US Customs Withdraws

In 2009, United States Customs and Border Protection (USCBP) announced its’ intention to revoke letter rulings that allowed oil and gas companies to use foreign-flagged ships in the Gulf of Mexico. These letters exempted the companies from adherence to the Jones Act. The Act requires that ships carrying merchandise from U.S. port to another be owned by U.S. citizens, be built in the U.S. and be crewed by U.S. citizens. USCBP had been issuing these exemptions since the 1980’s. For offshore oil and gas operations, the foreign offshore supply vessels are often more readily available at a lower price to assist with the construction, maintenance, and repair offshore oil facilities. When the revocation of the letters was proposed, there would have essentially expanded the definition of “merchandise” under the Jones Act. “Vessel equipment,” or the equipment necessary for the maintenance, operation, and navigation of a vessel has been exempt from the definition of “merchandise.”  This set of definitions provided the basis for the letter rulings. If USCBP determined that “vessel equipment” was part of “merchandise” then they would be able to revoke certain rulings.

Once USCBP decided to review and possibly revoke the letter rulings, the U.S. marine industry began to invest money to develop new ships to fill the void if foreign vessels could no longer be used. The U.S. marine industry advocated for the change in policy as it would create maritime jobs.  There would be a greater need for American shipbuilders and mariners.  A combination of oil companies, gas companies, and international maritime associations, argued that such a change would slow down offshore energy development and cause economic losses in the Gulf region with the loss in production. With less production, the jobs gained in the maritime sector could be lost in their sector. For eight years no action was taken, then in January 2017, USCBP again proposed a review of the rulings with the intention of revoking them.  In May 2017, the Customs Bulletin stated those plans had been withdrawn pending more regulatory review. Numerous comments were sent to USCBP advocating both sides of the argument, and that led to a determination for further consideration.

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