US issues 60-day Jones Act waiver, industry questions market impact

White House press secretary Karoline Leavitt noted on X that the move comes as the US “military continues meeting the objectives of Operation Epic Fury.”

“This action will allow vital resources such as oil, natural gas, fertiliser and coal to flow more freely to US ports for 60 days, and the Administration remains committed to strengthening our critical supply chains,” she added.

Reed Smith partner Alice Colarossi explained that the Jones Act typically requires the use of US-flagged, US-built, US-owned and US-operated vessels to move any cargo between US ports, subject to limited exceptions.

Questions over impact

Despite its stated goal, Ms Colarossi said industry participants are already “questioning whether the waiver will have the intended effect of reducing US oil prices.”

Among other factors, only a small percentage of US oil supply is transported on Jones Act vessels, she explained. Many Jones Act tankers are tied up in long-term charter agreements, under which the customers, such as refineries, will still have to pay for these vessels despite the waiver, she added.

She also pointed to a shortage of foreign-flagged oceangoing tankers and elevated freight rates in the international market due to the Strait of Hormuz crisis.

Ms Colarossi noted that the waiver comes a week after Donald Trump authorised the Department of Energy to release 172M barrels from the Strategic Petroleum Reserve. US Secretary of Energy Chris Wright said these barrels will take approximately 120 days to deliver based on planned discharge rates.

“The Strategic Petroleum Reserve is located at four sites along the US Gulf of Mexico coastline. The Jones Act waiver will allow non-US vessels to transport these barrels to US ports within 60 days,” she said.

The procedure

Ms Colarossi further explained that within 24 hours of requesting a waiver, the Secretary of Defense must submit to Congress “a written explanation of the circumstances requiring such a waiver in the interest of national defence, including confirmation that there are insufficient qualified vessels to meet national defence needs without it.”

“The waiver may be challenged on the basis that these requirements may not be satisfied here,” she added.

According to Ms Colarossi, all US domestic transport of merchandise by foreign vessels under the waiver must be reported to the US Maritime Administration within 10 days of voyage completion.

The report must include the following information, which will be published on the Administration’s website: the vessel’s name and flag; the name of its owner and operator; voyage dates; relevant ports of call; a description of the cargo; an explanation of why the waiver served national defence interests; and any additional information deemed necessary by the Maritime Administrator.