Wednesday, September 27, 2017

Why the Feds Denied Puerto Rico a Shipping Waiver – And Why Congress Should Act

After Hurricanes Harvey and Irma, the federal government loosened restrictions on a century-old shipping law to allow foreign ships to carry relief supplies and fuel from US ports to affected areas in Florida, Louisiana and Texas. This week the Trump Administration denied a request for a similar waiver to allow foreign ships to ferry supplies from the mainland United States to the island of Puerto Rico.

The Jones Act, formally known as the Merchant Marine Act of 1920, regulates maritime trade between US ports and in US territorial waters. Part of the law restricts cabotage, trade between two ports within the United States, to American vessels. Foreign vessels can transport cargo from other countries into the US, but not from one US port to another. Since Puerto Rico is American territory, trade between the mainland of the United States and the island is limited to American ships. The Jones Act was passed after World War I to help revitalize the American merchant marine losses incurred during the war.

After hurricanes hit Texas and Florida, the Trump Administration waived the Jones Act to allow more ships to move cargo from American ports to the affected areas. The extra shipping capacity helped to alleviate a looming fuel shortage after the storms.

Reuters reports that a delegation of congressmen led by Rep. Nydia Velázquez (D-N.Y.) petitioned the Department of Homeland Security to issue a similar waiver to aid Puerto Rico. This time the request was denied.

Gregory Moore, a spokesman for Customs and Border Protection, explained that an assessment of US shipping had determined that there was “sufficient capacity” on American ships to bring in supplies to Puerto Rico. “The limitation is going to be port capacity to offload and transit, not vessel availability,” Moore explained. With Puerto Rico’s ports and airports heavily damaged by the storm, the limiting factor on aid to Puerto Rico is not ships to transport the cargo, but ports in which to offload it.

 “We do have the capability,” Joint Chiefs Chairman Gen. Joseph Dunford told Senators on, but relief ships and airplanes “can't come in until we get the ports and airfields open.”

The Jones Act has been controversial for years and its effect on hurricane relief means that it will remain a sore spot for the island. The New York Times explains that there are two options for bringing foreign goods to Puerto Rico. If the ships come directly to the island, they must pay heavy taxes, tariffs and fees. The other option is to ship the goods to the mainland United States and then put them on American ships for the journey to Puerto Rico. In either case, the increased costs are passed along to consumers.

The Times notes that the added cost makes prices “at least double” that of neighboring islands, including the US Virgin Islands which are not covered by the Jones Act. The cost to the Puerto Rico economy is estimated to be billions of dollars annually.

A temporary waiver of the Jones Act, would likely lift morale on the shattered island, if nothing else. “Our dependence on fossil fuel imports by sea is hampering the restoration of services,” Juan Declet-Barreto, an energy expert at the Union of Concerned Scientists, told Reuters. The decision not to allow a waiver “is raising fears on the island that they are going to be left behind in this disaster.”

As ports are repaired, goods imported to the island by foreign ships will be more able to aid the long-term recovery and rebuilding of the island. Prices for food and consumer goods would drop which would increase the standard of living as well as making manufacturing and tourism more attractive.

Shipping companies oppose changing the law, which they say is necessary to keep the American merchant shipping industry strong and protect jobs, but the policy is already applied unevenly. The Jones Act applies to Alaska and Hawaii as well as Puerto Rico, but at least three US territories, including the US Virgin Islands, are exempt from the law.

While a Jones Act waiver may not help the island in the short term, repeal of the cabotage section of the Jones Act may help the island’s recovery in the long term. The Heritage Foundation and the Cato Institute are among the organizations that have advocated repeal. In recent years, Sen. John McCain (R-Ariz.) and Rep. Gary Palmer (R-Ala.) have proposed repeal of the law. As the island struggles to rebuild after Hurricane Maria, the time to end the Jones Act may have finally come.  

Originally published on The Resurgent

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