Babauta’s shipping initiative sets stage for Saipan to overtake Guam in regional distribution economy

The CNMI may replace Guam as the region’s transshipment and fuel-holding center, if an initiative Sen. Celina Roberto Babauta is pushing with federal agencies succeeds. The senator is in Hawaii now, on a federally-funded trip, arranging and coordinating federal agency assistance for the CNMI finally to utilize among its most powerful and unique tools in its Covenant: the Commonwealth’s Jones Act exemption.

The Jones Act, in a nutshell, prohibits foreign-made ships from transporting cargo from one U.S. port to another. The 1920 protectionist-era federal law, created without regard for the economic interests of U.S. territories (including the then-territories of Alaska and Hawaii), is the primary cause of high prices on Guam and into the region.

Prices throughout the region are more expensive because goods and fuel call on and are stored on Guam before being distributed to the CNMI and the other islands of Micronesia.

The CNMI, however, does not have this prohibition. Therefore, foreign-made ships can, for example, leave the port of Busan, Korea full of goods to drop in Los Angeles, pick up cargo in LA, then drop off goods from both Korea and the U.S. in Saipan on the way back to Korea.

The senator met with Vince Mantero, Director of Ports and Waterways Planning from the Maritime Administration (MARAD), to maximize the CNMI’s Jones Act waiver under the Covenant.

“This will eventually lead to having inter-island ferry service between Saipan, Tinian, Rota and Guam in the very near future,” Ms. Babauta said.

And that’s where the opportunities will carry Saipan to become the hub of the Western Pacific, according to sources within the shipping and construction industries on Guam.

“When you think about it, why would big companies operating in the region continue to ship their products to Apra Harbor on Guam, when they can ship it for much cheaper to Saipan, stage it there for distribution, and then distribute through ferry service, as needed?” one of the shipping executives told Kandit.

“I am confident we will have inter-island ferry service, where people can bring on board their vehicles when traveling to Saipan, Tinian or Rota,” Ms. Babauta said. The inter-island transshipment of goods – where shippers offload goods at the port of Saipan first – will lead, she said, to sharp reductions in costs of imports: groceries, construction supplies and equipment, household items, clothes, etc.

But the opportunities don’t stop there. The region’s major fuel suppliers, who currently stage the fuel on Guam, also will have an incentive to move the storage facilities to Saipan, if Ms. Babauta’s vision is implemented. Such a feat would drive down the cost of gas at the pumps throughout the CNMI.

The Babauta effort is a few steps past the vision stage, with the availability of $800,000 in federal funds for a feasibility study of the  inter-island ferry service (Saipan, Tinian, Rota, Guam). On this trip, Ms. Babauta has propelled the planning further by engaging with MARAD regarding bureaucrat-level disagreements about the Covenant’s language on the Jones Act.

“Recently we received Federal Highway designation, not only around Saipan, Tinian, Rota and Guam, but also between the islands,” Ms. Babauta said. “That’s why an inter-island ferry will be possible between the Marianas.”

“As a result of these direct interactions with our federal grantors, they provide direct technical assistance with funding opportunities,” she said. “Also, I have met with and invited the Army Corps of Engineers to come to Saipan for much-needed technical assistance. They are expected to be in the CNMI for about two weeks.”


  • OMG. I knew it was just a matter of time before the CNMI beat the door down and exercised that exemption to the Jones Act. Man, if that goes through…winner, winner, chicken dinner.

  • Mabel Doge Luhan

      05/12/2023 at 10:39 PM

    For once, an actual good idea based on reality, not a childish pipe dream or planned heist.

    Potential problems:

    1. Politically, Matson and other interested parties will lobby to remove the CNMI’s exemption, or to give Guam the same exemption.

    1a. Investments in infrastructure necessary to become a shipping hub take many years to pay off. How can shipping companies be sure that we’ll maintain this statutory advantage over Guam? That loophole can disappear overnight, especially when there will be intense lobbying.

    2. Shipping hubs are, like hookup apps, as valuable as they have others already using them. It’s hard selling a shipping hub that’s uncrowded, because crowded is what everyone wants. It’s more valuable the more popular it is. It’s hard to be new, for a variety of reasons.

    3. Becoming a shipping hub doesn’t do much for economic development or even jobs. Yes, they need to hire a few dock workers, but it’s not going to be economic salvation. Cargo on container ships doesn’t spend money.

    4. There’s some potential for a garment/Abramoff-style scandal, as non-US-flagged ships are full of labor and environmental abuses. The CNMI will be accused of sneaking that stuff in under the US flag, just like in the garment days.

  • While what is expressed in this article is all good in theory, this in practice would have to overcome a multitude of problems.
    The very first thing that would have to be done would to get rid and replace the complete CPA Board and others within CPA and replace them with actual qualified educated, experienced people from this field. In all probability these people would have to be brought in from off island and this would create another problem as few if any would work for anything connected with this Govt. due to a very bad reputation. (look at CUC attempts at hiring mandated qualified individuals)

    The other problem as far as fuel storage and cargo would be two fold. First would be the present oil companies, doubtful they would co-operate with this as it would cut down on their profits especially, as in the past, other oil companies attempts at coming inside and CPA and local Govt was bought off by the local oil companies.

    The other big problem all around would involving cargo and fuel would be the actual space available for such an actual real time operation as such expressed and the ability of this Govt. actual be posatively engaged and it’s involvement along with the current rip off of the existing stevedore companies which again would drive the prices up to current levels or higher.

