Customs Withdraws Proposal on Jones Act Offshore Rules

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Published May 10, 2017 8:49 PM by The Maritime Executive

On Wednesday, U.S. Customs and Border Protection announced that it has “withdrawn” a proposal to revoke rulings that allow foreign-flag vessels to transport certain equipment from U.S. shores to U.S. rigs. It is the second time in eight years that CBP has publicly considered and then deferred the proposal. 

The revocation would have affected a limited number of foreign-flag subsea construction vessels in the Gulf of Mexico, some of which are already idle due to the downturn in the offshore sector. It had support from a broad range of U.S. maritime industry associations, who argued that it would create jobs for up to 1,000 American mariners. However, it ran into vehement opposition from the powerful oil and gas lobby and from the International Marine Contractors Association, who claimed that it would interfere with offshore energy development and cost the U.S. billions of dollars in lost economic activity. 

In a statement published in CBP's regular bulletin, director of border security and trade compliance Glen Vereb said only that the agency believed its earlier proposal should be "reconsidered" in light of the comments it has received. "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," he wrote. 

While Vereb did not give a detailed rationale for withdrawing the proposal, the Offshore Marine Services Association (OMSA) suggests that the decision came at the request of the White House Office of Management and Budget, a division of the Executive Office of the President. 

“Obliging to foreign interests, the Office of Management and Budget (OMB) recommended a regulatory review process that will significantly delay the lawful and correct enforcement of the Jones Act,” OMSA said in a statement. 

"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," added Aaron Smith, OMSA’s president and CEO. "We call on President Trump to take immediate action and correct these damaging rulings that have continued to put foreign companies first and American companies and workers last."

Tom Allegretti, the chairman of the American Maritime Partnership and Matthew Paxton, president of the Shipbuilders Council of America both echoed Smith's remarks. However, the oil and gas industry expressed a different view: in a statement published Wednesday, the American Petroleum Institute said that it welcomed CBP's decision to withdraw "harmful new Jones Act rulings."

“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. “By rescinding the proposal, CBP has decided not to impose potentially serious limitations to the industry’s ability to safely, effectively, and economically operate." 

Congress reacts to administration’s decision

In a statement Wednesday, House majority whip Rep. Steve Scalise (R-La.) said that he was “very disappointed in the announcement today by US Customs and Border Protection regarding the Jones Act.”
"It is mind-boggling why a new cumbersome regulatory process is necessary or even appropriate when the issue at hand simply involves the proper enforcement of existing law,” he said. "While some foreign interests may take issue with the Jones Act, it is the law of the land and is in place to ensure that America can protect our borders.”
“I urge the Administration to tread carefully in this process and to thoroughly consider its implications on our national security, and I am committed to doing everything I can to make sure that the Jones Act isn't undermined in this process,” Scalise added.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.