MarEx OP-ED: Issue Is Power, Not Legal Interpretation

Featured print article from the Maritime Executive November/December 2009 Dockwise edition. Robert Vosbein weighs in on CBP’s Jones Act interpretations.

Despite heated debate and uncertainty stemming from this summer’s proposed ruling by U.S. Customs and Border Protection (“CBP”), the “Jones Act,” the common reference for U.S. coastwise merchandise laws,(1) is relatively simple and straightforward: Vessels that transport merchandise between points or places in the United States must be owned by Americans and built in America. Congress’ underlying policy is also simple:
Preserve a strong merchant marine and shipping industry to secure the homeland. So enforcement of the Jones Act is not about complex legal analysis, it’s about political power.

Congress has taken an expansive approach with the Jones Act and its restriction on foreign vessels, including their support of subsea oil and gas. This was clearly articulated in the Outer Continental Shelf Lands Act (“OCSLA”), wherein Congress extended federal laws, including the Jones Act, to the subsoil and seabed of the Outer Continental Shelf (“OCS”) and artificial islands and to all installations and other devices permanently or temporarily attached to the seabed that support oil and gas exploration and production.(2) Congress also broadly defined merchandise to include “goods, wares and chattels of every description….”(3)

So with Congress’ clear intent and consistent approach, foreign vessels are simply not allowed to transport equipment and material to well sites on the OCS and install it onto the federally regulated seabed, right? Not so fast. Under pressure from foreign vessel interests, the CBP(4) issued a plethora of rulings that have eroded the Jones Act to where it resembles Louisiana’s coastline.

The gates opened in 1976, when CBP permitted foreign vessels to lay pipelines and repair offshore installations.(5) Instead of focusing on the foreign vessel’s majority role in transporting the merchandise to its final resting place on the OCS, the CBP reasoned that the “pipe was not landed but only paid out….” Foreign vessels repairing subsea structures were found not to be engaged in coastwise trade, and their transportation of goods was necessary for the vessel’s mission.

The underlying premises were presumptuous, if not circular. Empowered, foreign vessel interests became aggressive and requested approval for more and more OCS work. CBP, little by little, gave way, expanding work permitted on the OCS based on tenuous analyses and previously expansive interpretations.

But the balance of power may be changing. On July 17, 2009, CBP pushed back issues of a proposed revocation and modification of its prior rulings.(6) CBP recognized that foreign vessel transportation of merchandise to the OCS cannot be permissible simply because that same vessel does the installation. It also clarified that the “vessel equipment” exception is limited to equipment needed to safely operate the vessel and does not include additional equipment to complete its work.

Shocked, but unshaken, foreign vessel interests lobbied hard against the ruling. Without statutory law or precedent, other than the rulings to be revoked, they claim the rulings create uncertainty and take away a critical supply of vessels that will paralyze the oil and gas industry.

The irony of claiming uncertainty as the basis to stop CBP’s revocation of prior rulings permitting OCS work by foreign vessels based on hyper-technical, skewed interpretations of the Jones Act cannot be missed.

Congress has been clear and unwavering in its efforts to limit vessel support operations on the OCS to American vessels. It is the rulings to be revoked that created the confusion and the weakening of the Jones Act.
If foreign operators seek clarity, let’s get back to the basics and implement the laws as Congress intended them. Otherwise, they should be thankful for any ambiguity that remains. Indeed, it is only the residuum of confusing exceptions permitting foreign operators to transport merchandise for the oil and gas industry on the OCS.

The alleged lack of supply is equally unfounded. Currently there is an oversupply of American-flag vessels capable of performing subsea support. Many are under long-term charter to construction companies actively seeking to work them. Some are without charter seeking work. Still others have left the U.S. Gulf of Mexico for work abroad.

And without addressing each vessel function claimed to be unsupported by American vessels, waivers are available to address any such needs. The use of waivers to address these demands not only upholds the integrity of the law but also encourages American operators to build American vessels in American shipyards to meet those demands in the long run. This intended result is important now more than ever when many shipyards and vessel operators are struggling to keep qualified workers and mariners, and others are struggling to survive.

1 46 U.S.C. §55102
2 OCSLA of 1953, 43 U.S.C. §133(a), emphasis added.
3 19 U.S.C. §1401(c), emphasis added.
4 CBP is charged with enforcing the Jones Act.
5 CBP reference T.D. 78-387, subparagraph (1) (October 7, 1976)
6 Customs Bulleting and Decisions, Vol. 43, No. 28 (July 17, 2009).