Puerto Rico pushes for end to Jones Act in debt restructuring plan

John Gallagher

http://www.joc.com/maritime-news/short-sea-shipping/puerto-rico-pushes-end-jones-act-debt-restructuring-plan_20150915.html

Sep 15, 2015       

 

The U.S. Congress would no longer require U.S.-flag vessels to move goods between the mainland and Puerto Rico under a five-year debt restructuring plan proposed Wednesday by Puerto Rican Gov. Alejandro Garcia Padilla.

 

The release of the plan by the commonwealth struggling with roughly $72 billion in bond debt is the latest threat to the Jones Act industry. The Puerto Rico government argues the law — requiring that cargo moved between U.S. points be carried by U.S.-flag, U.S.-built vessels operated by U.S. crews — unfairly raises the cost of shipping cargo to the island, driving up the cost of goods in Puerto Rico.

 

The Navy League of the United States, a civilian lobbying group that promotes seaborne military services, said the repeal of the Jones Act would undermine national security. In a letter to Congress Wednesday, Bruce Butler, Navy League executive director, cited a report from the U.S. Government Accountability Office concluding that without the Jones Act, the Department of Defense “would have to incur substantial additional costs to maintain and recapitalize a reserve fleet of its own.”

 

In 2013, the GAO, the congressional watchdog, examined claims by Puerto Rican shippers that the Jones Act directly caused higher freight rates. The GAO determined it was impossible to measure how high rates in the trade would be without the act because it was not known “the extent to which rules and regulations would apply to international carriers’ vessels that may serve this trade.”

 

While volume in the trade has declined in recent years, changes in the U.S.-Puerto Rico trade, such as the exit of Horizon Lines, have resulted in a drop in capacity, allowing the remaining carriers in the trade to increase their rates.

 

A version of this story originally appeared on IHS Maritime 360, a sister product of JOC.com within IHS.

 

Contact John Gallagher at john.gallagher@ihs.com