<strong>MARITIME</strong>PROFESSIONAL.COM 27,000+ Members: Join the largest networking group in the maritime industry Keeping up with the Jones (Act) Get the Maritime Professional App for iPhone, Android and Windows devices Puerto Rico’s money woes have nothing to do with the Jones Act. Arguably, the U.S. island would be worse off without it. Joseph Keefe is the lead commentator of MaritimeProfessional.com. In the late 1980’s, I was toiling for a small maritime consulting group, traveling probably 20 days per month, following oil tankers around the globe as they lifted and discharged various cargoes for oil traders and multi-national refining groups. It was wonderfully satisfying work, typically conducted at 3 AM in a sweaty tank farm while swatting mosquitoes large enough to carry away small pets with a single bite. And it involved other pleasant tasks such as making telephone calls to Wharton-educated oil traders who resented having their afternoon squash match interrupted by a perspiring surveyor who had bad news about the dog-of-a-ship they had chartered 45 days prior, at a huge discount, in the hopes of increasing the margins on a less-thansavvy crude oil lifting. As it turned out, one of the places I was dispatched – on a regular basis – was the island of Puerto Rico. In fact, I spent the better part of two years traveling back and forth to the island, often staying 10 days or more at a whack before fleeing back to the mainland. Hence, I know a little bit more than most about ocean shipping in and out of the island. I’m embarrassed to say that, given the amount of time I spent there, my conversational Spanish skills should be a lot better. On the other hand, my experiences there give me a unique perspective that others perhaps do not. For the most part, I was assigned to attend marine petroleum custody transfers for all manners of liquid cargoes; crude oils, condensate and refined products. Along the way, I vetted ships for suitability and safety, maintained loss accounting records and looked for ways to increase efficiencies for my local, refining and trading clients. It didn’t always go well for the client here, and at one point, I was asked to do a full evaluation – paper and physical infrastructure – of their primary facilities. When I was done, the reasons why became fully evident. I walked every pipeline in that terminal, located and recorded every valve and its position, and when I was done, I presented my report to the client. Their physical and paper losses were likely to continue, I said, unless they began to employ fully independent and competent security, 24 hours per day, 365 days per year. That’s because it didn’t take a genius to see that unlocked gates at supposedly inactive truck racks, where mysterious tank trucks would show up at odd hours and idle for predictable periods of time, were eating into the profits. Alleged custody transfer losses, in theory of the ship-toshore kind, were largely paper-generated, and a function of what was happening ashore. Interestingly, the vast majority of the countless vessels that I boarded and surveyed during my time spent on the island were foreign registered vessels, with U.S. flag product tankers arriving only to haul refined products to the U.S. East Coast. Sometimes, the client might even get a Jones Act waiver when no U.S. flag asset was available. Jones Act trade was actually quite a small percentage of the overall marine traffic in and out that port, and in the end, had little to do with economic success or failure of the operations ashore. Eventually, I moved on to another job, which took me to other exotic and equally grimy tank farm terminals, and so I understand, the facility in Puerto Rico also eventually closed its doors. To be fair, what I saw and experienced there could happen just about anywhere, but from my bird’s eye perspective, the basis for a prosperous and successful local economy – built on local industry, ocean trade and tourism – were always present, but never fully realized. At the time, a low mileage rental car at San Juan’s International Airport was defined as anything with less than 30,000 miles on the odometer and the local infrastructure was crumbling and dangerous. It was a tough place to work then, and based on what is being reported today about the island’s economy and so-called debt crisis, I’m guessing that it hasn’t gotten any better. Again, that’s got nothing to do with the Jones Act. Local Debt & Ocean Shipping: Apples & Oranges Claims of a causal link between the costs associated with U.S. domestic maritime policies and the reported $72 billion debt crisis facing the Commonwealth are being bandied about by local pundits as an example of what can happen when the Jones Act holds a particular geographic economy hostage. One such account, a report commissioned by the government of Puerto Rico, holds that all islands suffer from high transportation costs. And, the report claims, Puerto Rico “does so disproportionately, with import costs at least twice as high as in neighboring islands on account of the Jones Act, which forces all shipping to and from U.S. Ports to be conducted with U.S. Vessels and crews.” In contrast, a 2013 study of the Jones Act in Puerto Rico by the U.S. Government Accountability Office (GAO) doesn’t necessarily agree. One of the primary advantages to Jones Act rules, according to GAO, is the nature of the just-in-time service that regular liner routes provide. If replaced by foreign flag tonnage, the report insists, the likelihood of dedicated liner service to the island would be substantially reduced, and the quality and timeliness of freight service impacted. Beyond this, GAO reported that in 2011, at least twothirds of the ships serving Puerto Rico were foreign registered, representing as many as 55 different foreign flag carriers. Apparently, then, there is plenty of competition to deliver low cost freight to Puerto Rico. Correctly pointing out that most developed trading nations have cabotage laws applied to various modes of domestic commerce, the GAO study also says that foreign-flag ships are not subject to U.S. taxation, U.S. immigration, and other U.S. laws. Faced with those impediments to the bottom line, the report goes on to say, the perceived gap in transport costs would largely evaporate. As I write this blog, a massive, domestic, multi-shipper capital improvement program is underway for carriers in the Puerto Rico trades. The U.S. built vessels that will soon join this freight corridor will be among the best, most environmentally correct of any operating anywhere else on the planet. All of that investment brings me around to a larger point, and question: What do we tell U.S. flag operators who collectively operate 40,000 domestically built hulls that the Jones Act is no longer valid? And, don’t tell me that you can selectively eliminate the cabotage rules in one locale (Puerto Rico, for example), but not another. It’s like being a little bit pregnant. Actually, the most articulate response to Jones Act naysayers I’ve heard in the past 10 years came from U.S. flag operator Morton Bouchard III, who told MarineNews magazine back in November of 2014, “The continuous failed attempts by companies to circumvent the Jones Act are amazing to me. This legislation will not change. From our inception, Bouchard has invested well over five billion dollars in vessels built in the United States, crewed by United States seamen and owned by the Bouchard family. 8 Maritime Reporter & Engineering News • SEPTEMBER 2015
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