Interest in Jones Act waiver trips by foreign vessel owners has decreased since mid-August when the new case-by-case review process was implemented, according to people familiar with the matter.
The combination of increased scrutiny by the US Maritime Administration (MARAD), high international tanker rates and the clarification by US authorities that foreign vessels using the waiver would still be subject to US taxes, have lowered the use of Jones Act waivers by foreign shipowners.
The US administration initially waived the Jones Act — which allows only US-flagged, US-owned and US-crewed vessels to carry US-to-US shipments — on 17 March on national security grounds, opening up domestic shipping to foreign vessels. The waiver has since been extended twice, first in May and again in August, with some additional oversight. The current waiver extension is slated to expire on 15 November, and domestic maritime interests called on US president Donald Trump last week to not renew it.
The American Maritime Partnership (AMP) in its letter urging Trump to let the waiver lapse said increased review of waiver requests and the IRS clarifying that foreign vessels using Jones Act waivers would still be subject to US tax laws is reducing foreign vessel movement within US-US trades. A shipowner familiar with the matter told Argus that the tax issue was an important factor in preventing charterer interest in using spot foreign-flagged vessels for Jones Act trips.
Shipowners are also keen to capitalize on the higher rates in the current tanker market. They are looking to put their ships on time charters, to lock in historically high earnings, rather than book single spot market Jones Act trips, which is also contributing to fewer international vessels using the waiver, according to a Jones Act shipowner.
Case-by-case review process
Starting in mid-August, the Jones Act waiver switched from an automatic blanket waiver to a case-by-case review in which MARAD consulted with the domestic maritime community to assess the availability of domestic vessels to carry a cargo before deciding to approve or deny a request.
Out of 185 vessel availability requests sent by MARAD to the domestic maritime community since the start of the case-by-case review process, 41 requests were approved and 62 denied. The outcome of the remaining 79 requests is still pending, and an additional three requests were rescinded, according to a broker familiar with the matter.
In its letter to Trump last week, AMP called the switch to the new process a step in the right direction while still noting that the waiver threatens investment in American shipyards, the revitalization of which has championed by the Trump administration.
Denouncing the lack of transparency of the case-by-case waiver process, Aaron Smith, president of the Offshore Marine Service Association told Argus that going forward Jones Act waivers should only be made in a transparent manner and only when there is a true lack of US equipment and a genuine national defense need.
The White House did not respond to multiple requests for comments from Argus on whether the Jones Act waiver would be extended or allowed to lapse.
