The Jones Act Reform Coalition has published a point-by-point rebuttal of our Q & A briefing on the Jones Act. We did not expect the JARC to endorse our statement and fold its tent, and, in fact, welcome the opportunity to further expand on our support for the Jones Act. And like our critic, we want to expand the debate on the Jones Act. We invite visitors to our homepage to send us questions about the Jones Act. We will, with the individual's permission, publish representative questions and our answers.
To repeat LCA's original statement, the JARC's response, and then our response will overload the Internet (or make a webmaster a millionaire), so we have chosen to summarize the previous statements and believe we have accurately condensed the JARC's positions and statements. Also, we invite our readers to visit the homepage of The Maritime Cabotage Task Force. This is the national coalition representing all segments of the U.S.-Flag Jones Act fleet, related maritime industry groups and representatives from the U.S. rail, trucking and aviation industries. LCA's expertise is primarily Great Lakes, so if you have questions concerning the other Jones Act trades, you will find the MCTF homepage a great source for accurate information.
Why did Congress pass the Jones Act?
Was the Jones Act pioneering legislation?
Do other countries have Cabotage laws?
How do Canada's and Mexico's Cabotage laws differ from the Jones Act?
Does the Jones Act cover the transport of passengers?
How does the Jones Act differ from laws governing other transportation modes?
Does the Jones Act protect American shipyards?
Do Jones Act carriers receive government subsidies?
How has the Jones Act benefited Great Lakes shipping?
Are there environmental benefits to the Jones Act?
Is there competition among Jones Act carriers?
Why are U.S.-Flag freight rates higher than foreign-flag carriers?
Is there a vessel shortage on the Great Lakes?
Is the U.S.-Flag Great Lakes fleet "old"?
Does the Jones Act impede a Lakes/North Carolina grain trade?
Do U.S.-Flag lake carriers transport salt?
Why are there fewer U.S.-Flag lakers compared to times gone-by?
Why would it be unfair to allow Canadian vessels into the Lakes Jones Act trades?
Does the Jones Act need changing?
What would be the aftermath of repealing the Jones Act?
Isn't "reform" of the Jones Act really just a way to circumvent immigration laws?
Additional Points
LCA's position on the St. Lawrence Seaway.
LCA and the JARC - Any Common Ground?
LCA states that the Jones Act was passed to promote a healthy U.S.-Flag fleet and protect that fleet from unfair foreign competition. The JARC thinks the law was enacted to "protect a Seattle-to-Alaska rail monopoly from competition from Japanese and Canadian ships."
One of our biggest frustrations with the JARC is that they keep insisting that the Jones Act was in some way a vast departure from previous U.S. maritime policy. IT WAS NOT. The Jones Act was signed into law on June 5, 1920, but the groundrules did not change significantly when President Wilson put pen to paper. A foreign-flagged or foreign-owned vessel could not carry cargo between U.S. ports before June 5, 1920. In fact, Congress has banned foreign vessels completely from the coastwise trades since 1817. (Act of March 1, 1817, ch. 31 § 4, 3 Stat. 351, later codified as § 4347, Revised Statutes, Second Edition [1878].) The 1920 recodification of our Cabotage laws only increased the citizen stock ownership requirement from 50% to 75% and established standards (patterned generally upon a 1918 law) for determining when the 75% stock ownership requirement had been met.
In this section, the JARC also says we're wrong that it's general labor and immigration laws that require U.S. citizen crews. The JARC says "the Jones Act is the only law governing any industry that specifically requires American citizens in any capacity." Not true - U.S. citizenship is frequently required in industries important to national defense and security - like maritime. Moreover, it is erroneous to imply, as does the JARC, that the citizenship requirement is a Cabotage issue. The citizen crew requirement originated with the documentation laws (which pre-date much of U.S. Cabotage law). Similar requirements are found in the maritime laws of every country that maintains a national flag shipping register.
LCA states that the Jones Act is just one of a long line of Cabotage laws meant to promote U.S.-Flag vessels. We trace U.S. Cabotage laws back to 1789. The JARC thinks the 1789 bill was a general revenue measure. Well, according to the U. S. Maritime Administration's 1987 publication By the Capes: A Primer on U.S. Coastwise Laws, "There have been Cabotage laws in this country since 1789. The first one restricted (emphasis added) registration for coastal trades and fisheries to U.S.-built and U.S.-owned vessels and gave those vessels preferential treatment with respect to tonnage taxes and cargo import duties." That sounds like Cabotage to us - remember "Cabotage" laws define who has the right to engage in domestic commerce.
