How a WWI-Era Shipping Law Could Be Hurting Puerto Rico's Recovery Efforts

Several members of Congress called for the act to be suspended so Puerto Rico can afford to rebuild

On Thursday, the Trump administration announced it would temporarily waive The Jones Act for Puerto Rico at the request of its governor. The White House said the waiver could take effect immediately.

As Puerto Rico struggles amid mass power outages and food and water shortages, some politicians and experts say that one 97-year-old maritime law will make recovering from the disaster much more difficult.

The Merchant Marine Act of 1920, also known as the Jones Act, was passed after World War I to protect the U.S. ship-building industry and requires that domestic shipping must be conducted by U.S.-owned, U.S.-made ships staffed by American crews. This has meant that Puerto Rico, an island that relies on imports from the U.S., pays more than twice as much as neighboring islands for American goods, according to a report by former International Monetary Fund economists.

Nydia Velázquez, a Puerto Rican-born congresswoman who represents parts of New York City, is leading the call for a one-year suspension of the act while the island rebuilds from hurricane damage.

"The island is now facing an unprecedented uphill battle to rebuild its homes, businesses and communities," said Velázquez in a letter written to the Department of Homeland Security on Monday and signed by seven other members of Congress. "Temporarily loosening these requirements – for the express purpose of disaster recovery – will allow Puerto Rico to have more access to the oil needed for its power plants, food, medicines, clothing, and building supplies."

The DHS suspended the Jones Act on Sept. 8 because of disruptions of the oil supply system after Hurricanes Harvey and Irma, but the waiver expired on Sept. 22. Hurricane Maria hit on Sept. 20, knocking out all power to the island and nearly all cell phone towers.

Puerto Rico Gov. Ricardo Rossello told NBC News Tuesday the territory risked collapsing "into a humanitarian crisis." On Wednesday, he told CNN that he expected the federal government to waive the Jones Act restrictions.

The Trump administration said Wednesday it has not yet made a decision. 

But a spokesman for DHS said Tuesday that officials thought that waiving the Jones Act would be unnecessary. An assessment by the DHS showed there was "sufficient capacity" of U.S.-flagged vessels to move commodities to Puerto Rico, spokesman Gregory Moore said in a statement to Reuters and NBC News.

"The limitation is going to be port capacity to offload and transit, not vessel availability," Moore said. "Most of the humanitarian shipments will be through barges, which make up a significant portion (along with tugs) of the US-flagged cargo fleet. After Hurricanes Harvey and Irma, the rationale for a Jones Act waiver was to facilitate movement of petroleum to numerous places along the east coast, and making up for the loss of very high capacity pipelines. The situation in Puerto Rico is much different."

Acting Department of Homeland Security Secretary Elaine Duke told reporters that there have been "no known waiver requests," referring to a lack of formal requests from shippers, NBC News reported. The request by some members of Congress for a one-year waiver to get fuel and other supplies to the island is "under consideration."  

Democratic Rep. Luis V. Gutiérrez from Illinois on Tuesday criticized leaving the Jones Act in place, amid Puerto Rico's financial crisis. The territory has been in a severe recession since 2006 and declared a form of bankruptcy earlier this year.

Gutiérrez, who was among those who signed Velázquez’s letter to DHS, said the U.S. government should suspend the Jones Act at least for a decade if not repeal it permanently.

"Since it was imposed on Puerto Rico, the Jones Act has cost Puerto Rican consumers more than all the money owed to Wall Street, yet the president reminds us of the debt in his tweets," he said on the floor of Congress. "Let the ships flow as quickly and as cheaply from wherever they may come from because this is an emergency."

Other politicians have spoken out in the past against the Jones Act for needlessly hurting Puerto Rico’s economy.

Republican Sen. John McCain of Arizona first introduced legislation to repeal the law in 2010 and tried again in July.

"I have long advocated the repeal of the Jones Act, an archaic and burdensome law that hinders free trade, stifles the economy, and ultimately harms consumers," he said.

