Hawaii lawmakers seek exemption from Jones Act

Members of the Hawaii Senate and House of Representatives have filed concurrent resolutions seeking an exemption for Hawaii from a provision in the Merchant Marine Act of 1920 (the Jones Act) requiring that all vessels be built in the United States. The resolutions also ask that Alaska, Guam and Puerto Rico be exempt.

To comply with the Jones Act and engage in coastwise trade between the ports of the United States, a ship must:
1)  fly the U.S. flag;
2)  be built in a U.S. shipyard;
3)  be 75% owned by U.S. citizens; and
4)  be crewed by U.S. citizens or permanent residents. 

Proponents of exempting non-contiguous trades from the second hurdle (the “domestic build requirement”) say it would create a larger market and foster greater competition in ocean shipping for the noncontiguous trades (in addition to having no negative effect on jobs).

This past Friday, Senator Sam Slom filed concurrent resolutions SR10 and SCR34, co-sponsored by Senators Will Espero, Brickwood Galuteria, Breene Harimoto, Clarence Nishihara, Gilbert Keith-Agaran, Lorraine Inouye, Russell Ruderman and Gil Riviere.

The companion resolutions in the House were filed by primary introducers Representatives Sam Kong, Cindy Evans, Lauren Cheape-Matsumoto, Andria Tupola and Gene Ward (HR21 and HCR46). The resolutions urge Congress to exempt Hawaii (and other non-contiguous states and territories) from the domestic build requirement because of its restrictive impact on the market for shipping goods to Hawaii.

“The Jones Act was originally meant to protect the shipping industry and maritime trade, but almost a century has gone by and it’s easy to see that the law does not serve its original purpose. Today, the effect of the Jones Act is that people in Hawaii, Alaska, Puerto Rico and Guam pay significantly more than the rest of the country for everyday necessities,” said Sen. Slom.

“Don’t get fooled though, it is not just these more remote locations as the Jones Act also adds to the cost of goods and oil for the lower 48 states,” continued Sen. Slom. “It is time for our U.S. Congress to address the role that the antiquated Jones Act plays in the high cost of living. I am grateful that so many of my colleagues in both the Senate and the House see that an exemption to the U.S. build requirement can make a huge difference in what we here in Hawaii pay for goods.”

“A U.S.-build exemption would allow U.S. ship owners to acquire foreign built ships, register them under the U.S.-flag and operate them in the domestic noncontiguous trades,” said Hawaii Shippers Council President Mike Hansen. “The advantage of this reform is new ships built in South Korea and Japan are a fifth the cost of comparable ships built in the U.S., and that dramatically lower capital cost will lead to greater competition and moderate freight costs by lowering barriers to entry and increasing contestability in the shipping market place.”

Dr. Kim Kepner-Sybounmy, Chief of Staff for Senator Slom, is another proponent of Jones Act reform. She has produced a short documentary film to educate the public about the Jones Act, which will be shown this Friday, February 27, 2015 at 12 p.m. in the Capitol Auditorium.  Members of the media as well as the general public are invited to attend.

“I was first introduced to the Jones Act about a year ago when I attended the Jones Act Video Conference while working for Senator Slom,” said Dr. Kepner-Sybounmy. “During the video conference I listened to the legislative spokespeople from Alaska and Puerto Rico discuss Jones Act reform, and I began to see the economic struggles Hawaii has in common with these locations. This unnecessary cost is frustrating, and it makes you wonder how many new businesses are never started and how many existing businesses are prevented from expanding due to the high costs for shipping as a result of the Jones Act.

“This movie is the result of my desire to make this complex issue understandable,” she added. “On a personal level, like many people in Hawaii, my family is constantly looking long term to decide whether we can afford to retire here. My concern is that Hawaii, along with the other noncontiguous locations, makes up only 2 percent of the population of the U.S. yet we shoulder most of the cost burden of the expensive Jones Act ships.”