LCA states that nearly 50 countries throughout the world have laws similar to the Jones Act. The JARC states that only two countries, Peru and Indonesia, have laws with the same requirements as the Jones Act. Well, for once we're both right. The two previously-mentioned countries have the closest parallel to the Jones Act, but according to a 1991 Maritime Administration study, other nations grant their domestic carriers advantages not extended to U.S.-Flag carriers under the Jones Act. For example, Japan subsidizes the deficits from operations by shipping lines engaged in the "remote islands" trades ... Norway subsidizes local ferries.... In anticipation of the JARC's response, we will concede that some nations such as the United Kingdom and Belgium have lifted some flag restrictions, but they maintain crewing requirements - and may be covered by broader Cabotage regimes such as that of the European Community.
Our initial point remains valid - the concept of Cabotage is common to virtually all nations and all forms of domestic transportation. For more specifics on individual countries, please consult the MCTF's overview of Cabotage laws throughout the world.
LCA states that Canada's and Mexico's Cabotage laws differ primarily from the Jones Act in that they allow nationals to build ships for the domestic trades in foreign shipyards. However, in the case of Canada, the shipowner must pay a 25 percent tariff on the ship. The JARC says the North American Free Trade Agreement has reduced that tariff to 5 percent and will lead to its total elimination by 1998. This is correct only as it pertains to a ship built in the United States. (The tariff is also being phased out, albeit at a different pace, on a ship built in Mexico.) Were a Canadian carrier to build a ship in South Korea, Finland, China..., the owner still would have to pay the 25 percent tariff before the vessel could trade coastwise.
LCA states that the Jones Act does not cover passengers, but that trade is governed by a law with similar requirements - the Passenger Vessel Act of 1886. The JARC opposes the PVA and lists its reasons.
We will confine our response to the PVA as it pertains to the Great Lakes. American Great Lakes Ports (AGLP), an association of U.S. Great Lakes Port Authorities, has as one of its 1996 Policy Positions to seek changes to - or exemptions from the PVA - that will improve the economic viability of Great Lakes passenger cruise operations, and help foster a rebirth of Great Lakes passenger cruises.
LCA and AGLP work closely together to keep Great Lakes shipping safe and efficient. We cooperate on a wide range of matters ... Coast Guard icebreaking resources, dredging, government-impelled cargos, length of the navigation season..., but on this issue we must differ with our fellow members of the Great Lakes maritime community. The PVA is not the problem. The cruise industry that once flourished on the Lakes gave way to "the interstate highway system and a more extensive airline network" to quote a study by the Great Lakes Commission.
However, as the Great Lakes environment has improved, recreational uses of the Lakes have rebounded. Clipper Cruise Line, a U.S.-Flag operator, this year will call at Rochester, then transit the Welland Canal to Put-In-Bay (Ohio), Toledo, Mackinac Island, Leland, Presque Isle and Sault Ste. Marie. Other U.S. operators also offer cruises into the Great Lakes. We understand port authorities' frustration with the limited amount of service that currently exists, but let's always remember that with Canada being so close by, one can right now use a ship of any flag merely by alternating between U.S. and Canadian ports. One could put together an attractive itinerary by trading between the two countries. That more service does not exist is perhaps an indication of limited demand and the limited cruising season.
LCA states that other rules governing other segments of the American transportation industry (rail, truck and aviation) differ mainly in that U.S.-Flag vessel operators must build and maintain their ships in the United States. The JARC says this is an "absurd distortion" of the facts. The JARC is wrong and a complete analysis is being prepared for the Maritime Cabotage Task Force's homepage.
LCA believes that the Jones Act helps American shipyards compete against subsidized foreign competition. The JARC responds that since 1980, more than 60 shipyards have closed and 200,000 jobs in the shipbuilding industry lost. We will assume that those figures are correct, but the downsizing of the shipbuilding industry is hardly an indictment of the Jones Act. What has happened in this country since 1980? First, we suffered through a severe recession in the 1980s, one that forced most industries to restructure. Also, the end of the Cold War has dramatically reduced the need for military vessels, always an important market for American shipyards. To say that the shake-out of the shipbuilding industry is proof the Jones Act has failed is like saying our healthy, vibrant steel industry has crumbled because it now employs 150,000 instead of 500,000 people... that our automotive industry has failed because Studebaker and Packard are no more....
