March 31, 2021

CBP's Most Recent Offshore Wind Jones Act Ruling Signals a Trend

Holland & Knight Alert
Gerald A. Morrissey III | J. Michael Cavanaugh | Sean T. Pribyl

As outlined in a previous Holland & Knight alert on this subject, U.S. Customs and Border Protection (CBP) earlier this year for the first time expressly found that the Jones Act applies to transportation of merchandise from a U.S. port to a location on the U.S. outer continental shelf (OCS) for the purpose of the development and production of wind energy. (See "CBP Expressly Applies Jones Act to Offshore Wind Projects on Outer Continental Shelf," Feb. 2, 2021, concerning HQ H309186 ruling on Jan. 27, 2021). That ruling followed an amendment to the Outer Continental Shelf Lands Act (OCSLA) and ended a long-standing ambiguity over whether OCSLA extended the Jones Act to installations and other devices attached to the OCS for the purpose of exploring for, developing or producing non-mineral energy resources, such as offshore wind.

In a second ruling, dated Feb. 4, 2021, CBP again addressed the application of U.S. coastwise laws on proposed offshore wind construction activities on the OCS. See HQ H316313. That ruling provided significant guidance on permissible uses of foreign-flag vessels in connection with offshore wind activities, including important guidance on installation tools and items treated as "vessel equipment" and permissible categorization of installation personnel as vessel crew, not passengers.

In the third and most recent ruling, CBP significantly modified its first ruling. See HQ H317289, March 25, 2021. The first ruling specifically addressed scour protection – how and when U.S. coastwise qualified, and non-U.S. coastwise qualified vessels, could permissibly transport and deposit on the OCS "scour protection material" ultimately used to protect turbine foundations. In the first of seven scenarios presented to CBP, the scour protection material would be laden at a U.S. port and deposited on a "pristine" location on the OCS. CBP concluded – without discussion or citation to a substantial body of prior rulings concerning what constitutes OCS coastwise points, including rulings to the effect that a "pristine" seabed does not constitute a point – that the "pristine" seabed where scour would be deposited would be a coastwise point.

CBP reversed that ruling in the instant modification, concluding that "at that time of first delivery, there is no coastwise point, and hence, no transportation of merchandise from one coastwise point to another. As a result, the Scour Vessel may transport the scour protection material to the installation location when that location is the pristine seabed, without violating 46 U.S.C. § 55102."

What Trend Does This Signal?

First, the three rulings taken together indicate CBP's willingness to reach back to a substantial body of prior interpretative principles largely developed in connection with oil and gas activities. It has been unclear how CBP would apply some of those principles moving forward, as highlighted in Holland & Knight's Feb. 2 alert, and these rulings provide some guidance in that regard.

Second, CBP's Jan. 27 and March 25 rulings indicate that despite looking to existing analogous principles, CBP is willing to set new precedent for offshore wind activities. For example, although CBP revoked part of its initial Jan. 27 ruling finding that a "pristine" OCS seabed was a coastwise point, in doing so in its most recent March 25 ruling CBP offered a new and rather broad interpretation of what will now constitute a "coastwise point."

Finally, the fact that CBP is actively issuing rulings in the space is in and of itself an important, if not critical, trend. The political dynamic regarding renewable energy and offshore wind has clearly turned – the President's plan to promote 30 gigawatts of offshore wind by 2030 being just one recent example. Anything close to the level of activity needed to achieve such goals will require virtually every permutation of available U.S. coastwise qualified vessels and permissible foreign-flag vessels. CBP's active participation in the industry is a necessary and welcome trend.

For more information and questions on the CBP's recent rulings and their impact, contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.

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