Advocates For Consumer Rights

Analysis Of McCain Jones Act Amendment

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On January 13, 2015, U.S. Senator John McCain (R-AZ) filed an amendment to repeal the Merchant Marine Act of 1920, also known as The Jones Act, which requires that all goods shipped between waterborne ports of the United States be carried by vessels built in the United States and owned and operated by Americans. MORE OF SENATOR MCCAIN’S OFFICIAL STATEMENT HERE and read his January 22, 2015, statement made to the full senate regarding his amendment HERE

THE FOLLOWING ANALYSIS of Senator McCain’s action is from Hawaii based Michael N. “Mike” Hansen, President of the Hawaii Shippers’ Council (HSC) — “a business league organization (IRS 501-c-6) incorporated in 1997 to represent cargo interests known as “shippers” who tender goods for shipment with the ocean carriers operating in the Hawaii trade.”

MichaelHansenRight

Michael N. “Mike” Hansen

Aloha,

U.S. Senator John S McCain (R-AZ) filed with the Secretary of the Senate on January 13, 2015, an amendment (SA 4) to the Senate version of The Keystone XL Pipeline Act.  Sen McCain’s amendment would eliminate the U.S. build requirement of the Jones Act and other U.S. maritime cabotage laws for most vessels engaged in domestic trade, or more formally as it is known in U.S. jurisprudence, the coastwise trade of the U.S.

The original Senate version of the legislation in the current Congress, namely “The Keystone XL Pipeline Act”  (S. 1), was introduced by Senator John Henry Hoeven III (R-ND) on January 6, 2015.  Senator LisaMurkowskiLisa Murkowski (R-AK) offered on January 12, 2015 “The Keystone XL Pipeline Approval Act” (S. 147) as Amendment 2 to replace S. 1.

Sen McCain’s instant amendment would be a rider to the Keystone legislation (actually to Sen Murkowski’s Amendment No. 2) and is modeled very closely on his previous standalone bill “Open America’s Waters Act” (S. 3525, 111th Congress, 2nd Session) introduced on June 23, 2010, which was not acted upon and died at the end of that Congress.

Sen. McCain’s press release covering the filing of his amendment contains provocative language affirming the need to fully repeal the Jones Act paralleling his previous comments as keynote speaker at the Heritage Foundation on December 5, 2014 and his press release from June 2010 covering the standalone bill (here and here).  These statements have led some to report incorrectly that Sen McCain’s amendment to the Keystone Legislation proposes to fully repeal the Jones Act, which it does not.

The Keystone XL Pipeline Act

The Keystone legislation was introduced In both chambers on January 6, 2015 during the opening days of the 114th Congress, 1st Session, to authorize TransCanada Keystone Pipeline LP to build a $8 billion  1,179-mile crude oil pipeline from Canada to the Gulf of Mexico, a project which was been pending federal approval since 2008.

The Keystone XL Pipeline Act (H.R. 3) was passed by the U.S. House of Representatives on January 9, 2015 by a 266 to 153 majority, and sent to the U.S. Senate where it was received on Monday, January 12, 2015.  The Senate determined to take up the companion measures with their procedural vote 63 to 32 on January 12, 2015 to end cloture. The Senate resumed consideration of the Keystone legislation on Tuesday, January 20, 2015.  It is expected that the Senate debate will take between two and three weeks when some 55 amendments will be offered, debated and voted on prior to expected passage of the bill.

 President Barak H. Obama (D) has pledged to veto The Keystone XL Pipeline Act when it gets to his desk.  A two-thirds majority in each chamber of Congress is needed to override a Presidential veto, which is a very high hurdle requiring a majority of 345 in the House and 67 in the Senate.  The majorities achieved in the votes already taken on the measures in the House and Senate would be insufficient to override a presidential veto.

The sources I contacted in Washington D.C.  on January 14, 2015 who closely monitor the Keystone XL Pipeline and domestic maritime issues said that they were surprised to learn about Sen McCain’s amendment and noted that the Keystone’s bill’s Senate managers have expressed their desire to pass out a clean bill without controversial amendments so as to improve its prospects of becoming law.  They further opined it would not be unexpected for Sen McCain to withdraw his Jones Act amendment after having made his point because it is unlikely given the number of amendments and the expressed view of the bill’s managers that his would be among the few to be selected as candidates for possible consideration, debated and actually voted on.

