Rico in a single month. Foreign shipping companies compete directly with the American shipping companies in an intensely competitive transportation market.
The assertion injected by Denis and others, although completely false, has made it into the bloodstream of the mainstream media.
An Associated Press report dated August 7 stated the Jones Act "mandates that only ships owned, built and operated in a U.S. state can carry cargo to and from the island." A PBS Newshour report dated August 13 stated: "The Jones Act, which requires everybody in Puerto Rico to buy goods from an American-made ship with an American crew, limits business owners and jacks up prices."
In his op-ed, Denis conflates the U.S. cabotage law with separate trade requirements and import-export costs that have no relationship whatsoever to the Jones Act. "A foreign-flagged vessel may directly enter Puerto Rico - but only after paying taxes, customs and import fees that often double the price of the goods it carries," he wrote.
Duties and import fees could apply to any foreign cargo imported to Puerto Rico, regardless of the registry of the ship carrying it.
The GAO in its study noted foreign-flagged ships carrying imported cargoes to Puerto Rico are not subject to U.S. taxation, U.S. immigration, U.S. safety and other U.S. laws. Should the Jones Act be modified or repealed, foreign-flagged vessels operating in the U.S. domestic trades could be subject to many of the same laws as U.S.-flagged vessels, drastically affecting any perceived cost savings. The GAO found that: "Foreign carriers operating in the U.S. coastwise trade could be required to comply with other U.S. laws and regulations, which could increase foreign carriers' costs and may affect the rates they could charge."
The media reports cited, as well as others in circulation, suggest, imply or directly state the Jones Act should be altered or repealed. Denis, in his op-ed, goes farther with the baseless claim: "From 1970 through 2010, the Jones Act cost Puerto Rico $29 billion."
However, in its study published in 2013, the GAO stated: "So many factors influence freight rates and product prices that the independent effect and associated economic costs of the Jones Act cannot be determined."
According to the GAO, the loss of the Jones Act and the dedicated U.S.-flag service it sustains for Puerto Rico would probably produce less reliable, less timely and less consistent service, resulting in "difficult trade-offs" - including the need for warehousing more goods for longer periods at higher expense.
As noted by the AMP report published in July, many goods imported by Puerto Rico are perishables requiring on-time delivery. Jones Act carriers meet the just-in-time delivery demands of import inventory managers who rely on prompt shipping to stock shelves and limit costly warehousing in Puerto Rico.
According to the GAO study: "If the Jones Act were exempted, foreign carriers that currently serve Puerto Rico as part of a multiple-stop trade route would likely continue this model to accommodate other shipping routes to and from other Caribbean destinations or world markets rather than provide dedicated service between the United States and Puerto Rico, as the current Jones Act carriers provide."
Longer multi-port trade routes make it difficult to ensure the reliability and consistency of scheduled service. International carriers are more likely to experience lengthy weather delays or delays at ports, and could even intentionally bypass ports on occasion to make up lost travel time, AMP noted.
The GAO also observed modifications to the Jones Act would cause "uncertain" impacts, with some being highly negative, and could lead to the "loss of convenient and inexpensive backhaul service" from Puerto Rico to the mainland.
The media reports critical of the Jones Act do not touch upon the essential roles served by the cabotage law in national security, U.S. sealift strategy, U.S. military operations and domestic commerce. These reports do not mention American companies are currently spending billions of dollars building state-of-the-art ships in American shipyards specifically to provide the most efficient and environmentally friendly cargo service possible in the Puerto Rico trade.
Either due to ignorance or intent, the reports cited supply hollow blocks for the construction of a specious case against a vital U.S. law that sustains an American industry employing nearly 500,000 and generating an annual economic impact of nearly $100 billion.
As pointed out by AMP Chairman Thomas Allegretti in a letter to the editor published August 13 by The New York Times: "To blame the domestic American maritime industry for the financial woes of Puerto Rico is wrong. The reality is that the domestic American maritime industry supports the people of Puerto Rico."
Jones Act critics inject false assertions into coverage of Puerto Rico's debt crisis
When there is a problem, people often seek someone or something to blame.
Business interests with a stake in opening U.S. domestic markets to foreign shipping, along with political opportunists who have an ideological hand to play, are working overtime to capitalize on this truism by heaping false blame for Puerto Rico's debt crisis on the Jones Act and the U.S. maritime industry.
The persistently shrinking tax base in Puerto Rico and the Commonwealth's inability to pay more than $70 billion in pubic debt have many causes, but the Jones Act is not one of them.
The U.S. Government Accountability Office (GAO) in an extensive study of the Jones Act and Puerto Rico's maritime trade found, among other things, the Jones Act "has helped to ensure reliable, regular service between the United States and Puerto Rico - service that is important to the Puerto Rican economy."
Faced with this fact, Jones Act critics are injecting false assertions and baseless claims into the public discussion of Puerto Rico's debt crisis, cynically seizing a new platform from which to attack the time-tested statute that is vital to U.S. commerce, national security and defense.
