The updated interpretation of the Jones Act goes into full effect today, February 17, 2020, as the gulf coast braces for the act's impact on the oil and gas and industry.
On December 11, 2019, Customs and Border Protection (CBP) finalized the changes to the controversial act which requires merchandise shipped between U.S. ports to be transported on ships that are built, owned, and operated by United States citizens or permanent residents. Since the Jones Act directly affects how offshore oil and gas structures are built, maintained and dismantled, the new interpretation will play a direct role in operations in the Gulf.
The December 11th finalization modifies several Jones Act-related rulings but primarily focuses on what constitutes "vessel equipment" and the clarification of specific "lifting operations".
Previously, CBP created an intricate framework that determined which objects loaded on offshore construction vessels are "cargo" (subject to the Jones Act) or "vessel equipment" (free to be carried by any ship).
The term "Vessel Equipment" will now be defined more generally as "all articles or physical resources serving to equip the vessel, including the implements used in the vessel's operation or activity." The items considered necessary and appropriate for the operation of the vessel are those items carried by and integral to the function of the vessel. These items may include "items that aid in the installation, inspection, repair, maintenance, surveying, positioning, modification, construction, decommissioning, drilling, completion, workover, abandonment or other similar activities or operations of wells, seafloor or subsea infrastructure, flow lines, and surface production facilities." Overall, the most recent interpretation leaves the specific definitions of what "vessel equipment" means to be determined on a future case by case basis.
Aside from the "vessel equipment" definition issue, the CBP also addressed their interpretation of what constitutes coastwise transport in the context of offshore heavy lifts. Previously, CBP ruled that foreign-flag crane ships could pick up a cargo that had been carried from a U.S. port by a U.S. ship, rotate it on the central axis, then install the item at a U.S. offshore site. However, the crane ships in action could not move horizontally with the load suspended. This guidance caused safety concerns and under the new finalization, horizontal movement is now allowed.
The CBP closed the comment period concerning these changes on November 2, 2019, in preparation for this finalization. All of the alterations made in December concerning the Jones Act can be found on page 84 of the CBP's bulletin.
Gulf Marine Contractors (GMC) is a lead logistics provider to the offshore energy industry in the Gulf of Mexico. If your Gulf of Mexico operation involves foreign-flagged or non-coastwise qualified vessels, GMC can assist by providing advisory and compliance services, including obtaining advisory opinions and formal rulings from US Customs and Border Protection.