Jones Act Waiver Debacle Demonstrates the Need for Reform

In the wake of Hurricane Fiona last month, a tanker sailing from Texas to Europe diverted to Puerto Rico to bolster the island’s depleted diesel fuel stocks. But, because of a century-old U.S. maritime law called the Jones Act, the foreign-flagged ship waited offshore for days before federal officials allowed its much-needed cargo to be offloaded.  And even that took a massive public outcry and direct presidential intervention. 

It was an absurd and frustrating scene – one that the Jones Act makes all too common during emergencies – and another clear sign of why this misguided law needs immediate reform.

Enacted in 1920, the Jones Act mandates that vessels carrying goods between U.S. ports are U.S.-flagged, U.S.-built and mostly U.S.-crewed and owned.  In normal times, the protectionist law primarily means higher prices. In emergencies, however, it can mean much worse, rigidly limiting shipping options that disaster response efforts often require.

Indeed, more than 99 percent of the world’s cargo ships do not comply with the Jones Act’s restrictions. Of the 93 that do, a mere five—plus eight slower, less reliable barges—offer regularly scheduled service to Puerto Rico from only four U.S. ports. For energy shipments, Jones Act vessels are so costly the island overwhelmingly uses international ships to import fuel from abroad, even as neighboring Dominican Republic consumes ample U.S. energy. In fact, Puerto Rico required yet another Jones Act waiver earlier this month to obtain U.S.-origin liquified natural gas (LNG) due to the complete lack of LNG tankers that comply with the law’s costly requirements.

These transportation bottlenecks are daily headaches for Puerto Rico, but become serious problems following a natural disaster, when all hands should be on deck and every second counts.

Unfortunately, obtaining emergency relief from the Jones Act is no easy task. In the aftermath of Hurricane Maria in 2017, the Trump administration waived the law for 10 days to speed relief to the island. But in 2020, Congress pared back that waiver authority to those instances deemed necessary to “address an immediate adverse impact on military operations.” Jones Act lobbyists were elated.

DHS can also grant waivers provided they are for “national defense”—a term with no clear definition— if no Jones Act-compliant vessel is available. These, however, are limited to 10 days and typically granted for single ship movements, such as the recent diesel and LNG deliveries.

Compounding matters, such waivers take too much time by requiring a bureaucratic interagency process and are invariably subject to political pressure given ambiguity over what constitutes “national defense.”

Prior to granting a waiver after Hurricane Maria, for example, President Trump noted that “we have a lot of shippers…and a lot of people who work in the shipping industry that don’t want the Jones Act lifted.” After Fiona, meanwhile, Sen. Chris Coons opined that President Biden would have to weigh permitting the diesel shipment against maritime unions’ support for the law.

Last month’s waiver announcement also reeked of politics. It took DHS Secretary Alejandro Mayorkas more than a week to issue the waiver and only after a political firestorm erupted. When he finally did act, Mayorkas made no mention of the national defense requirement, noting only that the “temporary and targeted” waiver was issued to help “ensure that the people of Puerto Rico have sufficient diesel to run generators needed for electricity and the functioning of critical facilities…”

The U.S. Maritime Administration, meanwhile, called the waiver “novel and problematic” for being requested after the vessel had left port with its load of diesel. But allowing vessels already underway and best positioned to provide quick relief should be exactly what we want. That this was instead deemed an obstacle by bureaucrats is yet another indictment of the current waiver system.

The best solution to these problems is full repeal of the Jones Act or a blanket exemption for Puerto Rico, Hawaii, and other non-contiguous states and territories.  The added difficulty and expense of transportation to these shipping-dependent parts of the United States resulting from the Jones Act is a heavy burden under normal circumstances and an intolerable one in times of duress.  The neighboring U.S. Virgin Islands already enjoys such an exemption – and has tellingly resisted efforts to eliminate it.

Failing that reform, the waiver process must be streamlined. Rather than resorting to tortured interpretations of “national defense” to grant waivers, Congress should automatically suspend the law’s application to any state or territory for which an emergency has been declared and remove the limits on presidential authority imposed in 2020.

When disaster strikes, a full array of options must be on the table to speed relief to Americans in peril. Protectionist and outdated obstacles to that relief should be urgently removed. And, as last month’s debacle showed, we should start with the Jones Act.

Scott Lincicome is the Cato Institute’s director of general economics and director of the institute’s Herbert A. Stiefel Center for Trade Policy Studies. Colin Grabow is a research fellow at the Herbert A. Stiefel Center for Trade Policy Studies.