Category: Maritime Alerts

Customs and Border Protection Revokes New Ruling Regarding Offshore Wind

Jonathan K. Waldron and Stefanos N. Roulakis

Stakeholders in offshore wind, particularly vessel operators and project managers, should ignore a recent U.S. Customs and Border Protection (“CBP”) ruling on offshore wind. While there had been buzz about this ruling, CBP has revoked the ruling based on a misunderstanding of the facts in question in the ruling request. As such, there are no recent rulings related to offshore wind, and stakeholders should continue to examine their Jones Act compliance plans with experienced counsel and seek rulings as needed.

NEW DEVELOPMENT

A recent CBP ruling, HQ H309672 (July 15, 2020) (the “Ruling”), drew the attention of many in the industry since the last ruling relating to offshore wind was issued approximately nine years ago for the Deepwater Wind project in 2011. The Ruling related to wind farm activities occurring in the territorial sea off the coasts of Rhode Island and Massachusetts. CBP has since published a revocation notice, HQ H312773 (August 3, 2020) (the “Revocation”), which was published on the CBP website on August 12, 2020, retracting the Ruling. CBP’s stated reason for the revocation was the lack of clarity on whether the “activities would occur in the territorial sea or on the Outer Continental Shelf (“OCS”)” and that it would be best to revoke the Ruling “until the coordinates of the installation can be established.”

BACKGROUND

In 2011, CBP issued Blank Rome a ruling on behalf of the Deepwater Wind project that the use of a crane that is aboard a non-coastwise-qualified vessel to load and unload wind turbines in the territorial seas is not prohibited by the Jones Act. No rulings have been issued on an offshore wind project since the 2011 ruling. Since that time, we understand CBP has declined to rule on requests to issue a ruling on the applicability of the Jones Act to offshore wind activities occurring on the OCS and whether a wind farm foundation or other devices attached to the seabed for wind farm purposes would constitute a coastwise point under the Jones Act.

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Navigating the Maritime Regulatory Response to the COVID-19 Pandemic

Jeanne M. Grasso, Jonathan K. Waldron, Dana S. Merkel, and Stefanos N. Roulakis

Maritime stakeholders should examine key guidance documents that have been published by U.S. government agencies in response to the coronavirus pandemic. Some of these guidance documents create new opportunities for stakeholders, while others may impact operations in U.S. waters. Regardless of effect, businesses involved in maritime commerce should be aware of these updates and plan accordingly. For example, companies who depend on non-U.S. citizen crews for operations in U.S. waters should be adequately prepared to equip crew with support letters during visa interviews and transit to the United States. And, vessel owners and operators with upcoming ballast water compliance dates should examine whether installation is feasible in this climate and seek extensions to their compliance date if it is not.

EW DEVELOPMENTS

The COVID-19 pandemic and the logistical and operational challenges it has caused have raised a host of questions within the maritime industry. A number of government agencies have sought to clarify expectations and even ease some requirements for the industry. Some of these changes, such as changes to the approach to extending the compliance date for installation of ballast water management systems, were directly intended to benefit the maritime industry. Other updates, such as the U.S. entry restrictions instituted via a Presidential Proclamation, did not target the maritime industry, but the impact was felt by companies that rely on the ability to have crewmembers travel through the United States. Below is a summary of some key guidance documents that are affecting the maritime industry during this pandemic.

ANALYSIS

Visas and Entry Restrictions

On March 14, 2020, a Presidential Proclamation entitled “Suspension of Entry as Immigrants and Nonimmigrants of Certain Additional Persons Who Pose a Risk of Transmitting 2019 Novel Coronavirus” (available here) was issued, which included a travel ban for several countries. This Proclamation contained an exception for “any alien traveling as a nonimmigrant pursuant to a C‑1, D, or C-1/D nonimmigrant visa as a crewmember or any alien otherwise traveling to the United States as air or sea crew.” However, there have been significant problems for holders of B-1 visas for offshore work, which stems from differing interpretations from U.S. Customs and Border Protection (“CBP”) and the State Department. To date, industry is still experiencing difficulty with some embassies, which apparently are not recognizing that B-1 crew type visas are exempt from the Presidential Proclamation and should be considered mission critical, leading to reluctance on the part of some embassies around the world to issue these visas on an emergency basis. Support letters should be provided to crew seeking appointments and these crew type visas.

