Author Topic: Jones Act  (Read 3595 times)

TheDrake

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Jones Act
« on: September 28, 2017, 09:31:26 AM »
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Critics say the Jones Act costs American jobs by encouraging residents in Puerto Rico, the U.S. Virgin Islands and Hawaii to buy foreign-made goods that are shipped on foreign flagged vessels, rather than goods made in America.
That's what happens when it comes to gasoline and other fuels, said Tom Kloza, chief oil analyst for Oil Price Information Service.
"Puerto Rico typically gets most of its gas from foreign sources -- Canada and Europe," he said. "Jones Act ships are so expensive that it doesn't make sense to buy gasoline from U.S. refineries." So, Kloza said, a waiver of the Jones act won't bring much more fuel to the island since Puerto Rico gets what it needs from other countries.
But plenty of other things are much more expensive in Puerto Rico because of the Jones Act. Cars, for example, cost about 40% more in Puerto Rico than on U.S. mainland, partly because of the law. It also affects other necessities.

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Trump has waived it in the face of recent disasters on a limited basis.

I didn't know it existed, but now that I do, I want it repealed entirely. We're making goods more expensive between US ports, and as a result, Puerto Rico is buying all its fuel from overseas instead of from US producers. This is a blatant case of robbing consumers and producers to line the wallets of one industry - American companies that own ships.

I have to wonder also if this means that shipping between mainland ports might be giving way to overland shipping.

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The report shows that industries across the nation could save millions of dollars if the Jones Act problem were fixed, including the water sector ($1.5 billion), chemicals ($103 million), air transportation ($91 million), steel ($50 million) and lumber ($32 million).

The Jones Act may soon drive the price of gasoline higher because of proposed changes by U.S. Customs and Border Protection. Previously, many oil firms had an exemption from the Jones Act for certain operations, but now U.S. Customs and Border Protection has proposed removing the exemptions. This imposition of the Jones Act could cost the oil industry $4.3 billion, and cause a loss of 30,000 jobs in 2017, according to a study by the American Petroleum Institute (API).

article

McCain has been trying to repeal the Jones Act since at least 2010. He gets no love from the supposedly "free-market" republicans, and even less support from democrats.


Seriati

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Re: Jones Act
« Reply #1 on: September 28, 2017, 10:12:49 AM »
I didn't know it existed, but now that I do, I want it repealed entirely. We're making goods more expensive between US ports, and as a result, Puerto Rico is buying all its fuel from overseas instead of from US producers. This is a blatant case of robbing consumers and producers to line the wallets of one industry - American companies that own ships.

Not saying I love the Jones Act but there is an entire history you are ignoring to express your outrage.

Do you still feel that we should let non-US carriers ship between US ports, when you realize their boats don't have to meet the same regulatory standards as US flagged ships?  Lower safety and environmental standards?  No compliance with minimum wage laws?

The law is definitely protectionist, but it's not as one sided as you might believe when you consider the global market (virtually all shipping flags in countries that require the lowest possible standards).

Whether Puerto Rico is actually suffering from any shipping delays as a result of the Jones act is also in question.  I have friends in the industry who flatly assert that the issues on the island are with transport after delivery, not delivery, but they have their own bias.

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This imposition of the Jones Act could cost the oil industry $4.3 billion, and cause a loss of 30,000 jobs in 2017, according to a study by the American Petroleum Institute (API).

And why does it cost so much?  Because the tankers have to meet US safety standards and employment guidelines.  The horror.

LetterRip

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Re: Jones Act
« Reply #2 on: September 28, 2017, 12:39:55 PM »
The Jones Act should be replaced with an act that any ship that has the US as a port of call, should have to meet US environmental and labor standards - rather than just those ships travelling between US ports.  Flags of convenience should not be a viable method to get around labor and environmental and safety standards.

TheDrake

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Re: Jones Act
« Reply #3 on: September 28, 2017, 02:43:34 PM »
It's a decent point about standards, although that wasn't really the intent of the Act originally as I understand it.

Personally, I don't see why I should care about labor laws for someone providing a service. I don't care about it when it comes to textile manufacture, call centers, cell phone parts, or just about any other globally sourced good or service.

As to environmental standards, I would think that could be applied for any ship travelling in US waters. Perhaps this has been the mechanism for it, but I would be fine with any restriction that said "hey, you can't be leaking oil" for instance. As far as their environmental impact anywhere but in US waters, I could care less.

