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White House studies permanent Jones Act waiver for Puerto Rico: sources

The Trump White House is studying the feasibility of a permanent JonesAct waiver for Puerto Rico, according to multiple sources.

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A working group of Trump administration officials are studying the issue,but there is no clear time line for the study's release, according toadministration sources.

It is also unclear if the Trump administration would lift Jones Actrequirements for Puerto Rico even if the study recommends doing so,sources said.

"I don't think they'd be able to do it without legislation," according toone source familiar with the group's work.

One issue the group is grappling with is how to justify a waiver forPuerto Rico while keeping Jones Act requirements for other US ports, suchas Hawaii, sources said.

Sources discussed the study on the condition of anonymity.

The Jones Act, a nearly 100-year-old law, requires vessels transportinggoods between US ports to be US-flagged, US-built and majority US-owned.

A Jones Act waiver requires either a request from the Department ofDefense or a finding from the US Maritime Administration that there is ashortage of Jones Act-compliant vessels. The Homeland Security secretarymust declare that such a waiver is in the interest of national defensebefore issuing one.

One source said that, without finding a permanent waiver in the interestof national defense, the Trump administration appears unable to issuesuch a waiver without congressional support.

In response to the impact of Hurricane Maria, the Trump administrationSeptember 28 issued a Jones Act waiver for fuel and other goods shippedto Puerto Rico, but declined to extend it after it expired 10 days later.

The waiver came amid intense public pressure to waive Jones Actrequirements, but also faced criticism from the US maritime industry thatsuch a waiver could weaken the law.

Despite a brief Department of Defense statement that the September 28waiver for Puerto Rico was in the "interest of national defense,"administration officials said at the time that the waiver was proactiveand likely not necessary.

Due to Jones Act requirements, shipping costs to Puerto Rico from the USmay be roughly twice as much as shipments from the US to other Caribbeanislands, according to a 2014 Federal Reserve Bank of New York report.Shipping a container from the US East Coast to Puerto Rico cost $3,063,but cost $1,504 to ship the same container to the Dominican Republic and$1,607 to ship to Kingston, Jamaica, according to the report.

Jones Act tankers have seen a recent increase in demand, in particularfrom US Gulf Coast terminals to Delaware Bay refineries, Sam Norton, theCEO of Overseas Shipholding Group, said during an earnings call Friday.

On September 28, Senators John McCain, Republican-Arizona, and Mike Lee,Republican-Utah, introduced a bill to permanently exempt Puerto Rico fromthe Jones Act, but the bill has generated no public support from Senateleaders.

Any change to the Jones Act is likely to receive staunch opposition fromthe domestic maritime industry and both Republicans and Democrats inCongress.

In a statement Monday, the American Maritime Partnership argued that aJones Act waiver for Puerto Rico was unnecessary.

Jones Act carriers "have provided regular, dedicated service to PuertoRico for decades, assuring a vital and cost-effective transportation linkbetween the US mainland and Puerto Rico," the maritime trade group said.

About two-thirds of vessels that call on the Port of San Juan areforeign-flagged, "demonstrating the Jones Act does not interfere withinternational trade," the group said. --Brian Scheid, brian.scheid@spglobal.com

--Edited by Valarie Jackson, newsdesk@spglobal.com