On October 1, 2009, the U.S. Customs and Border Protection (CBP) withdrew its Proposed Modifications and Revocation of Ruling Letters Relating to the Customs Position on the Application of the Jones Act to the Transportation of Certain Merchandise and Equipment Between Coastwise Points (“Proposed Modifications”), published on July 17, 2009. Thus, U.S. law on this subject remains unchanged for the time being. However, the CBP has stated that “a new notice which will set forth CBP’s proposed action relating to [this issue] will be published in the Customs Bulletin in the near future.” See Customs Bulletin and Decisions, Vol. 43, No. 40, October 1, 2009.

DRAFTED NOVEMBER 24, 2009

Background:

The Jones Act prohibits the transportation of “merchandise” between points in the United States embraced within the coastwise laws in any vessel other than a vessel built in, documented under the laws of, and owned by citizens of the United States. See 46 U.S.C. S 55102 and 46 U.S.C. App. 883. However, “equipment,” which is defined by the CBP as “portable articles necessary and appropriate for the navigation, operation or maintenance of the vessel and for the comfort and safety of the persons on board” may be freely transported by foreign-flagged (non-coastwise qualified) vessels. See 19 U.S.C. S 1309 (emphasis added). In addition to satisfying the foregoing definition, the CBP has also required the articles being transported to be “necessary to the accomplishment of the mission of the vessel” in order to qualify as equipment. See, e.g., HQ 115487 (Nov. 20, 2001) (emphasis added).

Over time, however, the CBP began to rely solely on the latter italicized language in determining what “equipment” may be transported by non-coastwise qualified vessels. Simply put, if the article was “necessary to the accomplishment of the mission of the vessel” it would be considered equipment, without regard to whether the article was also necessary to the navigation, operation and maintenance or comfort and safety of the individuals aboard the vessel itself.

In its July 17, 2009 Proposed Modifications, the CBP formally asserted its position that allowing foreign-flagged (non-coastwise qualified) vessels to transport articles that are not needed to navigate, operate, or maintain that vessel or for the safety and comfort of the persons on board that vessel, but rather to solely accomplish an activity for which that vessel would be engaged, would be contrary to the legislative intent on the Jones Act. Accordingly, the CBP sought to revoke all past CBP rulings relying solely on whether the article is “necessary to the accomplishment of the mission of the vessel” and, in the future, limit the definition of equipment to “articles necessary and appropriate for the navigation, operation or maintenance of the vessel and for the comfort and safety of the persons on board.” See Customs Bulletin and Decisions, Vol. 43, No. 28, July 17, 2009.

After receiving 141 comments in response to the Proposed Modifications, both in support and opposition, the CBP has apparently decided that its proposed action should be “reconsidered.”

DRAFTED NOVEMBER 19, 2009