US Customs postpones potential Jones Act changes

In a sharp reversal for US offshore service companies, US Customs and Border Protection (CBP) withdrew its proposed changes to Jones Act rules that could have shut the door to foreign-flag operators in the Gulf of Mexico.

CBP has decided to withdraw a proposal that would have reinterpreted 30 years of decisions under the Jones Act. If approved, the ruling would have essentially taken away exemptions that have benefited foreign vessel operators supporting the energy, cable repair and maintenance, and other business sectors.

The decision is a setback for US-flag operators, shipbuilders and allies who had high hopes the Trump administration’s “buy American, hire American” mantra would preserve one of the last policy moves under the outgoing Obama administration. Those advocates contended that stricter enforcement of cabotage rules related to offshore oil and gas work would create 3,200 new jobs and USD700 million in economic activity on the Gulf coast.

In a notice issued this week, Glen Vereb, director of border security and trade compliance for the CBP, announced the agency is withdrawing proposed actions that would have revoked Jones Act rulings on non-US-flag operators transporting oil field equipment.

The agency’s January 18 announcement of that intention spurred intense lobbying from international operators and oil companies to keep the status quo. On the other side, US operators – who had been in frequent talks with CBP for years, urging reconsideration of old rulings – pressed for final approval of the measures.

The ensuing debate led CBP to extend public comment on the proposal beyond 60 days, to April 18. In his statement Vereb noted that more than 3,000 comments poured into the agency.

“Based on the many substantive comments CBP received, both supporting and opposing the proposed action, and CBP’s further research on the issue, we conclude that the agency’s notice of proposed modification and revocation of the various ruling letters relating to the Jones Act should be reconsidered,” Vereb stated.

The retreat is a victory for the international operators and their oil industry supporters like the American Petroleum Institute, which contended that a new CBP policy would lock out foreign-flag operators and equipment to the detriment of the overall Gulf of Mexico industry.

The convoluted history of CBP Jones Act rulings in the oil patch date to 1976 with offshore construction vessel operations, and the question of whether well, pipe-laying and other equipment counted as cargo under the Jones Act or as exempted “vessel equipment.”