Carmel: MARAD Was Not Consulted About Jones Act Waiver

In a hearing before the Congressional Transporation and Infrastructure Committee on Wednesday, committeemembers scrutinized the U.S. Maritime Administration and the Federal Maritime Commission's FY2027 budget requests. But the main topic for lawmakers was the White House's Jones Act waiver, the longest and broadest in recent history - which, according to testimony, MARAD was not informed of until after the decision to issue the waiver had been made.

When ranking member Rep. Rick Larsen (D-WA) asked Maritime Administrator Stephen Carmel for his views on the value of the waiver, Carmel said that his office had not been consulted.

"The Jones Act waiver was done by the Department of War and Homeland Security. We were not advised until the end that it was going to happen," Carmel said. "The way this works under 501(a), we are not involved in this process at all. We are not consulted before a waiver is issued and in fact we generally officially are not told about it until 10 days after the voyage ends."

Responding to later questions by Congressman Salud Carbajal (D-CA), Carmel confirmed once again that his office had not been consulted.

The waiver is broadly opposed by U.S. shipyards, shipping companies and maritime unions, who argue that it introduces uncertainty and could undermine the viability of the U.S. domestic fleet. Foreign-flag operators can hire seafarers and build tonnage in low-wage jurisdictions overseas, and can use their low overhead to outcompete American vessels on price point - reducing day rates for charterers, but at a cost to American maritime's national-defense capabilities in time of need.

Carmel is a longtime supporter of the Jones Act and an active member of the industry, having previously served as president of U.S. Marine Management, a division of the Jones Act vessel leasing and financing company Maritime Partners. In his confirmation hearing last October, he confirmed to the Senate Transportation Committee that he supports the Act.

Budget leans into Tanker Security Program, USMMA Revamp and Maritime Security Trust Fund

The U.S. Maritime Administration has requested funding to double the number of tankers in the U.S.-flagged Tanker Security Program (TSP) in FY 2027, bringing the fleet to the fully-authorized level of 20 vessels. Previously, Congress has only supplied funding for 10 ships, though the National Defense Authorization Act began mandating 20 hulls in FY2024.

"This investment addresses the urgent and critical national security requirements for the U.S.-flag product tankers. It also supports our deployed Armed Forces in contingency operations and improves core assets to enhance our Nation’s global network of distribution capabilities," said Maritime Administrator Capt. Stephen Carmel in a statement.

Carmel noted that there is "barely" enough cargo volume to sustain the 10 ships currently in the Tanker Security Program, in part because the military does not have to ship oil products aboard American tonnage and uses foreign-flag operators at will. Given the dearth of petroleum cargo, he acknowledged that increasing the TSP to 20 ships comes with risks. However, he told Congress that the investment in growing the fleet "is not only necessary, but warranted."

Other budget highlights include $550 million for the U.S. Merchant Marine Academy's infrastructure revamp initiative, the Campus Asset Management Program (CAMP). USMMA stakeholders have long called for federal investment in fixing up the aging physical plant of the campus, and it is a major priority for Transportation Secretary Sean Duffy.

The budget would also cut assistance to state maritime academies by $50 million, cancel funding for the Cable Security Program, and eliminate the Maritime Environmental and Technical Assistance Program (META), MARAD's low-emissions R&D initiative.

The proposed budget is an increase over last year's levels, but it draws all of the increase from the proposed Maritime Security Trust Fund, which would have to be enacted as part of the FY2027 budget. The MSTF would be a repository for foreign-ship port fees (a policy deferred since last year), taxes and other revenue streams, plus an initial allocation of $1.4 billion in federal funding to start it off.

If the MSTF is not created as part of the FY2027 budget process, and there is no other funding pool to augment the regular budget, "there's a significant decrease in funding" for longstanding MARAD initiatives like the Port Infrastructure Development Program, cautioned Congressman Salud Carbajal (D-CA). Without the MSTF, the proposed budget allocation for the PIDP would drop by about $450 million, a $130 million budget for new "support ships" to work at the three National Defense Reserve Fleet sites would not be available, and most of the funding for USMMA renovations would disappear.