Jones Act Waiver Extended By 90 Days

President Donald Trump’s administration announced another 90-day extension of the controversial waiver to the Jones Act, the long-standing law that restricts water shipments between U.S. ports to U.S-built, U.S.-crewed vessels, on August 10. The waiver was set to expire August 16, but a flurry of articles driven by hints and comments from administration figures strongly suggested it would be renewed before that deadline. The new waiver extension commences August 17.

The waivers have been strongly opposed by all maritime interests. Jennifer Carpenter, president and CEO of both the American Waterways Operators and the American Maritime Partnership, a coalition of maritime Jones Act supporters, said, “While AWO appreciates the dialogue with administration officials that led to changes to this waiver – including the requirement that the Department of War consult with the Maritime Administration on the availability of Jones Act-qualified vessels and a narrowing of the scope of commodities covered by the waiver – we are deeply disappointed that the waiver has been extended when the public record over the last five months makes clear that the waiver has not been driven by military needs (the statutory standard), has not reduced the price of gasoline for U.S. consumers and has allowed foreign vessels, including those linked to U.S. adversaries like China and Russia, to take work from Americans.

“Our work is not over; it now moves into a different phase: working with the Trump administration and Congress to ensure that any request by a foreign vessel to use the waiver is scrutinized carefully to ensure that it meets a legitimate national defense need that cannot be met by a qualified U.S. vessel, and that any foreign vessel carrying cargo in U.S. domestic commerce comply fully with all applicable U.S. tax, immigration, labor and environmental laws,” Carpenter continued.

The first waiver took effect March 17, under a national defense authority to address energy constraints linked to the war with Iran. The latest extension lengthens the total waiver period to 240 days, the longest episode since Congress set conditions for Jones Act waivers in 1950.

The Seafarers’ International Union said, “If the administration’s goal is to reduce costs for American families, it should pursue policies that directly address market conditions — not continue a waiver that has enriched foreign shipping interests, including Chinese- and Russian-owned vessels, at the expense of American workers and our domestic maritime industry. … The only thing this waiver has lowered is the amount of work available for American mariners. It has been a bonanza for foreign shipping interests and energy traders — not for the American consumer.”

‘New’ Conditions

Addressing maritime complaints that the original waivers were too sweeping and that vetting of voyages was lax, the renewed waiver restricts the scope of covered commodities to fuel blend stocks, diesel, gasoline, jet fuel, crude oil, fuel oil, gas oil, bunker fuel, liquefied petroleum gas, bitumen, pet coke, chemicals derived from petroleum or natural gas, liquefied natural gas, naphtha, soybean oil and fertilizers.

Additionally, the Internal Revenue Service issued guidance clarifying that foreign companies shipping cargoes between U.S. ports are not eligible for a specific tax exemption, which could add a significant cost to those trips. The IRS said these voyages do not qualify under the “international operation of ships” provision of Section 883 of the Internal Revenue Code, meaning they do not qualify for a gross income exclusion or treaty benefits related to the operation of ships in international traffic.

Media Coverage

Some news outlets have repeated that the waivers are meant to lower gas prices. However, impartial third parties have estimated that shipping waivers likely reduce gasoline prices by only a few pennies per gallon.

Regarding the waiver supporters’ claims that they have increased voyages, Aaron Smith, president and CEO of the Offshore Marine Service Association, retorted, “This waiver’s defenders can count the voyages. They cannot count the savings. The experiment has failed; outsourcing our jobs didn’t allow American families to pay less for fuel, and it is not a reason to keep American mariners on the beach.”