A new study of the Jones Act has concluded that retail prices in Puerto Rico are not higher because of it.
The study was sponsored by the American Maritime Partnership (AMP), a coalition of businesses, associations and labor unions that support the U.S. domestic shipping industry and the Jones Act. That’s the law that requires vessels moving cargo between points in the United States — including the mainland of the U.S. and Puerto Rico — be done with ships that are U.S. owned, U.S. built and U.S. crewed.
John Reeve, the lead economist on the study, said, “The findings of our analysis show that reliable, efficient and regular Jones Act services benefit consumers and businesses on the island, and no evidence suggests that exempting Puerto Rico from the Jones Act would reduce consumer prices in Puerto Rico. On the contrary, such an action may well increase prices.
“We used as a fact base what Walmart stores in San Juan sell — a number of grocery items as well as durable goods — and found that they were the same in San Juan as Jacksonville, Florida, where these items would generally be loaded on ships going to Puerto Rico,” said Reeve during a press conference on Tuesday.
His firm, Yarmouthport, Mass-based Reeve & Associates, conducted the study together with San Juan-based Estudios Técnicos Inc.
The study contradicts claims made by groups such as the Heritage Foundation that the Jones Act is “a drag on Puerto Rico’s economy” or a 2012 report by economists at the University of Puerto Rico that claimed the law caused a cumulative loss of $17 billion to the island’s economy between 1990 and 2010.
The report says freight rates for shipments to Puerto Rico are similar to those to other Caribbean destinations. A chart in the report compares revenue per container in the Puerto Rico trade to other Caribbean locations. Revenue is 11 percent lower to the Dominican Republic, 5 percent higher to Haiti, 16 percent higher to St. Thomas and 44 percent higher to St. Croix. “Clearly, Puerto Rico is not suffering a significant disadvantage in terms of freight rates,” the study claims.
Shippers have the option of having cargo shipped directly from overseas locations on foreign flag vessels to Puerto Rico, and the report suggests that if shippers believed Jones Act carriers were adding costs that negatively affected their businesses, they would use them.
But it says the mix of domestic and foreign freight has “remained relatively stable” since 2010 with roughly three-quarters of freight carried by domestic carriers and 25 percent carried by foreign carriers.
U.S. flag shipping companies offering regular liner service to Puerto Rico are Crowley Maritime, Tote, Trailer Bridge and National Shipping, and the study says they have invested more than $1 billion over the past five years. Tote has put into service two LNG-fueled containerships, and Crowley expects its two new LNG-fueled container roll-on, roll-off ships to come into service later this year.
The study did not look at cargo moving in tankers or dry bulk vessels.
Reeve noted the service provided by the carriers between the mainland and Puerto Rico is “tailored to the U.S. logistics systems and closely integrates Puerto Rico with the whole logistics network of mainland U.S. shippers.”
For example, he said there are a large number of 53-foot containers and trailers that are moved by the carriers involved in the trade. A 53-foot container or trailer has 43 percent more cubic capacity for cargo than a “high cube” 40-foot international container. This reduces transportation costs and makes it easier to mesh with domestic supply chains, using the same packing system and pallets, for example, when a shipper moves cargo to a warehouse in San Juan or elsewhere on the mainland.
Michael Roberts, senior vice president of Crowley Maritime and vice president of AMP, said, “There’s been a lot of speculation and a lot of misinformation about the impact of the Jones Act on consumer prices and costs in Puerto Rico, and it is affecting the policy discussions in Washington.”
The industry is “very comfortable with the findings” in the report and plan to make it available to public officials in Washington and in Puerto Rico, he said.