U.S. Customs and Border Protection Decision Makes Substantial Changes Affecting the Offshore Industry

Jonathan K. Waldron and Stefanos N. Roulakis

U.S. Customs and Border Protection (“CBP”) issued a significant decision on December 19, 2019, which will substantially alter how certain operations conducted by coastwise and non-coastwise vessels can be conducted offshore in the oil and gas and wind industries. The changes become effective on February 17, 2020. Stakeholders should examine this decision to determine how it will impact their operations.

NEW DEVELOPMENT

On December 19, 2019, CBP issued its decision in the Customs Bulletin entitled “Modification and Revocation of Ruling Letters Relating to CBP’s Application of the Jones Act to the Transportation of Certain Merchandise and Equipment Between Coastwise Points” (the “Notice”). Available here. The Notice clarifies CBP’s position on whether certain items constitute “vessel equipment,” which is not “merchandise” and may be transported by non-coastwise qualified vessels. The Notice also contains a section clarifying that “lifting operations” are not “transportation” within the meaning of the Jones Act. In short, the Notice eliminates previous erroneous decisions that allowed non-coastwise qualified vessels to transport items that should have been considered merchandise and not “vessel equipment” under the Jones Act. The Notice also returns CBP to the position that it held for decades that lifting operations may be conducted by non-coastwise qualified vessels.

BACKGROUND

In January 2017, CBP proposed a notice that would have overturned decades of precedent with regard to offshore operations potentially subject to the Jones Act. This notice, which was published in the CBP Customs Bulletin, proposed the modification of approximately 25 CBP rulings that delineated the difference between “equipment of the vessel,” the transportation of which does not implicate the Jones Act, and “merchandise,” which may only be transported by qualified vessels under the Jones Act. CBP withdrew this notice on May 10, 2017. Since then, regulatory officials engaged stakeholders in dialogue to resolve the issues raised in the notice.

The Notice also addressed issues related to lifting operations. Since at least 1983, CBP has held that a stationary, foreign-flag crane vessel may load and unload cargo as well as construct or dismantle a marine structure in compliance with the Jones Act. In 2012-2013, CBP issued what have become known as the “Koff Rulings” (HQ H225102 (September 24, 2012); HQ H23542 (November 15, 2012); and HQ H242466 (July 3, 2013)), which held that any movement of a vessel, even a short distance, while a topside is suspended from its crane and off its central axis for safety reasons is a violation of the Jones Act because in the Koff Rulings, this movement of the vessel is interpreted by CBP as providing part of the transportation of the topside between two points in the United States.

CBP issued its proposed Notice on October 23, 2019. There were 37 commenters to the Notice. CBP responded to the comments it received and clarified some points, but there were no substantive changes between CBP’s proposal and the Notice itself.

ANALYSIS

Vessel Equipment

Historically, CBP used a “Mission of the Vessel” concept to justify certain installation, repair, and maintenance work subsea. This concept was applied over broadly, which allowed non-coastwise qualified vessel to perform some of these activities that should have been reserved to Jones Act vessels. The Mission of the Vessel concept was revoked by the Notice and replaced with a new “Vessel Equipment” interpretation. Under this interpretation, the scope of vessel equipment includes items, which are “necessary and appropriate for the navigation, operation, or maintenance of a vessel and for the comfort and safety of the persons on board.”

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Note from the Editor

 

Thomas H. Belknap Jr.

As another year comes to a close, it is a perfect opportunity to evaluate the challenges and opportunities that we faced—and hopefully, embraced and overcame—as well as the goals we will set for the year ahead. Whether in the personal or professional realm, in the maritime industry or beyond, a good team is always greater than the sum of its parts.

In this final Mainbrace edition for 2019, we take a look at progressive topics involving the ever-developing legal, regulatory, and financial landscape for autonomous vessels, as well as current developments regarding climate change and renewable energy in the maritime industry.

We also revisit key discussions involving insolvency-related judgments under chapter 15; exercising maritime liens against cargo and sub-freights; effectively utilizing personal jurisdiction matters; and the reach and limitations of U.S. forfeiture law. All of these timely articles remind us that the maritime industry continues to evolve, grow, and change—sometimes slower than we’d like, and other times at lightning speed—and we must therefore continue to work together to understand and safely adapt to important shipping developments as they occur.

We also highlight some of the recent accomplishments, recognitions, and newsworthy developments both within our Maritime group and our Firm as a whole. We are incredibly proud of our Blank Rome family of attorneys and professionals for working diligently every day to ensure that our clients, colleagues, and communities are valued and appreciated, and we are humbled and honored to receive recognition from our clients, peers, and the legal industry in doing so.

May the final weeks of 2019 bring peace and prosperity to you and yours during the holiday season and new year celebrations. We look forward to continuing our quarterly Mainbrace editions in the year ahead and working with you in 2020 and beyond.

EDITOR, Mainbrace
THOMAS H. BELKNAP JR.
Partner
212.885.5270
tbelknap@blankrome.com

Exercising Maritime Liens against Cargo and Sub-Freights

Thomas H. Belknap Jr.