In an op-ed published August 6 by The New York Times, Nelson Denis stated: "The most unfair law of all is the Merchant Marine Act of 1920, also known as the Jones Act, which requires that every product that enters or leaves Puerto Rico - cars from Japan, engines from Germany, food from South America, medicine from Canada - must be carried on a United States ship."
In this context, the Jones Act only affects cargo transported directly between the continental U.S. and Puerto Rico, requiring that vessels serving in this specific trade be owned and operated by U.S. companies, built by U.S. shipyards, registered in the U.S., and manned by U.S. mariners.
The Jones Act has no influence whatsoever over the ability of foreign-flagged ships carrying "cars from Japan, engines from Germany, food from South America, medicine from Canada" or any cargo or commodity from any foreign port to deliver their cargo to Puerto Rico. The Jones Act has no bearing whatsoever on the ability of foreign-flagged ships to carry export cargo from Puerto Rico to any foreign port.
As noted by the American Maritime Partnership (AMP) in a report published online in July regarding the Jones Act and Puerto Rico: "Merchandise can be imported and exported from anywhere in the world, and traded with anyone at any time." In 2011, the GAO concluded two-thirds of the ships serving Puerto Rico are foreign ships, and 55 different foreign carriers provided imported cargo to Puerto Rico in a single month. Foreign shipping companies compete directly with the American shipping companies in an intensely competitive transportation market.
The assertion injected by Denis and others, although completely false, has made it into the bloodstream of the mainstream media.
An Associated Press report dated August 7 stated the Jones Act "mandates that only ships owned, built and operated in a U.S. state can carry cargo to and from the island." A PBS Newshour report dated August 13 stated: "The Jones Act, which requires everybody in Puerto Rico to buy goods from an American-made ship with an American crew, limits business owners and jacks up prices."
In his op-ed, Denis conflates the U.S. cabotage law with separate trade requirements and import-export costs that have no relationship whatsoever to the Jones Act. "A foreign-flagged vessel may directly enter Puerto Rico - but only after paying taxes, customs and import fees that often double the price of the goods it carries," he wrote.
Duties and import fees could apply to any foreign cargo imported to Puerto Rico, regardless of the registry of the ship carrying it.
The GAO in its study noted foreign-flagged ships carrying imported cargoes to Puerto Rico are not subject to U.S. taxation, U.S. immigration, U.S. safety and other U.S. laws. Should the Jones Act be modified or repealed, foreign-flagged vessels operating in the U.S. domestic trades could be subject to many of the same laws as U.S.-flagged vessels, drastically affecting any perceived cost savings. The GAO found that: "Foreign carriers operating in the U.S. coastwise trade could be required to comply with other U.S. laws and regulations, which could increase foreign carriers' costs and may affect the rates they could charge."
The media reports cited, as well as others in circulation, suggest, imply or directly state the Jones Act should be altered or repealed. Denis, in his op-ed, goes farther with the baseless claim: "From 1970 through 2010, the Jones Act cost Puerto Rico $29 billion."
However, in its study published in 2013, the GAO stated: "So many factors influence freight rates and product prices that the independent effect and associated economic costs of the Jones Act cannot be determined."
According to the GAO, the loss of the Jones Act and the dedicated U.S.-flag service it sustains for Puerto Rico would probably produce less reliable, less timely and less consistent service, resulting in "difficult trade-offs" - including the need for warehousing more goods for longer periods at higher expense.
As noted by the AMP report published in July, many goods imported by Puerto Rico are perishables requiring on-time delivery. Jones Act carriers meet the just-in-time delivery demands of import inventory managers who rely on prompt shipping to stock shelves and limit costly warehousing in Puerto Rico.
According to the GAO study: "If the Jones Act were exempted, foreign carriers that currently serve Puerto Rico as part of a multiple-stop trade route would likely continue this model to accommodate other shipping routes to and from other Caribbean destinations or world markets rather than provide dedicated service between the United States and Puerto Rico, as the current Jones Act carriers provide."
Longer multi-port trade routes make it difficult to ensure the reliability and consistency of scheduled service. International carriers are more likely to experience lengthy weather delays or delays at ports, and could even intentionally bypass ports on occasion to make up lost travel time, AMP noted.
The GAO also observed modifications to the Jones Act would cause "uncertain" impacts, with some being highly negative, and could lead to the "loss of convenient and inexpensive backhaul service" from Puerto Rico to the mainland.
The media reports critical of the Jones Act do not touch upon the essential roles served by the cabotage law in national security, U.S. sealift strategy, U.S. military operations and domestic commerce. These reports do not mention American companies are currently spending billions of dollars building state-of-the-art ships in American shipyards specifically to provide the most efficient and environmentally friendly cargo service possible in the Puerto Rico trade.
Either due to ignorance or intent, the reports cited supply hollow blocks for the construction of a specious case against a vital U.S. law that sustains an American industry employing nearly 500,000 and generating an annual economic impact of nearly $100 billion.
As pointed out by AMP Chairman Thomas Allegretti in a letter to the editor published August 13 by The New York Times: "To blame the domestic American maritime industry for the financial woes of Puerto Rico is wrong. The reality is that the domestic American maritime industry supports the people of Puerto Rico."