Hawaii Resolutions Call for Same Jones Act Exemption that Guam Now Has

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Guam – 5 Hawaii State Representatives have introduced a pair of resolutions calling on the U.S. Congress to loosen the Jones Act’s national build requirements for deep draft shipping to Hawaii, similar to the exemption Guam currently has.

The Jones Act requires that all goods transported by water between U.S. ports be carried in U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens or U.S. permanent residents.

The Act applies to 4  of the 7 non-contiguous U.S. jurisdictions, Alaska, Hawaii, Puerto Rico and [to a limited degree] Guam. American Samoa, the CNMI and the Virgin Islands are fully exempt from the Jones Act.

READ House Concurrent Resolution 150 HERE

READ House Resolution 119 HERE

One of the sponsor’s of the resoultions, Hawaii State Representative Gene Ward (R) issued a release explaining that the exemption they’re seeking “is modeled on the Guam Exemption and the Hawai‘i Cruise Trade exemption.  The historical Guam Exemption allows foreign-built vessels in the domestic Guam trade.” [read Rep. Ward’s release below].

The so-called “Guam Exemption” relieves the island from the U.S. build requirement.  But it doesn’t do Guam much good because the flow of goods from the U.S. west coast naturally passes through Hawaii, where the Jones Act is in full force. Island leaders have often blamed the Act for the high cost of goods on Guam.

Hawaii Rep. Ward also points out that an “exemption from the U.S. built requirement will become very important in Governor Abercrombie’s plans to switch from petroleum based fuels to Liquefied Natural Gas (LNG) for the purpose of electrical power generation.”

The Guam Power Authority is planing a similar switich to LNG.

In his most recent newsletter, Hawaii Shippers Council President Michael Hansen points out that “the reform proposed by the resolutions would not alter the other key Jones Act vessel requirements in respect of the noncontiguous trades, i.e., the U.S.-flag, U.S.-ownership and U.S.-crew provisions. Neither would it change in any way the current application of the Jones Act to those domestic waterborne trades exclusive to the 48 contiguous states.”  [see the full newsleter below]


The Hawaii Shippers Council (HSC) is a business league organization incorporated in 1997 to represent cargo interests – known as “shippers” – who tender goods for shipment with the ocean carriers operating the Hawaii trade.

READ Hawaii Shippers Council President Michael Hansen’s newsletter below:

Hawaii State House introduces Jones Act reform measure

Dear Friends,

A bipartisan group of five Hawaii State Representatives introduced in the current session a pair of resolutions calling on the U.S. Congress to enact reform legislation liberalizing the national build requirement of the Jones Act for deep draft ships operating the Hawaii and other noncontiguous domestic trades.

The companion resolutions, House Concurrent Resolution 150 ( HCR 150) and House Resolution 119 (HR 119), were introduced on March 13, 2013, and are both entitled, “Requesting Congress To Exempt The Noncontiguous Domestic Trades of Alaska, Hawaii, and Puerto Rico From the United States Build Requirement of the Jones Act for Large Oceangoing Ships”

The reform proposed by the resolutions would not alter the other key Jones Act vessel requirements in respect of the noncontiguous trades, i.e., the U.S.-flag, U.S.-ownership and U.S.-crew provisions. Neither would it change in any way the current application of the Jones Act to those domestic waterborne trades exclusive to the 48 contiguous states.

The purpose of the resolutions is to demonstrate that the State of Hawaii supports the limited noncontiguous trades Jones Act reform described therein.  Adoption of the resolutions by the Hawaii State Legislature will send a message to Congress and encourage it’s members to enact federal legislation to achieve Jones Act reform.

The five introducers of the measure are as follows:

·         Representative Gene Ward (R), Minority Leader Emeritus, 17th House District – Kalama Valley, Queen’s Gate & Hawaii Kai

·         Representative Lauren Kealohilani Cheape (R), Minority Whip, 45th House District – Mililani, Schofield & Kunia

·         Representative John M. Mizuno (D), Vice Speaker, 28th House District – Kamehameha Heights & Kalihi Valley

·         Representative Cindy Evans (D), Chair, Committee on Water and Land, 7th House District – Kaupulehu, Waimea & Halaula

·         Representative Clift Tsuji (D), Chair, Economic Development & Business Affairs, 2nd House District – Hilo, Waiakea & Keaukaha

The lead sponsor of the measures, Rep Ward, issued a press release on March 20, 2013, announcing introduction of the measure and extending an invitation to the legislatures of Alaska, Guam and Puerto Rico to consider similar measures of their own.

We would encourage the three other legislatures to follow Rep Ward’s suggestion and join Hawaii with similar resolutions of their own.  Together those resolutions would send a clear message to Congress that all the noncontiguous jurisdictions support the same Jones Act reform.

The Hawaii Shippers Council strongly supports Resolutions HCR 150 and HR 119, and kindly asks you to join with us in support of the measures.

