Agenda Item for 2014 Legislative Session - Noncontiguous Trades Jones Act Reform (NTJAR) proposed by the Hawaii Shippers Council
Dear Senate President Kim, Mr. Souki, Members of the Hawaii Senate, and Members of the Hawaii House of Representatives, January 7, 2014
The 2014 Hawaii Legislature will be requested to consider passage of a resolution on reforming the Jones Act. I endorse and support the initiative of the Hawaii Shippers Council and urge your support and passage.
Placing this matter as a priority agenda item and formulating task forces in both chambers of the Hawaii Legislature to work jointly and collectively will be most helpful in securing passage of this legislative matter at the earliest time. The Resolution, directed to the non contiguous states, Hawaii being one, has a rippling and overall beneficial impact for all US Flag carriers, shipyards, port operators, consumers and most importantly merchant seamen.
Proponents and supporters of the Jones Act will inevitably view a resolution calling for reform of the Jones Act as activist, intrusive, subversive, and to some unpatriotic. Rest assured that activism as intended by the Resolution's call for reform is based on fact and careful analysis. Often fact and truth are difficult to accept. For the longest time the proponents and supporters have deflected attempts to reform the Jones Act and have maintained a steadfast defensive posture. Denying the need for reform will accelerate the further and eventual damage to the maritime industry in the United States.
The substantive language of the Resolution calls for a bold and assertive reform of the Jones Act. From my view this is a wake up call is to unite and come to terms with a provision of law for which the time has come for reform. There needs to be a starting point. The Resolution will serve as a foundation for the industry, regulators, consumers, and the legislators to address a matter that is longstanding and of great import to the Nation.
Like an acorn that grows into a giant oak tree, the careful nurturing will ensure its growth and existence for many years. I am confident that The Hawaii Shippers Council will take your approval and outreach to other non contiguous and contiguous states to generate national support for reform of the Jones Act.
The request from the Hawaii Shippers Council was first introduced into the Hawaii State House of Representatives in 2013. Please refer to:
HR 119: http://www.capitol.hawaii.gov/session2013/Bills/HR119_.PDF
HCR 150: http://www.capitol.hawaii.gov/session2013/Bills/HCR150_.PDF
The Resolution was not placed on the House Transportation Committee calendar for hearing., thereby was not brought to formal vote The intent in 2014 is to have the measure introduced into both the Senate and the House for consideration and passage.
Governor Abercrombie has said that the happenings in Washington, D.C. have migrated to Hawaii. Indeed, the federal budget crisis, sequestration, furloughs, agency budget and personnel cuts, trimming of entitlements and benefits, delays in passage of major legislation, and the morass and entanglements in Congress have impacted Hawaii and will continue to impact on Hawaii for the future..
The bottom line is programs, grants, incentives, protectionist laws and legislation need to be reviewed and a determination made whether or not reform is mandated to streamline the governmental process, that is, maintain programs, grants, incentives, protectionist laws and legislation that are in keeping with their intended purpose; terminate programs, grants, incentives, protectionist laws and legislation that have extended beyond their economic value and intended purposes; and reform programs, grants, incentives, protectionist laws and legislation that continue to serve their intended purposes and require streamlining to make their processes efficient, effective, and competitive.
The proposed reform of the Jones Act maintains its core intent and seeks to strengthen and integrate concepts to allow US Flags Carriers to compete in the shipping industry.
As the shipping industry as a whole struggles in this economic environment and shippers strain to keep their businesses moving forward, major shippers have formed and are forming alliances.
The US Federal Maritime Commission in February 2013 approved the comprehensive agreement between members of The New World and Grand alliances and the creation of The G6 Alliance. New World Alliance members are APL, Hyundai Merchant Marine, and Mitsui O.S.K Lines. Grand Alliance members are Hapag-Lloyd AG, Nippon Yusen Kaisha and Orient Overseas Container Line. The G6 Alliance created one of the leading shipping networks in the Far East-to-Europe and Far East-to-Mediterranean container shipping markets. More than 90 ships calling at more than 40 ports in Asia, Europe and the Mediterranean.
Currently the US Federal Maritime Commission is considering the application file by the P3 Alliance - Maersk Line (US Flag Carrier), MSC (Mediterranean Shipping Company S.A., a Swiss shipping company) and CMA CGM (Compagnie Maritime d'Affrètement (CMA) Compagnie Générale Maritime (CGM), a French container transportation and shipping company).
These major shipping companies previously held a distinct competitive advantage over smaller shipping companies. The current concern within consignees, the shipping industry, industry regulators, in the United States and the European Union is the further impact of these alliances on their trade sector and on small carriers that provide a necessary services but who may be forced out of business or be absorbed.
The reform of the Jones Act focuses on the US build requirement for vessel construction as this is the major cost factor and consideration for shippers and investors seeking to build and place into service newer more fuel efficient and environmentally compliant vessels or to upgrade existing vessels. In prior years the term US built meant 100% built in the United States.
1. "To be considered built in the United States a vessel must meet both of the following criteria: (a) All major components of its hull and superstructure are fabricated in the United States; and (b) The vessel is assembled in the United States.” 46 C.F.R. § 67.97
2. Foreign components amounting to less than 1.5% of a vessel's steelweight are not considered "major" as that term is used in 46 C.F.R. § 67.97(a).
This inroad has been carved out after years of struggle by the shipping industry to maintain its high standards of safety and integrity and achieve cost competiveness.
The reform urged by The Hawaii Shippers Council maintains the original purpose of the Jones Act, that is, the protection of Merchant Seamen. The requirements of safety at sea, vessel stability and integrity, environmental and security considerations are preserved.
For many reasons and for many years, regulators of the shipping industry and the courts have viewed complaints and concerns raised by small groups and/or individuals as not representative of the diverse interests of the populace, that is, residents, businesses, and the community.
Collectively and jointly the Resolution from the State of Hawaii will send a clear and unambiguous message conveying the urgency, necessity, and focus required to reform the Jones Act.
Your consideration and passage of the Resolution from the Hawaii State Legislature and Governor Neil Abercrombie requesting reform of the Jones Act is respectfully requested.
Clifton M. Hasegawa
President & CEO
Clifton M. Hasegawa & Associates, LLC