Originally published by David L. Reisman.
The saga of the U.S. Customs and Border Protection’s (CBP) ten-year effort to amend its interpretation of key components of the Jones Act continues. After failed attempts to expand the scope of the Jones Act’s prohibition on activities by non-coastwise endorsed vessels in 2009 and 2017, CBP recently published a notice of proposed modification and revocation of certain ruling letters interpreting the Jones Act (see https://liskow.sharefile.com/d-s45a327d7ae7441e9). Unlike its recent, unsuccessful efforts to amend its interpretations, the current proposal attempts to expand one prohibition while narrowing another.
Background
The Jones Act, in general terms, prohibits non-coastwise endorsed vessels from engaging in the “transportation” of “passengers or merchandise” between “coastwise points”. A coastwise point is defined as any point/location within the territorial waters of the United States, i.e., all points/locations landward of the three-mile belt surrounding the coast of the United Stated and its island territories and possessions (including Puerto Rico, but generally excluding American Samoa, Northern Mariana Islands and the Virgin Islands), as well as artificial islands (platforms and similar structures), mobile drilling rigs and vessels on the Outer Continental Shelf (OCS) which are “permanently or temporarily attached to the seabed for the purpose of exploring for, developing or producing resources therefrom”. The key inquiries in a Jones Act analysis, therefore, are: (i) passengers/merchandise, (ii) transportation, and (iii) coastwise points. The CBP now proposes to modify its historical interpretation of merchandise and transportation.
Merchandise/Vessel Equipment
Vessel equipment is not merchandise. Historically, the CBP (and its predecessor, the United States Customs Service) held that pipeline related equipment carried on a vessel and which was used in the activity in which the vessel was engaged (i.e., used “on or from” the vessel) constituted “vessel equipment” rather than “merchandise”. For example, pipe, pipe connectors, spool pieces, manifolds and other similar items that would, or might, be installed by that vessel, were deemed vessel equipment and not merchandise. Now, however, the CBP seeks to narrow its interpretation of vessel equipment to include only items which are “necessary and appropriate for the navigation, operation or maintenance of a vessel and for the comfort and safety of the persons on board.” One factor the CBP proposes to use in evaluating whether an item constitutes vessel equipment is whether the item “is returned to and departs with the vessel after an operation is completed, and is not left behind on the seabed”. Whether the item will be used “by” the vessel, as opposed to “on” the vessel, would no longer be relevant to the “vessel equipment” inquiry. Based on these modifications, items such as pipe, pipe connectors, flanges, spools, manifolds, etc. would no longer appear to qualify as vessel equipment, as they would not be used on the vessel and will be left behind on the seabed. Accordingly, those and similar items would only be permitted to be transported between coastwise points on coastwise endorsed vessels. This would mark a major change in interpretation and would severely restrict the legal usage of foreign flagged boats and work barges.
Transportation
The Jones Act’s restrictions are triggered by “transportation”. While transportation can be easily understood in the context of placing merchandise on the deck of a boat and sailing from one point to another, the issue becomes more complicated in the context of a heavy lift operation. CBP has historically held that a non-coastwise endorsed vessel could be used for a heavy lift operation “provided that any movement of merchandise is effected exclusively by the crane and not by any movement of the vessel, except for necessary movement which is incidental to a lifting operation while it is taking place.” In other words, non-coastwise endorsed vessels have been allowed to make lifts and then, using the revolving function of the crane, rotate their loads and place them on another vessel or facility. The CBP, however, took the position that while rotating a barge on its central axis did not constitute “transportation”, swinging the barge itself (when the center of the barge shifts) did result in “transportation”. Non-coastwise endorsed sheerleg or A-frame heavy lift assets have therefore been effectively precluded from making lifts on the OCS unless the load was coming directly from or going directly to a foreign port. Citing safety concerns, CBP now proposes to modify its rulings to allow “certain lateral movements” in connection with a “lifting operation”. CBP proposes to define a lifting operation as:
the initial vertical movement of an item from a lower position to a higher position, and any additional vertical or lateral movement necessary (including incidental movement while lifted items are temporarily placed on the deck of the lifting vessel as necessary for the safety of certain lifted items, as well as surface and subsea infrastructure, and the vessels and mariners involved) to safely place into position or remove an item from the vicinity of an existing structure, facility or installation.
Under this proposal, non-coastwise endorsed heavy lift assets would be able to lift and shift a load laterally (albeit it “incidentally”), even if that requires lateral movement of the barge itself. This change would seem to open the door to the use of non-coastwise endorsed sheerlegs and A-frames to engage in heavy lifts on the OCS.
CBP will accept comments on these proposed changes until November 22, 2019. We would be happy to discuss any questions or concerns you may have in this regard.
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