This document provides testimony opposing resolutions (HR 113, HCR 153, SR 45, SR 93) that would exempt Hawaii from the U.S. build requirement of the Jones Act for large ocean-going ships. It provides background on the Jones Act and examines a GAO report on the potential effects of exempting Puerto Rico from the Jones Act. While reform should be considered, a full exemption is not in Hawaii's best interest due to national security, homeland security, and support for the domestic shipping and maritime industries.

1. TO THE HAWAII SENATE AND COMMITTEES ON
PUBLIC SAFETY, INTERGOVERNMENTAL AND MILITARY AFFAIRS
TRANSPORTATION AND INTERNATIONAL AFFAIRS
WAYS AND MEANS
TO THE HAWAII HOUSE OF REPRESENTATIVES AND COMMITTEES ON
TRANSPORTATION
CONSUMER PROTECTION & COMMERCE
FINANCE
THE TWENTY-SEVENTH LEGISLATURE
REGULAR SESSION OF 2014
THURSDAY, MARCH 15, 2014
TESTIMONY OF CLIFTON M. HASEGAWA, PRESIDENT AND CEO
CLIFTON M. HASEGAWA & ASSOCIATES, LLC
ON
HR 113; HCR 153; SR 45; SR 93
THE HONORABLE DONNA MERCHADO KIM, PRESIDENT OF THE SENATE;
SENATOR WILL ESPERO, CHAIR, SENATE COMMITTEE ON PUBLIC SAFETY, INTERGOVERNMENTAL AND
MILITARY AFFAIRS; SENATOR ROSALYN H. BAKER, VICE CHAIR, AND MEMBERS OF THE COMMITTEE;
SENATOR J. KALANI ENGLISH, CHAIR, SENATE COMMITTEE ON TRANSPORTATION AND INTERNATIONAL
AFFAIRS; SENATOR DONOVAN M. DELA CRUZ, VICE CHAIR, AND MEMBERS OF THE COMMITTEE;
SENATOR DAVID IGE, CHAIR, SENATE COMMITTEE ON WAYS AND MEANS;

2. SENATOR MICHELLE N. KIDANI, VICE CHAIR, AND MEMBERS OF THE COMMITTEE ON WAYS AND MEANS.
MR. JOE SOUKI, SPEAKER OF THE HOUSE OF REPRESENTATIVES;
REPRESENTATIVE ANGUS L.K. MCKELVEY, CHAIR, HOUSE COMMITTEE ON CONSUMER PROTECTION &
COMMERCE; REPRESENATIVE DEREK S.K. KAWAKAMI, VICE CHAIR, AND MEMBERS OF THE COMMITTEE;
REPRESENTATIVE SYLVIA LUKE, CHAIR, HOUSE COMMITTEE ON FINANCE; REPRESENTATIVE AARON LING
JOHANSON, VICE CHAIR; REPRESENATIVE SCOTT Y. NISHIMOTO, VICE CHAIR, AND MEMBERS OF THE
COMMITTEE;
REPRESENTATIVE RYAN L. YAMANE, CHAIR, HOUSE COMMITTEE ON TRANSPORTATION;
REPRESENTATIVE GREGG TAKAYAMA, VICE CHAIR, AND MEMBERS OF THE COMMITTEE.
RELATING TO: HR 113; H.C.R. 153; SR 45; SR 93
DESCRIPTION: Requesting Congress to Exempt Hawaii (Joined by Puerto Rico And Alaska) from the U.S.
Build Requirement of the Jones Act for Large Ocean Going Ships.
POSITION: I oppose HR 113, HCR 153, SR 45, and SR 93 as a measure requesting Congress to EXEMPT
Hawaii from the U.S. Build Requirements of the Jones Act for large ocean going ships.
FULL EXEMPTION FROM THE JONES ACT
The Honorable Pedro R. Pierluisi House of Representatives, Commissioner, Commonwealth of Puerto
Rico, requested the United States Government Accountability Office (GAO) examine the effect of the
Jones Act1
on coastwise domestic shipping to Puerto Rico - an exemption for Puerto Rico from the Jones
Act in its entirety, allowing foreign carriers to provide service between the United States and Puerto
Rico, and for an exemption from the U.S.-build requirement of the Jones Act to allowing U.S. carriers to
use foreign-built vessels.2,3
1
Section 27 of the Merchant Marine Act of 1920, Pub. L. No. 66-261, 41 Stat. 988, 999
(1920) (codified as amended at 46 U.S.C. § 55102).
2
Matson lists 4 Foreign-Flagged Vessels in its inventory: M/V Olomana, M/V Liloa, M/V Imua, and M/V
Mana. Source: Matson Form 10-K Annual Report. Filed - February 28, 2014.
http://investor.matson.com/secfiling.cfm?filingID=1104659-14-14819&CIK=3453