 Provisions of Sen McCain’s Amendment

The substantive part of Sen. McCain’s instant amendment to the Keystone legislation is its Section 3, entitled “Repeal of Certain Limitations on Coastwise Trade,” which directly addresses the U.S. build and touches on the U.S. ownership requirements of the Jones Act and the other coastwise laws .

The key modification is made by Section 3, paragraph (a) “In General,” which would repeal Section 46 USC 12112  Coastwise endorsement paragraph (a) and replace it with authorization for the U.S. Coast Guard to issue a coastwise endorsement to a vessel that qualifies in terms of safety and security.  Repealed are the requirements for a vessel to be: (1) U.S. owned under Section 46 USC 12103 and (2) U.S. built.  In addition, this section repeals long standing exemptions to the U.S. build requirement for vessels captured in war, forfeited for a breach of U.S. law, and wrecked on a U.S. coast under section 46 USC 12107 Wrecked vessels.  Without the domestic build requirement in force, these exemptions would be superfluous and properly repealed.

It is not clear if the U.S. ownership requirements would be positively repealed by eliminating this requirement for a coastwise endorsement in Section 46 USC 12112 because the ownership requirements are still stated in Section 46 USC 12103 General eligibility requirements , which is not repealed by Sen McCain’s amendment.

In addition, five conforming amendments are made by McCain’s amendment: (1) eliminating a wrecked vessel provision from 46 USC 3703a (c) (1) (C) Tank vessel construction standards; (2) liberalizing  a foreign build exemption in Section 46 USC 12120 Liquefied gas carriers to be employed in the Puerto Rico trade; (3) eliminating Section 46 USC 12112 requirements from Section 46 USC 12112 Small passenger vessels; (4) deleting Section 46 USC 12132  Loss of coastwise trade privileges eliminating the foreign ownership, foreign registry and foreign rebuilding causes for loss of coastwise privileges; and, (5) deleting Section 46 USC 12132 listing from the table of contents in a clerical amendment.

These provisions would substantially change the U.S. build and possibly ownership requirements of the coastwise laws if enacted.

Blue Water Ship Build Exemptions

Sen McCain’s instant amendment to eliminate the domestic ship build provisions of the U.S. cabotage laws (including the Jones Act) follows on several previous and similar proposals made over the past twenty years or so that have been limited to the so-called Blue Water trades.

In August 1998, Tom Moore, then President of Chevron Shipping Company, proposed that the domestic build requirement should be eliminated for the domestic “Blue Water” trades.  As a subsidiary of the oil major Chevron Inc. and an important Jones Act tanker owner and operator, this statement was a major departure from widespread corporate support for the U.S. build requirement and the Jones Act generally.  The Chevron Shipping proposal was not restricted to tankers.

For those in the U.S. maritime industry, the “Blue Water” trades are those where oceangoing ships are employed to carry cargoes over deepwater, which typically has a blue color.  This is as opposed to the “Brown Water” trades, which refers to the inland waterways on the nation’s rivers, canals and the intracoastal waterway, where the water often has a muddy brown color.

The Blue Water trades can be identified more formally as the coastal, intercoastal and noncontiguous trades of the U.S.  The coastal trades are transportation movements confined to either the East Coast, Gulf Coast or Pacific Coast of the U.S.  Intercoastal trades are those movements between the designated “coasts” of the U.S.  And, the noncontiguous trades are those involving those areas of the U.S. (including Alaska, Guam, Hawaii and Puerto Rico) that are not geographically connected to the 48 contiguous states.

At approximately the same time of the Chevron Shipping proposal, U.S. Representative Nick H. Smith (R) (MI-07) introduced on July 16, 1998, “Shipping Relief for Agriculture Act of 1998” (H.R. 4236), which would have eliminated the domestic  build requirement for the “deepwater transportation” of “certain noncontainerized agricultural and bulk cargoes in coastwise trade”.  In this construction, deepwater meant the Blue Water trades and the Great Lakes.  Interestingly, bulk liquid cargoes were specifically excluded from Rep Smith’s bill.