LCA states that the Jones Act can and has been waived in the interest of national defense. The most recent example occurred in 1991 when President Bush did allow a limited number of foreign-flag tankers to move some crude oil from the Strategic Petroleum Reserve. The JARC says that these waivers illustrate a shortage of vessels. That conclusion is incorrect. The U.S. vessels that could serve this emergency trade were fully engaged moving oil elsewhere and the President believed time to be important.
LCA states that Jones Act carriers receive no subsidies from the Federal government. Jones Act vessels are disqualified from the Operating Differential Subsidy (ODS) Program and were not allowed to participate in the now defunct Construction Differential Subsidy Program. The JARC responds that economists consider laws which protect markets an "insidious form of hidden subsidy or price support." In other words, when the facts don't support your argument, get philosophical or academic.
While it is irrefutable that we are unsubsidized, we disagree with the view of the unnamed economists and the notion that the Jones Act "protects" our markets. The Jones Act doesn't protect any company or segment of the industry from competition. It simply requires all operators in domestic transportation to play by the same rules. If Jones Act markets were "protected," American railroads would not have won iron ore and coal cargos from Lakes fleets, unit trains would not have come to dominate grain movements, tug/barge units would not have made a major inroad into the salt trade....
LCA states that the Jones Act has benefited Great Lakes shipping by fostering a fleet of the world's most technologically-advanced vessels... that our 1,000-footers, historically, have carried 65,000 tons of iron ore from Lake Superior to Lake Erie for roughly $6 a ton ... that freight rates for short-haul cargos are as low as $2 a ton. The JARC says that in reality the Great Lakes fleet is among the oldest in the world. Not a single ship has been replaced in the last 15 years.
LCA has a staff of but four professionals, so we don't have the time to determine the age of other countries' fleets, but if this statement is correct, we have a hunch it's an apples to oranges comparison. With an average age of 35.6 years, the U.S.-Flag Great Lakes fleet is old compared to DEEP SEA FLEETS, but that's because salt water is extremely corrosive and shipowners in those trades generally have to replace their ships after 20 years or so (or invest significant funds in rehabing the ship). As we noted in our original statement, our ships spend their entire lives in FRESH water, so if properly maintained, the hull can last indefinitely. (Since we are answering the JARC in order, we'll return to this issue of vessel age a bit later.)
Concerning the hiatus in new builds, the newest U.S.-Flag laker was christened in 1982. For the record, that's 14, not 15 years ago. In 1991, the retired ore carrier LEON FRASER was converted to the largest cement carrier ever to work the Great Lakes. In 1991, the long-idled JOHN J. BOLAND was rehabilitated in advance of the planned retirement of the 1905-vintage NICOLET. (The NICOLET was very active in the salt trade and the internal problems were extensive.)
LCA will be the first to agree that vessel replacement has been very limited in the past 14 years, (our Canadian counterparts have not added a new hull to their Lakes fleet since 1985) but again, let's look at events around us. In 1981, the iron ore float on the Lakes was 83.9 million tons (a lackluster total; in 1979, the ore float was 103.1 million tons). In 1982, the ore trade crashed with the recession to a mere 43.1 million tons. THAT'S A DECLINE OF 48.6 PERCENT IN ONE YEAR. The ore trade "rebounded" to 58.3 million tons in 1983. The 1995 shipping season represents the new post-recession peak for the Lakes ore trade - 70.6 million tons.
Iron ore has always been the backbone of Great Lakes shipping, but let's quickly look how other cargos fared. Coal did not suffer the extreme decline of iron ore; during the period 1982 - 1995, Great Lakes coal shipments ranged from a high of 43.1 million tons in 1984 to a low of 30.5 million tons in 1993. The stone trade has actually grown since the onset of the recession. Shipments in 1995 totaled 34.6 million tons, a figure which compares favorably with pre-recession floats. (Stone's rebound reflects not only strong demand from the construction industry, but increased use of fluxed pellets by the steel industry.)
The relative stability in coal and stone did not offset the loss of iron ore, so U.S.-Flag Lakes fleets found themselves having built 31 ships between 1972 - 1982 in anticipation of continued growth. (In addition to new builds, many existing ships were lengthened and converted to self-unloaders.) Instead, the market contracted. It is not difficult to understand why so little tonnage has been added to the fleet in the past 14 years.
