S.R. NO.













requesting congress to exempt hawaii (JOINED BY PUERTO RICO AND ALASKA) from the u.s. build Requirement of the jones act for large oceangoing ships.


     WHEREAS, interstate ocean shipping is a vital economic link between the seven (7) noncontiguous domestic jurisdictions of the United States and the contiguous forty-eight (48) mainland states of the union; and


     WHEREAS, Section 27 of the Merchant Marine Act of 1920 (P.L. 66-261)(46 U.S.C. § 55102), commonly known as the Jones Act, is a federal cabotage law that restricts the carriage of cargo between coastwise points in the United States to vessels that are U.S.-built, U.S.-flag, U.S.-owned and U.S.-crewed; and


     WHEREAS, the coastwise laws of the U.S. including the Jones Act encompass four (4) of the seven (7) noncontiguous domestic jurisdictions, namely, the State of Alaska, the Territory of Guam, the State of Hawaii and the Commonwealth of Puerto Rico, while the Territory of American Samoa, the commonwealth of the Northern Mariana Islands, and the virgin Islands of the United States are fully exempt from the Jones Act as a result of the international treaties associated with their annexation to the U.S.; and


     WHEREAS, there is historical exemption from the U.S.-build requirement of the Jones Act for all commercial vessels engaged in the domestic Guam trade (46 U.S.C.§ 12111) known as the “Guam Exemption” and the other three (3) noncontiguous jurisdictions encompassed by the coastwise laws, namely Hawaii, joined by Alaska and Puerto Rico, are seeking a more limited, similar, exemption; and


     WHEREAS, the Guam Exemption is of limited utility to Guam because the natural westbound trade lane from the U.S. West Coast to Guam passes through Hawaii making it difficult for ocean common carriers to mount financially viable voyages without carrying cargo to both Hawaii and Guam effectively binding Guam’s interstate trade to the U.S.-build requirement despite its exemption and prompting Guam to support the limited extension of their exemption to Hawaii; and


     WHEREAS, the late U.S. Senator Daniel K. Inouye inserted a limited exemption from the U.S.-built requirement of the vessel documentation laws granting three large foreign-built U.S.-flag cruise ships a coastwise endorsement to operate in the Hawaii trade into the Omnibus Appropriations Act of 2003, known as the “Hawaii Cruise Trade Exemption” (P.L. 108-7, Div. B, title II § 211)recognizing that U.S. shipyards could not successfully construct large specialist cruise ships after the failure of an earlier program to do just that and which Senator Inouye sponsored, known as “Project America” contained in the Department of Defense Appropriations Act for Fiscal year 1998 (P.L. 105-56 § 8109); and


     WHEREAS, current Hawaii Governor Neil Abercrombie in his State of the State address on January 21, 2013, strongly implored the Hawaii State Legislature to “move forward with” him to “embark on a path to LNG (liquefied natural gas)[that] will result in long term avoided costs” and “allow us to purchase fuel from American sources” because “our state, our residents, our constituents, our businesses and communities need relief” while “to do nothing puts everyone in the state at risk;” and


     WHEREAS, the former Governor of Puerto Rico, Luis Fortuno, established an LNG program which includes gaining access to domestic sources, for the Commonwealth and his successor Governor Alejandro Garcia Padilla is following suit to reduce their energy costs; and Governor Sean Parnell of Alaska is developing the State’s North Slope LNG resources for export primarily to Asia and shipment to Hawaii too; and


     WHEREAS, the ocean shipment of LNG requires specialist tanker ships known as “LNG Carriers” none of which have been built in the U.S. since the mid-1970’s and new construction in the U.S. would be cost prohibitive and potentially result in failure as did Project America denying Hawaii access to U.S. LNG sources unless the noncontiguous trades are exempted from the U.S.-built requirement; and


     WHEREAS, the U.S.-build requirement of the Jones Act creates an artificial scarcity of major capital ships, erects substantial barriers to entry domestic trades, and severely restricts the contestability of the domestic ocean transportation markets; and


WHEREAS, U.S. deep-draft construction is typically three or more times the cost than ships built in Japan or South Korea and U.S. ship production is very limited – building an average of less than three deep draft merchant ships annually in the U.S. since the mid-1980’s – putting the major U.S. shipbuilding yards at a distinct disadvantage in terms of economies of scale adversely affecting their ability to apply new technology, expertise and experience in the construction of large modern oceangoing ships as compared to their international peers; and


WHEREAS, the high cost and low production of the U.S. shipbuilding industry has resulted in an ageing and inefficient deep-sea Jones Act fleet that disproportionately imposes an economic burden on and adversely affects Hawaii and the other noncontiguous jurisdictions; and


WHEREAS, the average age of containerships employed in noncontiguous trade is twenty-eight years compared to the international average of twelve years, and international maritime insurance data show that accident rates increase with increasing ship-age spiking after twenty years; and


WHEREAS, foreign and U.S.-built ships alike are designed and built to the universal standards established by the nearly 50 international conventions and agreements, and numerous protocols and amendments administered by the United Nation (UN)’s International Maritime Organization (IMO), which have been ratified by the United States and made part of U.S. law; and