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U.S. Supreme Court Issues Safe Berth Warranty Decision

Jeffrey S. Moller

The final decision in the ATHOS I saga has recently been issued by the U.S. Supreme Court, upholding the decision of the U. S. Court of Appeals for the Third Circuit to the effect that a plain reading of the language found in the ASBATANKVOY charter form creates a warranty of safety rather than merely a duty of due diligence.

OPERATIVE FACTS

The facts were these: the voyage charterer of the fully laden tanker ATHOS I was also the owner of the refining complex in Paulsboro, New Jersey, which the vessel was approaching when its (single skin) hull was torn open by an anchor that had been lost/abandoned by some unknown vessel. The anchor was lying on the bottom of a federally-maintained anchorage ground through which the ship had to transit on its way to the berth from the federally-maintained ship channel. The anchor, which had not been previously discovered or removed by the U.S. Army Corps of Engineers, had evidently laid on the bottom with its flukes down for at least three years, during which time many ships had passed over it without incident. But, at some time prior to the ATHOS’ arrival, the anchor was somehow flipped over so that its flukes could be in position to rake the ATHOS I’s hull and tear open a number of its cargo tanks. ATHOS I’s cargo was Venezuelan heavy crude oil, which the charterer/wharfinger was importing to use in making asphalt. Because the anchorage was maintained by the federal government, the charterer/wharfinger had never expected that the anchorage would have obstructions within it so, although passage through the anchorage en route the berth commonly involved passage through the anchorage, the charterer/wharfinger never took steps on its own to conduct sonar surveys. An estimated 263,000 gallons of Venezuelan crude oil was released into the Delaware River when ATHOS I was punctured, giving rise to enormous (U.S. $180 million+) cleanup and business interruption expenses.

The vessel was the subject of two charter parties. The first was a time charter between the vessel’s owner and a fleet operating entity under which the latter agreed to exercise “due diligence” to ensure that the vessel was only sent to “safe places.” The time charterer then subchartered the vessel under a voyage charter to the operator of the Paulsboro refinery on the ASBATANKVOY form, which contained a “safe berth” or “safe berth” warranty that was not expressly limited to the exercise of due diligence. The owner of the ship was not a direct party to this subcharter. The owner of the ship remained its operator and was therefore the responsible party for the consequences of the oil spill under the Oil Pollution Act of 1990.

The origin of the anchor being unknown, the shipowner sued the charterer/wharfinger for breaches of both the contractual “warranty of safe berth” (Charterer “shall select . . .always safely afloat”) found in the ASBATANKVOY charter party and of the maritime law duty of care to properly maintain its berth and the approach(es) thereto. The United States was a party to the suit both for recovery of funds from the national Oil Spill Liability Trust Fund, which had made partial reimbursement payments to the innocent ATHOS I and her underwriters, and as the subject of a counterclaim for having failed to properly maintain the anchorage.

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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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New Visa Guidance for Crews Working on Offshore Wind Projects

Jonathan K. Waldron and Stefanos N. Roulakis

The U.S. State Department published new guidance on visas issued to crewmembers who will work aboard vessels engaged in offshore wind farm operations. Vessel owners and project managers in the offshore wind sector should examine these changes and implement internal procedures to facilitate future wind farm projects.

New Development

The State Department has updated its policy guidance in the Foreign Affairs Manual of the United States (the “FAM”) to include a visa category for offshore wind projects. Blank Rome coordinated this effort along with the relevant agencies in the U.S. government. This new guidance solves a regulatory hurdle that had been causing logistical problems for the industry by clarifying the correct type of visa that will be issued by U.S. embassies to crewmembers working on vessels on offshore wind projects.

Background

The traditional method of obtaining visas for crewmembers engaged on energy projects located on the U.S. Outer Continental Shelf (“OCS”) is to obtain a B-1 visa with an OCS annotation. Crewmembers are issued such a visa on the basis of a letter of non-applicability, which is issued by the U.S. Coast Guard (the “Coast Guard” or “USCG”) when it is determined that a vessel is owned or controlled more than 50 percent by foreign interests so that foreign citizens can crew a vessel engaged in OCS energy projects. The authority to regulate offshore wind farm energy projects was authorized pursuant to Section 388 of the Energy Policy Act of 2005, which amended the Outer Continental Shelf Lands Act. 43 U.S.C. § 1337(p)(1)(c). Nevertheless, the Coast Guard takes the position that it lacks statutory authority to regulate wind farms located on the OCS. As a result, the Coast Guard will not issue letters of non-applicability, which refusal rendered the State Department unable to issue B-1 (OCS) visas for offshore wind projects.

