Time to retire the Jones Act’s U.S.-build requirement

by Keli'i Akina, Ph.D., President / CEO, Grassroot Institute of Hawaii

The most revolutionary Jones Act reform proposed in recent memory seems to be flying under everyone’s radar.

On Aug. 1, U.S. Rep. Ed Case of Hawaii introduced HR4839, which would establish the Merchant Marine Allies Partnership Act.

This bill proposes exempting Jones Act carriers from the federal 50% tax on major vessel modifications conducted in foreign shipyards if the work is done in allied nations such Japan or South Korea. It would also create a path by which ships owned by companies in allied nations could transport goods between U.S. ports in foreign-owned and foreign-crewed vessels.

But most important, it would create a Jones Act exemption for ships purchased from our allies.

Reforming the Jones Act’s U.S.-build requirement is exactly what the Grassroot Institute of Hawaii, of which I am president, has been advocating for years.

The cost of the Jones Act to Hawaii alone has been estimated to be about $1.2 billion a year. According to a 2020 study commissioned by Grassroot, repealing only the U.S.-build requirement of the Jones Act could save Hawaii residents about $500 million annually.

Overall, Rep. Case’s bill addresses both the realities of global shipping and the national security concerns that underlie the primary rationale for the Jones Act.

Defenders of the Jones Act say that we need a strong merchant marine in order to meet our nation’s needs in times of emergency. I couldn’t agree more. But under the Jones Act, American shipbuilding has nearly disappeared.

If we are serious about building a strong merchant marine, we need to start thinking about different ways to accomplish that goal.

This is why Rep. Case’s approach is a great compromise. It seeks to address the monopolistic practices that have hurt America’s coastwise trade while respecting security concerns regarding dependence on foreign ships and shipyards.

Further, it’s possible that opening up ship repair and purchases through our allies could even help rebuild the American shipbuilding industry.

As Rep. Case observed in the news release that accompanied his introduction of the bill, Japan and South Korea are both “nations with world-class maritime industries and deep national security alignment with the United States.”

It is well known that the Jones Act places a significant economic burden on American consumers in myriad ways, and unreasonable for us to bear the cost of an antiquated shipping law that has utterly failed to protect our own interests as intended.

Rep. Case deserves our thanks for putting forth a real effort to update the Jones Act for a new era. I hope more of his colleagues in Congress will finally take notice.

E hana kākou! (Let's work together!)