The Jones Act requires the use of U.S.-built, crewed, and owned vessels to ship merchandise between two U.S. points. Further, the Outer Continental Shelf Lands Act of 1953 (43 U.S.C. 1333) extends the Jones Act to the U.S. territorial sea and declares installations permanently or temporarily attached to the seabed for the purposes of exploration, development, or production of natural resources to be points in the United States. As a result, merchandise transported to or from oil and gas facilities located on the U.S. Outer Continental Shelf is required to be carried by Jones Act-qualified vessels. The U.S. Bureau of Customs and Border Protection (CBP) is charged with enforcing the Jones Act.
Congress drafted the Jones Act to restrict the Administration or bureaucrats’ ability to issue waivers. In fact, only the Secretary of Defense or the Secretary of Homeland Security can issue Jones Act waivers, These waivers can only be issued after the Secretary has certified the waiver is necessary for the national defense of the U.S. Additionally, in the case of the Secretary of Homeland Security, waivers must be predicated by a termination from the Maritime Administrator that no U.S. vessels are available.
While waivers of the Jones Act cannot be issued by CBP, CBP does have the authority to issue interpretive rulings for specific transactions under the Jones Act. In practice, this authority means from time to time interested parties will have questions whether certain movements are covered by the Jones Act or if certain pieces of equipment would be considered merchandise. In these cases, the party involved writes to CBP to request an interpretive ruling to determine if the Jones Act applies to that specific transaction.
CBP is charged with responding to these requests with a letter dictating the official position of CBP on the transaction described in the letter ruling. These letter rulings are only applicable to that transaction and “substantially identical transactions.” Additionally, these letter rulings are not supposed to set precedence, and cannot override the unambiguous language of the Jones Act.
Unfortunately, while letter rulings are only applicable to the specific transaction, CBP has used letter rulings to set precedence, basing its findings on one letter ruling on the findings found in previous letter ruling. The result has been a weakening of the Jones Act over time with many new letter ruling providing foreign vessels the ability to conduct more activities which the Jones Act reserves for U.S.-built, crewed, and owned vessels.
Additionally, little enforcement has been conducted parties using existing letter rulings as justification for transactions which do not have the same fact pattern. This laxed enforcement gives foreign vessels the ability to conduct operations which the Jones Act dictates should be conducted by U.S. vessels.
Unlike other government decisions, CBP is not required to seek comments from the public before issuing these letter rulings. However, Congress created a special process that CBP is required to use to revoke or modify a letter ruling. This process requires CBP to seek public comments prior revoking or modifying a letter. In practice, this means that those who want to continue using foreign vessels as permitted by faulty letter rulings have time to apply political pressure on CBP with the hopes of halting the revocation effort.
Unfortunately, CBP has issued numerous letter rulings that are directly contrary to the Jones Act. These unlawful interpretations have stifled investment by U.S. vessel owners and operators, shipyards, and other suppliers and have prevented U.S. mariners from work opportunities. CBP has three times attempted to revoke or modify letter rulings with incorrect interpretations of the Jones Act, however, only one of those attempts was completed by CBP. When completed that revocation also included new “interpretive guidance” which OMSA believes will provide foreign vessels with another justification for completing operations the Jones Act reserves for U.S. vessels.
