In the wake of fuel shortages arising from Hurricanes Irma and Harvey, Tuesday evening the US Customs and Border Protection (Customs) extended and expanded its September 8 waiver of the coastwise trade provisions of the Jones Act. The coastwise trade provisions of the Jones Act require that vessels engaged in shipments of fuel (and other merchandise) between US ports be US-flagged, US-crewed, US-built, and majority US-owned. Such US flag vessels are considerably smaller and less numerous than their foreign counterparts and are considerably more expensive.
Specifically, the expanded waiver now: (1) allows the use of foreign flag vessels for refined petroleum products loaded onboard a vessel through and including September 22 (the original waiver extended only until September 15); and (2) covers shipments from New York, Pennsylvania, Texas, Louisiana, New Jersey, Delaware, Maryland, Mississippi, Alabama, Arkansas and New Mexico to South Carolina, Georgia, Florida, Puerto Rico, North Carolina, Virginia and West Virginia. The original waiver did not cover important petroleum storage hubs and refinery locations such as New Jersey, Maryland and Delaware, which caused significant confusion for those seeking to send shipments to storm-damaged areas.
As with the previous waiver, only refined petroleum products are covered by the waiver. All such refined products should be covered by the waiver, regardless of whether they are used directly for transportation fuel or otherwise. Crude oil and non-petroleum gasoline additives (e.g., ethanol, biodiesel, certain detergents) are not covered, and US flag vessels must be used for all shipments of this merchandise. This is important as many such blendstocks serve important roles of boosting octane and helping to meet environmental standards (reducing sulfur and meeting Renewable Fuel Standard requirements). East Coast refiners will likewise be unable to take delivery of crude oil by foreign flag vessels, potentially impacting their ability to resupply after drawdowns of their crude oil inventories following increased demand for their product in storm-damaged states.
Lastly, the modified waiver is applicable to covered merchandise that is loaded through and including September 22, 2017. As a result, deliveries do not need to occur by September 22. Instead, the vessel need only be loaded by the end of the day on September 22. The waiver is silent on whether the foreign flag vessel need depart the berth by any particular date.
Yesterday’s extension of the Jones Act waiver may not be the last word on the subject in the wake of these storms. If gasoline shortages persist or if crude oil or blendstocks become hard to locate in certain regions, then industry or the federal government could seek to further extend the existing waiver. Industry should continue to follow this issue closely over the coming days.