Case Re-Introduces Bills to Attack Key Driver of Hawai’i’s High Cost of Living

His proposals would amend the century-old Jones Act to combat monopolies in domestic shipping

(Honolulu, HI) – Congressman Ed Case (HI-01) re-introduced three bills in Congress to reform the century-old Merchant Marine Act of 1920 (commonly referred to as the “Jones Act”), which is widely credited with artificially inflating the cost of shipping goods to Hawai’i.

“These three bills are meant to end a century of monopolistic closed market domestic cargo shipping to and from my isolated home state of Hawai‘i as well as the other island and separated jurisdictions of our country that lie outside the continental United States,” said Case.

“The bills aim directly at one of the key drivers of our astronomically high cost of living in Hawai‘i and other similarly located jurisdictions.”

Case continued: “Because the Jones Act severely limits the supply of shipping to and from our communities, it has allowed a very few companies to control our very lifeline to the outside world and as a result command shipping rates way higher than the rest of the world.

“The Jones Act mandates that all cargo shipping between U.S. ports occur exclusively on U.S., not foreign, flagged vessels. Additionally, the law requires that these vessels are built in the U.S. and owned and crewed by U.S. citizens. Because Jones Act shipping has shrunken and international shipping has increased dramatically, especially in the last quarter-century, the Jones Act results in a very few carriers serving all domestic shipping needs.

“And those few U.S. flag cargo lines that remain have maneuvered the Jones Act to develop virtual monopolies over domestic cargo shipping to, from and within our most isolated and exposed locales – our island and offshore states and territories – that have no alternative modes of transportation such as trucking or rail.

“Hawai‘i is a classic example. Located almost 2,500 miles off the West Coast, we import well over 90 percent of our life necessities by ocean cargo. There are plenty of international cargo lines who could and would compete for a share of that market. Yet only two U.S. flag domestic cargo lines—Matson Navigation and Pasha Hawai‘i—operate a virtual duopoly over our lifeline.

‘While they are nominally subject to federal regulation, the fact of the matter is that cargo prices have gone in only one direction–up, fast and repeatedly, despite a surplus of international shipping–and it is indisputable that there is no downward market pressure which would otherwise result from meaningful competition.

“These accelerating cargo prices are not absorbed by the shipping lines, but passed through all the way down the chain, to the transporters, wholesalers, retailers, small businesses, mom-n-pops and ultimately consumers, of all of the elementals of life, from food to medical supplies, clothes, housing and virtually all other goods.”

“More broadly, there is much evidence about the direct impact of the Jones Act on shipping prices to noncontiguous areas. At a basic level, the everyday goods that we rely on in Hawai‘i cost much more than on the Mainland, a difference which largely cannot be attributed to anything other than shipping costs,” said Case.

Last year, the Grassroot Institute of Hawai‘i published a thorough and first-of-it-kind report, “Quantifying the Cost of the Jones Act to Hawai‘i.” The report found that:

  • The median annual cost of the Jones Act to the Hawai‘i economy is $1.2 billion.
  • The annual cost of shipping to Hawai‘i is estimated to be $654 million higher and prices $916 million higher.
  • The Jones Act annually costs each Hawai‘i resident more than $645.
  • Thanks to the Jones Act, Hawai‘i has approximately 9,100 fewer jobs, representing $404 million in wages.
  • Hawai‘i families across all income groups would benefit from Jones Act reform. In the absence of Jones Act restrictions, those making between $15,000 and $70,000 annually would see an annual across-the-board economic benefit ranging from $78 million to $154 million.
  • Annual tax revenues would be $148.2 million higher.
  • Focusing solely on the Jones Act requirement that vessels be built in the United States, they found that the build provision results in a 1.2% shipping cost increase for Hawaii. This translates annually to an added cost of $531.7 million to the state’s economy, or about $296 per resident.
  • It also means a loss of 3,860 jobs, and $30.8 million less in state and local tax revenues.

Case’s three measures and their proposed amendments to the Jones Act are:

  • the Noncontiguous Shipping Relief Act, which exempts all noncontiguous U.S. locations, including Hawai‘i, from the Jones Act;
  • the Noncontiguous Shipping Reasonable Rate Act, which benchmarks the definition of a “reasonable rate” which domestic shippers can charge as no more than ten percent above international shipping rates for comparable routes; and
  • the Noncontiguous Shipping Competition Act, which rescinds the Jones Act wherever monopolies or duopolies in noncontiguous Jones Act shipping develop.

“These long-overdue bills are of the utmost importance to the unique localities which have been left undefended to bear the brunt of the Jones Act. It is often difficult to pierce the veil of longstanding custom and understanding to see the real negative impacts of a law and what should instead be. It is even more difficult to change a law which provides a federally created and endorsed monopoly under which no competition exists to hold down prices. Yet clearly the time for these measures is overdue.”

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