Repeal the Jones Act and allow Puerto Ricans to import goods more cost effectively.
San Juan — At today’s port call in Puerto Rico on the NRI cruise, the fruits of the Jones Act were on display.
The Jones Act requires that ships transporting goods between U.S. ports be built in the U.S., flagged in the U.S., and owned and crewed by Americans. Very few ships meet these standards because modern shipping is a very globalized industry. As a result, transporting goods between American ports is much more expensive than transporting the same goods over similar distances internationally.
The law especially harms Puerto Rico, a U.S. territory that is economically underdeveloped compared to the mainland. Since so few ships meet Jones Act standards, only a few companies deliver goods to Puerto Rico from the mainland U.S., which is Puerto Rico’s largest trading partner.
Two companies, Crowley Maritime and TOTE Maritime, are responsible for 85 percent of container capacity between the mainland and Puerto Rico.
From the top of the cruise ship, passengers could look adjacent to the cruise terminal and see the Crowley terminal.
The ship in that picture is the Taino. She was built in 2018. She’ll steam back to her home port of Jacksonville, where 88 percent of Puerto Rico-bound containers originate.
Across the harbor, passengers could see the Puerto Nuevo terminal, where a TOTE vessel was docked (apologies for the picture quality, it was a long way away for my phone camera to pick up).
That vessel is the Isla Bella. She was built in 2015. While it is expected to see Crowley and TOTE ships in San Juan, it was relatively unusual to see two ships that were seven or fewer years old.
Ships that comply with the Jones Act are generally quite old. As Colin Grabow of the Cato Institute pointed out earlier this year, Jones Act ships are generally expected to last 40 years, while 20-year lifespans are more normal in the rest of the world. He calculated that the average age of the last 15 Jones Act ships that were retired was 43. Older ships cost more to maintain and operate, are not well-suited for mobilization in a time of war, and can be less safe.
In 2015, a 40-year-old Jones Act vessel owned by TOTE, El Faro, sank in a hurricane on its journey between Jacksonville and San Juan. The entire crew of 33 perished. Former El Faro crew members told CNN in 2015 that the vessel “needed a death certificate,” “was a rust bucket,” and “wasn’t supposed to be on the water.” They said, “They were bandaging the ship with extra steel all the time.” The ship’s propulsion failed during the storm, stranding the crew in the hurricane, CNN said.
Fortunately, the Taino and Isla Bella are unlikely to face that kind of problem because they are relatively new. But building a new Jones Act ship costs far more than it should, and these two ships are no exception.
The Taino was one of only four Jones Act ships built in all U.S. shipyards between 2018 and mid 2019. U.S.-built containerships cost around five times the global average to build, and they take much longer as well. There were 40 months between when the Taino‘s keel was laid down and the ship was completed; a containership with eight times more container capacity was completed in 2017 on the global market in only 17 months.
As Grabow pointed out earlier this year, for the Isla Bella‘s cost of $162.5 million, a different shipping company buying on the global market was able to purchase six smaller vessels that combined to carry 61 percent more containers than the Isla Bella — with $17.5 million left over. And TOTE got government financing to purchase the Isla Bella and a sister ship.
Puerto Ricans should not be stuck with this kind of globally uncompetitive service. Repeal the Jones Act and allow Puerto Ricans to import goods more cost effectively.