The JARC concludes its questioning of our efficiency by suggesting that if we are so good, if freight rates are already as low as they can go, then our members' customers will remain loyal and we have nothing to fear from new maritime competitors. LCA's members know their customers would want to remain loyal, and therefore anticipate that their customers would come to them and ask if they could match lower rates offered elsewhere. Our members survived the recession and remain competitive because they continually find new economies, but there is no way U.S.-Flag self-propelled vessel rates could be cut to match the third-flag rates made possible with crews drawn from the developing nations.
LCA states that the high safety and crewing standards with which Jones Act carriers conform are an environmental protection for the Great Lakes. And that it is a FACT that some foreign-flag vessel operators (Canadians excepted) do not even approach these standards. The JARC calls this false advertising.
Our statement is neither false nor advertising. Just this April the U.S. Coast Guard updated its list of Targeted Flag States, countries whose registered ships had a higher than average history of Port State Control detentions over the past three years while operating in U.S. waters. The list is part of the Coast Guard's Port State Control Initiative. The goal of the program is to focus Coast Guard ship boarding resources on those parties most likely to be operating substandard ships which, by nature of their condition, pose an increased risk to crew safety, the marine environment or the port. In all in, there are 24 countries on the list.
The JARC says crew expertise would be preserved in its proposal because ships operating on a regularly-scheduled basis must employ American crewmembers. We're not quite sure we know what the JARC means by "regularly-scheduled service." We can tell you this, Great Lakes shipping isn't like the liner trades where companies offer sailings from say New York to Lisbon on every Monday and Thursday. Our members sign contacts to move a certain amount of cargo each season and have monthly commitments, but then it's up to the vessel dispatchers to determine the best schedule, one that keeps the ship full of cargo as often as possible. And what about the spot market? Our members tell us the salt trade is largely spot market. Also, during the shipping season, customers adjust their requirements and request additional tonnages not covered by the original contract. Would these instances be considered spot cargos subject to carriage by foreign-flag vessels?
For arguments sake, let's assume the JARC is correct and that ships in regularly-scheduled service will employ American mariners. What would stop foreign-flag operators from "tramping" and thus circumventing the American crew requirements. This is a very likely scenario. Given the choice of paying American wages and benefits versus $15 a day to a crewmember from the developing world, foreign shipowners will opt for the latter whenever possible.
LCA states that its members compete fiercely on several levels. First, among themselves, then with the railroads and, in some instances, trucks. (We forgot to add the emerging uninspected tug/barge unit. Mea Culpa.)
The JARC repeats a quote attributed to MarAd's Great Lakes Region Director in the Journal of Commerce on February 29, 1996: "It [Great Lakes shipping] is like bus service. There's some competition, but not much." LCA has not refuted this statement to date, nor shall we. While we have a high regard for the Journal of Commerce, the individual in question is too well versed in Great Lakes shipping and the maritime industry to have made such a statement. Either something got lost in the translation or the statement is out of context.
The JARC further doubts the existence of competition on the Lakes because so many vessels are owned by shippers. (For those unfamiliar with transportation terminology, "carriers" carry cargo; "shippers" engage carriers.) The JARC puts too much stock in the "Captive Fleet." They exist now primarily in the cement and liquid-bulk trades and that's because cargo hold design precludes these ships from carrying or unloading other types of cargo.
Let's look at these supposed captive fleets.
American Steamship Company (ten ships with a combined per-trip carrying capacity of 345,140 gross tons). Owned by GATX, American Steamship carries virtually any dry-bulk cargo to U.S. and Canadian customers on all five Lakes.
Bethlehem Steel Corporation (two 1,000-footers with a combined per-trip carrying capacity of 119,000 gross tons). Bethlehem's ships are essentially dedicated to feeding iron ore to Bethlehem Steel's blast furnaces, but even this company on occasion carries iron ore for other customers.
Cement Transit Company (one self-propelled cement carrier and one cement barge with a combined per-trip carrying capacity of 20,000 tons). Cement Transit is a wholly-owned subsidiary of Medusa Cement Corporation and carries exclusively for its parent. The unloading system on cement carriers precludes these ships from discharging other commodities.
Cleveland Tankers Ship Management Inc. (two double-hulled tankers with a combined per-trip capacity of 118,000 barrels). Cleveland Tankers carries liquid-bulk products for a variety of customers in the U.S. and Canada. Although the large, ocean-going tankers have carried dry-bulk cargos such as grain, these ships are too small to bid for anything other than liquid-bulk cargos.
