Foreign offshore vessels safe in U.S. as Jones Act proposal scrapped

The U.S. Customs and Border Protection has withdrawn its proposal to amend the Jones Act in a way that would have made a bulk of international offshore vessels banned from operating in the U.S. waters.

The Jones Act, passed in 1920 prevents foreign-flagged ships from shipping merchandise between points in the United States. Under the coastwise laws, only a vessel that is built in the United States, owned by U.S. citizens, documented under U.S. registry, and crewed by U.S. seafarers may “provide any part of the transportation of merchandise by water, or by land and water, between points in the United States to which the coastwise laws apply.”

The U.S. Customs & Border Protection (CBP) had proposed for the Jones Act to cover offshore construction vessels, which have so far been exempted.

While the foreign-built and flagged ships have been prevented from transporting merchandise between the U.S. coastwise points, over the years some exceptions have been made for construction vessels working in the offshore oil and gas industry.

The foreign construction vessels have been allowed to carry aboard pipeline repair material; anodes; pipeline connectors; wellhead equipment, valves, and valve guards; damaged pipeline; and platform repair material. This has not been seen as a Jones Act violation because the goods have been seen as a necessary equipment.

However, had the CBP proposal materialized, foreign-flagged vessels would not have been able to carry any of the “items” listed above, and would be violating law if they did.

U.S. Customs and Border Protection on Wednesday said: “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 ruling letters relating to the Jones Act should be reconsidered. Accordingly, CBP is withdrawing its proposed action relating to the modification of HQ 101925 and revision of rulings determining certain articles are vessel equipment under T.D. 49815(4), as set forth in the January 18, 2017 notice.”

API pleased

The American Petroleum Institute, which has been against the proposed changes from the start, welcomed the news on Wednesday. The API had alleged that the changes, as they were proposed, could have had “widespread negative impacts on American jobs.”

“Withdrawing the proposed changes protects U.S. energy security and allows for consumers and businesses to continue benefitting from America’s energy renaissance,” said API Upstream Director Erik Milito. “A recent report projected that this proposal could have resulted in the loss of thousands of American jobs, reduced U.S. oil and natural gas production, and diminished revenues for federal and state government.

“By rescinding the proposal, CBP has decided not to impose potentially serious limitations to the industry’s ability to safely, effectively, and economically operate. The responsible development of America’s abundant oil and natural gas resources is a critical part of a forward-looking energy policy that will secure our energy future and help meet our nation’s energy needs.”

The International Marine Contractors Association has been vocal about the proposed changes, and has been campaigning against them.

The IMCA has previously said that the proposed changes on the marine construction vessel market, could effectively stop deepwater developments in the U.S. because there would be no domestic capacity to install the facilities.

In a statement following the withdrawal of the proposed Jones Act revision, the IMCA CEO Allen Leatt, said: “Members of the International Marine Contractors Association with vessels active in U.S. waters, together with their clients, welcome the decision by the U.S. Customs and Border Protection (CBP) Agency to withdraw its proposed revocation of longstanding decisions made over the last 40 years concerning the Jones Act. The proposals, which would have represented a major change in maritime policy if enacted, had been forecast to result in a substantial GDP loss coupled with significant American job losses along the entire U.S. Gulf coast.

“Now that the CBP proposal has been withdrawn, IMCA and its members, look forward to working with CBP and other regulatory and industry stakeholders to consider ways to conduct complex operations offshore under the Jones Act. This development will greatly assist in providing operators and international contractors the confidence they need to continue investing in the Gulf of Mexico, and continuing to create American jobs and prosperity.”
While the API and IMCA have welcomed the new the U.S. offshore vessel owners and operators do not appreciate the move.

Responding to the latest CBP move the Offshore Marine Service Association (OMSA), representing 250 member companies in the U.S. said the decision “hurts American workers, vessel owners and U.S. shipbuilders and prevents the creation of 3,200 new American jobs.”

OMSA deeply disappointed

OMSA said: “The offshore service industry is deeply disappointed in the Administration’s decision to delay the revocation of letter rulings that would correctly enforce the Jones Act and put American mariners first,” said Aaron Smith, President and CEO of the Offshore Marine Service Association.

“This decision to move to a regulatory review process is deeply damaging to the American crews, shipyards, and companies who have waited more than eight years while the Administration studied taking corrective action. Additionally, during this time our industry has invested more than $2 billion to ensure offshore production and exploration would not be disrupted, while foreign interests lobbied the U.S. government to promote their own economic interests through their promotion of false statements and scare tactics. We call on President Donald J. Trump to take immediate action and correct these damaging rulings that have continued to put foreign companies first and American companies and workers last.”

Offshore Energy Today Staff