Claim: Changing the Jones Act in Puerto Rico is a narrow fix that does not impact the rest of the country.
Not true. Changes to the Jones Act in Puerto Rico would undermine hundreds of millions of dollars of recent investments in modern, state-of-the-art American vessels operating between the U.S. mainland and Puerto Rico. More broadly, altering the fundamental regulatory structure in Puerto Rico — literally changing the rules in the middle of the game after massive investments were made in new vessels for that trade — would undermine future investment in every segment of the Jones Act industry nationwide. Even the Government Accountability Office (GAO) discussed the potential ripple effects of a Jones Act change in Puerto Rico throughout other American regions. Changing the Jones Act for Puerto Rico would not affect only Puerto Rico; instead, the implications would quickly affect the entire domestic maritime industry.
Claim: The U.S. Virgin Islands are not subject to the Jones Act, so why should the Jones Act apply to Puerto Rico?
The two areas are treated very differently under U.S. law. Since 1917, Puerto Rico has operated under a legal structure that generally makes U.S. federal law automatically applicable in Puerto Rico, just as it would be in any American state. That is not true in the Virgin Islands. Also, importantly, the U.S. Virgin Islands are outside the U.S. customs territory while Puerto Rico and the United States are inside the U.S. customs territory. Historically, the Jones Act has applied to U.S. territories inside the U.S. customs territory and not applied to those outside of it.
Claim: Changing the Jones Act in Puerto Rico will help the island, especially considering its current economic crisis.
Changes to the Jones Act in Puerto Rico would undermine national security, reduce border protection, and outsource American jobs. The GAO study on the Jones Act in Puerto Rico listed a number of potential harms to Puerto Rico itself if the Jones Act were changed, including the possible loss of the stable service the island currently enjoys under the Jones Act and the loss of jobs on the island. Moreover, American domestic carriers are making some of the largest private sector investments currently underway in Puerto Rico by investing nearly $1 billion in new vessels, equipment, and infrastructure. They employ hundreds of Puerto Rican American citizens on the island and on vessels serving the market, providing highly reliable, low-cost maritime and logistics services. These private sector jobs and reliable services are important to the long-term recovery of the Puerto Rican economy and would be jeopardized by changes to the Jones Act.
Claim: The Jones Act adds significantly to the cost of goods in Puerto Rico.
Over the last decade, a parade of politicians and “experts” have attempted to estimate the so- called “cost” of the Jones Act in Puerto Rico. Because the estimates have been wildly contradictory, in 2012, Puerto Rico Delegate Pierluisi asked the GAO to determine the true “cost.” The GAO studied the issue for more than a year and debunked the previous estimates. First, the GAO said there are far too many factors that impact the price of a consumer good to determine the supposed cost related to shipping, much less the Jones Act. Second, the GAO said, one could not truly estimate the cost unless one knew which American laws would be applied to foreign ships if they were allowed to enter the domestic trades, which would certainly increase the cost of foreign shipping.
Claim: The Jones Act has undermined Puerto Rico’s efforts to import liquefied natural gas (LNG).
Flatly false. American carriers pioneered the use of LNG in Puerto Rican markets, deploying the world’s first LNG-powered containerships and developing small-scale LNG supply and logistics services to help manufacturing and other industrial facilities on the island reduce the cost and improve the reliability of their energy supply. Puerto Rico’s real impediment is that there is no market for shipping bulk LNG between the U.S. mainland and Puerto Rico for the foreseeable future due to limited export facilities, infrastructure, and demand for bulk LNG. Qualified American vessels are fully prepared to provide bulk LNG transportation services to the island. They could begin service promptly using any of the dozens of LNG vessels already authorized to operate in the trade. Or they could design and build new LNG vessels in full compliance with American safety and regulatory standards, including the Jones Act. Blaming the lack of LNG on the Jones Act is a red herring.
Claim: The Krueger report from Puerto Rico said, “Import costs [are] at least twice as high [in Puerto Rico] as in neighboring islands on account of the Jones Act.”
There is no study that supports this statement in any way, and the Krueger report cited none. In fact, anecdotal evidence about rates indicates that the opposite is true. For example, one analysis shows it is 40% more expensive to ship goods from the U.S. mainland on foreign vessels to the U.S. Virgin Islands (not subject to the Jones Act) than on Jones Act vessels to Puerto Rico.
Claim: The Jones Act does not contribute to national security.
The Department of Defense (“DOD”), Navy, and Coast Guard are among the strongest supporters of the Jones Act because the military relies on the commercial maritime industry for its sealift capacity. Within the last year, senior military leaders and the Commandant of the Coast Guard have emphasized the harm to national security if the Jones Act was changed. Also, in its landmark study of the Jones Act in Puerto Rico, the GAO recently talked about the harm to national security if the Jones Act was changed there. Finally, DOD itself has estimated that it would incur annual costs of tens of billions a year if it was forced to replicate the benefits of the commercial maritime industry.
Claim: The Jones Act adds 15 cents a gallon to the cost of gasoline in Puerto Rico and supposedly adds 30% to the cost of LNG for Puerto Rico’s state-run power authority.
Flatly false. No data or source for these statistics has ever been cited, and there is none. In December 2015, for example, the average price of gasoline was $2.04 per gallon. According to the Energy Information Administration, the price of crude oil is the single largest driver of the cost of gasoline, representing approximately 42 percent of the overall cost of gasoline, or $0.86 per gallon. Jones Act transportation costs contributed less than one-tenth of one cent to that nationwide average cost per gallon.
Claim: All cargo shipped in or out of Puerto Rico must be transported on Jones Act vessels.
This is a common misconception. Cargo from anywhere in the world can be imported into or exported from Puerto Rico. In fact, nearly two-thirds of the vessels calling on Puerto Rico are foreign.
Claim: Jones Act shipping is all about protecting the “union bosses.”
The Jones Act is about protecting America’s economic, national, and homeland security interests. A significant aspect of the Jones Act is ensuring that a pool of highly trained seafarers — some of whom belong to unions, but the vast majority of which do not — are available in times of war and emergency. For decades, military leaders have consistently highlighted the important role that commercial seamen play in America’s military sealift capacity. Just last year, for example, General Paul J. Selva, then Commander of U.S. Transportation Command, and currently the Vice Chairman of the Joint Chiefs of Staff, said that he depends on access to American seafarers to meet the military’s operational requirements and those seafarers are provided by Jones Act shipping. Our nation is highly dependent on these highly trained, highly valued seamen.