On Tuesday, McCain also said he was urging DHS to waive the act for Puerto Rico to aid its recovery efforts. In a letter to Acting Secretary Elaine Duke, he also asked that it assess how a long-term waiver or full repeal would effect hurricane-damaged communities, including those in Florida and Texas.

Economists at the University of Puerto Rico found that the Jones Act cost the island’s economy $17 billion between 1990 and 2010, according to a 2012 report.

Republican Rep. Gary Palmer of Alabama cited this study in 2016 when he, too, called for Puerto Rico to be exempt from the Jones Act. Three American territories are exempt from the Jones Act: the U.S. Virgin Islands, Guam and American Samoa.

Other studies have said the Jones Act costs Puerto Rico, Hawaii and Alaska about $2.8 billion to $9.8 billion per year.

A report by the Government Accountability Office in 2013 said that although the Jones Act may make imports to the island more expensive, the dedicated routes also ensure reliability and keep more than 1,400 American jobs.

In April, the Trump administration had appeared to be moving forward with an Obama-era proposal to reverse the Jones Act, but it was withdrawn in May.

The Jones Act was last temporarily waived in December of 2012 so that petroleum products could be delivered for relief assistance after superstorm Sandy.

Op-eds in major national newspapers have endorsed calls to get rid of the act, including one published Monday in The New York Times by Nelson A. Denis, a former New York state assemblyman who has written extensively on Puerto Rico's economic crisis.

"A humanitarian crisis is about to explode in Puerto Rico," Denis wrote. "But the consequences of Jones Act relief would be immediate and powerful. This is not the time to price-gouge the entire population. It is time for Congress to act ethically and responsibly and suspend the Jones Act in Puerto Rico."

The consequences of leaving the Jones Act in place could be dire for the 3.4 million U.S. citizens in Puerto Rico, some experts warn.

"It means extending the suffering," said Dennis Nixon, a professor of marine law at the University of Rhode Island. "It’s hot there today, there’s a risk of thunder showers. They’ve got no electricity, no drinking water." 

Nixon said that it could lead to an even more painful financial crisis for Puerto Ricans, who might start leaving the island in a forced mass migration to the U.S.

He advocates suspending the act. 

"It would hugely accelerate the ability to move goods into Puerto Rico, because you’d basically be getting a 20 percent discount on everything," he said.

STATEMENT FROM SCA / Navy League / American Maritime Partnership

Jonathan Gutoff, a maritime law professor at the Roger Williams University School of Law in Bristol, Rhode Island, said that even though the Jones Act may not be hindering aid from reaching the island, it does increase prices for consumers and makes it harder for businesses to market their exports.

"Given that Puerto Rico is suffering from a fiscal crisis and the aftermath of Maria, anything to help Puerto Ricans should be done and the Jones Act should be suspended," he said.

Whether or not to repeal the act is a tougher question, Gutoff said. Because of the role of the Jones Act in maintaining the American boat building industry for offshore work, more study should be done before a repeal, he said.

The American Maritime Partnership said it is actively working with the Trump administration, FEMA, The United States Maritime Administration (MARAD), and other relief organizations to deliver food, fuel, first aid supplies and building materials to Puerto Rico. Approximately 9,500 containers of goods have already arrived on the island to help in recovery efforts, according to the partnership.

"A steady stream of additional supplies keeps arriving in Puerto Rico on American vessels and on international ships from around the world,” said the charmain of the partnership, Thomas Allegretti. “The problem now is distributing supplies from Puerto Rico’s ports inland by surface transportation."

The Shipbuilders Council of America did not immediately respond for comment on the Jones Act, but according to its website the council strongly supports the act, calling it "vital to America’s economic, national and homeland security."

CORRECTION (Sept. 27, 11:35 a.m.): An earlier version of this story misstated the number of U.S. citizens in Puerto Rico. There are 3.4 million.

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