Wednesday, September 18, 2019
Hawai'i Free Press

Current Articles | Archives

Friday, February 15, 2019
U.S.-build rule deters ocean cargo service to Hawaii
By Grassroot Institute @ 3:16 AM :: 1245 Views :: Jones Act

U.S.-build rule deters ocean cargo service to Hawaii

by Jonathan Helton, Grassroot Institute, Feb 13, 2019

Have you ever wondered why there are only a few ocean common carriers carrying goods between Hawaii and the U.S. mainland?

Mainly it has to do with the federal U.S. shipping law known as the Jones Act, otherwise known as Section 27 of the Merchant Marine Act of 1920.

Not only does the Jones Act block foreign companies from transporting goods between U.S. ports by requiring that all ships in the domestic trade be U.S.-owned, U.S.-flagged, and three-fourths crewed by Americans, it also requires the qualified carriers to use only substantially overpriced U.S.-built ships.[1]

As a result, only two companies — Matson Inc. and Pasha Hawaii Transport Lines LLC — have held dominance over the Hawaii-U.S. mainland cargo market for years.[2]

The Congressional Research Service estimated in 2017 that U.S.-built ships can cost six to eight times more than foreign-built ones.[3] This amounts to millions of dollars in extra costs, dis-incentivizing U.S. carriers from purchasing new ships. The effect has been to insulate Matson and Pasha from additional competition from U.S-owned, U.S.-flagged ships, as evidenced recently when TOTE Maritime was considering entering the Hawaii-U.S. mainland market.

TOTE had planned on buying four ships from Philadelphia Shipyard. While the exact cost it would have had to pay for the ships is not publicly available, there are some estimates. Matson recently bought two containerships from Philly at a cost of $418 million.[4] TOTE’s order was for ships of a similar size, meaning they would have likely had to spend almost $900 million for all four.[5]

TOTE was apparently prepared to pay for the extra costs of the four additional U.S.-built ships, but when combined with other factors, the cost of the ships became a deal-breaker. Those other factors included having to upgrade the piers assigned to it by the Hawaii Department of Transportation, having to procure cranes for cargo loading and unloading, and “possibly some dredging.”[6]

If TOTE could have bought its ships at a fraction of the cost from South Korea, it might have been able to afford the necessary harbor upgrades. Instead, TOTE canceled its plans entirely.

If TOTE had been able to enter the Hawaii market, competition would have increased, likely leading to lower prices, thereby benefiting shippers and consumers.

The precedent for that? One year after Pasha entered the Hawaii market in 2006, competing against Matson and Horizon Lines, Matson’s vehicle business (the transporting of cars and other vehicles) was off 20 percent.[7] To retain market share, both Matson and Horizon had to lower their rates.[8]

Currently Hawaii has few transportation choices, and the Jones Act’s U.S.-build restriction is a major reason. Artificially high capital costs have been a barrier to entry, and led to Hawaii to have only two ocean cargo carriers to serve the market. Horizon pulled out of the market in 2014, citing the high maintenance and potential replacement cost of its “aging ships” as a factor.[9]

Eliminating the Jones Act’s U.S.-build requirement for ocean cargo vessels would lower the cost of entry for potential competitors, likely leading to increased competition and decreased costs for Hawaii consumers.

—————

[1] “Merchant Marine Act of 1920,” Wikipedia, January 2019, https://en.wikipedia.org/wiki/Merchant_Marine_Act_of_1920.

[2] Michael Hansen, “TOTE pulls plug: What will Hawaii DOT, Philly Shipyard, Pasha and Matson do next?” Hawaii Free Press, Jan. 31, 2018, http://www.hawaiifreepress.com/ArticlesMain/tabid/56/ID/21066/TOTE-pulls-plug-What-will-Hawaii-DOT-Philly-Shipyard-Pasha-and-Matson-do-next.aspx. There are other carriers that ship goods between Hawaii and the mainland, such as Crowley Maritime Corp. and Kirby Corp., but they operate ocean-going “articulated tug barges” instead of ships, limiting their market share to mainly liquids such as petroleum. See “Petroleum and Chemical Transportation,” Crowley Maritime Corp., http://www.crowley.com/what-we-do/petroleum-and-chemical-transportation/overview, and  “Fincantieri Bay Shipbuilding Delivers Kirby ATB,” Maritime Executive, Jan. 26, 2018, https://www.maritime-executive.com/corporate/fincantieri-bay-shipbuilding-delivers-kirby-atb-1.

