Jones Act enchilada might be too big for CBP to swallow

Where you stand on the idea of banning international offshore construction vessels from the Gulf of Mexico probably depends on where you are in the world – or maybe not.

As highlighted several times recently by OSJ, maritime organisations in the US strongly support a decision by US Customs & Border Patrol (CBP) to revoke what the Offshore Marine Service Association (OMSA) describes as "errant letter rulings" and realign interpretations of the Jones Act with what it describes as the 'true text' of the statute.

Bodies such as the International Marine Contractors Association (IMCA) warn of dire consequences. It says its members' clients – the oil majors – are concerned about the changes. Even the American Petroleum Institute is said to have doubts about an idea that could, IMCA claims, see costs increase in the Gulf of Mexico at a time when the industry is desperately trying to reduce costs. Projects could be delayed, it says. CBP has been 'sloppy' in the past, it is argued, and has created confusion with interpretations of the Jones Act, but the recent revocations will have unintended consequences.  

If OMSA gets its way, come June, when CBP will have assessed input from both sides in the argument, the offshore vessel landscape in the Gulf of Mexico could change overnight. It believes that there are sufficient US-flag, Jones Act-qualified vessels to carry out all of the subsea construction/inspection, maintenance and repair (IMR) work in the Gulf of Mexico.

It also highlights the fact that it isn't all doom and gloom for international vessel owners – OMSA says CBP isn't proposing changes to its interpretation of the Jones Act as it affects heavy lift vessel operations, for instance, or its so-called 'paid-out, not unladen' analysis that permits transportation of pipe by an international vessel in connection with a pipelay operation. It says accommodation support vessels would not be affected. "The CBP Notice does not affect the operations of these vessels as they are not used to transport merchandise," it says. Although the proposed action does not affect diving operations – because CBP's position is that this is permissible repair and installation activity – dive support work would be affected if an international vessel is used to transport materials or equipment to the site. The proposed revocation indicates that the transportation of materials and tools used to intervene in a well are 'merchandise', so intervention activity must either be conducted from a Jones Act-qualified vessel or the merchandise must be transported to the vessel that is conducting the well intervention or stimulation activity by a Jones Act-qualified vessel. This would mean there would be greater need for tandem operations, with one vessel transporting equipment and a second installing it.

OMSA says its members have invested billions of dollars in new ships in recent years in anticipation of just the kind of changes that are being proposed, although it seems unlikely that they would really have done so without a cast iron guarantee from CBP that international vessels definitely would be banned. In fact, like OSV owners everywhere, owners in the US invested billions of dollars in new ships because they expected the market to continue to boom, not crash.

IMCA says its members have also invested billions of dollars in vessels and equipment. It warns that even if more US vessels start winning work in the Gulf of Mexico the offshore supply chain in the US will be hit and US jobs lost. If CBP sticks to its guns, and OMSA gets its way, where do owners of non-Jones Act vessels who are already in the Gulf of Mexico on long-term charters stand? How would contractors be placed contractually? Will projects that are being tendered now need to be retendered? No-one really seems to know how it will fall out.

In truth, what seems at first sight like a relatively straightforward decision based on an understandable desire get people back to work is fraught with complications and the way offshore oil and gas infrastructure is installed and maintained in the Gulf of Mexico undoubtedly would change. IMCA argues that if international vessels are banned, a way of working that has helped bring about enormous, positive change in the deepwater Gulf of Mexico over the last couple of decades – that has resulted in significant job creation in the US – would be broken up.

OMSA says the consequences of inaction by CBP would be to "put foreign companies first and American companies last," discourage investment in US infrastructure and "proliferate tax evasion practices" by owners of Norwegian vessels (a claim that Norwegian owners strongly object to, that has nothing whatever to do with the question CBP is actually addressing).

Unless CBP kicks the issue into the long grass again by addressing it as a rule-making issue, the revocations could end up creating more work for lawyers but leave the industry faced with years of uncertainty. Unfortunately, OMSA has muddied the water about what is actually an incredibly important issue, which could have far-reaching implications for the OSV industry worldwide. The issue is actually about interpretation of US shipping law, not tax evasion, immigration or national security, however well these subjects play to politicians in the US right now.