Connections Magazine

Summer 2013 Connections

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In Defense of the Jones Act From Tom Crowley Jr. CEO and Chairman Crowley Maritime The Government Accountability Office (GAO) came out with its muchanticipated study of the effect of the Jones Act on Puerto Rico this spring, reporting (contrary to what opponents of the Act want to believe) that rising consumer prices on the island are not being caused by U.S.-flag carriers. Moreover, GAO reported that the four carriers in the trade "provide reliable, on-time service between the U.S. and Puerto Rico, allowing shippers to meet Just in Time delivery needs. In fact, many island importers' inventory management relies on prompt and regular shipping and receipt of needed goods to stock shelves, instead of warehousing goods, a benefit that helps minimize inventory storage costs." Presented with the evidence of reliable, on-time service, the GAO questioned the wisdom of modifying the application of the Jones Act for Puerto Rico, as some have suggested, saying "it is possible that the reliability and other beneficial aspects of the current service could be affected." In particular, GAO noted the benefits to customers of being able to utilize highcapacity 45-, 48- and 53-foot containers in the trade, whereas foreign carriers only provide 20- and 40-foot standard containers. They also reported that in the absence of the Jones Act, foreign carriers currently serving Puerto Rico as part of a multiple-stop trade route, or via a transshipment location, would likely continue this model "rather than provide dedicated service … as current Jones Act carriers provide." GAO said, "Reduced reliability of service could result in shippers needing to keep larger inventories of products, and could thus increase warehousing and inventoryrelated costs for companies in Puerto Rico." Some stakeholders interviewed by GAO "expressed concern about the possible loss of convenient and inexpensive backhaul (northbound) service," which could occur if foreign carriers chose to utilize multi-port trade routes and not provide dedicated service to the U.S. Additionally, and most importantly, if the Act was weakened or eliminated, GAO reported, that "unrestricted competition from foreign flag vessels could result in the disappearance of most U.S.-flag vessels in this trade, having a negative impact on the U.S. merchant marine and the shipyard industrial base that the Act was meant to protect." The Jones Act was established because of its vital importance to the security and economic wellbeing of the United States of America. It requires that all goods transported by water between U.S. ports be carried on U.S.-flag ships, which are constructed in the U.S., owned by U.S. citizens, and crewed by U.S. citizens and permanent residents. As such, the Act helps ensure the long-term viability of U.S. shipyards and a skilled U.S. merchant marine, both of which are essential in wartime and during national emergencies. Critics will always nit-pick elements of the Jones Act and some will even call for its reform. But, that cannot be allowed to happen. It is absolutely essential to our nation's economic and homeland security. Without it, there would be no U.S. shipyards and no U.S. merchant marine. This work would essentially be outsourced to low-cost foreign companies who do not have to comply with U.S. wages, taxes, or meet national safety or environmental standards. It would jeopardize nearly 500,000 U.S. jobs, $29 billion in labor compensation, and more than $100 billion in annual economic output currently attributed the U.S. domestic shipping industry. This is why the Act has enjoyed the support of the U.S. Navy, members of Congress of both parties, and every U.S. president in modern history. There is also the issue of fairness and consistency to consider. Railroads, airlines, trucking and cruise ship companies, among others, play by a similar set of cabotage rules. Only U.S. companies are allowed to provide domestic transportation services. Foreign operators can carry cargo and passengers from the U.S. to foreign destinations and vice versa, but cannot transport them between points in the U.S. Foreign countries have cabotage laws prohibiting U.S. companies from doing the same in their countries. Allowing foreign companies to operate in the U.S. outside of our immigration, employment, safety, environmental, tax, labor and other laws would be unfair. Every industry in the U.S. providing services exclusively in domestic commerce does so in accordance with U.S. laws, and the shipping industry is no exception. It needs to remain that way. Crowley will continue to be a strong proponent of the Jones Act, because it is not only good for America, but also for companies who have built key parts of their business around serving customers in U.S. domestic markets. Crowley is one of those companies. We have invested more than $1 billion over the last 10 years in new U.S.-flag vessels and we plan to invest another $1 billion over the next several years. It is essential to Crowley and all others who compete in this market that the Act not be weakened or eliminated. All of us have chosen to compete and play by the rules. Now we just need to ensure that the rules aren't changed halfway through the game. Tom Crowley Chairman and CEO

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