Federal Court Lets Foreign Ships Move US Rock to US Offshore Wind Farms
Great Lakes Dredge & Dock has lost its appeal to reverse a Customs and Border Protection ruling that allows foreign rock-dumping vessels to compete more easily for U.S. offshore wind farm contracts. The U.S. 5th Circuit ruled that GLDD's suit was speculative, finding that the harm to GLDD's business interests had not yet occurred.
CBP ruled in January 2021 that foreign-flagged vessels could not be used to dump U.S. rock onto the U.S. continental shelf: the rock originated at a U.S. point, and would be deposited at a U.S. point on the OCS. Two months later, after a request from the American Petroleum Institute, CBP reversed itself and ruled that foreign-flagged vessels could dump the first layer of scour protection rock on "pristine" seabed at a new U.S. windfarm, as the seabed is not a Jones Act-regulated U.S. point before the moment when a vessel installs rock on it. The second and subsequent layers must be placed by a Jones Act vessel, CBP ruled.
U.S. coastwise shipping interests rely upon legal protection to exclude foreign operators, which have lower capital, labor and compliance costs and can usually underbid Jones Act-qualified shipping on a commercial basis. For national security reasons, U.S. coastwise shipping is protected from global price pressure by federal law. Customs and Border Protection is tasked with defining the limits of those protections through letter rulings, advisory interpretations of the Jones Act that lay out what does and does not constitute protected coastwise trade between U.S. points.
GLDD has invested about $200 million in a new Jones Act rock placement vessel to serve offshore wind installations, the only one of its kind in the United States, and will be the first company ever to install U.S. rock at a U.S. OCS wind farm. Its outsize investment in U.S.-built tonnage is predicated on a long-term pipeline of scour protection contracts for U.S. wind farm projects. As the sole bidder with a legally qualified ship on order, GLDD secured three rock contracts by the end of 2023, and it expected more: at the time, the industry appeared to be picking up pace. In a federal lawsuit, GLDD argued that by partially opening the market to low-cost foreign bidders, CBP's ruling reduced its ability to compete successfully for future work.
The American Petroleum Institute intervened in the case as an appellee, and it argued that GLDD did not have standing to sue because it had not yet lost a bid to a foreign rock placement vessel operator, and had therefore not yet suffered any harm. The district court agreed and dismissed GLDD's suit as lacking standing, without considering the merits of the case. GLDD objected, since it had already spent millions on a new ship, and appealed the decision.
On appeal, the 5th Circuit confirmed the dismissal of GLDD's case. The circuit court ruled that GLDD had not shown that it would face future competition from foreign flag vessels when bidding for future Jones Act rock-placement work. The judges noted that the same work could be performed without considering the Jones Act, simply by shipping the rock from a foreign port, and decided that there was too little information to assess the prospects of foreign participation in a brand new trade: no firm has yet actually moved U.S. rock to a U.S. outer continental shelf wind farm.
"In sum, Great Lakes has not shown injury-in-fact merely because the [CBP] letter may foster future competition. We agree with CBP that this theory of competitor standing 'sweeps far too broadly,'" the judges ruled.