Rep Smith’s “Shipping Relief for Agriculture Act of 1998” was one of six pieces of legislation introduced in Congress during the period from 1996 through 2003 in response to the efforts of the Jones Act Reform Coalition (JARC) led by its then president Rob Quartel.  JARC is defunct today.

The next piece of Jones Act legislation was Sen McCain’s Open America’s Waters Act of 2010, from which his instant amendment is drawn.

Also in 2010, we put forward our Noncontiguous Trades Jones Act Reform (NTJAR) proposal that would exempt those trade lanes from the domestic build requirement for large oceangoing ships.  Other than eliminating the build requirement, our proposal would retain the other Jones Act requirements in respect of large self-propelled ships operating in the noncontiguous trades (i.e., the U.S.-flag, U.S.-ownership, U.S.-crew and U.S. management requirements).  We are not proposing to change the U.S. build requirement for the domestic tug and barge industry operating in the noncontiguous trades.

We will continue to pursue our goal of enacting Jones Act reform for the noncontiguous trades and look forward to your support.

Reach Mike Hansen at:
Tel:  808 947-4334
Cel:  808 373-0954
Email

RELATED DOCUMENTS AND MEDIA BELOW:

Shipping Relief for Agriculture Act of 1998 (H.R. 4236)

105th Congress, 2nd session

Representative Nick H. Smith (R-MI-7)

07-16-1998

URL: http://www.gpo.gov/fdsys/pkg/BILLS-105hr4236ih/pdf/BILLS-105hr4236ih.pdf

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 Open America’s Waters Act (S. 3525)

111th Congress 2nd Session

Senator John S McCain

June 23, 2010

URL: http://www.gpo.gov/fdsys/pkg/BILLS-111s3525is/pdf/BILLS-111s3525is.pdf

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 Video: Jones Act vs. Free Markets

Moderator:  Bryan Riley

Key Note Speaker: John S. McCain

Panelists:  Charles Drevna, Gary Clyde Hufbauer & Brian Slattery

Heritage Foundation

December 5, 2014

http://www.heritage.org/events/2014/12/jones-act-vs-free-markets

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 The Keystone XL Pipeline Act (H.R. 3)

114th Congress, 1st Session

Representative Kevin J. Cramer (R-ND)

January 6, 2015

http://www.gpo.gov/fdsys/pkg/BILLS-114hr3eh/pdf/BILLS-114hr3eh.pdf

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The Keystone XL Pipeline Act (S. 1)

114th Congress, 1st Session

Senator John Henry Hoeven III (R-ND)

January 6, 2015

http://www.hoeven.senate.gov/public/index.cfm/files/serve/?File_id=d1b5ce41-7afb-4bac-9142-5641c12a01ed 

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 Repeal Of Certain Limitations On Coastwise Trade (SA 4)

Amendment No. 4 to Amendment No.2 (The Keystone Pipeline Approval Act (S. 147)) to The Keystone XL Pipeline Act (S. 1)

Senator John S McCain (R-AR)

January 13, 2015

http://www.mccain.senate.gov/public/_cache/files/df4f540f-b0b8-45e6-a185-a2bf88df80fa/mccain-amendment-repealing-the-jones-act.pdf

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Keystone XL Pipeline Approval Act (S. 147)

Amendment No. 2 to The Keystone XL Pipeline Act (S. 1)

Senator Lisa Murkowski (R-AK)

January 12, 2015

http://www.gpo.gov/fdsys/pkg/BILLS-114s147pcs/pdf/BILLS-114s147pcs.pdf

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Affected Federal Statutes:

Section 46 USC 12103 General eligibility requirements

http://www.gpo.gov/fdsys/pkg/USCODE-2010-title46/pdf/USCODE-2010-title46-subtitleII-partH-chap121-subchapI-sec12103.pdf

Section 46 USC 12107 Wrecked vessels

http://www.gpo.gov/fdsys/pkg/USCODE-2010-title46/pdf/USCODE-2010-title46-subtitleII-partH-chap121-subchapI-sec12107.pdf

Section 46 USC 12112 Coastwise endorsement

http://www.gpo.gov/fdsys/pkg/USCODE-2010-title46/pdf/USCODE-2010-title46-subtitleII-partH-chap121-subchapII-sec12112.pdf

