Type to search

Biz Views Featured

Op-Ed: The burden of the Jones Act

Our firm, Advantage Business Consulting, just concluded a study on the impact of the Jones Act on Puerto Rico that is much better than the two studies commissioned by the Jones Act Carriers (JACs) or even the one prepared by the General Accounting Office (GAO).

It is not
that we are geniuses at Advantage. It is that we had data from a survey of
importers comprising the cost information on some 40,000 containers brought to
Puerto Rico from all over the world.

Thus, a
40-ft. container to Puerto Rico from Cartagena, Colombia costs $703; from
Panama it costs $1,220; and from Jacksonville, Fla., in Jones Act ships it
costs $2,404. A refrigerated container from Cartagena costs $2,004, from Panama
$1,715 and from Jacksonville using JACs $6,054. This information had not been
published in the past.

One of
Advantage’s recommendations is to order the JACs to regularly inform tariff
data to the Puerto Rico Department of Economic Development and Commerce and
that these by published in the same way that data from other industries is
published, such as commercial banking, insurance, gas retailing and hospitals. This
is such a standard practice that the Shanghai Containerized Freight Index, made
up of container traffic data using the port of Shanghai, is traded in
securities exchanges.

Standardizing for distance and size of container (40, 45 and 53 feet), using JACs is 151 percent more expensive — two and a half times — than using international ships. We validated this enormous difference in cost to Puerto Rico by benchmarking with a study from the federal government.

The U.S.
Department of Transportation obtained data on the cost of operating under the
Jones Act through a survey of JACs throughout the United States. Their
conclusion was the cost of operating JACs was 170 percent, or 2.7 times, more
expensive than international ships.

The study of
the federal government is consistent with our results and inconsistent with the
allegations of the JACs that the Jones Act does not represent a form of
taxation on Puerto Rico. Curiously, the studies commissioned by the JACs ignore
the study by the U.S. Department of Transportation.

One of the
main contributions of Advantage’s study was to obliterate the argument of the
JACs that the cost of inland transportation is the same with and without the
Jones Act. This difference comes up because the JACs service Puerto Rico from
only four ports in the U.S. and only one of them, Jacksonville, has a significant
frequency of sailing dates. The cost of inland transportation is significant
and additional to the 151 percent premium from using JACs.

Suppose that
a ship from Europe arrives in Miami with 6,000 containers, of which 200 have
Puerto Rico as final destination. In the absence of the Jones Act, the cargo
would be transshipped from Miami to the island. Due to the Jones Act, it is
necessary to put the containers on trucks and move them overland to
Jacksonville before shipment to Puerto Rico.

Suppose now
that the containers come from California, the state with the largest food
production in the United States. The JACs do not serve Puerto Rico from any
port in California. Thus, it is necessary to bring the containers overland to
Jacksonville. The inland cost is some $7,000 per container—in addition to the
$2,404 from Jacksonville to San Juan via the JACs.

To estimate
the cost of bringing this same container from California using international
ships, we searched for a benchmark. Thanks to the survey of importers, we had
data on what it costs to bring a container from Chile, across the Panama Canal,
up to San Juan.

This is
similar to the possible route from California to San Juan. The cost is $2,483.
That is, when taking into account the inland cost, shipping a container from
California to San Juan costs almost four times what it would cost in the
absence of the Jones Act.

government of Puerto Rico requested an exemption from the Jones Act to bring
liquified natural gas (LNG) to the island. At present, the JACs have no ship
that could deliver the LNG. At present, the Eco-Eléctrica and some plants of
the Puerto Rico Electric Power Authority use LNG from Trinidad & Tobago
because they cannot bring it from the U.S. In an action that harms both Puerto
Rico and the United States, the JACs oppose the exemption request.

In the
aftermath of Hurricane María, when people in Puerto Rico were literally dying,
the government of Puerto Rico requested an exemption to the Jones Act. The JACs
opposed it. President Trump granted a 10-day exemption. During this period 10 foreign
ships provided Puerto Rico with gas, diesel, generators, water and baby food,
among others.

Before Hurricane Maria, Puerto Rico underwent an economic contraction. If we do not take significant actions, after the disaster recovery funds are spent, we will be back in contraction mode. The elimination of the Jones Act is one of these significant actions.

Editor’s note: This column originally appeared
in Spanish in El Nuevo Día.

Author Details
Author Details
This story was written by our staff based on a press release.

1 Comment

  1. Richard R. Tryon II February 28, 2019

    For years, the politicians and shippers have colluded to hide the huge cost differential for just the most important part of solving a serious problem- high cost of importing. So other shipments not needing the huge extra costs provide a large base in which one can hide the huge extra expense on the vital food part! We import 85% of our food and much comes via the extra cost way.

    Time for PR to be Free! Get away from U.S. corruption as well as our own part of it!


Leave a Comment

Your email address will not be published. Required fields are marked *