Jones Act waived in Katrina's aftermath

Jones Act waived in Katrina's aftermath

U.S. maritime offers cautious response, support of narrow oil, gas exemption

Domestic maritime interests reacted cautiously to the Bush administration's emergency suspension of the Jones Act in coastal energy trades after Hurricane Katrina ravaged New Orleans and other Gulf Coast communities.

Enacted as Section 27 of the Merchant Marine Act of 1920, the Jones Act reserves all waterborne commerce between U.S. ports for merchant vessels owned, built, flagged and manned in the United States. The law was waived Sept. 1 to allow foreign-flagged tankers to carry crude oil and petroleum products along the Gulf and East Coasts. The waiver--announced as American Maritime Officer neared press time--was to have lapsed Sept. 19.

The waiver was described as a temporary measure to help address fuel supply shortages resulting from damage to oil refineries and pipelines in the hard-hit Gulf Coast states of Louisiana, Mississippi and Alabama, where the cumulative death toll was projected at several thousand.

"Another challenge we face is that the downed pipelines are causing the need to transport gasoline to needed markets by ship," President Bush said in a news conference in Washington Sept. 1. "Under current law (the Jones Act), shipping between American ports can only take place on American ships, and there are currently not enough American ships to move the oil and gasoline to where it's needed."

The President said he had instructed Secretary of Homeland Security Michael Chertoff "to temporarily waive this requirement so foreign ships can also distribute oil and gasoline to where it's needed--today's action will further help us move gasoline to accommodate the demands of the American citizens."

In a Sept. 2 statement, the Washington-based Maritime Cabotage Task Force--a broad coalition of U.S.-flagged domestic merchant vessel operators, seagoing unions (including American Maritime Officers) and other transportation interests--backed the President's action.

"The domestic maritime industry supports President Bush's effort to respond quickly and effectively to this terrible tragedy and is prepared to assist in any way it can," the task force said. "America's domestic fleet, which numbers tens of thousands of vessels manned by U.S. citizen mariners, is by far the largest and most diverse in the world, and vessels are immediately available to assist with the rescue, relief and reconstruction efforts.

"President Bush yesterday announced a temporary waiver of the long-standing requirement that American vessels with American crews be used to transport certain petroleum products domestically," the MCTF continued. "The President said that such a waiver, which would be limited in scope and time, was necessary because of downed pipelines in the Gulf region. The industry normally opposes coastwise waivers because of the robust capacity of the domestic fleet. In this case, though, we respect the President's decision in light of the unusual and temporary circumstance caused by the downed pipelines and the dimensions of human tragedy. Those pipelines are already coming back on line, and the industry is confident that it will have ample capacity to carry all future domestic cargoes, petroleum or otherwise."

The Jones Act is enforced by the former U.S. Customs Service, which is now the U.S. Customs and Border Protection Service in the Department of Homeland Security. The agency is authorized by law to waive the Jones Act in national security emergencies.

The Maritime Administration, an agency in the Department of Transportation, explained the waiver in a Sept. 1 advisory to U.S.-flagged shipping interests.

"Due to the extraordinary hardships that Hurricane Katrina has placed on the U.S. transportation system, the U.S. government has had to consider all means of keeping the United States supplied with petroleum products, distillate and crude oil," MARAD said. "Today, we know that the Colonial Pipeline (between the Gulf and East Coasts) is only able to operate at 30 percent capacity, hopefully 50-percent capacity by Sunday, 4 Sept.

"Consequently, in working with the enforcement branch (Customs), MARAD will be working with all shippers to meet national energy needs," the MARAD advisory added. "Specifically, if a shipper cannot find a U.S.-flag coastwise qualified vessel, the shipper is being directed to MARAD. MARAD will conduct a search for vessels. If MARAD cannot find a suitable vessel in the time frame indicated, MARAD will issue a letter of 'non-availability of U.S.-flag vessel.' Shippers will be able to present these letters to Customs officials in petroleum discharge ports (if a foreign vessel is required) where the vessel may be cited for a violation of the coastwise laws, but not fined."

The agency concluded: "As the shipping and energy situation improves, MARAD hopes that this will be a very temporary measure. Currently, MARAD is in receipt of three requests for determinations, mostly in the Gulf of Mexico. If you have qualified vessels available, please let us know."

The Customs and Border Protection Service emphasized in a later advisory that the waiver cannot be applied to other than oil and petroleum product cargoes. "CBP field officers do not have authority to waive the Jones Act beyond what the Secretary has authorized," the advisory said. "Consequently, the use of such vessels (foreign-flagged ships in other than oil and petroleum product trades) violates the law."

The advisory said CBP would consider "exigent circumstances" arising in non-oil and petroleum domestic trades, but shippers in such cases were advised to contact MARAD to locate U.S.-flag tonnage. "Failure to use such referenced vessels has potential penalty consequences under the Jones Act," the Customs and Border Protection Service noted.

Commenting at AMO national headquarters in Dania Beach, Fla., AMO National President Michael R. McKay said: "Given the President's solid record in support of the Jones Act, and given MARAD's frequent and vigorous promotion of the law as beneficial to the U.S. economy and to U.S. national security, I take the administration at its word on the limited nature of this waiver. Maritime labor has been assured that the Jones Act will not be suspended for any longer than is absolutely necessary to ease the flow of gasoline and other petroleum products in domestic markets, and that the Jones Act waiver will not be applied to container, dry bulk or other cargoes."

McKay added: "AMO will remain alert to the possibility that persistent Jones Act critics in the United States and overseas will exploit this narrow Jones Act waiver to mount new offensives against the 'ship American' mandates that govern domestic cargo shipping along the East, West and Gulf Coasts, on the Great Lakes and along the U.S. inland waterways.

"The Bush administration's action in this extreme case must not be seen as an inducement to seek Jones Act waivers in other markets within the United States or between the United States and the remote U.S. states and territories of Alaska, Hawaii, Guam and Puerto Rico, and it must not be interpreted in the United States or overseas as an indication that the Jones Act can now be raised as a bargaining issue in trade negotiations."

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