Will new Jones Act enforcement division help?

In July, U.S. Customs and Border Protection (CBP) announced the creation of the National Jones Act Division of Enforcement (JADE).

CBP said that the mission of JADE will be to assist them and industry partners on issues concerning coastwise trade, with the goal of being a clearinghouse for coastwise trade issues. Exactly what this means to the offshore oil and gas industry is not clear.

The Jones Act of 1920, also known as the Merchant Marine Act, has long been considered the primary U.S. statute for promoting, regulating and protecting commerce in U.S. waters. Among other requirements, vessels that transport passengers and merchandise between U.S. ports must be U.S.-flagged, -built and majority U.S.-owned.

Years of ruling letters by the CBP’s Office of Regulations and Rulings has established the parameters by which vessels may operate within the Jones Act. However, the act continues to be a hot political issue. Recent penalty assessments have resulted in some questions as to CBP’s position with respect to whether certain operations continue to be in compliance with the Jones Act as established through ruling letter precedent.

Many of these areas of uncertainty are related to oil and gas operations on the Outer Continental Shelf in the U.S. Gulf of Mexico and the industry’s reliance on the guidance provided by longstanding CBP rulings.

Currently it’s not clear if JADE will be used primarily for enforcement by reporting suspected violations to it. This would likely be met with some skepticism from foreign-flag vessel interests. On the other hand, if the primary purpose of JADE is to simply serve as a liaison with all U.S. and foreign-flag components of the offshore industry and engage in open discussions as to whether certain operations are in compliance with the Jones Act, then JADE may end up being beneficial to many in the offshore industry. Offshore operators must often react quickly to offers to bid certain contracts or to award certain contracts on short notice, without the ability or the time to apply for and receive any formal ruling letter, a process that can take up to 90 days or longer.

Michael Hebert, JADE’s program manager, has said that JADE’s focus is on education and outreach and its goal is to help businesses avoid penalties by ensuring that they understand the regulations and how they apply to their particular operations.

About the author

Scott Jenkins

Scott Jenkins is head of the admiralty and maritime practice group at Jones Walker in New Orleans. Email him.

2 Comments

  1. Avatar

    The Jones Act does more than support the US offshore industry. Coastwise shipping also includes commercial fishing and shipping between US ports. Cargo to Alaska, Puerto Rico, American Samoa , Hawaii and coastwise barges. Without the Jones Act, the owners bribing US senators don’t realize the cheap Chinese tugs and ships that come here will be owned by foreign owners, too. All built, run and captained by people familiar with their home regulations, not ours. Maybe Bangladesh or the Philippines should build and run our ferries. They have such a good record.
    Boats, ships, barges, and tugs operating in US waters and between US ports have to be built in US shipyards, manned by licensed US mariners and meet US regulations. In WWII we built more ships than all the navies in all the world before that time. With the next naval war looming on the horizon, what will we do without the skilled personnel to train the masses we may need?
    No shipyards or ports in Arizona, I guess.

  2. Avatar

    The nature of warfare has changed and we don’t need the merchant marine for troop transport.We have aircraft carriers, nuclear missile carrying submarines, C 130 transport planes, foreign military bases in place, all kinds of missiles. We don’t need the merchant marine for national defense .The effect of the Jones Act is much more severe and an immediate and ongoing problem. Trade between territories should be as simple as between states. We don’t need an internal US tarrif.

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