Jones Act operators want vessel rebuild rules enforced

Jones Act operators want vessel rebuild rules enforced A group of vessel and shipbuilding interests involved in the U.S. coastal trades wants the Coast Guard to strengthen its enforcement of rules pertaining to vessel work performed in overseas shipyards.
   The “second proviso” of the Jones Act requires that U.S.-flag vessels be rebuilt in the United States to retain coastwise trading privileges.
   “While the rebuild determinations made since the regulations were issued in 1996 are inconsistent, there is one discernable trend. The Coast Guard’s enforcement of the second proviso has gotten increasingly lenient or non-existent,” said John P. Love, vice president of Pasha Hawaii Transport Lines, before the House Transportation and Infrastructure’s coast guard and marine transport subcommittee on June 11.
   Other representatives to testify before the House subcommittee included Matthew Paxton, president of the Shipbuilders Council of America, and Michael Roberts, counsel for Crowley Maritime Corp.
   These Jones Act representatives specifically noted the Coast Guard’s handling of second proviso applications involving work performed in China on Matson Navigation and Seabulk Tankers vessels.
   “The inconsistent application and changing tests and standards applied by the Coast Guard to allow larger rebuild and conversion jobs to go overseas has resulted in confusion and uncertainty not just for U.S. shipyards but across the U.S. maritime industry,” Paxton said. “Jones Act operators no longer have faith in what the true capital construction costs are to operate in the domestic trade.
   “Is it building a new vessel in a U.S. shipyard or rebuilding your Jones Act vessel in a Chinese shipyard?” he said.
   Since 2002, Crowley has invested about $1 billion in 17 new tank vessels under construction in U.S. shipyards. Pasha in 2005 launched its U.S.-built roll-on/roll-off vessel Jean Anne in the U.S. West Coast/Hawaiian trade. Both carrier representatives said the Coast Guard’s allowance for significant vessel upgrades in Chinese shipyards by Matson and Seabulk put them at a significant economic disadvantage in terms of recovering their more costly U.S.-flag vessel investments.
   The Coast Guard’s second proviso rule allows for overseas Jones Act vessel hull work if the individual components do not exceed 1.5 percent of the vessel’s total steel weight. Total overseas ship work also must not exceed 10 percent of the vessel’s weight.
   The Jones Act representatives before the House subcommittee argued that inconsistencies and lack of transparency in the Coast Guard’s second proviso approval process allowed Seabulk and Matson to perform significant rebuild work in Chinese shipyards.
   Crowley recommended an overhaul of the procedures the Coast Guard follows in deciding whether certain vessels should have coastwise privileges after overseas ship work is performed. Roberts said the procedures should include:
   ' Public notice that an application for the work has been filed.
   ' An opportunity for interested parties to participate fully in the proceeding, with appropriate restrictions to protect the confidentiality of proprietary information.
   ' A reasonable opportunity to pursue an administrative appeal within the Coast Guard.
   ' Judicial review under the Administrative Procedures Act.
   ' Publishing and indexing of Coast Guard decisions on these terms.
   Coast Guard Rear Adm. James Watson, director of prevention policy, told the subcommittee that the agency’s decisions on foreign vessel work applications for Jones Act vessels have been “consistent” with the second proviso.
   Matson and Seabulk, in written statements, said the recent work performed on their vessels in Chinese shipyards was done in accordance with the law and in full cooperation with the Coast Guard.
   “Seabulk would not have had its vessels retrofitted with double sides outside the United States if it had any doubt that the project would comply with those laws,” wrote Kenneth Rogers, president of Seabulk Traders, to the subcommittee. ' Chris Gillis