Coastwise Trading Company (one integrated tug/barge tanker with a per-trip carrying capacity of 70,000 barrels). A subsidiary of Amoco, the MICHIGAN/GREAT LAKES occasionally hauls for other producers.
Erie Sand Steamship Company (one 620-foot-long self-unloader with a per-trip carrying capacity of 15,173 gross tons). A privately-held company, Erie hauls stone, sand and coal for customers below the Soo Locks.
Inland Lakes Management, Inc. (five cement carriers with a combined per-trip carrying capacity of 51,965 gross tons). Inland Lakes is under contract to haul cement exclusively for Lafarge, but has on occasion carried for other cement producers when other cement carriers have been out of service for repairs.
Inland Steel Company (three ships in operation with a combined per-trip capacity of 86,040 gross tons). These boats are pretty well kept busy supplying Inland Steel's mills, but do carry stone and coal for other customers on Lake Michigan. These "backhaul" cargos are important to keeping Inland's raw materials costs competitive.
Interlake Steamship/Lakes Shipping Company (nine ships with a combined per-trip carrying capacity of 332,960 gross tons). Interlake/Lakes is a privately-held independent carrier delivering cargo to U.S. and Canadian customers on all five Lakes.
Litton Great Lakes Corp. (one 1,000-foot-long integrated tug/barge with a per-trip carrying capacity of 52,000 gross tons). The PRESQUE ISLE has a long-term haulage contract with USS Great Lakes Fleet, Inc. That fleet markets the vessel and the ship carries iron ore, coal and stone for a variety of customers.
Oglebay Norton Company (12 ships with a combined per-trip carrying capacity of 340,525 gross tons). Some might consider Oglebay Norton a captive fleet as the company also manages and has an ownership interest in an iron ore mine in Minnesota, but this fleet carries iron ore, coal and stone to U.S. and Canadian customers on all the Lakes except Ontario. (ON does have ships that could transit the Welland Canal, but their customer mix does not currently include Lake Ontario.)
Stinson, Inc. (one 1,000-footer with a per-trip carrying capacity of 59,000 gross tons; managed by Interlake Steamship). Although the GEORGE A. STINSON is pretty well dedicated to supplying iron ore to National Steel in Detroit, the ship has on occasion carried for other customers.
USS Great Lakes Fleet, Inc. (ten ships with a combined per-trip carrying capacity of 310,650 gross tons). This fleet is a wholly-owned subsidiary of Transstar. USX owns a minority share of Transstar, but of the 10 ships, only three are truly dedicated to the steelmaker - the 1,000-footers EDGAR B. SPEER and EDWIN H. GOTT and the 858-foot-long ROGER BLOUGH. These ships were designed to carry one cargo - iron ore. The configuration of their cargo holds is such that they would "cube out" too soon to be competitive in the coal trade. The SPEER and BLOUGH have shuttle-style unloading booms which limit them to two unloading ports - Gary, Indiana and Conneaut, Ohio. The other seven ships carry for both USX and other U.S. and Canadian customers on all five Lakes.
LCA states that U.S.-Flag freight rates are higher than foreign-flag ships because Jones Act carriers pay taxes, pay decent (not exorbitant) wages, comply with American laws and regulations. The JARC says other American companies do the same, but aren't guaranteed a market if they charge more than their competitors.
The JARC's comment again illustrates this notion that Jones Act carriers are somehow guaranteed their market. The only thing the Jones Act guarantees is that carriers compete on a level playing field among themselves and then in relation to other modes of transportation.
LCA states that Lakes Jones Act carriers had to scrap approximately 60 ships as part of restructuring during the recession of the early- and mid-1980s. The JARC says those scrappings caused the most pressing problem facing many American companies on the Great Lakes -- inadequate vessel capacity. The JARC continues on that there are many other industries operating in the Great Lakes region that could have used those ships. (Remember that point.)
The staff of Lake Carriers' Association remembers the recession very well. We went through it, either at LCA or at one of our members. So we can state categorically that our members looked far and wide for new cargos before making the decision to scrap the majority of those ships. (Some of the ships were close to retirement even if the economy had remained strong.) This supposed unserved customer base simply wasn't there during the 1980s.
