Coast Guard bill closes Jones Act loophole

Before breaking for summer recess, a House-Senate Conference Committee signed off on the Coast Guard’s fiscal year 2005 budget. It authorized $8.2 billion for Coast Guard operations and new equipment.

The big news for the marine industry was that it contained language to close the Jones Act lease-financing loophole. It also brought towing vessels under Coast Guard inspection.

The marine industry has been working since 1996 to fight what it called a major threat to billions in investments made by U.S. operators in Jones Act vessels. Congress approved a change in the law in 1996 that was meant to expand lease-financing sources for Jones Act vessels. At the same time, Congress did not want to change the requirement that these vessels must be built in the U.S. and owned and operated by U.S. citizens. The marine industry, led by the American Waterways Operators, the Offshore Marine Service Association and others, cried foul saying that the expanded financing was instead permitting foreign operators to  gain a foothold in the U.S. Jones Act vessel market.

The final fiscal 2005 Coast Guard Authorization Act changed the requirements for coastwise endorsements. The change “protects U.S.-owned, -flagged, and –crewed vessels by clarifying that foreign firms can finance, but not operate, ships in the coastwise trade,” the House said in a summary of H.R. 2443. It also grandfathered in certain foreign-chartered vessels that are currently permitted to operate in U.S. waters.

“We consider this a very big victory for the U.S.-flag fleet and a victory for the many maritime groups that came together,” said Ken Wells, president of Harahan, La.-based OMSA. “When we had to come together and rally around the Jones Act, the industry did.”

Wells said this should put an end to arrangements such as Rigdon Marine LLC’s deal with France-based Groupe Bourbon. Groupe Bourbon is providing up to $125 million in financing to Rigdon for the construction of up to 10 210’×75’ diesel-electric platform supply vessels — almost 100 percent of the construction costs. The deal called for the operation and chartering of the vessels in the U.S. market by Rigdon with Groupe Bourbon marketing the vessels internationally through its maritime group. So far, two boats have been delivered with a third scheduled for delivery in July.

“We believe it will now be impossible for Groupe Bourbon to do a similar deal such as Rigdon’s in the future,” said Wells, who added that OMSA is urging the Coast Guard to continue to study whether the arrangement violates ownership requirements for U.S. documentation. “We think the Coast Guard needs to look at whether this constitutes [foreign]control over the vessels.”

Rigdon officials have maintained that the issue has been resolved since financing for the boats was obtained through a U.S. subsidiary of Groupe Bourbon.

The authorization act also gave the Coast Guard the authority to establish regulations requiring the inspection of towing vessels and governing the maximum hours of service for towing vessel crewmen.

Included in the Coast Guard budget authorization is $1.1 billion for the Integrated Deepwater System, which will put the program on track for a 15-year timeline, five years ahead of the original 20-year schedule.

          — David Krapf

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