3. Excerpts from: GAO Report (GAO-13-260, Puerto Rico) - PUERTO RICO - Characteristics of the Island’s
Maritime Trade and Potential Effects of Modifying the Jones Act - Report to Congressional Requesters.
“Freight rates are set based on a host of supply and demand factors in the market, some of which are
affected directly or indirectly by Jones Act requirements. However, because so many other factors
besides the Jones Act affect rates, it is difficult to isolate the exact extent to which freight rates between
the United States and Puerto Rico are affected by the Jones Act. The Puerto Rico trade, much like the
maritime cargo trade around the world, has been affected by reduced demand overall because of the
recession.
Operating costs for carriers are another supply factor that contributes to the determination of freight
rates. Most of the carriers’ operating costs (about 69 percent based on carrier data for 2011) are non-
vessel operating costs, including such things as terminal and port costs, among others—and are not
directly affected by Jones Act requirements, and would be similarly borne by any carrier operating
between the United States and Puerto Rico. Vessel operating costs (which include crew costs,
insurance, maintenance and repair, and fuel costs, among others) comprise about 31 percent of the
carriers’ operating costs on average. Some vessel operating costs are affected by rules and regulations
related to the Jones Act and operating under the U.S. flag. Most significantly, Jones Act carriers must
hire predominantly U.S.-citizen crews, and according to data provided by the major Jones Act carriers,
crew costs in this trade represented an average of about 20 percent of vessel operating costs in 2011.
According to MARAD [U.S. Department of Transportation, Maritime Administration], the standard of
living in the United States, labor agreements negotiated with mariner unions, benefits included in
overall compensation, and government manning requirements, all affect crew costs.
In addition, U.S.-flag vessels are subject to government safety inspections and vessels have to comply
with a variety of construction, safety, and environmental regulatory requirements, which affect their
costs. According to the MARAD report, the lack of government safety inspections of foreign-flag vessels
operating under open registries helps provide such vessels with increased operating flexibility and lower
operating costs.
Another factor that could have affected freight rates in the past was conduct by certain carriers that led
to a Department of Justice antitrust investigation. The investigation found that some Jones Act carriers
conspired to fix rates at least as early as May 2002 until at least April 2008.
In addition, with respect to a class action lawsuit against various Jones Act carriers, in August 2011, the
United States District Court for the District of Puerto Rico granted final approval of settlement
agreements. The settlement terms give class action members the option of freezing the base rates—not
including other charges or fees, such as fuel surcharges—of any shipping contract that exists with three
of the Jones Act carrier defendants for a period of 2 years.
3
Other U.S. carriers, in the Hawaii trade lane, utilize Foreign-Flagged Vessels. Some vessels classified as
U.S. Flag Vessels may be misclassified.

4. The nature of the service provided between Puerto Rico and the United States could also be affected
by a full exemption from the Jones Act. In particular, foreign carriers that currently serve Puerto Rico
as part of a multiple-stop trade route would likely continue this model to accommodate other shipping
routes to and from other Caribbean destinations or world markets rather than provide dedicated service
between the United States and Puerto Rico, as the current Jones Act carriers provide. If this were to
occur, some stakeholders expressed concerns about the effect that such an altered shipping service
would have on the reliability of service to and from the United States.
The Surface Transportation Board (STB) has regulatory oversight of certain domestic shipping-freight
rates, including noncontiguous ocean shipping freight rate matters, and Jones Act carriers are required
to file tariff rates with STB as well as terms and conditions of contracts they execute with shippers.4
Foreign maritime carriers operating in the United States come under the jurisdiction of the Federal
Maritime Commission (FMC), which exercises regulatory oversight of foreign trade, and requires
common carriers involved in foreign-U.S. trade to file tariffs and service agreements. Section 7 of the
Shipping Act of 1984, as amended, exempts agreements between foreign common carriers from U.S.
antitrust law so long as the carriers file with FMC, and allows foreign carriers to discuss and set rates and
service terms and conditions.”5
[Emphasis and Clarification Supplied]
Source: GAO-13-260, Puerto Rico. http://www.gao.gov/assets/660/653046.pdf
On January 09, 2014, The Hawaii Free Press published my letter to the Legislature - Agenda Item for
2014 Legislative Session – Noncontiguous Trades Jones Act Reform (NTJAR) proposed by the Hawaii
Shippers Council.
http://www.hawaiifreepress.com/ArticlesMain/tabid/56/ID/11567/Jones-Act-Reform-Should-be-
onLegislative-Agenda.aspx
4
Carriers providing transportation or service in noncontiguous domestic trade, such as Jones Act
carriers, are required by statute and associated regulations to file tariffs showing their rates and service
terms and joint rates that they establish with other carriers including motor carriers, water carriers, and
freight forwarders. STB has the authority to determine the “reasonableness” of a rate for a movement
by or with a water carrier in noncontiguous domestic trade, among other things. A complaint can be
filed with STB that a rate, classification, rule, or practice in noncontiguous domestic trade violates the
requirements related to transportation or service provided by a carrier subject to this jurisdiction. See
49 U.S.C. Chapter 137.
5
See Pub. L. No. 98-237, 98 Stat. 73 (codified at 46 U.S.C. § 40307). Under this exemption, antitrust
immunity is not, however, extended to such agreements relating to transportation within the United
States.

