Coast Guard Denies Petition to Amend Jones Act Regs on Rebuilt Vessels

March 20, 2012 by Brian Feito|Other U.S.

On March 13, 2012 the Coast Guard denied a petition to amend the regulations concerning foreign-rebuilt determinations for vessels entitled to a coastwise trade endorsement. The Coast Guard denied the petition because, among other reasons, (i) a settled understanding of the regulation now exists due to court decisions, (ii) the proposal would result in onerous new requirements for any applicant seeking to have work done at a foreign shipyard, and (iii) the proposed amendments would make the Jones Act inconsistent with national treatment obligations of the General Agreement on Tariffs and Trade 1994.

(Under the Merchant Marine Act of 1920, known as the Jones Act, and specifically under 46 USC 12101, 12112, 12132(b), and 55102, a vessel eligible to engage in the coastwise trade and later rebuilt outside the U.S. may not thereafter engage in the coastwise trade.)

Petition Sought to Amend Criteria for Rebuilt-Foreign Determinations

The petition, dated December 9, 2010 and filed on behalf of a coalition of maritime organizations, petitioned the Coast Guard to amend 46 CFR 67.177 (Application for foreign rebuilding determination). The regulation the petition sought to amend sets the parameters for rebuilt-foreign determinations; directs when vessels with coastwise trade endorsements whose hulls or superstructure are altered outside the U.S. must submit a written document to the National Vessel Documentation Center (NVDC); and states when vessel owners considering such alterations may seek a preliminary rebuilt determination.

The petition sought to, among other things: (1) amend major-component test provisions; (2) amend considerable-parts test provisions; (3) amend criteria for when vessels altered outside the U.S. must submit material to the NVDC and what materials must be submitted; (4) amend preliminary rebuilt determinations application requirements; (5) require the Coast Guard to publish Federal Register notices of applications for a preliminary or final rebuilt determination and to establish appeal procedures; and (6) require the owner of a vessel eligible to engage in the coastwise trades that had any work performed on that vessel at a facility outside the U.S. to submit a form within 30 days of redelivery of the vessel after such work is completed.

Coast Guard Denied Petition Based on “Settled Understanding” of Criteria

The Coast Guard requested comments on the petition on February 25, 2011. According to the Coast Guard, all five submissions in response to the request supported to the petition. Furthermore, the Coast Guard states that four of the five submissions specifically requested that the Coast Guard move forward expeditiously with a rulemaking in order to clarify what types and amounts of foreign shipyard work on vessels are allowed under the Jones Act. However, the Coast Guard denied the petitioner's request to amend the Jones Act for the following reasons:

1) There is now a settled understanding of the interpretation of these regulations as a result of the decision in Shipbuilders Council of America v. U.S. Coast Guard (578 F.3d 234 (2009)).

2) The petitioner’s proposal would establish new and onerous procedural impediments to any applicant seeking to have work done at a foreign shipyard by, among other things, requiring new determinations regardless of whether proposed work was casualty-related or whether any shipyard in the U.S. is capable or available to perform the desired work.

3) The amendments proposed by the petitioner would violate the national treatment provision of GATT 1994. The U.S. has a specific exemption from the national treatment and certain other obligations of GATT 1994 for the Jones Act statutes and measures, such as the Coast Guard regulations implementing those statutes. Any changes to the Jones Act statutes or measures implementing those statutes must not make them less consistent with GATT 1994. According to the Coast Guard, the petitioner's proposed changes would make the Jones Act regulations more restrictive.

(FR Pub 03/20/12)