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Posted: August 19, 2016

Congressional transportation, seapower leaders emphasize economic and national security benefits of sustaining Jones Act jurisdiction for U.S. domestic and non-contiguous trades

The following letter dated August 15 and signed by Congressmen Duncan Hunter (R-CA), chairman of the Subcommittee on Coast Guard and Maritime Transportation, John Garamendi (D-CA), ranking member on the subcommittee, J. Randy Forbes (R-VA), chairman of the Subcommittee on Seapower and Projection Forces, and Joe Courtney (D-CT), ranking member on the subcommittee, was sent to Representatives Sean Duffy (R-WI), Nydia Velázquez (D-NY), Tom MacArthur (R-NJ) and Pedro Pierluisi (D-PR).

We look forward to seeing the report of the Congressional Task Force on Economic Growth in Puerto Rico (Task Force), and we hope you are successful in finding ways to create jobs in the Commonwealth. However, based on our review over many years of issues related to the U.S. maritime industry, national sealift needs and port security initiatives, we do not believe a review of the Jones Act by the Task Force, on which neither our Committees nor our Subcommittees are represented, is necessary.

The House Committee on Transportation and Infrastructure has jurisdiction over the United States' domestic cabotage law, popularly known as the Jones Act. The House Committee on Armed Services has jurisdiction over the merchant marine as it relates to national defense. Those Committees and particularly the subcommittees on which we serve as Chairmen and Ranking Members support the Jones Act, which protects good U.S. jobs, provides jobs and industrial skills needed to support U.S. defense sealift, and provides a network of U.S. mariners who are on the water and provide a knowledgeable first line of defense in our efforts to keep our trade ports and harbors secure. If questions arise about the Jones Act as the Task Force carries out its work, and since misinformation about the Jones Act is being disseminated, the following information may be useful to you and we are glad to discuss these issues further.

The U.S. Government Accountability Office (GAO) said changes to the Jones Act in Puerto Rico could be destabilizing to the Commonwealth. Congress's first mission is "do no harm" by not making the situation in Puerto Rico worse. At the request of Congress, the GAO recently completed what has been described as the most detailed study of the Jones Act in Puerto Rico ever. It also is the rare study that comes from a non-partisan, unbiased party. A principal finding of that study was that the impacts of changes to the Jones Act in Puerto Rico were "highly uncertain." The study found that the domestic maritime industry provides "reliable, on-time service" and "just in time" delivery to the island. Many Puerto Rican importers rely on this "prompt and regular shipping" to avoid warehousing and inventory costs, which are particularly high in Puerto Rico, according to the GAO. The agency further opined that changes to the Jones Act in Puerto Rico could undermine the crucial northbound service from Puerto Rico to the mainland. And, of course, the last thing Puerto Rico needs now is the disruption of its shipping or the outsourcing of its shipping jobs to other nations.

Shipping rates to Puerto Rico on Jones Act vessels from the mainland are the lowest in the region. You will hear many "facts" about the cost impact of the Jones Act in Puerto Rico and most have no basis. We do know that actual shipping rates from the U.S. mainland to Puerto Rico on Jones Act vessels are the lowest in the Caribbean - lower than rates on non-Jones Act vessels from the U.S. mainland to locations like the Dominican Republic. Allegations by some that shipping to the Virgin Islands is cheaper than Puerto Rico are flatly wrong. In fact, one analysis shows it is 40 percent more expensive to ship goods from the U.S. mainland on foreign vessels to the U.S. Virgin Islands (not subject to the Jones Act) than on Jones Act vessels to Puerto Rico. Similarly, the GAO asserted that it is impossible to accurately assess the "cost" of the Jones Act, if any, because it is impossible to know what additional American laws would be applied to foreign shipping companies were they ever allowed to engage in the U.S. domestic trades, and too many factors impact freight rates to assess a "cost" of the Jones Act.

Changes to the Jones Act in Puerto Rico could undermine national security, according to the GAO. The GAO specifically noted that the "military strategy of the United States relies on the use of commercial U.S.-flag ships and crews and the availability of a shipyard industrial base to support national defense needs." Leading representatives of the U.S. Department of Defense, Navy, and Coast Guard have all spoken about the military importance of the Jones Act, as has Congress, in a clear and unambiguous way. In its study, the GAO discussed the possible negative consequences of changes to the Jones Act in Puerto Rico on military readiness. We urge you to keep the national security benefits of the Jones Act front of mind. Also be aware that changes to the Jones Act in one part of the country would have important implications in other parts of our nation, undermining future investment in every segment of the Jones Act industry from the Great Lakes to the U.S. inland waters to the Gulf of Mexico to coastal waterways.

The Jones Act is important to American homeland security. Within the last several months, numerous experts and commentators have emphasized the importance of the Jones Act to homeland security. Recent reports like those from the Lexington Institute (e.g., Venerable Jones Act Provides An Important Barrier To Terrorist Infiltration of the Homeland) emphasize the importance of this law to keeping our nation secure. One expert and former 9/11 Commission member said, "helping plug a porous border is a benefit of the Jones Act that is far too often overlooked."

The Jones Act creates American jobs. The last thing Puerto Rico needs today is the outsourcing of American shipping jobs. Many of these jobs relate directly to the nearly $1 billion in Jones Act-related private sector investments currently underway to renew the vessels, equipment, and infrastructure serving Puerto Rico's trade. Changes to the Jones Act in Puerto Rico would undermine these investments in modern, state-of-the-art American vessels operating between the U.S. mainland and Puerto Rico. Moreover, changing the Jones Act in Puerto Rico will have negative impacts on other parts of the domestic maritime industry not directly serving the Puerto Rican trades, such as the nation's critically important shipbuilding industrial base and the pool of qualified mariners needed in time of war or national emergency.

We have spent years studying and understanding the implications of the Jones Act both from commercial and military perspectives. Our subcommittees have heard from numerous executive branch officials (including defense officials) and industry representatives about the important benefits of the Jones Act. We do not believe the Task Force needs to address this issue. However, if issues related to the Jones Act arise during Task Force discussions, we urge you to reach out to us.