Vessel owners rarely carry cargo for their own account. More commonly by far, a vessel owner will charter its vessel to another party to carry their (or their sub-charterer’s) cargo. The contracts can vary widely—from voyage charters or contracts of affreightment to time charters and negotiable bills of lading (not to mention the more complex arrangements that one often sees for container cargos). But in most instances, vessel owners are in the business of transporting cargo on behalf of others and, all going well, of being paid to do so. This article is about one mechanism the vessel owner may use to ensure that it gets paid: the maritime lien against cargo.

The Impracticalities of Settled U.S. Maritime Law

It has been settled for over a century under U.S. maritime law that a shipowner has a maritime lien against cargo for charges incurred during the course of its carriage. As the Supreme Court stated in its 1866 decision in Bird of Paridise,1 “Ship-owners, unquestionably, as a general rule, have a lien upon the cargo for the freight, and consequently may retain the goods after the arrival of the ship at port of destination until the payment is made.” Traditionally, a maritime lien against cargo for freight and demurrage was considered a “possessory” lien, meaning that the lien is lost upon the delivery of the cargo to the consignee. To exercise its maritime lien, in other words, the vessel owner was expected to retain possession and control of the cargo until payment; if no payment was received, it needed to enforce its lien by maritime arrest while the cargo remained in its possession. Continue reading “Exercising Maritime Liens against Cargo and Sub-Freights”

Enforcement of an Insolvency-Related Judgment Does Not Require Recognition under Chapter 15

Michael B. Schaedle and Evan Jason Zucker

In EMA GARP Fund v. Banro Corporation1 (the “U.S. Action”), the U.S. District Court for the Southern District of New York dismissed a lawsuit filed by shareholders of an insolvent Canadian company, Banro Corporation (“Banro”), and its former CEO, finding that, under the principles of comity, an approved Canadian plan of reorganization released all claims against the defendants. In so ruling, the court summarily rejected a longstanding principle that recognition of a foreign bankruptcy proceeding under chapter 15 of the U.S. Bankruptcy Code is a prerequisite to the enforcement by a U.S. court of a judgment entered in a foreign bankruptcy proceeding.

The Banro Insolvency Proceeding

Banro was a public corporation headquartered in Canada and incorporated under Canadian law. Banro was involved in the exploration, development, and mining of gold in the Democratic Republic of the Congo. Banro faced liquidity challenges in 2017, eventually becoming insolvent and in need of additional liquidity to fund operations. On December 22, 2017, under the Canadian Companies’ Creditors Arrangement Act (“CCAA”), Canada’s equivalent to chapter 11 of the U.S. Bankruptcy Code, Banro initiated a restructuring proceeding (the “CCAA Proceeding”) in the Ontario Superior Court of Justice (Commercial List) (the “Canadian Court”). On that same date, trading in Banro’s securities on the New York Stock Exchange was suspended. Continue reading “Enforcement of an Insolvency-Related Judgment Does Not Require Recognition under Chapter 15”

Blank Rome Honored as a 2019 Best Law Firm for Women by Working Mother

Blank Rome was named one of the 2019 Best Law Firms for Women by Working Mother magazine, marking the third year that our Firm has been recognized for its commitment to creating one of the best women-friendly workplaces in the United States. The winning law firms were honored at the Best Law Firms for Women Gala, which was held at the Peninsula Chicago on September 19, 2019.

Working Mother’s annual list honors 60 U.S. law firms for their policies in the advancement of women, notably with regard to key factors such as women representation, flexibility, paid time off and leaves of absence, leadership, and compensation and advancement, as well as the development and retention of women. In addition to these key factors, this year’s list particularly recognized Blank Rome for our 2018 Women’s Leadership Summit, which assembled 120 women lawyers who collaborated to “hack” the topics of leadership, diversity and inclusion, and delivering value and increasing organizational efficiency.

For more information, please visit Blank Rome Honored as a 2019 Best Law Firm for Women by Working Mother.

Blank Rome Named to Forbes List of America’s Top Trusted Corporate Law Firms

Blank Rome was named to Forbes’ inaugural America’s Top Trusted Corporate Law Firms list. In particular, Forbes recognized our Firm’s work in Banking & Financial Services as our “most recommended practice area.” Blank Rome is proud to join this select group of leading law firms ranked in this year’s list.

According to Forbes, the magazine partnered with Statista, a market research company, to create its first-ever list of 243 top U.S. corporate law firms, ranging from firms well known in the corporate and legal worlds to boutique firms that focus on very specific branches of the law.

For more information, please visit Blank Rome Named to Forbes List of America’s Top Trusted Corporate Law Firms.

Blank Rome Highly Ranked in U.S. News–Best Lawyers® 2020 “Best Law Firms”

Blank Rome’s Maritime practice was ranked in the top national and regional tiers for Admiralty & Maritime Law in the 2020 “Best Law Firms” survey by U.S. News & World Report–Best Lawyers.® Overall, the Firm was nationally ranked in 30 practice areas and regionally ranked in 82 practice areas.

Blank Rome’s highly ranked services and industries in this year’s survey include:

SERVICES

INDUSTRIES

For more information, please visit Blank Rome Highly Ranked in U.S. News–Best Lawyers® 2020 “Best Law Firms.