Temporary Jones Act waiver directly affects town company

In a Sept. 28 announcement, the Trump administration waived the Merchant Marine Act of 1920, also known as the Jones Act, a century-old shipping law that regulates coastwise trade between U.S. ports, for a 10-day period. The move, which the administration has claimed will ease hurricane aid shipments to storm-battered Puerto Rico, has drawn criticism from the maritime industry, which will face greater competition from foreign ships if the act is permanently repealed. By contrast, many Puerto Rican politicians are calling for complete elimination of the act in order to lower costs during the recovery process.

Though geographically removed from Puerto Rico, Princeton is nevertheless directly affected by the Trump administration’s position regarding the Jones Act.

Anthony Chiarello, president and CEO of Tote Inc., a Princeton-based maritime company and one of the four Jones Act shippers to Puerto Rico, explained that under the Jones Act freight traveling between U.S. ports must be moved on a vessel owned by a U.S. citizen; must be manned by a U.S. crew; and must be built in U.S. shipyards by U.S. workers.

When asked whether a Jones Act waiver is doing any good for Puerto Rico, Chiarello expressed that he remains unconvinced.

The administration and its supporters’ argument is that the waiving of the Jones Act would allow more foreign vessels to carry additional aid from the United States to Puerto Rico, but “that’s not the issue,” said Chiarello, adding that Tote and its competitors have more than enough capacity as is.

“The issue isn't getting the freight to the island,” said Chiarello. “The issue is getting from the terminal on the island into the people who need the freight.” Chiarello also explained that, as of Friday, Oct. 6, not one foreign competitor has come to the island to move freight. According to real time marine traffic data examined by the Miami Herald, as of 6 p.m. Friday, not a single foreign-flagged ship docked in the Port of San Juan traveled there from a foreign port. However, there were such vessels en route to Puerto Rico.

This lackluster foreign response is why Chiarello believes that the waiver will not be extended. On Oct. 6, the Department of Homeland Security told The Wall Street Journal that the waiver would indeed not be extended.

Although they were moving fewer freight containers to Puerto Rico two days after the hurricane, Tote Inc. and its competitors have been able to ship more and more in the days after. According to Chiarello, there were thousands of containers still sitting in the terminal in Puerto Rico last week — during the temporary lift of the Jones Act.

Chiarello responded to calls some U.S. politicians, such as Sen. John McCain (R.-Ariz.), have made that the Jones Act should be scrapped, arguing that it could have an adverse effect on U.S. jobs. For Chiarello, the current question of the Jones Act is a U.S. worker versus a non-U.S. worker issue.

Chiarello also explained that the Jones Act is important for national security because it protects coastal waterways from foreign entities. The U.S. maritime fleet does in fact provide capacity and manpower that the army can draw upon to support military operations. It also limits the access foreign countries have to U.S. waterways.

“I wouldn’t want North Korea moving barges and tugboats up and down the Mississippi River. If you don’t have this law, that could occur,” Chiarello said.

Additionally, both Republican and Democratic members of the House’s Subcommittee on Coast Guard and Maritime Transportation expressed support for the Jones Act when Chiarello testified to the committee on Oct. 3, 2017.

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The Jones Act is stirring up trouble in the territory, according to Puerto Rico senate minority leader Eduardo Bhatia ’86.

“It was fine in the 1920s, 1930s, 1940s, and perhaps 50s,” said Bhatia. “But, who cares about the navy anymore? They do not play the same role in the defense of the United States as they did a hundred years ago.”

Opponents to the legislation, such as McCain, are using this 10-day period to propose that it be eliminated altogether. Since the act was waived, McCain, who did not offer comment, has repeatedly vocalized the need to repeal the act. The outdated piece of legislation doesn’t come cheap, either, Bhatia explained. As a crucial partner to the cargo ships, Puerto Rico essentially provides a third of the ship workers’ income.

“Maritime is expensive,” said Bhatia. “It costs Puerto Rico a lot.”

Bhatia explained that the Jones Act's continued existence isn't the only thing that doesn't make sense to Puerto Ricans, but that Trump's 10-day waiver of the act is a clearly impractical, meaningless gesture.

“It should be six months,” Bhatia said. “That would give us a breather in Puerto Rico, it might decrease shipping costs, and it would open the concept of competition that doesn’t exist right now.”

If the mainland really wants to help Puerto Rico, it needs to give more money to FEMA, the Federal Emergency Management Agency for disaster relief, Bhatia said.

“Many areas of Puerto Rico, about 85 percent, have no electricity up to now,” said Bhatia. “They need the resources to get the water going and the grid up and the energy flowing.” Without energy and water, all you have is chaos, Bhatia said.

In a larger sense, damage control will take much more than facilitating transport of basic necessities, he added. A solid package of an estimated $70 billion is needed to repair 350,000 homes and countless other hospitals, roads, and bridges, according to the minority leader. Exacerbating the issue of infrastructure is the problem of health care, he added. With Puerto Rico’s allotment of Affordable Care Act funds expiring sometime this year, Bhatia expects that hundreds of thousands of people will relocate to Florida or New York, in search of better care, unless Congress reauthorizes the money.

“That is just a travesty,” Bhatia said.

The debate over the Jones Act concerns “a win-lose situation,” said Diego Negrón-Reichard ’18, who headed a disaster relief fundraising campaign for the territory,“because Puerto Rico, Alaska, Hawaii, and some states along the coast would win by removing these … regulations, but the maritime industry would take a hit.”

“I don’t know how substantial that hit would be if you’re only exempting Puerto Rico,” Negrón-Reichard added, “but there is a reason [special interest groups] are lobbying so aggressively. It’s because they wouldn’t be as profitable as they are now. Is that a good reason to chokehold a whole island of 3.5 million U.S. citizens?”

Shipping a container from the East Coast of the United States to Puerto Rico costs $3,063, but shipping the same container on a foreign ship to the Dominican Republic costs only around a third of that. The island loses over $500 million every year as a result of the Jones Act, according to studies published by the University of Puerto Rico.

“If you really are a Republican and you believe in the free market, then it doesn’t make sense to chokehold the island,” said Negrón-Reichard, adding that this is McCain’s rationale behind supporting the act’s repeal.

“The U.S. has a long history of institutional structures that have hindered the island’s economic growth,” Negrón-Reichard said, pointing to Operation Bootstrap — a series of projects headed by the federal government in the second half of the 20th century in which Puerto Rico’s economy industrialized and developed — as one of “the causes of the crisis.”

Puerto Rico’s poverty rate, almost 50 percent, is over twice as high as that of the poorest U.S. state. The situation should be viewed in that context, according to Negrón-Reichard.

The natural disaster was a “terrible tragedy,” he added, “but we have to make the most of it.”

Puerto Rican Governor Ricardo Rosselló requested the Jones Act waiver shortly after Hurricane Maria hit, arguing that the island needs all the help it can get. He added that the Trump Administration granted a seven-day Jones Act waiver after Hurricane Irma, which was much less devastating to the island. White House Press Secretary Sarah Sanders said that Trump immediately granted the waiver after Rosselló’s call according to an article in the Atlantic.

“One hundred years later, [Puerto Ricans’ U.S. citizenship] should mean something,” said Bhatia, expressing his concern that the mainland, swept up in the horror of the Las Vegas shooting, would forget about the devastating aftermath of Hurricane Maria in Puerto Rico. After all, it was the United States that approved Congress’ passage of the coincidentally-named Jones-Shafroth Act of 1917, making Puerto Ricans statutory U.S. citizens.