The Jones Act can be a devisive topic, especially for those living in places like Puerto Rico and Hawaii who rely on ships for just about everything. For Jones Act detractors, many believe that it increases the cost of shipping goods by reducing competition in the marketplace to only a handful of U.S. companies with qualifying fleets. But a new study conducted by Ernst & Young shows that the Jones Act actually provides more affordable and reliable shipping—at least for those in Puerto Rico.
After all, the Jones Act requires that goods transported between U.S. ports be shipped on U.S. built, owned, operated, and crewed vessels. While places like Puerto Rico and Hawaii legally can and do cater to internationally trading ships (an often misunderstood point when, say, a hurricane hits), there is no doubt they are reliant on domestic trade with the U.S. mainland.
The new comprehensive study was commissioned by the Transportation Institute (TI), a Washington, D.C.-based non-profit dedicated to maritime research education and promotion. To be sure, the organization has a history of being Jones Act-friendly (i.e. it’s no CATO).
The study looked specifically at the Jones Act trade serving Puerto Rico versus comparable international routes in the Carribean region (like Jamaica and the Dominican Republic), comparing things like freight rates, container availability, port congestion, and carrier performance relative to global averages.
The study looked only at the timeframe between January 2019 and December 2021 in order to capture the heightened volatility of freight movement during the peak of the COVID-19 pandemic.
What the study found was that shippers overwhelmingly associated better carrier performance with Jones Act carriers than non- Jones Act ones, and it concluded that “in addition to providing stability and security in the region, the Jones Act shipping industry continues to provide substantial economic benefits to Puerto Rico.”
The study also indicates that Caribbean routes in general were more stable during the pandemic as global shipping rates increased 27 times more on average than rates in the Caribbean region, and rate increases on Jones Act routes were comparable with the rest of the region.
The study also looked at the economic contributions of Jones Act shipping in Puerto Rico, finding that the Jones Act shipping industry supports over 2,000 jobs, $96 million in wages, and $221 million in annual gross economic output.
“Jones Act carriers are dedicated to Puerto Rico and help local businesses make goods more affordable and the supply chain more reliable compared to our global competitors,” said James L. Henry, Chairman and President of the Transportation Institute. “While the entire global supply chain was disrupted during the pandemic, our Jones Act carriers proved to be 27 times more affordable and 8 times more reliable than non-Jones Act carriers.”
Some of the study’s findings echoed those of the U.S. Government Accountability Office (GAO), which studied the issue in 2013. What the GAO found was that while the Jones Act market to Puerto Rico is served by only a select few U.S. companies, those companies provide the island with regularly scheduled and reliable container service that foreign carriers simply cannot provide. As for freight rates, the GAO found that those are set by a host of supply and demand factors, making it difficult to isolate precisely the extent to which freight rates between the U.S. mainland and Puerto Rico are affected by the Jones Act.
Perhaps this study helps to fill in some of those gaps.
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