Bill aims to close Jones Act ‘loopholes’

Newly proposed legislation in Congress would make it tougher for foreign vessels and their crews to work in the U.S. offshore energy sector.

The bill, Close Agency Loopholes to the Jones Act, was introduced on Wednesday by U.S. Rep. John Garamendi, D-Calif. It attempts to terminate 50 years of so-called “letter rulings” issued by U.S. Customs and Border Protection that effectively function as short-term Jones Act waivers for foreign shipowners.

Garamendi argues that CBP has not properly used its authority to issue such rulings and has been lax in penalizing carriers that take advantage of them, pushing aside American mariners and ancillary maritime jobs in the U.S. in favor of foreign workers.

“Congress has stood on the sidelines while federal regulators made bad decisions that erode crucial protections for the American worker,” Garamendi said in introducing the bill. “The U.S. government should do everything in its power to prevent foreign vessels from paying poverty wages to take jobs from Americans working in our maritime industry. Sadly, it has largely enabled it instead.”

Language in the bill notes that in December 2019, CBP published a bulletin of decisions that revoked “a handful” of the agency’s interpretations over the past 50 years after recognizing that their initial analyses were inconsistent with the Jones Act. The Jones Act requires the use of U.S.-built, -crewed and -owned vessels to move cargo between two U.S. points.

“However, the 2019 decision still left in force many ruling letters inconsistent with the Jones Act and original congressional intent, espousing the same unlawful doctrines, revoked others that properly interpreted the Jones Act, and created several new loopholes that purport to immunize much of the same foreign vessel activities that are now, and have always been, prohibited under the Jones Act,” the bill states.

Some “loopholes” that have been created, according to the legislation, and that it intends to close include:

• The “oceanographic research vessel” loophole, which allows foreign vessels engaging in seismic-blasting and similar pre-construction activities for offshore energy development in the U.S. Exclusive Economic Zone (EEZ).
• The “vessel equipment,” “lifting operations” and “installation vessel” loopholes, which allow foreign vessels with cranes and similar equipment to move building materials into place to construct offshore energy development in the EEZ.
• The “paid out, not unladen” loophole, which allows foreign vessels to transport and install undersea cable between the mainland United States and fixed points such as offshore platforms on the Outer Continental Shelf (OCS).
• The “decommissioning” loophole, which allows foreign vessels to decommission offshore platforms on the OCS.
• The “seabed sample” loophole, which allows foreign vessels to take samples from the seafloor on the OCS for offshore energy development.
• The “pristine seabed” loophole, which allows foreign vessels that artificially place rocks or other aggregates — known as “scour protection material” — on the seafloor of the OCS for offshore energy development.

The legislation would require foreign vessel operators, prior to engaging in operations on the OCS, to file a notification with the U.S. Department of Homeland Security describing the activities and operations to be performed, and to identify ruling letters issued by the agency that have approved the use of a foreign vessel in similar operations.

It also authorizes CBP to penalize foreign-flagged vessels operating on the OCS under an alleged Jones Act exemption for failing to notify the federal agency.

The legislation, if it gains traction, would likely get strong pushback from energy companies. Such companies rely on CBP letter rulings for operations that require foreign vessels due to a lack of U.S.-owned and U.S.-built vessels that are able to perform those operations.

“You can’t take decades of precedent and change it overnight without substantial disruption,” Charlie Papavizas, who chairs the maritime practice at the law firm Winston & Strawn, told FreightWaves. Papavizas, who supports the Jones Act, works with clients that make use of CBP letter rulings.

“The entire oil and gas industry has grown up with certain conditions that allow for Jones Act interpretation, and it can’t be changed without causing harm to the oil and gas industry and the offshore wind industry as well.”

Related articles:

• Biden underscores support for Jones Act
• Jones Act waiver for Puerto Rico relaxes rules on foreign tankers
• US Customs proposes relaxing Jones Act restrictions

 Click for more FreightWaves articles by John Gallagher.

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