I cannot "use" the mug on anything, so I cannot fill it with water.
When I'm in the kitchen, I click on "Use", then on the empty mug. But Guybrush immediately says "the mug is empty" and doesn't let me use it on anything.
Now if I use the powder on the mug at least once, then the exact same scenario keeps happening when I try to "use" the mug, except the message is not "the mug is empty", instead it becomes "that grog would be too dry" (same message as when you use the powder on the empty mug).
The message is reset to "the mug is empty" if I change room.
But maybe you didn't mean to use the mug on the sea, but the powder can directly? Well, when I do that, Guybrush says "this little can is nout enough for the ocean".