Guam's delegate pushes for Jones Act exemption to lower costs of food and medicine

By Troy Torres

Matson shipping's chokehold on the economies and political powerhouses of the Pacific has caused an economy of political courage juice in the islands: a scarcity of conscience.

No reasonable and educated policy maker, who is honest with him- or herself, actually believes the century-old federal law that protects shipping companies and drives up all of our costs in the islands is a good law. Yet, from the Mariana Islands to the islands of Hawaii, a category 5 storm happens more often than a politician who takes a stance against the Jones Act, or who otherwise challenges Matson shipping.

Matson is a Hawaii-based multibillion dollar shipping corporation that enjoys the support of all but one of Hawaii's congressional delegation and most of its local politicians. Campaign contributions talk in that state. It's the same language spoken to Guam's politicians, whose tongues have been caught by a cat as Matson tries to exile its only competitor in the Guam trade, APL.

The Guam trade involves many more people and islands than Guam. The shipping lanes riding out to sea from Apra Harbor bring nearly every consumable to ports in the Northern Mariana Islands, the Republic of Palau, the Federated States of Micronesia, and the Republic of the Marshall Islands. Despite the nightmarish specter of runaway price increases if Matson wins its lawsuit and manages to kick APL out of the Guam trade, the politicians are eerily quiet.

And Matson's exercise of control and influence in Guam hasn't only affected the politicians. It's like the mute button has been pressed on the Guam Chamber of Commerce, which has always been vocal against efforts that increase the cost of doing business. Any time a governor wanted to raise taxes to build or fund something, the chamber mobilized and defeated the effort. Any time a senator wanted to raise the minimum wage, the chamber cried about the exorbitant cost of giving its poorest workers a 50 cent increase in pay. But raise the issue of the cost of shipping, and it's crickets from the business league.

A chamber full of capitalists, who often lecture against government intervention in the marketplace has, for decades, been lukewarm about Jones Act reform.

There almost appears to be a golden rule in politics regarding the cost of shipping in both the Hawaii and the Guam trades: Thou shall not talk smack about Matson, or dare defy the Jones Act.

And then there's Maverick Mike San Nicolas. The sophomore U.S. congressman from Guam, known to throw political convention under his heel and to challenge nonsensical status quo, told the U.S. House Committee on Rules Wednesday that ships carrying food and medicine to the islands should be exempt from the Jones Act.

Matson, which has celebrated the Jones Act as the cornerstone of its business, must not be happy with Guam's very popular delegate to Congress. In a letter to its employees, the shipping company called the Jones Act, "The single most important piece of legislation to Matson."

What is the Jones Act? And why does Matson love it so much?

The elevator explanation of the Jones Act is this: It's a federal law from 1920 that makes it illegal for a foreign-built ship, even if it's owned and operated by an American company, to drop off and pick up cargo by sea between two U.S. seaports.

In order to appreciate why this law was important at the time it was enacted, it is necessary to understand that the Jones Act actually is part of a bigger law.

The Jones Act is Section 27 of the Merchant Marine Act of 1920. This law was created in the aftermath of the destruction of many of the United States's military and merchant ships by German U-Boats in World War I. The Merchant Marine Act was critical to U.S. national security from the time of its passage to the end of World War II, and lent to America's domination of the seas to this day.

Congress established a very simple policy one century ago that states: "It is necessary for the national defense and for the proper growth of its foreign and domestic commerce that the United States shall have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in time of war or national emergency, ultimately to be owned and operated privately by citizens of the United States."

Twenty six sections later in the Merchant Marine Act of 1920 is what we commonly know as the Jones Act, named after the U.S. Senator Wesley Jones of Washington, who sponsored the legislation.

It states, in relevant part, "No merchandise... shall be transported by water, or by land and water, on penalty of forfeiture of the merchandise, between points in the United States including Districts, Territories, and possessions thereof embraced within the coastwise laws, either directly or via a foreign port, or for any part of the transportation, in any other vessel than a vessel built in and documented under the laws of the United States and owned by persons who are citizens of the United States."

This law, created a century ago for the needs of the American people in a far away time, is now what causes the price of shipping in both the Hawaii and the Guam trades to be so high, the average family can barely afford food.

The Jones Act, while it helps Matson secure its annual multibillion dollar revenue drive, hurts Americans living in the Pacific Ocean.

According to a September 2019 article in Hawaii Business Magazine, it costs about $2,000 to ship a container from the American west coast to Sydney. It cost three times that amount to ship that same container to Honolulu. Sydney is nearly three times further from Long Beach, California than Honolulu is.

For the Guam trade, it's even worse. We have to pay Matson nearly five times the cost of shipping from the west coast to Sydney; and we share the same time zone.

What of the nation's needs to maintain a strong merchant marine?

The Merchant Marine Act of 1920 has a built in exemption clause. In it, the U.S. Secretary of Transportation, through the U.S. Maritime Administration, may provide a Jones Act waiver for ships owned and operated by Americans, but built somewhere else.

It became apparent in the 1980s that America will lose its Naval advantage if it didn't do something about the dwindling number of ships being built in the country to replace its breaking ships. To put it simply, it just cost too much money to build ships in America. In 1996, President Clinton started the Maritime Security Program to address this problem while maintaining America's commitment to a strong merchant marine.

In exchange for the ability to operate its ships in U.S. navigable waters and a small stipend, American shipping companies that participate in the MSP agree to surrender their ships to the Secretary of the Navy in times of national emergency or war.

This exemption has placed 60 war-ready ships, owned by American companies, in the Pacific and Atlantic Oceans, essentially forward-deployed for the protection of the country and her allies.

Matson is not a member of the MSP; but its competitor, APL, is. In its third attempt to rid the Guam trade of its only competitor, Matson is not suing APL at all. Matson is suing the U.S. Maritime Administration, which provided APL the exemption it needs to operate here. The basis of Matson's lawsuit is to discredit APL from the Maritime Security Program, which is necessary to the protection of America, and this part of the world.

Matson, in its lawsuit has complained that APL's presence in the Guam trade has kept prices from rising. To add insult to injury, the Hawaii company which fashions itself as the hometown carrier for Guam, is complaining in its current lawsuit that the $5 million APL receives as a stipend for its membership in the MSP creates an unfair market advantage.

The irony is that Matson's CEO, Matthew Cox, is paid $5 million, according to multiple sources of information from Hawaii. In fact, he and the CEO of Bank of Hawaii have been reported to be the two highest-paid residents of Hawaii.

The Guam trade has been good for Matson. The Jones Act has been good for Matson. But what is good for Guam? Her congressman, Michael San Nicolas, makes it very clear: at the very least, exempt the shipment of food and medicine from the Jones Act.

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