A Hawai‘i representative is taking aim at a Jones Act loophole that allows shipping companies to repair their vessels in China.
The Jones Act is a 105-year-old law that requires all goods transported by boat between U.S. ports to by carried by U.S. ships, built in U.S. shipyards and carrying a U.S. crew. This has had the side effect of severely limiting the companies that are able to ship to Hawai‘i and other island territories, resulting in higher costs for goods.
Hawai‘i Rep. Ed Case has repeatedly attempted to challenge the Jones Act with various bills over the years. His most recent measure, introduced Friday, closes a loophole being used by Jones Act shipping companies.
“Jones Act loopholes allow for supposedly minor parts fabrication and supposedly minor repairs to be conducted in foreign shipyards using foreign workers with no condition or restriction as to country,” Case told the House on Friday. “These modifications are frequently reclassified as mere ‘major modifications’ to avoid triggering the 50% U.S. import duty intended to disincentivize foreign work.”
Case named three specific Jones Act vessels — the Daniel K. Inouye, the Kaimana Hila and the Manukai, all Matson, Inc. vessels — that have undergone “major structural conversions” such as engine retrofits at shipyards near Shanghai with known ties to the Chinese government.
Case said this represents national security concerns, most obviously by allowing shipyards controlled by countries adversarial to the U.S. unfettered access to ships critical to the nation’s domestic supply chain. At the same time, by outsourcing ship repairs to China, the U.S.’ own shipbuilding industry is further weakened at a time when there are fewer than 100 Jones Act-compliant vessels in active service.
"This steady erosion [of America’s ship repair industry] is not due to foreign competition alone, but to deliberate business decisions by Jones Act carriers who choose to take advantage of legal loopholes that let them outsource high-value work overseas while still reaping the benefits of domestic protectionism,” Case said.
To combat this, Case’s bill — the Merchant Marine Allies Partnership Act — would allow shipping companies to undergo major vessel modification in foreign ports without paying the current 50% import duty, but only if those ports are in allied or partner countries.
The measure, which was co-introduced by Guam delegate James Moylan, would also allow ships purchased from ally nations to be exempted from the Jones Act, allowing more ships to enter the U.S. supply chain.
Keli‘i Akina, president and CEO of Grassroot Institute of Hawai‘i, told Aloha State Daily that the bill is “a great improvement from the current situation, but could be even better.”
Currently, Akina said, Jones Act shippers pass on the high costs of being restricted to U.S.-built ships to Hawai‘i consumers, which the bill should help alleviate. Akina said a Grassroot study in 2020 estimated that this change alone could reduce shipping costs in Hawai‘i by more than $500 million per year.
But Akina added that he “would prefer [the 50% import exemption] apply to all foreign countries.”
