I’ve written entirely too much about the Jones Act this year, but like a bad penny, it just keeps turning up in the public discourse. Last time I addressed this subject, it was over an effort by the U.S. shipping industry actually expand this pernicious and archaic protectionist law, an effort that thankfully failed thanks to some last minute interventions by a few members of the Texas congressional delegation.
That was back in May. Now, here we are four months later and the Jones Act has once again become the subject of national media coverage, this time mainly because President Trump keeps having to suspend it in order to help save lives after major hurricane events have devastated the U.S. and its territories. That sentence alone should make any observer wonder: After all,
Before we get into that, let’s review what the Jones Act actually does. Fellow Forbes contributor Ted Loch-Temziledes, in an excellent piece on the Act, sums it up thusly:
The act regulates all maritime commerce in U.S. waters and between U.S. ports. It requires that shipping of all goods transported between U.S. ports be carried out by ships under the U.S flag. The ships must be constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents. Furthermore, the steel used in any foreign repair work on a Jones Act vessel must be less than ten percent of the ship’s total weight. Waivers are only possible on a temporary basis, in cases involving national defense, or other emergencies, such as hurricanes.
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On Monday, I wrote about the concerns of the offshore oil and gas industry regarding a set of last-minute Obama-era amendments to the Jones Act, and the failure of most of the Texas congressional delegation to engage on the matter. The Jones Act is a 19th century law that requires vessels carrying cargoes between U.S. ports to be U.S.-flagged and staffed by U.S. crews.
I won’t repeat the details here, other than that the industry is concerned that finalization of the proposed regulations in question, which would extend Jones Act requirements to include vessels carrying cargoes between U.S. ports and offshore oil and gas rigs and platforms, would result in a lack of needed shipping capacity and create needless delays in offshore development.
This morning, word came from the U.S. Customs and Border Protection Service (CBP), under whose authority the amended regulations were proposed, that it will suspend and reconsider them rather than finalize them, which it had been expected to do any day now:
“Based on the many substantive comments CBP received, both supporting and opposing the proposed action, and CBP’s further research on the issue, we conclude that the Agency’s notice of proposed modification and revocation of the various ruling letters relating to the Jones Act should be reconsidered. Accordingly, CBP is withdrawing its proposed action relating to the modification of HQ 101925 and revision of rulings determining certain articles are vessel equipment under T.D. 49815(4), as set forth in the January 18, 2017 notice. “
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Photo Credit: Offshorepost.com
Battles tend to be pretty noncompetitive when only one side engages in the fight, and we see that happening right now in a dust-up over a last-minute action taken by former President Obama related to the Jones Act, an archaic 19th century law that mandates that only U.S.-flagged vessels are allowed to carry cargoes from one U.S. port to another.
Some background: on January 18, just two days prior to leaving office, the Obama Customs and Border Protection (CBP), which has regulatory authority under the Jones Act, issued a regulation that would reverse 40 years of court rulings by extending Jones Act flagging requirements to the various kinds of ships and barges that move equipment between ports and offshore drilling rigs and platforms. This move, like so many last-minute regulatory actions taken by the past Administration, was placed on a fast track designed to minimize stakeholder engagement that is required under the Administrative Procedures Act.
Had Trump officials not chosen to intervene, the original 30-day public comment period would have expired on Feb. 17, allowing CBP to issue a final rule just 30 days afterwards. As things stand, the 60-day extension of the comment period expired on April 18, and so CBP could issue a final regulation in the next handful of days.
So, you ask, why is this important? Well, first because offshore oil and gas producers don’t believe there currently exists an adequate number of U.S.-flagged vessels necessary to service the industry at its current level of activity, which is depressed by historical standards. And second, because the policy flies in the face of the stated goals of the Trump Administration to increase domestic energy production, largely by the elimination of last-minute Obama-era regulations just like this one.
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