 Section 46  USC 12120 Liquefied gas carriers

http://www.gpo.gov/fdsys/pkg/USCODE-2011-title46/pdf/USCODE-2011-title46-subtitleII-partH-chap121-subchapII-sec12120.pdf

 Section 46 USC 12132 Loss of coastwise privileges

http://www.gpo.gov/fdsys/pkg/USCODE-2011-title46/pdf/USCODE-2011-title46-subtitleII-partH-chap121-subchapIII-sec12132.pdf

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EARLIER PRESS COVERAGE

THURSDAY, JANUARY 15, 2015

American Shipper Magazine

McCain amendment would change Jones Act

Senator seeks to change the “build America” requirement for Jones Act ships.

By Chris Dupin

Sen. John McCain, R-Ariz., said an amendment he introduced to the bill to approve the Keystone XL Pipeline would “repeal the Merchant Marine Act of 1920, also known as The Jones Act, which requires that all goods shipped between waterborne ports of the United States be carried by vessels built in the United States and owned and operated by Americans.” More HERE.

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2015-01-15
The Maritime Executive
Industry Rises in Opposition to McCain Jones Act Amendment

The Navy League of the United States openly opposes the McCain Amendment (amendment #2) to S.1, which would gut the U.S. shipbuilding industry by striking the U.S. build requirement provisions of the Jones Act, the League said in a statement. MORE

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2015-01-18

The Maritime Executive
McCain Takes Dead Aim at U.S. Maritime
BY Tony Munoz
Publisher & Editor-in-Chief

The 114th Congress was no sooner sworn in before Senator John McCain (R-AZ) attacked the very heart of the Jones Act, its U.S.-build requirement. McCain took the opportunity to attach the repeal amendment to the Keystone XL Pipeline bill, which was passed by the House earlier this month and is now awaiting further action in the Senate. MORE

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Tradewinds
McCain targets Jones Act

A leading US politician has mounted a crusade against the Jones Act, a cabotage law that protects domestic operators from foreign competition. John McCain rose to prominence during an unsuccessful presidential bid. On Tuesday US Senator John McCain, a republican from Arizona, filed an amendment to repeal the Merchant Marine Act of 1920. MORE

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14/01/2015
EurActiv
TTIP: MEP hails proposal to repeal US Jones Act.

Liberal MEP Marietje Schaake flagged on Wednesday (14 January) a proposal by US Senator John McCain to repeal the ‘Jones Act’. McCain proposed an amendment for the full repeal of the Jones Act, which he considers “an antiquated law that has for too long hindered free trade, made US industry less competitive, and raised prices for American consumers.” MORE

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January 14, 2015
American Maritime Partnership (AMP)
Press Release

WASHINGTON, DC – American Maritime Partnership (AMP), the voice of the domestic maritime industry, today released the following statement on Senator John McCain’s recent measure to eliminate the U.S. shipbuilding industry, which is critical to supporting America’s military power and defense needs, employs hundreds of thousands of Americans, and pumps tens of billions of dollars into the U.S. economy. MORE

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January 19, 2015
Break Bulk
Senate Bill Could “Gut” Jones Act
Amendment added to Keystone XL Pipeline bill, vote as early as Tuesday, Jan. 20

Response to the news that Senator John McCain (R-AZ) has filed an amendment to a Keystone XL Pipeline bill that would repeal parts of the 1920 Jones Act has sparked fury from the U.S. maritime industry. MORE

 

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What is “The Jones Act” and why should you care?

A unique non-partisan collaboration joins Hawai`i, Alaska, Guam and Puerto Rico to seek a “slim exemption” from the Jones Act.

 History of the 1920 Jones Act HERE

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Jun 13, 2014

The Hawaii Shippers’ Council president is making progress in his quest for a Jones Act exemption By Mark Coleman

Michael Hansen isn’t asking for much.

After all, as president of the Hawaii Shippers’ Council, it’s not like he’s seeking repeal of the entire federal Jones Act, also known as the Merchant Marine Act of 1920. He just wants a slim exemption from the federal maritime provision — specifically from Section 27 of the Act, which regulates “transportation of merchandise between points in United States in other than domestic built or rebuilt and documented vessels.” READ THE COMPLETE STORY

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