Washington’s attempt to strengthen protection of its shipping sector potentially poses a major threat to foreign-flag tonnage that support the US domestic offshore industry.
The proposed changes to the Jones Act, which Energy has long suggested runs counter to the spirit of open competition advocated by the World Trade Organisation and should be declared illegal, could not only wreck business for non-American US ship owners and operators, but inflict severe damage to the US offshore industry itself – especially deepwater development and production activities.
This clearly has implications for Aberdeen as the rump of the global subsea contracting community is concentrated in the city, notably at Westhill, otherwise known as “Surf City”.
The International Marine Contractors Association (IMCA) raised the alarm just a few weeks ago on the intended changes, for which a consultation period of just 30 days was allowed. That window closed on August 16.
IMCA says it has won strong international support for its protest against the changes that the US Customs and Border Protection (CBP) department wants to implement.
“Support and opinions have come from far and wide,” Hugh Williams, CEO of IMCA, said in a detailed statement.
“Collective opinion is that if the changes, as written, are adopted, they could have a potentially devastating impact on the US offshore oil&gas industry.
“US companies involved in deepwater oil&gas exploration rely on sophisticated, highly specialised vessels for subsea installation construction support, pipe-umbilical laying, as well as maintenance of seafloor facilities.
“US-flagged vessels represent less than 20% of such capability, and almost none of the top-of-the-range vessels, so foreign-flagged vessels are essential to maintain operations at their current levels. Indeed, at least five years could be needed to develop a fleet of US vessels to meet the demands of the CBP’s proposal if adopted as proposed.
“Five years is not what is on offer to the industry. Instead, the 30-day comment period on the proposed changes was due to end on August 16 and the revised interpretation is scheduled to be in place within 90 days.
“We urge all likely to be affected by the proposals to request an extension to the CBP’s comment period. Thirty days is a pitifully short time for changes of this kind to be adequately researched and analysed.
“We would suggest a minimum of 90 days would be fairer to all concerned, providing time for a proper operational impact assessment.
“We have three principal concerns. The first is the lack of clarity in the target of the proposed rule change and the resulting amount of uncertainty. There is a whole offshore oil&gas industry which could be impacted, but the actual target may be quite small. The proposal is silent on the actual operations it wishes to target, creating an unacceptable amount of unpredictability.
“Secondly, the imprecision of the wording in the proposal concerns us.
“That shortness of timescale is our third concern. The fact that there is a lack of clarity of the target and interpretation of the wording indicates that all parties in industry and government need enough time to discuss and debate this whole issue fully. Then, with all the facts, a proper decision can be made that will not be detrimental to all parties.”
IMCA has a powerful voice as it represents nearly 600 offshore, marine and underwater engineering companies in 52 countries, mostly in the offshore oil&gas industry. Its members operate specialist vessels all over the world, including in US waters.
Predictably, the CBP’s proposal has supporters, notably from among American companies gathered under the Offshore Marine Service Association (OMSA) banner. OMSA says that the CBP proposal will protect American maritime jobs.
OMSA president Ken Wells said in a statement: “CBP is saying that there is a hard line between transportation and installation. Foreign boats may be able to instal oilfield equipment, but only US boats can carry it offshore.
“The problem is that, for many years, CBP rulings had allowed foreign vessels to carry cargo to subsea oil&gas locations as long as that vessel also installed it.”
Wells branded IMCA’s claims as “hysterical”.
The Jones Act, enacted in 1920 and actually Section 27 of the Merchant Marine Act of that year, simply requires that cargo moving between US ports be carried in ships which are US-owned, US-built and US-crewed.
The proposal now on the table involves plans to revoke or modify as many as 20 rulings to restore the (alleged) original intent of the Jones Act as it applies offshore. Such derogations cover the activities of pipe-laying, cable-laying, diving support work and heavy-lift crane construction and installation work. It boils down to 30 years of precedent that the US authorities want swept away.
This is counter free trade and readers with long memories will remember the US-EU banana wars that boiled over the late-1990s. That conflict centred on US attempts to open up European markets to its Central American and Caribbean-grown bananas produced by US food giant Chiquita.
In 1998, the US won a ruling from the WTO demanding that the EU dismantle favourable trading terms for European companies producing bananas in former African and Caribbean colonies. Eventually the US won.
Energy suggests that it is time Brussels took Washington to task over the Jones Act.
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