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.