Maybe I'm not as outraged as my original statement read, but I do think it deserves some kind of modification, and I'd generally still support a total repeal. This is preventing New England from getting Northwest lumber, according to one of the articles I read. On the face of it, that indicates a flaw.

TheDrake

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Re: Jones Act
« Reply #4 on: September 28, 2017, 04:52:31 PM »
FYI, I stumbled across an article that does confirm that ground transport is the bigger problem for PR.

link

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Part of the reason for the distribution backlog is that only 20% of truck drivers have reported back to work since Hurricane Maria swept through, according to a representative for Puerto Rican Gov. Ricardo Rosselló.
On top of that, a diesel fuel shortage and a tangle of blocked roads mean the distribution of supplies is extremely challenging. Even contacting drivers is a problem because cell towers are still down.

So.... we need to ship in some truck drivers? And trucks? And diesel?

What a mess. For anyone who might be interested, I tracked down the following charity with solid reports on charity navigator and recommended by a friend.

description

Hispanic Federation - NY

Funds are earmarked as disaster relief.


LetterRip

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Re: Jones Act
« Reply #5 on: September 28, 2017, 05:05:48 PM »
TheDrake,

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Personally, I don't see why I should care about labor laws for someone providing a service. I don't care about it when it comes to textile manufacture, call centers, cell phone parts, or just about any other globally sourced good or service.

Because it undercuts domestic producers of similar services.

TheDrake

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Re: Jones Act
« Reply #6 on: September 28, 2017, 05:44:04 PM »
Oh, I get why other people care. But I believe that the ultimate benefit is for work to move out to foreign producers, whose people become more affluent, who become consumers of high-end US goods and services, who eventually demand improvements in their own countries rules, who reach equilibrium.

Now, I draw an ethical line somewhere. If there's an eight year old on the ship being forced to clean out those tiny spaces in the hold, for instance.

Everything undercuts domestic producers. The alternative to undercutting domestic producers is economic stagnation, higher costs to consumers, and a maintenance of the have/have not divide globally.

LetterRip

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Re: Jones Act
« Reply #7 on: September 29, 2017, 10:50:58 AM »
TheDrake,

I was mostly concerned about the unfair 'race to the bottom' competition - using labor in unsafe conditions without reasonable limits on working hours certainly saves money - but I don't think it should be a factor that shipping companies should be able to compete on.  Similarly highly polluting ships save on maintenance costs and waste disposal, but again should not be factors that shipping companies should be allowed to compete on.

Fenring

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Re: Jones Act
« Reply #8 on: September 29, 2017, 10:58:54 AM »
There's no limit on the factors that should not be competed on. Hey, let's 'go into competition' with people who have no ambition for a first-world quality of life and will work for cents on the dollar since it's better than starving. It's loosely speaking like saying we should be competing with a country that employs slavery. And I don't mean that in the sense that cheap labor in Asia is subjugation of those people; they certainly prefer to be paid that than nothing and so it's voluntary. But if conditions of scarcity exist where the option is to work for cents on the dollar or to starve - in other words, an extreme seller's market - then the game option is roughly identical to a slavery scenario: work or die. The true race to the bottom amounts to little more than determining who is most desperate and setting wages at that level universally. What a great world that would be.

TheDeamon

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Re: Jones Act
« Reply #9 on: September 29, 2017, 11:58:34 AM »
Similarly highly polluting ships save on maintenance costs and waste disposal, but again should not be factors that shipping companies should be allowed to compete on.

Not quite, transportation is a slightly different critter than other industries. "High polluting ships" trend strongly towards older, and smaller ships which makes them inherently less competitive on both axis. They're smaller, which makes them less efficient for bulk shipment of goods. They're older, which makes them more maintenance intensive to keep in operation(and more prone to breakdowns).

That also ignores the matter how you define "high polluting" and while many emission reduction efforts are sometime elaborate boondoggles and often times expensive add-ons. There also is the matter of simple raw improvements in fuel efficiency to factor in as well. The newer, larger ship, with more efficient engines will beat out the older ship every time.

Of course, that takes time. That older ship is probably "paid for" while the newer ship is still under finance, so in that respect the older ship can undercut the newer ship in the short run because it has a lower overhead--but time will catch up with it. Of course, the additional complication is that those more efficient ships(without regard to size) cost more to build than their less efficient counterparts, with a ROI that will likely take years to pay out.

