New Legislation Casts Doubt on Future of Administrative Jones Act Waivers

by Colin Grabow, Cato, January, 2021

Earlier this month Congress passed the National Defense Authorization Act (NDAA)—and pro‐Jones Act special interests are elated. Regular Americans, however, may be less enthused. Buried deep within the bill—on page 1010 to be exact—is language that significantly pares back the executive branch’s ability to temporarily waive the 100‐​year‐​old law restricting domestic waterborne transport to vessels that are U.S.-registered, U.S.-built and mostly U.S.-owned and crewed.

Such waivers are perhaps best known for their use in recent decades to speed relief following natural disasters. After Puerto Rico was hit by Hurricane Maria in 2017, for example, the Trump administration waived the law for ten days so that foreign ships could transport supplies from U.S. ports to the beleaguered island. Other uses of this waiver authority include permitting non‐​Jones Act vessels to deliver petroleum products in the wake of Hurricanes Katrina (2005) and Sandy (2013). Expanding the universe of vessels allowed to deliver supplies not only saves money but, more importantly, time. Vessels closest to the disaster scene and best prepared to quickly provide relief are not always those that comply with the Jones Act’s restrictions.

But the use of administrative waivers in such disaster scenarios has now been cast in serious doubt.

Rather than allowing for Jones Act waivers deemed “necessary in the interest of national defense” as was previously the case, the NDAA limits such suspensions of the law to those viewed as “necessary in the interest of national defense to address an immediate adverse effect on military operations” (emphasis mine). The provision of assistance to Americans imperiled by natural disaster seems unlikely to qualify. In fact, it’s not clear that the vast majority of administrative waivers issued over the last 20 years would have met this new standard.

That Jones Act supporters made the limiting of such waivers a legislative priority isn’t surprising. While most Americans were searching for ways to help Puerto Rico in 2017 following Hurricane Maria, backers of the law hastily arranged a Capitol Hill “listening session” at which industry insiders and members of Congress implored President Trump not to waive the Jones Act. And in 2019 when news surfaced that President Trump was considering a long‐​term Jones Act waiver to provide Americans expanded access to domestically produced liquefied natural gas (LNG), the law’s supporters quickly mobilized to halt the measure.

Such vociferous opposition is curious given the limited or non‐​existent downside of these temporary and infrequent waivers for the domestic maritime industry. In the aftermath of Hurricane Maria, for example, U.S. vessels experienced no shortage of demand for the transportation of goods to Puerto Rico, while the proposed LNG waiver would have had no impact at all given that bulk transport of the fuel is not a service offered by Jones Act‐​qualified ships.

Nevertheless, allowing Americans access to foreign ships for domestic transport—even in emergency situations such as natural disasters—is something Jones Act supporters apparently cannot abide. This may be explained by the fact that waivers provide transparency into the cost savings and possibilities that could be unlocked through the domestic use of foreign ships. And that, in the minds of Jones Act supporters, appears intolerable.

The U.S. maritime industry may count the NDAA as a legislative win, but for the rest of the country it’s a very clear loss.