President Trump bowed to critics of his Puerto Rico relief efforts Thursday and said he would waive the 1920 Jones Act, which says that all shipments between two U.S. ports must be carried on U.S. flag vessels.
But U.S. shipping executives and unions say the move won't speed the delivery of relief to the island after the devastation of Hurricane Maria because there were already more than enough U.S. flag vessels to handle relief supplies.
Critics of the Jones Act restrictions say that they slow deliveries and raise prices, especially in emergencies. They say that when Trump initially declined to temporarily waive the act, he was showing more concern for a handful of shipping companies than for 3.5 million Puerto Rico residents.
Thomas B. Crowley, chief executive of a company with about 100 vessels, including tugs, barges, container ships and tankers, is one of those U.S. flag shipping firms and a leading contractor for the Federal Emergency Management Agency. The company has already delivered hundreds of containers and generators to Puerto Rico.
He said the problem in Puerto Rico isn’t deliveries by shipping companies to ports and terminals. The problem is distribution of those goods to people who need them.
“Would the relief effort be better or is it being hampered by the existence of the Jones Act?” he said in an interview. “The answer to that question is clearly no. If there were a case where a foreign vessel had a role, we would support that.”
Most shipping companies have both U.S. and foreign flag vessels, so the Jones Act waiver doesn't matter as much for them.
There are primarily three companies whose fleets are entirely or mostly U.S. flag vessels. They are Tote Maritime, Trailer Bridge and Crowley. The Masters, Mates and Pilots union said that cargo attributed to the Jones Act makes up less than 3 percent of total U.S. shipping.
Crowley, who was in Washington for an annual conference, said he and fellow carriers spent much of the week meeting with lawmakers and administration officials, including a Tuesday morning session with Transportation Secretary Elaine Chao and Pentagon officials.
“We were barraged with this Jones Act thing in every meeting,” he said. “I’m, like, what are you talking about? Why is this even an issue? You’re not solving any problems.”
Instead, shipping companies and unions say the Jones Act is crucial to supporting the U.S. shipping industry and protecting jobs -- which Crowley said was just the sort of thing Trump has pledged to do.
“The Jones Act is very important to our company and America’s shipping industry,” he said. “If America wants to have seafarers, the Jones Act is essential. Otherwise, the jobs would go offshore like they’ve done in so many industries.”
He said that protecting those jobs was just the sort of thing Trump has pledged to do.
Klaus Luhta, vice president at the Masters, Mates and Pilots union, said his union met on Tuesday with some Democratic members of Congress on other issues and ended up talking about the Jones Act. “The Jones Act is one leg of [a] three-legged stool that allows U.S. flag shipping to continue to exist,” he said.
He said that U.S. flag shipping companies have tonnage ready to be deployed.
Crowley said that waiving the Jones Act for Florida after Hurricane Irma hit there did little other than give some business to foreign flag vessels.
Florida, which has no oil refineries and little pipeline infrastructure, obtains much of its gasoline by ship from refineries in Louisiana and Texas. After Trump lifted the Jones Act for Florida, a customer canceled a contract with Crowley for gasoline delivery and bought instead from a foreign flag vessel. The switch had nothing to do with availability of the tanker, he said.
“Our crew members in Florida were calling and saying they need work to buy a new car or fix their houses. And we had to tell them the booking was canceled,” he said. Altogether, 46 U.S. flag vessels and six foreign flag vessels delivered fuel to Florida after the Jones Act waiver.
But many in the energy industry say that even in ordinary times the Jones Act raises costs. "Some Texas oil is moving to refineries in eastern Canada, bypassing refineries in the northeastern United States, because shipping to Canada on foreign-flag vessels is much cheaper than shipping domestically on Jones Act-eligible ships," said a report by the Congressional Research Service.
Foes of the Jones Act -- including leading Republican lawmakers -- say that it drives up prices, especially on islands such as Hawaii and Puerto Rico, and hurts economic competitiveness.
Sen. John McCain (R-Ariz.), a longtime advocate of repealing the Jones Act restrictions, wrote a letter to the Department of Homeland Security saying, "I am very concerned by the Department’s decision not to waive the Jones Act for current relief efforts in Puerto Rico, which is facing a worsening humanitarian crisis following Hurricane Maria."
San Juan Mayor Carmen Yulín Cruz said on CNN earlier this week that she wanted Trump to repeal the Jones Act, “which makes everything that comes into Puerto Rico … more expensive.”
“Much of this high cost is attributable to the Jones Act—also known as the Merchant Marine Act of 1920,” said a 2014 report by the New York Federal Reserve, although it noted that the Government Accountability Office findings about costs were inconclusive. The GAO suggested a Jones Act exception for shipments of natural gas to the island, a cleaner and perhaps cheaper alternative to the oil now burned to generate electricity.
In 2015, Anne Krueger, former chief economist of the World Bank and deputy managing director of the International Monetary Fund, wrote that the Jones Act “requires using very costly US-built ships and crews for all sea transport to and from the mainland.”
Crowley disputes that.
“Shipping rates have very little impact on the prices consumers see on the shelf. This has been demonstrated by studies time and time again,” he said. He acknowledged that American maritime workers have higher wages.
“Do American workers earn more than Chinese, absolutely. Does that impact how merchants price goods? It does not appear to be the case. Why? Because the supply chain we have is second to none.”
He boasted that his company also has built up its supply chain and facilities in Puerto Rico that have weathered the storm. He said that three days after the storm hit, his terminal was open. At 8 a.m. the next day when the port first opened, he said, one of his ships delivered 500 containers. Because it has its own generator, the company has maintained 200 refrigerated containers.
“If we cut some American jobs, replace them with foreign labor and save a few pennies on the delivered goods, then perhaps you could get the answer swayed to ‘yes,’ but no one has ever made a factual case that this is true,” he added.
After the president announced the waiver on Thursday, Crowley said in an email: “We understand the waiver will be temporary. In the meantime, we hope people will take the time to learn what our American vessel crews, dock workers and truck drivers are doing 24/7 to bring help to Puerto Rico. Americans responding to Americans in need.”