Will Jones Act Waivers Be a Viable Option in the Future?
Companies often ask if it is possible to obtain a Jones Act waiver in emergency circumstances or otherwise when they know that there may not be domestic Jones Act vessels available to perform the transportation or installation of cargo. Historically, waivers have been very difficult to obtain and recent Congressional developments will make them even more difficult to obtain.
The Jones Act prohibits the “transportation of merchandise by water, or by land and water, between points in the United States . . . either directly or via a foreign port” unless the vessel is U.S. built, U.S.-flag, and 75 percent U.S. owned. Jones Act requirements can only be waived if “necessary in the interest of national defense.” 46 U.S.C. § 501 (the “Waiver Provision”).
It is extremely difficult and rare to obtain a waiver of the Jones Act. The Waiver Provision has always limited waivers to situations where such waiver is needed for national defense purposes.
There have historically been two waiver types that could be granted by the Secretary of Homeland Security: those granted automatically when requested by the Secretary of Defense and those that were discretionary upon request with confirmation from the Maritime Administration that no U.S.-flag vessels were available.
Waivers were most frequently granted to address actual or perceived energy supply issues (determined to be in the interest of national defense), particularly oil and gas transportation after major hurricanes and national disasters or drawdowns on strategic reserves.
The 2021 National Defense Authorization Act (“NDAA”) significantly limited the Waiver Provision. For waivers granted automatically when requested by the Secretary of Defense, the 2021 NDAA required they be “in the interest of the national defense to address an immediate adverse effect on military operations.” It required the Secretary of Defense to give a report to Congress within 24 hours on the reasons for the waiver and confirmation that there were insufficient qualified U.S.-flag vessels. It also limited “discretionary” waivers to 10 days, which may be extended up to 45 days in aggregate maximum, and mandated numerous reporting and publishing information on “discretionary” waivers granted and used.
This was followed recently by even further limitations on waivers. The 2023 NDAA again amended the Waiver Provision, by mandating that only the “President” can determine that a waiver is necessary in the interest of national defense for “discretionary” waivers.
In addition, it prohibits waivers from being issued if the cargo was already loaded at the time of the request. Publication requirements were also increased to include the waiver requests and whether each request was granted or denied and an explanation of why. Further, it mandates at least a 48-hour delay between publication of the waiver request and issuance of the waiver, during which an assessment of non-availability of qualified U.S.-flag vessels must be conducted.
Publication requirements were also increased to include the waiver requests and whether each request was granted or denied and an explanation of why.
The next time someone asks you whether a Jones Act waiver would be a feasible option in an emergency or otherwise, we suggest you refer them to this article.
This article is one in a series of articles written for Blank Rome’s MAINBRACE: March 2023 edition.