The toll: How a century-old maritime law became a private tax on the island America says it cannot live without

By Samuel S. Kim

Sometime in the last year, a gallon of milk on Guam crossed $12. Rep. James Moylan, the island’s non-voting delegate to the House of Representatives, has cited that figure in congressional hearings, at think-tank panels, and in conversations with colleagues from mainland districts where the same gallon costs closer to $3.50. The colleagues, he has noted, tend to receive this with the expression of people confronting a fact they would prefer were false.

They should believe it. Nearly everything on Guam arrives by ship. The island is 30 miles long, sits nearly 3,800 miles west of Hawaii, and produces very little of what it consumes. A near-monopoly on the trans-Pacific crossing pushes its premium into the price of groceries, fuel, building materials and medicine.

A 1996 study commissioned by the government of Guam found that residents were paying at least $1,139 per year above fair-market shipping rates—worth approximately $2,300 today, or roughly 4 percent of the island’s median household income. That premium is not a tariff collected by the government for any public purpose. It flows, under federal law, to a small number of protected private companies. The law is called the Merchant Marine Act of 1920. Most people know it, when they know it at all, as the Jones Act.

Sen. Wesley Jones of Washington had defensible intentions. The year was 1920, and the world had recently demonstrated what happened to a maritime nation that could not supply itself. The law he proposed required that any goods moved between American ports travel on ships that were built, flagged, owned and crewed in the United States—a domestic merchant fleet capable of sustaining the country through another war.

England had maintained similar rules under its Navigation Acts since the seventeenth century before repealing them in 1849, having concluded they had long outlived their purpose. The United States, characteristically, took the longer view.

The Jones Act has now been in force for over a century. In that time, the fleet it governs has contracted from around 250 ships in the 1980s to fewer than 100 today. The American commercial shipbuilding industry now accounts for approximately 0.2 percent of worldwide ship production.

Fewer than 30 of the world’s 6,000-plus container ships comply with the law, meaning more than 99 percent of global container capacity is legally barred from moving goods between American ports. The law meant to protect American maritime power has presided over its quiet contraction over 10 decades, while ensuring that the few carriers still operating under its terms face no meaningful competition in the most captive markets within American territory.

One of those markets is Guam.

In fiscal year 2022, the Department of Defense spent approximately $2.5 billion on the island, roughly 41 percent of Guam’s entire GDP. In 2023, the Pentagon committed to an additional $7.3 billion for military construction over five years, including a dedicated integrated missile defense system.

Andersen Air Force Base and Naval Base Guam anchor the island’s strategic profile; thousands of Marines are relocating there from Okinawa; and Guam stands, in the language of military planners, at the forward edge of American power in the Indo-Pacific.

In 2015, China unveiled the DF-26 ballistic missile, with a range exceeding 3,000 miles, nicknamed the “Guam killer” for the installations it is designed to reach. In May 2023, Beijing reportedly launched a cyberattack targeting the island’s critical infrastructure directly.⁸

The United States, in other words, has decided that Guam is strategically indispensable. According to the 2020 U.S. Census, more than one in five of its residents lives below the poverty line.

The connection is not incidental. The Jones Act is a meaningful part of the mechanism linking these two facts. Matson, one of two carriers serving the Guam route, builds its ships domestically as the law requires; its newest vessels cost $209 million each, against an estimate that comparable foreign-built ships would cost roughly one-fifth as much.

Operating costs for Jones Act carriers run approximately three times higher than those of internationally flagged competitors. When Horizon Lines, Matson’s only direct competitor on the Guam route, withdrew from the trade in late 2011, Matson’s Guam-bound cargo volume jumped 94 percent in a single quarter. That is what a captive market looks like from the inside—and has looked like for decades.

Guam does hold a partial exemption from the Jones Act: ships serving the island are not required to be American-built, a carve-out in place since 1912, predating the law itself. In practice, it is hollow. The natural shipping lane from California to Guam runs through Hawaii, which is subject to the full Jones Act, and any carrier hoping to operate a viable trans-Pacific route needs the Hawaii call.

Guam’s own legislature has voted to support exempting Hawaii from the Jones Act—not as a favor to its neighbor, but because Guam cannot benefit from its own carve-out while Hawaii remains fully encumbered. As Guam Senator Frank Blas Jr. put it, the existing exemption “has very little effect on our shipping costs.”

Moylan and Rep. Ed Case of Hawaii have introduced a bipartisan package targeting non-contiguous jurisdictions, creating competitive exceptions, benchmarking rates against international comparables, allowing vessels from treaty allies to qualify under modified American standards. Versions of this effort have been reintroduced since at least 2010. None has passed.

The reason is not mysterious. It is the ordinary arithmetic of concentrated benefits and dispersed costs. A handful of shipping companies earn substantially more per voyage because of the Jones Act. Maritime unions, shipbuilders’ associations, and personal injury lawyers who profit from the law’s separate provisions for injured seamen have organized, with patience and sophistication, to protect the arrangement. Their lobbyists court newly elected members of Congress with framing built around patriotism: American goods, American ships, American crews. They contribute millions to congressional campaigns.

After Hurricane Maria devastated Puerto Rico in 2017, the administration initially refused to grant an emergency waiver; the president himself told reporters that “a lot of people that work in the shipping industry don’t want the Jones Act lifted.” A waiver was eventually granted for 10 days.

The political logic is plain: opposing the Jones Act offers little reward to those in office. There is no constituency mobilized, no check written, only the satisfaction of doing right by people who cannot vote in the elections that matter.

That last fact is also, perhaps, the key to the whole puzzle. The American citizens most harmed by the Jones Act—in Guam, Puerto Rico, the U.S. Virgin Islands, American Samoa and the Northern Mariana Islands—cannot vote for president. Guam’s tax code mirrors the U.S. Internal Revenue Code; its residents pay taxes under the same federal rules that apply in the fifty states, including Social Security contributions, yet they have no vote in the Congress that writes those rules. Their sole representation in Washington is a delegate who cannot vote on final passage of legislation.

The current administration is discussing the acquisition of new territories, with Greenland receiving the most prominent attention. Whatever the merit of those discussions, they might usefully be preceded by a candid look at how the United States treats the territories it already holds. Greenland’s residents hold full Danish citizenship with voting representation in the Danish parliament. For the people of Guam, no such standing exists. In December 2017, the United Nations General Assembly voted on a resolution affirming Guam’s right to self-determination. Ninety-three nations voted in favor. The United States was among the eight that voted against.²¹

That is the arrangement: an island the Pentagon calls indispensable to American security, where one in five residents lives in poverty, whose shipping costs are governed by a century-old law that serves the interests of a handful of mainland companies, and whose people have no vote in the Congress that maintains it. The twelve-dollar gallon of milk is not a curiosity. It is a summary.

Samuel S. Kim is a senior technology leader with more than 20 years of experience spanning software engineering to executive oversight. He founded and scaled a 60-person R&D division in Seoul, achieving national recognition, including a Presidential Award for Excellence in Workplace Culture (2022). He holds a BA in Economics from UCLA and currently resides on Guam with his family. He can be reached at sk102.co.

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