TOTE ship order may sink GAO Puerto Rico Jones Act study
by Michael Hansen, Hawaii Shippers Council
The influential British maritime journal Lloyd’s List published three articles today regarding the long awaited US. Government Accountability Office (GAO)’s release of a report on their study of the impact of the Jones Act on Puerto Rico and how it may be influenced by TOTE Inc.’s recent announcement of a new building order for two 3,100 twenty-foot equivalent unit (TEU) containerships for the Puerto Rico trade.
TOTE Inc. announced on December 5th that they had placed the two-ship order with General Dynamics NASSCO Shipbuilding yard in San Diego, California, with an estimated cost of at least $175 million apiece. We have estimated the additional cost of U.S. ship construction will impose more than $600 million on Puerto Rico consumers over the life of the two ships.
The GAO Puerto Rico Jones Act study was requested by the Resident Commissioner (also known as Congressman or Representative) Pedro Pierluisi in late 2011. The latest advice from Puerto Rico indicates the GAO will release their Puerto Rico Jones Act study on Ash Wednesday, February 13, 2013.
The Lloyd’s List articles contend that TOTE ship order may have been timed to influence the GAO conclusions especially as it relates to the U.S.-build requirement of the Jones Act. Although the Lloyd’s List articles were limited to the Puerto Rico, Matson Inc. also added fuel to the fire by letting it be known on November 25, 2012, that they are budgeting $400 million to build two 3,000 TEU containerships sometime in the next two to five years for the Hawaii trade.
The Jones Act requires that a vessel must be U.S.-built, U.S.-flag, U.S.-owned and U.S.-crewed in order to carry cargo between two places encompassed by the coastwise laws of the U.S. The U.S.-built requirement adds between 300% and 500% to the cost of constructing a deep draft ship, while the U.S. flag, owned and crew requirements adds about 20% to the operating cost of the ships.
We will have to wait and see what the GAO releases in February to know whether or not the TOTE and Matson Jones Act ship construction announcements have influenced the outcome of their study on the impact of the Jones Act on Puerto Rico.
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