U.S. Customs Agency Rules Against Jones Act Action – Foreign-Flag Construction Vessels to Stay in GoM

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The U.S. Customs and Border Protection agency announced Wednesday it is withdrawing its notice of proposed modification and revocation of letter rulings related to its enforcement of the Jones Act, meaning there will be no changes to the coastwise law with regards to the current use of foreign-flagged vessels for certain offshore oil and gas operations in U.S. waters – at least for now. 

The CBP’s proposed modifications and revocation of letter rulings, published in a Customs Bulletin just two days before President Obama left office, would have corrected certain aspects of the Jones Act by reversing long-standing rulings that have allowed non-Jones Act qualified offshore construction vessels to freely operate on the U.S. Outer Continental Shelf, most notably in the deepwater Gulf of Mexico. 

Under the Jones Act, only a vessel that is built in the United States, owned by a U.S. citizen and crewed by U.S. mariners can participate in the transportation of cargo between two points in the United States.

The CBP said Wednesday that it received over 3,000 comments both for and against the changes during the open comment period, which closed April 18.

“Based on the many substantive comments CBP received, both supporting and opposing the proposed action, and CBP’s further research on the issue, we conclude that the Agency’s notice of proposed modification and revocation of the various letter rulings relating to the Jones Act should be reconsidered,” said CBP director Glen Vereb in the Customs Bulletin published May 10.

Oil and gas interests, such as the American Petroleum Institute, opposed the changes, arguing the proposed action would have caused “significant and damaging impacts” to offshore oil and natural gas activity in the United States. The basis of their argument was that the Jones Act fleet does not have the highly-specialized vessels needed for the work, hindering offshore oil and gas development.  

“By rescinding the proposal, CBP has decided not to impose potentially serious limitations to the industry’s ability to safely, effectively and economically operate,” said Erik Milito, director of upstream and industry operations for the American Petroleum Institute.

But the proposed changes received strong support from domestic maritime industry stakeholders and several lawmakers in Washington, who argued that the ‘corrective action’ would have closed loopholes and restored American jobs

In a statement, the Offshore Marine Service Association (OMSA) called the CBP’s decision “profoundly damaging” as it “puts foreign companies first and American companies and workers last.” 

“Obliging to foreign interests, the Office of Management and Budget (OMB) recommended a regulatory review process that will significantly delay the lawful and correct enforcement of the Jones Act which requires good moving between one U.S. port and another be moved on vessels that are U.S. built, U.S. owned and U.S. crewed,” the Offshore Marine Service Association said in a statement Wednesday following the CBP’s decision. “This delay will only hurt American mariners and shipbuilders while continuing to benefit foreign vessels, shipbuilders and crews, domestically operating contrary to U.S. law.”

Matthew Paxton, President of Shipbuilders Council of America, agrees that the CBP’s decision will only hurt American workers. 

“We are disappointed the Administration chose to indefinitely kick this job-destroying regulatory can down the road. The correct interpretation and enforcement of the Jones Act is critical to the capitalization of the commercial shipbuilding and repair industry, and its industrial base, which is crucial to U.S. homeland and national security. This Administration’s needless delay only hurts the more than 400,000 men and women of the U.S. shipyard industry,” Paxton said. 

Tom Allegretti, Chairman of the American Maritime Partnership, called the decision “extremely disappointing” and called on President Trump to take action to restore jobs for U.S. mariners. 

“The Administration’s decision today to delay the revocation of letter rulings impacting the lawful enforcement of the Jones Act in the Gulf of Mexico is extremely disappointing, said Paxton. “This delay and move to a regulatory review process will damage our American mariners and domestic maritime industry, which is essential for U.S. economic security and job creation. The domestic maritime industry calls on President Trump and his Administration to take immediate action to return these jobs to our American mariners.”

The CBP’s decision was also criticized by Majority Whip Steve Scalise (R-La.), who issued the following statement:

“I am very disappointed in the announcement today by US Customs and Border Protection regarding the Jones Act.

“CBP’s action taken earlier this year took positive steps to finally enforce our nation’s maritime border law, and correct decades of faulty private letter rulings that put foreign interests above those of American workers and American national security. In January, CBP was correct in announcing their view that many of these letter rulings were not consistent with or legal under the Jones Act. Unfortunately, it is mind-boggling why a new cumbersome regulatory process is necessary or even appropriate when the issue at hand simply involves the proper enforcement of existing law.

“While some foreign interests may take issue with the Jones Act, it is the law of the land and is in place to ensure that America can protect our borders while also ensuring that only US-flagged and crewed vessels can have access to our inland waterways so we can protect our national security. And to be clear, this is not just a coastal issue- if the Jones Act is undermined, foreign vessels and crews, even those who come from places that don’t share our American values, could have access to the deepest interior of our country via our waterways.

“I urge the Administration to tread carefully in this process and to thoroughly consider its implications on our national security, and I am committed to doing everything I can to make sure that the Jones Act isn’t undermined in this process.”

For more information, read gCaptain’s full coverage of the Jones Act Ruling Letters