This has created confusion in industry as to the type of visa that an embassy will issue because crews could no longer obtain a B-1 (OCS) visa. A normal C-1/D crewman visa is not a viable option as it is only valid for 29 days. This type of visa would have provided an inadequate amount of time for the crew to conduct wind farm-related operations offshore. Such an issue could have proven to be a large impediment to the development of the nascent offshore wind sector in the United States.

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Coast Guard Issues Policy on Keel Laying Date

Jonathan K. Waldron and Dana S. Merkel

UPDATE — OCTOBER 4, 2019:

The U.S. Coast Guard issued a revised version of Determinations for a Vessel’s Keel Laid Date or Similar Stage of Construction, CVC-WI 015(2), shortly after publication of this advisory. The revised version makes no changes to the standards outlined in the guidance. However, it clarifies that the Work Instruction applies to only U.S. flag vessels.

The U.S. Coast Guard has published new guidance setting forth its interpretation of when a vessel’s keel is considered laid and building progression standards to determine what may be accepted in establishing the build date for a vessel. Shipyards and prospective shipowners and operators should be cognizant of this new guidance and its significant implications on the regulatory requirements applicable to a vessel.

New Development

The U.S. Coast Guard has issued a Work Instruction providing guidance on when a vessel’s keel is considered to be laid or the vessel is at a similar stage of construction. This guidance is intended to address law and regulations that refer to when a vessel is “new” or “existing,” “built,” or “constructed.” The Work Instruction, “Determinations for a Vessel’s Keel Laid Date or Similar Stage of Construction,” CVC-WI 015(1), was published on August 27, 2019, and is available here.

Background

U.S. law and regulation often refers to new or existing vessels or when a vessel is built or constructed to determine the applicability of newer construction, safety, and environmental standards. The definitions of these terms invariably discuss the vessels’ keel laid date or similar stage of construction. However, there has historically been scant guidance addressing when a vessel’s keel is considered laid or when a vessel can be considered at a similar stage of construction and how these terms should be applied for different regulatory purposes.

The Coast Guard has identified issues in the past with undefined structural members being placed in a shipyard without vessel construction plans in place or even intent to build a specific vessel to act as a regulatory placeholder. This is particularly a problem in the period before a newer, more stringent standard will come into effect, and shipbuilders or other companies seek to claim a keel laid date before a new standard takes effect by taking some action to start the building of a vessel with no firm planned completion date.

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Potential Impacts of Offshore Legislation on Industry

Jonathan K. Waldron and Stefanos N. Roulakis

The U.S. House of Representatives has introduced legislation that could potentially greatly alter the landscape for oil, gas, and wind installation and decommissioning activities on the U.S. Outer Continental Shelf (“OCS”). Stakeholders should examine the legislation for impacts to their operations.

New Development

The House Committee on Transportation and Infrastructure marked up and approved H.R. 3409, the Coast Guard Authorization Act of 2019 (“2019 CGAA”) on June 26, 2019. This legislation, if enacted, could have significant impacts on how oil, gas, and wind vessel activities are conducted on the OCS. Of particular note, the legislation could have an outsized effect on offshore wind in the United States, which is at a nascent stage and requires installation activities of the type contemplated in the 2019 CGAA.

Background

In January 2017, U.S. Customs and Border Protection (“CBP”) proposed to overturn decades of precedent with regard to offshore operations potentially subject to the Jones Act in its “Proposed Modification and Revocation of Ruling Letters Relating to Customs Application of the Jones Act to the Transportation of Certain Merchandise and Equipment Between Coastwise Points” (the “Notice”). The 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.

Please click here for the full client alert. 

The Supreme Court Rejects Punitive Damages in Unseaworthiness Claims

Keith B. Letourneau, William R. Bennett III, John D. Kimball, and Zachary J. Wyatte

A recent United States Supreme Court ruling held that a plaintiff may not recover punitive damages on a maritime claim of unseaworthiness. This new ruling has resolved a split among the circuits and has essentially reinforced an otherwise long-standing precedent.

On June 24, 2019, the United States Supreme Court decided Dutra Group v. Batterton, holding 6-3, that a plaintiff may not recover punitive damages on a claim of unseaworthiness. Justice Alito delivered the opinion of the Court in which Justices Roberts, Thomas, Kagan, Gorsuch, and Kavanaugh joined. Justice Ginsburg filed a dissenting opinion in which Justices Breyer and Sotomayor joined.

