US Customs Proposes Relaxing Jones Act Restrictions

The Trump administration is considering revoking past guidance on how U.S. maritime law is interpreted, a move that could expose offshore oil, gas and wind operations to more foreign-flag vessels.

The proposal, announced Oct. 23 in a bulletin notice by U.S. Customs and Border Protection (CBP), could provide relief for U.S.-flag vessels that serve those markets in that it modifies a series of past rulings that had allowed certain types of vessel equipment to move on foreign-flag ships.

But it would also revise the definition of offshore "lifting operations" to clarify that certain "lateral movements" of service vessels are not considered transportation moves under the Jones Act, which requires that such moves be carried out by U.S.-owned, U.S.-flagged and U.S.-built vessels. That creates an opening for foreign-owned and -operated ships.

The Offshore Marine Service Association (OMSA), which represents U.S.-based companies that own and operate vessels that service offshore oil and gas rigs, partially criticized the proposal.

"We appreciate CBP has again confirmed that a number of previously issued letter rulings are not consistent with the Jones Act and must be revoked or modified," OMSA said in a statement to FreightWaves. "However, we disagree with CBP's attempt to develop new definitions that will unfortunately create new loopholes. The Jones Act does not allow for the lateral movement of merchandise by foreign-flagged ships and no amount of interpretive guidance changes that."

While the act has come under fire by those who consider it an outdated maritime law that inhibits free trade, it has bipartisan backing in Congress as a policy that supports U.S. jobs.

Peter DeFazio (D-Oregon) who chairs the U.S. House Committee on Transportation and Infrastructure, said he has "very serious concerns" about the proposal.

"To be clear, any Administrative action or determination that serves to weaken the Jones Act is unacceptable," DeFazio said in a statement. "As I continue to work through the ‘Customs Bulletin Notice' to understand the full scope of its effect on the Jones Act, I urge CBP to reconsider any ruling that undermines the American shipping industry."

While equipment used as part of vessel operations is not typically considered merchandise subject to Jones Act restrictions, CBP's proposal leaves specific applications of what is considered to be "vessel equipment" to future rulings, commented Charlie Papavizas, a partner with the law firm Winston & Strawn.

"For example, in its modification of the original 1976 ruling, CBP leaves open the issue of whether tools used in connection with underwater repairs are ‘merchandise' or ‘vessel equipment' because such determination ‘depends upon the nature of the item and the facts associated with the operation of the vessel'," Papavizas wrote in a blog post.

Papavizas also pointed out that CBP is proposing no changes to its long-standing interpretation that laying underwater cable or pipeline between two points in the U.S. can legally be done by a foreign vessel.

The American Petroleum Institute (API), whose members stand to gain from policy changes that could open the offshore market to more competition, were reviewing the proposal and declined to comment.

When CBP proposed changes in 2017 that would have revoked past rulings that favored foreign-flagged vessels, Erik Milito, an API director at the time, said the changes "would not only overturn more than 40 years of precedent, it would place serious limitations on the industry's ability to safely, effectively and economically operate." CBP's 2017 proposal was subsequently withdrawn.

Nov. 22 is the deadline for comments on the current proposal.

Image by Rafael Oseguera from Pixabay