The US decision to waive domestic shipping requirements under the Jones Act until at least mid-August is prompting shippers to favor foreign-flagged vessels for US-to-US trips, even when Jones Act compliant vessels are available, according to shipping data reviewed by Argus.
The waiver was first issued on 17 March to help offset rising oil and refined products prices caused by the US-Israel war with Iran by easing movements between US ports. It was later extended by 90 days to 15 August by President Donald Trump. US independent refiners have made use of the waiver extensively, chartering more than 60 foreign-flagged vessels over the past two months for trips normally handled by one of the 92 ocean-going vessels, more than 150 sea-going articulated tug barges and thousands of smaller barges in the Jones Act-compliant fleet.
This is the first Jones Act waiver issued at the request of the Department of Defense (DoD) since the statute was amended in 2021 to require a finding that "there are insufficient qualified vessels to meet the needs of national defense without such a [DoD] waiver". But the official justification for this latest waiver has yet to be published, according to maritime law firm Reed Smith, even though most voyages carried out by foreign-flagged vessels likely had Jones Act-compliant tonnage nearby.
Out of 59 trips completed under the waiver as of 22 May, only 10 took place where no Jones Act vessels were available, according to data compiled by the American Maritime Partnership (AMP), which represent the US domestic maritime industry, using broker data. For the other 49 trips at least one Jones Act vessel was available, according to AMP data.
By contrast, US Maritime Administration (MARAD) data show shippers seeking foreign tonnage under the waiver citing a lack of Jones Act vessels available for these trips — a claim seemingly at odds with the AMP data. MARAD did not respond to a request for comment.
Some market participants told Argus that securing a Jones Act waiver can be surprisingly fast, with MARAD approval sometimes coming only 15 minutes after submitting the request. The quick turnaround suggests the administration's priority is to maintain steady US crude and refined products flow to help mitigate disruptions to oil markets caused by the Iran war, rather than ensuring US-flagged vessels are used first.
"This is the first time that the government has ever instituted a blanket waiver for all kinds of energy-related products, all ports and MARAD does not even have to call anybody and see if there's an equivalent Jones Act vessel available," Jones Act shipowner Centreline Logistics co-chief executive Jonathan Whitworth told Argus.
The Jones Act community initially showed little concern about the first waiver, in part because international freight rates for refined product tankers were already at a premium over comparable Jones Act vessel rates. That rare market configuration limited potential savings for shippers using the waiver and limited its use.
But international freight rates for product tankers have since eased, which has increased use of the waiver. The extension of the waiver through mid-August — and the possibility of a further extension — has sparked concern among Jones Act shipowners. One Jones Act operator told Argus it has lost two contracts so far due to the waiver. Jones Act shipments are typically handled on multi-year contracts, but established Jones Act participants may now dealy committing to new long-term deals to capture lower rates in the international spot market instead.
