Keeping Up with the Jones Act

Nearly three weeks after Hurricane Maria (and Hurricane Irma two weeks prior), Puerto Rico is still struggling to manage the amount of devastation left behind by the two storms. In their wake, nearly 3.5 million U.S. citizens are still without power, fuel, food and even lack access to clean water. Due to the immense power and destruction of Hurricane Maria alone, recovery is going to take a very long time and encompass a litany of challenges for the island. One challenge, specifically, is trade policy.

The Jones Act prohibits any foreign built or foreign flagged vessel from engaging in coastwise trade within the United States [Maritime Law Center]. Essentially, this law requires that only American ships can carry goods from one US port to another and any foreign vessels that enter an American port must pay punitive tariffs, taxes and fees.

If a foreign vessel carrying goods – such as food, water, medicine, or oil (which powers Puerto Rico’s entire electrical grid) comes directly into Puerto Rico it has to pay fees, duties, taxes and import quotas. Its only alternative would be to reroute to Jacksonville, FL, where the goods can be offloaded, reloaded onto an American vessel, then rerouted back to Puerto Rico. Regardless of the vessel's route, the costs this trade policy are passed along to the Puerto Rican consumer and delay emergency relief effort to the island.

Economist from the University of Puerto Rico found that the Jones Act penalized the economy of Puerto Rico to the effect of $17billion from 1990 to 2010. Research from the Federal Reserve Bank of New York also finds that the act hurts Puerto Rico’s economy. In fact, it appears that the only industry that continues to support this legislation is the shipbuilding industry (it should be noted that this law also decrees that every ship must be built, crewed, and owned by American citizens).

Now, President Trump – despite much opposition and delay – did temporarily suspend the Jones Act for Puerto Rico on September 28^th. However, The Department of Homeland Security announced on Thursday that it will not extend the 10-day waiver on shipping limitations. But with Puerto Rico still in a state of humanitarian crisis and the death count creeping upward, shouldn’t the waiver be extended so trade policy will not continue to affect the relief effort? And with the island having to completely rebuild its infrastructure and economy over the next several years, should the Jones Act be dismantled completely?

For more information visit:
http://money.cnn.com/2017/09/28/news/economy/jones-act-puerto-rico/index.html
https://www.nytimes.com/2017/09/25/opinion/hurricane-puerto-rico-jones-act.html?mcubz=0
http://www.reuters.com/article/us-usa-puertorico-shipping/extended-jones-act-waiver-not-needed-for-puerto-rico-dhs-idUSKBN1CA2C1
http://www.maritimelawcenter.com/html/the_jones_act.html