Vessel capacity shortages can be like beauty, they can exist in the eye of the beholder. We have repeatedly agreed that some spot cargos go over land rather than water because the proper vessel doesn't work the Lakes, but this is no criticism of the Jones Act. Even these foreign-flag ship operators the JARC wants to invite to the Lakes won't build new ships or convert existing vessels for the occasional cargo. Nor will they will take a ship off the Pacific run to carry one cargo in May and another in November. It won't make economic sense even with their low-cost crews and less-costly vessels.
Actually, the entire Great Lakes shipping community - shippers, carriers, terminals, port authorities... - deserves a scolding for allowing this myth about inadequate vessel capacity to persist. We need to apply the cooperation and skills we use to fight for adequate Coast Guard icebreaking resources, season extension... to marketing the system. LCA is at a disadvantage in that its members' ships weren't built to comply with the subdivision and stability standards required of ocean-going vessels, so we can't directly help when someone wants to move cargo from say Milwaukee to the Gulf. However, when it's a Lakes move, the maritime community needs to do a better job of communicating. Some proposed moves just won't make economic sense, but we could find solutions that would generate new cargos in U.S.-Flag vessels if we worked together.
LCA states that the Jones Act has no role in the decline of PL480 cargos from American Great Lakes ports. The JARC says this statement is irrelevant to the Jones Act. The JARC is simultaneously right and wrong. The Jones Act does not figure into PL480 cargo routings, but the JARC ought to know that the issue of government-impelled cargos is a sensitive one on the Lakes and is sometimes mistakenly linked to the Jones Act. Therefore it is not inappropriate to discuss the topic on our homepage.
But since the JARC took us to task, we will note that it is wrong to suggest that the PL480 question again illustrates the lack of Jones Act vessels on the Lakes. A certain percentage of PL480 cargos must move in U.S.-Flag vessels, but not necessarily Jones Act-qualified ships. As the JARC should know, U.S.-Flag vessels engaged in foreign commerce need not be built in the United States. (And we'll supply the JARC's rebuttal to that statement and our brief answer right now. Since U.S.-Flag carriers in foreign commerce must compete directly with flag of convenience operators, Congress has tried to level the playing field a bit by 1.) allowing them to build their ships overseas and 2.) providing some level of Operating Differential Subsidies. Jones Act carriers receive no ODS because they compete with other U.S.-Flag carriers and other American transportation modes.
LCA states that criticisms of the age of the Lakes fleet are unfair. Although 37 years sounds like a long time for a ship to be in service, the Lakes fresh water environment allows operators to modernize hulls rather than build new ships every 20 years or so as do carriers in the salt water trades. The JARC says our members' ships are "really old" and "relics of an earlier age."
We didn't want to nit-pick in the first round, but the average age for LCA-registered vessels is 35.6 years, not 37. And that's an inflated number. One can make a pretty good case that ships such as the IGLEHART, MIDDLETOWN and LEE A. TREGURTHA were so substantially rebuilt when converted from ocean to Lakes service in the 1960s that they hardly qualify as 1930s or 1940s vessels.
More importantly, 66 percent of our carrying capacity was built between 1972-1982 (a lot more if we include the ships that were lengthened and/or converted to self-unloaders). Just how our vessels can be labeled "relics of an earlier age" is beyond us. Even many of the older ships have new mid-bodies that increased per-trip carrying capacity, new self-unloading equipment, State-of-the-Art navigation systems....
For example, virtually every vessel registered with LCA now is a self-unloader. That means the ship can discharge its cargo without any assistance from shoreside personnel or unloading equipment. In fact, we have on the Lakes what are referred to as "workboat docks." The water is too shallow for the ship to come close to shore, so deckhands row the mooring cables to land and secure the vessel to any strong fixed object. Because we have self-unloaders, all the customer needs is an open spot of land. We do everything else.
One last point. A bit earlier the JARC said that there are customers who could have used the 60 ships we scrapped in the 1980s. Well, if our critics think the present U.S.-Flag Great Lakes fleet "really old" and "relics of an earlier age," they wouldn't have touched those ships. Some were darn near relics.
LCA states that the logistics of a Lakes/North Carolina grain trade favor rail over water. The one-way voyage would last approximately 18 "shipdays." (Shipdays include loading and unloading the cargo, port delays and expected sea delays.) A unit train could make the trip in two days. The JARC says a train takes in excess of 17 days. However, the JARC's 17 days include "turn time," which we take to mean the total cycle time from loading to empty and then returning to the point of loading. Fair enough, add turn time to the vessel, and those 18 shipdays become roughly 30, a lot more if the ship lacks a backhaul cargo and must "triangulate" or has to wait for its backhaul cargo.
