Offshore Wind Energy – Jones Act Application In First CBP Ruling
On January 27, 2021, U.S. Customs and Border Protection (“CBP”) published its first Jones Act guidance ruling (“Ruling”) related to offshore wind energy production.
The Ruling considered “scour protection,” materials used in installation and construction of offshore wind turbines to protect installation foundations, and its transport by vessel to offshore sites. As is typical, CBP responded to several different scenarios proposed by the inquiring party.
CBP essentially advised on two issues. One, whether the transportation of the scour protection as described would violate the Jones Act, 46 U.S.C. §55102; and two, whether the use of non-coastwise-qualified and coastwise-qualified tug boats to transport a barge carrying scour protection violates 46 U.S.C. § 55111.
Generally, the first issue considers whether certain goods fall under the Jones Act’s transportation of merchandise element which may only be performed by coastwise qualified vessels if between “coastwise points.” Unsurprisingly, CBP found scour protection to qualify as merchandise (a broadly understood term).
To determine if the proposed transportation occurs between coastwise points, a recent change in legislation shaped the analysis. Coastwise laws apply, in part, to points in the territorial sea, which is defined as the belt, three nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters, landward of the territorial sea baseline. However, in addition, Section 4(a)(1) of the Outer Continental Shelf Lands Act of 1953 (“OCSLA”), as recently amended by the National Defense Authorization Act for Fiscal Year 2021, H.R. 6395, 116th Cong. § 9503 (2021), provides that the laws and jurisdiction of the United States extend to, inter alia, installations and other devices permanently or temporarily attached to the seabed, which may be erected thereon for the purpose of exploring for, developing, or producing resources, including non-mineral energy resources; or any such installation or other device (other than a ship or vessel) for the purpose of transporting or transmitting such resources.
Accordingly, the Ruling concluded that a non-qualified vessel may not transport scour protection between US ports and the offshore sites, while transport from a Canadian port directly to the offshore sites would not violate the coastwise laws, lacking a second coastwise point. Further, an in-between solution involving a floating storage unit anchored in US territorial waters after the transporting vessel would leave from a Canadian port would violate the Jones Act based on the transport of the merchandise between the location in territorial waters and the offshore site.
In respect of the second issue, CBP considered whether towage by qualified, or alternatively, non-qualified tug boats would violate the Jones Act. Pursuant to 46 U.S.C. § 55111, except when towing a vessel in distress, only a coastwise-qualified vessel may do any part of any towing between coastwise points.
The Ruling concluded that as long as the tug is coastwise qualified no violation would occur. For non-qualified tugs, the analysis turns on whether at least two coastwise points are involved. Importantly, however, a coastwise transportation of merchandise also occurs when merchandise is laden onto a barge at one coastwise point and unladed at a second coastwise point (after the barge had been towed by a coastwise-qualified tug). See, e.g., HQ H280574 (Apr.28, 2017) (relating to the transportation via barge of a “power generation vessel” between coastwise points). In other words, involving a barge to hold the cargo does not free the tug of application of the Jones Act requirements and the barge equally needs to be coastwise qualified, otherwise a violation occurs.
In summary, the non-coastwise-qualified Scour Vessel at the center of the Ruling would have to load in Canada to avoid a Jones Act violation. Even the use of a non-coastwise-qualified barge loaded with materials and towed by a coastwise-qualified vessel from a U.S. port to an OCS site to be used by the Scour Vessel under the scenarios considered would not avoid a Jones Act violation according to CBP. Thus, one significant implication of this ruling is, among others, that it appears CBP may only authorize use of Jones Act qualified “feeder vessels,” including barges, from U.S. ports to offshore wind installations points. Further rulings from CBP on the use of feeder vessels for offshore wind installations will be interesting to watch out for as they will clearly impact operational considerations.
This recent Ruling underscores the importance of probing the underlying facts of any situation where Jones Act application is possible. We follow these recent developments with great interest.