This case arose from a personal injury incident aboard a vessel. Christopher Batterton was working as a deckhand on the vessel, which The Dutra Group owned and operated, when a hatch cover blew open and severely injured his hand. Batterton sued Dutra, asserting a variety of claims, including unseaworthiness, and sought general and punitive damages. Dutra moved to dismiss the punitive damages claim, arguing that such damages were not available on claims for unseaworthiness. The District Court denied Dutra’s motion, and the Ninth Circuit affirmed. But the Supreme Court reversed.

The Court noted that the overwhelming historical evidence suggests that punitive damages are not available for unseaworthiness claims and that the lack of punitive damages in traditional maritime law cases is “practically dispositive.” The Court said, “because there is no historical basis for allowing punitive damages in unseaworthiness actions, and in order to promote uniformity with the way courts have applied parallel statutory causes of action, we hold that punitive damages remain unavailable in unseaworthiness actions.”

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Considerations Following the Persian Gulf Attacks

Jonathan K. Waldron and Stefanos N. Roulakis

As attacks on vessels increase the risk of shipping in the Straits of Hormuz and throughout the Persian Gulf, vessel owners and operators, as well as shippers, should review their charter parties and assess risk management plans to ensure the safety of crews and vessels transiting the Persian Gulf.

New Development

U.S.-Iranian tensions recently came to a head when four tankers were attacked off Fujairah in May, a port in the United Arab Emirates in the Gulf of Oman. This was followed up by an attack on two Japanese vessels, the M/T Front Altair and M/T Kikuko Courageous, in the Gulf of Oman on June 13, 2019. U.S. government agencies have accused Iran of being behind the attacks. Tensions continue to rise, although President Trump has called the attacks “very minor.” In the meanwhile, shipping companies are taking steps to reduce their risks transiting in the Straits of Hormuz and Gulf of Oman.

Background

The attacks and tankers in the Persian Gulf region are reminiscent of the incidents involving international shipping surrounding regional conflicts, including the “Tanker War” in the 1980s and the re-flagging of Kuwaiti vessels to the U.S. registry during the Gulf War in the 1990s. During the Tanker War period in 1984, and the eight-year Iraq-Iran conflict, both sides attacked tankers and merchant ships in the Persian Gulf. At that time, the U.S. military provided escorts to tankers, some of which carried the U.S. flag.

As regards recent tensions with Iran, since withdrawing from the Joint Comprehensive Plan of Action (“JCPOA”) on May 8, 2018, tensions between the United States and Iran have been ratcheting to their most tense level in years. These flames have been fanned by hardliners on both sides. Credible analyses have noted that the White House has been intensely working on a future strategy to address these developments. And, as a result, shipping companies operating in the Persian Gulf region have been taking additional steps to manage their risks.

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The Supreme Court Adopts a Middle of the Road Approach When Deciding a Manufacturer’s Duty to Warn in the Context of Maritime Tort Asbestosis Cases

John D. Kimball and Noe S. Hamra

 

On March 19, 2019, the U.S. Supreme Court in Air & Liquid Systems Corp. v. Devries held that, under maritime law, a product manufacturer has a duty to warn of asbestos or other hazardous parts when its own product, although not containing such hazardous parts, requires its later incorporation, and the manufacturer knows or has reason to know that the integrated part is likely to be dangerous for its intended use. The Supreme Court’s decision settles a longstanding conflict between federal and state courts regarding the applicable rule in maritime tort cases. Manufacturers of such products must take this ruling into account when evaluating product warnings.

Background

For years, federal and state courts have struggled to find consensus on the applicable rule regarding a manufacturer’s duty to warn of the danger of its products when those products later had dangerous parts added to them. Prior to Devries, courts generally applied one of three approaches.

The first approach, viewed as plaintiff-friendly, relied on mere foreseeability. Under this approach, if it was foreseeable that the manufacturer’s product would be used with another product or part, even if the manufacturer’s product did not require use or incorporation of that other product or part, then the manufacturer could face liability for failure to warn.

The second approach, viewed as defendant-friendly, relieves manufacturers of any liability if they do not make, sell, or distribute the dangerous part or incorporate the dangerous part into the product, even if the product requires incorporation of the part and the manufacturer knows that the integrated product is likely to be dangerous for its intended use (this is also known as the “bare-metal defense”).

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