Puerto Rico recovery after Hurricane Maria: waiving the Jones Act

By Walter Olson

The 1920 Jones Act confines shipping traffic between US ports to US-flag, US-crew ships. That includes traffic between the mainland and outlying islands. It’s onerous for Puerto Rico in the best of times and now, in the emergency following the devastation of Hurricane Maria, much worse than that.

The Department of Homeland Security waived the Act beginning Sept. 8 in a limited manner for the purpose of allowing oil shipments to reach areas of Texas and Florida hit by Hurricanes Harvey and Irma. Those waivers expired Sept. 22. On Sept. 25 DHS announced that it would not waive the act for Maria and Puerto Rico even for the limited purpose of oil shipments, let alone general relief. DHS says it thinks most relief supplies for Puerto Rico from the U.S. will be sent by barge and it thinks there will be enough U.S.-flag barges available.

My Cato colleague Nicole Kaeding wrote two years ago that due to the Act, “goods coming from the mainland [to Puerto Rico] can’t come on the most cost-competitive vessel. They must go with one of four U.S. shippers operating that route. The limited competition increases costs. Puerto Rico’s shipping costs are twice those of its island neighbors, making items more expensive to purchase on the island. It also limits Puerto Rico’s ability to export its products to the mainland.”

Now the restrictions also mean that, say, a Norwegian- or Liberian-flagged vessel loaded up in Jacksonville or Savannah with relief supplies will not be allowed to unload them in Puerto Rico, no matter how much port capacity may have reopened there.

Rep. Nydia Velasquez (D-N.Y.) has called on President Trump to suspend the operation of the act for a year to reflect the current emergency, and that should be just an opening bid: Congress should move to repeal the law. Easier said than done: the Act, which also greatly drives up costs for Americans in places like Hawaii and Alaska, is tenaciously defended by U.S.-flag shipping interests and associated labor unions. Inertia, and the special interests that grow up around an existing law that protects some livelihoods, are powerful things. Critics of the Act, including Sen. John McCain (R-Ariz.), have made little headway. Trump, on Wednesday, on why he has hesitated: “a lot of people that work in the shipping industry… don’t want the Jones Act lifted.”

See also Amber Phillips/Washington Post “The Fix” (with link to Overlawyered), Nelson Denis, New York Times (“The Law Strangling Puerto Rico”), Henry Grabar/SlateMichael Tanner/NROMarc Scribner/CEI, and this new WSJ editorial (“DHS argues that under U.S. law the agency can’t ask for a waiver unless there’s a national defense threat and there aren’t enough Jones Act-compliant ships to carry goods. That may or may not be a cramped reading of the law by DHS, but the Department of Defense has fewer legal constraints. Defense Secretary Jim Mattis could simply find a Jones Act waiver is ‘necessary in the interest of national defense.’”)

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