Getting Our “Jones Act” Together

With the dawn of a new year, it appears certain that constraints in transpacific air and ocean markets will remain “dislocated” for some time to come.

Although some transpacific air passenger service routes have been reinstated, global passenger traffic (and belly space capacity) is unlikely to see pre-COVID-19 levels for several years.

It is also worth noting that with pandemic vaccines and related materials distribution expected to use air cargo services, there is likely be even more restricting of air cargo capacity in the 2020.

Meanwhile, constraints in transpacific ocean capacity remains severe. Several transpacific ocean carriers have fully deployed capacity, and new ship orderbooks are at multi-decade lows. At the same time, industry consolidation and alliances continue to look for better alignment of capacity to avoid over-tonnage. Still, there remains significant equipment demand and severe West Coast port congestion.

Amid all these dire projections, consider Matson Navigation, which competes in the Transpacific arena against both air and ocean cargo providers with a host of premium cargo services.

A Jones Act “darling,” Matson is the only carrier that can serve foreign commerce due to its presence in Guam, which provides a strong eastbound market for backhaul.

Like its transpacific rival, Pasha, it has its own designated docking infrastructure in California. This fact means that the Jones Act should be regarded more as a utility than just an enabler of port-to-port transport.

Both Matson and Pasha have invested in ships, containers, and terminals to provide door-to-door service even during critical events like hurricanes and other natural disasters.

Yet up until recently The Jones Act faced severe criticism from those who argued that the protectionist statute increases costs to the shipping industry, precludes foreign ships from assisting in cases of national emergency and creates unnecessary obstacles for industry stakeholders, particularly where U.S.-flagged vessels do not have the same capabilities as their foreign counterparts.

But President Biden’s executive order, “Made-in-America,” signed in 2021 makes it clear that the 100-year-old Jones Act will remain intact for the foreseeable future. Transportation Secretary, Pete Buttigieg, also noted at the time that this legal legacy creates hundreds of thousands of jobs, as well as a shipbuilding industry in the U.S.

Furthermore, with saber rattling between the People’s Republic and Taiwan reaching a fevered pitch these days, American foreign policy experts maintain that a strong message for the defense of democracy in the transpacific arena must remain viable.

While the Jones Act is a vital anchor for economic strength and job creation in California it is also a pillar of the nation’s security and military capability. Specifically, this law states that the transportation of merchandise between U.S. ports is reserved for U.S.-built and owned documented vessels.

Finally, if an argument is to be made for keeping Jones Act carriers competitive for decades to come, one only need to look at the leading U.S.-flag ocean cargo carrier in the Pacific Rim: Matson Navigation.

The storied company celebrates its 140th anniversary in 2022, and all indications point to another prosperous year for the liner and logistics managers reliant on its services in the region.

On a personal note, this is my final SCMR column, and I wish to thank all those readers who have been so generous with their feedback and suggestions over the years. My colleagues at Peerless Media will, as always, remain faithful in our mission of ensuring the most accurate and transactional market intelligence so vital to your decision-making and ongoing success.

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