00 SENATE JOINT RESOLUTION NO. 17 01 Requesting the United States Congress to exempt Alaska from the United States built 02 requirement of the Jones Act for large ocean-going ships. 03 BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 WHEREAS interstate ocean shipping provides a vital economic link between the 05 seven noncontiguous domestic jurisdictions of the United States and the contiguous 48 06 mainland states of the union; and 07 WHEREAS sec. 27 of the Merchant Marine Act of 1920 (46 U.S.C. 55102), 08 commonly known as the Jones Act, is a federal cabotage law that restricts the surface carriage 09 of cargo by water between coastwise points in the United States to vessels that are United 10 States built, United States flagged, United States owned, and crewed by United States 11 citizens; and 12 WHEREAS the coastwise laws of the United States, including the Jones Act, embrace 13 four of the seven noncontiguous domestic jurisdictions, namely the State of Alaska, the 14 Territory of Guam, the State of Hawaii, and the Commonwealth of Puerto Rico, while the 15 Territory of American Samoa, the Commonwealth of the Northern Mariana Islands, and the 16 Virgin Islands of the United States are fully exempt from the Jones Act as a result of the 01 international treaties associated with their annexation to the United States; and 02 WHEREAS there is an historical exemption from the United States built requirement 03 of the Jones Act for all commercial vessels engaged in the domestic Guam trade (46 U.S.C. 04 12111), commonly known as the "Guam Exemption," and the other three noncontiguous 05 jurisdictions embraced by the coastwise laws, namely Alaska, joined by Hawaii and Puerto 06 Rico, are seeking a more limited, similar exemption; and 07 WHEREAS the Guam Exemption is of limited utility to Guam because the natural 08 westbound trade lane from the west coast of the United States to Guam passes through 09 Hawaii, making it difficult for ocean common carriers to mount financially viable voyages 10 without carrying cargo to both Hawaii and Guam, effectively binding Guam's interstate trade 11 to the United States built requirement, despite its exemption, and prompting Guam to support 12 the limited extension of their exemption to Hawaii; and 13 WHEREAS, on April 15, 2014, in recognition of the inefficacity of the Guam 14 Exemption alone, the Thirty-Second Legislature of Guam, First Regular Session, adopted, by 15 a 12 to three bipartisan floor vote, Resolution 138-32 (COR), calling on their Congresswoman 16 Madeleine Z. Bordallo to introduce federal legislation to also exempt Alaska, Hawaii, and 17 Puerto Rico from the United States built requirement of the Jones Act; and 18 WHEREAS, on January 23, 2013, the World Economic Forum, in collaboration with 19 Bain and Company and the World Bank, issued a report entitled Enabling Trade: Valuing 20 Growth Opportunities, in which it found "The most restrictive example [of cabotage] is the 21 United States Jones Merchant Marine Act of 1920" and "such barriers actually damage local 22 economies and saddle businesses and consumers with significant costs"; and 23 WHEREAS, on July 25, 2013, Congressman Pedro Pierluisi, introduced the Puerto 24 Rico Interstate Commerce Improvement Act of 2013 (H.R. 2838) to exempt self-propelled 25 vessels carrying bulk cargoes in the Puerto Rico trade from the United States built 26 requirement of the Jones Act in conformity with a report of the federal Government 27 Accountability Office issued on March 14, 2013, Characteristics of the Island's Maritime 28 Trade and Potential Effects of Modifying the Jones Act (GAO-13-260), and found that he 29 could not move his measure forward and effect Jones Act reform without support from other 30 jurisdictions; and 31 WHEREAS the Hawaii Refinery Task Force, in their Final Report adopted April 9, 01 2014, recommended, among other things, that Hawaii seek a Jones Act exemption allowing 02 foreign flagged tankers in the Hawaii trade to mitigate the effects of a permanent closure of its 03 two small petroleum oil refineries; and 04 WHEREAS the average age of containerships employed in the noncontiguous 05 common carrier trades is 30 years compared to the international average of 12 years, resulting 06 in very high operating costs incurred by older ships, and international maritime insurance data 07 shows that accident rates increase with increasing ship-age, spiking after 20 years; and 08 WHEREAS Horizon Lines, Inc., once the largest common carrier in the 09 noncontiguous trades, operating a fleet of 15 Jones Act container ships now averaging 37 10 years old, is scheduled to become defunct in 2015 by terminating its Puerto Rico service, 11 selling its Hawaii service to Pasha Hawaii Transport Line, Inc., and selling its Alaska service 12 to Matson, Inc., after earlier withdrawing from Guam service in November 2011, because 13 Horizon Lines, Inc., could not afford to replace its aging ships in United States shipyards, and 14 their exit will cause an erosion of competition at the margins through further industry 15 consolidation and make the trades less subject to competition; and 16 WHEREAS the United States built requirement of the Jones Act creates an artificial 17 scarcity of major capital ships, erects substantial barriers to entry domestic trades, and 18 severely restricts the contestability of the domestic ocean transportation markets; and 19 WHEREAS the cost of major ship construction in the United States is typically four 20 to five times higher than the cost of building ships in Japan or South Korea, and United States 21 ship production is very limited, with an average of less than three deep-draft merchant ships 22 built in the United States annually since the mid-1980s, putting the major United States 23 shipbuilding yards at a distinct disadvantage in terms of economies of scale adversely 24 affecting their ability to apply new technology, expertise, and experience in the construction 25 of large, modern oceangoing ships, compared to their international peers; and 26 WHEREAS the high cost and low production of the United States ship building 27 industry has resulted in an aging and inefficient deep-sea Jones Act fleet that 28 disproportionately and adversely affects Alaska and the other noncontiguous jurisdictions; 29 and 30 WHEREAS foreign and United States built ships alike are designed and built to the 31 