New Jones Act Enforcement Initiative
Action Item: U.S. Customs and Border Protection (“CBP”) issued a Notice to the Area Port of New Orleans Trade Community on November 12, 2014, announcing electronic online reporting of possible Jones Act violations. Owners and operators of vessels engaged in OCS activities are encouraged to review their OCS operations to ensure compliance with the Jones Act, and to seek routine counsel to avoid the significant fines being imposed by CBP for violations.
U.S. Customs and Border Protection (“CBP”) issued a Notice to the Area Port of New Orleans Trade Community on November 12, 2014, announcing electronic online reporting of possible Jones Act violations. The notice includes a pamphlet, entitled Jones Act Suspected Violations, Online Reporting, Now Available, describing the Jones Act and the e-Allegations reporting procedure, and also reminds the public that they may report possible violations to the nearest port of entry. The notice and pamphlet are available here.
Under Section 27 of the Merchant Marine Act, 1920, commonly known as the Jones Act, no vessel other than a vessel built in and documented under the laws of the United States and owned by citizens of the United States may transport merchandise by water, or by land and water, between coastwise points either directly or via a foreign port, or for any part of the transportation. Coastwise points include all 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. Under the Outer Continental Shelf Lands Act (“OCSLA”), the coastwise laws are extended to structures attached to the U.S. outer continental shelf (“OCS”) for the purposes of exploration, development, and production of resources.
Over the past several years, there has been increased pressure placed on CBP from various Jones Act operators and associations, support groups and Congress, to step up Jones Act enforcement. Indeed, earlier this year, the U.S. Senate Committee on Appropriations issued its report accompanying the Department of Homeland Security (“DHS”) Appropriations Bill, 2015, in which it urged more stringent Jones Act enforcement.
In particular, the Senate report urges the DHS:
“to levy penalties for previously documented violations, continue working with the Offshore Marine Service Association in order to investigate future potential violations, and dedicate adequate resources to vigorously enforce the Jones Act on the Outer Continental Shelf.”
The Committee also directed the DHS to develop a system to track the status of Jones Act violations, from the time they are reported until assessed penalties have been collected or there is a finding of no violation and the charges are dismissed, and to make information available to the Committee and the public, on a quarterly basis, regarding Jones Act violations.
In response to this pressure, CBP has increased its efforts to identify Jones Act violations and has pursued multimillion dollar penalties for a number of alleged Jones Act violations related to OCS activities. Notably, CBP has actively pursued violations for activities that apparently have, under previous CBP interpretations, been found not to violate the Jones Act, particularly with regard to items previously viewed as equipment of the vessel. The recent pamphlet and Notice to the Area Port of New Orleans Trade Community furthers CBP’s efforts to identify and investigate Jones Act violations.
The pamphlet distributed with the notice briefly describes the Jones Act and outlines use of CBP’s new “suspected violation” online reporting system, called e-Allegations. The e-Allegations system allows anyone to submit information on a suspected violation, including citizens, corporations, importers, legal firms, and other U.S. or international governmental bodies. CBP encourages providing as much information on suspected violations as possible and states that it will not share the details of any allegation. E-Allegations may be submitted anonymously. In addition, suspected violations may still be reported in person to the nearest port of entry. CBP officials in other regions have also recommended that e-Allegations be used to report violations of the coastwise merchandise statute in domestic trades. We note that the pamphlet incorrectly implies that the Jones Act does not apply to foreign-flag vessels of 200 gross tons or less. The Jones Act applies to all vessels engaged in the coastwise trade.
Conclusions and Recommendations
Owners and operators of vessels engaged in OCS activities are encouraged to review their OCS operations to ensure compliance with the Jones Act. Owner/operators should also seek counsel on a regular basis to assist with this effort, depending on the complexity and novelty of its operations, in an effort to avoid the significant fines being imposed by CBP for violations.
Notice: The purpose of this newsletter is to review the latest developments which are of interest to clients of Blank Rome LLP. The information contained herein is abridged from legislation, court decisions, and administrative rulings and should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.