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Sunday, December 26, 2021
Jones Act needs an update, and so does the Jones Act fleet
By Grassroot Institute @ 12:41 AM :: 1359 Views

Jones Act needs an update, and so does the Jones Act fleet

by Jonathan Helton, Grassroot Institute, December 21, 2021

America’s federal Jones Act is old and in dire need of an update. Oceangoing U.S. ships sailing under the auspices of the Jones Act fleet are in a similar condition. 

Now 101 years old, the Jones Act technically is Section 27 of the Merchant Marine Act of 1920, and requires that all ships transporting goods between U.S. ports be U.S. flagged and built, and mostly owned and crewed by Americans.

Its intent was to ensure national security by protecting America’s maritime industry from foreign competition. By almost any measure, however, the law has been a failure. 

U.S. shipyards capable of building large oceangoing commercial ships have dwindled from 30 in 1953 to just four as of November 2021, and oceangoing Jones Act ships have declined in number from 257 in 1980 to just 96,1 less than 1% of all commercial oceangoing vessels worldwide.2

Worse — from an efficiency, cost and safety perspective — Jones Act ships are, on average, significantly older than most of their international counterparts, with the exception of oil tankers, which average 13.47 years old versus 18.87 internationally.3 The difference is largely due to the recent buildup of Jones Act tankers for the Gulf Coast-East Coast market, where the lack of pipeline capacity has necessitated the use of ships. The Oil Pollution Act of 1990’s double-hulled tanker mandate has also contributed to the lower age of Jones Act-qualified oil tankers.4

Even though these U.S. oil tankers are relatively young, there aren’t many of them — not enough to properly supply the East Coast’s demand for oil, at least. As the Colonial Pipeline hack in May 2021 demonstrated, oil companies simply do not have enough options for transporting oil, and the only short-term remedy to provide additional shipping capacity after the hack was for President Joe Biden to temporarily waive the Jones Act.5

Meanwhile, all of America’s oceangoing roll-on/roll-off ships, containerships and cargo ships are definitely outpacing their international counterparts in age. Jones Act container ships, for example, average 21.61 years old, versus the international average of 12.34. In Hawaii, the containerships operated by the two main Jones Act carriers, Matson and Pasha, average 16.5 and 41.25 years old, respectively.6

In the Great Lakes, the Jones Act fleet is in even worse shape. Until the launch of the Mark W. Barker earlier this year, no large ship had been added to the Great Lakes fleet since 1983. 

“Put another way” said Jones Act analyst Colin Grabow, “the last time the Great Lakes fleet saw a new ship was the same year Michael Jackson unveiled the moonwalk and the first cellphone was released for commercial use.”7

Internationally, many ships are scrapped between the ages of 15 and 20.8 The average scrapping age for general cargo ships is 35.4; the average age of Jones Act general cargo ships currently is 36.8.9

In past years, the Jones Act fleet also included dry bulk carriers, but not anymore. The last one, the Texas Enterprise, was scrapped earlier this year at the age of 40.10

Even when multiple Jones Act dry bulkers existed, the relative lack of these ships and their high costs proved a problem for U.S. businesses, such as livestock producers in North Carolina, who opted to import corn from Brazil instead of shipping it from the U.S. heartland.11

One reason for the increased costs of older ships is that they have higher maintenance and repair costs.12 They also are more carbon-intensive than recently constructed ships.13 The U.S. Government Accountability Office noted in 2013 that “older vessels burn fuel faster and less efficiently compared to newer vessels, and the age of some of the Jones Act carriers’ vessels has contributed to increasing fuel costs.”14

But old ships aren’t just inefficient. They’re also dangerous. 

For example, in 2015, the El Faro, a 40-year-old Jones Act containership, sank en route to Puerto Rico when it sailed into a hurricane. But the storm wasn’t the only problem the ship encountered. Economist Thomas Grennes noted that “the Coast Guard and the National Transportation Safety Board … found multiple factors that contributed to the sinking and loss of lives, but both agencies identified factors related to the age of the ship.”15

Former crew members told CNN that “the chief cook’s room was constantly leaking water” and that “the El Faro … needed a death certificate. It was a rust bucket.”16

Grennes also said academic research has found that the older the ship, the more likely it is to be involved in an accident. In fact, the Marshall Islands, a common flag of convenience registry, does not allow ships more than 20 years old in its registry — “unless owners provide additional information about the safety of the older ships.”17

Jones Act carriers, meanwhile, commonly keep their ships on the water well past the 40-year-old age of the El Faro. The last 12 Jones Act bluewater ships that were sold for scrap, for example, had an average age of 41.9 years. The latest ship scrapped, Matson’s Lihue, was a decrepit 50 years old — almost half as old as the Jones Act itself.18

By contrast, the average age of the largest fleet in the world, owned by shipping giant Maersk Line of Denmark, was just 9 years old in 2017. With the company’s acquisition that year of German-owned Hamburg Süd, that average actually improved, since Hamburg Süd’s ships averaged only 6 years old.19

The elderly Jones Act fleet is a natural consequence of the law’s U.S.-build requirement, which is problematic because Jones Act oceangoing ships cost between four and five times as much to construct as their international counterparts. This encourages ship owners to keep their vessels in service as long as possible.20

Both the Congressional Research Service and the Government Accountability Office have confirmed that the build requirement delays the purchase of newer ships.21

Let’s hope Congress doesn’t delay in reforming the domestic build requirement of the Jones Act, for the sake of economic freedom, efficiency and safety.

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