On September 2, 2022, the U.S. Customs and Border Protection of the Department of Homeland Security (“CBP”) issued a CBP ruling, HQ H32233, determining that most offshore Wind Energy installation projects, including the laying of transmission cables, generally requires the use of Jones Act (Coastwise) compliant vessels. Jones Act qualified and compliant vessels are those vessels that are, among other things, (a) wholly owned by a U.S. Citizen; and (b) have been issued a Certificate of Documentation with a valid coastwise endorsement.
Importantly, any offshore installation projects must ensure that plans incorporate and adhere to the Jones Act. Failure to comply with these demanding laws may result in severe penalties, fines, and even forfeiture of assets/vessels.
In this case, CBP was specifically asked to consider five (5) questions concerning the following topics:
(1) whether jet action emulsification for cable laying constitutes dredging;
(2) laying cable with a non-coastwise qualified vessel violated the Jones Act;
(3) whether excess cable returned to a U.S. port by a non-coastwise qualified vessel violated the Jones Act;
(4) whether the transportation and/or placement of concrete mats on a non-coastwise qualified vessel violates the Jones Act; and
(5) whether the transportation of the marine and project crew violates the Passenger Vessel Services Act.
First Issue: Dredging
Generally, dredging operations on the Outer Continental Shelf (“OCS”) require the use of Jones Act qualified vessels. However, CBP has consistently held that the use by cable-laying vessels of cable-burial devices employing a jetting action resulting in the emulsification of the seabed surrounding the cable does not constitute an engagement in dredging. Furthermore, CBP has also determined that the use of “a share or plow and cutting disc” that creates a ‘very narrow’ slice of the seabed under which the cable is buried is not an engagement in dredging. Thus, based upon these specific facts presented, the use of a water-jet cable-burial device does not violate the Jones Act if used by a non-coastwise qualified vessel on the OCS.
Second Issue: Cable Laying Vessel
In 2021, the Outer Continental Shelf Lands Act of 1953 (“OCSLA”) was specifically amended to include “installations and other devices… attached to the seabed which may be erected thereon for the purpose of exploring for, developing, or producing resources, including non-mineral energy resources…” Thus, OCSLA, as amended, extends U.S. jurisdiction to the OSC seabed for the purpose of producing wind energy. See, The William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, H.R. 6395, 116th Cong. § 9503 (2021). Therefore, coastwise laws apply to such wind energy installation projects on the OCS.
Generally, a Jones Act qualified vessel is required to transport merchandise between two “U.S. points.” However, since 2001, for cable laying operations, the CBP has consistently determined that cable placement operations do not constitute coastwise trade under the Jones Act. Previous determinations have permitted non-coastwise qualified (e.g., foreign flagged vessels) to pay-out cable within U.S. territorial waters and on to the OCS.
Additionally, the process of connecting a previously laid cable with a new reel of cable (on board the vessel) by picking up the cable on the seafloor and connecting it to the new extension does not violate the Jones Act if the operation is completed by non-coastwise qualified vessel. Such is an important determination that could accelerate transmission capabilities on the OCS.
Third Issue: Returning Excess Cable to U.S. Port Post-Operation
The Jones Act declares that only coastwise qualified vessels may transport merchandise or passengers between two U.S. points. Historically, CBP has liberally construed the term “merchandise” to include even “valueless” items. Here, CBP was asked whether the Jones Act would be violated if a non-coastwise qualified vessel transported excess cable (not paid out) to a U.S. port (the end of the unused reel of cable) following the conclusion of the project.
While CBP did not provide a precise answer, the general parameters were set: there is no violation of the Jones Act if the non-coastwise qualified vessel returns excess cable to the exact coastwise point at which it was loaded onto the vessel if such was ladened at a U.S. port. In fact, the “same point” requires the loading/unloading to take place in the same berth within the same harbor; otherwise, a violation of the Jones Act may occur given that “points within a harbor” are considered two U.S. points for purposes of transporting merchandise like this transmission cable.
Fourth Issue: Transporting Concrete Mats or Bags of Rock to Protect Cables
As previously discussed, merchandise has a broad definition, which includes even valueless items. The term merchandise includes concrete mats and bags of rock. Such items are not excluded from this broad definition even with the “vessel equipment” exception given that mats and rock are not “necessary and appropriate for the navigation of, operation or maintenance of the vessel.” In fact, in April 2022, CBP determined that cable-protection material transported and discharged by a cable installation vessel did not constitute “vessel equipment” because such items are not utilized to aid the cable installation itself, and are thus “dissimilar from things used as tools for installation operations.” Such materials are intended to perform functions separate from that of the vessel’s operations. Therefore, the mats and rock are “merchandise” and must be transported between two U.S. points (U.S. Port and the point discharged on to the OCS) by Jones Act qualified vessels. Here, the electrical transmission cable locations are coastwise points; and if the port of lading is also a U.S. port, then transporting the merchandise (rock and mats) between the U.S. port and the seabed must be conducted by a Jones Act qualified vessel.
Fifth Issue: Transporting Marine and Project Crew Violates the Passenger Vessel Services Act
Generally, a non-coastwise qualified vessel cannot transport “passengers” between two U.S. points either directly or indirectly via a foreign port. The marine crew is responsible for the navigation and operation of the vessel. Project crew members are those on board to oversee the cable installation, which include executive company representatives.
CBP determined that to the extent that the individuals will be engaged in any shipboard activities while traveling on the non-coastwise qualified vessels between two or more coastwise points that would be “directly and substantially” related to the operation, navigation, or business of the vessel itself, as would be the case under the facts herein submitted, such individuals would not be considered “passengers.” CBP determined project members are ‘directly and substantially’ related the operation and “business of the vessel,” which was to lay submarine electrical transmission cables on the OCS. Therefore, for the purposes of this factual scenario, the “project” members on board the vessel would not be considered “passengers” for purposes of the Passenger Vessel Services Act.
Overall, CBP appears to appreciate the complexity of constructing offshore wind installations on the OCS. Such includes the need to bury transmission cables and to transport company personnel on board vessels while such operations are underway.
While this ruling is in no way binding as precedent (as with any CBP ruling), such does offer guidance as to how CBP may approach and address future scenarios. However, should you have any specific questions or concerns, it is paramount to consult with counsel before undertaking offshore activities that may violate the Jones Act; violations may result in hefty fines, penalties, and forfeiture of vessels and assets.