July 1, 1997

Mr. James F. Collins
President
Steel Manufacturers Association
1730 Rhode Island Ave, NW
Suite 907
Washington, DC 20036-3101

Dear Mr. Collins:

On the Steel Manufacturers Association’s website, you declare that "The Jones Act in its present format is a national disgrace" and urge Congress to support legislation to "reform" the law. If anything is disgraceful, it’s the misinformation that permeates your broadside against our Cabotage laws.

You state that a 1991 study by the U.S. International Trade Commission found that the Jones Act costs U.S. consumers as much as $10.4 billion a year in higher prices. FACT: On June 12, 1996, during Congressional testimony, the ITC acknowledged that the study erred by as much as $7 billion. Furthermore, whatever "savings" were projected, they were based on the assumption that foreign ship lines would be exempt from U.S. laws. Exempt any industry from labor and safety regulations, taxes, ... and guess what, costs go down compared to American producers and suppliers complying with our laws.

You state there are no more than 4,800 jobs in the coastal and Great Lakes fleet. FACT: The Jones Act supports 80,000 shipboard jobs and another 44,000 jobs in shipyards and other shoreside activities.

You state 60 shipyards have gone out of business despite the U.S.-build requirement. FACT: The American shipbuilding industry was forced to rationalize by 1.) the downsizing of the U.S. Navy following the end of the Cold War; 2.) the crushing recession of the early- and mid-1980s; and 3.) in some trades, larger ships reduced the number of ships needed to meet the demands of commerce, thus less building and repair work.

You state 40,000 merchant seamen and 40,000 longshoremen have lost their jobs despite "purported" Jones Act protection. FACT: Modern U.S.-Flag vessels require fewer crew members and massive increases in individual ship carrying capacity require fewer ships. For example, one of our thirteen 1,000-foot-long supercarriers equals the seasonal hauling power of four of the 730-foot-long lakers that ruled as "Queens of the Lakes" until the early 70s. Technological advancements and a shared quest for efficiency with our shipboard unions have reduced crews from 35 or more to 27 on a self-propelled "laker" (12-14 on a large integrated tug/barge unit). Although longshoremen are not covered by the Jones Act, the decrease in employment reflects highly automated vessel unloading systems and containerization and modal shifts that evolved as the nation became connected by super highways, as unit trains came to the fore....

You state during Operation Dessert Storm, 99 percent of all U.S. military shipments were delivered in non-Jones Act carriers, that there is no significant contribution to national security from the Jones Act. FACTS: To quote from material prepared for Maritime Administrator Admiral Herberger when he testified at the previously-mentioned Congressional hearing on Cabotage:

QUESTION: Can you comment on the level of participation of Jones Act vessels during Desert Shield/Storm and the impact of the Jones Act on national security?

ANSWER: Eight Jones Act vessels (2 Ro/Ros and 6 tankers) played a key role in the mobility logistics of Operation Desert Shield/Storm. While Jones Act Ro/Ros delivered vehicles and other equipment to the Persian Gulf, the most critical contribution was performed by the 6 Jones Act tankers. Those Jones Act tankers delivered 1,001,696 tons of POL which was 20.6 percent of the total amount of U.S.-Flag POL delivered to the Persian Gulf.

The importance of the Jones Act was evident in 1994 and 1995 when sustainment requirements in support of Haiti during UPHOLD & MAINTAIN DEMOCRACY were met using Jones Act tug/barges. Utilizing short-term charters, the Military Sealift Command relied heavily on 14 U.S.-Flag Jones Act tug/barges to provide sustainment lift of unit equipment from CONUS to Haiti, and harbor tug service.

Aside from the value of providing vessels in support of military operations, the Jones Act is a major source of seafaring labor for the government’s organic fleet. For example, 70 percent of the civilian crews mobilized to serve on Ready Reserve Fleet vessels in support of the Bosnia military operation had been employed in the domestic fleet at some time during the five years since the Persian Gulf conflict.

You state U.S.-Flag freight rates from U.S. deep-water ports are so much higher than comparable international rates for the same markets that U.S. companies cannot ship from one U.S. deep-water port to another. FACTS: Re: freight rates, when a vessel operator builds his ship to lessor safety standards, registers it in a country with virtually no safety and environmental oversight on shipping, and employs crew members for $15 a day (with no benefits), it’s obvious the freight charge will be less than a U.S.-Flag vessel built to the world’s highest safety standards, operated in compliance with U.S. Coast Guard regulations, and crewed with American citizens who receive wages and benefits in line with other modes of transportation in this country. Re: the deep-water domestic trades, SMA members Nucor and Georgetown Steel move scrap and finished steel between U.S. ports. A quick survey of just three U.S.-Flag carriers finds roughly 900,000 tons moving on the East and Gulf Coasts in the past year or so. As a result of this growing trade, one American-Flag carrier has built what are believed to be the largest single-hold ocean barges in the world. Please consult the U.S. Army Corps of Engineers publication Waterborne Commerce of the United States for more details on shipments between U.S. deep-water ports. Your members will also verify they employ U.S.-Flag ships in these trades and are continually solicited by Jones Act operators for additional business.

You state that U.S. electric furnace steelmakers in the East and Midwest lose business on the West Coast to foreign competitors because they cannot ship products there under the Jones Act. FACT: Logistics direct this move to rail. If rail freight rates are noncompetitive, is it a proper response to introduce foreign corporations and workers into our domestic transportation system, exempt them from laws, regulations, taxes, ...? The SMA would scream bloody murder if steel consumers suggested the same for your products and services.

You state that the Coastal Shipping Competition Act of 1997 would allow competition in coastal shipping while also requiring compliance with U.S. environmental regulations, immigration laws and workforce health and safety requirements. FACTS: Number one, there is a loophole in the bill as big as an electric-arc furnace (Vessels in Irregular Service) that will allow unregulated ships with foreign crews to control our waters and thus endanger the safety of life, property, and the environment. Second, if these foreign ships truly comply with all applicable U.S. regulations and taxes, the savings in freight rates would be so negligible that little or no new waterborne commerce will evolve.

It is painfully obvious that Steel Manufacturers Association has been poorly informed on the Jones Act. I hope that by refuting these falsehoods, SMA will reconsider its position on the Jones Act. If there are some honest misunderstandings, I will be happy to discuss any Lakes-related issues. If there are questions about vessel service on other waterways, I will provide the names of contacts knowledgeable about those trades.

Sincerely,

George J. Ryan

President