The limited reform of the Jones Act proposed by the resolutions addresses the extremely high cost of constructing large ships in the United States, which is the major cost driver in the deep draft noncontiguous trades.  The cost of building a large ship in the United States today can be five times greater than in Japan, South Korea and China, where more than 90% of the world’s oceangoing ships are now constructed.

Allowing domestic shipowners to acquire mainline cargo ships from the major Asian shipbuilding yards for 20% of the cost in the U.S. for comparable ships will dramatically change the economics of the noncontiguous trades.  The proposed reform would substantially reduce the mainline ocean carrier’s capital costs, by lowering the acquisition cost of their primary assets — oceangoing ships.  This will effectively lower the barriers to entry into and increase the contestability of these trades.  This will put considerable competitive pressures on the incumbent carriers.

The proposed reform will create significant economic benefits that will flow through the system to businesses and consumers in Hawaii and other noncontiguous jurisdictions.  As a result, the reform would reduce the cost of goods and petroleum products to residents in the noncontiguous jurisdictions.

Please contact your Hawaii State House Representative and let them know you support the resolutions and wish to have them heard by the appropriate House committee(s).  Also, you may wish to thank the representatives named above who introduced the resolutions.

If you are a Hawaii resident and don’t know who your representative is, the Hawaii State Legislature website has a search function in the upper right hand corner “find your legislator” where you simply enter the name of your residential street.  You can also find the contact information for any Hawaii State legislator on the website, regardless whether you are a state resident or not.

Once hearings are announced, we will let you know when and where to submit your written testimony.

Best regards,
Michael N Hansen
President
Hawaii Shippers Council

The Legislative Process for a House Resolution (HR) and House Concurrent Resolution (HCR) in the Hawaii State Legislature

* Approved resolutions do not require the Governor’s signature as they are not a bill for an act.  Resolutions do not become law and are only intended to convey a sense of the legislature.

* A concurrent resolution approved by both chambers (house & senate) has far more impact than a resolution approved by only one chamber of the legislature.

* The Hawaii State Legislature is scheduled to adjourn on May 2, 2013.

Rep. Ward’s press release below:

REPRESENTATIVE GENE WARD
HOUSE MINORITY LEADER EMERITUS
HAWAI‘I STATE CAPITOL – HONOLULU, HAWAI‘I

NEWS RELEASE                                             
March 20, 2013                                         

Rep. Ward urges Jones Act reform

HONOLULU – Rep. Gene Ward (R, Hawai‘i Kai-Kalama Valley) introduced a resolution (HCR150/HR119) calling on Congress to enact Jones Act reform legislation extending Guam’s U.S. build exemption for large oceangoing ships to Hawai‘i, Alaska and Puerto Rico.

“The resolution asks Congress for a limited exemption from the U.S. build requirement of the Jones Act for large oceangoing ships in the noncontiguous domestic trades of Hawai‘i, Alaska and Puerto Rico,” Ward said.

The exemption is modeled on the Guam Exemption and the Hawai‘i Cruise Trade exemption.  The historical Guam Exemption allows foreign-built vessels in the domestic Guam trade.

The Hawai‘i Cruise Trade Exemption was put in place 2003 by the efforts of late U.S. Senator Daniel K Inouye.  With this exemption, Congress revitalized Hawai‘i’s cruise ship industry and boosted our tourist economy.

“This exemption from the U.S. built requirement will become very important in Governor Abercrombie’s plans to switch from petroleum based fuels to Liquefied Natural Gas (LNG) for the purpose of electrical power generation,” Ward continued.

No U.S. shipyard has built LNG carriers since the 1970’s.  With the shutdown of Tesoro’s Hawai‘i refinery in April 2013 — Hawai‘iGas loses its supplier of naphtha feed stock for the production of synthetic natural gas (SNG). Hawai‘iGas SNG customers will soon depend on recently-approved shipments of LNG carried in 40-foot refrigerated tank containers.  LNG carriers are required if LNG is to fuel the much larger demands of electricity generation.

Changing air pollution rules are forcing Hawai‘i electric generators to switch to Natural gas.  Likewise, ship owners are beginning to power their vessels with LNG to meet new air pollution requirements requiring reduced emissions within 250 miles of shore.

This proposed exemption would not change the other requirements of the Jones Act for U.S.-flag, crew and ownership, would not apply to the tug and barge industry, nor cause a loss of any maritime jobs in Hawai‘i or the other noncontiguous jurisdictions.

The high cost of new Jones Act ships is the main cost driver in the noncontiguous trades and by allowing foreign built oceangoing ships operating under U.S.-flag into these trades we can substantially lower the shipowners’ capital costs and meaningfully increase competition that will assist all of the residents.  This exemption would also not affect Matson has some of its ship repairs done in Asia rather than U.S. ports.  This will not alter current ship repair operations.

“We are looking forward to the Legislatures of Alaska, Guam and Puerto Rico to join with us by passing complimentary resolutions supporting this important Jones Act exemption for all of us,” Ward concluded.

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