DHS Denies Request for Puerto Rico Jones Act Waiver

Port of San Juan (file image)

By The Maritime Executive 09-26-2017 09:48:01

On Tuesday, the U.S. Department of Homeland Security announced that unlike Florida, Puerto Rico will not be granted a temporary Jones Act waiver to assist with recovery in the wake of Hurricane Maria. 

"The limitation is going to be port capacity to offload and transit, not vessel availability," said DHS in a statement. "Most of the humanitarian shipments will be through barges, which make up a significant portion (along with tugs) of the US-flagged cargo fleet." In the wake of Hurricane Irma, the Trump administration provided a two-week waiver for foreign-flagged product tankers to carry fuel from American refineries to American ports.

U.S. operators Tote Maritime and Crowley Maritime have both reported that their San Juan terminals have thousands of containers on the pier and ready to deliver. In a statement on Monday, Crowley suggested that shoreside transportation infrastructure is the primary bottleneck for getting much-needed goods to stores and customers. 

The letter from DHS was released one day after eight congressional representatives asked the agency to grant a one-year Jones Act waiver for Puerto Rico. "The island is now facing an unprecedented uphill battle to rebuild its homes, businesses and communities. Temporarily loosening [the Jones Act] requirements – for the express purposes of disaster recovery – will allow Puerto Rico to have more access to the oil needed for its power plants, food, medecines, clothing and building supplies," the group wrote. In addition, the petition called for the federal government to waive cost-sharing agreements for recovery programs, as Puerto Rico's government is already functionally bankrupt. 

“Puerto Rico can’t borrow funds and they are required to use American shipping only," argued Rep. Luis V. Gutierrez (D-IL). "In their hour of need, Washington can help by suspending the Jones Act and suspending cost-sharing obligations. Puerto Rico was closing schools and hospitals and laying off cops before the two hurricanes hit this month, so Washington should go these extra steps." 

Critics of the Jones Act have long contended that Puerto Rico bears an outsize share of the cost of maintaining America's maritime and shipbuilding industries. According to a 2013 study by the Government Accountability Office, shipping rates to carry goods from the U.S. mainland to Puerto Rico could be higher than for shipments from foreign ports carried on foreign-flag vessels, despite longer distances. However, GAO concluded that a Jones Act exemption for Puerto Rico might not bring down rates due to the imposition of other U.S. regulations on foreign vessel operators, and it warned that it could have undesirable effects on the American fleet. Among other potential outcomes, it could lead U.S. carriers to exit the Puerto Rican trade, according to MARAD.