Providing coverage of Alaska and northern Canada's oil and gas industry
May 2017

Vol. 22, No. 21 Week of May 21, 2017

CBP withdraws new Jones Act proposal

U.S. Customs and Border Protection has withdrawn a proposal that would have placed vessels engaged in the repair of offshore oil and gas installations within the constraints of the Jones Act. The Jones Act requires vessels transporting passengers or merchandise between U.S. ports to be manufactured, owned and flagged in the United States.

In a 1976 ruling the Customs Service confirmed a longstanding position that a vessel engaged in the laying of an offshore pipeline is not engaged in coastwise trade and can, therefore, be foreign flagged. That ruling included a clarification that a vessel engaged in pipeline repair would also be exempt from the Jones Act, even although the vessel may be transporting material required for the repair work. The agency included within that exemption vessels engaged in connecting pipelines to offshore platforms, and conducting platform repairs, provided that materials not required for that work are not delivered to the platform.

In January of this year CBP issued a proposed order, confirming that offshore repair work is not coastwise trade but saying that the carriage of materials for the repairs does constitute the transportation of merchandise. Thus, an operator of an offshore repair operation would require a U.S. vessel to carry repair materials to the site of the operation. The agency said that changes in the pertinent laws since 1976 had made the 1976 interpretation of the law invalid.

On the other hand tools used to conduct an offshore repair are viewed to be vessel equipment and, as such, would not trigger Jones Act vessel ownership restrictions, the proposed order said.

On May 10 CBP announced that, after receiving more than 3,000 comments, both supporting and opposing its proposal, it was withdrawing its January notice. The American Petroleum Institute promptly issued a statement welcoming the proposal withdrawal.

“By rescinding the proposal, CBP has decided not to impose potentially serious limitations to the industry’s ability to safely, effectively, and economically operate,” said API Upstream Director Erik Milito. “The responsible development of America’s abundant oil and natural gas resources is a critical part of a forward-looking energy policy that will secure our energy future and help meet our nation’s energy needs.”

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