The U.S. Jones Act, which requires that U.S. domestic ocean cargo is carried from port to port in ships that are built in the U.S., manned mostly by U.S. seamen and flagged in the U.S., should be repealed, Drewry Maritime Research said today. Jones Act defenders said the criticism took statistics out of context, and neglected the importance the U.S.-flagged fleet has on the nation's national and economic security.
The Merchant Marine Act of 1920, which is known as the Jones Act, is getting increasingly expensive for U.S. consumers and no longer has the same level of political support that has kept it as the law of the land for the last 73 years, Drewry said in its Container Insight Weekly.
What prompted Drewry’s opinion was the recent order by Matson for two container ships with capacities of 3,600 20-foot-equivalent units from Aker Philadelphia Shipyard in Philadelphia for approximately $209 million each. The order “underlines the possibility that U.S. flag protectionism is an increasingly expensive luxury,” Drewry said.
Vessels of a comparable size could be built in Asia today for less than one-fifth of that price. The last time Matson ordered four 2,890-TEU ships at a U.S. shipyard, which were delivered between 2003 and 2006, they cost around $125 million each, which was around four times higher than the market price in Asia at the time. So the cost differential is getting larger.
“The stipulation that U.S.-flagged ships must be manned by a crew which is at least 75 percent American must be a growing burden, although it is a small part of the equation,” Drewry said.
Over the past 10 years, maritime wage inflation for container vessels between 2,000 TEUs to 3,000 TEUs has soared 31 percent, according to Drewry’s Ship Operating Costs 2012/13 report, reaching up to $2,306 per day, and it would have been much higher were it not for the increasing recruitment of seafarers from developing countries.
Even China, which Drewry called “one of the most state-controlled countries in the world today,” is beginning to have second thoughts about the high level of protectionism afforded to its cabotage industry, and the European Union has already become home to a very liberalized and cost effective cabotage industry.
Drewry said most coastal container moves between EU ports can now be carried out at a free in and out rate of less than $75 per TEU for ocean transport only, and there is no flag protectionism. Anyone can play the game, and many increasingly do between such regions as the U.K. and continental Europe, and between continental Europe and the Baltic. Approximately one-third of the container traffic handled in Rotterdam, Europe’s largest port in the Netherlands, consisted of feeder and short sea cargo last year, for example.
The Jones Act renders transshipment of containerized ocean cargo between U.S. ports limited and expensive. As a result, efforts to establish short sea shipping services have floundered despite their lower carbon footprint, as compared to rail trucking, which dominates intra-regional U.S. transportation.
Drewry's view is hardly universal, however.
"The Drewry report is a weak attempt to use cost data taken out of the national strategic context of the Jones Act to construct a false narrative that fulfills private commercial objectives. said the American Maritime Partnership.
The Jones Act supporter said the utility of lawg that protects economic and national security should be "best left to those who understand its importance, the U.S. Congress, not those who stand to gain economically from its repeal."