News / Jones Act: frustrating, or fundamental to the US?

19/07/2024

The Jones Act, established to protect US shipping, continues to impede some logistics activities, prompting more calls for change. They seem unlikely to make much headway, however, as Washington’s mounting desire to ring-fence strategic industries is reinforcing support for the regulations.

Last year, Danish energy giant Orsted Wind cancelled its planned Ocean Wind 1 and 2 projects that were supposed to deliver 1,100 MW and 1,148 MW respectively to New Jersey. In its official notice of 31 October, management cited high inflation, rising interest rates and supply chain bottlenecks as the reasons for the decision.

CEO Mads Nipper commented that a shortage of installation vessels was a major factor, as this would have caused a “multi-year delay”.

The US government has ambitious goals for the development of offshore wind generation, aiming to produce 30 gigawatts (GW) by 2030 from fixed-bottom wind turbines, plus another 15 GW from floating wind installations by 2035, but these may be impeded by lack of suitable ships.

To date there is no operational US-built installation vessel. The first one is scheduled to enter service next year. By some estimates, the US needs at least four, if not six, such ships to meet its objectives.

The Merchant Marine Act, commonly referred to as the ‘Jones Act’, dictates that maritime commerce in US waters and between US ports has to be conducted with US-built, flagged and crewed vessels – which creates bottlenecks like the dearth of wind installation ships. Over time there have been calls to modify it to allow for non-US operators to step in, but the act’s supporters have fended off all attempts, and the current mood in Washington signals further tightening.

In June, lawmakers issued the ‘Congressional Guidance for a National Maritime Strategy’. This bipartisan strategy paper warns that the US is way behind China in regard to ships and shipbuilding and stresses a need to act in order to strengthen national security, with the additional benefit of “supercharging the economy”.

The authors point to decades of neglect that have seen China’s shipbuilding capacity surge to 230 times that of the US.

Analog to the CHIPS Act for the strengthening of US chip manufacturing, members of Congress have suggested a ‘SHIPS Act’ for the dual purpose of strengthening military capability and the merchant fleet.

The Jones Act is a central piece in the development of a national marine strategy, the congressmen emphasised in their recommendations, calling it “the backbone of our sea services, industry and maritime transportation system”.

“Our National Maritime Strategy should start with three key words: the Jones Act,” declared Congressman John Garamendi.

This is echoed by Jennifer Carpenter, president and CEO of the American Waterways Operators, who recently described the Jones act as “vital to defending American interests and sovereignty”.

“The Jones Act is fundamental to maintaining a fleet of American-built, -crewed and -owned vessels undergirding our nation’s economy and serving as a bulwark against China’s expansionism. It supports 650,000 American jobs, helps secure our domestic transportation from supply chain disruptions and buffers against anti-competitive manoeuvres from China,” she said.

One non-US forwarder executive agreed that the US needs to build up a strong marine industry that can maintain and protect its supply chains. For international companies that face bottlenecks on account of the Jones Act, on the other hand, the rhetoric in Washington is ominous.

For the installation of the first six of 62 turbines of the Vineyard 1 project off the coast of Massachusetts, the developers Avangrid and Copenhagen Infrastructure Partners had to use barges to move components from the port of New Bedford to the installation site and transfer them to the waiting foreign-flagged installation vessel. This complicated the logistics and pushed up costs. Avangrid indicated that it wants to find better solutions for its other projects.