Navy League opposes Jones Act exemption for Puerto Rico

A report from the Working Group for the Fiscal and Economic Recovery of Puerto Rico, established by Governor Alejandro García Padilla, said a Jones Act exemption would “reduce transportation costs and increase competitiveness.”    The Navy League has asked Congress to oppose a recent proposal to exempt Puerto Rico from the Jones Act.
   That recommendation was contained in a report released last week by the Working Group for the Fiscal and Economic Recovery of Puerto Rico established by the commonwealth’s Governor Alejandro García Padilla.
   According to the report, exempting Puerto Rico from the Jones Act, which requires cargo moving between mainland United States and the Commonwealth on ships built in the U.S., registered in the U.S., and employing U.S. citizens, would “reduce transportation costs and increase competitiveness.”
   It cited the so-called “Krueger Report,” issued earlier this summer which said restoring growth to Puerto Rico “requires restoring competitiveness. Key here is local and federal action to lower labor costs gradually and encourage employment (minimum wage, labor laws, and welfare reform), and to cut the very high cost of electricity and transportation (Jones Act). Local laws that raise input costs should be liberalized and obstacles to the ease of doing business removed.”
   But the Navy League said in a letter to members of the House Arms Services Committee, “Exempting Puerto Rico from the Jones Act would undermine national security. The U.S.-mainland-to-Puerto-Rico trade is a major American non-contiguous shipping trade. Ironically, Puerto Rico soon will be served some of the most modern, state-of-the-art vessels in the American fleet. Exempting Puerto Rico and changing the rules in the middle of the game would cause a ripple effect that would impact the entire American shipping industry.”
   General Dynamic’s National Steel and Shipbuilding yard in San Diego last month launched the second of two new LNG-powered container ships that it is building for TOTE and its Sea Star Line affiliate. The first of those two ships is expected to go into service later this year. VT Halter in Pascagoula, Miss also began construction on two container and roll-on/roll-off ships for Crowley last year.
   The Navy League letter said a U.S. General Accountability Office study of the Jones Act in Puerto Rico noted, “the military strategy of the United States relies on the use of commercial U.S.-flag ships and crews and the availability of a shipyard industrial base to support national defense needs” and that “according to DOD officials, to the extent that Jones Act markets are unable to sustain a viable reserve fleet, DOD would have to incur substantial additional costs to maintain and recapitalize a reserve fleet of its own.”
   The letter urged congressmen to “exercise your national security jurisdiction over the Jones Act and ensure that no changes are made to this important law in the context of Puerto Rico or any other context.”
   The Navy League letter was publicized by the American Maritime Partnership, a group that represents the domestic shipping industry.
   A change to the Jones Act is supported by the Heritage Foundation, which said in an article on the Puerto Rico debt crisis that Congress should “permanently exempt Puerto Rico from the Jones Act.”
   “Relief from the Jones Act would allow the cost of living on Puerto Rico to decline, effectively giving everyone on the island a raise,” said the foundation. “The Jones Act also makes doing business in Puerto Rico riskier because it makes supply lines to and from the U.S. mainland more brittle.”