     WHEREAS, the United States Coast Guard (USCG) inspects all foreign-built ships seeking to become registered vessels of the United States to ensure that they comply with all U.S. ship construction, safety laws and regulations; and


     WHEREAS the U.S.-build requirement of the Jones Act for large oceangoing ships in noncontiguous domestic trades is not essential for the national defense of the United States because the remaining eight domestic shipbuilding yards capable of constructing large oceangoing ships mainly build naval ships and produce so few merchant ships each year that this activity does not represent sufficient shipbuilding capacity to address the shipbuilding needs of a major war time contingency and sustains a limited industrial base unable to support ongoing naval construction programs; and


     WHEREAS, granting an exemption to the U.S.-build requirement allows aging ships to be more quickly and economically replaced by less expensive and more fuel efficient ships in accordance with efforts to conserve resources and protect the environment; and


     WHEREAS, more than half of the large oceangoing Jones Act fleet is employed in the coastwise noncontiguous domestic trades, thus imposing more than 50% of the additional cost burden of operating Jones Act ships on less than 2% of the U.S. population; and


     WHEREAS, all other modes of domestic transportation in the U.S. are permitted to use foreign manufactured equipment for commercial operation without restriction including aircraft, railroad cars and locomotives, trucks, automobiles and mass transit vehicles; and


     WHEREAS, in December 1994, the United States signed the Organization for Economic Cooperation and Development (OECD)’s final act of the “Agreement Respecting Normal Competitive Conditions in the Commercial Shipbuilding and Repair Industry” (known as the OECD Shipbuilding Agreement) that would allow certain foreign built ships in the domestic Jones Act trades, but it has not been ratified by the U.S. Congress; and


     WHEREAS, the U.S. domestic build provisions of the Jones Act do not comply with ongoing Multilateral Trade Negotiations (MTN) that began under the General Agreement on Tariffs and Trade (GATT) and continues with the World Trade Organization (WTO); and


     WHEREAS, U.S.-build requirement of the Jones Act is an absolute merchandise import restriction contrary to international trade agreements; and


     WHEREAS, the residents of Hawaii and the other coastwise noncontiguous jurisdictions subsidize an inefficient and commercially uncompetitive U.S. major ship building industry; and


     WHEREAS, the exemption described herein is a limited and narrowly targeted reform of the Jones Act that would not change the existing U.S.-flag, U.S.-ownership and U.S.-crew provisions of the Jones Act as they currently apply to the coastwise noncontiguous domestic trades, would not allow foreign seamen or foreign ship-owners in any domestic trade where they are not currently allowed, would not apply to the domestic tug and barge industry anywhere in the U.S. including in the Jones Act noncontiguous jurisdictions, would not affect any domestic shipping along the coasts of the contiguous U.S. mainland, in the intercoastal trades, on the inland waterways or on the Great lakes, and would not negatively impact any maritime industry jobs in the noncontiguous jurisdictions; and


     WHEREAS, the passage of federal legislation exempting the noncontiguous domestic trades from the U.S.-build requirement for large self-propelled ships would revitalize U.S.-flag shipping by allowing foreign-built ships into, removing barriers to entry and encouraging more effective competition in those trades, and generally making more U.S.-flag merchant ships available to support military operations; and


BE IT RESOLVED by the Senate of the Twenty-seventh Legislature of the State of Hawaii, Regular Session of 2014, that this body respectfully requests the Congress of the United States to pass legislation granting an exemption from the U.S.-build requirement of the Jones Act in the noncontiguous domestic trade of Hawaii for large self-propelled oceangoing ships (Alaska and Puerto Rico support and seek the same exemption); and


     BE IT FURTHER RESOLVED that the Hawaii State Senate respectfully requests the President of the United States and his administration to support the congressional legislation requested herein; and


     BE IT FURTHER RESOLVED that Hawaii's congressional delegation is urged to work with their colleagues from Alaska, Guam and Puerto Rico to introduce in Congress federal legislation that would exempt the Hawaii and other noncontiguous trades from the U.S.-build requirement of the Jones Act for large oceangoing ships; and


     BE IT FURTHER RESOLVED that the Hawaii congressional delegation is urged to request Congress to exempt Hawaii, along with Alaska and Puerto Rico, from the U.S.-build requirement of the Jones Act for large self-propelled oceangoing ships; and


     BE IT FURTHER RESOLVED that certified copies of this Resolution be transmitted to the President of the United States, the President of the United States Senate, the Speaker of the United States House of Representatives, the Secretary of the United States Department of Transportation, members of Hawaii's congressional delegation, members of Alaska, Guam, and Puerto Rico’s congressional delegations, and the Governors of Alaska, Guam, Hawaii and Puerto Rico.










Report Title:


Jones Act; Request Congressional Exemption from the U.S.-build requirement of the Jones Act in the noncontiguous domestic trade of Hawaii for large self-propelled oceangoing ships, joined by Alaska and Puerto Rico