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RCED-88-107 2 (1988-09-30)

handle is hein.gao/gaobabpbk0001 and id is 1 raw text is: B-230334 The Jones Act fleet' used in the Alaska trade comprises 21 percent of the militarily useful U.S.-flag fleet and provides positions for 22 percent of U.S.-citizen merchant mariners. In addition, since 1970, about 19 per- cent of the merchant ships built in U.S. shipyards have been built for the Alaska trade. The construction of these vessels has made a significant contribution to maintaining our military shipbuilding capacity. Background Alaska depends heavily on waterborne transportation. According to 1977 data (the most recent available), 63 percent of the tonnage shipped to Alaska was shipped primarily by water, compared with 9 percent of the tonnage shipped in the United States as a whole. The Alaska trade is dominated by the southbound shipment of crude oil, which amounted to 99 million tons in 1985. Northbound shipments of groceries, consumer goods, and other supplies, primarily from the Puget Sound area, amounted to less than 3 million tons. Most of the oil is shipped to the West Coast (59 percent), but 33 percent is shipped via Panama to the Gulf and East coasts. The rest is shipped to Hawaii or to the Virgin Islands. The Jones Act generally requires that domestic cargoes be transported in U.S.-built, U.S.-flag, U.S.-owned, and U.S.-crewed ships. One exception is cargo shipped to and from the U.S. Virgin Islands, which are exempt from the Jones Act. Oil shipped between the Virgin Islands and other points in the United States may, and often does, move on foreign-built, foreign-flag tankers. The impact of the Jones Act is strengthened by the Export Administration Act of 1979, which generally prohibits the export of crude oil produced in Alaska's North Slope. The oil must there- fore be shipped to points in the United States on Jones Act tankers. We used data from the Department of Transportation's Maritime Adminis- tration (MarAd) and from operators to develop estimates of the annual capital costs associated with the existing fleet of Alaska-trade Jones Act vessels, and calculated what these annual capital costs would have been had these vessels been built abroad. We also analyzed the possibility that building vessels in the United States increased operating costs because of the preponderance of steam-driven vessels in the U.S.-built fleet (as compared with more fuel-efficient diesel-driven vessels in the foreign-built fleet). MarAd officials and carriers, however, told us that, had U.S.-flag ships been built abroad in the 1970s, they probably would 2The Jones Act fleet consists of those vessels that qualify, under the Jones Act and other U.S. law, to offer transportation between points in the United States. This includes vessels that are U.S.-built, U.S.-flag, and U.S.-owned, and which do not receive construction or operating subsidies. GAO/RCED-8-107 The Jones Act Page 2

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