[3] John Frittelli, “Revitalizing Coastal Shipping for Domestic Commerce,” Congressional Research Service, May 2, 2017, p. 6, https://fas.org/sgp/crs/misc/R44831.pdf.

[4] Joseph Bonney, “Matson orders two container/ro-ro ships for Hawaii trade,” Journal of Commerce, Aug. 26, 2016, https://www.joc.com/maritime-news/container-lines/matson/matson-spend-511-million-two-ships-hawaii-trade_20160826.html.

[5] Ibid, and Mike Schuler, “TOTE’s Plan for New Hawaii Shipping Service Put on Indefinite Hold; Construction Suspended on Four Newbuilds at Philly Shipyard,” gCaptain, Jan. 26, 2018, https://gcaptain.com/totes-plan-for-new-hawaii-shipping-service-put-on-hold.

[6] Hansen, op. cit.

[7] Malia Hill, “The Sinking Ship of Cabotage: How the Jones Act lets unions and a few companies hold the economy hostage,” Capital Research Center, April 7, 2013, https://capitalresearch.org/article/the-sinking-ship-of-cabotage-how-the-jones-act-lets-unions-and-a-few-companies-hold-the-economy-hostage.

[8] Stephanie Nall, “New competition in Hawaii,” Journal of Commerce, April 10, 2005, https://www.joc.com/new-competition-hawaii_20050410.html.

[9] Mike Schuler, “Horizon Lines to Terminate Puerto Rico Service, Announces Sale of Remaining Company,” gCaptain, Nov. 11, 2014,  https://gcaptain.com/horizon-lines-to-terminate-puerto-rico-service-announces-sale-of-remaining-company.

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

808 State Update AM940

ABCDEFG Blog

ACA Signups Hawaii

ACCE

ALEC

Alliance Defending Freedom

Aloha Conservative Alliance

Aloha Life Advocates

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

American Mothers of Hawaii

AMVETS-Hawaii

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Audit The Rail

Ballotpedia Hawaii

Better Hawaii 

Blaisdell Memorial Project

Broken Trust

CAFR Hawaii

Castaway Conservative

Children's Alliance Hawaii

Children's Rights Institute

Christian Homeschoolers of Hawaii

Citizens for Recall

Cliff Slater's Second Opinion

Coffee Break

Conservative Forum for Hawaii

CSIS Pacific Forum

DAR Hawaii

DeedySupport.com

DVids Hawaii

E Hana Kakou Kelii Akina

E Māua Ola i Moku o Keawe

Farmers For Choice Hawaii

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Get Off Your Butts!

God, Freedom, America

Grassroot Institute

Habele.org

Hawaii Aganst Assisted Suicide

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crime Victims' Rights

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defending Marriage

Hawaii Defense Foundation

Hawaii Families for Educational Choice

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Firearm Community

Hawaii Fishermen's Alliance

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii Meth Project

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Right to Life -- Big Island

Hawaii Right to Life -- Oahu

Hawaii Shield Law Coalition

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HI Coalition Against Legalized Gambling

HIEC.Coop 

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Homeless Crisis

Honolulu Navy League

Honolulu Traffic

Horns of Jericho Blog

House Minority Blog

House Republican Caucus YouTube

HPACC

Hump Day Report

I Vote Hawaii

If Hawaii News

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

Judgepedia Hawaii

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes

KeyWiki

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons 

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Salvage The Rail

Save the Plastic Bag

School Choice in Hawaii

SenatorFong.com

SIFE Remington

SIFE W. Oahu 

Sink the Jones Act

Smart About Marijuana--Hawaii

St Marianne Cope

State Budget Solutions Hawaii

State Policy Network

Statehood for Guam

Tax Foundation of Hawaii

The Harriet Tubman Agenda

The Long War Journal

The Real Hanabusa

Time Out Honolulu

Truth About Trade & Technology - Hawaii

UCC Truths

Union Members Know Your Rights

US Tax Foundation Hawaii Info

Valor in the Pacific

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT