CBP Increases Jones Act Enforcement

by BakerHostetler

Last month, United States Customs and Border Protection (CBP) announced the creation of the National Jones Act Division of Enforcement (JADE). JADE will work with CBP and industry partners on coastwise trade, with an end goal of being the central division for coastwise trade issues. As published in a Notice to the Port of New Orleans Trade Community on July 15, 2016 (No. 16-013), JADE will be located within the New Orleans Field Office and will be staffed by a team of subject-matter experts to answer industry questions and concerns. JADE will also be available for outreach presentations to industry partners. Carrier ruling requests will continue to be delivered to the Office of Regulations and Rulings at CBP headquarters.

The Jones Act restricts the transportation of passengers and merchandise between coastwise points to vessels that have been coastwise qualified. Coastwise points are those points that have been embraced within the coastwise laws—broadly, points in the United States, points in U.S. territorial waters, and some points on the Outer Continental Shelf (OCS). A coastwise-qualified vessel is a U.S.-flag vessel that has a certificate of documentation with a coastwise endorsement from the U.S. Coast Guard. Penalties for violating the Jones Act can be severe. Merchandise transported in violation of the Jones Act is liable to seizure and forfeiture to the government, and a monetary penalty may be assessed in an amount equal to the value of the merchandise or the cost of transportation, whichever is greater.

The Outer Continental Shelf Lands Act (OCSLA) extends the Jones Act to the subsoil and seabed of the OCS and to all temporary or permanent installations on the OCS erected for the purpose of exploring for, developing, or producing resources from the OCS. When read together, the Jones Act and the OCSLA prohibit any non-coastwise-qualified vessel from transporting passengers or merchandise, in whole or in part, between points embraced by the coastwise laws of the United States—which include established points on the OCS like rigs, platforms, and other devices—either directly or by way of a foreign port.

JADE’s origins can be traced to legislation sponsored by Louisiana Sens. Mary Landrieu and Bill Cassidy. Sen. Landrieu spearheaded an effort to include language in a 2014 appropriations bill requiring CBP to dedicate sufficient staff to enforce the Jones Act, particularly on the OCS. The bill also ordered CBP to track Jones Act violations and assess substantial penalties on violators. Sen. Cassidy included similar language in a 2016 appropriations bill, which is under consideration.

On March 9, 2016, at a hearing before the U.S. Senate Committee on Appropriations, Subcommittee on Homeland Security, Senator Cassidy stressed that Jones Act enforcement needed to be enhanced and stated that he had worked “with CBP and our Offshore Marine Service Association” to step up enforcement efforts. CBP Deputy Commissioner Kevin McAleenan responded that CBP is committed to increasing Jones Act enforcement and is looking to review and update previously issued Jones Act rulings. JADE seems to be a step toward that commitment.

JADE’s creation emphasizes that Jones Act enforcement is a priority at CBP. As noted above, violations of the Jones Act can carry significant penalties, so it is important to be aware of JADE and how increased enforcement may impact your business. Locating JADE in New Orleans, a prime hub for offshore operations, is a signal that a large part of JADE’s efforts will involve Jones Act compliance on the OCS. Vessel owners and operators and other U.S. and foreign participants in U.S. coastwise trade—including the offshore industry—should be aware of the implications of JADE and possible risks under the Jones Act to ensure compliance with the coastwise trade laws.

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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