By Stas Margaronis, AJOTThe possible bankruptcy of Horizon Lines has renewed calls for Congress to abolish the Jones Act. A bankruptcy will decrease competition in Alaska, Hawaii and Puerto Rico and could spur demands from shippers and consumers there to replace old, fuel-inefficient ships with newer fuel-efficient foreign-built ships manned and owned by foreign nationals. No shipyard in the United States is building container ships today, so demands to replace the Horizon Lines ships with foreign-built ships could become an issue. The abolition of the Jones Act or, at least, the elimination of the U.S. build requirement in the law could shut down the troubled Aker shipyard in Philadelphia as well shut down other builders in the Great Lakes, the Gulf of Mexico and elsewhere. Previous efforts to abolish the Jones Act in Congress have been unsuccessful, but the bankruptcy of Horizon Lines would cripple a company that accounts for 36% of total marine container shipments to Alaska, Hawaii and Puerto Rico carried on 15 Jones Act-qualified ships. The oldest ships in the Horizon fleet were built in 1968. Background Horizon Lines Inc. recently agreed to pay a $45 million Department of Justice imposed fine to resolve federal price- fixing charges. On March 28th, Horizon announced that it failed to receive bondholder approval to waive a default in connection with the fine and may be forced to seek court protection if talks with creditors to restructure its debt fail. The announcement was contained in a regulatory filing, which also announced a “Separation Agreement” with its chief executive Charles Raymond, who is retiring. Horizon Lines may file for bankruptcy as soon as April according to Bloomberg News The announcement has renewed calls for the abolition of the Jones Act, the law the requires shipping between two U.S. ports be carried on ships built in the United States, owned by U.S. citizens and manned by U.S. crews. Opposition To The Jones Act Ernst Frankel, chairman of American President Lines and Professor Emeritus of Ocean/Mechanical Engineering at MIT called for the elimination of the Jones Act in an opinion piece which appeared in Marine Executive shortly after the Horizon Lines announcement: “The Jones Act served us well until 20-30 years ago, but is now just a big albatross around our neck, particularly the U.S.-built requirements for cargo vessels.  I challenge any proponent of the Act to identify how and where it benefits America in ocean-going cargo shipping. “ Professor Frankel argues that as a result of widening the Panama Canal and infrastructural investments made by the Port of Savannah, Savannah may dominate Atlantic coast oceangoing shipping. Very few Jones Act container vessels are available to transport this potential growth of containers. So, the burden of moving these containers from the main port to coastal ender users will fall on trucks. This will increase congestion on highways, such as I-95. By eliminating the Jones Act, Frankel argues, foreign flag carriers will be free to enter U.S. coastal trades and provide low cost vessel service with ships built in lower cost foreign shipyards and with crews coming from low-wage nations. These foreign carriers can carry U.S. cargoes from main ports, such as Savannah, to and from coastal end users and reduce long-haul trucking. John Carroll, a Hawaii attorney and former state Senator, criticized the Jones Act for damaging the Hawaii economy. He blames Matson Navigation and Horizon Lines for using the law to charge high freight rates: “The people of Hawai’i must be made aware of the damage the Jones Act shipping restrictions are inflicting on Hawai’i’s economy and the harm they will bring into the lives of each and every one of you. But don’t just take my word for it.  According to a recently published article in the Star Advertiser newspaper, since 2003 increases in ocean freight rates, terminal handling costs, fuel surcharges and government fees