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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