Jones Act Waiver Under Fire: $40M in Unrecorded Foreign Tanker Moves

At least a dozen foreign-flagged tankers moved more than $40 million in petroleum products between U.S. ports without appearing in the Maritime Administration's public waiver records — and now Congress wants to know what else slipped through. Rep. Salud Carbajal (D-Calif.) has given Homeland Security until October 31 to explain itself.

In an October 16 letter to Homeland Security Secretary Markwayne Mullin, first reported by Bloomberg Government, Carbajal demanded answers on whether foreign vessels working U.S. domestic trades under the Jones Act waiver are complying with immigration, tax and maritime law. He is the ranking Democrat on the House Transportation and Infrastructure Committee's Coast Guard and Maritime Transportation Subcommittee.

The letter lands on top of reporting that has already cracked the waiver's paper trail open. In September, gCaptain identified 14 previously unreported domestic tanker voyages, plus a possible 15th. That built on an earlier Bloomberg Government investigation documenting at least a dozen foreign vessels carrying more than $40 million in petroleum products that never showed up in MARAD's waiver records.

The scale is bigger than the official count suggests. MARAD's September 16 data listed 255 reported movements under the original March 17 waiver and its May extension. The unreported voyages mean that figure is incomplete — nobody knows by how much.

Why can't MARAD force disclosure?

Here's the mechanism, and it's a gap you could sail a tanker through. MARAD told Bloomberg Government it lacks legal authority to compel operators to file the required reports. Actual Jones Act enforcement belongs to U.S. Customs and Border Protection, which sits under DHS.

So the agency that collects the data can't demand it, and the agency that can enforce doesn't publish it. Carbajal's letter puts that structural hole directly in front of the department that owns it.

"These reports raise significant questions about whether DHS and its component agencies are adequately enforcing federal law with respect to foreign vessels operating in U.S. domestic commerce," Carbajal wrote.

What does this change for operators and shippers?

Three pressure points, each with money attached:

• Immigration. Federal rules generally bar crew admitted under D nonimmigrant status from working on domestic vessel movements. Carbajal wants to know what legal authority lets foreign officers and crew serve on waiver voyages — and whether any crewmembers were found with status inconsistent with domestic service, or absconded.
• Tax. Recent IRS guidance clarifies that income foreign corporations earn moving cargo between U.S. ports under the waiver counts as domestic-source income. It does not qualify for the Section 883 international shipping exclusion or treaty benefits. Carbajal asked whether DHS has shared voyage dates and cargo data with Treasury and the IRS so those obligations can actually be assessed.
• Everything else. He also requested enforcement details on maritime security, environmental protection, vessel safety and inspection, wages, labor, customs and harbor maintenance fees.

For foreign owners and charterers, the tax point bites hardest. A waiver that made the voyage legal never made the income exempt — and the IRS has now said so in writing. Voyages already completed may carry tax exposure nobody priced in.

For U.S.-flag operators, the letter is ammunition. Every unreported foreign movement is tonnage that competed domestically without visible oversight.

The clock is already tightening

The administration has not been idle. A second 90-day extension, effective August 17, requires operators to file a Vessel Availability Request first, so the government can check whether a qualified U.S.-flagged vessel exists before authorizing foreign tonnage.

Carbajal says public information shows more than 25 domestic voyages completed under the current waiver, several vessels making multiple trips. The original waiver was issued in March amid energy supply disruptions tied to the war with Iran. The current extension runs through November 15.

"The Administration has now authorized the waiver for an aggregate period of approximately 250 days, making oversight particularly important," Carbajal wrote. "Congress has a responsibility to ensure that a national-defense waiver is not being treated as a broader exemption from federal law."

He wants the response by October 31, with details on coordination between DHS and the Departments of Defense, Transportation and Treasury, plus the IRS and Coast Guard.

DHS declined to comment, referring questions to the Department of Defense, which did not respond, according to Bloomberg Government.

With the waiver expiring November 15 and a congressional response deadline of October 31, shippers relying on foreign tonnage in domestic petroleum trades face a two-week window in which enforcement answers, tax exposure and the waiver's renewal will all land at once.