02-10-2017

The Jones Act gets famous, but will it be weakened?

Nearly a century after it became law, the Jones Act got its 15 minutes of fame this week.

“Please lift the #JonesAct,” comedian Patton Oswalt tweeted to his 4.2 million followers and President Donald Trump Wednesday. “Do something and help people for once. Right now, okay?”

“The Jones Act came after World War II,” CNN anchor Chris Cuomo said erroneously during a broadcast Wednesday in regards to the law dating back to 1920.

The New York Times editorial board on Monday said the Jones Act was “strangling” Puerto Rico’s economy and a day later the Wall Street Journal’s editorial board said the maritime law needed to be suspended because of the high price of energy and food shipments to the island.

Trump administration officials had spent much of the week making a case for why a Jones Act waiver for hurricane-ravaged Puerto Rico was both unnecessary and, potentially, in violation of the statute.

“The limitation is going to be port capacity to offload and transit, not vessel availability,” the Department of Homeland Security said in a statement Tuesday.

“Our hands are pretty much tied by the law,” David Lapan, a DHS spokesman, told S&P Global Platts Wednesday.

Trump even indicated Wednesday that a Jones Act waiver may be a heavy lift due to opposition from the US maritime industry and unnecessary since there were “a lot of ships out there right now.”

But by Thursday morning, the political pressure had apparently become deafening and the Trump administration issued a 10-day Jones Act waiver for all products shipped to the island, even as it acknowledged the waiver would likely do little to aid the disaster.

“It was just the right thing to do proactively,” said Thomas Bossert, Trump’s Homeland Security adviser, during a White House briefing Thursday.

“We live in a political world, and you cannot and should never discount the political realities,” US Representative John Garamendi, a California Democrat, told S&P Global Platts Friday. “The administration responded to the political whims.”

Related: Find more content about Trump’s administration in our news and analysis feature.

BROAD SUPPORT FOR ACT

Like most Republicans and Democrats in Congress, Garamendi is a major backer of the Jones Act. The law requires vessels transporting goods between US ports to be US-flagged, US-built and majority US-owned. Without it, Garamendi claims, the US maritime industry would cease to exist.

Garamendi, the top Democrat on the House of Representatives’ Coast Guard and Maritime Transportation subcommittee, said the waiver issued this week was unnecessary. There is no shortage of US-flagged vessels to serve Puerto Rico and it is not expected that there will be one, he said.

“It’s conceivable that at some point it might become necessary, but that appears to be absolutely not the case,” he said.

Representative Duncan Hunter, a California Republican and chairman of the subcommittee, also has questioned the reasoning behind the waiver.

“Waiving the Jones Act will do nothing to speed up much needed aid to Puerto Rico’s residents,” Hunter said in a statement. “I hope the administration will reconsider the facts and rescind its temporary waiver.”

Garamendi said he was unconcerned that the waiver for Puerto Rico will have any lasting impact on the Jones Act going forward, but Senator John McCain, an Arizona Republican and longtime critic of the maritime law, introduced a bill this week to permanently exempt Puerto Rico from it.

McCain introduced bills in 2010, 2015 and in July to fully repeal the Jones Act, but all failed to even make it out of committee.

McCain has said that the US maritime industry, the chief backers of the Jones Act, was the most powerful lobby he has gone up against in his political career.

The American Maritime Partnership, the industry’s main trade group, has remained largely silent this week, outside of a statement Wednesday by Thomas Allegretti, the group’s chairman, that “cargo has been delivered to the port, and an armada of US and foreign vessels continues to arrive.”

Allegretti did not comment on the waiver issued Thursday.

“It’s hard to speak out against taking any action when people are suffering,” one source with the group said Friday. “I think, ultimately, the facts on the ground will show that this [waiver] wasn’t needed.”

Unlike previous Jones Act waivers, including the temporary waiver allowing foreign-flag ships to transport refined products following Hurricanes Harvey and Irma, the Puerto Rico waiver was requested by lawmakers, primarily Puerto Rico Governor Ricardo Rossello, not shipping or refining companies. No company has requested use of the waiver, according to DHS.

JUSTIFICATION TO WAIVE THE ACT

The 10-day waiver was issued following a determination by Ellen Lord, the Department of Defense’s undersecretary of defense for acquisition, technology and logistics, that it was in the “interest of national defense to waive the Jones Act.”

But Lord did not offer any further justification and DHS declined to offer any more details on the rationale behind the decision.

David McCullough, a partner at Eversheds Sutherland who represents commodity traders and fuel suppliers, said that DHS’ Jones Act approval process takes place “in a bit of a black box” where the agency’s justification for granting or denying a waiver may never become public.

But Representative Garamendi said the decision this week was all based on politics.

“Was it necessary because we did not have the ships?” he asked. “The answer is no. Was it necessary because of the political climate? Apparently so. It was a response to the political heat.”

Source: Platts

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