The trucking industry has comparable factors in play within the US Borders, although things were more than a bit weird starting around 2009 thanks to the California Air Resources board and the EPA. Where thanks to emissions restrictions imposed on heavy trucks, DPF/DEF became a defacto industry standard on new trucks... Which created the odd paradox until just recently of older trucks with aftermarket modifications getting better fuel economy(and reliability) than their "low emissions" counter-parts. My understanding at present is they're nearing parity now on mileage and reliability, but that's in part due to the pre-emissions trucks getting rather old at this point.

LetterRip

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Re: Jones Act
« Reply #10 on: September 29, 2017, 12:25:43 PM »
TheDeamon,

I didn't mean just CO2, but also sulfur and nitric compounds, and also dumping in the oceans.

Seriati

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Re: Jones Act
« Reply #11 on: September 29, 2017, 12:43:38 PM »
Not quite, transportation is a slightly different critter than other industries. "High polluting ships" trend strongly towards older, and smaller ships which makes them inherently less competitive on both axis. They're smaller, which makes them less efficient for bulk shipment of goods.

I actually think you're missing the point here.  Ships constructed for the purpose of operating in US waters and getting a US flag are built to fundamentally different and higher standards than those that are not.  It's not just a matter of which is more modern or bigger.  It's a matter of having to play by a different rule book.  There was a study a few years back that put the purchase price of a US flagged tanker at four times higher than a non-US flagged tanker.

It's been a while since I looked at this, but if I recall correctly, at least at one point, US flagged tankers were required to be two hulled and to carry liquids in lined internal compartments, while foreign flagged freighters could be single hulled and carry liquids directly in their holds.  Think about the difference in both cost and safety on those two tankers, not to mention that the latter is almost certainly going to leak toxic liquids, while the former doesn't.

That's before you even consider that the cost of operations is going to be at least four times higher, with crew and maintenance costs, and the burden of continuing to comply with changes to the regulations.

If it were a case that the ships were the same, I'd be more willing to think this was purely protectionism, but they generally aren't even close to the same.

TheDrake

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Re: Jones Act
« Reply #12 on: September 29, 2017, 01:13:52 PM »
I doubt there's a lot of evidence that there are more environmental disasters from foreign vessels. I tried to find any and failed. Not to mention that petroleum is just a small part of shipping regardless. I can't imagine there are so many issues with lumber or containers.

And so, you can reform the Jones act to require the safety standards, yeah? And not the country of origin.

I still remember all the hand-wringing that cheap labor in Japan would be the End of America economically, and that we would all be trading Yen. Likewise Korea. Likewise Taiwan. Likewise Vietnam. Time and again, what has happened instead is that it raises the standard of living for those countries and creates more markets for American products.

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A separate
MARAD study in June 2012 estimated the daily operating cost of a Jones Act tanker to be
$22,000, which would be about 3.7 times the operating cost of a foreign-flag tanker. A major
reason U.S.-flag vessels cost more to operate is that they are crewed by U.S. citizens. The crews
on most foreign-flag ships are drawn mainly from poor countries and are paid significantly less
than U.S. merchant seafarers.

big ass document

Man we're doing great. Except....

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A key aspect to improving the economic competitiveness of freight carriers is reducing empty
travel miles. If Jones Act product tankers were price competitive in the international market, they
could triangulate their trade routes, perhaps moving diesel fuel from Gulf Coast refineries to
Europe, then carrying European gasoline to the U.S. Atlantic Coast before sailing in ballast
(carrying only ballast water for stability) to the Gulf Coast to repeat. In this triangular route, two
out of three voyages would generate revenue and the ballast sailing distance would amount to
18% of the total sailing distance. With their costs rendering them uncompetitive on international
routes, however, Jones Act product tankers typically sail “piston” routes, carrying crude oil or
refined products from the Gulf Coast to the East Coast and then returning in ballast, thus earning
revenue on only half the trip.

It's not a safety issue. Take the same ship, reflag it, put foreign people on it and it can compete.

LetterRip

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Re: Jones Act
« Reply #13 on: September 29, 2017, 02:05:23 PM »
Seriati,

the double hull is for US oil tankers.

I read 3x the cost for US built new hulls - but mostly due to labor costs, not safety features.  Germany can make inexpensive ocean liners because it has more automation in the manufacturing; and China can make cheaper container ships because it has cheap labor. US uses very little automation and expensive labor.

Retrofitting ancient hulls for a double hull though is expensive because it triggers a safety refit if a 'major overhaul is done'.  (double hull retrofit only costs about 5% more, but triggers safety refit standard, which can be 40% of the value of an old hull).  Also the double hull reduces the total carrying capacity of the ship by around 3%.

Unfortunately I can't find any info that compares safety features of US vs Chinese built hulls.