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White House studies permanent Jones Act waiver for Puerto Rico: sources

The Trump White House is studying the feasibility of a permanent Jones Act waiver for Puerto Rico, according to multiple sources.

A working group of Trump administration officials are studying the issue, but there is no clear time line for the study’s release, according to administration sources.

It is also unclear if the Trump administration would lift Jones Act requirements for Puerto Rico even if the study recommends doing so, sources said.

“I don’t think they’d be able to do it without legislation,” according to one source familiar with the group’s work.

One issue the group is grappling with is how to justify a waiver for Puerto Rico while keeping Jones Act requirements for other US ports, such as Hawaii, sources said.

Sources discussed the study on the condition of anonymity.

The Jones Act, a nearly 100-year-old law, requires vessels transporting goods between US ports to be US-flagged, US-built and majority US-owned.

A Jones Act waiver requires either a request from the Department of Defense or a finding from the US Maritime Administration that there is a shortage of Jones Act-compliant vessels. The Homeland Security secretary must declare that such a waiver is in the interest of national defense before issuing one.

One source said that, without finding a permanent waiver in the interest of national defense, the Trump administration appears unable to issue such a waiver without congressional support.

In response to the impact of Hurricane Maria, the Trump administration September 28 issued a Jones Act waiver for fuel and other goods shipped to Puerto Rico, but declined to extend it after it expired 10 days later.

The waiver came amid intense public pressure to waive Jones Act requirements, but also faced criticism from the US maritime industry that such a waiver could weaken the law.

Despite a brief Department of Defense statement that the September 28 waiver for Puerto Rico was in the “interest of national defense,” administration officials said at the time that the waiver was proactive and likely not necessary.

Due to Jones Act requirements, shipping costs to Puerto Rico from the US may be roughly twice as much as shipments from the US to other Caribbean islands, according to a 2014 Federal Reserve Bank of New York report. Shipping a container from the US East Coast to Puerto Rico cost $3,063, but cost $1,504 to ship the same container to the Dominican Republic and $1,607 to ship to Kingston, Jamaica, according to the report.

Jones Act tankers have seen a recent increase in demand, in particular from US Gulf Coast terminals to Delaware Bay refineries, Sam Norton, the CEO of Overseas Shipholding Group, said during an earnings call Friday.

On September 28, Senators John McCain, Republican-Arizona, and Mike Lee, Republican-Utah, introduced a bill to permanently exempt Puerto Rico from the Jones Act, but the bill has generated no public support from Senate leaders.

Any change to the Jones Act is likely to receive staunch opposition from the domestic maritime industry and both Republicans and Democrats in Congress.

In a statement Monday, the American Maritime Partnership argued that a Jones Act waiver for Puerto Rico was unnecessary.

Jones Act carriers “have provided regular, dedicated service to Puerto Rico for decades, assuring a vital and cost-effective transportation link between the US mainland and Puerto Rico,” the maritime trade group said.

About two-thirds of vessels that call on the Port of San Juan are foreign-flagged, “demonstrating the Jones Act does not interfere with international trade,” the group said.
Source: Platts

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