5. The operative word in my request, published by the Hawaii Free Press, as distinguished from HR 113,
HCR 153, SR 45, and SR 93 is “REFORM” and not “EMEMPTION”.
Case in point,
Regional Domestic Contract (RDC)-6 - HTC711-13-R-W001 – Awarded on December 20, 2013 – Ceiling:
$265,000,000.00 ($265 Million) – Contracting Office: United States Transportation Command, Scott
AFB, Illinois 62225.
“This contract is to provide domestic ocean cargo transportation and distribution services using ocean
common or contract carriers, as defined in the Shipping Act of 1984, offering regularly scheduled
commercial liner service for requirements that may arise. Scope of services for this contract is
provided in accordance with the Jones Act. In accordance with the Cargo Preference Act and Jones
Act, all goods transported by water between US ports are carried by US flag ships, constructed in the
US, owned by US citizens, and crewed by US citizens, and US permanent residents.”
HTC711-14-D-W002
Alaska Marine Lines
5615 West Marginal Way SW
Seattle, WA 98106
$2,757,163.00 EST
HTC711-14-D-W003
Crimson Shipping Company
150 Viaduct Road
Chickasaw, AL 36611
$300,000.00 EST
HTC711-14-D-W004
Crowley Puerto Rico Services
2121 Eisenhower Avenue Ste 100
Alexandria, VA 22314
$1,510,666.00 EST
HTC711-14-D-W005
Horizon Lines, LLC
4064 Colony Road Ste 200
Charlotte, NC 28211
$3,078,928.00 EST
HTC711-14-D-W006
Matson Navigation Company, Inc.
555 12th Street
Oakland, CA 94607
$27,292,829.00 EST

6. HTC711-14-D-W007
National Shipping of America
433 California Street #820
San Francisco, CA 94104
$300,000.00 EST
HTC711-14-D-W009
Pasha Hawaii Transport
5725 Paradise Drive Ste 1000
Corte Madera, CA 94925
$5,208,707.00 EST
HTC711-14-D-W011
Sea Star Lines, Inc.
10550 Deerwood Park Blvd Ste 509
Jacksonville, FL 32256
$7,342,931.00 EST
HTC711-14-D-W008
Northland Services, Inc.
4025 Delridge Way SW Ste 100
Seattle, WA 98106
$1,614,364.00 EST
HTC711-14-D-W010
Dome Chartering & Trading Corp.
Doing Business as Schuyler Navigation Company
100 Severn Avenue Ste 103
Annapolis, MD 21403
$300,000.00 EST
HTC711-14-D-W012
Totem Ocean Trailer Express
32001 32nd Avenue South Ste 100
Federal Way, WA 98001
$15,421,735.00 EST
HTC711-14-D-W013
Trailer Bridge, Inc.
10405 New Berlin Road East
Jacksonville, FL 32226
$2,372,276.00 EST
HTC711-14-D-W014
Young Brothers Limited
1331 N. Nimitz Highway
Honolulu, HI 96817
$3,606,885.00 EST

7. CONCLUSION
I support the Jones Act. As a proactive subscriber to innovation, I believe that an examination of the
Jones Act is essential to build on our past and to secure our future. Reform is my preference. An
Exemption to U.S. Build requirement of Jones Act requirement and exemptions to the Jones Act as
provided in the Resolutions are not in my belief in the best interest of the Nation, our Homeland
Security, our National Defense, the Shipping and Maritime Industry, the State of Hawaii, our Soldiers and
Military organizations, the Residents and Businesses of the State of Hawaii.
Thank you for the opportunity to share my thoughts with you.
Sincerely,
Electronically Signed
Clifton M. Hasegawa, President and CEO
Clifton M. Hasegawa & Associates, LLC
1044 Kilani Avenue 12
Wahiawa, Hawaii 96786-2243
Telephone: 1-808-463-1057
Email: clifhasegawa@gmail.com
Internet: http://www.linkedin.com/in/cliftonhasegawa