This whole issue of a Lakes/North Carolina grain trade is an interesting example of how the JARC's story changes from telling to telling. A copy of the JARC's homepage printed out at 08:40:53 on March 5, 1996 states that "there are no available Jones Act ships to transport the grain by water, at any price." An April 18, 1996 print-out of the same section says "there are no available Jones Act ships to transport the grain by water on a regular basis (emphasis added), at any price."
The reason this change was necessary is that when this issue arose, U.S.-Flag carriers with Jones Act-qualified vessels did offer to explore the trade. If it is now "regularly-scheduled service" that the JARC seeks, the possibility of obtaining a backhaul cargo increases and makes this trade more viable. We will reiterate, however, there are still major obstacles to overcome. The size restrictions of the St. Lawrence Seaway would limit cargo capacity to perhaps 25,000 tons (893,000 bushels) of corn. The seasonal nature of the Seaway trade also hampers this move.
The JARC's statement ends with a strange comment. LCA had noted that there are no grain elevators at North Carolina's ports. The JARC says that agricultural interests "have looked into building a grain facility at the Port of Wilmington--which will depend on their ability to originate grain, either foreign or domestic, on a regular basis by water." Grain from Canada or Argentina could be carried by ships of any flag, so why not just build it? Is it possible that the waterborne route just doesn't work?
And for the record, we don't consider anyone a "bunch of yahoos". At worst, the JARC doesn't know very much about the real world of waterborne commerce, so they're "landlubbers."
The JARC also once said that there are "no Jones Act-qualified vessels [to carry] American salt between U.S. Great Lakes ports." They now agree that we do move salt (nearly 10 million tons during the period 1985 - 1995). The complaint now seems to be that some U.S.-Flag carriers decline to participate in the trade because of the damage salt does to a ship. (It is considerable.) What's the specific problem? Are salt producers losing sales because of a shortage of ships? We think not. Four LCA-registered vessels participated in the salt trade last year, as well as two large tug/barge units not in our Association. Those ships and barges have a combined per-trip carrying capacity of 102,109 gross tons, and in many instances left port in ballast (i.e., without cargo) even though the owners advised salt shippers of the vessels' availability. One member of Lake Carriers' Association has hauled salt in ships with per-trip capacities of 25,000 tons and would do so again.
LCA explains the reduction in the number of U.S.-Flag vessels as a result of tremendous increases in per-trip carrying capacity and other efficiencies. Again, the JARC says there is insufficient capacity on the Great Lakes to meet the demands of all American customers. We have answered this question before.
LCA states that it would be unfair to allow Canadian lakers into our domestic trades because the Canadian government has provided its carriers certain advantages not available from Washington. The JARC agrees(!) that "Canadians have certain advantages stemming from governmental policy", but before that, somehow confuses imports with the domestic trade. Canadian ships have carried grain from Thunder Bay (north shore of Lake Superior) to North Carolina. That's an import and has nothing to do with the Jones Act. North Carolina agricultural interests can this very minute hire a ship of any flag to move Canadian grain to their shores.
LCA states that the Jones Act, as maritime policy, does not need any changes. What must constantly change is the regulatory environment in which Jones Act carriers operate. The costs attendant with being an American enterprise will always make it impossible for us to compete with ships staffed with Third World crews. The JARC responds that it's not Third World countries with whom we compete, but with Europe, Japan, France and other countries which pay their citizens well enough.
For not the first time, the JARC's position is puzzling. With their international membership, the JARC should know about global competition. Specific to maritime, it is the Third World, the developing nations, where foreign-flag shipowners draw many of their crews and wages reflect that. One need only look at the registry of saltwater vessels entering the St. Lawrence Seaway each year - Cyprus, Malaya, Liberia, Ukraine, Turkey, Malta, St. Vincent, Lithuania, Panama, Singapore... For sure, the Ukraine, Lithuania... aren't Third World countries, but don't pretend their wages even begin to equate to ours.
LCA's penultimate statement is that repeal of the Jones Act will bring instability and possibly vessel shortages when political events or goals cause some countries to withdraw their ships from the U.S. trades. The JARC responds that this argument is the old "market mayhem" routine.
