The US domestic shipping community is calling for thorough reviews of Jones Act waiver requests due to concerns that the newest waiver extension gives the Department of Defense (DoD) final say on approvals, which shippers say could undermine the domestic maritime industry.
Jones Act-compliant shippers expressed disappointment that the waiver was extendedon 10 August and voiced concerns over the potential pitfalls of the new requirement that the Maritime Administration (MARAD), which supports the US merchant marine and the industry as a Department of Transportation agency, consult with DoD on vessel availability prior to issuing a Jones Act waiver. This would require shippers utilizing foreign tankers for shipments from one US port to another to demonstrate that no Jones Act-compliant ships were available for the shipment.
The US administration initially issued the Jones Act waiver — which allows foreign flagged and owned vessels to carry US-to-US shipments in place of just US-flagged, US-owned and US-crewed vessels as stipulated by the Jones Act — on 17 March on national security grounds under section 501a and later extended it by 90 days. But some of the voyages conducted under the waiver have been criticized by the domestic maritime industry as not serving any national security purpose. The waiver was issued to ensure US airfields and military installations are properly supplied with fuel during the period of the US conflict with Iran. But the waiver has also been highly popular with US refiners as it cuts their costs for moving crude and products from one US port to another.
Jennifer Carpenter, president of the American Maritime Partnership (AMP), a coalition of domestic maritime interests, urged President Donald Trump's administration to "conduct a rigorous review of the national defense justification for each and every waiver request and to carefully assess the availability of US vessels before allowing a foreign vessel to move cargo between US ports".
Most of the national defense justifications already provided by shippers under the ostensibly broader, existing Jones Act waiver have been generic statements copied across different shipments. Many simply allude to DoD as having issued the waiver, while 25 of the 217 shipments recorded so far by MARAD appear to have left a placeholder "[cargo]" in their national defense justification when describing the shipment itself.
"Any future waivers during this 90-day period must be strictly justified on a national security basis to safeguard this historic progress," Matthew Paxton, president of the Shipbuilders Council of America, told Argus.
"We've seen how exceptions to the Jones Act can be manipulated, and we've seen companies define their needs in ways that make available and capable US vessels appear unsuitable. A market-availability test is only meaningful if the government independently verifies the claims being made," Aaron Smith, president and chief executive of the Offshore Marine Service Association (OMSA), told Argus. "Without a rigorous and independent review, I believe this approach will function as a full waiver in all but name and further undermine the American maritime industry."
Doubts over MARAD consultations
The White House confirmed to Argus that the DoD will retain final authority in granting Jones Act waivers for individual trips, after consultation with MARAD on the availability of Jones Act vessels.
However, market participants are also concerned with MARAD's ability to conduct market availability tests. MARAD was still working to establish its vessel-operator contacts to assess available US-flagged capacity on 9 August, when it asked an industry group to help update its contact list and vessel information ahead of the administration's announcement, according to a person familiar with the matter.
The DoD will issue a waiver if it wants to, regardless of vessel availability, another person familiar with the matter told Argus.
The American Petroleum Institute, which represents natural gas and oil interests in the US, commended the Trump administration move to extend the Jones Act waivers.