universal standards established by the nearly 50 international conventions and agreements and 01 numerous protocols and amendments administered by the United Nation's International 02 Maritime Organization, which have been ratified by the United States and made part of 03 United States law; and 04 WHEREAS the United States Coast Guard inspects all foreign built ships seeking to 05 become registered vessels of the United States to ensure that they comply with all United 06 States ship construction and safety laws and regulations; and 07 WHEREAS the United States built requirement of the Jones Act for large oceangoing 08 ships in noncontiguous domestic trades is not essential for the national defense of the United 09 States because the remaining seven domestic shipbuilding yards capable of constructing large 10 oceangoing ships mainly build naval ships and produce so few merchant ships each year that 11 this activity does not represent sufficient shipbuilding capacity to address the mobilization 12 needs of a major wartime contingency and sustains only a limited industrial base unable to 13 support ongoing naval construction programs because of excessively high costs; and 14 WHEREAS granting an exemption to the United States built requirement allows 15 aging ships to be more quickly and economically replaced by less expensive, safer, and more 16 fuel-efficient ships in accordance with efforts to conserve resources and protect the 17 environment; and 18 WHEREAS more than half of the large oceangoing Jones Act fleet is employed in the 19 coastwise noncontiguous domestic trades, thus imposing more than 50 percent of the 20 additional cost burden of operating Jones Act ships on less than two percent of the population 21 of the United States; and 22 WHEREAS all other modes of domestic transportation in the United States are 23 permitted to use foreign-manufactured equipment for commercial operation without 24 restriction, including aircraft, railroad cars and locomotives, trucks, automobiles, and mass 25 transit vehicles; and 26 WHEREAS, in December 1994, the United States signed the Organization for 27 Economic Cooperation and Development's Agreement Respecting Normal Competitive 28 Conditions in the Commercial Shipbuilding and Repair Industry, commonly known as the 29 OECD Shipbuilding Agreement, that would allow certain foreign built ships in the domestic 30 Jones Act trades, but it has not been ratified by the United States Congress; and 31 WHEREAS the United States built provisions of the Jones Act do not comply with 01 ongoing multilateral trade negotiations that began under the General Agreement on Tariffs 02 and Trade and continues with the World Trade Organization; and 03 WHEREAS the United States built requirement of the Jones Act is an absolute 04 merchandise import restriction contrary to international trade agreements; and 05 WHEREAS the residents of Alaska and the other coastwise noncontiguous 06 jurisdictions subsidize an inefficient and commercially uncompetitive United States major 07 ship building industry; and 08 WHEREAS the exemption to the United States built requirement is a limited and 09 narrowly targeted reform of the Jones Act that would not change the existing United States 10 flag, United States ownership, and United States crew provisions of the Jones Act as they 11 currently apply to the coastwise noncontiguous domestic trades, would not allow foreign 12 seamen or foreign ship owners in any domestic trade where they are not currently allowed, 13 would not apply to the domestic tug and barge industry anywhere in the United States, 14 including in the Jones Act noncontiguous jurisdictions, would not affect any domestic 15 shipping along the coasts of the contiguous United States mainland in the intercoastal trades 16 on the inland waterways or on the Great Lakes, and would not negatively affect any maritime 17 industry jobs in the noncontiguous jurisdictions; and 18 WHEREAS the passage of federal legislation exempting the noncontiguous domestic 19 trades from the United States built requirement for large self-propelled ships would revitalize 20 United States flag shipping by allowing foreign-built ships into the United States by removing 21 barriers to entry and encouraging more effective competition in those trades and generally 22 making more United States flagged merchant ships available to support military sealift 23 operations; 24 BE IT RESOLVED that the Alaska State Legislature requests the United States 25 Congress to pass legislation granting an exemption from the United States built requirement 26 of the Jones Act in the noncontiguous domestic trade of Alaska for large self-propelled 27 oceangoing ships, an exemption sought and supported by the State of Hawaii and the 28 Commonwealth of Puerto Rico; and be it 29 FURTHER RESOLVED that the Alaska State Legislature respectfully requests 30 President Barack Obama and his administration to support the legislation exempting the 31 United States built requirement of the Jones Act in the noncontiguous domestic trade of 01 Alaska for large self-propelled oceangoing ships; and be it 02 FURTHER RESOLVED that the Alaska State Legislature urges the Alaska 03 Congressional delegation to work with colleagues from Guam, Hawaii, and Puerto Rico to 04 introduce in the United States Congress federal legislation that would exempt the Alaska and 05 other noncontiguous trades from the United States built requirement of the Jones Act for large 06 oceangoing ships; and be it 07 FURTHER RESOLVED that the Alaska State Legislature urges the Alaska 08 Congressional delegation to request the United States Congress to exempt Alaska, along with 09 Hawaii and Puerto Rico, from the United States built requirement of the Jones Act for large 10 self-propelled oceangoing ships. 11 COPIES of this resolution shall be sent to the Honorable Barack Obama, President of 12 the United States; the Honorable Joseph R. Biden, Jr., Vice-President of the United States and 13 President of the U.S. Senate; the Honorable John Boehner, Speaker of the U.S. House of 14 Representatives; the Honorable Mitch McConnell, Majority Leader of the U.S. Senate; the 15 Honorable Anthony Foxx, United States Secretary of Transportation; and the Honorable Lisa 16 Murkowski and the Honorable Dan Sullivan, U.S. Senators, and the Honorable Don Young, 17 U.S. Representative, members of the Alaska delegation in Congress.