We remain committed to our original statement. Repeal of the Jones Act will turn Great Lakes shipping into a parade of flag of convenience operators. The United States Coast Guard would do its best to inspect these ships and detain the worst offenders, but the Service admits right now it doesn't have enough ship inspectors (AND the Coast Guard is further trimming its staff). Concerning political events or goals, it is simply naive to think that governments wouldn't recall their ships from U.S. waters during periods of tension with the U.S. over foreign policy. On the other hand, LCA's members are dedicated to serving their customers and will always be there to meet their needs!
LCA concludes its statement on the Jones Act by warning that repeal is really a way to circumvent U.S. immigration laws. The JARC responds that "it's hardly worth dignifying this ludicrous assertion with a response," but then showers us with 166 words. Reminds us of the line from Hamlet (protest too much). (Pardon us, but the JARC worked King George III into their statement, so....)
Again, LCA stands by its original statement. If the JARC has its way, foreign workers will be allowed into domestic commerce. And where will it stop? Will hog and turkey farmers be forever satisfied that they can use a foreign-owned and -crewed vessel to haul grain from the Lakes to North Carolina? How long will it take before they decide American dockworkers must be replaced with foreign labor to again lower the delivered cost of grain? (Is not this the reason why the International Longshoremen's Association opposes efforts to repeal the Jones Act? The ILA ought to gain from all this new maritime commerce the JARC promises, but they fully support the existing Jones Act.) Can one really believe that American railroads will stand by and lose cargo to foreign ships and sailors? They will seek parity.
We trust our critic won't object too much if we use this response as a chance to touch on some issues not addressed in our first statement. There are two points we would like to make.
The first concerns the St. Lawrence Seaway. This debate over the viability of a Lakes/North Carolina grain trade has forced LCA to make some statements that could be taken as critical of or even anti-Seaway. We support the St. Lawrence Seaway 100 percent. The waterway is an important conduit for Canadian iron ore needed by American steelmakers. The overseas cargos create and sustain jobs for American longshoremen, truckers.... and provide competitive advantages for many Great Lakes basin industries. Even our colleagues at the port authorities wish the Seaway locks were wider and/or deeper, that the season was longer.... LCA has no argument with the Seaway.
Second, and most importantly, we have tried to step back and listen to both sides of the arguments dispassionately. It cannot escape one that both LCA and the JARC have a shared goal of more waterborne commerce on the Great Lakes. In fact, in one instance we can outright agree with the JARC - the laws and regulations governing U.S.-Flag vessel operators need to be brought more in line with the best of international standards. LCA will be the first to agree that the routine under which we operate is sometimes overly stringent. For example, it has taken much too long to restore (in essence) the 6-year interval for drydocking. For the second year in a row, our ANNUAL REPORT stresses that manning standards must be revisited through meaningful negotiations between ship operators, shipboard unions and the U.S. Coast Guard.
We also agree that waterborne commerce is the most environmentally-friendly mode of transportation. We helped fund a study to that effect.
Why then do we oppose the JARC? It boils down to one simple fact - they are unrealistic in their outlook and approach. Shipowners and operators make money carrying cargo, not by holding ships in reserve or selling them for scrap. If there were viable trades untapped on the Lakes or on the Coasts, American carriers would compete for those cargos. Our members have never willingly forfeited a trade to another mode of transportation and are always interested in exploring new business opportunities. THE JONES ACT IS A VALID AND SUCCESSFUL MARITIME POLICY. THE JARC SEEMS UNABLE TO UNDERSTAND THAT THE COMPETITION AMONG TRANSPORTATION MODES IS FIERCE AND SOMETIMES WATERBORNE JUST DOESN'T WIN, EVEN IN A FAIR FIGHT.
The JARC's approach also does not promote face-to-face discussions that might find solutions to problems that some mistakenly attribute to our Cabotage laws. We hope readers have noted that while the JARC labeled our statements in the Q & A briefing "claims" and "assertions", we avoided the temptation to copy or "better" the JARC's style in this piece.
In closing, we again invite our readers to send us their questions on the Jones Act and any other aspect of U.S.-Flag Great Lakes shipping.
And please check out our homepage on a regular basis. Now that our Communications Director is getting up to "lake gate" with "HTML," we intend to make our homepage one of the most active on the Internet. And we've got a lot more to do than just discuss the Jones Act!