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Thursday, December 04, 2014
The Jones Act’s Costly Impact
By Heritage Foundation @ 3:59 PM :: 2897 Views :: Jones Act

The Jones Act’s Costly Impact

Heritage Foundation Factsheet #154 December 4, 2014

  • The Jones Act, also known as the Merchant Marine Act of 1920, requires that vessels used for domestic shipping must be built in the United States, owned by U.S. citizens, and at least 75 percent crewed by U.S. citizens.
  • U.S. law allows shippers to transport goods domestically on cars, trucks, aircraft, or rail cars built in other countries. Just not ships.

Costly Impact

  • According to the Congressional Research Service, the purchase price for U.S.-built tankers is about four times the price of foreign-built tankers.
  • According to the World Economic Forum, the ban on letting foreign ships trans-ship cargo between U.S. ports costs the U.S. economy $200 million per year.
  • According to the Federal Reserve Bank of New York, shipping a 20-foot container of household and commercial goods from the East Coast to Puerto Rico on a Jones Act ship costs twice as much as shipping the same goods to the nearby Dominican Republic.

Harmful in Time of Emergency

  • In the aftermath of Hurricanes Sandy, Katrina, and Rita, the federal government waived the Jones Act to expedite the delivery of fuel. Earlier this year, New Jersey’s state Assembly voted 73-0 to ask Congress to modify the Jones Act after the state was unable to obtain readily available road salt during a severe winter storm.

 

Increased Energy Prices

  • The Jones Act raises gas prices by as much as 15 cents per gallon.
  • Foreign-flagged ships could transport oil for an estimated one-third of the cost of U.S.-flagged ships.
  • Electricity prices in Hawaii are nearly double those in the state with the next highest prices, in part because Hawaii generates 75 percent of its electricity from petroleum and must rely on Jones Act vessels for all domestic oil shipments.
  • Puerto Rico’s Electric Power Authority reportedly pays as much as 30 percent more for liquefied natural gas because of restrictions on the use of foreign-flagged ships.

Dubious National Security Claims

  • The U.S. Department of Defense has frequently leased foreign vessels to execute missions that required additional sealift capacity. Policymakers should strive to provide the Navy and Coast Guard with the fleets they need and have requested instead of subjecting the entire U.S. economy to the inefficiencies of a massive protectionist regime that has not sustained either of the sea services.
  • Air and ground transportation, which are vital to U.S. defense, aren’t subject to Jones Act-style restrictions. Ocean transportation should not be restricted either.
  • Jones Act proponents argue that America must keep its shipyards in operation in case that capacity is required in times of military buildup. Yet of the five shipyards that produce major vessels for the Navy and Coast Guard, only one also builds large commercial vessels under the protection of the Jones Act.

Fixing the Jones Act

The government should repeal all aspects of the Jones Act that interfere with the free flow of commerce. Doing so would:

  • Allow U.S. shipping companies and their employees to benefit from foreign investment,
  • Give U.S. shippers the freedom to use foreign-built vessels when it is more economical to do so,
  • Remove a costly barrier to the trans-shipment of goods between domestic ports, and
  • Facilitate the transport of goods between the continental United States and noncontiguous locations including Hawaii and Puerto Rico.

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