CBP Announces the “JADE”—A New Enforcement Division for the Jones Act

by Blank Rome LLP
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Action Item: The creation of the National Jones Act Division of Enforcement (“JADE”) signals that U.S. Customs and Border Protection has made Jones Act outreach and enforcement a national priority. U.S. and foreign stakeholders in the coastwise trade, including the offshore sector, should consult with counsel to discuss the implications of the establishment of JADE and activities that could implicate the Jones Act to help ensure compliance.

New Developments

U.S. Customs and Border Protection (“CBP”) recently announced the creation of the JADE, a special enforcement division to police the nearly century-old Jones Act. The mission of the JADE is reportedly to be a clearinghouse for all coastwise trade issues, including enforcement, with the exception of issuing rulings, which will continue to be handled by CBP’s Regulations and Rulings, in the Office of International Trade. The prospect for increased enforcement is significant because penalties are commonly issued in an amount equal to the value of the cargo transported in contravention of the Jones Act. The JADE will be headquartered in New Orleans and will have nationwide jurisdiction for outreach and enforcement. It will be headed up by Michael Hebert, former Port Director for Morgan City, Louisiana.

Background

Section 27 of the Merchant Marine Act of 1920 (Pub. L. No. 66-261) (commonly known as the “Jones Act”) restricts the carriage of goods between U.S. ports to vessels that are U.S. built, U.S. flag, and 75 percent U.S. owned that are documented for the coastwise trade. Although the Jones Act is the “modern” incarnation of the United States’ cabotage laws, restrictions on coastwise trade date back to the earliest days of the republic. Since the passage of the Jones Act, compliance with the law has been regulated by a variety of agencies. Currently, most regulatory and enforcement functions are housed in CBP, an agency of the Department of Homeland Security (“DHS”). In addition to CBP’s enforcement mandate, CBP’s Regulations and Rulings, in the Office of International Trade, also issues formal rulings on Jones Act compliance when requested, which are publicly available at rulings.cbp.gov.

The JADE’s origins lie in many respects in legislation dating back to 2013 sponsored by the Louisiana delegation, a state that has many companies and workers tied to coastwise trade and offshore marine services. Senator Mary Landrieu sponsored language in DHS’s 2014 appropriations bill that ordered CBP to dedicate sufficient resources to vigorously enforce the Jones Act, especially on the U.S. Outer Continental Shelf (“OCS”). That bill also mandated CBP to develop a system to track the status of all Jones Act violations and assess substantial penalties for violations. Similar language, sponsored by Senator Bill Cassidy of Louisiana in DHS’s 2016 spending bill, is currently under consideration.

Analysis

With the creation of the JADE, CBP is making a clear public statement that Jones Act outreach and enforcement are a high priority. And, the siting of the JADE in New Orleans, a hub for the U.S. offshore sector, as well as the key role of the Louisiana delegation in creating JADE, indicates that a major part of the JADE’s portfolio will be ensuring Jones Act compliance on the OCS. Additionally, the stated goal of the JADE is to work with the domestic industry and encourage the reporting of violations (which, as reported in our November 2014 advisory, “New Jones Act Enforcement Initiative” can be accomplished at https://eallegations.cbp.gov), which shows that the JADE’s resources will be amplified by cooperation with private sector stakeholders. The head of the JADE, Michael Hebert, was recently quoted as saying that the JADE’s mission is focused on education and outreach and not issuing penalties. He noted that, of course, there are times when there will need to be enforcement actions, but the JADE wants to make sure that the industry is familiar with the regulations to help ensure compliance. The JADE wants to notify industry stakeholders that it has been created to help the industry, not simply enforce the Jones Act. Hebert also has clarified that the JADE will not issue formal rulings on the application of the Jones Act to specific cases, rather, it will only provide informal preliminary findings as a service for those looking for general guidance. The issuance of rulings will remain with CBP Headquarters.

Conclusions

The creation of the JADE is clearly noteworthy. Only time will tell as to the exact focus areas JADE will have in reality, but for sure, nationwide enforcement will be one of them. Accordingly, because of the significant penalties that can be issued under the Jones Act, owners and operators of vessels operating in U.S. waters should consult with counsel with regard to the formation of JADE and activities which could implicate the Jones Act to help ensure compliance.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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