CBP Alters Jones Act Guidance for Offshore Vessels
On Thursday, U.S. Customs and Border Protection revised key elements of its interpretation of how the Jones Act should be enforced in the U.S. offshore sector. It has rescinded or modified a longstanding set of "letter rulings" on how and when foreign-flag ships may be used in offshore applications, including the use of crane ships. The decision has drawn intense criticism from U.S.-flag offshore vessel operators.
The alterations (found on page 84 of this bulletin) center on how the agency interprets the term "vessel equipment," a perennial point of debate for the U.S. offshore oil and gas sector. In a decades-long series of letter rulings, CBP has created a complex framework for determining which objects loaded aboard an offshore construction vessel are cargo - which must be transported by a Jones Act vessel if the voyage is between a U.S. port and a U.S. offshore installation - or "vessel equipment," which can be carried by any ship.
Relying upon a previous U.S. Treasury ruling, CBP now intends to interpret “vessel equipment” more broadly, to include "all articles or physical resources serving to equip the vessel, including the implements used in the vessel’s operation or activity." This includes any article that "aids" the full range of installation and maintenance work on wells, subsea infrastructure, flow lines and surface facilities. An article that leaves the work site with the ship when the job is done is more likely to be "vessel equipment" in CBP's view, but even objects that are left behind could potentially meet the definition. No examples of specific articles were provided, and CBP says that it expects to receive requests for clarification on a case-by-case basis.
The decision also includes more permissive guidelines for the operation of foreign-flag crane ships. Under previous guidance, CBP ruled that a foreign-flag crane ship could pick up a cargo item that had been carried from a U.S. port by a U.S.-flag ship, then rotate on its own central axis, then install the item at a U.S. offshore site - but not move horizontally with the load suspended. Under the new guidance, horizontal movement is allowed, and a foreign-flag crane ship may set the load down upon its own deck if needed in order to complete the lifting evolution safely.
These changes come despite written opposition from dozens of congressional representatives from both parties. The Offshore Marine Services Association (OMSA), which represents America's offshore services operators, described the decision as a step backwards.
“We are disappointed that [CBP] has decided to put America second by creating potential loopholes for foreign vessels and crews to unlawfully operate in American waters and take the jobs of American vessels and workers," said OMSA president and CEO Aaron Smith in a statement Thursday. “We support the more than 50 bipartisan members of Congress who correctly asserted that only the U.S. Congress can amend the Jones Act. We will be closely scrutinizing CBP’s implementation of these legally dubious loopholes to ensure that CBP follows the law and requires all foreign-flagged vessels to request and receive letter rulings."