    The other area is the ferry service between the island transporting vehicles on a regular service such as has been proposed in the past. It would be cost prohibitive to the average person for example that would like to take his vehicle to Guam or Rota etc. to spend a couple of days. At one time such a proposal was quoted as around $150+ a trip for average vehicle.

    As far as business goes transporting materials on a loaded truck etc. that may prove workable price wise but not sustainable for a ferry operation, again due to the customer base.
    The biggest problem all goes back to the customer base and demand (lack of) in regards to the ferry service.
    Even Hawaii has not been able to make this work after multiple attempts over the years.
    The last I heard Hawaii only has the small ferry daily between Maui and Lanai transporting workers which is also subsidized by a Lanai business.
    Even the two ferries between Tinian and Saipan was running at a loss and was unsustainable.

    Then in all of this concerning ferries you would have the environmentalists that stopped the last attempt at a ferry between Sugar dock and Tinian.
    Then add add environmental study and other Gov interference, both Fed and local Govt. along with the total incompetence of others Govt. employees and boards etc. (plus the local politico “shakedown” for any new business.

    • John Camacho

        05/13/2023 at 7:25 PM

      These are all good points to consider. I think the issue with fuel storage is literally who owns the fuel lines here (which is mobile). Not certain but I’m thinking that if ships dock here and unload fuel for storage they use the mobile fuel lines to get the fuel off ships into storage facilities (see EPA requirements).. but since it is their fuel lines they can charge whatever they want for the use of them.

      The practicality of using their lines to bring down prices on a commodity they sell is pretty slim.

      Additionally the concept of storage/staging as a commodity reduction effort is novel because shipping is only really reduced when there are outbound exports that leave so shipping lines are not running empty. Staging commodities for mean a foreign flagged vessel would drop off the commodity for staging and then could move on… but if there are not exports to replace the cargo that was dropped off… they shipping line is just making an extra stop with no financial incentive.

      If a Korean flagged vessel stopped in Saipan, dropped of commodities for staging.. then picked up export cargo to then trans-ship to its final destination of Laos Angeles.. then their would be a financial incentive to stop in Saipan.. but without exports it makes no sense. If you look at the garment days… the exports of the finished products is what made the model work and reduced the cost of all commodities.

      • On the fuel issue, I was thinking along the lines from an example from the past when an RFP was put out for a fuel supplier to contract for CUC from decades past.

        From my bad memory there was at least one a suppler that had offered a substantial cheaper price but was contingent on building a storage facility, in short that was denied.
        At the time there was “rumors” that Mobile was involved in this being denied by CPA.
        I would be willing to bet if any area close to the port would be made available and open for bid that there would be many applicants that would be willing to come in and set up as another own fuel storage facilities source, along with also building gas stations to supply fuel to the populace and also CUC and in all probability even onward to Guam.
        This is needed to break the monopoly that Shell and Mobile have in this area.

        In the past, In many areas around Asia, there are so many new independent non branded gas station that continue to be built that sell gas and diesel at a substantially lower price even as these smaller companies buy from the larger companies that have their own refineries.
        On the whole petroleum prices are also adjusted weekly at the pumps in these areas with the non-branded companies substantially lower prices per liter. Also in the cities all the fuel is much higher priced by the branded companies than in the rural areas, reportedly, due to the larger population and higher demand.

        This even as Shell oil post more than double profits at over $40bill from the previous year of $19 bill..

        BTW, many years past, in Hawaii as there was almost all private family owned gas stations that were in essence “franchised” and carried branded oil company signage and products.
        Eventually over the years the EPA and state (backed by the oil companies) changed much regulation that it made it cost prohibitive for these small operation to comply.
        The major oil companies came and bought or leased the locations and built new facilities, to pump your own gas (along with small stores) to distribute their brand.
        Until today, from my knowledge, there are still no independent gas stations in the Hawaiian Islands.

        On outbound cargo, it is doubtful if those in this fray have thought about that unless they are thinking about Saipan as being a “distribution hub”, but then is all comes back to infrastructure as you mentioned.
        Again from bad memory, years past, at one time the port was over run with empty shipping containers after the exit of the garment factories. I do not know the situation today on what, if any, exports to fill those empty containers being dropped containing products for local consumption .

  • Jonathan Camacho

      05/13/2023 at 7:09 PM

    This is a well conceived approach, however the practicality is stifled by issues of infrastructure. The ports are probably not equipped with the required infrastructure necessary to bring this vision to reality in the next decade. While there may be funding for studies and technical assistance, there is no money for actual infrastructure development. If you are looking at inter-island ferry service, the issue becomes infrastructure at even smaller ports. The military wouldn’t even put up money for the Tinian breakwater rather they use their roll-offs when doing training exercises there….also you may want to check out previous studies already done by the army corp done within the last five years. Also, WSP is currently doing a CPA study on port master planning which obviously considers the Jones-Act.

    Again, this is not a new concept and dates back to the 2009 CEDS. I applaud the Senator for her efforts. I would recommend that she stray away from the executive functions of development and adhere to her Senatorial function of developing the framework necessary to bring this to fruition.

  • I think she just wants to make herself look good, whatever lady just pay attention to your island and just leave us out of your drama…

  • Alan San Nicolas

      05/14/2023 at 9:17 AM

    Maseha hafa na setbisio u ma chogue, na siguru na para I minaolek todu. Mungnga hit na I riku po sen riku ya I man takpapa po ma fa saosao addeng. ESTA I OTRU BIRADA AFAÑELOS

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